AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT (the "Agreement")
is made and dated as of the 10th day of December, 1998, by and among SANWA
BANK CALIFORNIA ("Sanwa"), the lending institutions party hereto from time to
time (such lending institutions and Sanwa being referred to herein
individually as a "Lender" and collectively as the "Lenders"), SANWA, as
agent for the Lenders (in such capacity, the "Agent"), and EQUITY MARKETING,
INC., a Delaware corporation (the "Company").
RECITALS
A. Pursuant to that certain Credit Agreement dated as of January
26, 1996 by and among the Company, the Agent, and the Lenders (as amended to
date, the "Existing Credit Agreement"), the Lenders have extended credit to
the Company on the terms and subject to the conditions set forth therein.
B. The Company, the Agent and the Lenders desire to amend the
Existing Credit Agreement in certain respects and, for convenience of
reference, to restate the Existing Credit Agreement in its entirety herein.
NOW, THEREFORE, in consideration of the above Recitals and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto hereby agree as follows:
AGREEMENT
1. LOAN FACILITY.
1(a) CREDIT LIMIT. On the terms and subject to the
conditions set forth herein, the Lenders severally agree that they shall from
time to time to but not including the Maturity Date make Loans (the "Loans"
or a "Loan"), pro rata in accordance with their respective Percentage Shares,
in aggregate amounts not to exceed at any one time outstanding:
(1) The Credit Limit, minus
(2) The aggregate amount of all Outstanding Letters
of Credit and all unpaid L/C Drawings.
1(b) CALCULATION OF INTEREST. The Company shall pay
interest on Loans outstanding hereunder from the date disbursed to but not
including the date of payment at a rate per annum equal to, at the option of
and as selected by the Company from time to time (subject to the provisions
of PARAGRAPHS 1(e), and 3(j) below): (1) with respect to each Loan which is a
COF Loan, at the Applicable COF Rate for the applicable Interest Period, and
(2) with respect to each Loan which is a Reference Rate Loan, at the
Applicable Reference Rate during the applicable computation period.
1(c) PAYMENT OF INTEREST. Interest accruing on
Reference Rate Loans outstanding hereunder shall be payable monthly, in
arrears, for each month on the date of the delivery (which may be telephonic)
by the Agent of an interest billing to the Company (provided such notice is
delivered by 11:00 a.m. (Los Angeles time); otherwise payment shall be due on
the next Business Day) in the amount set forth in such interest billing for
such Reference Rate Loans and a final payment on the Maturity Date in the
amount of interest then accrued but unpaid. Interest accruing on COF Loans
shall be payable in arrears: (1) in the case of COF Loans with Interest
Periods ending 30, 60 or 90 days from the date advanced, at the end of the
applicable Interest Period therefor; and (2) in the case of COF Loans with
Interest Periods ending later than 90 days from the date advanced, at the end
of each 90 day period from the date advanced and at the end of the applicable
Interest Period therefor. Each such interest billing shall be deemed
conclusively correct and accepted by the Company unless the Company otherwise
notifies the Agent to the contrary within thirty Business Days following the
delivery of a written copy of such billing.
1(d) ELECTION OF TYPE OF LOAN; CONVERSION OPTIONS.
(1) The Company may elect from time to time to
have Loans funded by giving the Agent irrevocable notice of
such election not more than two (2) Business Days prior to but
not later than 10:00 a.m. (Los Angeles time) on the day of the
requested funding. The principal amount of each Reference
Rate Loan shall be in the minimum amount of $100,000.00 and
whole multiples of $25,000.00 in excess thereof and the
principal amount of each COF Loan shall be in the minimum
amount of $750,000.00 and whole multiples of $100,000.00 in
excess thereof. The Company may elect from time to time to
convert Loans outstanding as COF Loans to Reference Rate Loans
and convert Loans outstanding as Reference Rate Loans to COF
Loans by giving the Agent irrevocable notice of such election
not more than two (2) Business Days prior to but not later
than 10:00 a.m. (Los Angeles time) on the day of the requested
conversion. Any conversion of COF Loans may only be made on
the last day of the applicable Interest Period. No Reference
Rate Loan shall be converted into a COF Loan if an Event of
Default or Potential Default has occurred and is continuing.
All or any part of outstanding Loans may be converted as
provided herein, provided that partial conversions shall be in
a principal amount of not less than the minimum amount in
which the type of Loan to which the Loan will be converted
could have been funded. The Lenders shall have no obligation
to fund a COF Loan or to accept conversion of a Reference Rate
Loan to a COF Loan if, after giving effect to such funding or
conversion, the aggregate of the then number of outstanding
COF Loans having a different Interest Period shall exceed
eight.
(2) Any COF Loan may be continued as such upon
the expiration of the Interest Period with respect thereto by
giving the Agent irrevocable notice of such election not more
than two (2) Business Days prior to but not later than 10:00
a.m. (Los Angeles time) on the day of the requested
continuation; provided, however, that no COF Loan may be
continued as such when any Event of Default or Potential
Default has occurred and is continuing, but shall be
automatically converted to a Reference Rate Loan on the last
day of the then current Interest Period applicable thereto,
and the Agent shall notify the Company promptly that such
automatic conversion will
2
occur. If the Company shall fail to give notice as provided
above, the Company shall be deemed to have elected to convert
the affected COF Loan to a Reference Rate Loan on the last day
of the relevant Interest Period.
(3) Each request for the funding, continuation
or conversion of a Loan shall be evidenced by the timely
delivery by the Company to the Agent of a duly executed Loan
Request in person, by messenger or by telecopy; provided,
however, that the Company shall promptly deliver to the Agent
the original of any such notice initially delivered by
telecopy.
1(e) ILLEGALITY. Notwithstanding any other
provisions herein, if any law, regulation, treaty or directive or any change
therein or in the interpretation or application thereof, shall make it
unlawful for any Lender to maintain any COF Loans as contemplated by this
Agreement, such COF Loan shall be converted automatically to a Reference Rate
Loan at the end of the applicable Interest Period or within such earlier
period as required by law. In the event of a conversion of any such Loan
prior to the end of the applicable Interest Period the Company hereby agrees
promptly to pay the Agent, upon demand, the amounts required pursuant to
PARAGRAPH 1(h) below, it being agreed and understood that such conversion
shall constitute a prepayment for all purposes hereof. The provisions hereof
shall survive the termination of this Agreement and payment of the
outstanding Loans and all other amounts payable hereunder.
1(f) FUNDING. The Lenders shall be entitled to fund
all or any portion of the Loans in any manner it may determine in its sole
discretion, including, without limitation, in the Grand Cayman inter-bank
market, the London inter-bank market and within the United States, but all
calculations and transactions hereunder shall be conducted as though the
Lenders actually funds all COF Loans through the purchase in London of
offshore dollar deposits in the amount of the relevant COF Loan in maturities
corresponding to the applicable Interest Period.
1(g) BREAKAGE PREMIUM. In addition to all other
payment obligations hereunder, in the event: (1) any COF Loan is prepaid
prior to the last day of the applicable Interest Period, whether following a
voluntary prepayment, a mandatory prepayment or otherwise, or (2) the Company
shall fail to borrow or to continue or to make a conversion to a COF Loan
after the Company has given notice thereof as provided in PARAGRAPH 1(d)
above, then the Company shall immediately pay to the Agent an additional
premium sum in an amount equal to the losses associated therewith, as
internally allocated by each Lender consistent with its policies and
practices in effect from time to time as such are applied to its borrowers
generally, such allocation to be conclusively deemed to accurately reflect
such losses. Upon request of the Company (which may be telephonic) to the
Lenders indicating that it is contemplating a voluntary prepayment of a COF
Loan, each Lender shall promptly (and in all events within one Business Day)
advise the Company of the additional premium sum which would be required in
connection with such prepayment.
1(h) REPAYMENT OF PRINCIPAL. Subject to the
mandatory prepayment requirements of PARAGRAPH 3(g)(2) below, the Company
shall pay the principal amount of each Loan on the Maturity Date. Principal
amounts prepaid hereunder may be reborrowed subject to
3
the then current Credit Limit, it being expressly acknowledged and agreed
that the credit facility under this PARAGRAPH 1 is a revolving facility.
2. LETTER OF CREDIT FACILITY.
2(a) PRE-EXISTING LETTERS OF CREDIT. On the terms
and subject to the conditions set forth in the Existing Credit Agreement,
Sanwa has issued certain letters of credit for the account of the Company
which letters of credit are Outstanding at the date of this Agreement and
which letters of credit are described more particularly on EXHIBIT A attached
hereto (the "Pre-Existing Letters of Credit"). Following the Effective Date
such Pre-Existing Letters of Credit shall constitute "Letters of Credit"
under, and for all purposes of, the Loan Documents. On the Effective Date
Sanwa shall pay to each Lender its respective Percentage Share, with respect
to each Pre-Existing Letter of Credit, that portion of the issuance fee paid
by the Company at the date of issuance of such Pre-Existing Letter of Credit
allocable to the period from the Effective Date to the expiration or end of
the effective term thereof.
2(b) ISSUANCE OF NEW LETTERS OF CREDIT. On the
terms and subject to the conditions set forth herein, Sanwa shall from time
to time from and after the Effective Date, issue its letters of credit (a
"New Letter of Credit" and, collectively, the "New Letters of Credit") for
the account of the Company in an amount which when added to the aggregate
amount of Loans outstanding hereunder and the aggregate amount of other
Outstanding New Letters of Credit, Pre-Existing Letters of Credit and
unrepaid L/C Drawings will not exceed the Credit Limit. Each New Letter of
Credit shall be requested by the Company at least one Business Day prior to
the proposed issuance date by delivery to Sanwa of a duly executed Letter of
Credit Application, with a copy to the Agent, accompanied by all other
documents, instruments and agreements as Sanwa may require (the "L/C
Documents"). No New Letter of Credit shall have a stated expiration date (or
provide for the extension of such stated expiration date or the issuance of
any replacement therefor) later than the earlier of: (1) the 270th day
following the issuance date thereof, and (2) the Maturity Date.
2(c) PURCHASE OF PARTICIPATION INTERESTS. Upon the
issuance of each New Letter of Credit (and effective as of the Effective Date
with respect to all Pre-Existing Letters of Credit) the Lenders shall be
automatically deemed to have purchased an undivided participation interest
therein and in all rights and obligations relating thereto pro rata in
accordance with their respective Percentage Shares.
2(d) REPAYMENT OF L/C DRAWINGS. Any drawing under
any Letter of Credit (a "L/C Drawing") shall be payable in full by the
Company: (1) prior to the occurrence of an Event of Default and acceleration
of the Obligations, on the date the Agent notifies the Company (which notice
may be telephonic) of such L/C Drawing if such notice is given prior to 11:00
a.m. (Los Angeles time), or on the next succeeding Business Day if given
after 11:00 a.m. (Los Angeles time), or (2) following the occurrence of an
Event of Default and acceleration of the Obligations, without demand upon or
notice to the Company, on the date of such L/C Drawing. Any L/C Drawing not
paid on the date when due shall accrue interest as provided in PARAGRAPH 3(e)
below, from and including such date to but not including the date paid in
full. The Lenders hereby absolutely and unconditionally (including, without
limitation, following the occurrence of an Event of Default) agree to
purchase and sell among themselves the dollar
4
amount of any L/C Drawing which is not paid on the date when due by the
Company, so that each unrepaid L/C Drawing shall be held and participated in
by the Lenders in accordance with their respective Percentage Shares.
2(e) ABSOLUTE OBLIGATION TO REPAY. The Company's
obligation to repay L/C Drawings shall be absolute, irrevocable and
unconditional under any and all circumstances whatsoever and irrespective of
any set-off, counterclaim or defense to payment which the Company may have or
have had, against any Lender or any other Person, including, without
limitation, any set-off, counterclaim or defense based upon or arising out of:
(1) Any lack of validity or enforceability of
this Agreement or any of the other Loan Documents;
(2) Any amendment or waiver of or any consent
to departure from the terms of any Letter of Credit;
(3) The existence of any claim, setoff,
defense or other right which the Company or any other Person
may have at any time against any beneficiary or any transferee
of any Letter of Credit (or any Person for whom any such
beneficiary or any such transferee may be acting);
(4) Any allegation that any demand, statement
or any other document presented under any Letter of Credit is
forged, fraudulent, invalid or insufficient in any respect, or
that any statement therein is untrue or inaccurate in any
respect whatsoever or that variations in punctuation,
capitalization, spelling or format were contained in the
drafts or any statements presented in connection with any L/C
Drawing;
(5) Any payment by a Lender under any Letter
of Credit against presentation of a draft or certificate that
does not strictly comply with the terms of such Letter of
Credit, or any payment made by Lender under any Letter of
Credit to any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors,
liquidator, receiver or other representative of or successor
to any beneficiary or any transferee of any Letter of Credit,
including any arising in connection with any insolvency
proceeding;
(6) Any exchange, release or non-perfection of
any Collateral or Subsidiary Collateral, or any release or
amendment or waiver of or consent to departure from any
Guaranty, for all or any of the Obligations of the Company in
respect of any Letter of Credit; or
(7) Any other circumstance of happening
whatsoever, whether or not similar to any of the foregoing,
including any other circumstance that might otherwise
constitute a defense available to, or a discharge of, the
Company or any Guarantor.
5
Nothing contained herein shall constitute a waiver of any rights of the
Company against Sanwa arising out of the gross negligence or willful
misconduct of Sanwa in connection with any Pre-Existing Letters of Credit or
any New Letter of Credit issued hereunder.
2(f) UNIFORM CUSTOMS AND PRACTICE. The Uniform
Customs and Practice for Documentary Credits as published by the
International Chamber of Commerce most recently at the time of issuance of
any Letter of Credit shall (unless otherwise expressly provided in the
Letters of Credit) apply to the Letters of Credit.
2(g) RELATIONSHIP TO LETTER OF CREDIT APPLICATION.
In the event of any inconsistency between the terms and provisions of this
Agreement and the terms and provisions of the Letter of Credit Application,
the terms and provisions of this Agreement shall supersede and govern.
2(h) ADDITIONAL LETTERS OF CREDIT. From time to
time the Company may desire Sanwa to issue letters of credit for the account
of the Company in excess of the aggregate dollar amount of Letters of Credit
which may be issued hereunder, said additional letters of credit to be one
hundred percent (100%) cash collateralized. The Company will provide Sanwa
and each of the other Lenders with written notice requesting such additional
letters of credit no later than three Business Days prior to the proposed
issuance date. In the event Sanwa, in its sole and absolute discretion,
elects to issue such additional letters of credit it may, but only with the
consent of the Lenders, do so; provided, however, that in no event will any
such additional letters of credit be issued by Sanwa unless there is no
credit availability for the issuance of such letters of credit as "New
Letters of Credit" hereunder; and, provided further, that in the event Sanwa
elects to issue such additional letters of credit it will give each Lender
the opportunity to participate therein to the extent of such Lender's
Percentage Share hereunder. The issuance of such additional letters of
credit shall be subject to documentation in form and substance acceptable to
Sanwa.
3. MISCELLANEOUS PROVISIONS.
3(a) USE OF PROCEEDS. All Loans made hereunder
shall be utilized by the Company for general corporate and working capital
purposes of the Company, which may include repaying prior advances on
outstanding Loans.
3(b) REQUEST FOR LOANS; MAKING OF LOANS. If the
Company desires to borrow hereunder, the Company shall deliver a Loan Request
to the Agent, which shall be delivered telephonically no later than 10:30
a.m. (Los Angeles time) and confirmed by facsimile transmission, on the day
notice of borrowing is required to be given pursuant to PARAGRAPH 1(d) above.
The Agent shall notify each Lender of such Lender's Percentage Share of the
requested Loan or Loans no later than 11:00 a.m. (Los Angeles time) on the
date such notice is received by the Agent (said notice by the Agent to the
Lenders to be given telephonically and confirmed by facsimile transmission).
Each Lender shall make its Percentage Share of the proposed Loan available to
the Agent, in same-day funds, on the funding date at the Contact Office, ABA
▇▇▇▇▇▇▇▇▇, for Account No. 2302-25217 for credit to Loan Syndications: Equity
Marketing, Inc., or such other account as the Agent shall designate no later
than 12:00 noon (Los Angeles time). The failure of any Lender to advance its
Percentage Share of a proposed Loan
6
shall not relieve any other Lender of its obligation hereunder to advance its
Percentage Share thereof, but no Lender shall be responsible for the failure
of any other Lender to make any such advance.
3(c) NOTES. The obligation of the Company to repay
the Loans shall be evidenced by a note payable to the order of each Lender in
the form of that attached hereto as EXHIBIT B (a "Note" or, collectively, the
"Notes"). The Agent shall deliver a statement of account to the Company and
each Lender monthly setting forth the unpaid balance of Loans outstanding
hereunder. Such statement shall (absent manifest error) be deemed
conclusively correct and accepted by the Company and the Lenders unless any
of such Persons notifies the Agent to the contrary within thirty (30)
Business Days following delivery of such statement.
3(d) NATURE AND PLACE OF PAYMENTS. All payments
made on account of the Obligations shall be made by the Company, without
setoff or counterclaim, in lawful money of the United States of America in
immediately available same day funds, free and clear of and without deduction
for any Taxes, fees or other charges of any nature whatsoever imposed by any
taxing authority and must be received by the Agent by 12:00 noon (Los Angeles
time) on the day of payment, it being expressly agreed and understood that if
a payment is received after 12:00 noon (Los Angeles time) by the Agent, such
payment will be considered to have been made by the Company on the next
succeeding Business Day and interest thereon shall be payable by the Company
at the rate otherwise applicable thereto during such extension. All payments
on account of the Obligations shall be made to the Agent through the Contact
Office. If any payment required to be made by the Company hereunder becomes
due and payable on a day other than a Business Day, the due date thereof
shall be extended to the next succeeding Business Day and interest thereon
shall be payable at the then applicable rate during such extension. The
Agent is hereby irrevocably authorized by the Company, without prior notice
to the Company, to debit the general operating account of the Company
maintained with Sanwa for the full amount of monthly and periodic interest
▇▇▇▇▇▇▇▇, fees and other Obligations payable hereunder; provided, however,
that (1) the Agent shall notify (which notification may be telephonic) the
Company of such debit within three Business Days, and (2) the failure of the
Agent to so debit such account shall not in any manner or to any extent
affect the obligation of the Company to pay such Obligations as provided
herein and in the other Loan Documents.
3(e) DEFAULT RATE OF INTEREST. Notwithstanding
anything to the contrary contained herein, on any date that there shall have
occurred and be continuing an Event of Default, any and all Obligations
outstanding shall bear interest at a per annum rate equal to three percent
(3%) above the Reference Rate.
3(f) COMPUTATIONS. All computations of interest
and fees payable hereunder shall be based upon a year of 360 days for the
actual number of days elapsed.
3(g) PREPAYMENTS.
(1) The Company may prepay Loans hereunder in
whole or in part at any time.
(2) Loans hereunder are subject to mandatory
prepayment:
7
(i) By application of the proceeds of Collateral
as provided in the Security Agreement;
(ii) On any date upon which the aggregate
amount of Loans outstanding, Outstanding Letters of Credit
and unrepaid L/C Drawings exceeds the Credit Limit on such
date, by payment by the Company to the Agent of the amount
of such excess; and
(iii) On any date upon which any Lender's
Percentage Share of the aggregate amount of Loans
outstanding, Outstanding Letters of Credit and unrepaid
L/C Drawings exceeds such Lender's Maximum Commitment on
such date, by payment by the Company to the Agent of the
amount of such excess.
(3) The Company shall pay in connection with
any prepayment hereunder, whether voluntary or mandatory, all
interest accrued but unpaid on Loans to which such prepayment
is applied, and all prepayment premiums, if any, on COF Loans
to which such prepayment is applied, concurrently with payment
of any principal amounts.
Prior to the occurrence of an Event of Default and acceleration of the
Obligations, the Agent shall allocate prepayments first to Reference Rate Loans
to the extent possible and then to COF Loans.
3(h) ALLOCATION OF PAYMENTS RECEIVED. Prior to the
occurrence of an Event of Default and acceleration of the Obligations, all
amounts received by the Agent on account of the Obligations shall be
disbursed by the Agent to the Lenders pro rata in accordance with their
respective Percentage Shares by wire transfer of like funds received on the
date of receipt if received by the Agent before 12:00 noon (Los Angeles time)
or if received later, by 12:00 noon (Los Angeles time) on the next succeeding
Business Day, without further interest payable by the Agent; provided,
however, that amounts paid by the Company to the Agent pursuant to
subparagraphs (ii) through (v) of PARAGRAPH 3(i)(1) below shall be
distributed to the Lenders on the last Business Day of each calendar month
(and such earlier date during each calendar month as the Agent shall have
received amounts thereunder in excess of $5,000.00) and, provided further,
that amounts paid by the Company to the Agent pursuant to Paragraph
3(g)(2)(iii) above shall be disbursed by the Agent to the Lender on behalf of
which the mandatory prepayment required thereby is made. Following the
occurrence of an Event of Default and acceleration of the Obligations, all
amounts received by the Agent on account of the Obligations, including,
without limitation, as proceeds of the sale or other disposition of
Collateral, shall be promptly disbursed by the Agent as follows:
(1) First, to the payment of expenses incurred
by the Agent and the Lenders in the enforcement of their
rights under the Loan Documents, including, without
limitation, all costs and expenses of collection, attorneys'
fees (including all allocated costs of internal counsel),
court costs and foreclosure expenses, including as provided in
PARAGRAPH 7(g) below;
8
(2) Then, to the Lenders, pro rata in
accordance with their respective Percentage Shares, until all
outstanding Loans and unrepaid L/C Drawings and interest
accrued thereon have been paid in full, said amounts to be
allocated by the Lenders first to interest and then, but only
after all accrued interest has been paid in full, to principal
of Loans and unrepaid L/C Drawings;
(3) Then, and if but only if there remain
Outstanding any Letters of Credit, to the Agent to hold as
cash collateral for the obligation of the Company to reimburse
any future L/C Drawings, the Company hereby irrevocably
agreeing that amounts held by the Agent as cash collateral may
be applied from time to time in reimbursement of L/C Drawings
as the same may occur, until there are no further Letters of
Credit Outstanding; and
(4) Then, to such Persons as may be legally
entitled thereto.
3(i) FEES. The Company shall pay the following fees:
(1) To the Agent, for the pro rata benefit of the
Lenders in accordance with their respective Percentage Shares:
(i) On the first Business Day of the first
month of each calendar quarter (and on the Maturity Date)
for the immediately preceding calendar quarter (or portion
thereof) a non-usage fee in the amount set forth in a fee
billing delivered by the Agent to the Company, which
non-usage fee shall be computed at the per annum rate of
one-quarter of one percent (0.25%) against: a. the average
daily Credit Limit in effect during the immediately
preceding calendar quarter (or portion thereof), minus b.
the daily average amount of Loans outstanding and
Outstanding Letters of Credit during the immediately
preceding calendar quarter (or portion thereof);
(ii) On or before the date of issuance by
Sanwa of a New Letter of Credit which is in the nature of
a standby (as opposed to commercial/documentary) letter of
credit, a non-refundable issuance fee in an amount equal
to the greater of: a. $250.00, and b. one and one-half
percent (1.50%) per annum of the face amount of such New
Letter of Credit for the effective term of such New Letter
of Credit (provided, however, that the first $250.00 of
such fee shall be retained by Sanwa and only the balance,
if any, allocated among the Lenders pro rata);
(iii) On or before the date of issuance by
Sanwa of a New Letter of Credit which is in the nature of a
commercial/documentary letter of credit, a non-refundable
issuance fee in an amount equal to the greater of: a.
$90.00, and b. one eighth of one percent (0.125%) of the
face amount of such New Letter of Credit (provided, however,
that the first $120.00 of such fee shall be retained by
Sanwa and only the balance, if any, allocated among the
Lenders pro rata);
9
(iv) On the date of negotiation of each
draft under a New Letter of Credit which is in the nature
of a commercial/documentary letter of credit, a negotiation
fee in an amount equal to the greater of: a. $90.00, and b.
one eighth of one percent (0.125%) of the amount of such
draft; and
(v) Such renewal, increase and extension
fees relating to any Letter of Credit as are customarily
charged by Sanwa to its customers from time to time.
(2) Directly to Sanwa, from time to time upon
demand, such fees and charges, including, without
limitation, miscellaneous charges and transfer fees,
relating to the Letters of Credit as Sanwa customarily
charges with respect to similar letters of credit issued
by it.
(3) To the Agent, for its own account,
from time to time, such fees as may be required pursuant
to the Agent's Fee Letter.
3(j) REQUIREMENTS OF LAW; INCREASED COSTS. In
the event that following the Effective Date a change in any applicable law,
order, regulation, treaty or directive issued by any central bank or other
governmental authority, agency or instrumentality or in the governmental or
judicial interpretation or application thereof, or compliance by any Lender
with any request or directive (whether or not having the force of law) issued
by any central bank or other governmental authority, agency or
instrumentality:
(1) Does or shall subject any Lender to any
tax of any kind whatsoever with respect to this Agreement or
any Loans made or Letters of Credit Outstanding hereunder, or
change the basis of taxation of payments to such Lender of
principal, fee, interest or any other amount payable hereunder
(except for change in the rate of tax on the overall net
income of such Lender);
(2) Does or shall impose, modify or hold
applicable any reserve, capital requirement, special deposit,
compulsory loan or similar requirements against assets held
by, or deposits or other liabilities in or for the account of,
advances or loans by, or other credit extended by, or any
other acquisition of funds by, any office of such Lender
which are not otherwise included in the determination of
interest payable on the Obligations; or
(3) Does or shall impose on such Lender any other
condition;
and the result of any of the foregoing is to increase the cost to such Lender
of making, renewing or maintaining any Loan or issuing or maintaining any
Letter of Credit or to reduce any amount receivable in respect thereof or the
rate of return on the capital of such Lender or any corporation controlling
such Lender, then, in any such case, the Company shall promptly pay to such
Lender, upon its written demand made through the Agent, any additional
amounts necessary to compensate such Lender for such additional cost or
reduced amounts receivable or rate of return as determined by such Lender
with respect to this Agreement or Loans made hereunder. If a Lender becomes
entitled to claim any additional amounts pursuant to this PARAGRAPH 3(j), it
shall
10
promptly notify the Company of the event by reason of which it has become so
entitled. A certificate as to any additional amounts payable pursuant to the
foregoing sentence containing the calculation thereof in reasonable detail
submitted by a Lender to the Company shall be conclusive in the absence of
manifest error. The provisions of this PARAGRAPH 3(j) shall survive the
termination of this Agreement and payment of the outstanding Loans and all
other amounts payable hereunder, provided, however, that all claims of any
Lender hereunder must be made upon the Company no later than the 180th day
following the date all Obligations have been paid in full, there are no
Letters of Credit outstanding, and the Lenders have no further obligation to
make Loans or issue Letters of Credit hereunder.
4. SECURITY; ADDITIONAL DOCUMENTS.
4(a) SECURITY AGREEMENT. As collateral security for the
"Obligations" of the Company under (and as the term "Obligations" is defined
in) the Existing Credit Agreement, the Company has executed and delivered to
the Agent the Security Agreement, pursuant to which the Company has pledged,
assigned and granted to the Agent for the PARI PASSU benefit of the Lenders a
perfected security interest in and Lien upon the Collateral, subject only to
Liens permitted under PARAGRAPH 8(a) below. As a condition precedent to the
first Credit Event hereunder, the Company shall execute and deliver to the
Agent a reaffirmation of the Security Agreement in the form of that attached
hereto as EXHIBIT C (the "Reaffirmation of Security Agreement"), accompanied
by evidence satisfactory to the Agent of the continuing perfection and first
priority of the Lien in favor of the Agent for the benefit of the Lenders.
4(b) GUARANTIES; COLLATERAL FOR GUARANTIES. As
additional credit support for the Obligations of the Company under (and as
the term "Obligations" is defined in) the Existing Credit Agreement, the
Company was required to cause each of the Domestic Subsidiaries of the
Company to execute and deliver to the Agent: (1) a Guaranty and (2) a
Subsidiary Security Agreement pursuant to which each Domestic Subsidiary has
pledged, assigned and granted the Agent for the PARI PASSU benefit of the
Lenders a perfected security interest in and Lien upon such Domestic
Subsidiary's Subsidiary Collateral subject only to Liens permitted under
PARAGRAPH 8(a) below. Pursuant to the First Amendment to the Existing Credit
Agreement, the Agent and the Banks waived the requirement that EPI Group
Limited execute and deliver such documents; however, at the date hereof there
exist three other Domestic Subsidiaries which have not executed and delivered
such documents. The Company has informed the Agent and the Lenders that
three of such Domestic Subsidiaries, EMI Property Corporation, a Florida
corporation, EMI Merger Corporation, a Florida corporation and EPI Group
Limited, a Delaware corporation (the "Dissolving Subsidiaries") are in the
process of being dissolved and their existence terminated. Unless evidence
satisfactory to the Agent of such dissolution and termination is delivered to
the Agent on or before February 15, 1999, then the Company shall immediately
cause the Dissolving Subsidiaries to execute and deliver a Guaranty and a
Subsidiary Security Agreement and such other documents, instruments and
agreements as the Agent shall require in connection therewith and the Company
shall pledge and deliver to the Agent for the benefit of the Lenders share
certificates evidencing all outstanding capital stock of the Dissolving
Subsidiaries accompanied by blank stock transfer powers therefor. The Company
shall cause the third such Domestic Subsidiary, Equity Marketing Hong Kong,
Ltd., a Delaware corporation ("EMHK"), on or before the Effective Date of
this Agreement, to execute and deliver a Guaranty and a Subsidiary Security
Agreement and such
11
other documents, instruments and agreements as the Agent shall require in
connection therewith and the Company shall pledge and deliver to the Agent
for the benefit of the Lenders share certificates evidencing all outstanding
capital stock of EMHK accompanied by blank stock transfer powers therefor.
The Agent and the Lenders hereby agree that as a condition precedent to the
first Credit Event hereunder, the Company shall cause each Domestic
Subsidiary which has prior to the date hereof delivered a Guaranty and
Subsidiary Security Agreement to execute and deliver to the Agent: (y) a
reaffirmation of its Guaranty in the form of that attached hereto as EXHIBIT
D (the "Reaffirmation of Guaranty") and (z) a reaffirmation of its Subsidiary
Security Agreement in the form of that attached hereto as EXHIBIT E (the
"Reaffirmation of Subsidiary Security Agreement") accompanied by evidence
satisfactory to the Agent of the continuing perfection and first priority of
the Liens in favor of the Agent for the benefit of the Lenders.
4(c) FURTHER DOCUMENTS. The Company agrees to execute and
deliver and to cause to be executed and delivered to the Agent on behalf of
the Lenders from time to time (1) from each Domestic Subsidiary of the
Company organized following the Effective Date as permitted under PARAGRAPH
8(t) below, promptly following the organization thereof, a Guaranty, a
Subsidiary Security Agreement and such UCC-1 financing statements and other
documents, instruments and agreements as the Agent may request, and (2) from
the Company and such Persons as the Agent may request, such confirmatory or
supplementary security agreements, financing statements and other documents,
instruments or agreements as the Agent may reasonably request, which are in
the Agent's judgment necessary or desirable to obtain for the Agent on behalf
of the Lenders, the benefit of the Loan Documents, the Collateral and the
Subsidiary Collateral (the "Additional Collateral Documents").
5. CONDITIONS TO MAKING LOANS AND ISSUING NEW LETTERS OF
CREDIT.
5(a) FIRST CREDIT EVENT. As
conditions precedent to the first Credit Event hereunder:
(1) The Company shall have delivered or shall
have caused to be delivered to the Agent, in form and
substance satisfactory to the Lenders and their counsel and
duly executed by the appropriate Persons (with sufficient
copies for each of the Lenders), each of the following:
(i) This Agreement;
(ii) The Notes;
(iii) The Reaffirmation of Security Agreement;
(iv) A Reaffirmation of Guaranty from Corinthian;
(v) A Reaffirmation of Subsidiary Security
Agreement from Corinthian;
(vi) A Guaranty from EMHK;
(vii) A Subsidiary Security Agreement from EMHK;
12
(viii) All financing statements and Additional
Collateral Documents as may be requested by the Agent and
the Lenders;
(ix) Such credit applications, financial
statements, authorizations and such information concerning
the Company, each Domestic Subsidiary and their respective
business, operations and condition (financial and
otherwise) as any Lender may reasonably request;
(x) Certified copies of resolutions of the
Boards of Directors of the Company and each of Corinthian
and EMHK approving the execution, delivery and performance
of the Loan Documents to which such Person is a party;
(xi) A certificate or certificates of the
Secretary or an Assistant Secretary of the Company and
each of Corinthian and EMHK certifying the names and true
signatures of the officers of such Person authorized to
sign the Loan Documents to which such Person is a party
and, on an ongoing basis, to act under and perform the
Loan Documents;
(xii) Opinions of counsel for the Company,
Corinthian and EMHK, which counsel shall be satisfactory
to each of the Lenders and which may, for purposes of this
Agreement, be in-house counsel, and shall cover such
matters as the Agent or any Lender may reasonably request;
(xiii) A copy of the Certificate of
Incorporation of the Company and each of Corinthian and
EMHK, certified by the Secretary of State or other
official of the state or jurisdiction of incorporation of
such Person as of a recent date;
(xiv) A copy of the Certificate of
Incorporation and Bylaws of the Company and each of
Corinthian and EMHK, certified by the Secretary or an
Assistant Secretary of such Person as of the date of this
Agreement as being accurate and complete;
(xv) A certificate of authority and good
standing as of a recent date for the Company and each of
Corinthian and EMHK for each state in which such Person is
qualified to do business;
(xvi) A certificate of an Approved Financial
Officer in the form of that attached hereto as EXHIBIT F
dated as of the date of the first Credit Event, executed
to the best of such Person's knowledge in the responsible
conduct of his or her duties;
(xvii) Evidence satisfactory to the Agent
that upon the occurrence of the first Credit Event, all
Indebtedness of the Company outstanding under the Existing
Credit Agreement shall become Obligations of the Company
under the credit facilities evidenced hereby;
13
(xviii) Confirmation from the Agent (which
may be oral) that the Agent's Fee Letter has been executed
and delivered by the Company;
(xix) A certificate of an Approved Financial
Officer showing compliance with the financial tests set
forth under PARAGRAPHS 8(i) through 8(n) at and as of
September 30, 1998, executed to the best of such Person's
knowledge in the responsible conduct of his or her duties;
and
(xx) Evidence satisfactory to the Agent of
the continuing perfection and first priority of the Liens
granted by the Company and Corinthian pursuant to the
Security Agreement and the Subsidiary Security Agreement
in favor of the Agent for the benefit of the Lenders.
(2) All acts and conditions (including,
without limitation, the obtaining of any necessary regulatory
approvals and the making of any required filings, recordings
or registrations) required to be done and performed and to
have happened precedent to the execution, delivery and
performance of the Loan Documents and to constitute the same
legal, valid and binding obligations, enforceable in
accordance with their respective terms, shall have been done
and performed and shall have happened in due and strict
compliance with all applicable laws.
(3) All documentation, including, without
limitation, documentation for corporate and legal proceedings
in connection with the transactions contemplated by the Loan
Documents shall be satisfactory in form and substance to the
Agent, the Lenders and their counsel.
5(b) ONGOING CREDIT EVENTS. As conditions precedent
to each Lender's obligation to advance its Percentage Share of any Loan or to
Sanwa's obligation to issue any New Letter of Credit hereunder, including the
first such Loan and New Letter of Credit, at and as of the date of the
funding or issuance thereof, as applicable;
(1) There shall have been delivered to the
Agent a Loan Request therefor (or, in the case of a New Letter
of Credit, there shall have been delivered to Sanwa a Letter
of Credit Application and the related L/C Documents therefor);
(2) The representations and warranties of the
Company contained in the Loan Documents shall be accurate and
complete in all material respects as if made on and as of the
date of such funding or issuance;
(3) There shall not have occurred an Event of
Default or Potential Default; and
(4) Following the occurrence of such Credit
Event, the aggregate principal amount of Loans outstanding
will not exceed the limitations of PARAGRAPH 1(b) above and
the aggregate amount of Outstanding Letters of Credit will not
exceed the limitations of PARAGRAPH 2(b) above.
14
By delivering a Loan Request or Letter of Credit Application to the Agent
hereunder, the Company shall be deemed to have represented and warranted the
accuracy and completeness of the statements set forth in SUBPARAGRAPHS (b)(2)
through (b)(4) above.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As an
inducement to the Agent and each Lender to enter into this Agreement and to
make Loans and, in the case of Sanwa, to issue New Letters of Credit, the
Company represents and warrants to the Agent and each Lender that:
6(a) FINANCIAL CONDITION. The financial statements,
dated the Statement Date and the Interim Date, copies of which have
heretofore been furnished to each Lender, are complete and correct and
present fairly in accordance with GAAP the financial condition of the Company
and its consolidated Subsidiaries at such dates and the consolidated and
consolidating results of their operations and consolidated cash flows for the
fiscal periods then ended, except that the financial statements dated as of
the Interim Date do not contain notes and are subject to normal audit
adjustments.
6(b) NO CHANGE. Except as set forth on Schedule 3
hereto, since the Statement Date: (1) there has been no Material Adverse
Effect, (2) neither the Company nor any Subsidiary has entered into, incurred
or assumed any long-term debt or mortgages, and (3) neither the Company nor
the Company and the Subsidiaries on a consolidated basis have entered into
any material leases other than the leases described on Schedule 4 hereto.
6(c) CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each
of the Company and each Subsidiary: (1) is duly organized, validly existing
and in good standing as a corporation under the laws of its jurisdiction of
incorporation and is qualified to do business in each jurisdiction where its
ownership of property or conduct of business requires such qualification and
where failure to qualify could have a Material Adverse Effect on the Company
or the Company and its Subsidiaries taken as a whole, (2) has the corporate
power and authority and the legal right to own and operate its property and
to conduct business in the manner in which it does and proposes so to do, and
(3) is in compliance with all Requirements of Law and Contractual
Obligations, the failure to comply with which could have a Material Adverse
Effect.
6(d) CORPORATE POWER; AUTHORIZATION; ENFORCEABLE
OBLIGATIONS. Each of the Company and each Domestic Subsidiary has the
corporate power and authority and the legal right to execute, deliver and
perform the Loan Documents to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance of such
Loan Documents. The applicable Loan Documents have been duly executed and
delivered on behalf of the Company and each Domestic Subsidiary and
constitute legal, valid and binding obligations of such Persons enforceable
against such Persons in accordance with their respective terms, subject to
the effect of applicable bankruptcy, insolvency, reorganization, moratorium
and other similar laws affecting the rights of creditors generally and the
effect of equitable principles whether applied in an action at law or a suit
in equity.
6(e) NO LEGAL BAR. The execution, delivery and
performance of the Loan Documents, the borrowing hereunder and the use of the
proceeds thereof, will not violate any Requirement of Law or any Contractual
Obligation of the Company or any Subsidiary, the
15
violation of which could have a Material Adverse Effect or create or result
in the creation of any Lien (except the Liens created by the Security
Agreement and the Subsidiary Security Agreements) on any assets of the
Company or any Subsidiary.
6(f) NO MATERIAL LITIGATION. Except as disclosed
on EXHIBIT G hereto, no litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the knowledge of
the Company, threatened by or against the Company or any of its Subsidiaries
or against any of such Persons' properties or revenues which pertains to the
Existing Credit Agreement, this Agreement or the other Loan Documents or
which, if adversely determined, is likely to have a Material Adverse Effect.
6(g) TAXES. The Company and each of its
Subsidiaries have filed or caused to be filed all tax returns that are
required to be filed and have paid all taxes shown to be due and payable on
said returns or on any assessments made against them or any of their property
other than taxes which are being contested in good faith by appropriate
proceedings and as to which the Company or applicable Subsidiary has
established adequate reserves in conformity with GAAP.
6(h) INVESTMENT COMPANY ACT. Neither the Company or
any Person controlling the Company or any Subsidiary is an "investment
company" or a company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
6(i) SUBSIDIARIES. Attached hereto as EXHIBIT H
is an accurate and complete list of all Subsidiaries of the Company existing
at the Effective Date, their respective jurisdictions of incorporation and
the percentage of their capital stock owned by the Company or other
Subsidiaries. All of the issued and outstanding shares of capital stock of
such Subsidiaries have been duly authorized and issued and are fully paid and
non-assessable.
6(j) FEDERAL RESERVE BOARD REGULATIONS. Neither
the Company nor any of its Subsidiaries is engaged or will engage,
principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" within the respective meanings of such terms under Regulation U. No
part of the proceeds of any Loan issued hereunder will be used for
"purchasing" or "carrying" "margin stock" as so defined or for any purpose
which violates, or which would be inconsistent with, the provisions of the
Regulations of the Board of Governors of the Federal Reserve System.
6(k) ERISA COMPLIANCE.
(1) Except as disclosed on EXHIBIT I hereto,
each Plan is in compliance in all material respect with the
applicable provisions of ERISA, the Code and other federal or
state law. Each Plan which is intended to qualify under
Section 401(a) of the Code has received a favorable
determination letter from the IRS and to the best knowledge of
the Company, nothing has occurred which would cause the loss
of such qualification.
(2) There are no pending or, to be best
knowledge of Company, threatened claims, actions or lawsuits,
or action by any Governmental
16
Authority, with respect to any Plan which has resulted or
could reasonably be expected to result in a Material Adverse
Effect. There has been no prohibited transaction or violation
of the fiduciary responsibility rules with respect to any Plan
which has resulted or could reasonably be expected to result
in a Material Adverse Effect.
(3) No ERISA Event has occurred or is
reasonably expected to occur with respect to any Pension Plan
or Multiemployer Plan.
(4) No Pension Plan has any Unfunded Pension
Liability.
(5) Neither the Company nor any ERISA
Affiliate has incurred, nor reasonably expects to incur, any
liability under Title IV of ERISA with respect to any Pension
Plan (other than premiums due and not delinquent under Section
4007 of ERISA).
(6) Neither the Company nor any ERISA
Affiliate has incurred nor reasonably expects to incur any
liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such
liability) under Section 4201 or 4243 of ERISA with respect to
a Multiemployer Plan.
(7) Neither the Company nor any ERISA
Affiliate has transferred any Unfunded Pension Liability to
any person or otherwise engaged in a transaction that could be
subject to Section 4069 or 4212(c) of ERISA.
6(l) ASSETS. The Company and each of its
Subsidiaries has good and marketable title to all property and assets
reflected in the financial statements referred to in PARAGRAPH 6(a) above,
except for any defects in title as would not have Material Adverse Effect,
and except property and assets sold or otherwise disposed of in the ordinary
course of business subsequent to the respective dates thereof and except as
the marketability of certain licensing and other contractual rights may be
affected by prohibitions against the sale, transfer or other disposition
thereof and provided that in any event the Company and each of its
Subsidiaries has good and marketable title to all of its respective
"accounts" (as defined in the California Uniform Commercial Code). Neither
the Company nor any of its Subsidiaries has outstanding Liens on any of its
properties or assets nor are there any security agreements to which the
Company or any of its Subsidiaries is a party, or title retention agreements,
whether in the form of leases or otherwise, of any personal property except
as reflected in the financial statements referred to in PARAGRAPH 6(a) above
or as permitted under PARAGRAPH 8(a) below.
6(m) SECURITIES ACTS. The Company has not issued
any unregistered securities in violation of the registration requirements of
Section 5 of the Securities Act of 1933, as amended, or any other law, and is
not violating any rule, regulation or requirement under the Securities Act of
1933, as amended, or the Securities and Exchange Act of 1934, as amended,
other than violations which could not have a Material Adverse Effect. The
Company is not required to qualify an indenture under the Trust Indenture Act
of 1939, as amended, in connection with its execution and delivery of the
Notes.
6(n) CONSENTS, ETC. No consent, approval,
authorization of, or registration, declaration or filing with any Person,
including, without limitation, any
17
Governmental Authority, is required on the part of the Company or any
Subsidiary in connection with the execution and delivery of the Loan
Documents (other than filings to perfect the Liens granted by such Persons to
the Agent on behalf of the Lenders under the Loan Documents) or the
performance of or compliance with the terms, provisions and conditions hereof
or thereof.
6(o) HAZARDOUS MATERIALS. Except as otherwise
disclosed in writing to the Agent and the Lenders, neither the Company nor,
to the best knowledge of the Company, any other Person has: (1) caused or
permitted any Hazardous Materials to be disposed of in, on, under or about
the Property or any part thereof, and neither the Property, nor any part
thereof, has ever been used (whether by the Company or, to the best knowledge
of the Company, by any other Person) for activities involving, directly or
indirectly, the disposal of any Hazardous Materials; (2) caused or permitted
to be incorporated into or utilized in the construction of any improvements
located on the Property any chemical, material, or substance to which
exposure is prohibited, limited or regulated by any Hazardous Materials Laws
or which, even if not so regulated, is known to pose a hazard (either in its
present form or if disturbed or removed) to the health and safety of the
occupants of the Property or of property adjacent to the Property; or (3)
discovered any occurrence or condition on the Property that could cause the
Property or any part thereof to be in violation of any Hazardous Materials
Laws.
6(p) REGULATED ENTITIES. The Company is not subject
to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Interstate Commerce Act, any state public utilities
code, or any other Federal or state statute or regulation limiting its
ability to incur Indebtedness.
6(q) COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES,
ETC. The Company or its Subsidiaries own or are licensed or otherwise have
the right to use all of the patents, trademarks, service marks, trade names,
copyrights, contractual franchises, authorizations and other rights that are
reasonably necessary for the operation of their respective businesses,
without conflict with the rights of any other Person. To the best knowledge
of the Company, no slogan or other advertising device, product, process,
method, substance, part or other material now employed, or now contemplated
to be employed, by the Company or any Subsidiary infringes upon any rights
held by any other Person. Except as specifically disclosed in EXHIBIT G
hereto, no claim or litigation regarding any of the foregoing is pending or,
to the knowledge of the Company, threatened, and, to the knowledge of the
Company, no patent, invention, device, application, principle or any statute,
law, rule, regulation, standard or code is pending or proposed, which, in
either case, could, reasonably be expected to have a Material Adverse Effect.
6(r) COLLATERAL DOCUMENTS. The provisions of each
of the Collateral Documents are effective to create in favor of the Agent for
the benefit of the Lenders, a legal, valid and enforceable security interest
in all right, title and interest of the Company and its Domestic Subsidiaries
in the Collateral and Subsidiary Collateral described therein, subject only
to Liens permitted under PARAGRAPH 8(a) below.
6(s) INSURANCE. The properties of the Company and
its Subsidiaries are insured with financially sound and reputable insurance
companies not Affiliates of the Company, in such amounts, with such
deductibles and covering such risks as are customarily carried by companies
engaged in similar businesses and owning similar properties in localities
where the
18
Company or such Subsidiary operates. All such sources of insurance name the
Agent as loss payee and an additional insured for the benefit of the Agent
and each Lender, as their interests may appear.
6(t) FULL DISCLOSURE. None of the representations
or warranties made by the Company or any Domestic Subsidiary in the Loan
Documents as of the date such representations and warranties are made or
deemed made, and none of the statements contained in any exhibit, report,
statement or certificate furnished by or on behalf of the Company or any
Domestic Subsidiary in connection with the Loan Documents contains any untrue
statement of a material fact or omits any material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the time when
made or delivered.
It is expressly acknowledged and agreed by the Agent and the Lenders that the
representations and warranties set forth herein shall be deemed modified from
time to time to the extent of any disclosures made in writing by the Company
to the Agent and the Lenders and approved in writing by the Agent (with oral
consent of the Lenders given to the Agent) as modifications to such
representations and warranties, with the Agent agreeing to use reasonable
efforts to obtain the response of the Lenders within thirty (30) days
following receipt of such disclosure.
7. AFFIRMATIVE COVENANTS. The Company hereby covenants and
agrees with the Agent and each Lender that, as long as any Obligations remain
unpaid or any Lender has any obligation to make Loans hereunder, or, in the
case of Sanwa, to issue New Letters of Credit, the Company shall:
7(a) FINANCIAL STATEMENTS. Furnish or cause to be
furnished to the Agent and each of the Lenders directly:
(1) Within the 100th day after the last day of
each fiscal year of the Company: (i) consolidated statements
of income and statements of cash flows for such year and a
balance sheet as of the end of such year presented fairly in
accordance with GAAP and accompanied by an unqualified report
of a "Big Six" accounting firm or other firm of independent
certified public accountants acceptable to the Agent and the
Lenders and (ii) consolidating statements of income for such
year and balance sheets as of the end of such year,
accompanied by a certificate of an Approved Financial Officer
stating that, to the best of such Person's knowledge in the
responsible conduct of such Person's duties, such Company
prepared financial statements are presented fairly in
accordance with GAAP and such detailed supporting
documentation and schedules as any Lender may require;
(2) Within forty-five (45) days after the last
day of each of the Company's first three fiscal quarters,
consolidated and consolidating statements of income for such
fiscal quarter and balance sheets as of the end of such fiscal
quarter of the Company and its Subsidiaries, accompanied by a
certificate of an Approved Financial Officer stating that, to
the best of such Person's knowledge in the responsible conduct
of such Person's duties, such Company-prepared financial
statements are presented fairly in accordance with GAAP
(except that they do not contain notes and are subject to
normal
19
year-end audit adjustments) and such detailed
supporting documentation and schedules as any Lender may
require;
(3) Concurrently with each delivery of
financial statements pursuant to subparagraphs (a)(1) and
(a)(2) above, a certificate of the chief financial officer or
treasurer of the Company, in form and detail satisfactory to
the Lenders, setting forth calculations certified, to the best
of such Person's knowledge in the responsible conduct of such
Person's duties, to be true, complete and correct showing
compliance with the financial covenants set forth in
PARAGRAPHS 8(i) through 8(o) below as of the last day of the
fiscal quarter then ending; and
(4) Promptly upon receipt thereof, a copy of
each management letter delivered to the Company by the
Company's independent certified public accountants.
7(b) CERTIFICATES; REPORTS; OTHER INFORMATION. Furnish
or cause to be furnished to the Agent and each of the Lenders directly:
(1) Promptly after sending, filing or
publishing the same, copies of all proxy statements, financial
statements and reports which the Company sends to its public
stockholders and copies of all regular and periodic reports
and all registration statements which the Company files with
the Securities and Exchange Commission and copies of all
material press releases issued by Company;
(2) No later than forty-five (45) days after
the last day of each fiscal quarter, an aged accounts
receivable trial balance and an aged accounts payable trial
balance in a form reasonably acceptable to the Agent;
(3) No later than one hundred (100) days after
the last day of each of the Company's fiscal years, a copy of
the Company's projections for operations for the next fiscal
year, such projections to be in form and detail reasonably
satisfactory to the Lenders; and
(4) Promptly, such additional Company-prepared
financial and other information, including, without
limitation, financial statements of the Company and the
Subsidiaries, and information regarding the Collateral and the
Subsidiary Collateral as any Lender may from time to time
reasonably request, including, without limitation, such
information as is necessary for any Lender to assign or to
participate out any of its interests in the Obligations.
7(c) PAYMENT OF INDEBTEDNESS. And shall cause each
of the Subsidiaries to, pay, discharge or otherwise satisfy at or before
maturity or before it becomes delinquent, defaulted or accelerated, as the
case may be, all its Indebtedness (including taxes), except Indebtedness
being contested in good faith and for which provision is made to the
reasonable satisfaction of the Agent and the Lenders for the payment thereof
in the event the Company or any of the Subsidiaries is found to be obligated
to pay such Indebtedness and which Indebtedness is thereupon promptly paid by
the Company or such Subsidiaries.
20
7(d) MAINTENANCE OF EXISTENCE AND PROPERTIES. And shall
cause each of the Subsidiaries to, except in connection with the transactions
permitted under PARAGRAPH 8(c) below, maintain its corporate existence and
maintain all rights, privileges, licenses, approvals, franchises, properties
and assets necessary or desirable in the normal conduct of its business;
provided, however, that nothing contained herein shall prohibit the
dissolution of any of the Dissolving Subsidiaries.
7(e) INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS.
And shall cause each of the Subsidiaries to, keep proper books of record and
account in which full, true and correct entries in conformity with GAAP and
all Requirements of Law shall be made of all dealings and transactions in
relation to its business and activities, and permit representatives of the
Agent or any Lender (at no cost or expense to the Company or any Subsidiary
and upon reasonable notice unless there shall have occurred and be continuing
an Event of Default) to visit and inspect any of its properties and examine
and make abstracts from any of its books and records at any reasonable time
and as often as may reasonably be desired by the Agent or any Lender, and to
discuss the business, operations, properties and financial and other
condition of the Company and any of its Subsidiaries with officers and
employees of such parties, and with their independent certified public
accountants.
7(f) NOTICES. And shall cause each of the
Subsidiaries to, promptly give written notice to the Agent and each Lender
directly of:
(1) The occurrence of any Potential Default or
Event of Default;
(2) Any litigation or proceeding affecting the
Company or any of its Subsidiaries or the Collateral or the
Subsidiary Collateral which could have a Material Adverse
Effect;
(3) Any of the following events affecting the
Company or any ERISA Affiliate (but in no event more than 10
days after such event), together with a copy of any notice
with respect to such event that may be required to be filed
with a Governmental Authority and any notice delivered by a
Governmental Authority to the Company or any ERISA Affiliate
with respect to such event:
(i) An ERISA Event;
(ii) If any of the representations and
warranties in PARAGRAPH 6(k) cease to be accurate and
complete in all material respects;
(iii) The adoption of any new Pension Plan or
other Plan subject to Section 412 of the Code by the
Company or an ERISA Affiliate;
(iv) The adoption of any amendment to a Pension
Plan or other Plan subject to Section 412 of the Code, if
such amendment results in a material increase in
contributions or Unfunded Pension Liability; or
21
(v) The commencement of contributions by the
Company or an ERISA Affiliate to any Pension Plan,
Multiemployer Plan or other Plan subject to Section 412 of
the Code; and
(4) Any Material Adverse Effect not disclosed
pursuant to SUBPARAGRAPHS (2) and (3) above.
7(g) EXPENSES. Pay all reasonable out-of-pocket
expenses (including fees and disbursements of outside counsel and the
allocated costs of internal counsel): (1) of the Agent incident to the
preparation, negotiation and administration of the Loan Documents and the
protection of the rights of the Lenders and the Agent under the Loan
Documents, and (2) of the Agent and each of the Lenders incident to the
enforcement of payment of the Obligations, whether by judicial proceedings or
otherwise, including, without limitation, in connection with bankruptcy,
insolvency, liquidation, reorganization, moratorium or other similar
proceedings involving the Company or a "workout" of the Obligation. The
obligations of the Company under this PARAGRAPH 7(g) shall be effective and
enforceable whether or not any Credit Event occurs hereunder and shall
survive payment of all other Obligations and the termination of this
Agreement.
7(h) LOAN DOCUMENTS. And shall cause each of the
Subsidiaries to, comply with and observe all terms and conditions of the Loan
Documents.
7(i) INSURANCE. And shall cause each of the
Subsidiaries to, obtain and maintain insurance with responsible companies in
such amounts and against such risks as are usually carried by corporations
engaged in similar businesses similarly situated, which shall name the Agent
as loss payee and an additional insured for the benefit of the Agent and each
Lender as their interests may appear, and furnish any of the Lenders on
request full information as to all such insurance. Such insurance coverage
shall include, without limitation, product liability insurance covering all
products in the minimum amount of $1,000,000.00 for any single claim
thereunder and a minimum aggregate amount of $25,000,000.00 for all claims
thereunder.
7(j) HAZARDOUS MATERIALS. And shall cause each of
the Subsidiaries to:
(1) Keep and maintain all Property in
compliance with, and shall not cause or permit any Property to
be in violation of, any Hazardous Materials Laws or any
federal, state or local laws, ordinances or regulations
relating to industrial hygiene or to the environmental
conditions on, under or about any Property, including, but not
limited to, soil and ground water conditions.
(2) Not cause or permit the discharge, release
or disposal of any Hazardous Materials in, on, under or about
the Property (except relating to use of solvents, paints and
other chemical products used in connection with the operation
and production of equipment and inventory in the ordinary
course of business in accordance with all Requirements of Law,
including, without limitation, Hazardous Materials Laws).
(3) Promptly advise the Agent and each Lender
in writing of: (i) any threatened or actual Hazardous
Materials Claims, (ii) the Company's or any Subsidiary's
receipt of any notice of any violation of Hazardous Materials
Laws (and the
22
Company shall promptly provide the Lender with a
copy of such notice of violation), and (iii) the Company's or
any Subsidiary's discovery of any occurrence or condition on
the Property or any property adjacent to or in the vicinity of
the Property that could cause the Property or any part thereof
to be in violation of any Hazardous Materials Laws. If the
Agent and/or any Lender shall be joined in any legal
proceedings or actions initiated in connection with any
Hazardous Materials Claims, such Person shall have its
reasonable attorneys' fees and disbursements in connection
therewith paid by the Company.
(4) In the event (a "Hazardous
Materials Event") of a Hazardous Materials Claim, the receipt
of a notice of violation as described in the preceding
SUBPARAGRAPH (3)(ii), or the discovery of an occurrence or
condition as described in the preceding SUBPARAGRAPH (3)(iii),
promptly correct the violation or condition.
7(k) COMPLIANCE WITH LAWS. And shall cause each of
its Subsidiaries to, comply, in all material respects with all Requirements
of Law and Contractual Obligations the failure to comply with which could
have a Material Adverse Effect.
7(l) FURTHER ASSURANCES. And shall cause each of
its Domestic Subsidiaries to, promptly upon request by the Agent or any
Lender, do, execute, acknowledge, deliver, record, re-record, file, re-file,
register and re-register, any and all such further acts, deeds, conveyances,
security agreements, mortgages, assignments, estoppel certificates, financing
statements and continuations thereof, termination statements, notices of
assignment, transfers, certificates, assurances and other instruments the
Agent or such Lender, as the case may be, may reasonably require from time to
time in order (i) to carry out more effectively the purposes of this
Agreement or any other Loan Document, (ii) to subject to the Liens created by
any of the Collateral Documents any of the properties, rights or interests
covered by any of the Collateral Documents, (iii) to perfect and maintain the
validity, effectiveness and priority of any of the Collateral Documents and
the Liens intended to be created thereby, and (iv) to better assure, convey,
grant, assign, transfer, preserve, protect and confirm to the Agent and
Lenders the rights granted or now or hereafter intended to be granted to the
Lenders under any Loan Document or under any other document executed in
connection therewith.
7(m) YEAR 2000 COMPLIANCE. And shall cause each of its
Subsidiaries to, perform all acts reasonably necessary to ensure that the
Company and such Subsidiaries (and any business in which the Company or any
of its Subsidiaries holds a substantial interest) become Year 2000 Compliant
in a timely manner. Such acts shall include, without limitation, performing
a comprehensive review and assessment of all of the systems of the Company
and its Subsidiaries and adopting a detailed plan, with itemized budget, for
the remediation and testing of such systems, as well as ascertaining that the
material customers, suppliers and vendors of the Company and its Subsidiaries
are taking all appropriate steps to become Year 2000 Compliant on a timely
basis. For purposes hereof, the phrase "Year 2000 Compliant" shall mean, in
regard to any entity, that the software, hardware, firmware, equipment, goods
and systems utilized by and material to the business operations or financial
condition of such entity, will properly perform date sensitive functions
before, during and after the year 2000. The Company shall immediately upon
request provide the Agent with such reasonable certifications or other
evidence of the
23
compliance of the Company and its Subsidiaries with the terms hereof as the
Agent may from time to time require.
8. NEGATIVE COVENANTS. The Company hereby agrees that, as
long as any Obligations remain unpaid or any Lender has any obligation to
make Loans hereunder, or, in the case of Sanwa, to issue New Letters of
Credit, the Company shall not, directly or indirectly:
8(a) LIENS. And shall not permit any Subsidiary to,
create, incur, assume or suffer to exist, any Lien upon the Collateral
described in Paragraphs 3(a), 3(b), 3(f) and 3(g) of the Security Agreement
or the Subsidiary Collateral described in Paragraphs 4(a), 4(b), 4(f) and
4(g) of the Subsidiary Security Agreements except the Liens created by the
Security Agreement and the Subsidiary Security Agreements or create, incur,
assume or suffer to exist any Lien upon any other Collateral or any of its
other property and assets except:
(1) Liens or charges for current taxes,
assessments or other governmental charges which are not
delinquent or which remain payable without penalty, or the
validity of which are contested in good faith by appropriate
proceedings upon stay of execution of the enforcement thereof,
provided the Company shall have set aside on its books and
shall maintain adequate reserves for the payment of same in
conformity with GAAP;
(2) Liens, deposits or pledges made to secure
statutory obligations, surety or appeal bonds, or bonds for
the release of attachments or for stay of execution, or to
secure the performance of bids, tenders, contracts (other than
for the payment of borrowed money), leases or for purposes of
like general nature in the ordinary course of the Company's
business;
(3) Purchase money security interests for
property hereafter acquired, conditional sale agreements, or
other title retention agreements, with respect to property
hereafter acquired; provided, however, that no such security
interest or agreement shall extend to any property other than
the property acquired and the principal amount of the
Indebtedness secured thereby does not exceed one hundred
percent (100%) of the cost of such property;
(4) Statutory Liens of carriers, warehousemen,
mechanics, materialmen and other similar Liens imposed by law
and created in the ordinary course of business for amounts not
yet due or which are being contested in good faith by
appropriate proceedings and with respect to which adequate
reserves are being maintained in conformity with GAAP;
(5) Attachment and judgment Liens not
otherwise constituting an Event of Default each of which lien
is in existence less than thirty (30) days after the entry
thereof or with respect to which execution has been stayed,
payment is covered in full by insurance, or the Company shall
in good faith be prosecuting an appeal or proceedings for
review and shall have set aside on its books such reserves as
may be required by GAAP with respect to such judgment or
award; and
24
(6) Other Liens incidental to the conduct of
the business or the ownership of the property of the Company
which were not incurred in connection with borrowed money and
which do not in the aggregate materially detract from the
value of the property or materially impair the use thereof in
the operation of the business and which, in any event, do not
secure obligations aggregating in excess of $100,000.00.
8(b) INDEBTEDNESS. And shall not permit any
Domestic Subsidiary to, create, incur, assume or suffer to exist, or
otherwise become or be liable in respect of any Indebtedness other than:
(1) The Obligations;
(2) Indebtedness reflected in the financial
statements referred to in PARAGRAPH 6(a) above;
(3) Trade debt incurred in the ordinary
course of business and outstanding less than sixty (60) days
after the same has become due and payable or which is being
contested in good faith, provided provision is made to the
satisfaction of the Lenders for the eventual payment thereof
in the event it is found that such contested trade debt is
payable by the Company;
(4) Indebtedness incurred in connection with
Capital Expenditures permitted under PARAGRAPH 8(o) below in
an amount not to exceed $500,000.00 in the aggregate during
any fiscal year;
(5) Indebtedness secured by Liens permitted
under PARAGRAPH 8(a) above;
(6) Indebtedness relating to additional
letters of credit issued pursuant to PARAGRAPH 2(h) above;
(7) Indebtedness constituting the obligation
to pay any management fee permitted under PARAGRAPH 8(p)
below;
(8) Indebtedness incurred in connection with
occupancy leases requiring rental and other payments in an
amount not to exceed $2,500,000.00 in the aggregate during
any fiscal year;
(9) Indebtedness incurred in connection with
licensing agreements; and
(10) Indebtedness incurred in connection with
operating leases.
8(c) CONSOLIDATION AND MERGER. And shall not permit
any Subsidiary to liquidate or dissolve or enter into any consolidation,
merger, partnership, joint venture, syndicate or other combination, except
that any Subsidiary may be consolidated with or merged into the Company or
any Domestic Subsidiary if immediately after the effectiveness of such merger
or
25
consolidation, there shall not have occurred and be continuing any Event
of Default or Potential Default.
8(d) ACQUISITIONS. And shall not permit any
Subsidiary to, whether in one transaction or a series of transactions,
purchase or acquire or incur liability for the purchase or acquisition of the
business or all or substantially all of the assets or business of any Person
unless:
(1) Such Person is primarily engaged in a line
of business within the
toys/novelty/gifts/premiums/promotions/collectibles industry;
(2) If the consideration for such purchase or
acquisition requires the issuance of stock by the Company or
any of its Subsidiaries, the value of such stock, when added
to the value of all other stock issued in connection with
purchases and acquisitions consummated after the Effective
Date of this Agreement, does not exceed fifty percent (50%) of
the Company's consolidated Tangible Net Worth at the time such
stock is issued;
(3) The cash consideration for such purchase or
acquisition, when added to the cash consideration paid in
connection with all other purchases and acquisitions
consummated after the Effective Date of this Agreement, shall
not exceed twenty-five percent (25%) of the Company's
consolidated Tangible Net Worth at the time such cash
consideration is paid; and
(4) No Event of Default or Potential Default
shall exist both before and after the consummation of such
purchase or acquisition, and the Company shall have delivered
to the Agent prior to such consummation a certificate of the
chief financial officer or treasurer of the Company, in form
and detail satisfactory to the Agent and the Lenders, setting
forth calculations certified, to the best of such Person's
knowledge in the responsible conduct of such Person's duties,
to be true, complete and correct showing compliance with the
financial covenants set forth in PARAGRAPHS 8(i) through 8(o)
below on a pro-forma basis.
8(e) PAYMENT OF DIVIDENDS. Declare or pay any
dividends upon its shares of stock now or hereafter outstanding or make any
distribution of assets to its stockholders as such, whether in cash, property
or securities, except dividends payable in shares of capital stock and cash
in lieu of fractional shares or in options, warrants or other rights to
purchase shares of capital stock.
8(f) PURCHASE OR RETIREMENT OF STOCK. Acquire,
purchase, redeem or retire any shares of its capital stock now or hereafter
outstanding, in one transaction or a series of transactions; provided,
however, that if and only if at the date such acquisition, purchase,
redemption or retirement is consummated there does not exist an Event of
Default or Potential Default, the Company may acquire, purchase, redeem or
retire any shares of its capital stock for an aggregate dollar amount not to
exceed $1,000,000.00 during any consecutive twelve (12)-month period.
26
8(g) INVESTMENTS; ADVANCES. And shall not permit
any Subsidiary to, make or commit to make any advance, loan or extension of
credit or capital contribution to, or purchase any stock, bonds, notes,
debentures or other securities of, or make any other investment in, any
Person (collectively, "Investments"), except: (1) Investments in Subsidiaries
permitted under PARAGRAPH 8(t) BELOW, (2) Investments consistent with the
Existing Investment Policies, (3) loans to employees; provided, however, that
the aggregate dollar amount of such loans may not exceed $200,000.00 at any
time outstanding, (4) advances to employees for traveling and other business
related expenses in the ordinary course of business, and (5) investments
received in connection with the bankruptcy or reorganization of customers or
in settlement of delinquent obligations or other disputes with such customers
or suppliers arising in the ordinary course of business.
8(h) SALE OF ASSETS. And shall not permit any
Subsidiary to sell, lease, assign, transfer or otherwise dispose of any of
its assets, whether now owned or hereafter acquired, other than dispositions
of personal property consisting of inventory disposed of in the ordinary
course of business or personal property in the nature of furniture,
furnishings, equipment and supplies which are worn or obsolete or otherwise
not needed in the running of the business and, subject to the provisions of
PARAGRAPH 8(p) below, sales among the Company and/or Subsidiaries.
8(i) MINIMUM TANGIBLE NET WORTH. Permit the
Company's consolidated Tangible Net Worth for any calendar quarter to be less
than the sum of (i) $9,700,000.00, plus, (ii) on a cumulative basis (with no
deduction for losses) for each calendar quarter after September 30, 1998, (y)
seventy five percent (75%) of the Company's consolidated Net Profit After
Taxes during such calendar quarter plus (z) seventy five percent (75%) of the
net proceeds of any additional equity shares or Subordinated Debt issued by
the Company or its Subsidiaries.
8(j) RATIO OF TOTAL LIABILITIES TO NET WORTH.
(1) Permit the Company's ratio of
consolidated Total Liabilities (including Outstanding Letters
of Credit) to consolidated Tangible Net Worth to be more than:
(i) as of September 30, 1998, 6.90:1.00, (ii) as of December
31, 1998, 4.90:1.00, and (iii) as of the last day of each
calendar quarter thereafter, 3.00:1.00; or
(2) Permit the Company's ratio of
consolidated Total Liabilities (excluding Outstanding Letters
of Credit) to consolidated Tangible Net Worth to be more than:
(i) as of September 30, 1998, 6.50:1.00, (ii) as of December
31, 1998, 4.75:1.00, (iii) as of March 31, 1999, June 30,
1999, September 30, 1999 and December 31, 1999, 2.75:1.00, and
(iv) as of the last day of each calendar quarter thereafter,
2.00:1.00.
8(k) MINIMUM CURRENT RATIO. Permit the Company's
ratio of consolidated Current Assets to consolidated Current Liabilities to
be less than: (1) as of the last day of each calendar quarter ending on or
before December 31, 1999, 1.00:1.00, and (2) as of the last day of each
calendar quarter thereafter, 1.20:1.00.
27
8(l) MAXIMUM FUNDED DEBT COVERAGE RATIO. Permit as
of the last day of any calendar quarter the ratio of (i) Funded Debt of the
Company and its consolidated Subsidiaries during such quarter to (ii) EBITDA
of the Company and its consolidated Subsidiaries during such quarter and the
immediately preceding three calendar quarters to exceed (x) as of the last
day of the calendar quarter ending December 31, 1998, 2.45:1.00 or (y) as of
the last day of any calendar quarter thereafter, 1.50:1.00.
8(m) MINIMUM FIXED CHARGE COVERAGE RATIO. Permit as
of the last day of any calendar quarter the ratio of (i) EBITDA of the
Company and its consolidated Subsidiaries during such quarter and the
immediately preceding three calendar quarters to (ii) the Annual Commitment
Reduction Amount PLUS Interest Expense of the Company and its consolidated
Subsidiaries during such four calendar quarters PLUS Taxes paid by the
Company and its consolidated Subsidiaries for such four calendar quarters to
be less than (y) for any calendar quarter ending on or before December 31,
1998, 1.25:1.00, or (z) for any calendar quarter thereafter, 1.35:1.00.
8(n) NET PROFIT AFTER TAXES; QUARTERLY NET INCOME.
Permit: (1) the Company's consolidated Net Profit After Taxes for any fiscal
year to be less than $1.00; or (2) the Company's consolidated net income (as
shown on the quarterly financial statements delivered pursuant to PARAGRAPH
7(a) above) to be less than $0.00 for each of any two consecutive quarters in
any fiscal year.
8(o) CAPITAL EXPENDITURES. And shall not permit any
Subsidiary to, make or commit to make (by way of acquisition of the
securities of any Person or otherwise), Capital Expenditures, taken in the
aggregate for the Company and its consolidated Subsidiaries, in excess of (y)
$7,000,000.00 during fiscal year 1998 or (z) $2,000,000.00 for any fiscal
year thereafter.
8(p) LIMITATION ON TRANSACTIONS WITH AFFILIATES.
Purchase, acquire or lease any property from, or sell, transfer or lease any
property to, or lend or advance any money to, or borrow any money from, or
guarantee any obligation of, or acquire any stock, obligations or securities
of, or enter into any merger or consolidation agreement, or any management or
similar fee, agreement with, any Affiliate, or enter into any other
transaction or arrangement or make any payment to (including, without
limitation, on account of any management fees, service fees, home office
charges, consulting fees, technical services charges or tax sharing charges)
or otherwise deal with, in the ordinary course of business or otherwise, any
Affiliate other than on terms no less favorable to the Company as would be
obtained in an arms-length transaction with a non-Affiliate and provided that
accounts receivable of the Company or any Subsidiary generated by sales of
inventory to a Subsidiary shall be required to be (and shall in fact be) paid
no later than ninety (90) days following the sale date for the related
inventory; provided, however, that nothing contained herein shall be deemed
to: (1) prohibit the payment of any fees by any Subsidiary to the Company or
a Domestic Subsidiary; (2) prohibit the payment by the Company of management
fees to Subsidiaries in connection with the purchase of goods by the Company
from foreign manufacturers so long as any such fee does not exceed fifteen
percent (15%) of the costs charged by the manufacturer in connection with
such sale; or (3) permit the Company to enter into any transaction with any
Subsidiary in violation of PARAGRAPH 8(t)(2) below.
28
8(q) INVENTORY REPURCHASE. And shall not permit any
Subsidiary to, repurchase inventory for amounts greater than $2,000,000.00 in
the aggregate during any fiscal year or if upon such repurchase there would
exist an Event of Default or Potential Default hereunder.
8(r) CHANGE IN BUSINESS. And shall not permit any
Subsidiary to, engage in any material line of business substantially
different from those lines of business carried on by it on the Effective Date
or, in the case of any Subsidiary formed following the Effective Date, the
lines of business to be carried on by it upon formation.
8(s) ACCOUNTING CHANGES. And shall not permit any
Subsidiary to, make any significant change in accounting treatment or
reporting practices, except as required by GAAP, or change the fiscal year of
the Company or of any of its consolidated Subsidiaries.
8(t) SUBSIDIARIES. And shall not permit any
Subsidiary to:
(1) Form, following the Effective Date, any
Subsidiary without thirty (30) days prior written notice to
the Agent and the Lenders:
(2) Invest, following the Effective Date,
cash in or contribute cash or transfer other assets or make
loans to Subsidiaries in an aggregate amount in excess of
$2,000,000.00 or, with respect to any single Subsidiary,
$1,000,000.00 (it being agreed and understood that for
purposes of this Paragraph 8(t)(2) the dollar amount of loans
to Subsidiaries shall be amounts at any time actually
outstanding); provided, however, that the limitations
contained in this SUBPARAGRAPH (2) shall not include
management fees paid to Subsidiaries to the extent permitted
pursuant to PARAGRAPH 8(p) above or fair market value cash
sales of inventory to Subsidiaries; or
(3) Form or permit to exist any Subsidiary
which is not a wholly-owned Subsidiary; PROVIDED, HOWEVER,
that, as a condition precedent to the formation of any such
Subsidiary, if such Subsidiary is a Domestic Subsidiary, it
will execute and deliver to the Agent the documents required
pursuant to PARAGRAPH 4(c)(1) above.
8(u) SALES OF INVENTORY. Permit more than thirty
five percent (35%) of sales of inventory of the Company and its consolidated
Subsidiaries (excluding sales by the Company to Subsidiaries or by
Subsidiaries to the Company or to other Subsidiaries) during any consecutive
twelve (12)-month period to represent sales of inventory by any Person other
than the Company.
9. EVENTS OF DEFAULT. Upon the occurrence of any of the
following events (an "Event of Default"):
9(a) The Company shall fail to (1) pay any
required payment of principal under this Agreement or any Note, when due,
whether at stated maturity, by acceleration, by notice of prepayment or
otherwise, (2) pay any required payment of interest under this Agreement or
any Note or any fees payable pursuant to PARAGRAPH 3(i) for a period of five
(5) days or more after the date such payment is due, or (3) pay any other
Obligation under this Agreement within fifteen (15) days of the date such
payment is due; or
29
9(b) Any representation or warranty made by the
Company in any Loan Document or in connection with any Loan Document shall be
inaccurate or incomplete in any material respect on or as of the date made; or
9(c) The Company shall default in the observance or
performance of any covenant or agreement contained in PARAGRAPH 7(d) above,
in PARAGRAPH 8 above or in the Collateral Documents; or
9(d) The Company shall fail to observe or perform
any other term or provision contained in the Loan Documents and such failure
shall continue for thirty (30) days after the Company knows or, in the
orderly course of its business, should have known of such failure; or
9(e) The Company shall default in any payment of
principal of or interest on any Indebtedness (other than the Obligations) in
an aggregate in excess of $200,000.00, the effect of which is to permit such
Indebtedness to be declared or otherwise to become due prior to its stated
maturity; or
9(f) (1) The Company or any of its Subsidiaries,
shall commence any case, proceeding or other action (i) under any existing or
future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (ii) seeking appointment of a receiver, trustee, custodian or
other similar official for it or for all or any substantial part of its
assets, or the Company or any of its Subsidiaries shall make a general
assignment for the benefit of its creditors; or (2) there shall be commenced
against the Company or any of its Subsidiaries, any case, proceeding or other
action of a nature referred to in clause (1) above which (i) results in the
entry of an order for relief or any such adjudication or appointment, or (ii)
remains undismissed, undischarged or unbonded for a period of sixty (60)
days; or (3) there shall be commenced against the Company or any of its
Subsidiaries, any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against all or
substantially all of its assets which results in the entry of an order for
any such relief which shall not have been vacated, discharged, stayed,
satisfied or bonded pending appeal within sixty (60) days from the entry
thereof; or (4) the Company or any of its Subsidiaries, shall take any action
in furtherance of, or indicating its consent to, approval of, or acquiescence
in (other than in connection with a final settlement), any of the acts set
forth in clause (1), (2) or (3) above; or (5) the Company or any of its
Subsidiaries, shall generally not, or shall be unable to, or shall admit in
writing its inability to pay its debts as they become due; or
9(g) (1) An ERISA Event shall occur with respect to
a Pension Plan or Multiemployer Plan which has resulted or could reasonably
expected to result in liability of the Company under Title IV of ERISA to the
Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess
of five percent (5%) of consolidated Tangible Net Worth; (2) the commencement
or increase of contributions to, or the adoption of or the amendment of a
Pension Plan by the Company or an ERISA Affiliate which has resulted or could
reasonably be expected to result in an increase in Unfunded Pension Liability
among all Pension Plans in an aggregate
30
amount in excess of five percent (5%) of consolidated Tangible Net Worth; (3)
any of the representations and warranties contained in PARAGRAPH 6(k) shall
cease to be accurate and complete in any material respect; or (4) the Company
or an ERISA Affiliate shall fail to pay when due, after the expiration of any
applicable grace period, any installment payment with respect to its
withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan,
which has resulted or could reasonably be expected to result in a Material
Adverse Effect; or
9(h) One or more judgments or decrees in an
aggregate amount in excess of $200,000.00 (excluding judgments and decrees
covered by insurance, without giving effect to self-insurance or deductibles)
shall be entered and be outstanding at any date against the Company or any of
its Subsidiaries and all such judgments or decrees shall not have been
vacated, discharged, stayed, satisfied or bonded pending appeal within thirty
(30) days from the entry thereof or in any event later than five days prior
to the date of any proposed sale thereunder; or
9(i) Any Subsidiary shall attempt to rescind or
revoke its Guaranty, with respect to future transactions or otherwise, or
shall fail to observe or perform any term or provision of its Guaranty or its
Subsidiary Security Agreement; or
9(j) Any provision of any Collateral Document
shall for any reason cease to be valid and binding on or enforceable against
the Company or any Subsidiary party thereto or the Company or any Subsidiary
shall so state in writing or bring an action to limit its obligations or
liabilities thereunder; or
9(k) Any Collateral Document shall for any reason
(other than pursuant to the terms thereof) cease to create a valid perfected
security interest in the Collateral purported to be covered thereby with the
priority required by the Loan Documents;
THEN, automatically upon the occurrence of an Event of
Default under PARAGRAPH 9(f) above, at the option of any Lender upon the
occurrence of an Event of Default under PARAGRAPH 9(a) above and, in all
other cases, at the option of the Majority Lenders, each Lender's obligation
to make Loans and Sanwa's obligation to issue New Letters of Credit hereunder
shall terminate and the principal balance of outstanding Loans and interest
accrued but unpaid thereon and the aggregate contingent obligation of the
Company to reimburse the Lenders for future L/C Drawings with respect to
Outstanding Letters of Credit and all other Obligations shall become
immediately due and payable, without demand upon or presentment to the
Company, which are expressly waived by the Company and the Agent and the
Lenders may immediately exercise all rights, powers and remedies available to
them at law, in equity or otherwise, including, without limitation, under the
Loan Documents, all of which rights, powers and remedies are cumulative and
not exclusive.
10. THE AGENT.
10(a) APPOINTMENT. Each Lender hereby irrevocably
designates and appoints the Agent as the agent of such Lender under the Loan
Documents and each such Lender hereby irrevocably authorizes the Agent, as
the agent for such Lender, to take such action on its behalf under the
provisions of the Loan Documents and to exercise such powers and perform
31
such duties as are expressly delegated to the Agent by the terms of the Loan
Documents, together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary elsewhere in the Loan
Documents, the Agent shall not have any duties or responsibilities, except
those expressly set forth herein or therein, or any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into the Loan Documents or
otherwise exist against the Agent.
10(b) DELEGATION OF DUTIES. The Agent may execute
any of its duties under the Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for
the negligence or misconduct of any agents or attorneys-in-fact selected by
it with reasonable care.
10(c) EXCULPATORY PROVISIONS. Neither the Agent
nor any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (1) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with the Loan Documents
(except for its or such Person's own gross negligence or willful misconduct),
or (2) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by the Company or any officer
thereof contained in the Loan Documents or in any certificate, report,
statement or other document referred to or provided for in, or received by
the Agent under or in connection with the Loan Documents or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of the
Loan Documents or for any failure of the Company to perform its obligations
hereunder. The Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, the Loan Documents or to inspect
the properties, books or records of the Company.
10(d) RELIANCE BY AGENT. The Agent shall be
entitled to rely, and shall be fully protected in relying, upon any note,
writing, resolution, notice, consent, certification, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation reasonably believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons
and upon advice and statements of legal counsel (including, without
limitation, counsel to the Company), independent accountants and other
experts selected by the Agent. The Agent may deem and treat the payee of any
note as the owner thereof for all purposes. As to the Lenders: (1) the
Agent shall be fully justified in failing or refusing to take any action
under the Loan Documents unless it shall first receive such advice or
concurrence of one hundred percent (100%) of the Lenders or it shall first be
indemnified to its satisfaction by the Lenders ratably in accordance with
their respective Percentage Shares against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any
action (except for liabilities and expenses resulting from the Agent's gross
negligence or willful misconduct), and (2) the Agent shall in all cases be
fully protected in acting, or in refraining from acting, under the Loan
Documents in accordance with a request of one hundred percent (100%) of the
Lenders, as appropriate, and such request and any action taken or failure to
act pursuant thereto shall be binding upon all the Lenders.
10(e) NOTICE OF DEFAULT. The Agent shall not be
deemed to have knowledge or notice of the occurrence of any Potential Default
or Event of Default hereunder
32
unless the Agent has received notice from a Lender or the Company referring
to the Loan Documents, describing such Potential Default or Event of Default
and stating that such notice is a "notice of default." In the event that the
Agent receives such a notice, the Agent shall promptly give notice thereof to
the Lenders. The Agent shall take such action with respect to such Potential
Default or Event of Default as shall be reasonably directed by all of the
Lenders (or any Lender with respect to an Event of Default under PARAGRAPH
9(a) above); provided that, unless and until the Agent shall have received
such directions, the Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interest of the
Lenders.
10(f) NON-RELIANCE ON AGENT AND OTHER LENDERS.
Each Lender expressly acknowledges that neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates has
made any representations or warranties to it and that no act by the Agent
hereinafter taken, including any review of the affairs of the Company, shall
be deemed to constitute any representation or warranty by the Agent to any
Lender. Each Lender represents to the Agent that it has, independently and
without reliance upon the Agent or any other Lender, and based on such
documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Company and made
its own decision to make its loans hereunder and enter into this Agreement.
Each Lender also represents that it will, independently and without reliance
upon the Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement, and to make such investigation as it deems necessary to
inform itself as to the business, operations, property, financial and other
condition and creditworthiness of the Company. Except for notices, reports
and other documents expressly required to be furnished to the Lenders by the
Agent hereunder, the Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the
business, operations, property, financial and other condition or
creditworthiness of the Company which may come into the possession of the
Agent or any of its officers, directors, employees, agents, attorneys-in-fact
or affiliates.
10(g) INDEMNIFICATION. The Lenders agree to
indemnify the Agent in its capacity as such (to the extent not reimbursed by
the Company and without limiting the obligation of the Company to do so),
ratably according to the respective amounts of their Percentage Shares, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including without limitation at any time
following the payment of the Obligations) be imposed on, incurred by or
asserted against the Agent in any way relating to or arising out of the Loan
Documents or any documents contemplated by or referred to herein or the
transactions contemplated hereby or any action taken or omitted by the Agent
under or in connection with any of the foregoing; provided that no Lender
shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent's gross negligence or
willful misconduct. The agreements in this subsection shall survive the
payment of the Obligations.
10(h) AGENT IN ITS INDIVIDUAL CAPACITY. The Agent
and its affiliates may make loans to, accept deposits from and generally
engage in any kind of business with the
33
Company as though the Agent were not the Agent hereunder. With respect to
such loans made or renewed by them and any Note issued to them, the Agent
shall have the same rights and powers under the Loan Documents as any Lender
and may exercise the same as though it were not the Agent, and the terms
"Lender" and "Lenders" shall include the Agent in its individual capacity.
10(i) SUCCESSOR AGENT. The Agent may resign as
Agent under the Loan Documents upon thirty (30) days' notice to the Lenders
and agrees that it will so resign in the event it ceases to hold any
Percentage Share of the Obligations. If the Agent shall resign, then the
Lenders (other than the Lender resigning as Agent) shall appoint a successor
agent or, if the Lenders are unable to agree on the appointment of a
successor agent, the Agent shall appoint a successor agent for the Lenders
whereupon such successor agent shall succeed to the rights, powers and duties
of the Agent, and the term "Agent" shall mean such successor agent effective
upon its appointment, and the former Agent's rights, powers and duties as
Agent shall be terminated, without any other or further act or deed on the
part of such former Agent or any of the parties to this Agreement or any of
the Loan Documents or successors thereto. After any retiring Agent's
resignation hereunder as Agent, the provisions of the Loan Documents shall
inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under the Loan Documents.
10(j) COLLATERAL MATTERS.
(1) The Agent is authorized on behalf of all
the Lenders, without the necessity of any notice to or further
consent from the Lenders, from time to time to take any action
with respect to any Collateral, any Subsidiary Collateral or
the Collateral Documents which may be necessary to perfect and
maintain perfected the security interest in and Liens upon
Collateral granted pursuant to the Collateral Documents.
(2) The Lenders irrevocably authorize the
Agent, at its option and in its discretion, to release any
Lien granted to or held by the Agent upon any Collateral or
any Subsidiary Collateral (i) upon termination of the Credit
Limit and payment in full of all Loans and all other
Obligations payable under this Agreement and under any other
Loan Documents; (ii) constituting property sold or to be sold
or disposed of as part of or in connection with any
disposition permitted hereunder; (iii) constituting property
in which the Company or any Subsidiary of the Company owned no
interest at the time the Lien was granted or at any time
thereafter; (iv) constituting property leased to the Company
or any Subsidiary of the Company under a lease which has
expired or been terminated in a transaction permitted under
this Agreement or is about to expire and which has not been,
and is not intended by the Company or such Subsidiary to be,
renewed or extended; (v) consisting of an instrument
evidencing Indebtedness or other debt instrument, if the
indebtedness evidenced thereby has been paid in full; or (vi)
if approved, authorized or ratified in writing by all the
Lenders. Upon request by the Agent at any time, the Lenders
will confirm in writing the Agent's authority to release
particular types or items of Collateral and Subsidiary
Collateral pursuant to this subsection.
34
(3) Each Lender agrees with and in favor of
each other (which agreement shall not be for the benefit of
the Company or any of its Subsidiaries) that the Company's
obligation to such Lender under this Agreement and the other
Loan Documents is not and shall not be secured by any real
property collateral now or hereafter acquired by such Lender.
11. MISCELLANEOUS PROVISIONS.
11(a) NO ASSIGNMENT. The Company may not assign
its rights or obligations under this Agreement or the other Loan Documents
without the prior written consent of one hundred percent (100%) of the Agent
and the Lenders. Subject to the foregoing, all provisions contained in this
Agreement or any document or agreement referred to herein or relating hereto
shall inure to the benefit of each Lender, its successors and assigns, and
shall be binding upon the Company, its successors and assigns. Any purported
assignment in violation hereof shall be automatically null and void.
11(b) AMENDMENT. Neither this Agreement nor any
other Loan Document nor any Outstanding Letter of Credit may be amended,
renewed or terms or provisions hereof waived unless such amendment or waiver
is in writing and signed by the Agent, the Majority Lenders and the Company;
provided, however, no such amendment or waiver shall, without the prior
written consent of one hundred percent (100%) of the Lenders: (1) reduce the
principal of, or rate of interest on, the Loans or fees payable hereunder,
(2) except as expressly contemplated by Paragraph 11(h) below, modify the
Percentage Share of any Lender, (3) modify the Maximum Commitment of any
Lender, (4) modify the definition of "Majority Lenders", (5) extend or waive
any scheduled payment date for any principal, interest or fees, or the
Maturity Date, (6) release any Guarantor from its obligations under its
Guaranty or Subsidiary Security Agreement, (7) amend this PARAGRAPH 11(b), or
(8) amend any provision of the Loan Documents which by its terms requires the
consent or approval of one hundred percent (100%) of the Lenders. It is
expressly agreed and understood that the failure by the required Lenders to
elect to accelerate amounts outstanding hereunder and/or to terminate the
obligation of the Lenders to make Loans hereunder shall not constitute an
amendment or waiver of any term or provision of this Agreement. No amendment
of any provision of the Loan Documents relating to the Agent shall be
effective without the written consent of the Agent.
11(c) CUMULATIVE RIGHTS; NO WAIVER. The rights,
powers and remedies of the Lenders hereunder and under the other Loan
Documents are cumulative and in addition to all rights, power and remedies
provided under any and all agreements between the Company and the Lenders
relating hereto, at law, in equity or otherwise. Any delay or failure by the
Lenders to exercise any right, power or remedy shall not constitute a waiver
thereof by the Lenders, and no single or partial exercise by the Lenders of
any right, power or remedy shall preclude other or further exercise thereof
or any exercise of any other rights, powers or remedies.
11(d) ENTIRE AGREEMENT. This Agreement, the other
Loan Documents and the documents and agreements referred to herein and
therein embody the entire agreement and understanding between the parties
hereto and supersede all prior agreements and understandings relating to the
subject matter hereof and thereof.
35
11(e) SURVIVAL. All representations, warranties,
covenants and agreements contained in this Agreement and the other Loan
Documents on the part of the Company shall survive the termination of this
Agreement and shall be effective until the Obligations are paid and performed
in full or longer as expressly provided herein.
11(f) NOTICES. All notices given by any party to
the others under this Agreement and the other Loan Documents shall be in
writing unless otherwise provided for herein, delivered personally, by
facsimile transmission or by depositing the same in the United States mail,
registered or certified, with postage prepaid, addressed to the party at the
address set forth on SCHEDULE 2 attached hereto. Any party may change the
address to which notices are to be sent by notice of such change to each
other party given as provided herein. Such notices shall be effective on the
date received or, if mailed, on the third Business Day following the date
mailed.
11(g) GOVERNING LAW. This Agreement and the other
Loan Documents shall be governed by and construed in accordance with the laws
of the State of California.
11(h) ASSIGNMENT; ADDITION OF NEW LENDER.
(1) Any Lender may, in the ordinary course of its
business and in accordance with applicable law, at any time assign to any of
its Affiliates or to one or more banks or other financial institutions (each,
an "Applicant Institution") all or any part of its rights and obligations
under the Loan Documents. The prior written consent of the Company and the
Agent shall be required in connection with any assignment if the Applicant
Institution is not a Lender or an Affiliate thereof; provided, however, that
if an Event of Default has occurred and is continuing, the consent of the
Company shall not be required. Such consent shall not be unreasonably
withheld or delayed. Each Applicant Institution's proposed Maximum
Commitment must be not less than $5,000,000.00. The addition of any
Applicant Institution shall be subject to:
(i) If such Applicant Institution will be
acquiring less than all of an existing Lender's Maximum
Commitment by way of an assignment from such existing
Lender, such existing Lender holding a Maximum Commitment
of not less than $5,000,000.00 following the consummation
of the contemplated assignment; and
(ii) Delivery of each of the items and the
occurrence of each of the applicable events described in
subparagraph (2) below.
(2) Assuming delivery of any consents required
pursuant to subparagraph (1) above, the Agent and the Company
shall mutually agree on the Adjustment Date on which such
Applicant Institution shall become a party hereto and a Lender
hereunder. On such Adjustment Date:
(i) The Administrative Agent shall
deliver to the Company and each of the Lenders a
Commitment Schedule to be effective from such Adjustment
Date.
36
(ii) In the event such Applicant
Institution is not an existing Lender, such Applicant
Institution shall pay to the Agent, no later than 12:00
noon (Los Angeles time), an amount equal to such
Applicant Institution's Percentage Share of Loans
outstanding. The Agent shall thereupon remit to the
Lenders their respective shares of such funds, as
applicable. In the event of an assignment between
existing Lenders, such existing Lenders shall purchase
and sell between themselves on such Adjustment Date the
appropriate portions of Loans outstanding so that such
Lenders shall hold the Obligations in accordance with
their respective Percentage Shares. Following such
Adjustment Date, fees and interest accrued on Loans to
but not including such Adjustment Date shall be payable
to the Lenders in accordance with their respective
Percentage Shares prior to such Adjustment Date before
giving effect to the readjustment thereof pursuant to the
Commitment Schedule provided by the Company on such
Adjustment Date.
(iii) In the event the Applicant
Institution is not an existing Lender, the Administrative
Agent, the Company and such Applicant Institution shall
execute and deliver an agreement in the form of that
attached hereto as EXHIBIT J (an "Additional Lender
Agreement"), which agreement shall constitute an
amendment to this Agreement to the extent necessary to
reflect the inclusion of such Applicant Institution as a
Lender hereunder. In addition, if in connection with the
inclusion of such Applicant Institution as a Lender
hereunder, the Credit Limit will be increased, the
parties hereto will execute any additional amendments to
the Loan Documents as the Agent reasonably requests to
reflect such increase.
(iv) The Company shall execute and deliver
new Notes, as applicable, to such Applicant Institution
if it is not an existing Lender.
(v) Subject to the requirements described
above, such Applicant Institution (to the extent it is
not an existing Lender hereunder) shall become a party
hereto and a Lender hereunder and shall be entitled to
all rights, benefits and privileges accorded a Lender
hereunder and under the other Loan Documents and shall be
subject to all obligations of a Lender hereunder and
under the other Loan Documents.
(vi) The Applicant Institution shall pay
to the Agent for its own account a registration fee of
$3,500.00 (said fee covering the admission of the
Applicant Institution into this Agreement).
(3) Any Lender may at any time sell to one or
more Persons (each of such Persons being herein called a
"Participant") participating interests in any of the
Obligations held by such Lender and its commitments hereunder;
provided, however, that:
(i) No participation contemplated by this
Paragraph 11(h) shall relieve such Lender from its
obligations hereunder or under any other Loan Document;
37
(ii) Such Lender shall remain solely
responsible for the performance of such obligations and
such Lender shall grant no voting rights to any
Participant other than as to matters which require the
approval of one hundred percent (100%) of the Lenders
pursuant to Paragraph 11(b) above; and
(iii) The Company, the Agent and the
other Lenders shall continue to deal solely and directly
with such Lender in connection with such Lender's rights
and obligations under the Loan Documents; provided,
however, that the Company acknowledges and agrees that
each Participant shall be considered a Lender for
purposes of Paragraphs 1(d), 1(e) and 1(g) above.
11(i) COUNTERPARTS. This Agreement and the other
Loan Documents may be executed in any number of counterparts, all of which
together shall constitute one agreement.
11(j) SHARING OF PAYMENTS. If any Lender shall
receive and retain any payment, whether by setoff, application of deposit
balance or security, or otherwise, in respect of the Obligations in excess of
such Lender's Percentage Share thereof, then such Lender shall purchase from
the other Lenders for cash and at face value and without recourse, such
participation in the Obligations held by them as shall be necessary to cause
such excess payment to be shared ratably as aforesaid with each of them;
provided, that if such excess payment or part thereof is thereafter recovered
from such purchasing Lender, the related purchases from the other Lenders
shall be rescinded ratably and the purchase price restored as to the portion
of such excess payment so recovered, but without interest. Each Lender is
hereby authorized by the Company to exercise any and all rights of setoff,
counterclaim or bankers' lien against the full amount of the Obligations,
whether or not held by such Lender. Each Lender hereby agrees to exercise
any such rights first against the Obligations and only then to any other
Indebtedness of the Company to such Lender.
11(k) CONSENT TO JURISDICTION. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR
THE SOUTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE COMPANY, THE AGENT AND THE LENDERS CONSENTS, FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF
THOSE COURTS. EACH OF THE COMPANY, THE AGENT AND THE LENDERS IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED
ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF
THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY, THE AGENT AND
THE LENDERS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER
PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW.
11(l) WAIVER OF JURY TRIAL. THE COMPANY, THE
LENDERS AND THE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR
38
RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION
OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY
AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE LENDERS AND THE
AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES
FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY
OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY
OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR
THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
11(m) INDEMNITY.
(1) Whether or not the transactions
contemplated hereby are consummated, the Company shall
indemnify and hold the Agent and each Lender and each of their
respective officers, directors, employees, counsel, agents and
attorneys-in-fact (each, an "Indemnified Person") harmless
from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, charges,
expenses and disbursements (including attorney's fees and
expenses, including the allocated cost of internal counsel) of
any kind or nature whatsoever which may at any time (including
at any time following repayment of the Loans and the
termination, resignation or replacement of the Agent or
replacement of any Lender) be imposed on, incurred by or
asserted against any such Person in any way relating to or
arising out of this Agreement or any document contemplated by
or referred to herein, or the transactions contemplated
hereby, or any action taken or omitted by any such Person
under or in connection with any of the foregoing, including
with respect to any investigation, litigation or proceeding
(including any insolvency proceeding or appellate proceeding)
related to or arising out of this Agreement or the Loans or
the use of the proceeds thereof, whether or not any
Indemnified Person is a party thereto (all the foregoing,
collectively, the "Indemnified Liabilities"); provided,
however, that the Company shall have no obligation hereunder
to any Indemnified Person with respect to Indemnified
Liabilities resulting solely from the gross negligence or
willful misconduct of such Indemnified Person. The agreements
in this PARAGRAPH 11(m)(1) shall survive payment of all other
Obligations.
(2) Any agreement of the Agent and the Lenders
herein to receive certain notices by telephone or facsimile is
solely for the convenience and at the request of the Company.
The Agent and the Lenders shall be entitled to rely on the
authority of any Person purporting to be an Authorized Person
and the Agent and the Lenders shall not have any liability to
the Company or other Person on account of any action taken or
not taken by the Agent or the Lenders in reliance upon such
telephonic or facsimile notice. The obligation of the Company
to repay the Loans shall not be affected
39
in any way or to any extent by any failure by the Agent and
the Lenders to receive written confirmation of any telephonic
or facsimile notice or the receipt by the Agent and the
Lenders of a confirmation which is at variance with the terms
understood by the Agent and the Lenders to be contained in the
telephonic or facsimile notice.
11(n) MARSHALLING; PAYMENTS SET ASIDE. Neither the
Agent nor the Lenders shall be under any obligation to ▇▇▇▇▇▇▇▇ any assets in
favor of the Company or any other Person or against or in payment of any or
all of the Obligations. To the extent that the Company makes a payment or
payments to the Agent or the Lenders, or the Agent or the Lenders enforce
their Liens or exercise their rights of set-off, and such payment or payments
or the proceeds of such enforcement or set-off or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set
aside or required (including pursuant to any settlement entered into by the
Agent in its discretion) to be repaid to a trustee, receiver or any other
party in connection with any insolvency proceeding, or otherwise, then (1) to
the extent of such recovery the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and
effect as if such payment had not been made or such enforcement or set-off
had not occurred, and (2) each Lender severally agrees to pay to the Agent
upon demand its ratable share of the total amount so recovered from or repaid
by the Agent.
11(o) SET-OFF. In addition to any rights and
remedies of the Lenders provided by law, if an Event of Default exists, each
Lender is authorized at any time and from time to time, without prior notice
to the Company, any such notice being waived by the Company to the fullest
extent permitted by law, to set off and apply any and all deposits (general
or special, time or demand, provisional or final) at any time held by, and
other indebtedness at any time owing to, such Lender to or for the credit or
the account of the Company against any and all Obligations owing to such
Lender, now or hereafter existing, irrespective of whether or not the Agent
or such Lender shall have made demand under this Agreement or any Loan
Document and although such Obligations may be contingent or unmatured. Each
Lender agrees promptly to notify the Company and the Agent after any such
set-off and application made by such Lender; provided, however, that the
failure to give such notice shall not affect the validity of such set-off and
application.
11(p) SEVERABILITY. The illegality or
unenforceability of any provision of this Agreement or any other Loan
Document or any instrument or agreement required hereunder or thereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions hereof or thereof.
11(q) NO THIRD PARTIES BENEFITED. This Agreement
and the other Loan Documents are made and entered into for the sole
protection and legal benefit of the Company, the Lenders and the Agent, and
their permitted successors and assigns, and no other Person shall be a direct
or indirect legal beneficiary of, or have any direct or indirect cause of
action or claim in connection with, this Agreement or any of the other Loan
Documents. Neither the Agent nor any Lender shall have any obligation to any
Person not a party to this Agreement or other Loan Documents.
11(r) TIME. Time is of the essence as to each term
or provision of this Agreement and each of the other Loan Documents.
40
11(s) REPORTS AND NOTICES. Any agreement of the
Agent in PARAGRAPHS 2 and 3 to give notice or reports to the Company
regarding amounts due under the Agreement or the Notes, whether principal,
interest or fees, is solely for the convenience and at the request of the
Company; provided, however, that the failure to give any such notice or
report shall not affect the validity of the Company's obligation to pay any
such amount to the Agent or the Lenders.
11(t) CONFIDENTIALITY. The Agent and the Lenders
acknowledge and agree that the information to be provided to them or to which
they will have access relating to the Company and its Subsidiaries is
confidential (the "Confidential Information"); provided, however, that in no
event shall Confidential Information include information which is or becomes
generally available to the public other than as a result of disclosure by the
Agent or the Lenders or any of their respective representatives or agents or
is or becomes available to them on a nonconfidential basis from a source
other than the Company or its representatives or agents. The Agent and the
Lenders will, and will cause their respective officers, directors, employees
and agents to, keep the Confidential Information confidential and not
disclose such Confidential Information to third parties or use such
Confidential Information for any reason or purpose except: (1) in connection
with the transactions contemplated by the Loan Documents, (2) as specifically
authorized by the Company, (3) as reasonably necessary for the Lenders to
sell and assign or participate out their respective interest in the
Obligations and to legal counsel, accountants and other professional advisors
(provided that they inform any Person to whom Confidential Information is
provided for such purpose of the confidential nature thereof and direct them
to treat such information as confidential), (4) as required to law,
regulation or judicial process.
12. DEFINITIONS. For purposes of this Agreement and the
other Loan Documents, the terms set forth below shall have the following
meanings:
"ADDITIONAL COLLATERAL DOCUMENTS" shall have the meaning
given such term in PARAGRAPH 4(c) above.
"ADDITIONAL LENDER AGREEMENT" shall have the meaning given
such term in PARAGRAPH 11(h)(2)(iii) above.
"ADJUSTMENT DATE" shall mean, with respect to the assignment
of Obligations by any Lender, or the addition of an Applicant Institution as
a Lender hereunder pursuant to Paragraph 11(h) above, the effective date
thereof.
"AFFILIATE" shall mean, as to any Person, any other Person
directly or indirectly controlling, controlled by or under direct or indirect
common control with, such Person. "Control" as used herein means the power
to direct the management and policies of such corporation.
"AGENT" shall have the meaning given such term in the
introductory paragraph hereof and shall include any successor to Sanwa as the
initial "Agent" hereunder.
41
"AGENT'S FEE LETTER" shall mean a written agreement between
the Agent and the Company establishing the fees to be paid by the Company to
the Agent under the Loan Documents and the timing of payment thereof.
"AGREEMENT" shall mean this Agreement, as the same may be
amended, extended or replaced from time to time.
"ANNUAL COMMITMENT REDUCTION AMOUNT" shall mean an amount
equal to $4,000,000.00.
"APPLICABLE COF RATE" shall mean with respect to any
Interest Period, the COF Rate for such Interest Period plus the Applicable
COF Spread.
"APPLICABLE COF SPREAD" shall mean on any day that
percentage determined based upon the ratio of Funded Debt to EBITDA (as
determined in accordance with Paragraph 8(l) above) as reported in the most
recent financial statements required to be delivered by the Company prior to
the date of determination (with any resulting change in the Applicable COF
Spread being effective as of the date such financial statements are required
to be delivered pursuant to the terms of this Agreement) in accordance with
the following:
FUNDED DEBT: EBITDA APPLICABLE COF SPREAD
------------------- ---------------------
Less than or equal to 1.75%
.75:1.00
Greater than .75:1.00 2.00%
but less than 1.25:1.00
Greater than 1.25:1.00 2.25%
"APPLICABLE REFERENCE RATE" shall mean for any interest
calculation period for any Reference Rate Loan, the daily average Reference
Rate in effect during such calculation period plus the Applicable Reference
Rate Spread.
"APPLICABLE REFERENCE RATE SPREAD" shall mean on any day
that percentage determined based upon the ratio of Funded Debt to EBITDA (as
determined in accordance with Paragraph 8(l) above) as reported in the most
recent financial statements required to be delivered by the Company prior to
the date of determination (with any resulting change in the Applicable
Reference Rate Spread being effective as of the date such financial
statements are required to be delivered pursuant to the terms of this
Agreement) in accordance with the following:
FUNDED DEBT: EBITDA APPLICABLE COF SPREAD
------------------- ---------------------
Less than or equal to 0.00%
.75:1.00
Greater than .75:1.00 0.00%
but less than 1.25:1.00
42
Greater than 1.25:1.00 .25%
"APPLICANT INSTITUTION" shall have the meaning given such term in
PARAGRAPH 11(h)(1) above.
"APPROVED FINANCIAL OFFICER" shall mean either the chief
financial officer of the Company or its Controller.
"AUTHORIZED PERSON" shall mean those Persons who are
authorized by the Company to deliver notices and make requests hereunder,
such Persons initially being those individuals listed on SCHEDULE 2 attached
hereto, as such Schedule may be modified from time to time by the Company
upon not less than three Business Days prior written notice to the Agent.
"BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday or a day on which banks in Los Angeles or San Francisco, California
are authorized or obligated to close their regular banking business.
"CAPITAL EXPENDITURES" shall mean, for any period, the
aggregate of all expenditures by the Company and its Subsidiaries for the
acquisition or leasing of fixed or capital assets or additions to equipment
(including replacements, capitalized repairs and improvements during such
period) which should be capitalized under GAAP on a consolidated balance
sheet of the Company and its Subsidiaries, LESS net proceeds from sales of
fixed or capital assets received by the Company or any of its Subsidiaries
during such period. For the purpose of this definition, the purchase price
of equipment which is purchased simultaneously with the trade-in of existing
equipment owned by the Company or any of its Subsidiaries or with insurance
proceeds shall be included in Capital Expenditures only to the extent of the
gross amount of such purchase price less the credit granted by the seller of
such equipment for such equipment being traded in at such time, or the amount
of such proceeds, as the case may be.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder as from time to
time in effect.
"COF LOAN" shall mean a Loan hereunder during such time as
it is made and/or being maintained at a rate of interest based on the COF
Rate.
"COF RATE" shall mean, with respect to any Interest Period
for a COF Loan, a percentage equivalent to the rate per annum quoted in
London by banks in the interbank eurocurrency market for deposits in
immediately available U.S. dollars in an amount equal to the amount of such
COF Loan for a period of time equal to such Interest Period on the first day
of such Interest Period which Sanwa determines in its sole and absolute
discretion to be equal to Sanwa's cost of acquiring funds (adjusted for any
and all assessments, surcharges and reserve requirements pertaining to the
borrowing or purchase by Sanwa of such funds) in an amount approximately
equal the amount of the relevant COF Loan for a period of time approximately
equal to the relevant Interest Period.
"COLLATERAL" shall have the meaning given such term in the
Security Agreement.
43
"COLLATERAL DOCUMENTS" shall mean, collectively, (a) the
Security Agreement, the Reaffirmation of Security Agreement, the Subsidiary
Security Agreements, the Reaffirmations of Subsidiary Security Agreement, the
Additional Collateral Documents, the Guaranties, the Reaffirmations of
Guaranty and all other security agreements, assignments, guaranties and other
similar agreements between the Company or its Subsidiaries and the Lenders or
the Agent for the benefit of the Lenders now or hereafter delivered to the
Lenders or the Agent pursuant to or in connection with the transactions
contemplated hereby, and all financing statements (or comparable documents
now or hereafter filed in accordance with the UCC or comparable law) against
the Company or any Subsidiaries as debtor in favor of the Lenders or the
Agent for the benefit of the Lenders as secured party and (ii) any
amendments, supplements, modifications, renewals, replacements,
consolidations, substitutions and extensions of any of the foregoing.
"COLLATERAL PAYMENT" shall have the meaning given such term
in PARAGRAPH 7(a) of the Security Agreement.
"COMMITMENT SCHEDULE" shall mean a schedule setting forth
the Credit Limit, the Maximum Commitment and Percentage Shares of the
Lenders, as such schedule may be amended from time to time with the written
consent of the Company, the Agent and one hundred percent (100%) of the
Lenders, and with the initial Commitment Schedule attached hereto as SCHEDULE
5.
"CONTRACT OFFICE" shall mean the office of Sanwa located at
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇-▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or such other
office as Sanwa may notify the Company and the Lenders from time to time in
writing.
"CONTRACTUAL OBLIGATION" as to any Person shall mean any
provision of any security issued by such Person or of any agreement,
instrument or undertaking to which such Person is a party or by which it or
any of its property is bound.
"CORINTHIAN" shall mean Corinthian Marketing, Inc., a
Delaware corporation and a Domestic Subsidiary of the Company.
"CREDIT EVENT" shall mean the making of a Loan or the
issuance of a New Letter of Credit.
"CREDIT LIMIT" shall mean, as of the Effective Date to and
including January 30, 1999, $40,000,000.00, with said Credit Limit to be
reduced according to the following schedule:
DATE REDUCTION AMOUNT
---- ----------------
January 31, 1999 $5,000,000
March 31, 1999 $5,000,000;
provided that the then current Credit Limit may at any date be decreased
by written agreement of the Company, the Agent and one hundred percent (100%)
of the Lenders.
44
"CURRENT ASSETS" shall mean for any Person, as of any date
of determination, all amounts which would, in accordance with GAAP, be
included under current assets on a balance sheet of such Person; provided,
however, that such amounts shall not include (a) any amounts for any
Indebtedness owing by an Affiliate of such Person unless such Indebtedness
arose in connection with the sale of goods or other property in the ordinary
course of business and would otherwise constitute current assets in
conformity with GAAP, (b) the equity value of any shares of stock issued by
an Affiliate of such Person, (c) the cash surrender value of any life
insurance policy, or (d) any intangibles.
"CURRENT LIABILITIES" shall mean for any Person, as of any
date of determination, all amounts which would, in accordance with GAAP, be
included under current liabilities on a balance sheet of such Person.
"DISSOLVING SUBSIDIARIES" shall have the meaning given such
term in PARAGRAPH 4(b) above.
"DOMESTIC SUBSIDIARY" shall mean a Subsidiary formed under
the laws of the United States of America.
"EBITDA" shall mean for any period the sum of (a) net income
(or net loss) plus (b) all amounts treated as expenses for interest,
amortization, depreciation, taxes (to the extent included in the
determination of net income (or net loss), and other non-cash charges for
such period, plus (c) all amounts treated as expenses related to the Company
becoming Year 2000 Compliant during the calendar quarters ending September
30, 1998 and December 31, 1998, which expenses shall not exceed (i) during
the calendar quarter ended September 30, 1998, $1,800,000.00 and (ii) during
the calendar quarter ending December 31, 1998, $1,600,000.00.
"EFFECTIVE DATE" shall mean the date as of which all
conditions set forth in PARAGRAPH 5(a) above shall have been satisfied and
the first Credit Event shall have occurred.
"EMHK" shall have the meaning given such term in PARAGRAPH
4(b) above.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended, and the rules and regulations promulgated thereunder
as from time to time in effect.
"ERISA AFFILIATE" shall mean any trade or business (whether
or not incorporated) under common control with the Company within the meaning
of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) for
purposes of provisions relating to Section 412 of the Code).
"ERISA EVENT" shall mean (a) a Reportable Event with respect
to a Pension Plan or a Multiemployer Plan; (b) a withdrawal by the Company or
any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA
during a plan year in which it was a substantial employer (as defined in
Section 4001(a)(2) of ERISA) or a cessation of operations which is treated as
such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial
withdrawal by the Company or any ERISA Affiliate from a Multiemployer Plan or
notification that a multiemployer is in reorganization; (d) the filing of a
notice of intent to terminate, the treatment of a plan amendment as a
termination under Section 4041 or 4041A of ERISA or the
45
commencement of proceedings by the PBGC to terminate a Pension Plan or
Multiemployer Plan; (e) a failure by the Company or any member of the
Controlled Group to make required contributions to a Pension Plan,
Multiemployer Plan or other Plan subject to Section 412 of the Code; (f) an
event or condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan or Multiemployer Plan; (g) the
imposition of any liability under Title IV of ERISA, other than PBGC premiums
due but not delinquent under Section 4007 of ERISA, upon the Company or any
ERISA Affiliate; or (h) an application for a funding waiver or an extension
of any amortization period pursuant to Section 412 of the Code with respect
to any Plan.
"EVENT OF DEFAULT" shall have the meaning given such term in
PARAGRAPH 9 above.
"EXISTING CREDIT AGREEMENT" shall have the meaning given
such term in RECITAL A above.
"EXISTING INVESTMENT POLICIES" shall mean those investment
policies described on EXHIBIT K attached hereto.
"FUNDED DEBT" shall mean for any Person for any period all
Indebtedness for borrowed money outstanding during such period, but excluding
Subordinated Debt.
"GAAP" shall mean generally accepted accounting principles
in the United States of America in effect from time to time.
"GOVERNMENTAL AUTHORITY" shall mean any nation or
government, any state or other political subdivision thereof, any central
bank (or similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any
of the foregoing.
"GUARANTY" shall mean any guaranty executed and reaffirmed
by any Domestic Subsidiary in accordance with PARAGRAPH 4(b) above and shall
include all Guaranties executed subsequent to the Effective Date pursuant to
PARAGRAPH 4(c)(1) above.
"GUARANTY OBLIGATIONS" shall have the meaning, as to any
Subsidiary, given such term in PARAGRAPH 3 of such Subsidiary's Subsidiary
Security Agreement.
"HAZARDOUS MATERIALS" shall mean any flammable materials
(excluding wood products normally used in construction), explosives,
radioactive materials, hazardous wastes, toxic substances or related
materials, including, without limitation, any substances defined as or
included in the definitions of "hazardous substances," "Hazardous wastes,"
"hazardous materials," or toxic substances" under any applicable federal,
state, or local laws or regulations.
"HAZARDOUS MATERIALS CLAIMS" shall mean any enforcement,
cleanup, removal or other governmental or regulatory action or order with
respect to the Property, pursuant to any Hazardous Materials Laws, and/or any
claim asserted in writing by any third party relating to damage,
contribution, cost recovery compensation, loss or injury resulting from any
Hazardous Materials.
46
"HAZARDOUS MATERIALS EVENT" shall have the meaning given
such term in PARAGRAPH 7(j)(4) above.
"HAZARDOUS MATERIALS LAWS" shall mean any applicable
federal, state or local laws, ordinances or regulations relating to Hazardous
Materials.
"INDEBTEDNESS" of any Person shall mean: (a) all items of
indebtedness which, in accordance with GAAP and practices, would be included
in determining liabilities as shown on the liability side of a statement of
condition of such Person as of the date as of which indebtedness is to be
determined, including, without limitation, all obligations for money borrowed
and capitalized lease obligations, and (b) all indebtedness and liabilities
of others assumed or guaranteed by such Person or in respect of which such
Person is secondarily or contingently liable (other than by endorsement of
instruments in the course of collection) whether by reason of any agreement
to acquire such indebtedness or to supply or advance sums or otherwise.
"INTEREST EXPENSE" shall mean for any period all interest
and similar charges actually paid on account of Indebtedness of the Company
and its Subsidiaries during such period.
"INTEREST PERIOD" shall mean with respect to any Loan which
is a COF Loan, the period commencing on the date such Loan is advanced and
ending 30, 60, 90 or 180 days thereafter, as designated in the related Loan
Request; provided, however, that (a) any Interest Period which would
otherwise end on a day which is not a Business Day shall be extended to the
next succeeding Business Day, and (b) no Interest Period shall end after the
Maturity Date.
"INTERIM DATE" shall mean September 30, 1998.
"IRS" means the Internal Revenue Service or any entity
succeeding to any of its principal functions under the Code.
"L/C DOCUMENTS" shall have the meaning given such term in
PARAGRAPH 2(b) above.
"L/C DRAWING" shall have the meaning given such term in
PARAGRAPH 2(d) above.
"LETTER OF CREDIT" shall mean a New Letter of Credit or a
Pre-Existing Letter of Credit but shall not include any additional letter of
credit issued pursuant to PARAGRAPH 2(h) above.
"LETTER OF CREDIT APPLICATION" shall mean an application for
the issuance of a New Letter of Credit in form satisfactory to Sanwa.
"LIEN" shall mean any security interest, mortgage, pledge,
lien, claim on property, charge or encumbrance (including any conditional
sale or other title retention agreement), and any lease in the nature
thereof.
47
"LOAN DOCUMENTS" shall mean this Agreement, the Notes, the
Letter of Credit Applications and other L/C Documents, the Guaranties, the
Collateral Documents, the Additional Collateral Documents and each other
document, instrument or agreement executed by the Company or any Subsidiary
in connection herewith or therewith, as any of the same may be amended,
extended or replaced from time to time.
"LOAN REQUEST" shall mean a request for a Loan in form
satisfactory to the Agent.
"LOANS" shall have the meaning given in PARAGRAPH 1(a)
above.
"MAJORITY LENDERS" shall mean Lenders holding Percentage
Shares of at least sixty-six and two-thirds percent (66.66%); provided,
however, that in the event there are only two Lenders hereunder, the term
"Majority Lenders" shall mean both such Lenders.
"MATERIAL ADVERSE EFFECT" shall mean (a) a material adverse
change in, or a material adverse effect upon, the operations, business,
properties, condition (financial or otherwise) or prospects of the Company or
the Company and its Subsidiaries taken as a whole; (b) a material impairment
of the ability of the Company or any Subsidiary to perform under any Loan
Document and to avoid any Event of Default; or (c) a material adverse effect
upon the legality, validity, binding effect or enforceability against the
Company or any Subsidiary of any Loan Document.
"MATURITY DATE" shall mean the earlier of: (a) June 30,
2001, and (b) the date the Lenders terminate their obligation to make further
Loans hereunder pursuant to PARAGRAPH 9 above.
"MAXIMUM COMMITMENT" shall mean for any Lender at any date
that dollar amount set forth as such on the then current Commitment Schedule.
"MULTIEMPLOYER PLAN" shall mean a "multiemployer plan"
(within the meaning of Section 4001(a)(3) of ERISA) and to which the Company
or any ERISA Affiliate makes, is making, or is obligated to make
contributions or, during the preceding three calendar years, has made, or
been obligated to make, contributions.
"NET PROFIT AFTER TAXES" shall mean for any Person, for any
period, determined in accordance with GAAP, the pre-tax net income (or net
loss) of such Person for such period LESS all accrued taxes on or measured by
income to the extent included in the determination of such net income (or
loss); provided, however, that net income (or net loss) shall be computed for
these purposes without giving effect to extraordinary losses or extraordinary
gains, as determined under GAAP.
"NEW LETTER OF CREDIT" shall have the meaning given such
term in PARAGRAPH 2(b) above.
"NOTES" shall have the meaning given such term in PARAGRAPH
3(c) above.
"OBLIGATIONS" shall mean any and all debts, obligations and
liabilities of the Company to the Agent and the Lenders (whether now existing
or hereafter arising, voluntary or
48
involuntary, whether or not jointly owed with others, direct or indirect,
absolute or contingent, liquidated or unliquidated, and whether or not from
time to time decreased or extinguished and later increased, created or
incurred), arising out of or related to the Loan Documents.
"OUTSTANDING" shall mean with respect to Letters of Credit,
any Letter of Credit which has not been canceled, expired unutilized or fully
drawn upon and reference to the "amount" of any Outstanding Letter of Credit
shall be deemed to mean the amount available for drawing thereunder.
"PARTICIPANT" shall have the meaning given such term in
PARAGRAPH 11(h)(3) above.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
or any entity succeeding to any of its principal functions under ERISA.
"PENSION PLAN" shall mean a pension plan (as defined in
Section 3(2) of ERISA) subject to Title IV of ERISA which the Company or any
ERISA Affiliate sponsors, maintains, or to which it makes, is making, or is
obligated to make contributions, or in the case of a multiple employer plan
(as described in Section 4064(a) of ERISA) has made contributions at any time
during the immediately preceding five (5) plan years, but excluding any
Multiemployer Plan.
"PERCENTAGE SHARE" shall mean for any Lender at any date
that percentage which such Lender's Maximum Commitment at such date bears to
the Credit Limit at such date.
"PERSON" shall mean any corporation, natural person, firm,
joint venture, partnership, trust, unincorporated organization, government or
any department or agency of any government.
"PLAN" shall mean an employee benefit plan (as defined in
Section 3(3) of ERISA) which the Company or any ERISA Affiliate sponsors or
maintains or to which the Company or any ERISA Affiliate makes, is making, or
is obligated to make contributions and includes any Pension Plan or
Multiemployer Plan.
"PLEDGED SHARES" shall have the meaning, as applicable,
given such term in PARAGRAPH 3(f) of the Security Agreement and PARAGRAPH
4(f) of the Subsidiary Security Agreements.
"POTENTIAL DEFAULT" shall mean an event which but for the
lapse of time or the giving of notice, or both, would constitute an Event of
Default.
"PRE-EXISTING LETTERS OF CREDIT" shall have the meaning
given such term in PARAGRAPH 2(a) above.
"PROCEEDS" shall mean whatever is receivable or received
when Collateral or proceeds thereof are sold, collected, exchanged or
otherwise disposed of, whether such disposition is voluntary or involuntary,
and includes, without limitation, all rights to payment, including return
premiums, with respect to any insurance relating thereto.
49
"PROPERTY" shall mean, collectively and severally, any and
all real property, including all improvements and fixtures thereon, owned or
occupied by the Company.
"REAFFIRMATION OF GUARANTY" shall have the meaning given
such term in PARAGRAPH 4(b) above.
"REAFFIRMATION OF SECURITY AGREEMENT" shall have the meaning
given such term in PARAGRAPH 4(a) above.
"REAFFIRMATION OF SUBSIDIARY SECURITY AGREEMENT" shall have
the meaning given such term in PARAGRAPH 4(b) above.
"REFERENCE RATE" shall mean the fluctuating per annum rate
announced from time to time by Sanwa in Los Angeles, California as its
"reference rate". The Reference Rate is a rate set by Sanwa based upon
various factors including Sanwa's costs and desired return, general economic
conditions, and other factors, and is used as a reference point for pricing
some loans, which may be priced at, above or below the Reference Rate.
"REFERENCE RATE LOANS" shall mean Loans hereunder during
such time as they are made and/or being maintained at a rate of interest
based upon the Reference Rate.
"REPORTABLE EVENT" shall mean any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder, other than any such
event for which the thirty (30)-day notice requirement under ERISA has been
waived in regulations issued by the PBGC.
"REQUIREMENTS OF LAW" shall mean as to any Person the
Certificate of Incorporation and ByLaws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or a final
and binding determination of an arbitrator or a determination of a court or
other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property
is subject.
"SECURITY AGREEMENT" shall have that certain Security and
Collateral Agency Agreement dated as of January 26, 1996 by and among the
Company, the Lenders and the Agent, as amended, extended, reaffirmed and
replaced from time to time.
"STATEMENT DATE" shall mean December 31, 1997.
"SUBORDINATED DEBT" shall mean as to any Person Indebtedness
of such Person which is subordinated to the Obligations pursuant to a written
agreement in form and substance satisfactory to the Agent and the Lenders.
"SUBSIDIARY" shall mean any corporation more than fifty
percent (50%) of the stock of which having by the terms thereof ordinary
voting power to elect the board of directors, managers or trustees of the
corporation (irrespective of whether or not at the time stock of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) shall, at the time as of which
any determination is being made, be owned, either directly or through
Subsidiaries and any other partnership, joint venture or other
50
business combination whose management and policies are controlled by or under
common control with the Company or any of its Subsidiaries.
"SUBSIDIARY COLLATERAL" shall have the meaning, as to each
Subsidiary, given such term in the Subsidiary Security Agreement executed by
such Subsidiary.
"SUBSIDIARY COLLATERAL PAYMENT" shall have the meaning, as
to each Subsidiary, given such term in PARAGRAPH 8(a) of the Subsidiary
Security Agreement executed by such Subsidiary.
"SUBSIDIARY SECURITY AGREEMENT" shall mean any security
agreement executed and reaffirmed by a Domestic Subsidiary pursuant to
PARAGRAPH 4(b) above and shall include all Subsidiary Security Agreements
executed subsequent to the Effective Date pursuant to PARAGRAPH 4(c)(1) above.
"TANGIBLE NET WORTH" shall mean for any Person at any time
of determination, (a) net worth as determined in accordance with GAAP, PLUS
(b) Subordinated Debt, LESS (c) any intangible assets.
"TAXES" shall mean any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities
with respect thereto which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or the Loan Documents, excluding, however, in the case of each
Lender and the Agent, such taxes (including income taxes or franchise taxes)
as are imposed on or measured by each Lender's net income by the jurisdiction
(or any political subdivision thereof) under the laws of which such Lender or
the Agent, as the case may be, is organized or maintains a lending office.
"TOTAL LIABILITIES" shall mean for any Person at any time of
determination, all liabilities of such Person which in accordance with GAAP
would be shown on the liability side of a balance sheet of such Person, but
excluding Subordinated Debt, as determined in accordance with GAAP.
"UNFUNDED PENSION LIABILITY" shall mean the excess of a
Pension Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over
the current value of that Plan's assets, determined in accordance with the
assumptions used for funding the Pension Plan pursuant to Section 412 of the
Code for the applicable plan year.
"YEAR 2000 COMPLIANT" shall have the meaning given such term in
PARAGRAPH 7(n) above.
51
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
EQUITY MARKETING, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Exec. Vice President and CFO
By
-------------------------------
Name
-----------------------------
Title
----------------------------
SANWA BANK CALIFORNIA,
as Agent and as a Lender
By: /s/ ▇.▇.▇▇▇▇▇▇▇
-------------------------------
Name: ▇.▇. ▇▇▇▇▇▇▇
Title: Vice President
IMPERIAL BANK, as a Lender
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Senior Vice President
52
SCHEDULE OF EXHIBITS
EXHIBIT DOCUMENT
------- --------
A Schedule of Pre-Existing Letters of Credit
B Form of Note
C Form of Reaffirmation of Security Agreement
D Form of Reaffirmation of Guaranty
E Form of Reaffirmation of Subsidiary Security Agreement
F Form of Officer's Certificate
G Schedule of Material Litigation
H Schedule of Subsidiaries
I Schedule of ERISA Disclosures
J Form of Additional Lender Agreement
K Existing Investment Policies
Schedule 1 Schedule of Addresses/Facsimile and Telephone Numbers
for Purposes of Notices
Schedule 2 Initial Schedule of Authorized Persons
Schedule 3 Schedule of Changes Since Statement Date
Schedule 4 Schedule of Leases
Schedule 5 Commitment Schedule