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EXHIBIT 4.2
LOAN AGREEMENT
BETWEEN
NATIONSBANK, N.A.
AND
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LIVING OMNIMEDIA LLC
February 3, 1997
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TABLE OF CONTENTS
Page
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I. DEFINITIONS AND REFERENCE TERMS.................................... 1
II. LOANS.............................................................. 10
A. Loan......................................................... 10
B. Note......................................................... 10
C. Interest Rate and Repayment.................................. 11
D. Use of Proceeds.............................................. 11
E. Clean-Up Period.............................................. 11
F. Reduction of Commitment...................................... 11
G. Extension of Maturity Date................................... 11
H. Prepayments.................................................. 11
(1) Mandatory Prepayments.................................. 11
(2) Optional Prepayment.................................... 12
I. Commitment Fee............................................... 12
J. Payment...................................................... 12
K. Computations of Interest; Business Day....................... 12
L. Increased Costs, Etc......................................... 13
M. Letters of Credit............................................ 13
III. CONDITIONS TO LOANS................................................ 14
A. Conditions to All Loans...................................... 14
B. Conditions to Initial Loan................................... 15
IV. REPRESENTATIONS AND WARRANTIES..................................... 18
A. Good Standing................................................ 18
B. Authorization................................................ 18
C. No Conflicts................................................. 18
D. Approvals.................................................... 19
E. Binding Agreement............................................ 19
F. Litigation................................................... 19
G. Compliance with Laws......................................... 19
H. Taxes........................................................ 19
I. Accuracy of Information...................................... 19
J. Use of Proceeds.............................................. 19
K. Ownership of Properties...................................... 20
L. ERISA........................................................ 20
M. Environmental................................................ 20
N. Purchase Documents........................................... 20
O. Solvency..................................................... 21
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P. Investment Company Act; Public Utility Holding
Company Act................................................ 21
V. AFFIRMATIVE COVENANTS.............................................. 21
A. Financial Statements and Other Information................... 21
B. Insurance.................................................... 23
C. Existence and Compliance..................................... 24
D. Taxes........................................................ 24
E. Use of Proceeds.............................................. 24
F. Maintenance.................................................. 24
G. Environmental................................................ 24
H. ERISA........................................................ 25
I. Obligations under Loan Documents............................. 25
J. Other Obligations............................................ 25
K. Maintaining Records; Access to Properties and
Inspections; Right to Audit................................ 25
L. Maintenance of Accounts...................................... 26
M. Assignment of Life and Disability Insurance;
Copyright and Trademark Filings............................ 26
N. Further Assurances........................................... 26
VI. NEGATIVE COVENANTS................................................. 26
A. Liens........................................................ 26
B. Debt......................................................... 27
C. Investments.................................................. 27
D. Capital Expenditures......................................... 27
E. Dividends, Distributions and Payments........................ 28
F. Consolidations, Mergers and Sales of Assets.................. 28
G. Sale and Lease-Back Transactions............................. 28
H. Sales of Receivables......................................... 28
I. Quick Ratio.................................................. 28
J. Debt Service Coverage Ratio.................................. 28
K. Character of Business........................................ 29
L. Subsidiaries................................................. 29
M. Accounting Change............................................ 29
N. Transactions with Affiliates................................. 29
O. ERISA........................................................ 29
P. Prepayment or Modification of Indebtedness;
Modification of Agreements................................. 30
Q. Negative Pledges, Etc........................................ 30
VII. REMEDIES UPON DEFAULT.............................................. 31
VIII. NOTICES............................................................ 31
IX. COSTS, EXPENSES AND ATTORNEYS' FEES................................ 32
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X. MISCELLANEOUS...................................................... 33
A. Cumulative Rights and No Waiver.............................. 33
B. Applicable Law............................................... 33
C. Amendment.................................................... 33
D. Right to Setoff.............................................. 34
E. Documents.................................................... 34
F. Partial Invalidity........................................... 34
G. Survivability................................................ 34
H. Headings..................................................... 34
I. Counterparts................................................. 34
XI. ARBITRATION........................................................ 34
A. SPECIAL RULES................................................ 35
B. RESERVATION OF RIGHTS........................................ 35
XII. NO ORAL AGREEMENT.................................................. 36
Exhibits
Exhibit A - Borrower Security Agreement
Exhibit B - Form of Borrowing Base Certificate
Exhibit C - Guaranty
Exhibit D - Kmart Consent
Exhibit E - Lifetime Consent
Exhibit F - Note
Exhibit G - Partnership Guaranty
Exhibit H - Partnership Security Agreement
Exhibit I - ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Consent
Exhibit J - ▇▇▇▇▇▇▇ Security Agreement
Exhibit K - Subordination Agreement
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NATIONSBANK, N.A.
LOAN AGREEMENT
This Loan Agreement (the "Agreement"), dated as of February 3, 1997, by
and between NationsBank, N.A., a national banking association (the "Bank"), and
the Borrower described below.
In consideration of the Loans described below and the mutual covenants and
agreements contained herein, and intending to be legally bound hereby, the Bank
and the Borrower agree as follows:
I. DEFINITIONS AND REFERENCE TERMS. In addition to any other terms defined
herein, the following terms shall have the meaning set forth with respect
thereto:
A. "AFFILIATE" of any Person means any other Person which, directly
or indirectly, controls or is controlled by or is under common control with such
Person and, without limiting the generality of the foregoing, includes (i) any
Person which beneficially owns or holds 10% or more of any class of voting
securities of such Person or 10% or more of the equity interest in such Person,
(ii) any Person of which such Person beneficially owns or holds 10% or more of
any class of voting securities or in which such Person beneficially owns or
holds 10% or more of the equity interest in such Person and (iii) any director,
officer, member or partner of such Person.
B. "AVAILABILITY" means, at any time, an amount equal to (i) the
lesser of (A) the Commitment and (B) the Borrowing Base, minus (ii) the sum of
(A) the aggregate principal amount of all Loans outstanding at such time and (B)
an amount equal to all reserves which the Bank establishes in accordance with
the provisions of this Agreement.
C. "BANKRUPTCY CODE" means Title 11 of the United States Code, as
amended.
D. "BORROWER SECURITY AGREEMENT" means the Security Agreement dated
as of the Closing Date between the Borrower and the Bank in the form of Exhibit
A hereto, as the same may be amended, modified or supplemented from time to
time.
E. "BORROWER" means ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Living Omnimedia LLC, a Delaware
limited liability company.
F. "BORROWER'S ADDRESS" means ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
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G. "BORROWING BASE" means, at any date of determination, an amount
equal to the product of (i) seventy-five percent (75%) and (ii) the sum of (A)
Eligible Receivables on such date plus (B) the product of (i) fifty percent
(50%) and (ii) the Eligible Subscription Receivables on such date. The amount of
Eligible Receivables and Eligible Subscription Receivables shall be determined
by the Bank by reference to the Borrowing Base Certificate then most recently
delivered to it; provided that the information contained in any such Borrowing
Base Certificate shall not be conclusive in calculating the amount of Eligible
Receivables and Eligible Subscription Receivables on any date and the resulting
Borrowing Base and, after consultation with the Borrower, the Bank shall be
entitled to adjust the amount of Eligible Receivables on such date and the
resulting Borrowing Base by establishing reserves and otherwise adjusting the
amounts and other information contained therein to the extent that the Bank
believes in its reasonable credit judgment that such adjustments are necessary
or appropriate to cause the Borrowing Base (as so adjusted) to reflect the
standards set forth in the definition of the term "Eligible Receivables" in
light of any factor which the Bank reasonably believes could adversely affect
the value of the Eligible Receivables or the enforceability or the priority of
the Bank's Liens therein, materially increase the likelihood of a bankruptcy,
insolvency or other similar proceeding involving Borrower or cause a Default or
an Event of Default.
H. "BORROWING BASE CERTIFICATE" means a certificate, substantially
in the form of Exhibit B hereto.
I. "BUSINESS DAY" means any day, other than a Saturday, Sunday or
other day on which commercial banks in New York, New York are authorized or
required by law to close.
J. "CAPITAL EXPENDITURES" means for any period, the aggregate of all
amounts which, in accordance with GAAP, would be added as a debit to the fixed
asset account of such person, including, without limitation, all amounts paid or
payable with respect to Capital Lease Obligations and interest which is required
to be capitalized in accordance with GAAP.
K. "CAPITAL LEASE OBLIGATION" means any obligation to pay rent or
other amounts under any leasing or similar arrangement which, in accordance with
GAAP, is classified as a capital lease.
L. "CLOSING DATE" means the date on which the initial Loan is made
hereunder after all of the conditions precedent set forth in Section III.B. have
been satisfied or, at the sole discretion of the Bank, waived.
M. "CODE" means the Internal Revenue Code of 1986, as amended, and
the regulations promulgated and the rulings issued thereunder, as in effect from
time to time.
N. "COLLATERAL" means all property and interests therein (real and
personal, tangible and intangible) in which a Lien is now or hereafter granted
to the Bank by any Loan Party as security for the Obligations, including the
property in which a Lien is purported to be
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granted to the Bank pursuant to the Borrower Security Agreement, the Partnership
Security Agreement and the ▇▇▇▇▇▇▇ Security Agreement.
O. "COMMITMENT" means the commitment of the Bank to make Loans
pursuant to Section II.A. in an aggregate principal amount at any time
outstanding not to exceed $10,000,000, as such commitment may be reduced or
terminated in accordance with the provisions of this Agreement.
P. "COMMITMENT FEE" has the meaning assigned to such term in Section
II.I.
Q. "CONTEMPLATED TRANSACTIONS" means the transactions contemplated
by this Agreement and the other Loan Documents.
R. "CURRENT ASSETS" means, at any time, with respect to the Borrower
and the Subsidiaries, (i) the aggregate amount of all assets which would, in
accordance with GAAP, properly be defined as current assets at such time minus
(ii) the aggregate amount of all assets which would, in accordance with GAAP,
properly be defined as inventory.
S. "CURRENT LIABILITIES" means, at any time, with respect to the
Borrower and the Subsidiaries, (i) the aggregate amount of all liabilities which
would, in accordance with GAAP, properly be defined as current liabilities, but
in any event shall include all liabilities except those having a maturity date
at such time which is more than one year from the date as of which such
computation is being made minus (ii) the aggregate amount of all liabilities
which would, in accordance with GAAP, properly be defined as deferred income.
T. "CUSTOMER" means and includes the account debtor or obligor with
respect to any Receivable.
U. "DEBT SERVICE COVERAGE RATIO" means the aggregate of net income
after taxes plus depreciation, amortization and other non-cash expenses, divided
by the aggregate of the current portion of principal and interest on long-term
debt and Capital Lease Obligations.
V. "DEFAULT" means any condition, act or event which, with notice or
lapse of time or both, would constitute an Event of Default.
W. "ELIGIBLE RECEIVABLES" means, at any date, the sum of (A) the
Lifetime Receivables on such date and (B) the amount equal to the aggregate
amount of those Receivables which then conform to the following criteria: (i)
such Receivable is created by the Borrower in the ordinary course of its
business arising from the sale for cash of advertising time or space to a
Customer that is a Person resident in, or whose principal executive office is
located in, the United States, (ii) such Receivable has not remained unpaid
later than ninety (90) days past the original invoice date, (iii) such
Receivable is not due from a Customer whose obligations to the Borrower on
Receivables which were due more than 90 days past the original invoice date
exceeds 50% of such Customer's total obligations for Receivables, (iv) such
Receivable is not evidenced by chattel paper or an instrument or security of any
kind, (v) (a) the Bank holds a perfected, first priority security interest in
such Receivable and (b) such Receivable is not subject to any other Lien
whatsoever (other than a Lien in favor of Time Publishing that is subordinate to
the Lien of
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the Bank therein in accordance with the terms of the Subordination Agreement),
(vi) such Receivable is denominated in United States dollars, (vii) the Customer
or account party with respect to such Receivable is not the subject of any
bankruptcy or insolvency proceeding of any kind and, to the knowledge of the
Borrower, is Solvent or is not unable to pay its obligations in respect of such
Receivable, (viii) such Receivable is net of (a) any returns, discounts, claims,
credits or allowances and (b) any obligations owing under "make-good" contracts
or arrangements, (ix) the Customer or account party with respect to such
Receivable is not an Affiliate of any Loan Party or any Governmental Authority,
(x) such Receivable is not subject to any setoff, net-out contract, offset,
deduction, dispute, credit, counterclaim or other defense arising out of the
transactions represented by the Receivable or independently thereof, (xi) such
Receivable is one upon which the Borrower's right to receive payment is absolute
and is not contingent upon the fulfillment of any condition whatsoever and the
Borrower is able to bring suit or otherwise enforce its remedies against the
Customer or account party through judicial process and (xii) such Receivable is
neither an Eligible Subscription Receivable nor arises from a subscription to
any magazine or other publication.
X. "ELIGIBLE SUBSCRIPTION RECEIVABLES" mean all Receivables of the
Borrower that would otherwise constitute Eligible Receivables but that arise
from a subscription to a magazine or other publication, but shall not include
any such Receivable (or portion thereof) to the extent that the portion of the
Borrowing Base attributable to such Receivables exceeds twenty-five percent
(25%) of the total Borrowing Base on such date.
Y. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder, as in
effect from time to time.
Z. "ERISA AFFILIATE" of any Person means any other Person that for
purposes of Title IV of ERISA is a member of such Person's controlled group, or
under common control with such Person, within the meaning of Section 414 of the
Code.
AA. "EVENT OF DEFAULT" has the meaning assigned to such term in the
Note.
BB. "FISCAL YEAR" means the fiscal year of the Borrower for
accounting purposes, which ends on December 31 of each year.
CC. "GOVERNMENTAL AUTHORITY" means any nation or government, any
federal, state, city, town, municipality, county, local or other political
subdivision thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
DD. "GUARANTOR" means ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, an individual.
EE. "GUARANTY" means the Continuing and Unconditional Guaranty dated
as of the Closing Date executed by the Guarantor for the benefit of the Bank, in
the form of Exhibit C hereto, as the same may be amended, modified or
supplemented from time to time.
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FF. "HAZARDOUS MATERIALS" include all materials defined as hazardous
materials or substances, or which form the basis of liability, under any local,
state or federal environmental laws, rules or regulations, including, without
limitation, petroleum, petroleum products, oil, polychlorinated biphenyls,
radioactive substances and asbestos.
GG. "INDEBTEDNESS" means, with respect to any Person, (i) all
indebtedness or other obligations of such Person for borrowed money or for the
deferred purchase price of property or services, (ii) all obligations of such
Person under direct or indirect guaranties in respect of, and contingent or
other obligations of such Person to purchase or otherwise acquire or otherwise
assure a creditor against loss in respect of, indebtedness or other obligations
of any other Person for borrowed money or for the deferred purchase price of
property or services, (iii) all indebtedness or other obligations of any other
Person for borrowed money or for the deferred purchase price of property or
services secured by (or for which the holder of such indebtedness has an
existing right, contingent or otherwise, to be secured by) any lien, security
interest or other charge or encumbrance upon or in property owned by such
Person, (iv) all obligations of such Person to make reimbursement or payment in
respect of letters of credit and bankers' acceptances, and (v) the net
liabilities of such Person under all interest rate swap, interest rate collar,
interest rate cap, interest rate floor, forward rate agreements, commodity swaps
or other agreements or arrangements designed to protect against fluctuations in
interest rates or currency, commodity or equity values, each calculated in good
faith in the reasonable discretion of the Bank.
HH. "INDEMNIFIED PARTY" has the meaning assigned to such term in
Section IX.B.
II. "INSURANCE ASSIGNMENTS" means (i) the collateral assignment to
the Bank by the Borrower of a keyman life insurance policy issued by an
insurance company satisfactory to the Bank insuring the life of the Guarantor in
a minimum policy amount of $10,000,000 pursuant to an assignment agreement
acceptable in form and substance to the Bank and delivered to the Bank pursuant
to Section V.M. and (ii) the collateral assignment to the Bank by the Borrower
of a disability policy issued by an insurance company satisfactory to the Bank
insuring the Guarantor in a minimum policy amount of $10,000,000 pursuant to an
assignment agreement acceptable in form and substance to the Bank and delivered
to the Bank pursuant to Section V.M.
JJ. "INVESTMENT" in any Person means (i) the acquisition (whether
for cash, property, services, assumption of Indebtedness, securities or
otherwise) of shares of capital stock, bonds, notes, debentures, partnership,
joint venture or other ownership interests or other securities of such Person,
(ii) any deposit with, or advance, loan or other extension of credit to, such
Person (other than deposits made in connection with the purchase of equipment or
other assets in the ordinary course of business) or (iii) any other investment
in such Person, including, without limitation, any guaranty incurred for the
benefit of such Person.
KK. "KMART CONSENT" means the Consent and Agreement, dated as of the
date hereof, among Kmart Corporation, the Borrower and the Bank, substantially
in the form of Exhibit D hereto, as the same may be amended, modified or
supplemented from time to time.
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LL. "LETTERS OF CREDIT" has the meaning specified in Section II.M.
MM. "LIEN" means, with respect to any asset, (i) any mortgage, lien,
pledge, encumbrance, charge or security interest in or on such asset, (ii) the
interest of a vendor or a lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset, (iii) in the
case of securities, any purchase option, call or similar right of a third party
with respect to such securities or (iv) any other right of or arrangement with
any creditor to be entitled to receive any such mortgage, lien, pledge,
encumbrance, charge, or security interest on or to have such creditor's claim
satisfied out of such assets, or the proceeds therefrom, prior to the general
creditors of the owner thereof.
NN. "LIFETIME CONSENT" means the Consent and Agreement, dated as of
the date hereof, among Lifetime Entertainment Services, the Borrower and the
Bank, substantially in the form of Exhibit E hereto, as the same may be amended,
modified or supplemented from time to time.
OO. "LIFETIME RECEIVABLE" means a Receivable that arises from the
agreement, dated as of April 19, 1996, by and between Lifetime Entertainment
Services and assumed by the Borrower and has not remained unpaid later than
ninety (90) days past the original date such payment is required to be made
under such agreement.
PP. "LLC AGREEMENT" means the Second Amended and Restated Limited
Liability Company Agreement of the Borrower, dated as of February 3, 1997, as
the same may be amended, modified or supplemented from time to time.
QQ. "LOAN DOCUMENT" means any of this Agreement, the Note, the
Security Documents, the Guaranty, the Partnership Guaranty, the Kmart Consent,
the Lifetime Consent, the ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Consent, the Subordination Agreement,
any Letter of Credit Application and all other documents, instruments,
guarantees, certificates and agreements executed and/or delivered by the
Borrower, the Guarantor, the ▇▇▇▇▇▇▇ Partnership or any third party in
connection with any Loan.
RR. "LOAN PARTIES" means, collectively, the Borrower, the Guarantor
and the ▇▇▇▇▇▇▇ Partnership.
SS. "LOANS" mean the loans made by the Bank to the Borrower pursuant
to Section II.A and the issuance by the Bank of Letters of Credit for the
account of the Borrower pursuant to Section II.M. At any time and for all
purposes of this Agreement, each Letter of Credit issued by the Bank shall be
deemed to be a Loan in a principal amount equal to the sum of (i) the undrawn
amount of such Letter of Credit at such time and (ii) the aggregate unpaid
principal amount of all Reimbursement Obligations of the Borrower at such time
in respect of all drawings under such Letter of Credit.
TT. "MATERIAL ADVERSE EFFECT" means a material adverse effect on (i)
the business, assets, liabilities, properties, prospects, operations or
financial or other condition of the Borrower, or the other Loan Parties taken as
a whole, (ii) the ability of any Loan Party to perform
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or pay the Obligations in accordance with the terms hereof or of any other Loan
Document or to perform its other obligations thereunder or (iii) the value of
the Collateral or the amount which the Bank could receive in the liquidation of
the Collateral.
UU. "MATURITY DATE" means June 30, 1998 or such later date that is
established pursuant to Section II.F.
VV. "MULTIEMPLOYER PLAN" means a Plan (other than a Welfare Plan)
which is a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA.
WW. "NOTE" means the promissory note of the Borrower, in the form of
Exhibit F hereto, evidencing the Obligations of the Borrower with respect to the
Loans and delivered to the Bank pursuant to Section III.B.(2), as such
promissory note may be modified or extended from time to time, and any
promissory note or notes issued in exchange or replacement thereof.
XX. "NOTICE OF BORROWING" has the meaning assigned to such term in
Section II.A.
YY. "OBLIGATIONS" means (i) the obligations of any Loan Party to
pay, as and when due and payable (by mandatory prepayment, by scheduled maturity
or otherwise), all amounts from time to time owing by it pursuant to any Loan
Document, whether for principal, interest, fees or otherwise and (ii) the
obligations of any Loan Party to perform or observe all of such Loan Party's
other obligations from time to time existing under any Loan Document.
ZZ. "PARTNERSHIP AGREEMENT" means the Agreement of Limited
Partnership of the ▇▇▇▇▇▇▇ Partnership, dated as of December 19, 1996, as the
same may be amended, modified or supplemented from time to time.
AAA. "PARTNERSHIP GUARANTY" means the Continuing and Unconditional
Guaranty dated as of the Closing Date executed by the ▇▇▇▇▇▇▇ Partnership for
the benefit of the Bank, in the form of Exhibit G hereto, as the same may be
amended, modified or supplemented from time to time.
BBB. "PARTNERSHIP SECURITY AGREEMENT" means the Security Agreement
dated as of the Closing Date between the ▇▇▇▇▇▇▇ Partnership and the Bank in the
form of Exhibit H hereto, as the same may be amended, modified or supplemented
from time to time.
CCC. "PBGC" means the Pension Benefit Guaranty Corporation, or any
successor agency or entity performing substantially the same functions.
DDD. "PERMITTED LIENS" has the meaning assigned to such term in
Section VI.A.
EEE. "PERSON" means an individual, limited liability company,
partnership, corporation (including a business trust), joint stock company,
trust, unincorporated association, joint venture or other entity, or
Governmental Authority.
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FFF. "PLAN" means, at any particular time, any employee benefit plan
which is covered by ERISA and in respect of which the Borrower or an ERISA
Affiliate is an "employer" as defined in Section 3(5) of ERISA.
GGG. "PURCHASE AGREEMENT" means the Asset Purchase Agreement dated
as of February 3, 1997 between the Borrower and Time Publishing, as the same may
be amended, modified or supplemented from time to time solely as permitted by
the terms of this Agreement.
HHH. "PURCHASE DOCUMENTS" means the Purchase Agreement and all other
documents, instruments, certificates and agreements executed and/or delivered in
connection therewith (other than the Time Publishing Agreements), as the same
may be amended, modified or supplemented from time to time solely as permitted
by the terms of this Agreement.
III. "PURCHASE TRANSACTIONS" means the transactions contemplated by
the Purchase Agreement and the other Purchase Documents.
JJJ. "REIMBURSEMENT OBLIGATION" means the obligation of the Borrower
to reimburse amounts paid by the Bank in respect of any drawings under a Letter
of Credit issued for the account of the Borrower.
KKK. "RECEIVABLES" means and includes all of the Accounts Receivable
(as defined in the Borrower Security Agreement) of the Borrower.
LLL. "REPORTABLE EVENT" means any of the events set forth in Section
4043 of ERISA, other than those events as to which the 30-day notice period is
waived under PBGC regulations.
MMM. "SECURITY DOCUMENTS" means the Borrower Security Agreement, the
Partnership Security Agreement, the ▇▇▇▇▇▇▇ Security Agreement, the Insurance
Assignments and each other agreement now existing or hereafter created providing
collateral security for, or in furtherance of the enforcement of, the payment or
performance of any Obligations.
NNN. "▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ CONSENT" means the Consent and Agreement,
dated as of the date hereof, among The ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Company, the Borrower
and the Bank, substantially in the form of Exhibit I hereto, as the same may be
amended, modified or supplemented from time to time.
OOO. "SOLVENT" means, with respect to any Person as of a particular
date, that on such date (i) such Person is able to pay its debts and other
liabilities, contingent obligations and other commitments as they mature in the
normal course of business, (ii) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's ability to
pay as such debts and liabilities mature in their ordinary course, (iii) such
Person is not engaged in a business or a transaction, and is not about to engage
in a business or a transaction, for which such Person's assets would constitute
unreasonably small capital after giving due consideration to the prevailing
practice in the industry in which such Person is engaged or is to engage, (iv)
the fair value of the assets of such Person is greater than the total amount of
liabilities, including, without limitation, contingent liabilities, of such
Person and (v) the present
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fair salable value of the assets of such Person is not less than the amount that
will be required to pay the probable liability of such Person on its debts as
they become absolute and matured. In computing the amount of contingent
liabilities at any time, it is intended that such liabilities will be computed
at the amount which, in light of all the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
PPP. "▇▇▇▇▇▇▇ PARTNERSHIP" means The ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Family Limited
Partnership, a Connecticut limited partnership.
QQQ. "▇▇▇▇▇▇▇ SECURITY AGREEMENT" means the Security Agreement dated
as of the Closing Date between the Guarantor and the Bank in the form of Exhibit
J hereto, as the same may be amended, modified or supplemented from time to
time.
RRR. "SUBORDINATION AGREEMENT" means the Subordination Agreement
dated as of the Closing Date among the Bank, the Borrower and Time Publishing in
the form of Exhibit K hereto, as the same may be amended, modified or
supplemented from time to time.
SSS. "SUBSIDIARY" means, with respect to the Borrower, (i) any
corporation of which securities or other ownership interests representing more
than 50% of the ordinary voting power are, at the time as of which any
determination is being made, owned or controlled, directly or indirectly, by the
Borrower and/or one or more subsidiaries of the Borrower and (ii) any
partnership, association, joint venture or other entity in which the Borrower
has more than a 50% equity interest.
TTT. "TERMINATION DATE" means the earlier of (i) the Maturity Date
and (ii) the date on which the Bank terminates the Commitment following an Event
of Default.
UUU. "TIME PUBLISHING" means Time Publishing Ventures, Inc., a
Delaware corporation.
VVV. "TIME PUBLISHING AGREEMENTS" means, collectively, (i) the Note
dated February 3, 1997 made by the Borrower in favor of Time Publishing in the
principal amount of $30,000,000, (ii) the Security Agreement dated as of
February 3, 1997 between the Borrower and Time Publishing and (iii) all other
documents, instruments, guaranties, certificates and agreements executed and/or
delivered in connection therewith, as each may be amended, modified or
supplemented from time to time solely as permitted by the provisions of this
Agreement.
WWW. "TIME PUBLISHING INDEBTEDNESS" means the Indebtedness of the
Borrower under the Time Publishing Agreements.
XXX. "WELFARE PLAN" means a Plan which is a "welfare plan" as
defined in Section 3(1) of ERISA.
All accounting terms not specifically defined or specified herein shall
have the meanings attributed to such terms under United States generally
accepted accounting principles ("GAAP"),
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as in effect from time to time, consistently applied. All calculations made for
the purposes of determining compliance with this Loan Agreement shall (except as
otherwise expressly provided herein) be made by application of GAAP applied on a
basis consistent with the most recent annual or quarterly financial statements
delivered pursuant to Section V.A. hereof; provided, however, if (a) the
Borrower shall object to determining such compliance on such basis at the time
of delivery of such financial statements due to any change in GAAP or the rules
promulgated with respect thereto or (b) the Bank shall so object in writing
within 30 days after delivery of such financial statements, then such
calculations shall be made on a basis consistent with the most recent financial
statements delivered by the Borrower to the Bank as to which no such objection
shall have been made.
II. LOANS.
A. LOAN. The Bank hereby agrees, on the terms and conditions
hereinafter set forth, to make one or more Loans (including by way of issuing
one or more Letters of Credit) to the Borrower from the Closing Date to the
Termination Date in an aggregate principal amount at any one time outstanding
not to exceed the Commitment. Notwithstanding the foregoing or anything else
contained herein or in any other Loan Document, the Bank shall have no
obligation to make a Loan (including by way of issuing a Letter of Credit) and
no Loan shall be made to the Borrower (including by way of issuing a Letter of
Credit) if, after giving effect thereto, the Availability would be less than
zero. Each Loan shall be in an amount equal to $100,000 or an integral multiple
of $25,000 in excess thereof. Each request for a Loan, other than by way of
issuing a Letter of Credit (a "Notice of Borrowing"), shall be made by
telephonic or written communication by a Person reasonably believed by the Bank
to be an authorized representative of the Borrower at least one (1) Business Day
prior to the proposed date for such requested Loan. The Notice of Borrowing
shall specify the proposed amount of such Loan and the Business Day on which
such Loan shall be made. On the Business Day specified in the Notice of
Borrowing and upon fulfillment of the applicable terms and conditions set forth
in Article III hereof, the Bank will make the proceeds of such Loan available to
the Borrower in same day funds in United States Dollars to the account specified
by the Borrower, not later than 5:00 p.m. (New York City time) on such date.
Each request for a Letter of Credit shall be made in accordance with Section
II.M. Within the limits of the Commitment and subject to the second sentence of
this Section II.A., the Borrower may borrow, repay in whole or in part and
reborrow Loans pursuant to this Section until the Termination Date.
Notwithstanding any other provision of this Agreement, the Commitment shall
expire on, and the Bank shall have no obligation to extend credit to the
Borrower or make any Loan (including by way of issuing a Letter of Credit) on or
after, the Termination Date and no Letter of Credit shall be issued that has an
expiration date that extends beyond the Termination Date.
B. NOTE. All Loans shall be evidenced by the Note. The Bank shall
record advances and principal payments thereof on the grid attached thereto or,
at its option, in its records, and the Banks record thereof shall be conclusive
absent manifest error. Notwithstanding the foregoing, the failure to make or an
error in making a notation with respect to any Loan or any payment shall not
limit or otherwise affect the Obligations of the Borrower with respect to such
Loan or payment.
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C. INTEREST RATE AND REPAYMENT. The Borrower shall repay, and shall
pay interest on, the unpaid principal amount of the Loans in accordance with the
provisions of the Note.
D. USE OF PROCEEDS. The proceeds of the Loans shall be available
(and the Borrower agrees that it shall use such proceeds) to finance seasonal
needs, provide funds for special projects, pay transaction costs for the
Purchase Transactions and provide for the ordinary working capital of the
Borrower.
E. CLEAN-UP PERIOD. The Borrower shall reduce the aggregate
principal amount of Loans outstanding, and all accrued and unpaid interest
thereon, under this Agreement to zero for a period of at least 30 consecutive
days during each Fiscal Year; provided that no Loan that has been extended by
the issuance by the Bank of a letter of credit for the benefit of the Borrower
shall be required to be reduced as a result of this Section II.E.
F. REDUCTION OF COMMITMENT. Upon at least three Business Days'
irrevocable notice, the Borrower shall have the right to permanently terminate
or reduce the Commitment at any time or from time to time; provided that (i)
each partial reduction shall be in aggregate amount at least equal to $1,000,000
or any integral multiple of $100,000 in excess thereof and (ii) no reduction
shall be made to the extent it would reduce the Commitment to an amount less
than the aggregate principal amount of the Loans then outstanding. Any reduction
or termination of the Commitment under this Section 2.F. shall be permanent and
may not be reinstated.
G. EXTENSION OF MATURITY DATE. No later than 60 days before the
Maturity Date, the Borrower may deliver a written notice to the Bank specifying
that it desires to extend the Maturity Date to June 30 of the following calendar
year. Should the Borrower so notify the Bank, no later than 30 days before the
Maturity Date the Bank shall notify the Borrower whether the Bank is willing to
so extend the Maturity Date. Should the Bank agree to so extend the Maturity
Date, the Bank shall timely so notify the Borrower and the Maturity Date shall
be extended to June 30 of the following calendar year. If the Bank does not
agree to extend the Maturity Date, the Bank shall so notify the Borrower and the
Maturity Date shall remain unchanged.
H. PREPAYMENTS.
(1) MANDATORY PREPAYMENTS.
(a) If, at any time and from time to time, the Bank
notifies the Borrower that the aggregate principal amount of the Loans then
outstanding exceeds an amount equal to the Borrowing Base on such date, the
Borrower shall repay the Loans within two (2) Business Days of the date such
notice is given by the amount equal to such excess, together with accrued and
unpaid interest to the date of such prepayment on the principal amount so
prepaid. Any amount of principal of a Loan so prepaid may be reborrowed in
accordance with Section II.A.
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(b) The Borrower shall, on each day on which funds are
deposited in the Account (as defined in the Security Agreement), apply such
funds to prepay the outstanding principal amount of the Loans, together with
accrued and unpaid interest to the date of such prepayment on the principal
amount so prepaid. Any amount of principal of a Loan so prepaid may be
reborrowed in accordance with Section II.A.
(2) OPTIONAL PREPAYMENT. The Borrower may prepay any Loan in
whole at any time or in part from time to time, without penalty or premium, and
each such prepayment shall be accompanied by the payment of accrued interest to
the date of such prepayment on the amount prepaid; provided that (i) each
partial prepayment shall be in a principal amount equal to $10,000 or an
integral multiple thereof and (ii) the Borrower shall give the Bank written
notice at least one (1) Business Day prior to the date of the prepayment of a
Loan. Each notice of prepayment shall be irrevocable and shall specify the date
and the amount of the prepayment. Any amount of principal of a Loan so prepaid
may be reborrowed in accordance with Section II.A.
I. COMMITMENT FEE. The Borrower will pay in immediately available
funds on the last Business Day of each March, June, September and December and
on the Termination Date, a commitment fee (the "Commitment Fee") equal to
one-half of one percent (1/2%) per annum on the average amount, calculated on a
daily basis, by which the Commitment exceeds the sum of the aggregate
outstanding principal amount of all Loans during the quarterly (or shorter)
period ending on such date. The Commitment Fee due under this Section II.H.
shall be calculated by the Bank (which calculation shall be conclusive absent
demonstrable error), shall commence to accrue on the Closing Date and shall
cease to accrue on the Termination Date.
J. PAYMENT. Payment of principal, interest and any other sums due
under this Agreement or under the Note shall be made without setoff or
counterclaim in United States dollars and in immediately available funds on the
day such payment is due not later than 12:00 noon (New York time). All sums
received after such time shall be deemed received on the next Business Day, and
principal payments or sums (other than interest) due hereunder shall bear
interest for an additional day or days, as applicable. All payments shall be
made to the Bank in accordance with the Bank's written instructions.
K. COMPUTATIONS OF INTEREST; BUSINESS DAY.
(1) All computations of interest under this Agreement and the
Note shall be made on the basis of a year of three hundred sixty (360) days and
actual days elapsed. Interest shall accrue daily on each Loan outstanding from
and including the date such Loan is made by the Bank to but excluding the date
on which such Loan is repaid.
(2) Payment of all amounts due hereunder shall be made on a
Business Day. Any payment due on a day that is not a Business Day shall be made
on the next Business Day.
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L. INCREASED COSTS, ETC.
(1) If, after the date of this Agreement, due to either (i)
the introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of law),
there shall be any (x) change in the basis of taxation of payments to the Bank
of the principal of or interest on any Loan (excluding changes in the rate of
tax payable on the Bank's overall income or income allocable to a particular
jurisdiction and bank franchise taxes) or (y) imposition or change in any
reserve or similar requirement, and the result of any of the foregoing is an
increase in the cost to the Bank of agreeing to make or making, funding or
maintaining any Loan, then the Borrower shall from time to time, upon demand by
the Bank, pay to the Bank an additional amount which the Bank has determined
reasonably and in good faith to be sufficient to compensate the Bank for such
increased cost. The Bank shall give the Borrower written notice of such
occurrence and deliver to the Borrower a certificate setting forth the amount of
such increased cost, together with its reasonably detailed calculations used to
determine such amount, which shall be conclusive and binding for all purposes,
absent demonstrable error.
(2) If the Bank determines that compliance with any law or
regulation or any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by the Bank
or any corporation controlling the Bank and that the amount of such capital is
increased by or based upon the existence of any Loan or the Commitment, then the
Borrower shall, upon demand by the Bank, pay to the Bank an additional amount
sufficient to compensate the Bank or such corporation in the light of such
circumstances, to the extent that the Bank reasonably determines such increase
in capital to be allocable to the existence of such Loans or the Commitment. A
certificate as to such amounts, submitted to the Borrower by the Bank, shall be
conclusive and binding for all purposes, absent demonstrable error.
(3) Prior to making any demand for compensation under this
Section II.K., (i) the Bank will use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to file any certificate
or document requested by the Borrower or to change the jurisdiction of its
lending office if the making of such a filing or change would avoid the need
for, or reduce the amount of, any such additional amounts that may thereafter
accrue and would not, in the judgment of the Bank, be otherwise disadvantageous
to the Bank, and (ii) the Bank will permit the Borrower to prepay all or any
part of the affected Loans, together with interest to the date of payment;
provided that nothing herein shall relieve the Borrower from its obligations to
compensate the Bank for increased costs or reduced return incurred prior to the
taking of the actions contemplated by clauses (i) and (ii) above.
M. LETTERS OF CREDIT. Subject to the terms of this Agreement, the
Commitment may be utilized, upon the request of the Borrower, in addition to
making Loans pursuant to Section II.A., by the issuance by the Bank of letters
of credit ("Letters of Credit") for the account of the Borrower. At least three
(3) Business Days prior to the proposed date of issuance of any requested Letter
of Credit, the Borrower shall deliver to the Bank a completed and executed
application in form satisfactory to the Bank (a "Letter of Credit Application")
with
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respect to such Letter of Credit which shall specify the account party or
parties therefor and shall describe in reasonable detail the proposed terms of
such Letter of Credit (including the beneficiary thereof) and the nature of the
transactions or obligations proposed to be supported thereby. The Borrower shall
observe and perform all of the agreements to be observed and to be performed by
it under each Letter of Credit Application, including its obligation to pay any
letter of credit fee specified therein and its Reimbursement Obligation with
respect thereto. The issuance by the Bank of each Letter of Credit shall, in
addition to the conditions precedent set forth in Article III, be subject to the
conditions precedent that (i) such Letter of Credit shall be in such form,
contain such terms and support such transactions as shall be satisfactory to the
Bank and (ii) the Borrower shall have executed and delivered a Letter of Credit
Application and such other instruments relating to such Letter of Credit as to
the Bank shall reasonably request; provided, however, that in the event of any
conflict between any Letter of Credit Application or other instrument and the
provisions of any other Loan Document, the provisions of such other Loan
Document shall govern.
III. CONDITIONS TO LOANS.
A. CONDITIONS TO ALL LOANS. The obligation of the Bank to make any
Loan hereunder on any date is subject to the conditions precedent that:
(1) The following statements shall be true on and as of the
date when such Loan is made, and the acceptance of the proceeds of such Loan by
the Borrower shall be deemed to be a representation and warranty of the Borrower
on the date of such Loan that: (a) the representations and warranties contained
in Article IV hereof and in each other Loan Document are true and correct on and
as of such date, before and after giving effect to such Loan and to the
application of the proceeds therefrom and (b) no event has occurred and is
continuing or would result from the making of such Loan, which constitutes a
Default or an Event of Default hereunder;
(2) The Bank shall have received a Notice of Borrowing in
accordance with Section II.A. with respect to such Loan;
(3) The Bank shall have determined that there is sufficient
Availability to make such Loan; and
(4) The Bank shall not have determined that the prospect of
payment or performance of any Loan has been materially impaired as a result of
any event or condition causing a Material Adverse Effect.
B. CONDITIONS TO INITIAL LOAN. The obligation of the Bank to make
the initial Loan hereunder is subject to the following additional conditions
precedent:
(1) The Bank shall have received this Agreement, duly executed
by the Borrower.
(2) The Bank shall have received the Note, duly executed by
the Borrower.
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(3) The Bank shall have received the Guaranty, duly executed
by the Guarantor.
(4) The Bank shall have received the Partnership Guaranty,
duly executed by the ▇▇▇▇▇▇▇ Partnership.
(5) The Bank shall have received the Borrower Security
Agreement, duly executed by the Borrower, the Partnership Security Agreement,
duly executed by the ▇▇▇▇▇▇▇ Partnership, and the ▇▇▇▇▇▇▇ Security Agreement,
duly executed by the Guarantor, together with:
(a) copies of proper Uniform Commercial Code financing
statements, and other appropriate filings, each duly filed or ready for
filing in all jurisdictions and offices that the Bank may deem necessary
in order to perfect the security interests created by the Borrower
Security Agreement, the Partnership Security Agreement and the ▇▇▇▇▇▇▇
Security Agreement,
(b) completed requests for information, listing all
effective financing statements filed in the jurisdictions referred to in
paragraph (a) above that name the Borrower, the ▇▇▇▇▇▇▇ Partnership or the
Guarantor as debtor, together with copies of such financing statements
(none of which shall cover the Collateral purported to be covered by the
Borrower Security Agreement, the Partnership Security Agreement or the
▇▇▇▇▇▇▇ Security Agreement), and
(c) evidence that all other actions necessary or, in the
good faith opinion of the Bank, desirable to perfect and protect the
security interests created by the Borrower Security Agreement, the
Partnership Security Agreement and the ▇▇▇▇▇▇▇ Security Agreement have
been taken, in form and substance reasonably satisfactory to the Bank.
(6) The Bank shall have received a Borrowing Base Certificate
setting forth the Borrowing Base as of the Closing Date.
(7) The Bank shall have received the Kmart Consent, duly
executed by Kmart Corporation and acknowledged by the Borrower.
(8) The Bank shall have received the Lifetime Consent, duly
executed by Lifetime Entertainment Services and acknowledged by the Borrower.
(9) The Bank shall have received the ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Consent,
duly executed by The ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Company and acknowledged by the Borrower.
(10) The Bank shall have received the Subordination Agreement,
duly executed by the Borrower and Time Publishing.
(11) Prior to or simultaneously with the Closing Date, the
transactions contemplated under the Time Publishing Agreements and the Purchase
Transactions shall have
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been consummated in accordance with (i) the Time Publishing Agreements and the
Purchase Documents, without any waiver or amendment not consented to by the Bank
of any term, provision or condition set forth therein and (ii) all applicable
laws or requirements of any applicable Governmental Authority.
(12) All representations and warranties of the Borrower and
Time Publishing contained in the Time Publishing Agreements and the Purchase
Documents shall be true and correct in all material respects on the Closing
Date, as though made on and as of such date (except insofar as such
representations and warranties relate expressly to an earlier date, in which
case they shall be true and correct in all material respects as of such earlier
date) and no default or event of default shall exist thereunder.
(13) The Bank shall have received true and complete copies,
certified by an officer of the Borrower, of the Purchase Agreement with all
schedules and exhibits thereto, each other Purchase Document, each Time
Publishing Agreement and each Assigned Contract (as defined in the Borrower
Security Agreement).
(14) The Bank shall have received
(a) a copy of the Certificate of Formation of the
Borrower, as amended to such date, certified as of a recent date by the
Secretary of State of the State of Delaware, and a certificate of good
standing from such Secretary of State dated as of a recent date;
(b) a certificate of an officer of the Borrower, dated
the Closing Date and certifying (i) that attached thereto is a true and
complete copy of the LLC Agreement and other constitutive documents as in
effect on the date of such certificate, (ii) that attached thereto is a
true and complete copy of the resolutions adopted by the managers of the
Borrower authorizing the execution, delivery and performance of each of
the Loan Documents and the Contemplated Transactions and that such
resolutions have not been modified, rescinded or amended and are in full
force and effect, (iii) that the Borrower's Certificate of Formation has
not been amended since the date of the last amendment thereto shown on the
certificate of good standing delivered pursuant to subparagraph 14(a)
above, (iv) that attached thereto is a true and complete list of the
members, officers and directors of the Borrower as of the date of such
certificate and (v) as to the incumbency and specimen signature of each of
the Borrower's officers executing this Agreement, the Note, each Security
Document or any other Loan Document delivered herewith or therewith, as
applicable; and
(c) a certificate of another of the officers of the
Borrower as to the incumbency and signature of the officer delivering the
certificate described in subparagraph 14(b) above.
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(15) The Bank shall have received
(a) a copy of the Certificate of Limited Partnership of
the ▇▇▇▇▇▇▇ Partnership, as amended to such date, certified as of a recent
date by the Secretary of State of the State of Connecticut, and a
certificate of existence from such Secretary of State dated as of a recent
date;
(b) a certificate of the general partner of the ▇▇▇▇▇▇▇
Partnership, dated the Closing Date and certifying (i) that attached
thereto is a true and complete copy of the Partnership Agreement and other
constitutive documents as in effect on the date of such certificate, (ii)
that the Certificate of Limited Partnership of the ▇▇▇▇▇▇▇ Partnership has
not been amended since the date of the last amendment thereto shown on the
certificate of good standing delivered pursuant to subparagraph 15(a)
above, (iii) that attached thereto is a true and complete list of the
partners of the ▇▇▇▇▇▇▇ Partnership as of the date of such certificate and
(iv) as to the incumbency and specimen signature of each of the ▇▇▇▇▇▇▇
Partnership's partners executing the Loan Documents to which the ▇▇▇▇▇▇▇
Partnership is party; and
(c) a certificate of another of the partners of the
▇▇▇▇▇▇▇ Partnership as to the incumbency and signature of the partner
delivering the certificate described in subparagraph 15(b) above.
(16) The LLC Agreement shall have been executed by the members
of the Borrower and shall be in form and substance satisfactory to the Bank.
(17) The Borrower shall have paid to the Bank the fee of
$100,000 with respect to the issuance of the commitment letter dated as of
January 13, 1997 among the Bank, the Borrower, the Guarantor, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
Inc. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Company.
(18) The Bank shall have received, and determined the same to
be in form and substance satisfactory to it, evidence of the Borrower's
compliance with Section V.B. hereof.
(19) The Account shall have been established in accordance
with the terms of this Agreement and the Borrower Security Agreement.
(20) The Bank shall have received favorable opinions of
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇ and ▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to the Borrower, as
to such matters as the Bank may reasonably request, in form and substance
reasonably satisfactory to the Bank.
(21) The Bank shall have received a certificate(s) evidencing
the interest of the ▇▇▇▇▇▇▇ Partnership in the Company, together with a stock
power executed in blank with medallion guaranty.
(22) All legal matters in connection with the Contemplated
Transactions and the Purchase Transactions shall be satisfactory to the Bank and
its counsel in their sole discretion.
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(23) The Bank shall have received all other promissory notes,
loan agreements, security agreements, financing statements, assignments,
guaranties, corporate resolutions, appraisals and other documents and
instruments that are, in the opinion of the Bank, necessary in connection with
the Loans, and such other financial or other information as the Bank may
reasonably require.
IV. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and
warrants to the Bank as follows:
A. GOOD STANDING. The Borrower (i) is a limited liability company,
duly organized, validly existing and in good standing under the laws of the
State of Delaware, (ii) has the requisite power and authority to own, lease and
operate its property and assets and to carry on its business as conducted and
currently proposed to be conducted and (iii) is qualified to do business in each
jurisdiction where the failure to so qualify could have a Material Adverse
Effect.
B. AUTHORIZATION. The Borrower (i) has the power and authority to
execute, deliver and perform its obligations under this Agreement, the Note, the
other Loan Documents, the Time Publishing Agreements and the Purchase Documents
to which it is a party and (ii) is duly authorized to execute, deliver and
perform this Agreement, each of the other Loan Documents, the Time Publishing
Agreements and the Purchase Documents to which it is a party, borrow hereunder,
grant the security interests in the Collateral created by the Security Documents
and consummate the Contemplated Transactions and the Purchase Transactions and
to incur the Time Publishing Indebtedness.
C. NO CONFLICTS. Neither the execution and delivery of the Loan
Documents, the Time Publishing Agreements and the Purchase Documents, nor the
consummation of the transactions contemplated herein and therein, nor the
performance of and compliance with the terms and provisions hereof and thereof
by the Borrower will (i) violate or conflict with any provision of its
Certificate of Formation or the LLC Agreement or other constitutive documents,
(ii) violate, contravene or conflict with any law, regulation (including,
without limitation, Regulation G, T, U or X of the Board of Governors of the
Federal Reserve), order, writ, judgment, injunction, decree or permit of any
Governmental Authority or arbitration authority applicable to it, (iii) violate,
contravene or conflict with contractual provisions of, or cause a default under,
any indenture, agreement, mortgage, deed of trust or other agreement or
instrument to which it is a party or by which it may be bound, the violation of
which could reasonably be expected to have a Material Adverse Effect, or (iv)
result in or require the creation of any Lien (other than Permitted Liens) upon
any property or assets of the Borrower.
D. APPROVALS. No registration or filing with, consent or approval
of, or other action by, any Governmental Authority is or will be required on
behalf of the Borrower in connection with the Contemplated Transactions, the
Purchase Transactions or the incurrence of the Time Publishing Indebtedness,
other than the filings necessary to perfect the Liens as contemplated by the
Subordination Agreement and those which the failure to obtain could not have a
Material Adverse Effect.
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E. BINDING AGREEMENT. Each of this Agreement, the other Loan
Documents, the Purchase Documents and the Time Publishing Agreements to which
the Borrower is a party have been duly executed and delivered by the Borrower
and each constitutes its valid and legally binding obligation, enforceable
against the Borrower in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability.
F. LITIGATION. There is no litigation or proceeding involving the
Borrower pending or, to the knowledge of the Borrower, threatened before any
court or other Governmental Authority or arbitration authority, against or
affecting the Borrower or its business, assets or rights, the Purchase
Transactions or the transactions contemplated by the Time Publishing Agreements.
G. COMPLIANCE WITH LAWS. The Borrower is not in violation of any
law, rule or regulation or in default with respect to any judgment, writ,
injunction or decree, of any Governmental Authority or arbitration authority the
violation of which could have a Material Adverse Effect.
H. TAXES. All taxes and assessments due and payable by the Borrower
have been paid or are being contested in good faith by appropriate proceedings
and the Borrower has filed all tax returns which it is required to file.
I. ACCURACY OF INFORMATION. All information furnished by the
Borrower to the Bank in connection with this Agreement and the other Loan
Documents is and will be accurate and complete in all material respects on the
date as of which such information is delivered to the Bank and is not and will
not be incomplete by the omission of any fact necessary to make such information
not materially misleading.
J. USE OF PROCEEDS. The proceeds of the Loans are to be used solely
for the purposes set forth in and permitted by Section II.D. hereof. None of
such proceeds will be used for the purpose of purchasing or carrying any Margin
Stock or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve.
K. OWNERSHIP OF PROPERTIES. The Borrower has good and marketable
title to its assets, free and clear of all Liens, other than Permitted Liens.
The Borrower has good and marketable title to all the assets purchased by it
from Time Publishing under the Purchase Documents, free and clear of all Liens
other than Permitted Liens, and such assets comprise all of the rights and
property necessary to permit the Borrower to conduct the business of ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Living Enterprises division, including, without limitation, ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Living Television, ▇▇▇▇▇▇ by Mail and Home for the Holidays, in all
material respects as it was conducted by Time Publishing.
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L. ERISA. With respect to the provisions of ERISA:
(1) Each Plan has complied with and has been administered in
all material respects in accordance with applicable provisions of ERISA and the
Code.
(2) No Reportable Event has occurred with respect to any Plan
that resulted or is reasonably likely to result in any unpaid liability that
could have a Material Adverse Effect.
(3) The present value of all accrued benefits under each
Single Employer Plan maintained by the Borrower or any ERISA Affiliate (based on
then current assumptions used to fund such Plan as of the last annual valuation
date applicable thereto), does not exceed the value of the assets of each such
Plan allocable to such benefits.
(4) Neither the Borrower nor any ERISA Affiliate has received
notice that any Multiemployer Plan is in reorganization or insolvent where such
reorganization or insolvency has resulted, or would be reasonably likely to
result in an unpaid liability that is reasonably likely to have a Material
Adverse Effect nor, to the best knowledge of the Borrower, is any such
reorganization or insolvency reasonably likely to occur. Neither the Borrower
nor any ERISA Affiliate has incurred any unpaid withdrawal liability, or is
reasonably expected to incur any withdrawal liability, to any Multiemployer
Plan.
M. ENVIRONMENTAL. The conduct of the Borrower's business operations
and the condition of the Borrower's property does not and will not violate any
federal laws, rules or ordinances for environmental protection, regulations of
the Environmental Protection Agency, any applicable local or state law, rule,
regulation or rule of common law or any judicial interpretation thereof relating
primarily to the environment or Hazardous Materials the violation of which could
reasonably be expected to have a Material Adverse Effect.
N. PURCHASE DOCUMENTS. The Purchase Documents have been duly
executed and delivered by the parties thereto, are in full force and effect,
constitute valid and legally binding obligations of the parties thereto and are
enforceable against such parties in accordance with the terms thereof. The
Purchase Transactions to occur on or prior to the Closing Date have been
consummated, and all conditions precedent to such transactions have been
satisfied or waived in writing. The representations and warranties of the
Borrower and, to the knowledge of the Borrower, Time Publishing contained in the
Purchase Documents are each true and correct in all material respects.
O. SOLVENCY. The Borrower is and, immediately after consummation of
the Contemplated Transactions and the transactions contemplated by the Purchase
Documents and the Time Publishing Agreements, will be Solvent.
P. INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT. The
Borrower is not an "investment company" as defined in, or is otherwise subject
to regulation under, the Investment Company Act of 1940. The Borrower is not a
"holding company" as that
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term is defined in or is otherwise subject to regulation under, the Public
Utility Holding Company Act of 1935.
V. AFFIRMATIVE COVENANTS. Until full payment and performance of all
Obligations and the termination of the Commitment, the Borrower will, and will
cause each of the Subsidiaries to, unless the Bank consents otherwise in writing
(and without limiting any requirement of any other Loan Document):
A. FINANCIAL STATEMENTS AND OTHER INFORMATION. Furnish to the Bank,
in form and content reasonably acceptable to the Bank, the following:
(1) as soon as available, but not later than 90 days after the
end of each Fiscal Year, a copy of the audited consolidated balance sheet of the
Borrower as at the end of such Fiscal Year and the related consolidated
statements of income and statements of earnings, operations, cash flow and
members' equity for such Fiscal Year, prepared in accordance with GAAP and
certified in a manner reasonably acceptable to the Bank by independent certified
public accountants reasonably acceptable to the Bank;
(2) as soon as available, but not later than 45 days after the
end of each of the first three quarters of each Fiscal Year of the Borrower, an
unaudited consolidated balance sheet of the Borrower as of the end of such
quarter and a consolidated income statement, and consolidated statement of
earnings, operations, cash flows and members' equity for the period commencing
at the end of the previous Fiscal Year and ending with end of such quarter,
prepared in accordance with GAAP and certified (subject to normal year-end audit
adjustment and the absence of footnotes) on behalf of the Borrower by the chief
financial officer of the Borrower;
(3) as soon as available, but not later than 30 days after the
end of each month, an unaudited consolidated balance sheet of the Borrower as of
the end of such month and a consolidated income statement and consolidated
statement of earnings, operations, cash flows and members' equity for each such
month, prepared in accordance with GAAP and certified (subject to normal
year-end audit adjustment and the absence of footnotes) on behalf of the
Borrower by the chief financial officer of the Borrower;
(4) concurrently with any delivery under paragraph (1), (2) or
(3) above, a certificate of the chief financial officer of the Borrower (a)
certifying that no Default or Event of Default has occurred and, if a Default or
Event of Default has occurred, specifying the nature and extent thereof and any
corrective action taken or proposed to be taken with respect thereto and (b)
setting forth computations and conclusions, in such detail as the Bank may
reasonably request, with respect to compliance with this Agreement, and the
other Loan Documents, including computations of all quantitative covenants;
(5) as soon as practicable, copies of all registration
statements, annual, periodic or other reports, forms, filings, proxy statements,
loan documents, financial information, and other information filed by any Loan
Party with or submitted to the Securities and Exchange Commission or any
Governmental Authority that may be substituted therefor, or any national
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securities exchange and copies of all proxy statements, financial statements and
reports submitted to its shareholders;
(6) not later than November 30 of each year, a copy of the
business plan and the projections of the operating budget and cash flow budget
of the Borrower and the Subsidiaries for the next succeeding Fiscal Year, such
projections to be accompanied by a summary of assumptions and operating
statistics used in calculating such budgets and a certificate of the chief
financial officer of the Borrower certifying that such projections have been
prepared in good faith on the basis of reasonable assumptions and that such
officer has no reason to believe that they are incorrect or misleading in any
material respect, and within 45 days after the end of each fiscal quarter, an
update or revision to such plan, and any other updates or revisions to such plan
as soon as available;
(7) as soon as available, but not later than 20 days after the
end of each month,
(a) a summary aging schedule of the Receivables as of
the last day of such month for the Borrower, and
(b) a Borrowing Base Certificate as of the last day of
such month executed by the chief financial officer of the Borrower;
(8) promptly upon, and in any event not later than five (5)
days after, becoming aware thereof, notice of
(a) the breach by any party of any Assigned Contract,
any Purchase Document or any Time Publishing Agreement;
(b) the issuance by any Governmental Authority of any
injunction, order, decision or other restraint prohibiting, or having the
effect of prohibiting, the making of the Loans, or invalidating, or having
the effect of invalidating, any provision of this Agreement, the Note, the
other Loan Documents or any Time Publishing Agreement or Purchase
Document, or the initiation of any litigation or similar proceeding
seeking any such injunction, order, decision or other restraint;
(c) the filing or commencement of any action, suit or
proceeding against the Borrower or any Subsidiary before any Governmental
Authority the adverse determination of which could reasonably be expected
to have a Material Adverse Effect;
(d) any Default or Event of Default, specifying the
nature and extent thereof and the action (if any) which is proposed to be
taken with respect thereto;
(e) the occurrence or expected occurrence of any
Reportable Event with respect to any Plan;
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(f) the institution of proceedings or the taking or
expected taking of any other action by the PBGC or the Borrower or any
ERISA Affiliate to terminate, withdraw or partially withdraw from any
Plan, and, with respect to any Multiemployer Plan, the reorganization or
insolvency of such Plan;
(g) any development in the business or affairs of the
Borrower, the Subsidiaries or any other Loan Party which has had or could
reasonably be expected to have a Material Adverse Effect;
(h) the commencement by the United States Internal
Revenue Service of an audit of any Federal income tax return of the
Borrower, any Subsidiary or any other Loan Party; and
(i) the commencement of any proceeding pursuant to which
the Borrower, any Subsidiary or any other Loan Party contests the validity
or amount of any tax, assessment or governmental charge or levy which is
in excess of $100,000;
(9) promptly upon receipt or delivery thereof, copies of all
notices received or delivered under or pursuant to the Purchase Documents or the
Time Publishing Agreements; and
(10) promptly such other information, reports and other
information as the Bank may reasonably request.
B. INSURANCE. Maintain at all times insurance with responsible
insurance companies (i) on such of its properties, in such amounts and against
such risks as is customarily maintained by similar businesses operating in the
same vicinity, specifically to include fire and extended coverage insurance
covering all assets, business interruption insurance, workers' compensation
insurance and liability insurance, all to be with such companies as are
reasonably satisfactory to the Bank and providing for at least 30 days' prior
notice to the Bank of any cancellation thereof and (ii) of the type and in the
amounts specified in the definition of Insurance Assignments herein. All
casualty insurance, credit insurance and other insurance covering tangible
personal property subject to a Lien in favor of the Bank granted pursuant to the
Security Documents shall provide that the Bank is a loss payee.
C. EXISTENCE AND COMPLIANCE. Do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence, and comply in all respects with all laws, rules, regulations and
orders of any Governmental Authority (including, without limitation, those
relating to environmental laws) applicable to the operation of its business
whether now in effect or hereafter enacted if noncompliance with such law, rule,
regulation or order could reasonably be expected to have a Material Adverse
Effect.
D. TAXES. Pay and discharge promptly when due all material taxes,
assessments and governmental charges, levies or claims imposed upon it or upon
its income or profits or in respect of its property before the same shall become
delinquent or in default, as well as all lawful claims for labor, materials and
supplies or otherwise, which, if unpaid, might give
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rise to Liens upon such properties or any part thereof, except such taxes,
assessments and governmental charges, levies and claims which are diligently
contested in good faith by appropriate proceedings and as to which adequate
reserves have been established in accordance with GAAP.
E. USE OF PROCEEDS. Use the proceeds of the Loans solely as
permitted under Section II.D.
F. MAINTENANCE. Maintain all of its tangible property in good
condition and repair and make all necessary replacements thereof, and preserve
and maintain all licenses, trademarks, copyrights, privileges, permits,
franchises, certificates and the like necessary for the operation of its
business.
G. ENVIRONMENTAL. Immediately advise the Bank in writing of (i) any
and all enforcement, cleanup, remedial, removal, or other governmental or
regulatory actions instituted, completed or threatened pursuant to any
applicable federal, state, or local laws, ordinances or regulations relating to
any Hazardous Materials affecting the Borrower's or any Subsidiary's business
operations and (ii) all claims made or threatened by any third party against the
Borrower or a Subsidiary relating to damages, contribution, cost recovery,
compensation, loss or injury resulting from any Hazardous Materials which if
adversely determined could reasonably be expected to have a Material Adverse
Effect. The Borrower shall promptly notify the Bank of any remedial action taken
by the Borrower or any Subsidiary with respect to any Hazardous Materials
affecting business operations of the Borrower or such Subsidiary. The Borrower
will not use or permit any other party to use any Hazardous Materials at any of
the Borrower's or the Subsidiaries' places of business or at any other property
owned by the Borrower except such materials as are incidental to the Borrower's
or such Subsidiary's normal course of business, maintenance and repairs and
which are handled in compliance with all applicable environmental laws. The
Borrower agrees to permit the Bank, its agents, contractors and employees to
enter and inspect any of the Borrower's or the Subsidiaries' places of business
or any other property of the Borrower or any Subsidiary at any reasonable times
upon three (3) days' prior notice for the purposes of conducting an
environmental investigation and audit (including taking physical samples) to
insure that the Borrower and the Subsidiaries are complying with this covenant
and the Borrower shall reimburse the Bank on demand for the costs of any such
environmental investigation and audit. The Borrower and the Subsidiaries shall
provide the Bank, its agents, contractors, employees and representatives with
access to and copies of any and all data and documents relating to or dealing
with any Hazardous Materials used, generated, manufactured, stored or disposed
of by the Borrower's and the Subsidiaries' business operations within five (5)
days of the request therefor.
H. ERISA. Pay and discharge promptly any liability imposed upon it
pursuant to the provisions of Title IV of ERISA; provided, however, that neither
the Borrower nor any ERISA Affiliate shall be required to pay any such liability
if (i) the amount, applicability or validity thereof shall be diligently
contested in good faith by appropriate proceedings, and (ii) such Person shall
have set aside on its books reserves which, in the opinion of the independent
certified public accountants of such Person, are adequate with respect thereto.
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I. OBLIGATIONS UNDER LOAN DOCUMENTS. (i) Make full and timely
payment of the Obligations, whether now existing or hereafter arising, (ii) duly
comply with all the terms and covenants contained in this Agreement and in each
of the other Loan Documents, and (iii) except for the filing of continuation
statements and the making of other filings by the Bank as secured party or
assignee, at all times take all actions necessary to maintain the Liens and
security interests provided for under any of the Loan Documents as valid and
perfected first priority Liens on the property intended to be covered thereby
(subject only to Permitted Liens) and supply all information to the Bank
necessary for such maintenance.
J. OTHER OBLIGATIONS. Perform in all respects all of its obligations
under the terms of all agreements, indentures, mortgages, security agreements or
other instruments to which it is a party or by which it or its properties is
bound (including those contained in the Purchase Documents and the Time
Publishing Agreements), except where the failure to perform could not reasonably
be expected to have a Material Adverse Effect.
K. MAINTAINING RECORDS; ACCESS TO PROPERTIES AND INSPECTIONS; RIGHT
TO AUDIT. Maintain financial records in accordance with GAAP and, upon
reasonable notice, at all reasonable times and as often as the Bank may
reasonably request, permit any authorized representative designated by the Bank
to visit and inspect the properties and financial records of the Borrower and
the Subsidiaries, subject to Section IX.A. hereof, and permit any authorized
representative designated by the Bank to discuss the affairs, finances and
condition of the Borrower and the Subsidiaries with the chief financial officer
of the Borrower and such other officers as the Bank shall deem appropriate and
the independent public accountants of the Borrower, as applicable. At the
expense of the Borrower, subject to Section IX.A. hereof, the Bank shall have
the right to audit (i) as often as it may reasonably request, the books and
records of the Borrower and the Subsidiaries and to review its compliance with
the terms and conditions of this Agreement and the other Loan Documents, and
(ii) at least twice each Fiscal Year, the books and records of the Borrower
relating to the Receivables.
L. MAINTENANCE OF ACCOUNTS. Maintain the Account, and maintain all
of its deposit accounts and cash concentration accounts with the Bank or its
Affiliates, except as is permitted by the Borrower Security Agreement.
M. ASSIGNMENT OF LIFE AND DISABILITY INSURANCE; COPYRIGHT AND
TRADEMARK FILINGS. As soon as practicable, (i) but not later than 60 days after
the Closing Date, deliver to the Bank the Insurance Assignments duly executed by
the Borrower and acknowledged by the issuers of the policies assigned thereunder
and (ii) but not later than 10 days after request therefor by the Bank, deliver
to the Bank such documents and instruments as the Bank may request to perfect
the Bank's Lien in the Copyrights and Trademarks (as defined in the Borrower
Security Agreement) pursuant to the Borrower Security Agreement.
N. FURTHER ASSURANCES. Execute any and all further documents and
take all further actions which may be required under applicable law, or which
the Bank may reasonably request, to grant, preserve, protect and perfect the
first priority security interest created by the Security Documents in the
Collateral.
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VI. NEGATIVE COVENANTS. Until full payment and performance of all
Obligations and the termination of the Commitment, the Borrower will not, and
will not permit its Subsidiaries to, without the prior written consent of the
Bank (and without limiting any requirement of any other Loan Documents):
A. LIENS. Incur, create, assume or permit to exist any Lien on any
of its property or assets, whether owned on the Closing Date or hereafter
acquired, or assign or convey any rights or security interest in any future
revenues, except for the following (collectively, "Permitted Liens"):
(i) Liens incurred and pledges and deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance,
old-age pensions and other social security benefits (not including any Lien
described in Section 412(m) of the Code) and utility company deposits; (ii)
Liens imposed by law, such as landlord, carriers', warehousemen's, mechanics',
materialmen's and vendors' Liens and other similar Liens, incurred in good faith
in the ordinary course of business and securing obligations which are not
overdue or are being contested in good faith by appropriate proceedings; (iii)
zoning restrictions, easements, licenses, reservations, provisions, covenants,
conditions, waivers, restrictions on the use of real property (and with respect
to leasehold interests, mortgages, obligations, liens and other encumbrances
incurred, created, assumed or permitted to exist and arising by, through or
under a landlord, ground lessor or owner of the leased property, with or without
consent of the lessee) which do not in the aggregate materially detract from the
value of the property or the assets or materially impair the use thereof in the
operation of the business of the Borrower and the Subsidiaries; (iv) Liens
created in favor of the Bank; (v) Liens securing the Indebtedness permitted
under clause (v) of Section VI.B. and which are at all times subordinate to the
Lien created by the Borrower Security Agreement in accordance with the terms of
the Subordination Agreement; (vi) judgment Liens which do not constitute an
Event of Default; provided that the execution or enforcement of any such Lien is
effectively stayed and the claim secured thereby is being actively contested in
good faith and by appropriate proceedings; (vii) purchase money Liens on any
property acquired by the Borrower or any Subsidiary securing Indebtedness
incurred or assumed by the Borrower or such Subsidiary in compliance with the
provisions of this Agreement and for the purpose of financing all or any part of
the cost of acquiring such property; provided that such Lien (A) is created or
incurred contemporaneously with such acquisition, (B) attaches solely to the
property so acquired in such transaction and (C) the principal amount of
Indebtedness secured by any such Lien shall at no time exceed 100% of the
original purchase price of such property at the time it was acquired; (viii)
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 permitted to exist under this Agreement; (ix) inchoate Liens for taxes
not yet due and payable or for taxes that are being contested actively and in
good faith by appropriate proceedings for which appropriate reserves have been
established in accordance with GAAP; and (x) Liens constituting intellectual
property licenses entered into in the ordinary course of business.
B. DEBT. Incur, create, assume or permit to exist any Indebtedness
other than (i) Indebtedness secured by Liens permitted under Section VI.A.; (ii)
Indebtedness existing on the Closing Date and listed on Schedule VI.B hereto,
and any extension, renewal or refunding
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thereof on terms and conditions no more favorable, in the aggregate, to the
obligee under such Indebtedness, but not any increase thereof; (iii)
Indebtedness incurred hereunder and under the other Loan Documents; (iv)
Indebtedness in respect of current accounts payable and accrued expenses
incurred in the ordinary course of business including, to the extent not
current, accounts payable and accrued expenses that are subject to good faith
dispute; and (v) the Time Publishing Indebtedness in an amount not to exceed
$30,000,000 in aggregate principal amount outstanding at any time and which
shall at all times be subordinate to the Loans and the Obligations in accordance
with terms of the Subordination Agreement.
C. INVESTMENTS. Make any Investments except for Investments which
are (i) accounts receivable created, acquired or made in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms,
(ii) except to the extent limited or prohibited by any other provision of this
Agreement, leases, subleases and capital leases, regardless of whether rent is
paid in arrears or in advance, (iii) deposits made or expenses prepaid in the
ordinary course of business in connection with workers' compensation, real
estate taxes and insurance policies required to be maintained hereunder, (iv)
any other prepaid expenses not to exceed $9,500,000 in the aggregate for the
Borrower and the Subsidiaries, (v) Investments in each Fiscal Year not to exceed
$750,000 in the aggregate for the Borrower and the Subsidiaries, (vi)
Investments listed on Schedule IV to the Borrower Security Agreement, (vii)
Collateral Investments (as defined in the Borrower Security Agreement) and
(viii) Investments in Subsidiaries in compliance with Section VI.O.
D. CAPITAL EXPENDITURES. Permit or suffer the aggregate amount of
payments made for Capital Expenditures, at the time incurred, to exceed (i)
$6,500,000 in 1997 and (ii) $2,000,000 in 1998 for the Borrower and the
Subsidiaries.
E. DIVIDENDS, DISTRIBUTIONS AND PAYMENTS. Declare or pay, directly
or indirectly, any cash dividends or make any other distribution in cash,
property, securities (other than its own membership interests or shares of its
capital stock) or a combination thereof, with respect to any of its membership
interests or shares of its capital stock, or directly or indirectly redeem,
purchase, retire or otherwise acquire for value any of its membership interests
or any shares of its capital stock, or set aside any amount for any such purpose
(including, without limitation, making the Call Offer, as such term is defined
in the LLC Agreement), except that (i) any Subsidiary may pay dividends or
distributions to the Borrower or any Subsidiary, (ii) the Borrower may pay
distributions to its members as provided in Section 9.2 of the LLC Agreement as
in effect on the date hereof and (iii) the Borrower may pay the Time Special
Distribution (as defined in the LLC Agreement).
F. CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. Consolidate or merge
into any other Person or sell, lease, transfer or assign to any Person,
voluntarily or by operation of law, or otherwise dispose of any of its assets
(whether now owned or hereafter acquired), or permit another Person to merge
into it, except that (i) the Borrower or any Subsidiary may sell any of its
inventory in the ordinary course of business, (ii) the Borrower or any
Subsidiary may sell, lease, transfer, assign or otherwise dispose of its assets
which are no longer necessary for the proper conduct of its business, (iii) the
Borrower may transfer its assets to a corporation to which the Borrower is
converting in accordance with Section 15.1(a) of the LLC Agreement as in effect
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on the date thereof and such transfer otherwise satisfies the requirements of
Section X.C. and (iv) the Borrower may pledge its assets to Time Publishing in
accordance with the terms of the Subordination Agreement.
G. SALE AND LEASE-BACK TRANSACTIONS. Enter into any arrangement,
directly or indirectly, with any person whereby the Borrower or any Subsidiary
shall sell or transfer any real or personal property and thereafter rent or
lease such property or such other property which the Borrower or such Subsidiary
intends to use for substantially the same purpose as the property being sold or
transferred.
H. SALES OF RECEIVABLES. Sell, assign, discount, transfer or
otherwise dispose of any Receivable, promissory note, draft or trade acceptance
or other right to receive payment held by it, except for (i) the purpose of
collection or settlement in the ordinary course of business and (ii) the grant
of Liens thereon pursuant to the Loan Documents and the Time Publishing
Agreements in accordance with the terms of the Subordination Agreement.
I. QUICK RATIO. Permit or suffer the ratio of Current Assets to
Current Liabilities of the Borrower and the Subsidiaries at the end of any
calendar quarter to be less than 1.35 to 1.0 for the three-month period then
ending.
J. DEBT SERVICE COVERAGE RATIO. Permit or suffer the Debt Service
Coverage Ratio of the Borrower and the Subsidiaries at each June 30 and December
31 to be less than 2.0 to 1.0 for the six-month period then ending, except as
may occur solely as a result of any payment of the Time Publishing Indebtedness
required to be made pursuant thereto as a result of the registration by the
Borrower of any equity securities of the Borrower pursuant to a registration
statement under the Securities Act of 1933, as amended.
K. CHARACTER OF BUSINESS. Change the general character of its
business as conducted at the date hereof, or engage in any type of business not
reasonably related to its business as presently conducted.
L. SUBSIDIARIES. Create, acquire or otherwise cause to come into
existence any Subsidiary; provided that the Borrower may create, acquire or
otherwise cause to come into existence a Subsidiary wholly owned (directly or
indirectly) by the Borrower if (i) the Borrower pledges all of its equity
interest in such Subsidiary to the Bank to secure the Obligations pursuant to a
pledge agreement in form and substance reasonably satisfactory to the Bank, (ii)
such Subsidiary guarantees the Obligations pursuant to a guaranty agreement in
form and substance reasonably satisfactory to the Bank, (iii) such Subsidiary
grants to the Bank a first priority security interest in all of its assets of
any kind or nature to secure such Subsidiary's obligations under the guaranty
described in clause (ii) above pursuant to a security agreement in form and
substance reasonably satisfactory to the Bank and (iv) the Bank receives such
board resolutions, officer's certificates and opinions of counsel as the Bank
shall reasonably request in connection with the actions described in clauses
(i), (ii) and (iii) above.
M. ACCOUNTING CHANGE. Make any change in its accounting treatment or
financial reporting practices except as required or permitted by GAAP, or change
its Fiscal Year.
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N. TRANSACTIONS WITH AFFILIATES. Directly or indirectly purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or enter into any other transaction with, any equity holder, Affiliate or agent
of such Person, or any relative thereof, except (i) transfers of membership
interests in the Borrower to employees of the Borrower as incentive compensation
in connection with such employment in an aggregate amount not to exceed at any
time 15% of the outstanding membership interests in the Borrower, (ii)
transactions pursuant to the agreements set forth on Schedule VI.N hereto as
such agreements are in effect on the date hereof and (iii) other transactions at
prices and on terms not less favorable to it than that which would have been
obtained in an arm's-length transaction with a non-affiliated third party.
O. ERISA. (1) Engage in any transaction in connection with which the
Borrower or any ERISA Affiliate is reasonably likely to be subject to either a
material civil penalty assessed pursuant to the provisions of Section 502 of
ERISA or a material tax imposed under the provisions of Section 4975 of the
Code.
(2) Terminate any Pension Plan in a "distress termination"
under Section 4041 of ERISA or take any other action which could result in a
material liability of the Borrower or any ERISA Affiliate to the PBGC.
(3) Fail to make payment when due of all amounts which, under
the provisions of any Plan, the Borrower or any ERISA Affiliate is required to
pay as contributions thereto, or, with respect to any Pension Plan, permit to
exist any material "accumulated funding deficiency" (within the meaning of
Section 302 of ERISA and Section 412 of the Code), whether or not waived, with
respect thereto.
(4) Adopt an amendment to any Pension Plan requiring the
provision of security under Section 307 of ERISA or Section 401(a)(29) of the
Code.
P. PREPAYMENT OR MODIFICATION OF INDEBTEDNESS; MODIFICATION OF
AGREEMENTS.
(1) Other than the Indebtedness incurred under any Loan
Document, directly or indirectly prepay, redeem, purchase or retire in advance
of its scheduled maturity any Indebtedness, including, without limitation, the
Time Publishing Indebtedness, except as is permitted by the terms of the
Subordination Agreement.
(2) Directly or indirectly amend, modify, supplement or waive
compliance with any term or provision of its Certificate of Formation, the LLC
Agreement, certificate of incorporation, bylaws or other constitutive documents
if the effect thereof could have a Material Adverse Effect.
(3) Directly or indirectly amend, modify, supplement or waive
compliance with, or seek a waiver, in any manner under any term or provision of
any of the Purchase Documents or the Time Publishing Agreements, or consent to
any of the foregoing.
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(4) Directly or indirectly amend, modify, supplement or waive
compliance with or seek a waiver under any term or provision of or any other
agreement, instrument or document to which the Borrower or such Subsidiary is a
party if the effect thereof could reasonably be expected to have a Material
Adverse Effect.
Q. NEGATIVE PLEDGES, ETC. Enter into or be subject to, directly or
indirectly, including, without limitation, as a non-party subsidiary of a party
to any agreement, any agreement (other than this Agreement, any other Loan
Document or any Time Publishing Agreement) which prohibits or restricts, in any
manner (i) the incurrence, creation or assumption of any Indebtedness or any
Lien upon any property of the Borrower or the Subsidiaries, or the sale,
disposition or pledge of any asset of the Borrower or the Subsidiaries, except
restrictions in any purchase money financing agreement permitted hereunder
relating only to the asset financed thereunder, or (ii) any amendment or
supplement to, or waiver under, this Agreement or any other Loan Document.
VII. REMEDIES UPON DEFAULT. If an Event of Default (as defined in the
Note) shall occur, the Bank may exercise all rights, powers and remedies
available to it under each of the Loan Documents, as well as all rights and
remedies available at law or in equity.
VIII. NOTICES. All notices, requests or demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to the other party at the following
address:
if to the Borrower:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Living Omnimedia LLC
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
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Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Bank:
NationsBank, N.A.
Credit Services Center
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▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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Attention: ▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
NationsBank, N.A.
Private Client Group
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
1285 Avenue of the Americas
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as any party may designate by written notice to all of
the parties. Each such notice, request and demand shall be deemed given or made
as follows:
(1) If sent by hand delivery, upon delivery;
(2) If sent by certified mail, upon the earlier of the date of receipt or
five (5) days after receipt in the U.S. mail, first class postage prepaid;
(3) If telecopied, telegraphed, telexed or cabled, when telecopied with
telephonic confirmation of the receipt thereof, delivered to the telegraph
company, confirmed by telex answerback or delivered to the cable company,
respectively.
IX. COSTS, EXPENSES AND ATTORNEYS' FEES.
A. The Borrower agrees to pay on demand all reasonable costs and
expenses, including, without limitation, all due diligence, transportation,
computer, duplication, appraisal, audit, insurance, consultant, search, filing
and recording fees and expenses, incurred by the Bank and its successors in
interest in connection with the preparation and administration of this Agreement
and any of the Loan Documents and the other documents to be delivered hereunder
or with any amendments, modifications, waivers, extensions, renegotiations or
workouts of the provisions hereof or thereof (whether or not consummated) or
after a Default and the continuance thereof or an Event of Default and the
continuance thereof, or in connection with any pending or threatened action,
proceeding or investigation relating to the foregoing, including, without
limitation, in each case, the reasonable fees and out-of-pocket expenses of
outside counsel for the Bank with respect thereto and with respect to advising
the Bank as to its rights and responsibilities under any Loan Document. The
Borrower further agrees to pay on demand all reasonable costs and expenses, if
any (including reasonable outside counsel fees and out-of-
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pocket expenses), incurred by the Bank and its successors in interest in
connection with the enforcement (whether through negotiations, legal proceedings
or otherwise) of the Loan Documents and the other documents to be delivered
hereunder, including, without limitation, reasonable outside counsel fees and
out-of-pocket expenses incurred in connection with the enforcement of rights
under this Article IX.
B. The Borrower hereby indemnifies the Bank and each of its
Affiliates, and their officers, directors, employees, agents, advisors and
successors in interest (each, an "Indemnified Party") against, and agrees to
hold each such Indemnified Party harmless from, any and all claims, damages,
losses, liabilities and expenses, including, without limitation, reasonable fees
and expenses of counsel, that may be incurred by or asserted or awarded against
any such Indemnified Party, in each case arising out of, in any way connected
with, or as result of, (i) the use of any of the proceeds of the Loans, (ii)
this Agreement or any of the other Loans Documents or the other documents
contemplated hereby or thereby, (iii) the performance by the parties hereto and
thereto of their respective obligations hereunder and thereunder and
consummation of the Contemplated Transactions, (iv) breach of any representation
or warranty by the Borrower, or (v) any claim, litigation, investigation or
proceeding relating to any of the foregoing, whether or not an Indemnified Party
is a party thereto, or whether or not such investigation, litigation or
proceeding is brought by the Borrower, its members or creditors or an
Indemnified Party and whether or not the Contemplated Transactions are
consummated; provided, however, that such indemnity shall not apply to the
extent that any such claims, damages, losses, liabilities or expenses are found
in a final, non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or willful misconduct.
C. The provisions of this Article IX shall remain operative and in
full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the Contemplated Transactions, the repayment of
the Loans, the invalidity or unenforceability of any term or provision of this
Agreement or the Note, or any investigation made by or on behalf of the Bank.
All amounts due under this Article IX shall be payable on written demand
therefor.
X. MISCELLANEOUS. The Borrower and the Bank further covenant and agree as
follows, without limiting any requirement of any other Loan Document:
A. CUMULATIVE RIGHTS AND NO WAIVER. Each and every right granted to
the Bank under any Loan Document, or allowed it by law or equity shall be
cumulative of each other right and may be exercised in addition to any and all
other rights of the Bank, and no delay in exercising any right shall operate as
a waiver thereof, nor shall any single or partial exercise by the Bank of any
right preclude any other future exercise thereof or the exercise of any other
right. The Borrower expressly waives any presentment, demand, protest or other
notice of any kind, including but not limited to notice of intent to accelerate
and notice of acceleration. No notice to or demand on the Borrower in any case
shall, of itself, entitle the Borrower to any other or future notice or demand
in similar or other circumstances.
B. APPLICABLE LAW. This Agreement and the Note and the rights and
obligations of the parties hereunder and thereunder shall be governed by and
interpreted in accordance with the laws of the State of New York without regards
to conflict of laws provisions.
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C. AMENDMENT. No modification, consent, amendment or waiver of any
provision of this Agreement, nor consent to any departure by the Borrower
therefrom, shall be effective unless the same shall be in writing and signed by
an officer that is at least a vice president of the Bank, and then shall be
effective only in the specified instance and for the purpose for which given.
This Agreement is binding upon the Borrower and its successors and assigns, and
inures to the benefit of the Bank, its successors and assigns; however, no
assignment or other transfer of the Borrower's rights or obligations hereunder
shall be made or be effective without the Bank's prior written consent, nor
shall it relieve the Borrower of any obligations hereunder, except that the
Borrower may assign and transfer its rights and obligations hereunder to any
corporation to which the Borrower may be converted in accordance with Section
15.1(a) of the LLC Agreement as in effect on the date hereof if (i) no Default
or Event of Default is then continuing or would result from such assignment,
transfer or conversion and (ii) such corporation executes and delivers to the
Bank such agreements, documents and other instruments (including promissory
notes, security agreements and financing statements) as the Bank may request to
effectuate and evidence such assignment and transfer. There is no third party
beneficiary of this Loan Agreement.
D. RIGHT TO SETOFF. If an Event of Default shall have occurred and
be continuing, the Bank shall and is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set off and apply any
Indebtedness at any time owing by the Bank to or for the credit or account of
the Borrower against any and all of the Obligations now or hereafter existing
under this Agreement, the Note or any other Loan Document, irrespective of
whether the Bank shall have made any demand therefor and although such
Obligations may be unmatured. The Bank agrees to notify promptly the Borrower
after any such setoff and application so made, but the failure to give such
notice shall not affect the validity of such setoff and application. The rights
of the Bank under this Section X.D. are in addition to other rights and remedies
which may be available to the Bank.
E. DOCUMENTS. All documents, certificates and other items required
under this Agreement to be executed and/or delivered to the Bank shall be in
form and content satisfactory to the Bank and its counsel.
F. PARTIAL INVALIDITY. The unenforceability or invalidity of any
provision of this Agreement shall not affect the enforceability or validity of
any other provision herein and the invalidity or unenforceability of any
provision of any Loan Document to any Person or circumstance shall not affect
the enforceability or validity of such provision as it may apply to other
Persons or circumstances.
G. SURVIVABILITY. All covenants, agreements, representations and
warranties made herein or in the other Loan Documents shall survive the making
of the Loans and shall continue in full force and effect until indefeasible
payment in full in cash of all Obligations.
H. HEADINGS. Article and Section headings and the Table of Contents
used herein are for convenience of reference only and are not to affect the
construction of, or to be taken into consideration in interpreting, this
Agreement.
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I. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be considered
to be an original and all of which taken together shall constitute one and the
same instrument.
XI. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES
HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR DOCUMENTS, INCLUDING ANY
CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING
ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT
APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR
THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR ANY SUCCESSOR
THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF
ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY
ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO
THIS AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING,
TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT
APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY
OF THE BORROWER'S DOMICILE AT TIME OF THE EXECUTION OF THIS AGREEMENT AND
ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE
OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN
ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED
WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL
ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH
HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION
SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE
STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR
(II) BE A WAIVER BY THE BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C.
Section 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT
OF THE BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH
AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT
OF A RECEIVER. THE BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSURE UPON
SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING
OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
AGREEMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR
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MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES
SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN
ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING
RESORT TO SUCH REMEDIES.
XII. NO ORAL AGREEMENT. THIS WRITTEN LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal by their duly authorized representatives as of the date
first above written.
BORROWER: BANK:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ NationsBank, N.A.
Living Omnimedia LLC
By: /s/▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------- --------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Adm. Officer Senior Vice President
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