COMPOSITE COPY
================================================================================
AMENDED AND RESTATED
CREDIT, SECURITY, GUARANTY AND PLEDGE AGREEMENT
DATED AS OF NOVEMBER 4, 1997,
AS AMENDED AND RESTATED AS OF AUGUST 16, 1999
AMONG
NEWSTAR MEDIA INC.
AS BORROWER,
THE GUARANTORS NAMED HEREIN
AND
THE CHASE MANHATTAN BANK, AS LENDER
================================================================================
TABLE OF CONTENTS
Page
----
1. DEFINITIONS...................................................................................................2
2. THE LOANS....................................................................................................24
SECTION 2.1. Loans.........................................................................................24
SECTION 2.2. Making of Loans...............................................................................25
SECTION 2.3. Note..........................................................................................26
SECTION 2.4. Interest on Note..............................................................................26
SECTION 2.5. Commitment Fees and Other Fees................................................................27
SECTION 2.6. Optional and Mandatory Termination or Reduction of Commitment................................27
SECTION 2.7. Default Interest; Alternate Rate of Interest..................................................28
SECTION 2.8. Continuation and Conversion of Loans..........................................................28
SECTION 2.9. Prepayment of Loans; Reimbursement of Lender..................................................29
SECTION 2.10. Change in Circumstances......................................................................31
SECTION 2.11. Change in Legality...........................................................................34
SECTION 2.12. Manner of Payments...........................................................................34
SECTION 2.13. Interest Adjustments.........................................................................34
SECTION 2.14. Letters of Credit............................................................................35
3. REPRESENTATIONS AND WARRANTIES OF CREDIT PARTIES.............................................................38
SECTION 3.1. Corporate Existence and Power.................................................................39
SECTION 3.2. Corporate Authority and No Violation. ......................................................39
SECTION 3.3. Governmental Approval.........................................................................39
SECTION 3.4. Binding Agreements............................................................................40
SECTION 3.5. Financial Statements..........................................................................40
SECTION 3.6. No Material Adverse Change ...................................................................40
SECTION 3.7. Ownership of Pledged Securities, etc..........................................................41
SECTION 3.8. Copyrights and Other Rights...................................................................41
SECTION 3.9. Fictitious Names..............................................................................42
SECTION 3.10. Title to Properties..........................................................................42
SECTION 3.11. Places of Business...........................................................................42
SECTION 3.12. Litigation...................................................................................42
SECTION 3.13. Federal Reserve Regulations..................................................................43
SECTION 3.14. Investment Company Act.......................................................................43
SECTION 3.15. Taxes........................................................................................43
SECTION 3.16. Compliance with ERISA........................................................................43
SECTION 3.17. Agreements...................................................................................43
SECTION 3.18. Security Interest; Other Security............................................................44
SECTION 3.19. Disclosure...................................................................................44
SECTION 3.20. Distribution Rights..........................................................................45
i
SECTION 3.21. Environmental Liabilities....................................................................45
SECTION 3.22. Pledged Securities...........................................................................46
SECTION 3.23. Compliance with Laws.........................................................................46
SECTION 3.24. Projected Financial Information..............................................................46
4. CONDITIONS OF LENDING........................................................................................46
SECTION 4.1. Conditions Precedent to Effectiveness of
this Amendment and Restatement..........................................................................46
SECTION 4.2. Conditions Precedent to Each Loan and Letter of Credit........................................51
5. AFFIRMATIVE COVENANTS........................................................................................51
SECTION 5.1. Financial Statements and Reports..............................................................52
SECTION 5.2. Corporate Existence...........................................................................54
SECTION 5.3. Maintenance of Properties.....................................................................54
SECTION 5.4. Notice of Material Events.....................................................................55
SECTION 5.5. Insurance.....................................................................................55
SECTION 5.6. Production....................................................................................57
SECTION 5.7. Music.........................................................................................57
SECTION 5.8. Copyright.....................................................................................57
SECTION 5.9. Books and Records. ..........................................................................57
SECTION 5.10. Third Party Audit Rights.....................................................................58
SECTION 5.11. Observance of Agreements.....................................................................58
SECTION 5.12. Film Properties and Rights; Credit Parties to Act as Pledgeholder............................58
SECTION 5.13. Laboratories; No Removal.....................................................................58
SECTION 5.14. Taxes and Charges; Indebtedness in Ordinary Course of Business...............................59
SECTION 5.15. Liens........................................................................................60
SECTION 5.16. Further Assurances; Security Interests.......................................................60
SECTION 5.17. ERISA Compliance and Reports.................................................................60
SECTION 5.18. Environmental Laws...........................................................................61
SECTION 5.19. Use of Proceeds..............................................................................62
SECTION 5.20. Security Agreements with the Guilds..........................................................62
SECTION 5.21. Uncompleted Product..........................................................................62
6. NEGATIVE COVENANTS...........................................................................................63
SECTION 6.1. Limitations on Indebtedness...................................................................63
SECTION 6.2. Limitations on Liens..........................................................................64
SECTION 6.3. Limitation on Guarantees......................................................................66
SECTION 6.4. Limitations on Investments....................................................................66
SECTION 6.5. Restricted Payments...........................................................................66
SECTION 6.6. Limitations on Leases.........................................................................66
SECTION 6.7. Consolidation, Merger, Sale or Purchase of Assets, etc........................................66
SECTION 6.8. Receivables...................................................................................66
SECTION 6.9. Sale and Leaseback............................................................................66
ii
SECTION 6.10. Places of Business; Change of Name...........................................................67
SECTION 6.11. Limitations on Capital Expenditures..........................................................67
SECTION 6.12. Transactions with Affiliates. ..............................................................67
SECTION 6.13. Prohibition of Amendments or Waivers.........................................................67
SECTION 6.14. Development Costs............................................................................67
SECTION 6.15. Overhead Expense.............................................................................67
SECTION 6.16. Consolidated Capital Base....................................................................68
SECTION 6.17. EBIT.........................................................................................68
SECTION 6.18. Liquidity Ratio.............................................................................68
SECTION 6.19. No Change in Business........................................................................68
SECTION 6.20. ERISA Compliance.............................................................................68
SECTION 6.21. Additional Limitations on Production and Acquisition of Product..............................69
SECTION 6.22. Subsidiaries.................................................................................69
SECTION 6.23. Bank Accounts................................................................................69
SECTION 6.24. Hazardous Materials..........................................................................69
SECTION 6.25. Use of Proceeds of Loans and Requests for Letters of Credit..................................70
SECTION 6.26. Interest Rate Protection Agreements, etc.....................................................70
SECTION 6.27. Amortization Method..........................................................................70
7. EVENTS OF DEFAULT............................................................................................70
8. GRANT OF SECURITY INTEREST; REMEDIES.........................................................................72
SECTION 8.1. Security Interests. .........................................................................72
SECTION 8.2. Use of Collateral.............................................................................73
SECTION 8.3. Collection Accounts...........................................................................73
SECTION 8.4. Credit Parties to Hold in Trust...............................................................75
SECTION 8.5. Collections, etc. ...........................................................................75
SECTION 8.6. Possession, Sale of Collateral, etc...........................................................75
SECTION 8.7. Application of Proceeds on Default............................................................76
SECTION 8.8. Power of Attorney.............................................................................77
SECTION 8.9. Financing Statements, Direct Payments.........................................................77
SECTION 8.10. Further Assurances...........................................................................78
SECTION 8.11. Termination..................................................................................78
SECTION 8.12. Remedies Not Exclusive.......................................................................78
SECTION 8.13. Quiet Enjoyment..............................................................................78
SECTION 8.14. Continuation and Reinstatement...............................................................78
9. GUARANTY.....................................................................................................79
SECTION 9.1. Guaranty......................................................................................79
SECTION 9.2. No Impairment of Guaranty, etc................................................................80
SECTION 9.3. Continuation and Reinstatement, etc...........................................................80
SECTION 9.4. Limitation on Guaranteed Amount etc...........................................................81
iii
10. PLEDGE......................................................................................................81
SECTION 10.1. Pledge........................................................................................81
SECTION 10.2. Covenant.....................................................................................81
SECTION 10.3. Registration in Nominee Name; Denominations..................................................82
SECTION 10.4. Voting Rights; Dividends; etc................................................................82
SECTION 10.5. Remedies Upon Default........................................................................82
SECTION 10.6. Application of Proceeds of Sale and Cash.....................................................84
SECTION 10.7. Securities Act, etc..........................................................................84
SECTION 10.8. Continuation and Reinstatement...............................................................85
SECTION 10.9. Termination..................................................................................85
11. MISCELLANEOUS...............................................................................................85
SECTION 11.1. Notices......................................................................................85
SECTION 11.2. Survival of Agreement, Representations and Warranties, etc...................................86
SECTION 11.3. Successors and Assigns; Loan Sales; Participations.........................................86
SECTION 11.4. Expenses; Documentary Taxes..................................................................88
SECTION 11.5. Indemnification of the Lender................................................................88
SECTION 11.6. CHOICE OF LAW................................................................................89
SECTION 11.7. WAIVER OF JURY TRIAL.........................................................................89
SECTION 11.8. No Waiver....................................................................................90
SECTION 11.9. Extension of Payment Date....................................................................90
SECTION 11.10. Amendments, etc.............................................................................90
SECTION 11.11. Severability................................................................................90
SECTION 11.12. SERVICE OF PROCESS..........................................................................91
SECTION 11.13. Headings....................................................................................92
SECTION 11.14. Execution in Counterparts...................................................................92
SECTION 11.15. Subordination of Intercompany Advances......................................................92
SECTION 11.16. Confidentiality.............................................................................92
SECTION 11.17. Entire Agreement............................................................................93
iv
Schedules
1 MEI Ownership Interest
3.7(a) Corporate Guarantors/Pledged Securities
3.7(b) Beneficial Interests
3.8 Items of Product; Copyrights
3.9 Fictitious Names
3.11 Principal Executive Office/Location of Collateral/Filing Offices
3.12 Litigation
3.17 Existing Indebtedness/Material Agreements
3.21 Environmental Liabilities
3.22 Outstanding Rights Re Pledged Securities
6.2 Existing Liens
6.3 Guarantees
6.4 Scheduled Investments
6.23 Bank Accounts
Exhibits
A Form of Note
B-1 Form of Opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇, special counsel to the Credit Parties
B-2 Form of Opinion of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, general counsel of the Borrower
C Form of Borrowing Base Certificate
D-1 Form of Pledgeholder Agreement (Uncompleted Product)
D-2 Form of Pledgeholder Agreement (Completed Product)
E-1 Form of Copyright Security Agreement
E-2 Form of Copyright Security Agreement Supplement
F Form of Laboratory Access Letter
G Form of Notice of Assignment and Irrevocable Instructions
H Form of Borrowing Certificate
I Form of Instrument of Assumption and Joinder
J Form of Contribution Agreement
K-1 Form of Amended and Restated Individual Guaranty Agreement by ▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇
K-2 Form of Amended and Restated Individual Guaranty Agreement by ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇
K-3 Form of Amended and Restated Individual Guaranty Agreement by ▇▇▇▇▇ ▇▇▇▇▇▇
K-4 Form of Amended and Restated Individual Guaranty Agreement by ▇▇▇▇ ▇. ▇▇▇▇▇
K-5 Form of Amended and Restated Individual Guaranty Agreement by ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇
v
AMENDED AND RESTATED CREDIT, SECURITY, GUARANTY AND
PLEDGE AGREEMENT, dated as of November 4, 1997, as
amended and restated as of August 16, 1999 (as
amended, supplemented or otherwise modified, renewed
or replaced from time to time, the "Credit Agreement")
among NEWSTAR MEDIA INC. (formerly known as Dove
Entertainment, Inc.), a California corporation (the
"Borrower"), the Corporate Guarantors named herein and
THE CHASE MANHATTAN BANK, a New York banking
corporation, as Lender (together with any permitted
assignees of all or part of the Commitment in
accordance with the terms hereof, the "Lender").
INTRODUCTORY STATEMENT
----------------------
All terms not otherwise defined above or in this Introductory
Statement are as defined in Article 1 hereof, or as defined elsewhere herein.
On November 4, 1997, the Borrower, certain of the Corporate
Guarantors and the Lender entered into a Credit, Security, Guaranty and Pledge
Agreement (such agreement, as it has been amended through the date hereof, the
"Existing Credit Agreement") providing for an $8,000,000 three-year secured
revolving credit facility. Pursuant to Amendment No. 2 to the Existing Credit
Agreement, the credit facility was increased to $10,000,000.
The Borrower has requested that the Lender amend and restate
the Existing Credit Agreement in order to, among other things, make available a
$10,000,000 secured revolving credit facility which will be used (i) to finance
the development, production, distribution or acquisition of audio books, books
and television product and film product (other than the distribution of motion
pictures in theaters) and related internet services and (ii) for other general
corporate purposes.
To provide assurance for the repayment of the Loans and other
Obligations of the Borrower and the Corporate Guarantors hereunder, the Borrower
and the Corporate Guarantors will provide or will cause to be provided to the
Lender, the following (each as more fully described herein):
(i) a security interest in the Collateral pursuant to
Article 8 hereof;
(ii) a guaranty of the Obligations pursuant to Article 9
hereof; and
(iii) a pledge of the Pledged Securities pursuant to
Article 10 hereof.
A principal shareholder of the Borrower is Media Equities
International, L.L.C. ("MEI") which is directly and indirectly owned by ▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇
- 1 -
(collectively referred to herein as the "Individual Guarantors"). To provide
further assurance and in order to induce the Lender to enter into this Credit
Agreement, as security for the repayment of the Loans and the other Obligations
of the Borrower hereunder, the Individual Guarantors will provide to the Lender,
pursuant to the Guaranty Agreements, an unconditional guaranty of payment of the
Obligations in an amount equal to the lesser of (x) $2,000,000 and (y) the
amount by which the aggregate of outstanding principal of and any interest on
all Loans and the L/C Exposure (excluding that certain Letter of Credit
described in Section 2.14(j) hereof) hereunder exceeds the Borrowing Base on the
date demand for payment is made under such Guaranty Agreements (the "Maximum
Guaranty Amount"); provided, that in the case of any Individual Guarantor, such
guarantor's guaranty obligation shall not exceed the product of 110% of such
Individual Guarantor's ownership interest in MEI as of the date hereof (as
indicated in Schedule 1 hereto) multiplied by the Maximum Guaranty Amount.
Subject to the terms and conditions set forth herein, the
Lender is willing to make Loans to the Borrower and issue Letters of Credit in
amounts in the aggregate at any one time outstanding not in excess of its
Commitment hereunder.
Accordingly, the parties hereto hereby agree as follows:
1. DEFINITIONS
For the purposes hereof unless the context otherwise requires,
all Section references herein shall be deemed to correspond with Sections
herein, the following terms shall have the meanings indicated, all accounting
terms not otherwise defined herein shall have the respective meanings accorded
to them under GAAP and all terms defined in the UCC and not otherwise defined
herein shall have the respective meanings accorded to them therein. Unless the
context otherwise requires, any of the following terms may be used in the
singular or the plural, depending on the reference:
"ACCEPTABLE L/C" shall mean an irrevocable letter of credit
which (i) is in form and on terms reasonably acceptable to the Lender, (ii) is
payable in Dollars at an office of the issuing or confirming bank in New York
City (or another city acceptable to the Lender in its sole discretion), (iii) is
issued or confirmed by (a) the Lender; (b) any commercial bank that has (or
which is the principal operating subsidiary of a holding company which has) as
of the time such letter of credit is issued, public debt outstanding with a
rating of at least "A" (or the equivalent of an "A") from one of the nationally
recognized debt rating agencies; or (c) by any other bank which the Lender may
in its sole discretion determine to be of acceptable credit quality and (iv)
with respect to letters of credit delivered in connection with an uncompleted
item of Product for which a Completion Guarantee is required pursuant to the
terms hereof, has an expiration date no earlier than three (3) months after the
"Outside Delivery Date" for an item of Product (as set forth in the Completion
Guarantee for such item of Product) to which the letter of credit relates.
- 2 -
"AFFILIATE" shall mean any Person which, directly or
indirectly, is in control of, is controlled by or is under common control with,
another Person. For purposes of this definition, a Person shall be deemed to be
"controlled by" another Person if such latter Person possesses, directly or
indirectly, power either to (i) vote 20% or more of the securities having
ordinary voting power for election of directors of such Person or (ii) direct or
cause the direction of the management and policies of such controlled Person
whether by contract or otherwise.
"ALTERNATE BASE RATE" shall mean, for any day, a rate per
annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the
greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in
effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect
for such day plus 1/2 of 1%. For purposes hereof, "PRIME RATE" shall mean the
rate of interest per annum publicly announced from time to time by the Lender as
its prime rate in effect at its principal office in New York City. "BASE CD
RATE" shall mean the sum of (a) the product of (i) the Three-Month Secondary CD
Rate and (ii) Statutory Reserves and (b) the Assessment Rate. "THREE-MONTH
SECONDARY CD RATE" shall mean, for any day, the secondary market rate for
three-month certificates of deposit reported as being in effect on such day (or,
if such day is not a Business Day, the next preceding Business Day) by the Board
through the public information telephone line of the Federal Reserve Bank of New
York (which rate will, under current practices of the Board, be published in
Federal Reserve Statistical Release H.15(519) during the week following such
day), or, if such rate shall not be so reported on such day or such next
preceding Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York City
received at approximately 10:00 a.m., New York City time, on such day (or, if
such day shall not be a Business Day, on the next preceding Business Day) by the
Lender from three New York City negotiable certificate of deposit dealers of
recognized standing selected by it. "STATUTORY RESERVES" shall mean a fraction
(expressed as a decimal), the numerator of which is the number one and the
denominator of which is the number one minus the aggregate of the maximum
reserve percentages (including any marginal, special, emergency or supplemental
reserves) expressed as a decimal established by the Board and any other banking
authority to which the Lender is subject for new negotiable nonpersonal time
deposits in dollars of over $100,000 with maturities approximately equal to
three months. Statutory Reserves shall be adjusted automatically on and as of
the effective date of any change in any reserve percentage. "FEDERAL FUNDS
EFFECTIVE RATE" shall mean, for any day, the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the average of the quotations for
the day of such transactions received by the Lender from three Federal funds
brokers of recognized standing selected by it. If for any reason the Lender
shall have determined (which determination shall be conclusive absent manifest
error) that it is unable to ascertain the Base CD Rate or the Federal Funds
Effective Rate or both for any reason, including the inability or failure of the
Lender to obtain sufficient quotations in accordance with the terms hereof, the
Alternate Base Rate shall be determined without regard to clause (b) or (c), or
both, of the first sentence of this definition, as appropriate, until the
circumstances giving rise to such inability no longer exist. Any change in the
- 3 -
Alternate Base Rate due to a change in the Prime Rate, the Three-Month Secondary
CD Rate or the Federal Funds Effective Rate shall be effective on the effective
date of such change in the Prime Rate, the Three-Month Secondary CD Rate or the
Federal Funds Effective Rate, respectively.
"ALTERNATE BASE RATE LOAN" shall mean a Loan based on the
Alternate Base Rate in accordance with the provisions of Article 2 hereof.
"APPLICABLE LAW" shall mean all provisions of statutes, rules,
regulations and orders of the United States or foreign governmental bodies or
regulatory agencies applicable to the Person in question, and all orders and
decrees of all U.S. federal or state courts and arbitrators in proceedings or
actions in which the Person in question is a party.
"APPLICABLE MARGIN" shall mean in the case of Alternate Base
Rate Loans, 2% per annum, or in the case of Eurodollar Loans, 3% per annum.
"APPROVED COMPLETION GUARANTOR" shall mean a financially sound
and reputable completion guarantor approved by the Lender. The Lender hereby
pre-approves as a completion guarantor (i) Fireman's Fund Insurance Company,
acting through its agent, International Film Guarantors L.P. (the general
partner of which is International Film Guarantors, Inc.), (ii) Cinema
Completions International Inc./Continental Casualty Company, (iii) The Motion
Picture Bond Company Inc. (to the extent a completion guarantee is accompanied
by a London Guarantee Insurance Company "cut-through"), (iv) Film Finances, Inc.
and its Affiliates that are insured under the same Lloyds of London insurance
policies as Film Finances, Inc. (only to the extent the completion guarantee is
accompanied by a Lloyd's of London "cut-through") and (v) Worldwide Film
Completion Inc./Connecticut Surety Group/NAC Re Corporation; PROVIDED, HOWEVER,
that any such pre-approval may be revoked by the Lender if deemed appropriate in
its sole discretion at any time upon 5 days prior written notice to the
Borrower; but FURTHER, PROVIDED, that such pre-approval may not be revoked with
regard to an item of Product if a Completion Guarantee has already been issued
for such item of Product.
"ASSESSMENT RATE" shall mean, for any day, the net annual
assessment rate (rounded upwards, if necessary, to the next higher 1/100 of 1%)
as most recently estimated by the Lender for determining the then current annual
assessment payable by the Lender to the Federal Deposit Insurance Corporation
(or any successor) for insurance by such Corporation (or such successor) of time
deposits made in Dollars at the Lender's domestic offices.
"AUTHORIZED OFFICER" shall mean, with respect to any Credit
Party, such Credit Party's Chief Executive Officer or Chief Financial Officer.
"BANKRUPTCY CODE" shall mean the Bankruptcy Reform Act of
1978, as heretofore and hereafter amended, as codified at 11 U.S.C. ss. 101 et
seq.
- 4 -
"BOARD" shall mean the Board of Governors of the Federal
Reserve System of the United States of America.
"BORROWING" shall mean a group of Loans of a single interest
rate type and as to which a single Interest Period is in effect on a single day.
"BORROWING BASE" shall mean, at any date for which the amount
thereof is to be determined, an amount equal to the aggregate (without double
counting) of the following:
(i) one hundred percent (100%) of Eligible L/C
Receivables; PLUS
(ii) eighty-five percent (85%) of Eligible Receivables;
PLUS
(iii) thirty-five percent (35%) of Eligible Library Amount;
PLUS
(iv) thirty percent (30%) of the book value of physical
audio cassettes and printed books; MINUS
(v) to the extent not already deducted in computing the
Borrowing Base, all amounts payable to third parties
from or with regard to the amounts otherwise included
in the Borrowing Base (not to exceed with respect to
any item of Product, the amount included in the
Borrowing Base attributable to such item of Product),
including without limitation remaining acquisition
payments, set offs, current profit participations,
deferments, residuals, commissions and royalties not
yet paid; minus
(vi) to the extent not otherwise deducted in computing the
Borrowing Base, the aggregate amount of all accrued
but unpaid residuals (not to exceed with respect to
any item of Product, the amount included in the
Borrowing Base attributable to such item of Product)
owed to any trade guild, to the extent that the
obligation of any Credit Party to pay such residuals
is secured by a security interest in any Eligible
Receivable included in the Borrowing Base, which
security interest is not subordinated to the security
interests of the Lender;
PROVIDED, HOWEVER, that credit in the Borrowing Base attributable to any
Eligible Receivable may not exceed 20% of the total Borrowing Base, except as
may be approved in writing by the Lender.
"BORROWING BASE CERTIFICATE" shall have the meaning given such
term in Section 5.1(e) hereof.
- 5 -
"BORROWING CERTIFICATE" shall mean a borrowing certificate,
substantially in the form of Exhibit H hereto, to be delivered by the Borrower
to the Lender in connection with each Borrowing.
"BUDGETED NEGATIVE COST" shall mean, with respect to any item
of Product, the amount of the cash budget (stated in Dollars) for such item of
Product including all costs customarily included in connection with the
acquisition of all underlying literary and musical rights with respect to such
item of Product and in connection with the preparation, production and
completion of such item of Product, including costs of materials, equipment,
physical properties, personnel and services utilized in connection with such
item of Product, both "above- the-line" and "below-the-line", any Completion
Guarantee fee (if applicable), and all other items customarily included in
negative costs, including finance charges and interest expense, but excluding
production fees and overhead charges payable to a Credit Party.
"BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or other day on which banks are required or permitted to close in the
States of California and New York; provided, however, that when used in
connection with a Eurodollar Loan, the term "Business Day" shall also exclude
any day on which banks are not open for dealings in Dollar deposits on the
London Interbank Market.
"CAPITAL EXPENDITURES" shall mean, with respect to any Person
for any period, the sum of (i) the aggregate of all expenditures (whether paid
in cash or accrued as a liability) by such Person during that period which, in
accordance with GAAP, are or should be included in "additions to property, plant
or equipment" or similar items included in cash flows (including Capital Leases)
and (ii) to the extent not covered by clause (i) hereof, the aggregate of all
expenditures properly capitalized in accordance with GAAP by such Person to
acquire, by purchase or otherwise, in whole or in part, the business, property
or fixed assets of, or stock or other evidence of beneficial ownership of any
other Person (other than the portion of such expenditures allocable in
accordance with GAAP to net current assets).
"CAPITAL LEASE" shall mean any lease of any property (whether
real, personal or mixed) by that Person as lessee which, in accordance with
GAAP, is or should be accounted for as a capital lease on the balance sheet of
that Person.
"CASH EQUIVALENTS" shall mean (i) marketable securities issued
or directly and fully guaranteed or insured by the United States of America or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States of America is pledged in support thereof) having maturities
of not more than twelve months from the date of acquisition, (ii) time deposits,
certificates of deposit, acceptances or prime commercial paper or repurchase
obligations for underlying securities of the types described in clause (i)
entered into with the Lender or any commercial bank having a short-term deposit
rating of at least A-2 or the equivalent thereof by Standard & Poor's Rating
Services or at least P-2 or the equivalent thereof by ▇▇▇▇▇'▇ Investors Service,
Inc. or (iii) commercial paper with a rating of A-1 or A-2 or the equivalent
- 6 -
thereof by Standard & Poor's Rating Services or P-1 or P-2 or the equivalent
thereof by ▇▇▇▇▇'▇ Investors Service, Inc. and in each case maturing within
twelve months after the date of acquisition.
"CHANGE IN CONTROL" shall mean either (i) any Person or group
(such term being used as defined in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) acquires ownership or control of voting stock
of the Borrower having voting power greater than the voting power at the time
controlled by MEI or (ii) if at any time, individuals who at the Closing Date
constituted the Board of Directors of the Borrower (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the shareholders of the Borrower was approved by a vote of the
majority of the directors then still in office who were either directors at the
Closing Date or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Borrower.
"CHANGE IN MANAGEMENT" shall mean that any two of ▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ shall cease to perform executive
functions for the Borrower; provided that a Change in Management shall not be
deemed to have occurred if such Person has been replaced by a Person reasonably
acceptable to the Lender within 180 days of such discontinuance.
"CLOSING DATE" shall mean the earliest date on which all
conditions precedent set forth in Section 4.1 have been satisfied or waived. The
closing shall take place in New York, New York.
"CODE" shall mean the Internal Revenue Code of 1986 and the
rules and regulations issued thereunder, as heretofore amended, as codified at
26 U.S.C. ss.1 et seq or any successor provision thereto.
"COLLATERAL" shall mean with respect to each Credit Party, all
of such Credit Party's right, title and interest in personal property, tangible
and intangible, wherever located or situated and whether now owned or hereafter
acquired or created, including but not limited to goods, accounts, intercompany
obligations, partnership and joint venture interests, contract rights,
documents, chattel paper, general intangibles, goodwill, equipment, inventory,
investment property, instruments, copyrights, trademarks, trade names, insurance
proceeds, cash and deposit accounts and any proceeds thereon, products thereof
or income therefrom, further including but not limited to all of such Credit
Party's right, title and interest in and to each and every item and type of
Product and Recorded Product, the scenario, screenplay or script upon which an
item of Product is based, all of the properties thereof, tangible and
intangible, and all domestic and foreign copyrights and all other rights therein
and thereto, of every kind and character, whether now in existence or hereafter
to be made or produced, and whether or not in possession of such Credit Party,
- 7 -
including with respect to each and every item of Product and/or Recorded Product
and without limiting the foregoing language, each and all of the following
particular rights and properties (to the extent they are owned or hereafter
created or acquired by such Credit Party):
(i) all scenarios, screenplays and/or scripts at every
stage thereof;
(ii) all common law and/or statutory copyright and other
rights in all literary and other properties
(hereinafter called "said literary properties") which
form the basis of each item of Product and/or
Recorded Product and/or which are and/or will be
incorporated into each item of Product and/or
Recorded Product, all component parts of each item of
Product and/or Recorded Product consisting of said
literary properties, all rights in and to the story,
all treatments of said story and said literary
properties, together with all preliminary and final
screenplays used and to be used in connection with
the item of Product and/or Recorded Product, and all
other literary material upon which the item of
Product and/or Recorded Product is based or from
which it is adapted;
(iii) all rights in and to all music and musical
compositions used and to be used in each item of
Product and/or Recorded Product, including, each
without limitation, all rights to record, rerecord,
produce, reproduce or synchronize all of said music
and musical compositions in and in connection
therewith;
(iv) all tangible personal property relating to each item
of Product and/or Recorded Product, including,
without limitation, all exposed film, developed film,
positives, negatives, prints, positive prints, answer
prints, special effects, preparing materials
(including interpositives, duplicate negatives,
internegatives, color reversals, intermediates,
lavenders, fine grain master prints and matrices, and
all other forms of pre-print elements), sound tracks,
cutouts, trims and any and all other physical
properties of every kind and nature relating to such
item of Product and/or Recorded Product, whether in
completed form or in some state of completion, and
all masters, duplicates, drafts, versions, variations
and copies of each thereof, in all formats whether on
film, videotape, disk or otherwise and all music
sheets and promotional materials relating to such
item of Product and/or Recorded Product
(collectively, the "PHYSICAL MATERIALS");
(v) all collateral, allied, subsidiary and merchandising
rights appurtenant or related to each item of Product
and/or Recorded Product including, without
limitation, the following rights: all rights to
produce remakes or sequels or prequels to each item
of Product and/or Recorded Product based upon each
item of Product and/or Recorded Product, said
literary properties or the theme of each item of
- 8 -
Product and/or Recorded Product and/or the text or
any part of said literary properties; all rights
throughout the world to broadcast, transmit and/or
reproduce by means of television (including
commercially sponsored, sustaining and subscription
or "pay" television) or by any process analogous
thereto, now known or hereafter devised, each item of
Product and/or Recorded Product or any remake or
sequel or prequel to the item of Product and/or
Recorded Product; all rights to produce primarily for
television or similar use a motion picture or series
of motion pictures, by use of film or any other
recording device or medium now known or hereafter
devised, based upon each item of Product and/or
Recorded Product, said literary properties or any
part thereof, including, without limitation, based
upon any script, scenario or the like used in each
item of Product and/or Recorded Product; all
merchandising rights including, without limitation,
all rights to use, exploit and license others to use
and exploit any and all commercial tie- ups of any
kind arising out of or connected with said literary
properties, each item of Product and/or Recorded
Product, the title or titles of each item of Product
and/or Recorded Product, the characters of each item
of Product and/or Recorded Product or said literary
properties and/or the names or characteristics of
said characters and including further, without
limitation, any and all commercial exploitation in
connection with or related to each item of Product
and/or Recorded Product, any remake or sequel thereof
and/or said literary properties;
(vi) all statutory copyrights, domestic and foreign,
obtained or to be obtained on each item of Product
and/or Recorded Product, together with any and all
copyrights obtained or to be obtained in connection
with each item of Product and/or Recorded Product or
any underlying or component elements of each item of
Product and/or Recorded Product, including, in each
case without limitation, all copyrights on the
property described in subparagraphs (i) through (v)
inclusive, of this paragraph, together with the right
to copyright (and all rights to renew or extend such
copyrights) and the right to ▇▇▇ in the name of any
of the Credit Parties for past, present and future
infringements of copyright;
(vii) all insurance policies and completion bonds connected
with each item of Product and/or Recorded Product and
all proceeds which may be derived therefrom;
(viii) all rights to distribute, sell, rent, license the
exhibition of and otherwise exploit and turn to
account each item of Product and/or Recorded Product,
the Physical Materials and rights in and to said
story, other literary material upon which each item
of Product and/or Recorded Product is based or from
which it is adapted, and said music and musical
compositions used or to be used in each item of
Product and/or Recorded Product;
- 9 -
(ix) any and all sums, proceeds, money, products, profits
or increases, including money profits or increases
(as those terms are used in the UCC or otherwise) or
other property obtained or to be obtained from the
distribution, exhibition, sale or other uses or
dispositions of each item of Product and/or Recorded
Product or any part of each item of Product and/or
Recorded Product, including, without limitation, all
proceeds, profits, products and increases, whether in
money or otherwise, from the sale, rental or
licensing of each item of Product and/or Recorded
Product and/or any of the elements of each item of
Product and/or Recorded Product including from
collateral, allied, subsidiary and merchandising
rights;
(x) the dramatic, nondramatic, stage, television, radio
and publishing rights, title and interest in and to
each item of Product and/or Recorded Product, and the
right to obtain copyrights and renewals of copyrights
therein;
(xi) the name or title of each item of Product and/or
Recorded Product and all rights of such Credit Party
to the use thereof, including, without limitation,
rights protected pursuant to trademark, service ▇▇▇▇,
unfair competition and/or the rules and principles of
law and of any other applicable statutory, common
law, or other applicable statutes, common law, or
other rule or principle of law;
(xii) any and all contract rights and/or chattel paper
which may arise in connection with each item of
Product and/or Recorded Product;
(xiii) all accounts and/or other rights to payment which
such Credit Party presently owns or which may arise
in favor of such Credit Party in the future,
including, without limitation, any refund under a
completion guaranty, all accounts and/or rights to
payment due from exhibitors in connection with the
distribution of each item of Product and/or Recorded
Product, and from exploitation of any and all of the
collateral, allied, subsidiary, merchandising and
other rights in connection with each item of Product
and/or Recorded Product;
- 10 -
(xiv) any and all "general intangibles" (as that term is
defined in the UCC) not elsewhere included in this
definition, including, without limitation, any and
all general intangibles consisting of any right to
payment which may arise in the distribution or
exploitation of any of the rights set out herein, and
any and all general intangible rights in favor of
such Credit Party for services or other performances
by any third parties, including actors, writers,
directors, individual producers and/or any and all
other performing or nonperforming artists in any way
connected with each item of Product and/or Recorded
Product, any and all general intangible rights in
favor of such Credit Party relating to licenses of
sound or other equipment, licenses for any photograph
or photographic process, and all general intangibles
related to the distribution or exploitation of each
item of Product and/or Recorded Product including
general intangibles related to or which grow out of
the exhibition of each item of Product and/or
Recorded Product and the exploitation of any and all
other rights in each item of Product and/or Recorded
Product set out in this definition;
(xv) any and all goods including inventory (as that term
is defined in the UCC) which may arise in connection
with the creation, production or delivery of each
item of Product and/or Recorded Product and which
goods pursuant to any production or distribution
agreement or otherwise are owned by such Credit
Party;
(xvi) all and each of the rights, regardless of
denomination, which arise in connection with the
creation, production, completion of production,
delivery, distribution, or other exploitation of each
item of Product and/or Recorded Product, including,
without limitation, any and all rights in favor of
such Credit Party, the ownership or control of which
are or may become necessary or desirable, in the
opinion of the Lender, in order to complete
production of each item of Product and/or Recorded
Product in the event that the Lender exercises any
rights it may have to take over and complete
production of each item of Product and/or Recorded
Product;
(xvii) any and all documents issued by any pledgeholder or
bailee with respect to the item of Product and/or
Recorded Product or any Physical Materials (whether
or not in completed form) with respect thereto;
(xviii) any and all production accounts or other bank
accounts established by such Credit Party with
respect to such item of Product and/or Recorded
Product;
(xix) any and all rights of such Credit Party under
contracts relating to the production or acquisition
of such item of Product and/or Recorded Product; and
(xx) any and all rights of such Credit Party under
Distribution Agreements relating to each item of
Product and/or Recorded Product;
- 11 -
provided, that, notwithstanding anything to the contrary contained above,
"Collateral" shall not include the "Real Property" described in the Deed of
Trust dated April 24, 1996 among the Borrower, Asahi Bank of California and
North American Title Company, as trustee, and the "Rents" described in the
Assignment of Rents dated April 24, 1996 between the Borrower and Asahi Bank of
California.
"COLLECTION ACCOUNT" shall have the meaning of given such term
in Section 8.3 hereof.
"COMMITMENT" shall mean the commitment of the Lender to make
Loans to the Borrower and issue Letters of Credit from the Closing Date through
the Commitment Termination Date up to an aggregate principal amount, at any one
time, not in excess of $10,000,000, as such amount may be reduced from time to
time in accordance with the terms of this Credit Agreement.
"COMMITMENT FEE" shall have the meaning given such term in
Section 2.5 hereof.
"COMMITMENT TERMINATION DATE" shall mean the earlier to occur
of (i) November 4, 2000 or (ii) such earlier date on which the Commitments shall
terminate in accordance with Section 2.6 or Article 7 hereof.
"COMPLETED" and "COMPLETION" shall mean with respect to any
item of Product that (A) either (i) sufficient elements have been delivered by
the Borrower to, and accepted by, a Person (other than the Borrower or Affiliate
thereof) to permit such Person to exhibit the item of Product in the medium for
which the item of Product is intended for initial exploitation in the United
States or (ii) the Borrower has certified to the Lender that an independent
laboratory has in its possession a complete final 35 mm or 70 mm (or other size
which has become standard in the industry) composite positive print, video
master or other equivalent master copy of the item of Product as finally cut,
main and end titled, edited, scored and assembled with sound track printed
thereon in perfect synchronization with the photographic action and fit and
ready for exhibition and distribution in the medium for which the item of
Product is intended for initial exploitation, provided that if such
certification shall not be verified to the Lender by such independent laboratory
within 20 business days thereafter, such item of Product shall revert to being
uncompleted until the Lender receives such verification, and (B) if such item of
Product was acquired from a third party, the entire acquisition price or minimum
advance shall have been paid to the extent then due and there is no condition or
event (other than the payment of money not yet due) the occurrence of which
might result in the Borrower losing any of its rights in such item of Product.
"COMPLETION GUARANTEE" shall mean a completion guarantee, in
the customary form accepted by the Lender or otherwise in form and substance
satisfactory to the Lender, issued by an Approved Completion Guarantor which
names the Lender as a beneficiary thereof to the extent of the applicable Credit
Party's financial interest in an item of Product.
- 12 -
"CONSOLIDATED CAPITAL BASE" shall mean the sum of the
principal amount of Subordinated Debt outstanding (net of unamortized debt
discount) plus the amount of Shareholders' Equity of the Borrower and its
Consolidated Subsidiaries, all determined in accordance with GAAP.
"CONSOLIDATED NET INCOME" shall mean, for any period for which
such amount is being determined, the net income (or loss) of the Borrower and
its Consolidated Subsidiaries during such period, determined on a consolidated
basis for such period taken as a single accounting period in accordance with
GAAP, provided that there shall be excluded (i) income (or loss) of any Person
(other than a Consolidated Subsidiary) in which the Borrower or any of its
Consolidated Subsidiaries has an equity investment or comparable interest,
except to the extent of the amount of dividends or other distributions actually
paid to the Borrower or any of its Consolidated Subsidiaries by such Person
during such period, (ii) the income (or loss) of any Person accrued prior to the
date it becomes a Consolidated Subsidiary of the Borrower or is merged into or
consolidated with the Borrower or any of its Consolidated Subsidiaries or the
Person's assets are acquired by the Borrower or any of its Consolidated
Subsidiaries and (iii) the income of any Consolidated Subsidiary to the extent
that the declaration or payment of dividends or similar distributions by that
Consolidated Subsidiary of its income is not at the time permitted by operation
of the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to that Consolidated
Subsidiary.
"CONSOLIDATED SUBSIDIARIES" shall mean all Subsidiaries of a
Person which are required or permitted to be Consolidated with such Person for
financial reporting purposes in accordance with GAAP.
"CONTRIBUTION AGREEMENT" shall mean a Contribution Agreement
executed by the Credit Parties substantially in the form of Exhibit J hereto, as
the same may be amended, supplemented or otherwise modified from time to time.
"CONTROLLED GROUP" shall mean all members of a controlled
group of corporations and all trades or businesses (whether or not incorporated)
under common control which, together with any Credit Party, are treated as a
single employer under Section 414(b), (c), (m) or (o) of the Code.
"COPYRIGHT SECURITY AGREEMENT" shall mean the Copyright
Security Agreement, substantially in the form of Exhibit E-1 hereto as the same
may be amended or supplemented from time to time by delivery of a Copyright
Security Agreement Supplement or otherwise.
"COPYRIGHT SECURITY AGREEMENT SUPPLEMENT" shall mean a
Supplement to the Copyright Security Agreement substantially in the form of
Exhibit E-2 hereto.
"CORPORATE GUARANTORS" shall mean all of the direct and
indirect Subsidiaries of the Borrower, now existing or hereafter acquired or
created.
- 13 -
"CREDIT PARTY" shall mean the Borrower or any of the Corporate
Guarantors.
"CURRENCY AGREEMENT" shall mean any foreign exchange contract,
currency swap agreement, futures contract, option contract or other similar
agreement designed to protect any Credit Party against fluctuations in currency
values.
"DEFAULT" shall mean any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.
"DISTRIBUTION AGREEMENTS" shall mean (i) any and all
agreements entered into by a Credit Party pursuant to which such Credit Party
has sold, leased, licensed or assigned distribution rights or other exploitation
rights to any item of Product to an un-Affiliated Person and (ii) any agreement
hereafter entered into by a Credit Party pursuant to which such Credit Party
sells, leases, licenses or assigns distribution rights to an item of Product to
an un-Affiliated Person.
"DOLLARS" and "$" shall mean lawful money of the United States
of America.
"EBIT" shall mean, for any period, for the Borrower and its
Subsidiaries on a Consolidated basis, the sum for such period of (i)
Consolidated Net Income, (ii) Total Interest, and (iii) provision for income
taxes during such period, all as determined for such period in conformity with
GAAP.
"ELIGIBLE L/C RECEIVABLE" shall have the same definition as an
Eligible Receivable except that an Acceptable L/C shall have been delivered to
the Lender for the full amount of the receivable.
"ELIGIBLE LIBRARY AMOUNT" shall initially be equal to
$13,300,000 and shall be redetermined no later than the Closing Date and on an
annual basis thereafter by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ or an independent consultant
selected by the Lender in its reasonable discretion exercised in good faith
using methodology consistent with the initial valuation without double counting
for items of Product that are receiving the credit in the Borrowing Base;
provided, however, that there will be interim reductions to the Eligible Library
Amount to reflect decreases, if any, in the remaining value of unsold library
rights resulting from major library deals (e.g., any single agreement or series
of related agreements pertaining to the licensing, distribution or sale of
library product providing for aggregate payments (including reasonably estimated
contingent payments) to a Credit Party in excess of $250,000) during such
interim period.
"ELIGIBLE RECEIVABLES" shall mean, at any date at which the
amount thereof is to be determined, an amount equal to the sum of the present
values (discounted, in the case of amounts which are not due and payable within
12 months following the date of determination, on a quarterly basis by a rate of
- 14 -
interest equal to the interest rate in effect on the Note on the date of
computation) of (a) all net amounts which pursuant to a binding agreement are
contractually obligated to be paid to any Credit Party either unconditionally or
subject only to normal delivery requirements, and which are reasonably expected
by the Borrower to be payable and collected from obligors (including, without
limitation, amounts which a distributor has reported to a Credit Party in
writing (and such report has been forwarded to the Lender) will be paid to such
Credit Party following receipt by the distributor of sums contractually required
to be paid to the distributor from third parties) minus (b) the sum, without
double counting and computed on a receivable by receivable basis and never in
excess of the amount of the corresponding receivable, of (i) in the case of
audio and book receivables, a reserve in respect of estimated returns for items
of Product sold on a returnable basis, allowances and doubtful payments of
accounts for each such receivable, in an amount which shall not be less than 30%
of the amount of the corresponding receivable, (ii) the following items (based
on the Borrower's then best estimates): third party profit participations,
residuals, collection/ distribution expenses, commissions, video fulfillment
costs, foreign withholding, remittance and similar taxes chargeable in respect
of such accounts receivable, and any other projected expenses of such Credit
Party arising in connection with such amounts and (iii) the outstanding amount
of unrecouped advances made by a distributor to the extent subject to repayment
by a Credit Party or adjustment pursuant to approved Distribution Agreements,
but Eligible Receivables shall not include amounts:
(i) which in the reasonable discretion of the Lender
(acting in good faith) are subject to material
conditions precedent to payment (including a material
performance obligation or a material executory aspect
on the part of the Credit Parties or any other party
or obligations contingent upon future events not
within a Credit Party's direct control within the
ordinary course of business);
(ii) to the extent such receivables are more than 90 days
past due;
(iii) in excess of $50,000 that are to be paid in a
currency other than Dollars unless hedged in a manner
satisfactory to the Lender;
(iv) to the extent included in the Borrower's estimated
bad debts;
(v) due from any obligor which has 20% or more of the
total receivable amount from such obligor 120 or more
days past due (exclusive of amounts that are being
disputed or contested in good faith);
(vi) for which there is a bona fide request for a material
credit, adjustment, compromise, offset, counterclaim
or dispute; provided, however, that only the amount
in question shall be excluded from such receivable;
(vii) which are attributable to an item of Product in which
a Credit Party cannot warrant sufficient title to the
underlying rights to justify such receivable;
- 15 -
(viii) in which the Lender does not have a first perfected
security interest under the UCC and applicable
copyright law; provided that, such receivable may be
subject to permitted liens subordinate to the
security interest of the Lender;
(ix) which are determined by the Lender in its reasonable
discretion, acting in good faith, upon written notice
from the Lender to the Borrower and effective 10 days
subsequent to the Borrower's receipt of such notice,
to be unacceptable (it being understood that certain
unacceptable receivables may be made acceptable and
may be included in the Borrowing Base if secured by
an Acceptable L/C);
(x) which relate to items of Product as to which the
Lender has not received a fully executed Laboratory
Access Letter or Pledgeholder Agreement for each
laboratory holding Physical Materials sufficient to
fully exploit the rights held by the Borrower in such
item of Product;
(xi) which will be subject to reduction or repayment to
the extent not earned by performance;
(xii) which are attributable to items of Product as
described in Section 5.21 unless the Borrower is in
compliance with Section 5.21;
(xiii) which are attributable to items of Product which have
not been Completed (except that (1) if a Letter of
Credit is issued in order to support the Borrower's
minimum payment obligation to acquire distribution
rights in such item of Product, amounts attributable
to such rights may be treated as Eligible Receivables
(even though the item of Product has not yet been
Completed), PROVIDED THAT (A) proof of Completion of
such item of Product must be presented in order to
draw under the Letter of Credit, (B) the portion of
the Borrowing Base attributable to such Eligible
Receivables for such item of Product does not exceed
the amount of such Letter of Credit for such item of
Product, and (C) such amounts otherwise meet all of
the applicable criteria for inclusion as Eligible
Receivables except clause (x); or (2) if a Completion
Guarantee has been issued for such item of Product or
the Borrower is otherwise in compliance with Section
5.21, amounts attributable to such item of Product
may be treated as Eligible Receivables (even though
the item of Product has not yet been Completed),
PROVIDED THAT (A) the portion of the Borrowing Base
attributable to such Eligible Receivables for such
- 16 -
item of Product shall not exceed the amounts which
would be paid to the Borrower or a Corporate
Guarantor under such Completion Guarantee if such
item of Product were abandoned as of the date of
computation of the Borrowing Base and (B) such
amounts otherwise meet all of the applicable criteria
for inclusion as Eligible Receivables except clause
(x); or
(xiv) which will not become due and payable until one year
or more after the scheduled final maturity of the
Credit Agreement.
The Lender from time to time by written notice to the Borrower
(which notice shall be prospective only, i.e., to the extent that giving effect
to such notice would otherwise result in a mandatory prepayment by the Borrower
under Section 2.9, such notice shall not be given effect for purposes of such
mandatory prepayment, but shall nevertheless be effective for all other purposes
under this Credit Agreement immediately upon the Borrower's receipt of such
notice) may determine that any amounts due under any Distribution Agreement are
unacceptable and shall no longer constitute an Eligible Receivable as it may,
acting in good faith, in its discretion deem appropriate.
"ENVIRONMENTAL LAWS" shall mean any and all federal, state,
local or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees or requirements of any Governmental Authority regulating,
relating to or imposing liability or standards of conduct concerning any
Hazardous Material or environmental protection or health and safety, as now or
may at any time hereafter be in effect, including without limitation, the Clean
Water Act also known as the Federal Water Pollution Control Act ("FWPCA"), 33
▇.▇.▇.▇▇. 1251 et seq., the Clean Air Act ("CAA"), 42 ▇.▇.▇.▇▇.▇▇. 7401 et seq.,
the Federal Insecticide, Fungicide and Rodenticide Act ("FIFRA"), 7 ▇.▇.▇.▇▇.▇▇.
136 et seq., the Surface Mining Control and Reclamation Act ("SMCRA"), 30
▇.▇.▇.▇▇.▇▇. 1201 et seq., the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C.ss.9601 et seq., the
Superfund Amendments and Reauthorization Act of 1986 ("▇▇▇▇"), Public Law
99-499, 100 Stat. 1613, the Emergency Planning and Community Right to Know Act
("ECPCRKA"), 42 U.S.C.ss.11001 et seq., the Resource Conservation and Recovery
Act ("RCRA"), 42 U.S.C. ss. 6901 et seq., the Occupational Safety and Health Act
as amended ("OSHA"), 29 ▇.▇.▇.▇▇. 655 andss. 657, together, in each case, with
any amendment thereto, and the regulations adopted pursuant thereto.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as heretofore and hereafter amended, as codified at 29 ▇.▇.▇.▇▇. 1001
et seq. and the regulations promulgated thereunder.
"EURODOLLAR LOAN" shall mean a Loan based on the LIBO Rate in
accordance with the provisions of Article 2 hereof.
"EVENT OF DEFAULT" shall have the meaning given such term in
Article 7 hereof.
- 17 -
"FUNDAMENTAL DOCUMENTS" shall mean this Credit Agreement, the
Note, the Guaranty Agreements, the Pledgeholder Agreements, the Laboratory
Access Letters, the Copyright Security Agreement, the Copyright Security
Agreement Supplements, the Instruments of Assumption and Joinder, the Notices of
Assignment and Irrevocable Instruction, UCC financing statements, and any other
ancillary documentation which is required to be or is otherwise executed by any
of the Credit Parties and delivered to the Lender in connection with this Credit
Agreement or any other Fundamental Document.
"GAAP" shall mean generally accepted accounting principles in
the United States of America consistently applied (except for accounting changes
in response to FASB releases, or other authoritative pronouncements).
"GOVERNMENTAL AUTHORITY" shall mean any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, or any court, in each case whether of the United States or a
foreign jurisdiction.
"GUARANTY" shall mean, as to any Person, any direct or
indirect obligation of such Person guaranteeing or intended to guaranty any
Indebtedness, Capital Lease, dividend or other monetary obligation ("primary
obligation") of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any obligation of such
Person, whether or not contingent, (i) to purchase any such primary obligation
or any property constituting direct or indirect security therefor, (ii) to
advance or supply funds (a) for the purchase or payment of any such primary
obligation or (b) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency of the primary
obligor, or (iii) to purchase property, securities or services, in each case,
primarily for the purpose of assuring the performance of the obligor of any such
primary obligation; provided, however, that the term Guaranty shall not include
endorsements for collection or collections for deposit, in either case in the
ordinary course of business. The amount of any Guaranty shall be deemed to be an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guaranty is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof (assuming such
Person is required to perform thereunder).
"GUARANTY AGREEMENTS" shall mean, collectively, the Amended
and Restated Individual Guaranty Agreements dated the date hereof, each between
an Individual Guarantor and the Lender substantially in the form of Exhibits K-1
through K-5 hereto, as the same may be amended, supplemented or otherwise
modified from time to time.
"HAZARDOUS MATERIALS" shall mean any flammable materials,
explosives, radioactive materials, hazardous materials, hazardous wastes,
hazardous or toxic substances, or similar materials defined in any Environmental
Law.
- 18 -
"INDEBTEDNESS" shall mean (without double counting), at any
time and with respect to any Person, (i) indebtedness of such Person for
borrowed money (whether by loan or the issuance and sale of debt securities) or
for the deferred purchase price of property or services purchased (other than
amounts constituting trade payables (payable within 90 days) arising in the
ordinary course of business); (ii) obligations of such Person in respect of
letters of credit, acceptance facilities, or drafts or similar instruments
issued or accepted by banks and other financial institutions for the account of
such Person; (iii) obligations of such Person under Capital Leases; (iv)
deferred payment obligations of such Person resulting from the adjudication or
settlement of any claim or litigation and (v) Indebtedness of others of the type
described in clauses (i), (ii), (iii) and (iv) hereof which such Person has (a)
directly or indirectly assumed or guaranteed in connection with a Guaranty or
(b) secured by a Lien on the assets of such Person, whether or not such Person
has assumed such indebtedness. Indebtedness shall not include non-refundable
advances made by a third-party distributor to "cash-flow" the production of an
item of Product.
"INDIVIDUAL GUARANTORS" shall be as defined in the
Introductory Statement hereof.
"INSTRUMENTS OF ASSUMPTION AND JOINDER" shall mean the
Instruments of Assumption and Joinder substantially in the form of Exhibit I
pursuant to which Subsidiaries of the Borrower become parties to this Credit
Agreement as contemplated by Section 6.22.
"INTEREST PAYMENT DATE" shall mean (i) as to any Eurodollar
Loan having an Interest Period of one, two or three months, the last day of such
Interest Period, (ii) as to any Eurodollar Loan having an Interest Period of
more than three months, the last day of such Interest Period and, in addition,
each date during such Interest Period that would be the last day of an Interest
Period commencing on the same day as the first day of such Interest Period but
having a duration of three months or any integral multiple thereof and (iii)
with respect to Alternate Base Rate Loans, the last Business Day of each March,
June, September and December.
"INTEREST PERIOD" shall mean as to any Eurodollar Loan, the
period commencing on the date such Loan is made, continued or converted or the
last day of the preceding Interest Period and ending on the numerically
corresponding day (or if there is no corresponding day, the last day) in the
calendar month that is one, two, three or six months thereafter as the Borrower
may elect; provided, however, that (i) if any Interest Period would end on a day
which shall not be a Business Day, such Interest Period shall be extended to the
next succeeding Business Day, unless such next succeeding Business Day would
fall in the next calendar month, in which case, such Interest Period shall end
on the next preceding Business Day and (ii) no Interest Period may be selected
which would end later than the Commitment Termination Date.
"INTEREST RATE PROTECTION AGREEMENT" shall mean any interest
rate swap agreement, interest rate cap agreement, synthetic caps, collars and
floors or other financial agreement or arrangement designed to protect any
Credit Party against fluctuations in interest rates.
- 19 -
"INVESTMENT" shall mean any stock, evidence of indebtedness or
other securities of any Person, any loan, advance, contribution of capital,
extension of credit or commitment therefor, including without limitation the
guarantee of loans made to others (except for current trade and customer
accounts receivable for goods or services provided or rendered in the ordinary
course of business and payable in accordance with customary trading terms in the
ordinary course of business), and any purchase of (i) any securities of another
Person or (ii) any business or undertaking of any Person or any commitment or
option to make any such purchase.
"L/C EXPOSURE" shall mean, at any time, the amount expressed
in Dollars of the aggregate face amount of all drafts which may then or
thereafter be presented by beneficiaries under all Letters of Credit then
outstanding plus (without duplication) the face amount of all drafts which have
been presented or accepted under all Letters of Credit but have not yet been
paid or have been paid but not reimbursed.
"LABORATORY" shall mean any laboratory reasonably acceptable
to the Lender which is located in the United States and is a party to a
Pledgeholder Agreement or a Laboratory Access Letter.
"LABORATORY ACCESS LETTER" shall mean a letter agreement among
(i) a Laboratory holding any elements of any item of Product to which a Credit
Party has the right of access, (ii) such Credit Party and (iii) the Lender,
substantially in the form of Exhibit F hereto or a form otherwise acceptable to
the Lender.
"LENDER" shall be as defined in the Introductory Statement
hereof.
"LENDING OFFICE" shall mean, with respect to the Lender, the
branch or branches (or affiliate or affiliates) from which the Lender's
Eurodollar Loans or Alternate Base Rate Loans, as the case may be, are made or
maintained and for the account of which all payments of principal of, and
interest on, the Lender's Eurodollar Loans or Alternate Base Rate Loans are
made.
"LETTER OF CREDIT" shall mean a letter of credit issued by the
Lender pursuant to Section 2.14.
"LIBO RATE" shall mean, with respect to the Interest Period
for a Eurodollar Loan, an interest rate per annum equal to the quotient (rounded
upwards to the next 1/100 of 1%) of (A) the average of the rates at which Dollar
deposits approximately equal in principal amount to such Eurodollar Loan and for
a maturity equal to the applicable Interest Period are offered to the Lending
Office of the Lender in immediately available funds in the London Interbank
Market for Eurodollars at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period divided by (B) one minus
- 20 -
the applicable statutory reserve requirements of the Lender, expressed as a
decimal (including without duplication or limitation, basic, supplemental,
marginal and emergency reserves), from time to time in effect under Regulation D
or similar regulations of the Board. It is agreed that for purposes of this
definition, Eurodollar Loans made hereunder shall be deemed to constitute
Eurocurrency Liabilities as defined in Regulation D and to be subject to the
reserve requirements of Regulation D.
"LIEN" shall mean any mortgage, copyright mortgage, pledge,
security interest, encumbrance, lien or charge of any kind whatsoever (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to give any financing statement under
the Uniform Commercial Code of any jurisdiction or the agreement to grant a
security interest at a future date).
"LOANS" shall mean the loans made hereunder in accordance with
the provisions of Section 2.2, whether made as a Eurodollar Loan or an Alternate
Base Rate Loan, as permitted hereby.
"MARGIN STOCK" shall be as defined in Regulation U of the
Board.
"MATERIAL AGREEMENT" shall mean any agreement set forth on
Schedule 3.17 hereto.
"MAXIMUM GUARANTY AMOUNT" shall be as defined in the
Introductory Statement hereof.
"MULTIEMPLOYER PLAN" shall mean a plan described in Section
4001(a)(3) of ERISA.
"NOTICE OF ASSIGNMENT AND IRREVOCABLE INSTRUCTIONS" shall mean
the Notice of Assignment and Irrevocable Instructions substantially in the form
of Exhibit G or in such other form as shall be acceptable to the Lender,
including without limitation the inclusion of such notice and instructions in a
Distribution Agreement.
"OBLIGATIONS" shall mean the obligation of the Borrower to
make due and punctual payment of principal of and interest on the Loans, the
Commitment Fee, reimbursement obligations in respect of Letters of Credit and
all other monetary obligations of the Borrower owed to the Lender under this
Credit Agreement, the Note, the Commitment Letter or any other Fundamental
Document and all amounts payable by the Borrower to the Lender under any
Interest Rate Protection Agreement or Currency Agreement, provided that the
Lender shall have received written notice within 10 days after execution of each
such Interest Rate Protection Agreement or Currency Agreement.
- 21 -
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any successor thereto.
"PERMITTED ENCUMBRANCES" shall mean Liens permitted under
Section 6.2 hereof.
"PERSON" shall mean any natural person, corporation,
partnership, trust, joint venture, association, company, estate, unincorporated
organization or government or any agency or political subdivision thereof.
"PHYSICAL MATERIALS" shall have the meaning given such term in
the definition of "Collateral" herein.
"PLAN" shall mean an employee benefit plan within the meaning
of Section 3(2) of ERISA, other than a Multiemployer Plan, maintained by the
Borrower or any member of the Controlled Group, or to which the Borrower or any
member of the Controlled Group contributes or is required to contribute or any
other plan covered by Title IV of ERISA that cover any employees of the Borrower
or any member of the Controlled Group.
"PLEDGED SECURITIES" shall mean 100% of the issued and
outstanding capital stock of each of the Corporate Guarantors.
"PLEDGEHOLDER AGREEMENT" shall mean a Laboratory Pledgeholder
Agreement among a Credit Party, the Lender, a third party completion guarantor
(if there is one), and one or more Laboratories, substantially in the form of
Exhibit D-1 or Exhibit D-2 hereto, or in such other form as shall be acceptable
to the Lender.
"PLEDGORS" shall mean those Credit Parties identified as such
on Schedule 3.7(a).
"PRODUCT" shall mean any motion picture, film or video tape
produced for television release or for release in any other medium, in each case
whether recorded on film, videotape, cassette, cartridge, disc or on or by any
other means, method, process or device whether now known or hereafter developed,
with respect to which a Credit Party (i) is the initial copyright owner or (ii)
acquires an equity interest or distribution rights. The term "item of Product"
shall include, without limitation, the scenario, screenplay or script upon which
such Product is based, all of the properties thereof, tangible and intangible,
and whether now in existence or hereafter to be made or produced, whether or not
in possession of the Credit Parties, and all rights therein and thereto, of
every kind and character.
"PRODUCTION ACCOUNT(S)" shall mean individually or
collectively, as the context so requires, each demand deposit account(s)
established by a Credit Party at a commercial bank located in the United States
or otherwise acceptable to the Lender, for the sole purpose of paying the
production costs of a particular item of Product and, if a Completion Guaranty
is required for such item of Product pursuant to the terms hereof, as to which
the Approved Completion Guarantor for such item of Product has agreed in writing
that amounts deposited in such account shall be deemed available for production
of such item of Product for purposes of the Completion Guarantee for such item
of Product.
- 22 -
"PRODUCTION EXPOSURE" for an item of Product shall mean the
Budgeted Negative Cost or acquisition price paid or to be paid by a Credit Party
(net of amounts being cash-flowed by a third party unrelated to a Credit Party
pursuant to contractual arrangements reasonably acceptable to the Lender).
"RECORDED PRODUCT" shall mean any audio embodiment or musical,
spoken or other sound based upon literary or other works regardless of the
nature of the material object, such as discs, tapes or other phonorecords, in
which such sounds are embodied, including without limitation audio books.
"REPORTABLE EVENT" shall mean any reportable event as defined
in Section 4043(c) of ERISA, other than a reportable event as to which provision
for 30-day notice to the PBGC would be waived under applicable regulations had
the regulations in effect on the Closing Date been in effect on the date of
occurrence of such reportable event.
"RESTRICTED PAYMENT" shall mean (i) any distribution, dividend
or other direct or indirect payment on account of shares of any class of stock
of, partnership interest in, or any other equity interest of, a Credit Party,
other than a dividend, distribution or other payment payable solely in shares of
common stock, (ii) any redemption or other acquisition, re-acquisition or
retirement by a Credit Party of any class of its own stock or other equity
interest of a Credit Party or an Affiliate, now or hereafter outstanding, (iii)
any payment made to retire, or obtain the surrender of any outstanding warrants,
puts or options or other rights to purchase or acquire shares of any class of
stock of, or any equity interest in, a Credit Party, now or hereafter
outstanding and (iv) any payment by a Credit Party of principal of, premium, if
any, or interest on, or any redemption, purchase, retirement, defeasance,
sinking fund or similar payment with respect to, any Subordinated Debt now or
hereafter outstanding.
"SHAREHOLDERS' EQUITY" shall mean the consolidated capital,
surplus and retained earnings and deficits of the Borrower and its Subsidiaries,
subject to intercompany eliminations and reduced by the outstanding amount of
any note held by the Borrower in payment for capital stock, all as determined in
accordance with GAAP.
"STRIKE PRICE" shall mean, with respect to any item of
Product, the amount of funds required to be provided under the relevant
Completion Guarantee, if applicable.
"SUBORDINATED DEBT" shall mean all Indebtedness of any of the
Credit Parties that is subordinated to the Obligations pursuant to written
agreements, containing interest rates, payment terms, maturities, amortization
schedules, covenants, defaults, remedies, subordination provisions and other
material terms in form and substance satisfactory to the Lender.
- 23 -
"SUBSIDIARY" shall mean with respect to any Person, any
corporation, association, joint venture, partnership or other business entity
(whether now existing or hereafter organized) of which at least a majority of
the Voting Stock or other ownership interests having ordinary voting power for
the election of directors (or the equivalent) is, at the time as of which any
determination is being made, owned or controlled by such Person or one or more
subsidiaries of such Person or by such Person and one or more subsidiaries of
such Person.
"TOTAL INTEREST" shall mean the sum of (i) all cash interest
expenses (net of interest income) calculated on an accrual basis of the Borrower
and its Consolidated Subsidiaries computed in accordance with GAAP (whether
indicated on the consolidated statement of earnings under the caption "Interest
Expense" or netted out under the amount appearing under the caption "Interest
and Investment Income") plus (ii) any cash interest expense calculated on an
accrual basis that has been capitalized (other than as part of film costs)
during the relevant period.
"UCC" shall mean the Uniform Commercial Code as in effect in
the State of New York on the date of execution of this Credit Agreement.
"VOTING STOCK" shall mean the capital stock of an entity
having ordinary voting power under ordinary circumstances to vote in the
election of directors of such entity.
2. THE LOANS
SECTION 2.1. LOANS. (a) The Lender agrees, upon the terms and
subject to the conditions hereof, to make loans to the Borrower, on any Business
Day and from time to time from the Closing Date to but excluding the Commitment
Termination Date, each in an aggregate principal amount which when added to the
aggregate principal amount of all Loans then outstanding to the Borrower from
the Lender plus the then current L/C Exposure, does not exceed the Lender's
Commitment (after giving effect to all Loans repaid and all reimbursements of
Letters of Credit made concurrently with the making of any Loans).
(b) Subject to Section 2.2, the Loans shall be made at such
times as the Borrower shall request.
(c) Subject to the terms and conditions of this Credit
Agreement, the Borrower may borrow, repay and re-borrow amounts constituting the
Commitment.
(d) Notwithstanding anything to the contrary above, the Lender
shall not be obligated to make Loans or to incur any incremental L/C Exposure
if, as a result thereof, the aggregate principal amount of all Loans then
outstanding plus the then current L/C Exposure exceeds the lesser of (x) the sum
of (A) the Maximum Guaranty Amount plus (B) amounts currently held in the
Collection Account plus (C) the Borrowing Base or (y) the Commitment.
- 24 -
SECTION 2.2. MAKING OF LOANS. (a) Each Loan shall be an
Alternate Base Rate Loan or a Eurodollar Loan as the Borrower may request
subject to and in accordance with this Section 2.2.
(b) The Borrower shall give the Lender at least three Business
Days' prior written, facsimile or telephonic (promptly confirmed in writing)
notice of each Borrowing which is to consist of Eurodollar Loans, and at least
one Business Day's prior written, facsimile or telephonic (promptly confirmed in
writing) notice of each Borrowing which is to consist of Alternate Base Rate
Loans. Each such notice in order to be effective must be received by the Lender
not later than 2:00 p.m., New York City time, on the day required and shall
specify the date (which shall be a Business Day) on which such Loan is to be
made, the aggregate principal amount of the requested Loan. Each such notice
shall be irrevocable and shall specify whether the Borrowing then being
requested is to consist of Alternate Base Rate Loans or Eurodollar Loans and in
the case of Eurodollar Loans, the Interest Period or Interest Periods with
respect thereto; provided, that in the event the Lender shall have determined
that Eurodollar Loans are not available pursuant to Section 2.7(b), the Borrower
may rescind such Borrowing request by providing the Lender notice thereof no
later than 5:00 p.m. (New York City time) on the day the Borrower received
notice of such unavailability. If no election of an Interest Period is specified
in such notice in the case of a Borrowing consisting of Eurodollar Loans, such
notice shall be deemed to be a request for an Interest Period of one month. If
no election is made as to the type of Loan, such notice shall be deemed a
request for a Borrowing consisting of Alternate Base Rate Loans. No Borrowing
shall consist of Eurodollar Loans if after giving effect thereto an aggregate of
more than six (6) separate Eurodollar Loans would be outstanding hereunder
(determined in accordance with Section 2.9(c) hereof).
(c) Each Loan requested by the Borrower shall be as specified
on the applicable Borrowing Certificate delivered to the Lender in connection
with such Loan. The Lender shall disburse such funds by depositing the requested
amounts into an account designated by the Borrower.
(d) The Lender may at its option fulfill its obligation to
make Eurodollar Loans by causing a foreign branch or affiliate to fund such
Eurodollar Loans, provided that any exercise of such option shall not affect the
obligation of the Borrower to repay Loans in accordance with the terms hereof.
Subject to the other provisions of this Section 2.2, Loans of more than one
interest rate type may be outstanding at the same time.
(e) The amount of any Borrowing of new funds shall be in an
aggregate principal amount of $125,000 (or such lesser amount as shall equal the
available but unused portion of the Commitment) or such greater amount which is
an integral multiple of $100,000; PROVIDED, HOWEVER that the amount of any
Borrowing of new funds which shall be a Eurodollar Loan shall be in an aggregate
principal amount of $500,000 or such greater amount which is an integral
multiple of $100,000.
- 25 -
(f) Notwithstanding the provisions of clause (b) above and/or
the absence of a request from the Borrower that the Lender make a Loan, the
Lender may make Loans and apply the proceeds thereof as follows:
(i) if the Approved Completion Guarantor for an
item of Product being produced by the
Borrower or for which receivables are
included in the Borrowing Base shall take
over production of such item of Product
pursuant to the Completion Guarantee with
respect to such item of Product, to make
Loans up to the Strike Price with respect to
the production of such item of Product and
pay the proceeds thereof directly to the
Approved Completion Guarantor to be used to
finance the production and delivery of such
item of Product pursuant to the terms of the
Completion Guarantee; and
(ii) if an Event of Default shall have occurred
and be continuing, to make Loans with respect
to any item of Product being produced by the
Borrower or for which receivables are
included in the Borrowing Base and pay the
proceeds thereof directly to Persons
providing services in connection with the
production, delivery and distribution of such
Product so as to ensure Completion of such
item of Product and/or the collection of
Eligible Receivables.
SECTION 2.3. NOTE. (a) The Loans made by the Lender hereunder
shall be evidenced by a single promissory note substantially in the form of
Exhibit A hereto (the "Note") in the face amount of the Lender's Commitment,
payable to the order of the Lender, duly executed by the Borrower and dated as
of November 4, 1997.
(b) The Note shall bear interest on the outstanding principal
balance thereof as set forth in Section 2.4 hereof. The Lender is hereby
authorized by the Borrower, but not obligated, to enter the amount of each Loan
and the amount of each payment or prepayment of principal or interest thereon in
the appropriate spaces on the reverse of or on an attachment to the Note;
PROVIDED, HOWEVER, that the failure of the Lender to set forth such Loans,
principal payments or other information shall not in any manner affect the
obligations of the Borrower to repay such Loans.
SECTION 2.4. INTEREST ON NOTE. (a) In the case of a Eurodollar
Loan, interest shall be payable at a rate per annum (computed on the basis of
the actual number of days elapsed over a year of 360 days) equal to the LIBO
Rate plus the Applicable Margin. Interest shall be payable on each Eurodollar
Loan on each applicable Interest Payment Date, at maturity and on the date of a
conversion of such Eurodollar Loan to an Alternate Base Rate Loan. The Lender
shall determine the applicable LIBO Rate for each Interest Period as soon as
practicable on the date when such determination is to be made in respect of such
Interest Period and shall notify the Borrower of the applicable interest rate so
determined. Such determination shall be conclusive absent manifest error.
- 26 -
(b) In the case of an Alternate Base Rate Loan, interest shall
be payable at a rate per annum (computed on the basis of the actual number of
days elapsed over a year of 365/366 days, as the case may be, during such times
as the Alternate Base Rate is based upon the Prime Rate, and over a year of 360
days at all other times) equal to the Alternate Base Rate plus the Applicable
Margin. Interest shall be payable on each Alternate Base Rate Loan on each
applicable Interest Payment Date and at maturity.
(c) Anything in this Credit Agreement or the Note to the
contrary notwithstanding, the interest rate on the Loans shall in no event be in
excess of the maximum permitted by Applicable Law.
SECTION 2.5. COMMITMENT FEES AND OTHER FEES. (a) The Borrower
agrees to pay to the Lender on the last Business Day of each March, June,
September and December in each year (commencing on the last Business Day of June
1999) prior to the Commitment Termination Date and on the Commitment Termination
Date, an aggregate fee (the "COMMITMENT FEE") of 1/2 of 1% per annum, computed
on the basis of the actual number of days elapsed during the preceding period or
quarter over a year of 360 days, on the average daily amount by which the
Lender's Commitment, as such Commitment may be reduced in accordance with the
provisions of this Credit Agreement, exceeds the sum of the principal balance of
the Lender's outstanding Loans plus its L/C Exposure during the preceding period
or quarter.
(b) The Commitment Fee shall commence to accrue from the
Closing Date.
SECTION 2.6. OPTIONAL AND MANDATORY TERMINATION OR REDUCTION
OF COMMITMENT. (a) Upon at least three Business Days' prior written, facsimile
or telephonic notice (provided that such telephonic notice is immediately
followed by written confirmation) to the Lender, the Borrower may at any time in
whole permanently terminate, or from time to time in part permanently reduce,
the Commitment. In the case of a partial reduction, each such reduction of the
Commitment shall be in a minimum aggregate principal amount of $500,000 or an
integral multiple thereof; PROVIDED, HOWEVER, that the Commitment may not be
reduced by more than the amount of the then unused Commitment and may not be
reduced to an amount less than the aggregate principal amount of the Loans
outstanding, plus the then current L/C Exposure.
(b) Simultaneously with each such termination or reduction of
the Commitment, the Borrower shall pay to the Lender all accrued and unpaid
Commitment Fees on the amount of the Commitment so terminated or reduced through
the date of such termination or reduction.
- 27 -
SECTION 2.7. DEFAULT INTEREST; ALTERNATE RATE OF INTEREST. (a)
If the Borrower shall default in the payment of the principal of, or interest on
any Loan becoming due hereunder, whether at stated maturity, by acceleration or
otherwise, or the payment of any other amount becoming due hereunder after
written notification from the Lender to the Borrower of such amount, the
Borrower shall on demand from time to time pay interest, to the extent permitted
by law, on all Loans and overdue amounts outstanding up to the date of actual
payment of such defaulted amount (after as well as before judgment) (i) for the
remainder of the then current Interest Period for each Eurodollar Loan, at 2% in
excess of the rate then in effect for each such Eurodollar Loan and (ii) for all
periods subsequent to the then current Interest Period for each Eurodollar Loan,
for all Alternate Base Rate Loans and for all other overdue amounts hereunder,
at 2% in excess of the rate then in effect for Alternate Base Rate Loans.
(b) In the event, and on each occasion, that on the day two
Business Days prior to the commencement of any Interest Period for a Eurodollar
Loan, (i) the Lender shall have determined (which determination, absent manifest
error, shall be conclusive) that Dollar deposits in the amount of the principal
amount of such Eurodollar Loan are not generally available in the London
Interbank Market or that the rate at which such Dollar deposits are being
offered will not adequately and fairly reflect the cost to the Lender of making
or maintaining the principal amount of such Eurodollar Loan during such Interest
Period or (ii) the Lender shall have determined that reasonable means do not
exist for ascertaining the applicable LIBO Rate, the Lender shall, as soon as
practicable thereafter, give written or facsimile notice of such determination
to the Borrower, and any request by the Borrower for a Eurodollar Loan (or
conversion to or continuation as a Eurodollar Loan pursuant to Section 2.8
hereof), made after receipt of such notice, shall be deemed a request for an
Alternate Base Rate Loan (unless such borrowing request has been rescinded
pursuant to Section 2.2 (b)). After such notice shall have been given and until
the circumstances giving rise to such notice no longer exist, each request (or
portion thereof, as the case may be) for a Eurodollar Loan shall be deemed to be
a request for an Alternate Base Rate Loan.
SECTION 2.8. CONTINUATION AND CONVERSION OF LOANS. The
Borrower shall have the right, at any time, (i) to convert any Eurodollar Loan
or portion thereof to an Alternate Base Rate Loan or to continue such Eurodollar
Loan or a portion thereof for a successive Interest Period, or (ii) to convert
any Alternate Base Rate Loan or a portion thereof to a Eurodollar Loan, subject
to the following:
(a) the Borrower shall give the Lender prior written,
facsimile or telephonic (promptly confirmed in writing) notice of each
continuation or conversion hereunder of at least three Business Days for
continuation as or conversion to a Eurodollar Loan; such notice shall be
irrevocable and to be effective, must be received by the Lender on the day
required not later than 2:00 p.m., New York City time;
- 28 -
(b) no Event of Default or Default shall have occurred and be
continuing at the time of any conversion to a Eurodollar Loan or continuation of
any such Eurodollar Loan into a subsequent Interest Period;
(c) no Alternate Base Rate Loan may be converted to a
Eurodollar Loan and no Eurodollar Loan may be continued as a Eurodollar Loan if,
after such conversion or continuance, and after giving effect to any concurrent
prepayment of Loans, an aggregate of more than six separate Eurodollar Loans
would be outstanding hereunder (for purposes of determining the number of such
Loans outstanding, Loans with different Interest Periods shall be counted as
different Loans even if made on the same date);
(d) the aggregate principal amount of Loans continued as or
converted to Eurodollar Loans as part of the same Borrowing shall be $500,000 or
such greater amount which is an integral multiple of $100,000;
(e) accrued interest on the Eurodollar Loans (or portion
thereof) being continued shall be paid by the Borrower at the time of
continuation;
(f) the Interest Period with respect to a new Eurodollar Loan
effected by a continuation or conversion shall commence on the date of such
continuation or conversion;
(g) if a Eurodollar Loan is converted to another type of Loan
prior to the last day of the Interest Period with respect thereto, the amounts
required by Section 2.9(b) shall be paid upon such conversion; and
(h) each request for a continuation as or conversion to a
Eurodollar Loan which fails to state an applicable Interest Period shall be
deemed to be a request for an Interest Period of one month.
In the event that the Borrower shall not give notice to continue or convert any
Eurodollar Loan as provided above, such Loan (unless repaid) shall automatically
be continued as a Eurodollar Loan having an Interest Period of one month at the
expiration of the then current Interest Period.
SECTION 2.9. Prepayment of Loans; Reimbursement of Lender. (a)
Subject to the terms of paragraph (b) of this Section 2.9, the Borrower shall
have the right at its option at any time and from time to time to prepay (i) any
Alternate Base Rate Loan, in whole or in part, upon at least one Business Day's
prior written, telephonic (promptly confirmed in writing) or facsimile notice to
the Lender, in the principal amount of $125,000 or such greater amount which is
an integral multiple of $100,000 or the remaining balance of such Loan if
prepaid in full and (ii) any Eurodollar Loan, in whole or in part, upon at least
three Business Days' prior written, telephonic (promptly confirmed in writing)
or facsimile notice, in the principal amount of $500,000 or such greater amount
which is an integral multiple of $100,000 if prepaid in part, or the remaining
balance of such Loan if prepaid in full. Each notice of prepayment shall specify
- 29 -
the prepayment date, each Loan to be prepaid and the principal amount thereof,
shall be irrevocable and shall commit the Borrower to prepay such Loan in the
amount and on the date stated therein. All prepayments under this Section 2.9(a)
shall be accompanied by accrued but unpaid interest on the principal amount
being prepaid to (but not including) the date of prepayment.
(b) The Borrower shall reimburse the Lender on demand for any
loss incurred or to be incurred by the Lender in the reemployment of the funds
released (i) by any prepayment (for any reason) of any Eurodollar Loan if such
Loan is repaid other than on the last day of the Interest Period for such Loan
or (ii) in the event that after the Borrower delivers a notice of borrowing
under Section 2.2(b) or Section 2.8(a) in respect of Eurodollar Loans, such Loan
is not made, converted to or continued as a Eurodollar Loan on the first day of
the Interest Period specified in such notice of borrowing for any reason other
than (A) a suspension or limitation under Section 2.7(b) of the right of the
Borrower to select a Eurodollar Loan, (B) a breach by the Lender of its
obligation to fund such borrowing when it is otherwise required to do so
hereunder or (C) a repayment resulting from a conversion required by the Lender
pursuant to Section 2.11(a). Such loss shall be the amount as reasonably
determined by the Lender as the excess, if any, of (I) the amount of interest
which would have accrued to the Lender on the amount so paid or not borrowed,
continued or converted at a rate of interest equal to the interest rate
applicable to such Loan pursuant to Section 2.4 hereof, for the period from the
date of such payment or failure to borrow, continue or convert to the last day
(x) in the case of a payment prior to the last day of the Interest Period for
such Loan, of the then current Interest Period for such Loan or (y) in the case
of such failure to borrow, continue or convert, of the Interest Period for such
Loan which would have commenced on the date of such failure to borrow, continue
or convert, over (II) the amount realized or to be realized by the Lender in
reemploying the funds not advanced or the funds received in prepayment or
realized from the Loan not so continued or converted during the period referred
to above. The Lender shall deliver to the Borrower from time to time one or more
certificates setting forth the amount of such loss (and in reasonable detail the
manner of computation thereof) as determined by the Lender, which certificates
shall be conclusive absent manifest error. The Borrower shall pay the Lender the
amounts shown on such certificate within ten days of the Borrower's receipt of
such certificate.
(c) In the event the Borrower fails to prepay any Loan on the
date specified in any prepayment notice delivered pursuant to Section 2.9(a),
the Borrower shall pay to the Lender any amounts required to compensate the
Lender for any actual loss incurred by the Lender as a result of such failure to
prepay, including, without limitation, any loss, cost or expenses incurred by
reason of the acquisition of deposits or other funds by the Lender to fulfill
deposit obligations incurred in anticipation of such prepayment. The Lender
shall deliver to the Borrower from time to time one or more certificates setting
forth the amount of such loss (and in reasonable detail the manner of
computation thereof) as determined by the Lender, which certificates shall be
conclusive absent manifest error. The Borrower shall pay the Lender the amounts
shown on such certificate within ten days of the Borrower's receipt of such
certificate.
- 30 -
(d) If at any time the sum of the Loans outstanding plus the
L/C Exposure exceeds the sum of (x) the Maximum Guaranty Amount, (y) the
Borrowing Base and (z) the amounts currently held in the Collection Account, as
set forth on the most recent Borrowing Base Certificate, the Borrower shall
immediately pay down the Loans outstanding or otherwise eliminate such excess.
(e) Simultaneously with each termination and/or mandatory or
optional reduction of the Commitment pursuant to Section 2.6, the Borrower shall
pay to the Lender an amount equal to the excess of the sum of aggregate
outstanding principal amount of the Loans plus the L/C Exposure, over the
reduced Commitment.
(f) Unless otherwise designated in writing by the Borrower,
all prepayments shall be applied to the applicable principal payment set forth
in this Section 2.9, first to that amount of such applicable principal payment
then maintained as Alternate Base Rate Loans by the Borrower, and then, to that
amount of such applicable principal payment maintained as Eurodollar Loans by
the Borrower in order of the scheduled expiry of Interest Periods with respect
thereto.
(g) All prepayments shall be accompanied by accrued but unpaid
interest on the principal amount being prepaid to but not including the date of
prepayment.
SECTION 2.10. CHANGE IN CIRCUMSTANCES. (a) In the event that
after the Closing Date any change in Applicable Law or in the official
interpretation or administration thereof (including, without limitation, any
request, guideline or policy not having the force of law) by any Governmental
Authority charged with the administration or interpretation thereof or, with
respect to clause (ii), (iii) or (iv) below any change in conditions, shall
occur which shall:
(i) subject the Lender to, or increase the net
tax, levy, impost, duty, charge, fee,
deduction or withholding with respect to any
Eurodollar Loan (other than withholding tax
imposed by the United States of America or
any political subdivision or taxing authority
thereof or any other tax, levy, impost, duty,
charge, fee, deduction or withholding (A)
that is measured with respect to the overall
net income of the Lender or of a Lending
Office of the Lender, and that is imposed by
the United States of America, or by the
jurisdiction in which the Lender or Lending
Office is incorporated, in which the Lending
Office is located, managed or controlled or
in which the Lender has its principal office
(or any political subdivision or taxing
authority thereof or therein), or (B) that is
imposed solely by reason of the Lender
failing to make a declaration of, or
otherwise to establish, non-residence, or to
make any other claim for exemption, or
otherwise to comply with any certification,
identification, information, documentation or
- 31 -
reporting requirements prescribed under the
laws of the relevant jurisdiction, in those
cases where the Lender may properly make
such declaration or claim or so establish
non-residence or otherwise comply); or
(ii) change the basis of taxation of any payment
to the Lender of principal or any interest on
any Eurodollar Loan or other fees and amounts
payable to the Lender hereunder, or any
combination of the foregoing; other than
withholding tax imposed by the United States
of America or any political subdivision or
taxing authority thereof or any other tax,
levy, impost, duty, charge, fee, deduction or
withholding that is measured with respect to
the overall net income of the Lender or of a
Lending Office of the Lender, and that is
imposed by the United States of America, or
by the jurisdiction in which the Lender or
Lending Office is incorporated, in which such
Lending Office is located, managed or
controlled or in which the Lender has its
principal office (or any political
subdivision or taxing authority thereof or
therein); or
(iii) impose, modify or deem applicable any
reserve, deposit or similar requirement
against any assets held by, deposits with or
for the account of or loans or commitments by
an office of the Lender with respect to any
Eurodollar Loan; or
(iv) impose upon the Lender or the London
Interbank Market any other condition with
respect to the Eurodollar Loans or this
Credit Agreement;
and the result of any of the foregoing shall be to increase the actual cost to
the Lender of making or maintaining any Eurodollar Loan hereunder or to reduce
the amount of any payment (whether of principal, interest or otherwise) received
or receivable by the Lender in connection with any Eurodollar Loan hereunder, or
to require the Lender to make any payment in connection with any Eurodollar Loan
hereunder, in each case by or in an amount which the Lender in its sole judgment
shall deem material, then and in each case the Borrower shall pay to the Lender,
as provided in paragraph (c) below, such amounts as shall be necessary to
compensate the Lender for such cost, reduction or payment.
(b) If at any time and from time to time after the Closing
Date the Lender shall have determined that the applicability of any law, rule,
regulation or guideline adopted after the Closing Date regarding capital
adequacy, or any change in any of the foregoing or in the interpretation or
administration of any of the foregoing by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by the Lender (or any Lending Office of the Lender) or
the Lender's holding company with any request or directive regarding capital
- 32 -
adequacy (whether or not having the force of law) of the authority, central bank
or comparable agency, would actually reduce the rate of return on the Lender's
capital or on the capital of the Lender's holding company, if any, as a
consequence of this Credit Agreement or the Loans made or Letters of Credit
issued by the Lender pursuant hereto to a level below that which the Lender or
the Lender's holding company could have achieved but for such applicability,
adoption, change or compliance (taking into consideration the Lender's policies
and the policies of the Lender's holding company with respect to capital
adequacy) by an amount deemed by the Lender to be material, then from time to
time the Borrower shall pay to the Lender such additional amount or amounts as
will compensate the Lender or the Lender's holding company for any such actual
reduction suffered with respect to Loans made by the Lender hereunder.
(c) The Lender shall deliver to the Borrower from time to
time, one or more certificates setting forth the amounts due to the Lender under
paragraphs (a) and (b) above within six months after incurring such additional
costs or suffering such reductions, the changes as a result of which such
amounts are due, the manner of computing such amounts and the manner of
computing the amounts allocable to Loans hereunder pursuant to paragraphs (a)
and (b) above. Each such certificate shall be conclusive in the absence of
manifest error. The Borrower shall pay to the Lender the amounts shown as due on
any such certificate within ten Business Days after its receipt of the same. No
failure on the part of the Lender to demand compensation under paragraph (a) or
(b) above on any one occasion shall constitute a waiver of its rights to demand
compensation on any other occasion. The protection of this Section 2.10(c) shall
be available to the Lender regardless of any possible contention of the
invalidity or inapplicability of any law, regulation or other condition which
shall give rise to any demand by the Lender for compensation thereunder.
(d) The Lender agrees that after it becomes aware of the
occurrence of an event or the existence of a condition that (i) would cause it
to incur any increased cost hereunder or render it unable to perform its
agreements hereunder for the reasons specifically set forth in Section 2.7(b),
this Section 2.10 or Section 2.14(g) or (ii) would require the Borrower to pay
an increased amount under Section 2.7(b), this Section 2.10 or Section 2.14(g),
it will use reasonable efforts to notify the Borrower of such event or condition
and, to the extent not inconsistent with the Lender's internal policies, will
use its reasonable efforts to make, fund or maintain the affected Loans of the
Lender, or, if applicable, to issue Letters of Credit as required under Section
2.14, through another Lending Office of the Lender if as a result thereof the
additional monies which would otherwise be required to be paid or the reduction
of amounts receivable by the Lender thereunder in respect of such Loans would be
materially reduced, or such inability to perform would cease to exist, or the
increased costs which would otherwise be required to be paid in respect of such
Loans pursuant to Section 2.7(b), this Section 2.10 or Section 2.14(f) would be
materially reduced or the taxes or other amounts otherwise payable under Section
2.7(b), this Section 2.10 or Section 2.14(f) would be materially reduced, and
if, as determined by the Lender, in its discretion, the making, funding or
maintaining of such Loans through such other Lending Office would not otherwise
materially adversely affect such Loans or the Lender.
- 33 -
SECTION 2.11. CHANGE IN LEGALITY. (a) Notwithstanding anything
to the contrary contained elsewhere in this Credit Agreement, if any change
after the Closing Date in Applicable Law, guideline or order, or in the
interpretation thereof by any Governmental Authority charged with the
administration thereof, shall make it unlawful for the Lender to make or
maintain any Eurodollar Loan or to give effect to its obligations as
contemplated hereby with respect to a Eurodollar Loan, then, by written notice
to the Borrower, the Lender may (i) declare that Eurodollar Loans will not
thereafter be made by the Lender hereunder and/or (ii) require that, subject to
Section 2.9(b), all outstanding Eurodollar Loans made by it be converted to
Alternate Base Rate Loans, whereupon all of such Eurodollar Loans shall
automatically be converted to Alternate Base Rate Loans, as of the effective
date of such notice as provided in paragraph (b) below. Any subsequent
Eurodollar Loan shall, instead, be an Alternate Base Rate Loan unless such
declaration is subsequently withdrawn.
(b) A notice to the Borrower by the Lender pursuant to
paragraph (a) above shall be effective for purposes of clause (ii) thereof, if
lawful, on the last day of the current Interest Period for each outstanding
Eurodollar Loan; and in all other cases, on the date of receipt of such notice
by the Borrower.
SECTION 2.12. MANNER OF PAYMENTS. All payments by the Borrower
hereunder and under the Note shall be made in Dollars in Federal or other
immediately available funds at the office of The Chase Manhattan Bank, Loan and
Agency Services Group, One Chase ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, for credit to the "NewStar Media Inc. Collection
Account," Account No. ▇▇▇-▇▇▇-▇▇▇, no later than 2:00 p.m., New York City time,
on the date on which such payment shall be due. Interest in respect of any Loan
hereunder shall accrue from and including the date of such Loan to but excluding
the date on which such Loan is paid or converted to a Loan of a different type.
SECTION 2.13. INTEREST ADJUSTMENTS. (a) If the provisions of
this Credit Agreement or Note would at any time require payment by the Borrower
to the Lender of any amount of interest in excess of the maximum amount then
permitted by the law applicable to any Loan, the interest payments to the Lender
shall be reduced to the extent necessary so that the Lender shall not receive
interest in excess of such maximum amount. If, as a result of the foregoing, the
Lender shall receive interest payments hereunder or under the Note in an amount
less than the amount otherwise provided hereunder, such deficit (hereinafter
called the "Interest Deficit") will, to the fullest extent permitted by
Applicable Law, cumulate and will be carried forward (without interest) until
the termination of this Credit Agreement. Interest otherwise payable to the
Lender hereunder and under the Note for any subsequent period shall be increased
by the maximum amount of the Interest Deficit that may be so added without
causing the Lender to receive interest in excess of the maximum amount then
permitted by the law applicable to the Loans.
- 34 -
(b) The amount of any Interest Deficit relating to a
particular Loan and the Note shall be treated as a prepayment penalty and shall,
to the fullest extent permitted by Applicable Law, be paid in full at the time
of any optional prepayment by the Borrower to the Lender of all the Loans at
that time outstanding pursuant to Section 2.9(a) hereof and upon termination or
reduction of the Commitment pursuant to Section 2.6 hereof. The amount of any
Interest Deficit relating to a particular Loan and the Note at the time of any
complete payment of the Loans at that time outstanding (other than an optional
prepayment thereof pursuant to Section 2.9(a) hereof) shall be canceled and not
paid.
SECTION 2.14. LETTERS OF CREDIT. (a) (i) Subject to the terms
and conditions hereof and of Applicable Law, the Lender agrees to issue Letters
of Credit payable in Dollars from time to time after the Closing Date and prior
to the Commitment Termination Date upon the request of the Borrower, PROVIDED,
HOWEVER, that (A) the Borrower shall not request that any Letter of Credit be
issued if, after giving effect thereto, the sum of the then current L/C
Exposure, plus the aggregate Loans then outstanding, would exceed the lesser of
(x) the sum of (I) the Maximum Guaranty Amount, (II) the then current amount of
the Borrowing Base and (III) the then current amount held in the Collection
Account or (y) the Commitment and (B) in no event shall the Lender issue any
Letter of Credit having an expiration date after the Commitment Termination Date
or pursuant to which drafts drawn thereunder would be payable after the
Commitment Termination Date.
(ii) Each Letter of Credit may, at the option of the
Lender, provide that the Lender may (but shall not be required to) pay all or
any part of the maximum amount which may at any time be available for drawing
thereunder to the beneficiary thereof upon the occurrence and continuation of an
Event of Default and the acceleration of the maturity of the Loans, provided
that, if payment is not then due to the beneficiary, the Lender may deposit the
funds in question in a segregated account with the Lender to secure payment to
the beneficiary and any funds so deposited shall be paid to the beneficiary of
the Letter of Credit if conditions to such payment are satisfied or returned to
the Lender (or, if all Obligations shall have been paid in full in cash, to the
Borrower) if no payment to the beneficiary has been made and the final date
available for drawings under the Letter of Credit has passed. Each payment or
deposit of funds by the Lender as provided in this paragraph shall be treated
for all purposes of this Credit Agreement as a drawing duly honored by the
Lender under the related Letter of Credit.
(b) Whenever the Borrower desires the issuance of a Letter of
Credit, it shall deliver to the Lender a written notice no later than 2:00 p.m.,
New York City time, at least five Business Days prior to the proposed date of
issuance. Such notice shall specify (i) the proposed date of issuance (which
shall be a Business Day), (ii) the face amount of the Letter of Credit, (iii)
the expiration date of the Letter of Credit and (iv) the name and address of the
beneficiary. Such notice shall be accompanied by a brief description of the
underlying transaction and upon request of the Lender, the Borrower shall
provide additional details regarding the underlying transaction. Concurrently
with the giving of written notice of a request for the issuance of a Letter of
Credit, the Borrower shall specify a precise description of the documents and
the verbatim text of any certificate to be presented by the beneficiary of such
- 35 -
Letter of Credit which, if presented by such beneficiary prior to the expiration
date of the Letter of Credit, would require the Lender to make payment under the
Letter of Credit; PROVIDED, HOWEVER, that the Lender, in its reasonable
discretion, may require customary changes in any such documents and
certificates.
(c) The payment of drafts under any Letter of Credit shall be
made in accordance with the terms of such Letter of Credit and the Uniform
Customs and Practice for documentary Credits of the International Chamber of
Commerce No. 500, as adopted or amended from time to time. The Lender shall be
entitled to honor any drafts and accept any documents presented to it by the
beneficiary of such Letter of Credit in accordance with the terms of such Letter
of Credit and believed by the Lender in good faith to be genuine. The Lender
shall not have any duty to inquire as to the accuracy or authenticity of any
draft or other drawing documents which may be presented to it, but shall be
responsible only to determine in accordance with customary commercial practices
that the documents which are required to be presented before payment or
acceptance of a draft under any Letter of Credit have been delivered and that
they comply on their face with the requirements of that Letter of Credit.
(d) Subject to provisions of Section 2.14(c), the Borrower is
absolutely, unconditionally and irrevocably obligated to reimburse all amounts
drawn under each Letter of Credit. If any draft is presented under a Letter of
Credit, payment of which is required to be made after the Commitment Termination
Date (it being understood that no Letter of Credit shall be issued which would
expire after the Commitment Termination Date), then the Borrower will, upon
demand by the Lender, pay to the Lender, in immediately available funds, the
full amount of such draft.
(e) (i) The Borrower agrees to pay to the Lender with respect
to Letters of Credit issued by it hereunder in connection with the issuance,
amendment, transfer or any other transaction related to each Letter of Credit
and each drawing made thereunder, documentary and processing charges in
accordance with the Lender's standard schedule for such charges in effect at the
time of such issuance, amendment, transfer or drawing, as the case may be.
(ii) The Borrower agrees to pay to the Lender a
commission calculated at a rate per annum equal to the Applicable Margin for
Eurodollar Loans (calculated in the same manner as interest) of the daily
average L/C Exposure. Such commission shall be payable in arrears on and through
the last Business Day of each fiscal quarter prior to the Commitment Termination
Date and on the Commitment Termination Date.
(f) If by reason of (i) any change in Applicable Law after the
Closing Date, or in the interpretation or administration thereof (including,
without limitation, any request, guideline or policy not having the force of
law) by any Governmental Authority charged with the administration or
interpretation thereof, or (ii) compliance by the Lender with any direction,
request or requirement (whether or not having the force of law) issued after the
Closing Date by any Governmental Authority or monetary authority (including any
change whether or not proposed or published prior to the Closing Date),
including, without limitation, any modifications to Regulation D occurring after
the Closing Date:
- 36 -
(A) the Lender shall be subject to an increase in any
tax, levy, impost, duty, charge, fee, deduction or withholding
with respect to any Letter of Credit (other than withholding
tax imposed by the United States of America or any political
subdivision or taxing authority thereof or any other tax,
levy, impost, duty, charge, fee, deduction or withholding (I)
that is measured with respect to the overall net income of the
Lender or of a Lending Office of the Lender, and that is
imposed by the United States of America, or by the
jurisdiction in which the Lender or Lending Office is
incorporated, or in which such Lending Office is located,
managed or controlled or in which the Lender has its principal
office (or any political subdivision or taxing authority
thereof or therein) or (II) that is imposed solely by reason
of the Lender failing to make a declaration of, or otherwise
to establish, non-residence or to make any other claim for
exemption, or otherwise to comply with any certification,
identification, information, documentation or reporting
requirements prescribed under the laws of the relevant
jurisdiction, in those cases where the Lender may properly
make such declaration or claim or so establish non-residence
or otherwise comply);
(B) the basis of taxation of any fee or amount
payable hereunder with respect to any Letter of Credit shall
be changed (except as described in clause (A) above);
(C) any reserve, deposit or similar requirement is or
shall be applicable, imposed or modified in respect of any
Letter of Credit issued by the Lender; or
(D) there shall be imposed on the Lender any other
condition regarding this Section 2.14 or any Letter of Credit;
and the result of the foregoing is to increase from the conditions that exist on
the Closing Date the actual cost to the Lender of issuing, making or maintaining
any Letter of Credit or to reduce the amount receivable in respect thereof by
the Lender, in each case by or in an amount which the Lender shall reasonably
deem material, then and in any such case the Lender may, at any time, notify the
Borrower, and the Borrower shall pay on demand such amounts as the Lender may
specify to be necessary to compensate the Lender for such additional cost or
reduced receipt. Section 2.10(b), (c), (d) and Section 2.11 shall in all
instances apply to the Lender with respect to Letters of Credit issued
hereunder. The determination by the Lender of any amount due pursuant to this
Section 2.14 as set forth in a certificate setting forth the calculation thereof
in reasonable detail shall, in the absence of manifest error, be final,
conclusive and binding on all of the parties hereto.
- 37 -
(g) If at any time when an Event of Default shall have
occurred and be continuing, any Letters of Credit shall remain outstanding, then
the Lender may, at its option, require the Borrower to deliver to the Lender
cash or Cash Equivalents in an amount equal to the full amount of the L/C
Exposure or to furnish other security acceptable to the Lender. Any amounts so
delivered pursuant to the preceding sentence shall be applied to reimburse the
Lender for the amount of any drawings honored under Letters of Credit; provided,
however, that if prior to the Commitment Termination Date, no Default or Event
of Default is then continuing, the Lender shall return all of such collateral
relating to such deposit to the Borrower upon request.
(h) If at any time that any Letter of Credit is outstanding,
the L/C Exposure, plus Loans outstanding, exceeds the sum of (i) the Maximum
Guaranty Amount, plus (ii) the Borrowing Base, plus (iii) the amount of cash and
Cash Equivalents currently held in the Collection Account, then the Lender may,
at its option, require (x) a prepayment of the Loans in accordance with Section
2.9(d) or (y) the Borrower to deliver cash or Cash Equivalents to the Lender in
an amount sufficient to eliminate such excess or to furnish other security for
such excess acceptable to the Lender. Any amounts so delivered pursuant to the
preceding sentence shall be applied to reimburse the Lender for the amount of
any drawings honored under Letters of Credit; PROVIDED, HOWEVER, that if
subsequent to any such deposit such excess is reduced to an amount less than the
amount of such deposited amounts and no Default or Event of Default is then
continuing, the Borrower shall be entitled to receive such excess collateral if
requested by it.
(i) Notwithstanding the termination of the Commitment and the
payment of the Loans, the obligations of the Borrower under this Section 2.14
shall remain in full force and effect until the Lender shall have been
irrevocably released from its obligations with regard to any and all Letters of
Credit.
(j) The parties hereto agree that the certain Irrevocable
Letter of Credit, L/C No. 5-364581, issued by the Lender on May 6, 1998 at the
request of the Borrower for the benefit of Amwest Surety Insurance Company in
the face amount of $286,649, shall be deemed to have been issued under this
Credit Agreement, and such Letter of Credit shall be subject to and governed by
the terms and conditions set forth herein and that certain letter agreement
dated as of July 1, 1998 among the Lender, the Credit Parties, the Individual
Guarantors and MEI. For the avoidance of doubt, until such time that such Letter
of Credit shall have expired the amount of such Letter of Credit shall be
included in the calculation of L/C Exposure hereunder.
3. REPRESENTATIONS AND WARRANTIES OF CREDIT PARTIES
In order to induce the Lender to enter into this Credit
Agreement and to make the Loans and issue Letters of Credit provided for herein,
the Credit Parties, jointly and severally, make the following representations
and warranties to, and agreements with, the Lender, all of which shall survive
the execution and delivery of this Credit Agreement, the issuance of the Note,
the making of the Loans and the issuance of the Letters of Credit:
- 38 -
SECTION 3.1. CORPORATE EXISTENCE AND POWER. Each of the Credit
Parties is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation, is in good standing as a
foreign corporation in all jurisdictions where the failure to be in good
standing as a foreign corporation would render Eligible Receivables which are
included in the Borrowing Base unenforceable or would give rise to a material
liability of any Credit Party. Each of the Credit Parties has the corporate
power and authority to own its respective properties and carry on its respective
businesses as now being conducted, to execute, deliver and perform, as
applicable, its obligations under this Credit Agreement, the Note and the other
Fundamental Documents and other documents contemplated hereby to which it is or
will be a party as provided herein and to grant to the Lender a security
interest in the Collateral as contemplated by Article 8 hereof and in the
Pledged Securities as contemplated by Article 10 hereof and in the case of each
Corporate Guarantor to guaranty the Obligations as contemplated by Article 9
hereof.
SECTION 3.2. Corporate Authority and No Violation. (a) The
execution, delivery and performance of this Credit Agreement and the other
Fundamental Documents to which it is a party, by each Credit Party and, in the
case of the Borrower, the Borrowings hereunder and the execution and delivery of
the Note and, in the case of each Credit Party, the grant to the Lender of the
security interest in the Collateral and the Pledged Securities as contemplated
herein and by the other Fundamental Documents and, in the case of each Corporate
Guarantor, the guaranty of the Obligations as contemplated in Article 9 hereof
(i) have been duly authorized by all necessary corporate action on the part of
each such Credit Party, (ii) will not constitute a violation by such Credit
Party in any material respect of any provision of Applicable Law or any order of
any court or other agency of the United States or any state thereof applicable
to such Credit Party or any of its properties or assets, (iii) will not violate
any provision of the Certificate or Articles of Incorporation or By-Laws of such
Credit Party, or any material provision of any Material Agreement or any other
material indenture, agreement, bond, note or other similar instrument to which
such Credit Party is a party or by which such Credit Party or its properties or
assets are bound, (iv) will not be in conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under or create
any right to terminate any Material Agreement, or any other material indenture,
agreement, bond, note or other instrument, and (v) will not result in the
creation or imposition of any Lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of any of the Credit Parties
other than pursuant to this Credit Agreement or the other Fundamental Documents
to which it is a party.
(b) There are no restrictions on the transfer of any of the
Pledged Securities other than as a result of this Credit Agreement or applicable
securities laws and the regulations promulgated thereunder.
SECTION 3.3. Governmental Approval. All authorizations,
approvals, registrations or filings with any governmental or public regulatory
body or authority of the United States or any state thereof (other than UCC
financing statements and the Copyright Security Agreement which will be
delivered to the Lender prior to the making of the initial Loan hereunder, in
- 39 -
form suitable for recording or filing with the appropriate filing office)
required for the execution, delivery and performance by any Credit Party of this
Credit Agreement and the other Fundamental Documents to which it is a party, and
the execution and delivery by the Borrower of the Note, have been duly obtained
or made, or duly applied for and are in full force and effect.
SECTION 3.4. BINDING AGREEMENTS. This Credit Agreement and the
other Fundamental Documents when executed will constitute the legal, valid and
binding obligations of the respective Credit Parties, enforceable in accordance
with their respective terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights and general principles of equity.
SECTION 3.5. FINANCIAL STATEMENTS. The audited consolidated
balance sheets of the Borrower and its Consolidated Subsidiaries at December 31,
1998, together with the related statements of income, cash flows and
Shareholders' Equity and the related notes and supplemental information for the
reviewed statements, in the forms which have previously been provided to the
Lender, have been prepared in accordance with GAAP, except as otherwise
indicated in the notes to such financial statements. All of such financial
statements fairly present the consolidated financial condition or the results of
operations of the Borrower and its Consolidated Subsidiaries at the dates or for
the periods indicated, subject (in the case of unaudited statements) to changes
resulting from normal year-end and audit adjustments, and, in the case of
balance sheets (including the notes thereto), reflect all known liabilities,
contingent or otherwise, as of such dates required in accordance with GAAP to be
shown or reserved against, or disclosed in the notes to the financial
statements.
SECTION 3.6. NO MATERIAL ADVERSE CHANGE (a) There has been no
material adverse change with respect to the business, operations, performance,
assets, properties, condition or prospects (financial or otherwise) of the
Credit Parties taken as a whole from December 31, 1998, except for changes due
to seasonality that are consistent with the corresponding periods in prior
years.
(b) No Credit Party has entered or is entering into the
arrangements contemplated hereby and by the other Fundamental Documents, or
intends to make any transfer or incur any obligations hereunder or thereunder,
with actual intent to hinder, delay or defraud either present or future
creditors. On and as of the Closing Date, on a pro forma basis after giving
effect to all Indebtedness (including the Loans) (i) each Credit Party expects
the cash available to such Credit Party, after taking into account all other
anticipated uses of the cash of such Credit Party (including the payments on or
in respect of debt referred to in clause (iii) of this Section 3.6(b)), will be
sufficient to satisfy all final judgments for money damages which have been
docketed against such Credit Party or which may be rendered against such Credit
Party in any action in which such Credit Party is a defendant (taking into
account the reasonably anticipated maximum amount of any such judgment and the
earliest time at which such judgment might be entered); (ii) the sum of the
present fair saleable value of the assets of each Credit Party will exceed the
- 40 -
probable liability of such Credit Party on its debts (including its Guaranties);
(iii) no Credit Party will have incurred or intends to, or believes that it
will, incur debts beyond its ability to pay such debts as such debts mature
(taking into account the timing and amounts of cash to be received by such
Credit Party from any source, and of amounts to be payable on or in respect of
debts of such Credit Party and the amounts referred to in clause (ii)); and (iv)
each Credit Party believes it will have sufficient capital with which to conduct
its present and proposed business and the property of such Credit Party does not
constitute unreasonably small capital with which to conduct its present or
proposed business. For purposes of this Section 3.6, "debt" means any liability
or a claim, and "claim" means (x) any right to payment whether or not such right
is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured, or (y)
any right to an equitable remedy for breach of performance if such breach gives
rise to a payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured.
SECTION 3.7. OWNERSHIP OF PLEDGED SECURITIES, ETC. (a) Annexed
hereto as Schedule 3.7(a) is a correct and complete list as of the date hereof,
of each corporate Subsidiary of the Borrower showing, as to each such
Subsidiary, its name, the jurisdiction of incorporation, its authorized
capitalization, the number of shares of its capital stock outstanding and the
ownership of the capital stock of each such Credit Party; and
(b) Except as noted on Schedule 3.7(b), no Credit Party owns
any Voting Stock or beneficial interest, directly or indirectly, in any Person
other than in the Subsidiaries of the Borrower.
(c) All of the outstanding shares of capital stock of each
Subsidiary of the Borrower have been validly issued and are fully paid and
non-assessable and, with respect to shares which are owned by a Credit Party
(set forth on Schedule 3.7(a)), are free and clear of all liens, charges or
encumbrances except as contemplated herein.
SECTION 3.8. COPYRIGHTS AND OTHER RIGHTS. On the date hereof,
the items of Product listed on Schedule 3.8 comprise all of the Product in which
any Credit Party has any right, title or interest (either directly or through a
joint venture or partnership). The copyright registration number and the
character of the interests held by the Credit Party for such items of Product
for which filing in the United States Copyright Office is applicable are set
forth across from the description of such item of Product and as to each item
listed on Schedule 3.8 hereto and, to the extent applicable, the Credit Party
holding such interests has duly recorded its interests in the United States
Copyright Office and has delivered copies of all such recordation to the Lender.
Schedule 3.8 shall identify the location of the best available Physical
Materials related to each item of Product owned by the Credit Parties. To the
best of each Credit Party's knowledge, all items of Product and all component
parts thereof do not and will not violate or infringe upon any copyright, right
of privacy, trademark, patent, trade name, performing right or any literary,
dramatic, musical, artistic, personal, private, contract or copyright right or
any other similar right of any Person or contain any libelous or slanderous
- 41 -
material other than to an extent which is either not material or for which
coverage is provided in existing insurance policies. Except as set forth on
Schedule 3.12, there is no claim, suit, action or, to the best of each Credit
Party's knowledge, proceeding pending or threatened against any Credit Party
that involves a claim of infringement of any copyright with respect to any item
of Product listed on Schedule 3.8 and no Credit Party has knowledge of any
existing infringement by any other Person of any copyright held by any Credit
Party with respect to any item of Product listed on Schedule 3.8.
SECTION 3.9. FICTITIOUS NAMES. Except as disclosed on Schedule
3.9, none of the Credit Parties are doing business or intend to do business
other than under its full corporate name, including, without limitation, under
any trade name or other doing business name.
SECTION 3.10. TITLE TO PROPERTIES. As of the Closing Date, the
Credit Parties have good title to each of the properties and assets reflected on
the latest balance sheets referred to in Section 3.5 (other than such properties
or assets disposed of in the ordinary course of business since the date of such
balance sheets) and all such properties and assets are free and clear of Liens,
except Permitted Encumbrances.
SECTION 3.11. PLACES OF BUSINESS. The chief executive office
of each Credit Party is, on the Closing Date, as set forth on Schedule 3.11
hereto, which offices in the United States are the places where each Credit
Party is "located" for the purpose of the UCC and the Uniform Commercial Code in
effect in any state in which any Credit Party is so located. All of the places
where each Credit Party keeps the records concerning the Collateral on the date
hereof or regularly keeps any goods included in the Collateral on the date
hereof are also listed on Schedule 3.11 hereto.
SECTION 3.12. LITIGATION. Except as set forth on Schedule 3.12
hereto, there are no actions, suits or other proceedings at law or in equity by
or before any arbitrator or arbitration panel, or any Governmental Authority
(including, but not limited to, matters relating to environmental liability) or,
to the knowledge of any Credit Party, any investigation by any Governmental
Authority of the affairs of, or threatened action, suit or other proceedings
against or affecting, any Credit Party or of any of their respective properties
or rights which either (A) would have a significant likelihood of materially and
adversely affecting (i) the ability of any Credit Party to perform its
obligations under the Fundamental Documents to which it is a party, (ii) the
ability of any Credit Party to carry on its business, (iii) the security
interests granted to the Lender under the Fundamental Documents, (iv) the
financial condition or business of the Credit Parties taken as a whole or (v)
the Collateral, or (B) involve this Credit Agreement or any of the transactions
contemplated hereby. No Credit Party is in default with respect to any order,
writ, injunction, decree, rule or regulation of any Governmental Authority
binding upon such Person, which default would have a material adverse effect
upon the financial condition or the business of the Credit Parties taken as a
whole.
- 43 -
SECTION 3.13. FEDERAL RESERVE REGULATIONS. No Credit Party is
engaged principally or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any Margin Stock. No
part of the proceeds of the Loans will be used, directly or indirectly, whether
immediately, incidentally or ultimately (i) to purchase or carry any Margin
Stock or to extend credit to others for the purpose of purchasing or carrying
any Margin Stock, or (ii) for any other purpose, in each case, violative of or
inconsistent with any of the provisions of any regulation of the Board,
including, without limitation, Regulations T, U and X thereto.
SECTION 3.14. INVESTMENT COMPANY ACT. No Credit Party is, or
will during the term of this Credit Agreement be, (i) an "investment company",
within the meaning of the Investment Company Act of 1940, as amended, or (ii)
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act or, to the best of each Credit Party's knowledge, any foreign,
federal or local statute or any other Applicable Law of the United States of
America or, to the best of each Credit Party's knowledge, any other
jurisdiction, in each case limiting its ability to incur indebtedness for money
borrowed as contemplated hereby or by any other Fundamental Document.
SECTION 3.15. TAXES. Each Credit Party has filed or caused to
be filed all federal, state, local and foreign tax returns which are required to
be filed with any Governmental Authority after giving effect to applicable
extensions, and has paid or has caused to be paid all taxes as shown on said
returns or on any assessment received by them in writing, to the extent that
such taxes have become due, except as permitted by Section 5.14 hereof. No
Credit Party knows of any material additional assessments or any basis therefor.
The Credit Parties reasonably believe that the charges, accrual and reserves on
its books in respect of taxes or other governmental charges are adequate.
SECTION 3.16. COMPLIANCE WITH ERISA. Each Credit Party is in
compliance in all material respects with the provisions of ERISA and the Code
applicable to Plans, and the regulations and published interpretations
thereunder, if any, which are applicable to it. As of the date hereof, no Credit
Party has, with respect to any Plan established or maintained by it, engaged in
a prohibited transaction which would subject it to a material tax or penalty on
prohibited transactions imposed by ERISA or Section 4975 of the Code. No
material liability to the PBGC has been or is expected to be incurred with
respect to the Plans (other than for premiums not yet due) and there has been no
Reportable Event and no other event or condition that presents a material risk
of termination of a Plan by the PBGC. No Credit Party has engaged in a
transaction which would result in the incurrence by such Credit Party of any
liability under Section 4069 of ERISA. No Credit Party has taken any action and
no event has occurred with respect to any Multiemployer Plan which would subject
any Credit Party to material liability under either Section 4201 or 4204 of
ERISA.
- 43 -
SECTION 3.17. AGREEMENTS. (a) No Credit Party is in default in
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any Material Agreement or any other material
indenture, agreement, bond, note or other instrument to which it is a party
which would reasonably be expected to result in any material adverse change in
the business, properties, assets, operations or condition (financial or
otherwise) of the Credit Parties taken as a whole.
(b) Schedule 3.17 is a true and complete listing as of the
date on which this Credit Agreement is executed by the Borrower of (i) all
credit agreements, indentures, and other agreements related to any Indebtedness
for borrowed money of the Credit Parties, (ii) all material joint venture
agreements to which the Credit Parties are a party (iii) all material
Distribution Agreements and (iv) all other contractual arrangements which are
material to any Credit Party, including but not limited to, guarantees and
employment agreements. The Credit Parties have delivered or made available to
the Lender a true and complete copy of each agreement described on Schedule
3.17, including all exhibits and schedules. For purposes of this Section 3.17, a
Distribution Agreement or other contract or agreement shall be deemed "material"
if the Credit Parties reasonably expect that any Credit Party would, pursuant to
the terms thereof, (A) recognize future revenues in excess of $500,000, (B)
incur liabilities or obligations in excess of $500,000 or (C) suffer damages or
losses in excess of $250,000 by reason of the breach or termination thereof.
SECTION 3.18. SECURITY INTEREST; OTHER SECURITY. This Credit
Agreement and the other Fundamental Documents, when executed and delivered and,
upon the making of the initial Loan hereunder and upon (i) the filing of the
appropriate UCC-1 financing statements, with the Secretary of State of the
States of California Florida and New York, and with the County Clerk of Kings
County, New York, (ii) the filing of the Copyright Security Agreement with the
U.S. Copyright Office and (iii) the delivery of the Pledged Securities, together
with appropriate stock powers, to the Lender, will create and grant to the
Lender a valid and first priority perfected security interests in the Collateral
and the Pledged Securities in existence on the Closing Date as to which security
interests may be perfected by such filings or delivery, subject only to
Permitted Encumbrances.
SECTION 3.19. DISCLOSURE. Neither this Credit Agreement nor
any other Fundamental Document nor any agreement, document, certificate or
statement furnished to the Lender by any Credit Party in connection with the
transactions contemplated hereby, at the time it was furnished or delivered
contained any untrue statement of a material fact regarding the Credit Parties
or, when taken together with such other agreements, documents, certificates and
statements omitted to state a material fact necessary under the circumstances
under which it was made in order to make the statements contained herein or
therein not misleading. There is no fact known to any Credit Party not
constituting general industry conditions or not disclosed in such agreements,
documents, certificates and statements which materially and adversely affects,
or could reasonably be expected in the future to materially and adversely
affect, the business, assets or condition, financial or otherwise of the Credit
Parties taken as a whole.
- 45 -
SECTION 3.20. DISTRIBUTION RIGHTS. Each Credit Party has
sufficient right, title and interest in each item of Product to enable it (i) to
enter into and perform all of the material Distribution Agreements to which it
is a party and other agreements generating Eligible Receivables and accounts
receivable reflected on the most recent balance sheet and the most recent
Borrowing Base Certificate delivered to the Lender pursuant hereto, and (ii) to
charge, earn, realize and retain all fees and profits to which such Credit Party
is entitled thereunder, and is not in breach of any of its obligations under
such agreements, nor does any Credit Party have any knowledge of any breach or
anticipated breach by any other parties thereto, which breach in either case
either individually or when aggregated with all other such breaches would have a
material adverse effect on the Credit Parties taken as a whole.
SECTION 3.21. ENVIRONMENTAL LIABILITIES. (a) Except as set
forth on Schedule 3.21 hereto, no Credit Party has used, stored, treated,
transported, manufactured, refined, handled, produced or disposed of any
Hazardous Materials on, under, at or from any of its properties or assets owned
or leased by a Credit Party, in any manner which at the time of the action in
question violated any Environmental Law governing the use, storage, treatment,
transportation, manufacture, refinement, handling, production or disposal of
Hazardous Materials and which violation would have a material adverse effect on
the business or financial condition of the Credit Parties taken as a whole and
to the best of the Credit Parties' knowledge, no prior owner of such property or
asset or any tenant, subtenant, prior tenant or prior subtenant thereof has used
Hazardous Materials on or affecting such property or asset, or otherwise, in any
manner which at the time of the action in question violated any Environmental
Law governing the use, storage, treatment, transportation, manufacture,
refinement, handling, production or disposal of Hazardous Materials.
(b) To the best of each Credit Party's knowledge (i) no Credit
Party has any obligations or liabilities, known or unknown, matured or not
matured, absolute or contingent, assessed or unassessed, which would reasonably
be expected to have a materially adverse effect on the business or condition
(financial or otherwise) of the Credit Parties taken as a whole and (ii) no
claims have been made against any of the Credit Parties during the past five
years and no presently outstanding citations or notices have been issued against
any of the Credit Parties, which could reasonably be expected to have a
materially adverse effect on the business or condition (financial or otherwise)
of the Credit Parties taken as a whole which in either case have been or are
imposed by reason of or based upon any provision of any Environmental Law,
including, without limitation, any such obligations or liabilities relating to
or arising out of or attributable, in whole or in part, to the manufacture,
processing, distribution, use, treatment, storage, disposal, transportation or
handling of any Hazardous Materials by any Credit Party, or any of its employees
or predecessors in interest in connection with or in any way arising from or
relating to any of the Credit Parties or any of their respective owned or leased
properties, or relating to or arising from or attributable, in whole or in part,
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transportation or handling of any such substance, by any other Person at or on
- 45 -
or under any of the real properties owned or used by any of the Credit Parties
or any other location where such could have a materially adverse effect on the
business or condition (financial or otherwise) of the Credit Parties taken as a
whole.
SECTION 3.22. PLEDGED SECURITIES. All of the Pledged
Securities are duly authorized, validly issued, fully paid and non-assessable,
and are owned and held by the Pledgors, free and clear of any liens,
encumbrances, or security interests whatsoever other than those created pursuant
to this Credit Agreement or Permitted Encumbrances and there are no restrictions
on the transfer of the Pledged Securities other than as a result of this Credit
Agreement or applicable securities laws. Except as set forth on Schedule 3.22,
there are no outstanding rights, warrants, options, or agreements to purchase or
otherwise acquire any shares of the stock or securities or obligations of any
kind convertible into any shares of capital stock of the issuers of the Pledged
Securities. The Pledged Securities are owned by the Persons specified on
Schedule 3.7(a).
SECTION 3.23. COMPLIANCE WITH LAWS. No Credit Party is in
violation of any Applicable Law except for such violations in the aggregate
which would not have a material adverse effect on the business condition
(financial or otherwise) of the Credit Parties taken as a whole. The Borrowings
hereunder, the intended use of the proceeds of the Loans as described in the
preamble hereto and as contemplated by Section 5.19 and any other transactions
contemplated hereby will not violate any Applicable Law.
SECTION 3.24. PROJECTED FINANCIAL INFORMATION. The Borrower
has delivered to the Lender certain projections relating to the Borrower and its
Consolidated Subsidiaries consisting of statements of income, cash flows,
balance sheets and an initial projected borrowing base. Such projected
statements cover a period commencing on the Closing Date and ending at fiscal
year end 2002 and prepared on a basis consistent with Borrower's past practices.
All of the foregoing shall have been prepared in good faith and shall represent
the good faith opinion of the senior management of the Borrower of the likely
course of its business as of the date of delivery of such projections to the
Lender, it being recognized by the Lender that such projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by any such other projections may differ from the projected
results.
4. CONDITIONS OF LENDING
SECTION 4.1. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS
AMENDMENT AND RESTATEMENT. The effectiveness of this amendment and restatement
of the Existing Credit Agreement is subject to the following conditions
precedent:
(a) CORPORATE DOCUMENTS. On or prior to the Closing Date, the
Lender shall have received:
(i) a copy of the articles or certificate of
incorporation of each Credit Party, certified
as of a recent date by the Secretary of State
of such Credit Party's jurisdiction of
incorporation or organization, as the case
may be;
- 46 -
(ii) a certificate of such Secretary of State and
of the franchise tax entity of such
jurisdiction of incorporation, if applicable,
dated as of a recent date as to the good
standing of and payment of taxes by each
Credit Party which lists the charter
documents on file in the office of such
Secretary of State;
(iii) a certificate dated as of a recent date as to
the good standing of each Credit Party issued
by the Secretary of State of each
jurisdiction in which each Credit Party is
qualified as a foreign corporation; and
(iv) a certificate of the Secretary of each Credit
Party dated the date of the initial Loan and
certifying (A) that attached thereto is a
true and complete copy of the By-Laws of such
party as in effect on the date of such
certification, (B) that attached thereto is a
true and complete copy of resolutions adopted
by the Board of Directors of such party
authorizing (to the extent applicable) the
Borrowings hereunder, the execution, delivery
and performance in accordance with its
respective terms of this Credit Agreement,
the Note (if any) to be executed by it, and
any other documents required or contemplated
hereunder or thereunder and that such
resolutions have not been amended, rescinded
or supplemented and are currently in effect,
(C) that the certificate of incorporation of
such party has not been amended since the
date of the last amendment thereto indicated
on the certificate of the Secretary of State
furnished pursuant to clause (i) above except
to the extent specified in such Secretary's
certificate and (D) as to the incumbency and
specimen signature of each officer of such
party executing (as applicable) this Credit
Agreement, the Note or any other document
delivered by it in connection herewith or
therewith (such certificate to contain a
certification by another officer of such
party as to the incumbency and signature of
the officer signing the certificate referred
to in this clause (iv)); and
(v) such additional supporting documents as the
Lender or its counsel may reasonably request.
(b) CREDIT AGREEMENT; NOTE. On or before the Closing Date, the
Lender shall have received the Credit Agreement executed by the Credit Parties
and the Note executed by the Borrower.
- 47 -
(c) OPINION OF COUNSEL. The Lender shall have received the
written opinions of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇, special counsel to the Credit
Parties, and ▇▇▇▇▇▇ ▇▇▇▇▇▇, general counsel of the Borrower, each dated November
10, 1997 and addressed to the Lender substantially in the form attached hereto
as Exhibits B-1 and B-2 respectively and in form and substance satisfactory to
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP.
(d) NO MATERIAL ADVERSE CHANGE. No material adverse change
shall have occurred with respect to the business, operations, performance,
assets, properties, condition (financial or otherwise) or prospects of the
Credit Parties taken as a whole from December 31, 1998 except as disclosed in
any public filing after the date thereof.
(e) INSURANCE. The Borrower shall have furnished the Lender
with (i) a summary of all existing insurance coverage, (ii) evidence acceptable
to the Lender that the insurance policies required by Section 5.5 have been
obtained and are in full force and effect and (iii) Certificates of Insurance
with respect to all existing insurance coverage which certificates shall name
The Chase Manhattan Bank, as the Certificate holder and shall evidence the
Borrower's compliance with Section 5.5(f) with respect to all insurance coverage
existing as of the Closing Date.
(f) BORROWING BASE CERTIFICATE. The Lender shall have received
a Borrowing Base Certificate substantially in the form of Exhibit C hereto,
signed by an Authorized Officer of the Borrower.
(g) SECURITY AND OTHER DOCUMENTATION. On or prior to the
Closing Date, the Lender shall have received fully executed copies of (i) a
Pledgeholder Agreement for each item of Product for which a Credit Party has
control over any physical elements thereof as listed on Schedule 3.8 hereto;
(ii) a Copyright Security Agreement listing each item of Product in which any
Credit Party has a copyrightable interest (as listed on Schedule 3.8 hereto)
executed by such Credit Parties; (iii) a Laboratory Access Letter addressed to
each Laboratory where a Credit Party has access rights to any physical elements
of Product; (iv) appropriate UCC-1 financing statements relating to the
Collateral; and (v) the Pledged Securities with appropriate undated stock powers
executed in blank.
(h) SECURITY INTERESTS IN COPYRIGHTS AND OTHER COLLATERAL. On
or prior to the Closing Date, the Lender shall have received evidence
satisfactory to it that each Credit Party has sufficient right, title and
interest in and to the Collateral and other assets which it purports to own
(including appropriate licenses under copyright), as set forth in its financial
statements and in the other documents presented to the Lender to enable each
such Credit Party to perform the Distribution Agreements to which each such
Credit Party is a party and as to each Credit Party to grant to the Lender the
security interests contemplated by the Fundamental Documents, and that all
financing statements, copyright filings and other filings under Applicable Law
necessary to provide the Lender with a first priority perfected security
interest in the Pledged Securities and Collateral (subject, as to the
Collateral, to Permitted Encumbrances) have been filed or delivered to the
Lender in satisfactory form for filing.
- 48 -
(i) PAYMENT OF FEES. All fees and expenses then due and
payable by any Credit Party in connection with the transactions contemplated
hereby (including without limitation legal fees and expenses) shall have been
paid.
(j) CERTIFICATE FROM THE BORROWER. The Lender shall have
received a certificate, signed by an Authorized Officer on behalf of Borrower,
confirming that the Borrower has determined that the projected availability of
the Loans as determined by the Borrowing Base, together with funds from
internally generated sources and other available sources that are acceptable to
the Lender, is sufficient to finance the Borrower in a manner compatible with
the forecasted financial statements previously delivered to the Lender.
(k) LITIGATION. Except as set forth on Schedule 3.12, no
litigation, inquiry, injunction or restraining order shall be pending, entered
or threatened which in the Lender's good faith judgment could reasonably be
expected to materially and adversely affect (i) the assets, operations,
business, condition or prospects (financial or otherwise) of the Borrower and
its Subsidiaries taken as a whole, (ii) the ability of the Borrower and its
Subsidiaries to perform their respective Obligations hereunder or (iii) the
rights and remedies of the Lender.
(l) UCC SEARCHES. The Lender shall have received UCC searches
satisfactory to it indicating that no other filings (other than in connection
with Permitted Encumbrances) with regard to the Collateral are of record in any
jurisdiction in which it shall be necessary or desirable for the Lender to make
a UCC filing in order to provide the Lender with a perfected security interest
in the Collateral.
(m) FINANCIAL STATEMENTS. The Lender shall have received and
be satisfied with the true and complete copies of all of the financial
statements referred to in Section 3.5.
(n) ERISA. The Lender shall have received copies of all Plans
of the Credit Parties that are in existence on the Closing Date, and
descriptions of those that are committed to on the Closing Date.
(o) DELIVERY OF AGREEMENTS. The Lender shall have received and
be satisfied with the terms and provisions of (i) the Borrower's standard form
of Distribution Agreement and all significant existing Distribution Agreements
listed on Schedule 3.17 which are not on such standard form, (ii) all joint
venture or partnership agreements to which any Credit Party is a party and (iii)
all other agreements listed on Schedule 3.17 to the extent requested by the
Lender.
(p) CONTRIBUTION AGREEMENT. The Lender shall have received a
fully executed Contribution Agreement duly executed by all parties thereto.
- 49 -
(q) COMPLIANCE WITH LAWS. The Lender shall be satisfied that
the transactions contemplated hereby will not violate any provision of
Applicable Law.
(r) REQUIRED CONSENTS AND APPROVALS. The Lender shall be
satisfied that all required consents and approvals have been obtained with
respect to the transactions contemplated hereby from all Governmental
Authorities with jurisdiction over the business and activities of any Credit
Party as of the date hereof, and from any other entity, foreign or domestic,
whose consent or approval the Lender in its reasonable discretion deems
necessary to effect the transactions contemplated hereby.
(s) FEDERAL RESERVE REGULATIONS. The Lender shall be satisfied
that the provisions of Regulations T, U and X of the Board will not be violated
by the transactions contemplated hereby.
(t) PRO-FORMA COMPLIANCE. The Lender shall have received a
pro-forma compliance report dated the Closing Date or on the date on which the
most recent data was available confirming that the Borrower and its Subsidiaries
are in pro-forma compliance with all covenants set forth in Article 5 and
Article 6 hereof and in the other Fundamental Documents.
(u) SUBORDINATION AGREEMENTS. The Lender shall have received
from each Affiliate who has made advances to a Credit Party which will not be
required to be repaid on or before the Closing Date, a subordination agreement
in form and substance acceptable to the Lender, pursuant to which the
obligations of such Credit Party to such Affiliate is subordinated to the
repayment in full of the Obligations.
(v) GUARANTY AGREEMENTS. The Lender shall have received fully
executed Amended and Restated Guaranty Agreements from each of the Individual
Guarantors, duly executed by all parties thereto.
(w) NOTICES OF ASSIGNMENT AND IRREVOCABLE INSTRUCTIONS. The
Lender shall have received, with respect to each material Eligible Receivable
included in the Borrowing Base Certificate dated May 19, 1999, copies of the
Notice of Assignment and Irrevocable Instructions executed by the appropriate
Credit Party and evidence that each such Notice of Assignment and Irrevocable
Instructions has been sent to the applicable obligor for execution thereof.
(x) EQUITY INVESTMENT. The Borrower shall have received an
amount not less than $4,100,000 of additional equity investments in the
Borrower, on terms and conditions satisfactory to the Lender.
(y) LIBRARY VALUATION. The Lender shall have received a
valuation of the Eligible Library Amount by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
- 50 -
(z) APPROVAL OF COUNSEL TO THE LENDER. All legal matters
incident to this Credit Agreement and the transactions contemplated hereby shall
be reasonably satisfactory to ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP, counsel to the
Lender.
(aa) OTHER DOCUMENTS. The Lender shall have received such
other documentation as the Lender may reasonably request.
SECTION 4.2. CONDITIONS PRECEDENT TO EACH LOAN AND LETTER OF
CREDIT. The obligations of the Lender to issue each Letter of Credit and make
each Loan are subject to the following conditions precedent:
(a) NOTICE. The Lender shall have received a notice with
respect to such Borrowing or with respect to such Letter of Credit as required
by Article 2 hereof.
(b) BORROWING CERTIFICATE. The Lender shall have received a
Borrowing Certificate with respect to such Borrowing, duly executed by an
Authorized Officer of the Borrower.
(c) REPRESENTATIONS AND WARRANTIES. The representations and
warranties set forth in Article 3 hereof and in the other Fundamental Documents
shall be true and correct in all material respects on and as of the date of each
Borrowing and issuance of a Letter of Credit hereunder (except to the extent
that such representations and warranties expressly relate to an earlier date)
with the same effect as if made on and as of such date.
(d) NO EVENT OF DEFAULT. On the date of each Borrowing or the
issuance of each Letter of Credit hereunder, each Credit Party shall be in
compliance with all of the terms and provisions set forth herein to be observed
or performed and no Event of Default or Default shall have occurred and be
continuing.
(e) ADDITIONAL DOCUMENTS. The Lender shall have received from
the Borrower on the date of each Borrowing and issuance of each Letter of Credit
such documents and information as they may reasonably request relating to the
satisfaction of the conditions in this Section 4.2.
Each request for a Borrowing or for issuance of a Letter of Credit shall be
deemed to be a representation and warranty by the Borrower on the date of such
Borrowing or issuance of such Letter of Credit as to the matters specified in
paragraphs (c) and (d) of this Section.
- 51 -
5. AFFIRMATIVE COVENANTS
From the Closing Date and for so long as the Commitment shall
be in effect or any amount remains outstanding under the Note or any Letter of
Credit shall remain outstanding or any Obligations remain unpaid or unsatisfied,
each Credit Party agrees that, unless the Lender shall otherwise consent in
writing, each of them will:
SECTION 5.1. FINANCIAL STATEMENTS AND REPORTS. Furnish or
cause to be furnished to the Lender:
(a) Within 120 days after the end of each fiscal year of the
Borrower, the audited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as at the end of, and the related statements of
income, Shareholders' Equity and cash flows (along with the related notes and
supplemental information) for such year, and the corresponding figures as at the
end of, and for, the preceding fiscal year, accompanied by an auditor's report
and opinion of KPMG LLP or such other independent public accountants of
nationally recognized standing as shall be retained by the Borrower and be
reasonably satisfactory to the Lender, which report and opinion shall be
prepared in accordance with generally accepted auditing standards relating to
reporting and which report and opinion shall contain no material exceptions or
qualifications except for qualifications relating to accounting changes (with
which such independent public accountants concur) in response to FASB releases
or other authoritative pronouncement, and with except for a going concern
qualification solely with respect to the auditor's report for the fiscal year
ended December 31, 1998;
(b) Within 60 days after the end of each of the first three
fiscal quarters of each of its fiscal years the unaudited consolidated balance
sheets of the Borrower and its Consolidated Subsidiaries as at the end of, and
the related unaudited consolidated statements of income, cash flow and
shareholders' equity for, such quarter, and the corresponding figures as at the
end of, and for, the corresponding period in the preceding fiscal year, together
with a certificate signed by an Authorized Officer of the Borrower, on behalf of
the Borrower, to the effect that such financial statements, while not examined
by independent public accountants, reflect, in the opinion of the Borrower, all
adjustments necessary to present fairly the financial position of the Borrower
and its Consolidated Subsidiaries as at the end of the fiscal quarter and the
results of its operations for the quarter then ended are in conformity with
GAAP, subject to normal year-end audit adjustments;
(c) Simultaneously with the delivery of the statements
referred to in paragraphs (a) and (b) of this Section 5.1, a certificate of an
Authorized Officer of the Borrower, on behalf of the Borrower, in form and
substance satisfactory to the Lender (i) stating whether or not such Authorized
Officer has knowledge, after due inquiry, of any condition or event which would
constitute an Event of Default or Default has occurred and, if so, specifying
each such condition or event and the nature thereof, (ii) demonstrating in
reasonable detail compliance with the provisions of Sections 6.14 through 6.18
and 6.21 hereof and (iii) certifying that all filings required under Section 5.8
hereof have been made and listing each such filing that has been made since the
date of the last certificate delivered in accordance with this Section 5.1(c);
- 52 -
(d) Together with each set of audited financial statements
required by paragraph (a) above, a report from the independent public
accountants rendering the report thereon (i) stating that such Person has made
such examination or investigation as is necessary to enable it to express an
informed opinion as to the matters referred to in clause (ii) of this Section
5.1(d), it being understood that no special audit procedures are required hereby
and (ii) stating whether, in connection with their audit examination, any
condition or event, at any time during or at the end of the accounting period
covered by such financial statements, which constitutes an Event of Default
under covenants relating to accounting matters has come to their attention, and
if such a condition or event has come to their attention, specifying the nature
and period, if known, of existence thereof;
(e) On or prior to the twentieth day of each month, a
certificate ("Borrowing Base Certificate") in the form of Exhibit C hereto,
setting forth the amount of each component included in the Borrowing Base as of
the last Business Day of the preceding month, attached to which shall be
detailed information including the calculation of each such component (the
Borrower, at its option, may furnish additional Borrowing Base Certificates
setting forth such information as of such other dates as it may deem
appropriate), together with an aging report of the Eligible Receivables included
in the Borrowing Base;
(f) Promptly upon their becoming available, copies of (i) all
management projections, studies or evaluations prepared by consultants for or
presented to any Credit Party's Board of Directors and (ii) all audits, studies,
reports or evaluations prepared for or submitted to any of the Credit Parties by
any outside professional firm or service, including, without limitation, the
final comment letter submitted by the Credit Parties' accountants to the Board
of Directors or the audit committee of the Board of Directors of the Borrower in
connection with their annual audit;
(g) Within 10 days of the Borrower's receipt thereof, copies
of all management letters issued to the Borrower by its auditors;
(h) Promptly upon their becoming available, copies of (i) all
registration statements, proxy statements, and all reports which the Borrower or
any other Credit Party shall file with any securities exchange or with the
Securities and Exchange Commission or any successor agency and (ii) all reports,
financial statements, press releases and other information which the Borrower or
any other Credit Party shall release, send or make available to its common
stockholders generally;
(i) Notice of (i) any substantive action taken by any Credit
Party in connection with the proposed issuance of any additional debt or equity
securities other than the issuance of securities to employees in connection with
the exercise of options and (ii) the date on which such Credit Party expects to
receive the net cash proceeds from the issuance of such additional debt or
equity securities;
- 53 -
(j) No later than May 31 of each year (commencing with May 31,
2000), a valuation of the Eligible Library Amount by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (or an
independent consultant selected by the Lender in its reasonable discretion),
together with a calculation of the Eligible Library Amount computed as of the
last Business Day of the twelve-month period ending May 31 of such year, as
contemplated by the definition of "Eligible Library Amount";
(k) Within 30 days of the Closing Date and on an annual basis
thereafter (commencing with the fiscal year ending December 31, 1999, such
annual reports to be delivered simultaneously with the statements referred to in
paragraph (a) of this Section 5.1), a report from KPMG LLP (or such other
independent public accountants of nationally recognized standing as shall be
retained by the Borrower and reasonably satisfactory to the Lender), which
report shall confirm the amounts of at least 50% of the Eligible Receivables
included in the Borrowing Base calculated as of the last Business Day of the
prior fiscal year (or in the case of the initial report, the Eligible
Receivables included in the Borrowing Base Certificate dated May 19, 1999);
(l) Simultaneously with the delivery of the statements
referred to in paragraph (a) of this Section 5.1, a reconciliation, on a
month-by-month basis, of the amount of Eligible Receivables included in the
Borrowing Base as of the beginning of each month against the amount of Eligible
Receivables included in the Borrowing Base as of the end of such month,
including an accounting of new Eligible Receivables obtained, and any
collections made in respect of existing Eligible Receivables, during such month;
and
(m) From time to time such additional information regarding
the financial condition or business of the Credit Parties or otherwise regarding
the Collateral, as the Lender may reasonably request for the purpose of assuring
itself as to compliance by the Credit Parties with the terms hereof.
SECTION 5.2. CORPORATE EXISTENCE. Do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its
corporate existence, rights, material licenses, material permits and material
franchises, and comply with all applicable statutes, regulations and orders of,
and all applicable restrictions imposed by, any Governmental Authority, except
as otherwise permitted under Section 6.7 and except that any Subsidiary of the
Borrower may be liquidated or dissolved if in the reasonable judgment of the
Board of Directors of the Borrower such Subsidiary is no longer necessary for
the proper conduct of the business of the Borrower.
SECTION 5.3. MAINTENANCE OF PROPERTIES. Keep its tangible
properties which are material to its business in good repair, working order and
condition (ordinary wear and tear excepted) and, from time to time (i) make all
necessary and proper repairs, renewals, replacements, additions and improvements
thereto and (ii) comply at all times with the provisions of all material leases
and other material agreements to which it is a party so as to prevent any loss
or forfeiture thereof or thereunder unless compliance therewith is being
currently contested in good faith by appropriate proceedings; provided, however,
- 54 -
that nothing in this Section 5.3 shall prevent any Credit Party from
discontinuing the use, operation or maintenance of such properties or disposing
of them if such discontinuance or disposal is, in the judgment of its Board of
Directors, desirable in the conduct of the business.
SECTION 5.4. NOTICE OF MATERIAL EVENTS. (a) Promptly upon any
Authorized Officer of any Credit Party obtaining knowledge of (i) any Default or
Event of Default, (ii) any material adverse change in the condition or
operations of the Borrower and its Subsidiaries taken as a whole, financial or
otherwise, (other than changes due to seasonality that are consistent with the
corresponding periods in prior years), (iii) any action or event which could
reasonably be expected to materially and adversely affect the performance of the
Credit Parties' obligations under this Credit Agreement, the repayment of the
Note, or the security interests granted to the Lender under this Credit
Agreement or any other Fundamental Document, (iv) the opening of any office of
any Credit Party or the change of the executive office or the principal place of
business of any Credit Party or of the location of any Credit Party's books and
records with respect to the Collateral, (v) any change in the name of any Credit
Party, (vi) any other event which could reasonably be expected to materially and
adversely impact upon the amount or collectibility of accounts receivable of the
Credit Parties or otherwise materially decrease the value of the Collateral or
(vii) any Person giving any notice to any Credit Party or taking any other
action to enforce remedies with respect to a claimed default or event or
condition of the type referred to in paragraph (d) of Article 7, such Credit
Party shall promptly give written notice thereof to the Lender specifying the
nature and period of existence of any such condition or event, or specifying the
notice given or action taken and the nature of such claimed Event of Default or
condition and what action such Credit Party has taken, is taking and proposes to
take with respect thereto.
(b) Promptly upon any Authorized Officer of any Credit Party
obtaining knowledge of (i) the institution of, or threat of, any action, suit,
proceeding, investigation or arbitration by any Governmental Authority or other
Person against or affecting any Credit Party or any of its assets, or (ii) any
material development in any such action, suit, proceeding, investigation or
arbitration (whether or not previously disclosed to the Lender), which, in the
case of (i) or (ii), could reasonably be expected to materially and adversely
affect the Borrower and its Subsidiaries taken as a whole, such Credit Party
shall promptly give notice thereof to the Lender and provide such other
information as may be available to it to enable the Lender to evaluate such
matters; and, in addition to the requirements set forth in clauses (i) and (ii)
of this subsection (b), such Credit Party upon request shall promptly give
notice of the status of any action, suit, proceeding, investigation or
arbitration covered by a report delivered to the Lender pursuant to clause (i)
and (ii) above to the Lender and provide such other information as may be
reasonably available to it to enable the Lender to evaluate such matters.
SECTION 5.5. INSURANCE. (a) Keep its assets which are of an
insurable character insured (to the extent and for the time periods consistent
with normal industry practices) by financially sound and reputable insurers
against loss or damage by fire, explosion, theft or other hazards which are
included under extended coverage in amounts not less than the insurable value of
the property insured or such lesser amounts, and with such self-insured
retention or deductible levels, as are consistent with normal industry
practices.
- 55 -
(b) Maintain with financially sound and reputable insurers,
insurance against other hazards and risks and liability to Persons and property
to the extent and in the manner customary for companies in similar businesses.
(c) Maintain, or cause to be maintained, in effect during the
period from the commencement of principal photography of each item of Product
produced by any Credit Party, through the third anniversary of the date on which
such item of Product is Completed and/or as otherwise required by applicable
contracts, a so-called "Errors and Omissions" policy with respect to all items
of Product for which principal photography has commenced, and cause such Errors
and Omissions policy to provide coverage to the extent and in such manner as is
customary for items of Product of like type but, at minimum, to the extent and
in such manner as is required under all applicable contracts relating thereto.
(d) Maintain, or cause to be maintained, in effect during the
period from the commencement of principal photography of each item of Product
produced by any Credit Party, or from the date of acquisition of each item of
Product acquired by any Credit Party (i) until such time as the Lender shall
have been provided with satisfactory evidence of the existence of one negative
or master tape in one location and an interpositive or internegative or
duplicate master tape in another location of the final version of the Completed
Product, insurance on the negatives and sound tracks or master tapes of such
item of Product in an amount not less than the cost of re-shooting the principal
photography of the item of Product, and (ii) until principal photography of such
item of Product has been concluded, a cast insurance policy with respect to such
item of Product, which provides coverage to the extent and in such manner as is
customary for a like type of Product, but at minimum, to the extent required
under all applicable contracts relating thereto.
(e) Maintain, or cause to be maintained, in effect
distributor's and/or publisher's "Errors and Omissions" insurance to the extent
and in amounts customary for companies in similar businesses.
(f) Cause all such above-described insurance (excluding
worker's compensation insurance) to (i) provide for the benefit of the Lender
that 30 days' prior written notice of suspension, cancellation, termination,
modification, non-renewal or lapse or material change of coverage shall be given
to the Lender; (ii) name the Lender as the loss payee as its interests may
appear (except for "Errors and Omissions" insurance and other third party
liability insurance), provided, however, that production insurance recoveries
received prior to Completion or abandonment of an item of Product may be
utilized to finance the production of such item of Product and property
insurance proceeds may be used to repair damage in respect of which such
proceeds were received; and (iii) to the extent that the Lender shall not be
liable for premiums or calls, name the Lender as an additional insured
including, without limitation, under any "Errors and Omissions" policy.
- 56 -
(g) Upon the request of the Lender, the Borrower will render
to the Lender a statement in such detail as the Lender may request as to all
such insurance coverage.
SECTION 5.6. PRODUCTION. Cause each item of Product being
produced by any Credit Party to be produced in all material respects in
accordance with the standards set forth in, and within the time period
established in, all agreements with respect to such item of Product to which
such Credit Party is a party, subject to the terms and conditions of such
agreements.
SECTION 5.7. MUSIC. When an item of Product has been scored,
if requested by the Lender, deliver to the Lender within a reasonable period of
time after such request (a) written evidence of the music synchronization rights
obtained from the composer or the licensor of the music and (b) copies of all
music cue sheets with respect to such item of Product.
SECTION 5.8. COPYRIGHT. (a) Within 90 days after the initial
release or broadcast of each item of Product, to the extent any Credit Party is
or becomes the copyright proprietor thereof or to the extent such interest is
obtained by any Credit Party, or any Credit Party otherwise acquires a
copyrightable interest, take any and all actions necessary to register the
copyright for such item in the name of such Credit Party (subject to a Lien in
favor of the Lender pursuant to the Copyright Security Agreement) in conformity
with the laws of the United States and such other jurisdictions as the Lender
may reasonably specify, and immediately deliver to the Lender (i) written
evidence of the registration of any and all such copyrights for inclusion in the
Collateral under this Credit Agreement and (ii) a Copyright Security Agreement
Supplement relating to such item executed by such Credit Party.
(b) Obtain instruments of transfer or other documents
evidencing the interest of any Credit Party with respect to the copyright
relating to items of Product in which such Credit Party is not entitled to be
the initial copyright proprietor, and promptly record such instruments of
transfer on the United States Copyright Register and such other jurisdictions as
the Lender may specify.
SECTION 5.9. BOOKS AND RECORDS. (a) Maintain or cause to be
maintained at all times true and complete books and records of its financial
operations and provide the Lender and its representatives access to such books
and records and to any of its properties or assets upon reasonable notice and
during regular business hours in order that the Lender may make such audits and
examinations and make abstracts from such books, accounts, records and other
papers pertaining to the Collateral (including, but not limited to, Eligible
Receivables included in the Borrowing Base) and upon notification to the
Borrower may discuss the affairs, finances and accounts with, and be advised as
to the same by, officers and independent accountants, all as the Lender may deem
appropriate for the purpose of verifying the accuracy of the Borrowing Base
Certificate and the various other reports delivered by any Credit Party to the
Lender pursuant to this Credit Agreement or for otherwise ascertaining
compliance with this Credit Agreement or any other Fundamental Document.
- 57 -
(b) If, prior to an Event of Default, the Lender wishes to
confirm with account debtors and other payors the amounts and terms of any or
all Eligible Receivables included in the Borrowing Base, the Lender will so
notify the Borrower; provided, that so long as an Event of Default has not
occurred and is continuing, the Lender shall be entitled to exercise such right
no more than once per year. Within 10 days after receipt of such notice from the
Lender, the Borrower may, upon written notice to the Lender, elect to have such
confirmation made through the Credit Parties' auditors. If the Borrower fails to
timely make such election, the Lender may proceed to make such confirmations
directly with account debtors and other payors. Each of the Credit Parties
hereby agrees that, upon the occurrence and during the continuance of an Event
of Default, the Lender shall be entitled to confirm directly with account
debtors the amounts and terms of all accounts receivable.
SECTION 5.10. THIRD PARTY AUDIT RIGHTS. Promptly notify the
Lender of, and allow the Lender access to the results of, all audits conducted
by any Credit Party of any third party licensee, partnership and joint venture
under any agreement with respect to any item of Product included in the
Collateral. The Credit Parties will exercise their audit rights with respect to
any third party licensees, partnerships and joint ventures under any agreement
with respect to an item of Product included in the Collateral upon the
reasonable written request of the Lender, to the extent such rights are
available to the Credit Parties; provided, that so long as an Event of Default
has not occurred and is continuing, the Lender shall be entitled to cause the
Credit Parties to exercise such audit rights no more than once per year. After
an Event of Default has occurred and is continuing, the Lender shall have the
right to exercise through any Credit Party such Credit Party's right to audit
any obligor under an agreement with respect to any item of Product included in
the Collateral.
SECTION 5.11. OBSERVANCE OF AGREEMENTS. Duly observe and
perform all material terms and conditions of all material agreements with
respect to the exploitation of items of Product and diligently protect and
enforce the rights of the Credit Parties under all such agreements in a manner
consistent with prudent business judgment and subject to the terms and
conditions of such agreements.
SECTION 5.12. FILM PROPERTIES AND RIGHTS; CREDIT PARTIES TO
ACT AS PLEDGEHOLDER. Act as pledgeholder for the Lender with the same effect as
if the Lender were a pledgee in possession of all property relating to items of
Product which are now or hereafter in the (actual or constructive) possession of
any Credit Party, subject to such access as shall be necessary to distribute
such items of Product.
- 58 -
SECTION 5.13. LABORATORIES; NO REMOVAL. (a) To the extent any
Credit Party has control over or rights to receive any of the Physical Materials
relating to any item of Product, deliver or cause to be delivered to a
Laboratory or Laboratories all negative and preprint material, master tapes and
all sound track materials with respect to each such item of Product and deliver
to the Lender a fully executed Pledgeholder Agreement with respect to such
materials. To the extent that any Credit Party has only rights of access to
preprint material or master tapes then the Credit Parties will deliver to the
Lender a fully executed Laboratory Access Letter covering such materials. Prior
to requesting any such Laboratory to deliver such negative or other preprint or
sound track material or master tapes to another laboratory, any such Credit
Party shall provide the Lender with a Pledgeholder Agreement or Laboratory
Access Letter, as appropriate, executed by such other laboratory and all other
parties to such Pledgeholder Agreement (including the Lender). Each Credit Party
hereby agrees not to remove or cause the removal of the original negative and
film or sound materials with respect to any item of Product owned by such Credit
Party or in which such Credit Party has an interest (i) to a location outside
the United States or (ii) to any state or jurisdiction where UCC-1 financing
statements (or in the case of jurisdictions outside the United States,
documentation similar in purpose and effect satisfactory to the Lender) have not
been filed against such Credit Party holding any rights to such item of Product.
(b) During production of any item of Product produced by any
Credit Party, such Credit Party shall promptly deliver the daily rushes for such
item of Product to the appropriate Laboratory.
(c) With respect to items of Product completed after the
Closing Date, as soon as practicable after completion, deliver to the Lender and
the Laboratories which are signatories to Pledgeholder Agreements a revised
schedule of Product on deposit with such Laboratories.
SECTION 5.14. TAXES AND CHARGES; INDEBTEDNESS IN ORDINARY
COURSE OF BUSINESS. Duly pay and discharge, or cause to be paid and discharged,
before the same shall become in arrears (after giving effect to applicable
extensions), all taxes, assessments, levies and other governmental charges,
imposed upon any Credit Party or its properties, sales and activities, or any
part thereof, or upon the income or profits therefrom, as well as all claims for
labor, materials, or supplies which if unpaid might by law become a Lien upon
any property of any Credit Party; provided, however, that any such tax,
assessment, charge, levy or claim need not be paid if the validity or amount
thereof shall currently be contested in good faith by appropriate proceedings
and if such Credit Party shall have set aside on its books reserves (the
presentation of which is segregated to the extent required by GAAP) adequate
with respect thereto if reserves shall be deemed necessary; and provided,
further, that such Credit Party will pay all such taxes, assessments, levies or
other governmental charges forthwith upon the commencement of proceedings to
foreclose any Lien which may have attached as security therefor. The Credit
Parties will promptly pay when due, or in conformance with customary trade
terms, all other indebtedness incident to its operations in a manner consistent
with such Credit Party's past business practices.
- 59 -
SECTION 5.15. LIENS. Defend the Collateral against any and all
Liens howsoever arising, other than Permitted Encumbrances, and in any event
defend against any attempted foreclosure.
SECTION 5.16. FURTHER ASSURANCES; SECURITY INTERESTS. (a) Upon
the request of the Lender, duly execute and deliver, or cause to be duly
executed and delivered, at the cost and expense of the Credit Parties, such
further instruments as may be appropriate in the reasonable judgment of the
Lender to carry out the provisions and purposes of this Credit Agreement and the
other Fundamental Documents.
(b) Upon the request of the Lender, promptly execute and
deliver or cause to be executed and delivered, at the cost and expense of the
Credit Parties, such further instruments as may be appropriate in the reasonable
judgment of the Lender, to provide the Lender a first perfected Lien in the
Collateral and any and all documents (including, without limitation, the
execution, amendment or supplementation of any financing statement and
continuation statement or other statement) for filing under the provisions of
the UCC and the rules and regulations thereunder, or any other statute, rule or
regulation of any applicable foreign, federal, state or local jurisdiction, and
perform or cause to be performed such other ministerial acts which are necessary
or advisable, from time to time, in order to grant and maintain in favor of the
Lender the security interest in the Collateral contemplated hereunder and under
the other Fundamental Documents, subject only to Permitted Encumbrances.
(c) Promptly undertake to deliver or cause to be delivered to
the Lender from time to time such other documentation, consents, authorizations
and approvals in form and substance reasonably satisfactory to the Lender, as
the Lender shall deem reasonably necessary or advisable to perfect or maintain
the Liens of the Lender.
SECTION 5.17. ERISA COMPLIANCE AND REPORTS. Furnish to the
Lender (a) as soon as possible, and in any event within 30 days after any Credit
Party knows that (i) any Reportable Event with respect to any Plan has occurred,
a statement of an executive officer of the Credit Party, setting forth on behalf
of such Credit Party details as to such Reportable Event and the action which it
proposes to take with respect thereto, together with a copy of the notice, if
any, required to be filed by the applicable Credit Party of such Reportable
Event given to the PBGC or (ii) an accumulated funding deficiency has been
incurred or an application has been made to the Secretary of the Treasury for a
waiver or modification of the minimum funding standard or an extension of any
amortization period under Section 412 of the Code with respect to a Plan, a Plan
or Multiemployer Plan has been or is proposed to be terminated, reorganized,
partitioned or declared insolvent under Title IV of ERISA, proceedings have been
instituted to terminate a Plan, a proceeding has been instituted pursuant to
Section 515 of ERISA to collect a delinquent contribution to a Multiemployer
Plan, or the Borrower or such Credit Party will incur any liability (including
any contingent or secondary liability) to or on account of the termination of or
withdrawal from a Plan or Multiemployer Plan under Sections 4062, 4063, 4201 or
- 60 -
4204 of ERISA, if the occurrence of any of the foregoing events would result in
a liability which is materially adverse to the financial condition of the
Borrower and its Subsidiaries taken as a whole or would materially and adversely
affect the ability of the Borrower to perform its obligations under this Credit
Agreement or the Note, a statement of an executive officer of the Borrower,
setting forth details as to such event and the action the applicable Credit
Party proposes to take with respect thereto, (b) promptly upon reasonable
request of the Lender, copies of each annual and other report with respect to
each Plan and (c) promptly after receipt thereof, a copy of any notice any
Credit Party may receive from the PBGC relating to the PBGC's intention to
terminate any Plan or to appoint a trustee to administer any Plan.
SECTION 5.18. ENVIRONMENTAL LAWS. (a) Promptly notify the
Lender upon any Credit Party becoming aware of any violation or, to the best of
each Credit Party's knowledge, potential violation, or non-compliance with, or
liability or, to the best of each Credit Party's knowledge, potential liability,
under any Environmental Laws which, when taken together with all other pending
violations would reasonably be expected to have a materially adverse effect on
the Borrower and its Subsidiaries taken as a whole, and promptly furnish to the
Lender all notices of any nature which any Credit Party may receive from any
Governmental Authority or other Person with respect to any violation, or
potential violation or non-compliance with, or liability or potential liability
under any Environmental Laws which, in any case or when taken together with all
such other notices, could reasonably be expected to have a materially adverse
effect on the Borrower and its Subsidiaries taken as a whole.
(b) Comply with and use reasonable efforts to ensure
compliance by all tenants and subtenants with all Environmental Laws, and obtain
and comply in all material respects with and maintain and use reasonable efforts
to ensure that all tenants and subtenants obtain and comply in all material
respects with and maintain any and all licenses, approvals, registrations or
permits required by Environmental Laws, except where failure to do so would not
have a materially adverse effect on the Borrower and its Subsidiaries taken as a
whole.
(c) Conduct and complete all investigations, studies, sampling
and testing, and all remedial, removal and other actions required under all
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities, except where failure to
do so would not have a materially adverse effect on the Borrower and its
Subsidiaries taken as a whole. Any order or directive whose lawfulness is being
contested in good faith by appropriate proceedings shall be considered a lawful
order or directive when such proceedings, including any judicial review of such
proceedings, have been finally concluded by the issuance of a final
non-appealable order; provided, however, that the appropriate Credit Party shall
have set aside on its books reserves (the presentation of which is segregated to
the extent required by GAAP) adequate with respect thereto if reserves shall be
deemed necessary.
(d) Defend, indemnify and hold harmless the Lender and its
employees, agents, officers and directors, from and against any claims, demands,
penalties, fines, liabilities, settlements, damages, costs and expenses of
whatever kind or nature, known or unknown, contingent or otherwise, arising out
of, or in any way related to the violation of or noncompliance by any Credit
- 61 -
Party with any Environmental Laws, or any orders, requirements or demands of
Governmental Authorities related thereto, including, without limitation,
reasonable attorney and consultant fees, investigation and laboratory fees,
court costs and litigation expenses, but excluding therefrom all claims,
demands, penalties, fines, liabilities, settlements, damages, costs and expenses
arising out of or resulting from (i) the gross negligence or willful misconduct
of any indemnified party or (ii) any acts or omissions of any indemnified party
occurring after any indemnified party is in possession of, or controls the
operation of, any property or asset.
SECTION 5.19. USE OF PROCEEDS. Use the proceeds of the Loans
solely for the Borrower (i) to finance the development, production, distribution
or acquisition of audio books, books, television product and film product (other
than the production and distribution of motion pictures in theaters) and related
internet services and (ii) for other general corporate purposes.
SECTION 5.20. SECURITY AGREEMENTS WITH THE GUILDS. Furnish to
the Lender duly executed copies of (i) each security agreement relating to an
item of Product entered into by a Credit Party with any guild and (ii) a
subordination agreement (in form and substance satisfactory to the Lender) from
the applicable guild with respect to the security interest and other rights
granted to it pursuant to each such security agreement delivered to the Lender
pursuant to clause (i) above.
SECTION 5.21. UNCOMPLETED PRODUCT. With respect to all items
of Product (other than audio books and books) for which any Credit Party is the
producer (but not a producer-for-hire) or has a financial interest which is
subject to a completion risk (i.e. payment by a Credit Party is not conditioned
upon delivery), deliver to the Lender, not later than (A) five (5) days prior to
the commencement of principal photography of such item of Product and (B) five
(5) days prior to payment of the acquisition cost for a negative pick-up, each
of the following to the extent applicable (it being understood that for purposes
of clause B clauses (viii) and (ix) below shall not be applicable), (i) the
budget for such item of Product, (ii) a schedule identifying all agreements
executed by a Credit Party in connection with such item of Product which provide
for deferments of compensation or a gross or net profit participation, (iii)
copies of such of the foregoing agreements as the Lender may reasonably request,
(iv) certificates or binders of insurance with respect to such item of Product
(and policies of insurance if requested by the Lender), including all forms of
insurance coverage required by Section 5.5 hereof, (v) copies of all instruments
of transfer or other instruments (in recordable form) ("Chain of Title"
documents) necessary to establish, to the reasonable satisfaction of the Lender,
in the appropriate Credit Party ownership of sufficient copyright rights in the
literary properties upon which such item of Product is to be based to enable
such Credit Party to produce and/or distribute such item of Product and to grant
the Lender the security interests therein which are contemplated by this Credit
Agreement which documents shall evidence to the Lender's satisfaction the Credit
Party's rights in, and with respect to, such item of Product, (vi) an executed
Copyright Security Agreement Supplement with respect to such item of Product,
(vii) executed Pledgeholder Agreements with respect to such item of Product,
(viii) a schedule of sources and uses demonstrating in detail that all cash
- 62 -
necessary to complete and deliver such item of Product will be available as and
when needed from sources acceptable to the Lender, and (ix) a Completion
Guarantee with respect to such item of Product in form and substance
satisfactory to the Lender naming the Lender as a beneficiary thereof; provided,
however, that subclause (ix) shall not be applicable to items of Product for
which a major television network has committed to provide financing in an amount
equal to at least 70% of the Budgeted Negative Cost for such item of Product.
SECTION 5.22. GOVERNMENTAL APPROVAL. If any further
authorizations, approvals, registrations or filings with any governmental or
public regulatory body or authority of the United States or any state thereof
required for the execution, delivery and performance by any Credit Party of this
Credit Agreement and the other Fundamental Documents to which it is a party
should hereafter become necessary, the Credit Parties shall obtain or make all
such authorizations, approvals, registrations or filings.
6. NEGATIVE COVENANTS
From the date hereof and for so long as the Commitment shall
be in effect or any amount remains outstanding under the Note or any Letter of
Credit shall remain outstanding or any Obligations remain unpaid or unsatisfied,
each Credit Party agrees that, unless the Lender shall otherwise consent in
writing, it will not and will not allow any of its Subsidiaries to:
SECTION 6.1. LIMITATIONS ON INDEBTEDNESS. Incur, create,
assume or suffer to exist any preferred stock or Indebtedness or permit any
partnership or joint venture in which any Credit Party is a general partner to
incur create, assume or suffer to exist any Indebtedness other than:
(a) the Indebtedness represented by the Note and the other
Obligations;
(b) Indebtedness in respect of secured purchase money
financing, including Capital Leases, to the extent permitted by Section 6.2(b)
and not to exceed $250,000 in the aggregate at any one time outstanding;
(c) unsecured liabilities for acquisitions of rights or
product incurred in the ordinary course of business and not otherwise prohibited
hereunder;
(d) liabilities relating to net or gross profit
participations, deferments and guild residuals with respect to the production or
acquisition of items of Product;
(e) existing Indebtedness listed on Schedule 3.17 hereto but
no increases, extensions or renewals thereof unless otherwise noted on Schedule
3.17;
- 63 -
(f) in the case of the Corporate Guarantors, the guarantees of
the Obligations pursuant to Article 9 hereof;
(g) Indebtedness incurred in connection with inter-company
advances permitted under Section 6.4(v) hereof;
(h) Subordinated Debt that does not require any cash payments
at any time prior to six months after the Commitment Termination Date;
(i) preferred stock without any mandatory redemption
provisions;
(j) Indebtedness incurred by a Credit Party in connection with
unsecured loans from MEI in an amount not to exceed $1,000,000 in the aggregate
at any one time outstanding;
(k) Indebtedness incurred by a Credit Party in connection with
the financing of insurance policies;
(l) Indebtedness incurred in connection with the settlement of
actions, suits or other proceedings brought against the Credit Parties in an
aggregate amount not to exceed $500,000 at any one time outstanding; and
(m) Indebtedness incurred in connection with the financing of
television programming for which the Lender has previously provided written
consent.
SECTION 6.2. LIMITATIONS ON LIENS. Incur, create, assume or
suffer to exist any Lien on its revenue stream, property or assets, whether now
owned or hereafter acquired, except:
(a) Liens pursuant to written security agreements (in form and
substance reasonably acceptable to the Lender) in favor of guilds required
pursuant to terms of collective bargaining agreements; provided, that such
guilds have entered into an intercreditor agreement with the Lender reasonably
satisfactory in all respects to the Lender;
(b) Liens granted to the Person financing the acquisition of
property, plant or equipment if (i) limited to the particular assets acquired;
(ii) the debt secured by the Lien does not exceed the acquisition cost of a
particular asset for which the Lien is granted; (iii) such transaction does not
otherwise violate this Credit Agreement and (iv) the aggregate amount of all
Indebtedness secured by Liens permitted under this paragraph does not exceed
$250,000 at any one time outstanding;
(c) Liens to secure distribution, exhibition and/or
exploitation rights of licensees pursuant to Distribution Agreements on terms
satisfactory to the Lender;
- 64 -
(d) deposits under worker's compensation, unemployment
insurance, old-age pensions and other Social Security laws or to secure the
performance of bids, tenders, contracts (other than for the repayment of
borrowed money) or leases or to secure statutory obligations or surety or appeal
bonds or performance or other similar bonds incurred in the ordinary course of
business (other than Completion Guarantees);
(e) Liens for taxes, assessments or other governmental charges
or levies due and payable, the validity or amount of which is currently being
contested in good faith by appropriate proceedings pursuant to the terms of
Section 5.14 hereof;
(f) Liens incurred in the ordinary course of business with
regard to services rendered by laboratories and post-production houses, and
suppliers of materials and equipment which secure trade payables in amounts not
exceeding $500,000 in the aggregate;
(g) Liens arising out of attachments, judgments or awards as
to which an appeal or other appropriate proceedings for contest or review are
promptly commenced (and as to which foreclosure and other enforcement
proceedings shall not have been commenced (unless fully bonded or otherwise
effectively stayed)) and as to which appropriate reserves have been established
in accordance with GAAP;
(h) the Liens of the Lender under this Credit Agreement, the
other Fundamental Documents and other documents contemplated hereby;
(i) existing Liens set forth on Schedule 6.2 hereto;
(j) customary Liens in favor of Approved Completion Guarantors
in connection with Completion Guarantees;
(k) possessory Liens (other than those of Laboratories and
production houses) which (i) occur in the ordinary course of business, (ii)
secure normal trade debt which is not yet due and payable and (iii) do not
secure Indebtedness for borrowed money;
(l) Liens arising by virtue of any statutory or common law
provision relating to banker's liens, rights of setoff or similar rights with
respect to deposit accounts of the Credit Parties;
(m) statutory Liens of landlords and other Liens imposed by
law, such as carriers', warehouseman's or mechanic's Liens, incurred in good
faith in the ordinary course of business and deposits made or bonds filed in the
ordinary course of business to obtain the release of such Liens in amounts not
exceeding $250,000 in the aggregate; and
(n) Liens in favor of third-party lenders in respect of
particular items of Product pursuant to production financing arrangements
approved by the Lender; provided, that each such third-party lender shall have
entered into an intercreditor agreement with the Lender in form and substance
satisfactory to the Lender.
- 65 -
SECTION 6.3. LIMITATION ON GUARANTEES. Provide any Guaranty,
either directly or indirectly, except (i) negative pickup agreements and minimum
guarantees to acquire items of Product in the ordinary course of business to the
extent otherwise permitted under Section 6.21 and the other provisions hereof,
(ii) guarantees to the Lender in accordance with Article 9 hereof and (iii)
existing Guarantees listed on Schedule 6.3 hereto.
SECTION 6.4. LIMITATIONS ON INVESTMENTS. Create, make or incur
any Investment other than (i) to acquire Product in the ordinary course of
business to the extent otherwise permitted under Section 6.21 and the other
provisions hereof, (ii) purchase of Cash Equivalents, (iii) inter-company
advances among Credit Parties, (iv) Investments as of the Closing Date set forth
on Schedule 6.4, (v) Guarantees permitted pursuant to Section 6.3, and (vi) the
acquisition or creation of new Subsidiaries in accordance with Section 6.22
hereof.
SECTION 6.5. RESTRICTED PAYMENTS. Declare, make or incur any
liability to make any Restricted Payments.
SECTION 6.6. LIMITATIONS ON LEASES. Create, incur or assume
combined lease expense (but specifically excluding amounts included in the
Budgeted Negative Cost of an item of Product) for any twelve consecutive
calendar months in excess of $500,000 commencing with the fiscal year ended
December 31, 1998.
SECTION 6.7. CONSOLIDATION, MERGER, SALE OR PURCHASE OF
ASSETS, ETC. Whether in one transaction or a series of transactions, (i) wind
up, liquidate or dissolve its affairs, or enter into any transaction of merger
or consolidation, (ii) sell or otherwise dispose of all or substantially all of
its property, stock or assets, (iii) except to the extent permitted by Sections
6.4 and 6.22 hereof, acquire all or substantially all of the stock or assets of
any other Person in amounts exceeding $500,000 in the aggregate, or (iv) agree
to do or suffer any of the foregoing, except that any Subsidiary of the Borrower
may merge with and into, or transfer assets to, another Subsidiary of the
Borrower or with and into, or transfer assets to, the Borrower; provided that if
any such transaction involves the Borrower, then the Borrower must be the
surviving entity in each such transaction.
SECTION 6.8. RECEIVABLES. Sell, discount or otherwise dispose
of notes, accounts receivable or other obligations owing to any Credit Party
except for the purpose of collection in the ordinary course of business.
SECTION 6.9. SALE AND LEASEBACK. Enter into any arrangement
with any Person or Persons, whereby in contemporaneous transactions any Credit
Party sells essentially all of its right, title and interest in an item of
Product and acquires or licenses the right to distribute or exploit such item of
Product in media and markets accounting for substantially all the value of such
item of Product, unless such arrangement does not impair the collateral position
of the Lender and is evidenced by documentation acceptable to the Lender.
- 66 -
SECTION 6.10. PLACES OF BUSINESS; CHANGE OF NAME. Change the
location of its chief executive office or principal place of business or any of
the locations where it keeps any material portion of the Collateral or its books
and records with respect to the Collateral or change its name without in each
case (i) giving the Lender 30 days' prior written notice of such change and (ii)
filing any additional Uniform Commercial Code financing statements, and such
other documents requested by the Lender or which are otherwise necessary or
desirable to maintain perfection of the security interest of the Lender in the
Collateral.
SECTION 6.11. LIMITATIONS ON CAPITAL EXPENDITURES. Make or
incur on a consolidated basis any obligation to make Capital Expenditures (other
than amounts included in the Budgeted Negative Cost of an item of Product) for
any fiscal year in excess of $250,000.
SECTION 6.12. TRANSACTIONS WITH AFFILIATES. Effect any
transaction with an Affiliate other than a Credit Party on a basis less
favorable to such Credit Party than would have been the case if such transaction
had been effected on an arms-length basis (and if involving more than $100,000,
without a resolution approving each such transaction from the Board of Directors
of each Credit Party involved).
SECTION 6.13. PROHIBITION OF AMENDMENTS OR WAIVERS. Amend,
alter, modify, terminate or waive, or consent to any amendment, alteration,
modification or waiver of (x) any material agreement to which any Credit Party
is a party, including, without limitation, the Material Agreements, or the terms
thereof in any manner which would change, alter or waive any material term
thereof and which could reasonably be expected to (i) materially and adversely
affect the collectibility of accounts receivable that form part of the Borrowing
Base, (ii) materially and adversely affect the financial condition of any Credit
Party, (iii) materially and adversely affect the rights of the Lender under this
Credit Agreement, the other Fundamental Documents and any other agreements
contemplated hereby, (iv) materially decrease the value of the Collateral, or
(v) decrease the amount of the sum of (i) the Borrowing Base plus (ii) the
Maximum Guaranty Amount plus (iii) amounts currently held in the Collection
Account, to less than the sum of then outstanding principal amount of the Loans
and the then current L/C Exposure, or (y) any indenture or note purchase
agreement governing any Subordinated Debt in any manner whatsoever.
SECTION 6.14. DEVELOPMENT COSTS. Permit unfunded development
costs (which have not been sold, written off or allocated to an item of Product
for which active preproduction has commenced) to exceed $100,000 for any item of
Product.
SECTION 6.15. OVERHEAD EXPENSE. Permit aggregate allocated and
unallocated overhead expenses to exceed $9,500,000 in fiscal 1998 or to exceed
in any subsequent fiscal year 110% of the maximum amount permitted for the
immediately preceding fiscal year.
- 67 -
SECTION 6.16. CONSOLIDATED CAPITAL BASE. Permit Consolidated
Capital Base at the end of the fiscal quarter ending June 30, 1999 to be less
than $6,800,000 and for each fiscal quarter thereafter to be less than the sum
of $6,800,000 plus 80% of all net new equity invested after June 30, 1999 plus
80% of accumulated net earnings, if any, for each fiscal quarter ending after
June 30, 1999 and prior to the date at which compliance is being determined.
SECTION 6.17. EBIT. Permit EBIT (i) as of the end of the
92-day period ending December 31, 1999 to be less than $300,000, and (ii) as of
the end of each fiscal quarter thereafter, to be less than $1,500,000.
SECTION 6.18. LIQUIDITY RATIO. Permit the ratio of (i) all
projected known cash sources (including cash on hand, borrowing under the Credit
Agreement (taking into account projected Borrowing Base availability plus the
Maximum Guaranty Amount), cash receipts from operations, overhead
reimbursements, and cash received from permitted Subordinated Debt and third
party investors) to (ii) all projected known cash uses (including debt service,
amounts to be spent to acquire film inventory, overhead, and all other cash
expenditures), all as determined as of each quarter end and as projected in good
faith by the Borrower for the ensuing 24 months, to be less than 1.0 to 1.
SECTION 6.19. NO CHANGE IN BUSINESS. Engage in any business
activities other than production, distribution and other exploitation of audio
books, books, television product and film product (other than the distribution
of motion pictures in theaters), in each case including ancillary rights (e.g.,
music publishing, soundtrack album, merchandising and publishing), and related
internet services.
SECTION 6.20. ERISA COMPLIANCE. Engage in a "prohibited
transaction", as defined in Section 406 of ERISA or Section 4975 of the Code,
with respect to any Plan or Multiemployer Plan or knowingly consent to any other
"party in interest" or any "disqualified person", as such terms are defined in
Section 3(14) or ERISA and Section 4975(e)(2) of the Code, respectively,
engaging in any "prohibited transaction", with respect to any Plan or
Multiemployer Plan maintained or contributed to by any Credit Party; or permit
any Plan maintained by any Credit Party to incur any "accumulated funding
deficiency", as defined in Section 302 of ERISA or Section 412 of the Code,
unless such incurrence shall have been waived in advance by the Internal Revenue
Service; or terminate any Plan in a manner which could result in the imposition
of a Lien on any property of any Credit Party pursuant to Section 4068 of ERISA;
or breach or knowingly permit any employee or officer or any trustee or
administrator of any Plan maintained by any Credit Party to breach any fiduciary
responsibility imposed under Title I of ERISA with respect to any Plan; engage
in any transaction which would result in the incurrence of a liability under
Section 4069 of ERISA; or fail to make contributions to a Plan or Multiemployer
Plan which results in the imposition of a Lien on any property of any Credit
Party pursuant to Section 302(f) of ERISA or Section 412(n) of the Code, if the
occurrence of any of the foregoing events (alone or in the aggregate) would
result in a liability which is materially adverse to the financial condition of
the Credit Parties taken as a whole or would materially and adversely affect the
ability of the Borrower to perform its obligations under this Credit Agreement
or the Note.
- 68 -
SECTION 6.21. ADDITIONAL LIMITATIONS ON PRODUCTION AND
ACQUISITION OF PRODUCT. (a) Permit production and acquisition deficits (net of
pre-sale guarantees and completed pre-sales payable within 1 year after
delivery) to exceed: $5,000,000 in the aggregate at any time outstanding for all
(i) television series in production or acquired, which shall not exceed $300,000
for any single episode of any television series; and (ii) for all movies-of-the-
week or mini-series, which shall not exceed $600,000 for any single
movie-of-the-week and $1,200,000 for any mini-series.
(b) Begin production on (i) any television series with a
pattern budget in excess of $1,200,000 per episode; (ii) any movie-of-the-week
having a budget in excess of $3,500,000; provided, however, that with respect to
movies-of-the-week, no more than $10,500,000 in the aggregate shall be
outstanding at any one time; or (iii) any television mini- series which would
result in the aggregate amount outstanding at any one time in respect of all
mini-series currently in production to exceed $7,000,000; in each case where a
Credit Party is the producer or has a financial interest which is subject to a
completion risk (i.e. payment by a Credit Party is not conditioned upon
delivery).
SECTION 6.22. SUBSIDIARIES. Acquire or create any new direct
or indirect Subsidiary; provided however that a Credit Party may acquire or
create additional Subsidiaries if (i) each such Subsidiary executes an
Instrument of Assumption and Joinder in the form attached hereto as Exhibit I
whereby such Subsidiary becomes a Credit Party hereunder and the certificates
representing 100% of the shares of capital stock of such Subsidiary held by such
Credit Party becomes part of the Pledged Securities hereunder and are delivered
to the Lender together with stock powers for each such certificate executed in
blank, and/or (ii) such Credit Party takes such other action in connection with
the stock of such Subsidiary as is deemed appropriate by the Lender to protect
the Lender's security interest therein.
SECTION 6.23. BANK ACCOUNTS. After the date hereof, open or
maintain any bank account other than (a) at the office of the Lender as
contemplated by Section 8.3 hereof, (b) those accounts listed on Schedule 6.23
or as to which the Lender shall have received notice, or (c) one or more
Production Accounts, as to which the Lender shall have received notice.
SECTION 6.24. HAZARDOUS MATERIALS. Except as set forth on
Schedule 3.21, cause or permit any of its properties or assets to be used to
generate, manufacture, refine, transport, treat, store, handle, dispose,
transfer, produce or process Hazardous Materials, except in compliance in all
material respects with all applicable Environmental Laws, nor release,
discharge, dispose or of permit or suffer any release or disposal as a result of
any intentional act or omission on its part of Hazardous Materials onto any such
property or asset in material violation of any Environmental Law.
- 69 -
SECTION 6.25. USE OF PROCEEDS OF LOANS AND REQUESTS FOR
LETTERS OF CREDIT. Use the proceeds of Loans or request any Letter of Credit
hereunder other than for the purposes set forth in, and as required by, Section
5.19 hereof.
SECTION 6.26. INTEREST RATE PROTECTION AGREEMENTS, ETC. Enter
into any Interest Rate Protection Agreement or Currency Agreement for other than
bona fide hedging purposes.
SECTION 6.27. AMORTIZATION METHOD. Change the method of
amortization of film/television inventory used by any of the Credit Parties,
unless required to do so under GAAP.
7. EVENTS OF DEFAULT
In the case of the happening and during the continuance of any
of the following events (herein called "Events of Default"):
(a) any representation or warranty made by any Credit Party in
this Credit Agreement or any other Fundamental Document or in connection with
this Credit Agreement or with the execution and delivery of the Note or the
Borrowings hereunder, or any statement or representation made in any report,
financial statement, certificate or other document furnished by or on behalf of
any Credit Party to the Lender under or in connection with this Credit Agreement
or any Fundamental Document shall prove to have been false or misleading in any
material respect when made, deemed to be made or delivered;
(b) default shall be made in the payment of any principal of
or interest on the Note or of any fees or other amounts payable by the Borrower
hereunder, when and as the same shall become due and payable, whether at the due
date thereof or at a date fixed for prepayment thereof or by acceleration
thereof or otherwise and, in the case of payments of any amounts other than
principal, such default shall continue unremedied for three (3) Business Days
after receipt by the Borrower of an invoice therefor;
(c) default shall be made by any Credit Party in the due
observance or performance of any covenant, condition or agreement contained in
Section 5.4 or Article 6 of this Credit Agreement;
(d) default shall be made with respect to any payment of any
Indebtedness of any Credit Party in excess of $250,000 when due or the
performance of any other obligation incurred in connection with any such
Indebtedness, if the effect of such default is to accelerate the maturity of
such Indebtedness or to permit the holder thereof to cause such Indebtedness to
become due prior to its stated maturity and such default shall not be remedied,
cured, waived or consented to within the period of grace with respect thereto;
- 70 -
(e) any Credit Party shall generally not pay its debts as they
become due or shall admit in writing its inability to pay its debts, or shall
make a general assignment for the benefit of creditors; or any Credit Party
shall commence any case, proceeding or other action seeking to have an order for
relief entered on its behalf as debtor or to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property or shall file an answer or
other pleading in any such case, proceeding or other action admitting the
material allegations of any petition, complaint or similar pleading filed
against it or consenting to the relief sought therein; or any Credit Party shall
take any action to authorize any of the foregoing;
(f) any involuntary case, proceeding or other action against
any Credit Party shall be commenced seeking to have an order for relief entered
against it as debtor or to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, liquidation, dissolution or composition
of it or its debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, or seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its property, and such case, proceeding or other action (i)
results in the entry of any order for relief against it or (ii) shall remain
undismissed for a period of thirty (30) days;
(g) final judgment(s) for the payment of money in excess of
$250,000 shall be rendered against any Credit Party which within thirty (30)
days from the entry of such judgment shall not have been discharged or stayed
pending appeal or which shall not have been discharged or bonded in full within
thirty (30) days from the entry of a final order of affirmance on appeal;
(h) failure to deliver a Borrowing Base Certificate to the
Lender within 10 Business Days of the date such Certificate was due pursuant to
Section 5.1(e) hereof, provided, however, that any failure to deliver a
Borrowing Base Certificate shall not give rise to an Event of Default under this
clause (h) in the event there are no outstanding Loans and Letters of Credit;
(i) a Change in Control or a Change in Management shall occur;
(j) the Guaranty Agreements shall for any reason, not be or
shall cease to be in full force and effect, or shall be declared null and void,
or become unenforceable, or it shall be terminated, or disaffirmed by any
Individual Guarantor thereunder;
(k) default shall be made by any Credit Party in the due
observance or performance of any other covenant, condition or agreement to be
observed or performed pursuant to the terms of this Credit Agreement, or any
other Fundamental Document, and such default shall continue unremedied for
thirty (30) consecutive days after any Credit Party obtains knowledge of such
occurrence;
(l) a Reportable Event relating to a failure to meet minimum
funding standards or an inability to pay benefits when due shall have occurred
with respect to any Plan -under the control of any Credit Party and shall not
have been remedied within thirty (30) days after the occurrence of such
Reportable Event; or a trustee shall be appointed by a United States District
Court to administer such Plan, or the PBGC shall institute proceedings to
terminate such Plan, and the Lender shall have notified the Borrower that the
Lender has determined that on the basis of such Reportable Event, appointment of
trustee or commencement of proceedings, there are reasonable grounds to believe
that such occurrence would have a material adverse effect to the financial
condition of the Credit Parties taken as a whole or would materially and
adversely affect the ability of the Borrower to perform its obligations under
this Credit Agreement or the Note; or
- 71 -
(m) any Fundamental Document shall, for any reason, not be or
shall cease to be in full force and effect except as provided herein or therein
or shall be declared null and void or any of the Fundamental Documents shall not
give or shall cease to give the Lender the Liens, rights, powers and privileges
purported to be created thereby in favor of the Lender superior to and prior to
the rights of all third Persons (except to the extent expressly permitted herein
or therein) and subject to no other Liens (except to the extent expressly
permitted herein or therein) other than by actions of the Lender, provided that
no such defect in the Fundamental Documents shall give rise to an Event of
Default under this paragraph (m) unless such defect or such failure shall affect
Collateral that is or should be subject to a Lien in favor of the Lender having
an aggregate value in excess of $250,000;
then, in every such event and at any time thereafter during the continuance of
such event, the Lender may take either or both of the following actions, at the
same or different times: terminate forthwith the Commitment and/or declare the
principal of and the interest on the Loans and the Note and all other amounts
payable hereunder or thereunder to be forthwith due and payable, whereupon the
same shall become and be forthwith due and payable, without presentment, demand,
protest, or other notice of any kind, all of which are hereby expressly waived,
anything in this Credit Agreement or in the Note to the contrary
notwithstanding. If an Event of Default specified in paragraphs (e) or (f) above
shall have occurred, the Commitment shall automatically terminate and the Loans
and the Note shall automatically become due and payable, both as to interest and
principal, without presentment, demand, protest, or other notice of any kind,
all of which are hereby expressly waived, anything in this Credit Agreement or
the Note to the contrary notwithstanding. Such remedies shall be in addition to
any other remedy available to the Lender pursuant to Applicable Law or
otherwise.
8. GRANT OF SECURITY INTEREST; REMEDIES
SECTION 8.1. SECURITY INTERESTS. The Borrower, as security for
the due and punctual payment of the Obligations, and the Corporate Guarantors,
as security for their obligations under Article 9 hereof, hereby mortgage,
pledge, assign, transfer, set over, convey and deliver to the Lender and grant
to the Lender a security interest in the Collateral.
- 72 -
SECTION 8.2. USE OF COLLATERAL. So long as no Event of Default
shall have occurred and be continuing, and subject to the various provisions of
this Credit Agreement and the other Fundamental Documents, a Credit Party may
use the Collateral in any lawful manner permitted hereunder.
SECTION 8.3. COLLECTION ACCOUNTS. (a) The Borrower will
establish a lockbox arrangement and related collection bank accounts (each, a
"Collection Account") and will direct all Persons who become licensees, buyers
or account debtors under receivables with respect to any item included in the
Collateral (other than de minimis amounts and proceeds of particular items of
Product which are assigned by a Credit Party to third-party lenders as
collateral for its obligations to make certain payments upon Completion and
delivery of such items of Product pursuant to production financing arrangements
permitted hereunder; provided that such third- party lender shall have entered
into an intercreditor agreement with the Lender in form and in substance
satisfactory to the Lender; and provided further that the Borrower may only
assign proceeds of Distribution Agreements which relate solely to the particular
item of Product whose production is being financed by such third-party lender)
to make payments under or in connection with the license agreements, sales
agreements or receivables directly to the appropriate lockbox or Collection
Account. To the extent practicable, the Credit Parties, will amend existing
agreements to direct all Persons who are licensees, buyers or account debtors
under receivables with respect to any item included in the Collateral, to make
payments under or in connection with the license agreements, sales agreements or
receivables directly to the appropriate lockbox or Collection Account.
(b) The Credit Parties will execute such documentation as may
be reasonably required by the Lender in order to provide for the deposit into
the Collection Accounts of all items received in the lockbox and to otherwise
effectuate the provisions of this Section 8.3.
(c) In the event a Credit Party receives payment from any
Person or proceeds under an Acceptable L/C, which payment should have been
remitted directly to a Collection Account, such Credit Party shall promptly
remit such payment or proceeds to a Collection Account to be applied in
accordance with the terms of this Credit Agreement.
(d) All such lockboxes and Collection Accounts shall be
maintained with the Lender or with such other financial institutions as may be
approved by the Lender, subject to the right of the Lender to at any time
withdraw such approval and transfer any such lockboxes and/or Collection
Account(s) to the Lender or another approved financial institution.
- 73 -
(e) The Lender is hereby authorized and directed to invest and
reinvest the funds from time to time deposited in the Collection Accounts, so
long as no Event of Default has occurred and is continuing, on the instructions
of the Borrower (provided that such notice may be given verbally to be confirmed
promptly in writing) or, if the Borrower shall fail to give such instruction
upon delivery of any such funds, in the sole discretion of the Lender, provided
that in no event may the Borrower give instructions to the Lender to, or may the
Lender in its discretion, invest or reinvest funds in the Collection Accounts in
other than Cash Equivalents described in clause (i) of the definition of Cash
Equivalents, or described in clauses (ii) and (iii) of the definition of Cash
Equivalents to the extent issued by The Chase Manhattan Bank.
(f) Any net income or gain on the investment of funds from
time to time held in the Collection Accounts, shall be promptly reinvested by
the Lender at the direction of the Borrower as a part of the Collection Accounts
and any net loss on any such investment shall be charged against the Collection
Accounts.
(g) The Lender shall not be a trustee for the Credit Parties,
or shall have any obligations or responsibilities, or shall be liable for
anything done or not done, in connection with the Collection Accounts, except as
expressly provided herein and except that the Lender shall have the obligations
of a secured party under the UCC. The Lender shall not have any obligation or
responsibilities and shall not be liable in any way for any investment decision
made pursuant to this Section 8.3(g) or for any decrease in the value of the
investments held in the Collection Accounts except for the gross negligence or
wilful misconduct of Lender in carrying out the written instructions of
Borrower.
(h) For value received and to induce the Lender to issue
Letters of Credit and to make Loans from time to time to the Borrower as
provided for in this Credit Agreement, as security for the payment of all of the
Obligations, the Credit Parties hereby assign to the Lender and grant to the
Lender, a first and prior Lien upon all the Credit Parties' rights in and to the
Collection Accounts, all cash, documents, instruments and securities from time
to time held therein, and all rights pertaining to investments of funds in the
Collection Accounts and all products and proceeds of any of the foregoing. All
cash, documents, instruments and securities from time to time on deposit in the
Collection Accounts, and all rights pertaining to investments of funds in the
Collection Accounts shall immediately and without any need for any further
action on the part of any of the Credit Parties or the Lender, become subject to
the Lien set forth in this Section 8.3(h), be deemed Collateral for all purposes
hereof and be subject to the provisions of this Credit Agreement.
(i) At any time after the Loans have been accelerated in
accordance with Article 7 hereof, the Lender may sell any documents, instruments
and securities held in the Collection Accounts and may immediately apply the
proceeds thereof and any other cash held in the Collection Accounts in
accordance with Section 10.5 hereof.
- 74 -
SECTION 8.4. CREDIT PARTIES TO HOLD IN TRUST. Upon the
occurrence and during the continuance of an Event of Default, the Credit Parties
will, upon receipt by them of any revenue, income, profits or other sums in
which a security interest is granted by this Article 8, payable pursuant to any
agreement or otherwise, or of any check, draft, note, trade acceptance or other
instrument evidencing an obligation to pay any such sum, hold the sum in trust
for the Lender, and forthwith, without any notice or demand whatsoever (all
notices, demands, or other actions on the part of the Lender being expressly
waived), endorse, transfer and deliver any such sums or instruments or both, to
the Lender to be applied to the repayment of the Obligations in accordance with
the provisions of Section 8.7 hereof.
SECTION 8.5. COLLECTIONS, ETC. Upon the occurrence and during
the continuance of an Event of Default, the Lender may, in its sole discretion,
in its name or in the name of any Credit Party or otherwise, demand, ▇▇▇ for,
collect or receive any money or property at any time payable or receivable on
account of or in exchange for, or make any compromise or settlement deemed
desirable with respect to, any of the Collateral, but shall be under no
obligation so to do, or the Lender may extend the time of payment, arrange for
payment in installments, or otherwise modify the terms of, or release, any of
the Collateral, without thereby incurring responsibility to, or discharging or
otherwise affecting any liability of, any Credit Party. The Lender will not be
required to take any steps to preserve any rights against prior parties to the
Collateral. If any Credit Party fails to make any payment or take any action
required hereunder, the Lender may make such payments and take all such actions
as the Lender reasonably deems necessary to protect the Lender's security
interests in the Collateral and/or the value thereof, and the Lender is hereby
authorized (without limiting the general nature of the authority herein above
conferred) to pay, purchase, contest or compromise any Liens that in the
judgment of the Lender appear to be equal to, prior to or superior to the
security interests of the Lender in the Collateral and any Liens not expressly
permitted by this Credit Agreement.
SECTION 8.6. POSSESSION, SALE OF COLLATERAL, ETC. Upon the
acceleration of the Loans in accordance with Article 7 hereof, the Lender may
enter upon the premises of any Credit Party or wherever the Collateral may be,
and take possession of the Collateral, and may demand and receive such
possession from any Person who has possession thereof, and the Lender may take
such measures as it may deem necessary or proper for the care or protection
thereof, including the right to remove all or any portion of the Collateral, and
with or without taking such possession may sell or cause to be sold, whenever
the Lender shall decide, in one or more sales or parcels, at such prices as the
Lender may deem best, and for cash or on credit or for future delivery, without
assumption of any credit risk, all or any portion of the Collateral, at any
broker's board or at public or private sale, without demand of performance or
notice of intention to sell or of time or place of sale (except the Lender shall
provide 15 days' written notice to the Credit Parties of the time and place of
any such public sale or sales and such other notices as may be required by
Applicable Law and cannot be waived), and the Lender or any other Person may be
the purchaser of all or any portion of the Collateral so sold and thereafter
hold the same absolutely, free (to the fullest extent permitted by Applicable
Law) from any claim or right of whatever kind, including any equity of
redemption, of any Credit Party, any such demand, notice, claim, right or equity
- 75 -
being hereby expressly waived and released. At any sale or sales made pursuant
to this Article 8, the Lender may bid for or purchase, free (to the fullest
extent permitted by Applicable Law) from any claim or right of whatever kind,
including any equity of redemption, of any Credit Party, any such demand,
notice, claim, right or equity being hereby expressly waived and released, any
part of or all of the Collateral offered for sale, and may make any payment on
account thereof by using any claim for moneys then due and payable to the Lender
by any Credit Party hereunder as a credit against the purchase price. The Lender
shall in any such sale make no representations or warranties with respect to the
Collateral or any part thereof, and the Lender shall not be chargeable with any
of the obligations or liabilities of any Credit Party. Each Credit Party hereby
agrees (i) that it will indemnify and hold the Lender harmless from and against
any and all claims with respect to the Collateral asserted before the taking of
actual possession or control of the relevant Collateral by the Lender pursuant
to this Article 8, or arising out of any act of, or omission to act on the part
of, any party (other than the Lender) prior to such taking of actual possession
or control by the Lender (whether asserted before or after such taking of
possession or control), or arising out of any act on the part of any Credit
Party, or its agents before or after the commencement of such actual possession
or control by the Lender except for claims arising out of Lender's gross
negligence or willful misconduct; and (ii) the Lender shall not have liability
or obligation to any Credit Party arising out of any such claim except for acts
of willful misconduct or gross negligence or not taken in good faith. Subject
only to the lawful rights of third parties, any Laboratory which has possession
of any of the Collateral is hereby constituted and appointed by the Credit
Parties as pledgeholder for the Lender and, upon the acceleration of the Loans
in accordance with Article 7 hereof, each such pledgeholder is hereby authorized
(to the fullest extent permitted by Applicable Law) to sell all or any portion
of the Collateral upon the order and direction of the Lender, and each Credit
Party hereby waives any and all claims, for damages or otherwise, for any action
taken by such pledgeholder in accordance with the terms of the UCC not otherwise
waived hereunder. In any action hereunder, the Lender shall be entitled if
permitted by Applicable Law to the appointment of a receiver without notice, to
take possession of all or any portion of the Collateral and to exercise such
powers as the court shall confer upon the receiver. Notwithstanding the
foregoing, upon the occurrence of an Event of Default, and during the
continuation of such Event of Default, the Lender shall be entitled to apply,
without prior notice to the Credit Parties, any cash or cash items constituting
Collateral in the possession of the Lender to payment of the Obligations.
SECTION 8.7. APPLICATION OF PROCEEDS ON DEFAULT. During the
continuance of an Event of Default, the balances in the Collection Account(s),
or in any account of any Credit Party with the Lender, all other income on the
Collateral, and all proceeds from any sale of the Collateral pursuant hereto
shall be applied first toward payment of the reasonable out-of-pocket costs and
expenses paid or incurred by the Lender in enforcing this Credit Agreement, in
realizing on or protecting any Collateral and in enforcing or collecting any
Obligations or any Guaranty thereof, including, without limitation, court costs
and the reasonable attorney's fees and expenses incurred by the Lender, and then
to the payment in full of the Obligations in such order as determined by the
Lender, provided, however, that, the Lender may in its discretion apply funds
- 76 -
comprising the Collateral to pay the cost (i) of completing any item of Product
owned in whole or in part by any Credit Party in any stage of production and
(ii) of making delivery to the distributors of such item of Product. Any amounts
remaining after such indefeasible payment in full shall be remitted to the
appropriate Credit Party or as a court of competent jurisdiction may otherwise
direct.
SECTION 8.8. POWER OF ATTORNEY. Each Credit Party does hereby
irrevocably make, constitute and appoint the Lender or any of its officers or
designees its true and lawful attorney-in-fact with full power in the name of
the Lender or any Credit Party, (a) after the acceleration of the Loans in
accordance with Article 7 hereof, to receive, open and dispose of all mail
addressed to any Credit Party, and to endorse any notes, checks, drafts, money
orders or other evidences of payment relating to the Collateral that may come
into the possession of the Lender with full power and right to cause the mail of
such Persons to be transferred to the Lender's own offices or otherwise, and to
do any and all other acts necessary or proper to carry out the intent of this
Credit Agreement and the grant of the security interests hereunder and under the
Fundamental Documents, and each Credit Party hereby ratifies and confirms all
that the Lender or its substitutes shall properly do by virtue hereof; (b) upon
the occurrence of an Event of Default which is not waived in writing by the
Lender, (i) to enforce all of each Credit Party's rights under and pursuant to
all agreements with respect to the Collateral, all for the sole benefit of the
Lender and to enter into such other agreements as may be necessary or
appropriate in the judgment of the Lender to complete the production,
distribution or exploitation of any item of Product which is included in the
Collateral, (ii) to enter into and perform such agreements as may be necessary
in order to carry out the terms, covenants and conditions of the Fundamental
Documents that are required to be observed or performed by any Credit Party,
(iii) to execute such other and further mortgages, pledges and assignments of
the Collateral, and related instruments or agreements, as the Lender may
reasonably require for the purpose of perfecting, protecting, maintaining or
enforcing the security interests granted to the Lender hereunder, and (iv) to do
any and all other things necessary or proper to carry out the intention of this
Credit Agreement and the grant of the security interests hereunder and under the
other Fundamental Documents. The Credit Parties hereby ratify and confirm in
advance all that the Lender as such attorney-in-fact or its substitutes shall
properly do by virtue of this power of attorney. In the event the Lender
exercises the power of attorney granted herein, the Lender shall, concurrently
with such exercise, provide written notice to the Borrower and the Lender in
accordance with Section 11.1.
SECTION 8.9. FINANCING STATEMENTS, DIRECT PAYMENTS. Each
Credit Party hereby authorizes the Lender to file UCC financing statements and
any amendments thereto or continuations thereof, any Copyright Security
Agreement, any Copyright Security Agreement Supplement, and any other
appropriate security documents or instruments and to give any notices necessary
or desirable to perfect the Lien of the Lender on the Collateral, in all cases
without the signatures of any Credit Party or to execute such items as
attorney-in-fact for any Credit Party. Each Credit Party further authorizes the
Lender upon the occurrence of an Event of Default, and during the continuation
of such Event of Default, to notify any account debtors that all sums payable to
any Credit Party relating to the Collateral shall be paid directly to the
Lender.
- 77 -
SECTION 8.10. FURTHER ASSURANCES. Upon the reasonable request
of the Lender, each Credit Party hereby agrees to duly and promptly execute and
deliver, or cause to be duly executed and delivered, at the cost and expense of
the Credit Parties, such further instruments as may be necessary or proper, in
the judgment of the Lender, to carry out the provisions and purposes of this
Article 8, necessary, in the judgment of the Lender, to perfect and preserve the
Liens of the Lender hereunder and under the Fundamental Documents, and in the
Collateral or any portion thereof.
SECTION 8.11. TERMINATION. The security interests granted
under this Article 8 shall terminate when all the Obligations have been paid in
full and performed and the Commitment shall have terminated and all Letters of
Credit shall have expired or been terminated or canceled. Upon request by the
Credit Parties (and at the sole expense of the Credit Parties) after such
termination, the Lender will take all reasonable action and do all things
reasonably necessary, including executing UCC terminations, Pledgeholder
Agreement terminations, termination letters to account debtors and copyright
reassignments, to release the security interest granted to it hereunder.
SECTION 8.12. REMEDIES NOT EXCLUSIVE. The remedies conferred
upon or reserved to the Lender in this Article 8 are intended to be in addition
to, and not in limitation of, any other remedy or remedies available to the
Lender. Without limiting the generality of the foregoing, the Lender shall have
all rights and remedies of a secured creditor under Article 9 of the UCC.
SECTION 8.13. QUIET ENJOYMENT. The Lender acknowledges that
its security interest hereunder is subject to the rights of Quiet Enjoyment of
parties to Distribution Agreements, license agreements and other similar
agreements, whether existing on the date hereof or hereafter executed. For the
purpose hereof, "Quiet Enjoyment" shall mean in connection with the rights of
licensees under license agreements and distributors under Distribution
Agreements, the Lender's agreement that its rights under this Credit Agreement
and the Fundamental Documents and in the Collateral are subject to the rights of
such parties to distribute, exhibit and/or to exploit the item of Product
licensed to them, and to receive prints or tapes or have access to preprint
material or master tapes in connection therewith and that even if the Lender
shall become the owner of the Collateral in case of an Event of Default, the
Lender's ownership rights shall be subject to the rights of said parties under
such agreements, provided, however, that such licensee or such distributor shall
not be in default under the relevant license agreement or Distribution Agreement
and, provided, further that the Lender shall not be responsible for any
liability or obligation of any Credit Party under any license agreement.
- 78 -
SECTION 8.14. CONTINUATION AND REINSTATEMENT. Each Credit
Party further agrees that the security interest granted hereunder shall continue
to be effective or be reinstated, as the case may be, if at any time payment or
any part thereof, of principal or interest on any Obligation is rescinded or
must otherwise be restored by the Lender upon the bankruptcy or reorganization
of any Credit Party or otherwise.
9. GUARANTY
SECTION 9.1. GUARANTY. (a) Each Corporate Guarantor
unconditionally and irrevocably guarantees to the Lender the due and punctual
payment by, and performance of, the Obligations (including interest accruing on
and after the filing of any petition in bankruptcy or of reorganization of the
obligor whether or not post filing interest is allowed in such proceeding). Each
Corporate Guarantor further agrees that the Obligations may be extended or
renewed, in whole or in part, without notice or further assent from it (except
as may be otherwise required herein), and it will remain bound upon this
guaranty notwithstanding any extension or renewal of any Obligation.
(b) Each Corporate Guarantor waives presentation to, demand
for payment from and protest to, as the case may be, the Credit Parties or any
other Corporate Guarantor of any of the Obligations, and also waives notice of
protest for nonpayment. The obligations of each Corporate Guarantor hereunder
shall not be affected by (i) the failure of the Lender to assert any claim or
demand or to enforce any right or remedy against the Borrower, Corporate
Guarantor, any Individual Guarantor or any other guarantor under the provisions
of this Credit Agreement or any other agreement or otherwise; (ii) any extension
or renewal of any provision hereof or thereof; (iii) the failure of the Lender
to obtain the consent of the Corporate Guarantor with respect to any rescission,
waiver, compromise, acceleration, amendment or modification of any of the terms
or provisions of this Credit Agreement, the Note or of any other agreement; (iv)
the release, exchange, waiver or foreclosure of any security held by the Lender
for the Obligations or any of them; (v) the failure of the Lender to exercise
any right or remedy against any other Corporate Guarantor, any Individual
Guarantor or any other guarantor of the Obligations; or (vi) the release or
substitution of any Corporate Guarantor, any Individual Guarantor or other
guarantor of the Obligations. Without limiting the generality of the foregoing
or any other provision hereof, to the extent permitted by applicable law, each
Corporate Guarantor hereby expressly waives any and all benefits which might
otherwise be available to it under California Civil Code Sections 2799, 2809,
2810, 2815, 2819, 2820, 2821, 2822, 2838, 2839, 2845, 2848, 2849, 2850, 2899 and
3433.
(c) Each Corporate Guarantor further agrees that this Guaranty
constitutes a guaranty of performance and of payment when due and not just of
collection, and waives any right to require that any resort be had by the Lender
to any security held for payment of the Obligations or to any balance of any
deposit, account or credit on the books of the Lender in favor of the Borrower,
any other Corporate Guarantor, any Individual Guarantor or to any other Person.
- 79 -
(d) Each Corporate Guarantor hereby expressly assumes all
responsibilities to remain informed of the financial condition of the Borrower,
the Corporate Guarantors, the Individual Guarantors and any other guarantors and
any circumstances affecting the ability of the Borrower to perform under this
Credit Agreement.
(e) Each Corporate Guarantor's obligations under the guaranty
shall not be affected by the genuineness, validity, regularity or enforceability
of the Obligations, the Note or any other instrument evidencing any Obligations,
or by the existence, validity, enforceability, perfection, or extent of any
collateral therefor or by any other circumstance relating to the Obligations
which might otherwise constitute a defense to this Guaranty. The Lender makes no
representation or warranty with respect to any such circumstances and has no
duty or responsibility whatsoever to each Corporate Guarantor in respect to the
management and maintenance of the Obligations or any collateral security for the
Obligations.
SECTION 9.2. NO IMPAIRMENT OF GUARANTY, ETC. The obligations
of each Corporate Guarantor hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason (except payment of the
Obligations), including, without limitation, any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to any defense or
set-off, counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality or unenforceability of the Obligations. Without limiting
the generality of the foregoing, the obligations of each Corporate Guarantor
hereunder shall not be discharged or impaired or otherwise affected by the
failure of the Lender to assert any claim or demand or to enforce any remedy
under this Credit Agreement or any other agreement, by any waiver or
modification of any provision thereof, by any default, failure or delay, willful
or otherwise, in the performance of the Obligations, or by any other act or
thing or omission or delay to do any other act or thing which may or might in
any manner or to any extent vary the risk of such Corporate Guarantor or would
otherwise operate as a discharge of such Corporate Guarantor as a matter of law,
unless and until the Obligations are paid in full, the Commitments have
terminated and each outstanding Letter of Credit has expired or otherwise been
terminated.
SECTION 9.3. CONTINUATION AND REINSTATEMENT, ETC. (a) Each
Corporate Guarantor further agrees that its guaranty hereunder shall continue to
be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of any Obligation is rescinded or must otherwise be restored
by the Lender upon the bankruptcy or reorganization of Borrower or a Corporate
Guarantor, or otherwise. In furtherance of the provisions of this Article 9, and
not in limitation of any other right which the Lender may have at law or in
equity against the Borrower or a Corporate Guarantor by virtue hereof, upon
failure of the Borrower to pay any Obligation when and as the same shall become
due, whether at maturity, by acceleration, after notice or otherwise, each
Corporate Guarantor hereby promises to and will, upon receipt of written demand
by the Lender, forthwith pay or cause to be paid to the Lender in cash an amount
equal to the unpaid amount of all the Obligations with interest thereon at a
rate of interest equal to the rate specified in Section 2.7(a) hereof, and
thereupon the Lender shall assign such Obligation, together with all security
interests, if any, then held by the Lender in respect of such Obligation, to the
- 80 -
Corporate Guarantors making such payment; such assignment to be subordinate and
junior to the rights of the Lender with regard to amounts payable by the
Borrower in connection with the remaining unpaid Obligations and to be pro tanto
to the extent to which the Obligation in question was discharged by the
Corporate Guarantor or Corporate Guarantors making such payments.
(b) All rights of the Corporate Guarantors against the
Borrower, arising as a result of the payment by any Corporate Guarantor of any
sums to the Lender or directly to the Lender hereunder by way of right of
subrogation or otherwise shall in all respects be subordinated and junior in
right of payment to, and shall not be exercised by such Corporate Guarantor
until and unless, the prior final and indefeasible payment in full of all the
Obligations. If any amount shall be paid to such Corporate Guarantor for the
account of the Borrower, such amount shall be held in trust for the benefit of
the Lender, segregated from such Corporate Guarantor's own assets, and shall
forthwith be paid to the Lender to be credited and applied to the Obligations,
whether matured or unmatured.
SECTION 9.4. LIMITATION ON GUARANTEED AMOUNT ETC.
Notwithstanding any other provision of this Article 9, the amount guaranteed by
each Corporate Guarantor hereunder shall be limited to the extent, if any,
required so that its obligations under this Article 9 shall not be subject to
avoidance under Section 548 of the Bankruptcy Code or to being set aside or
annulled under any applicable state law relating to fraud on creditors. In
determining the limitations, if any, on the amount of any Corporate Guarantor's
obligations hereunder pursuant to the preceding sentence, it is the intention of
the parties hereto that any rights of subrogation or contribution which such
Corporate Guarantor may have under this Article 9 (or as a result of the
operation of Article 8 with regard to assets of other Credit Parties) or any
other agreement or under Applicable Law shall be taken into account.
10. PLEDGE
SECTION 10.1. PLEDGE. As security for the Obligations, each
Pledgor hereby pledges, hypothecates, assigns, transfers, sets over and delivers
unto the Lender, a security interest in all Pledged Securities now owned or
hereafter acquired by it. On or prior to the Closing Date, the Pledgors shall
deliver to the Lender the definitive instruments representing all Pledged
Securities, accompanied by executed undated stock powers, duly endorsed or
executed in blank by the appropriate Pledgor, and such other instruments or
documents as the Lender or its counsel shall reasonably request.
SECTION 10.2. COVENANT. Each Pledgor covenants that as
stockholder of each of its respective Subsidiaries it will not take any action
to allow any additional shares of common stock, preferred stock or other equity
securities of any of its respective Subsidiaries or any securities convertible
or exchangeable into common or preferred stock of such Subsidiaries to be
issued, or grant any options or warrants, unless such securities are pledged to
the Lender as security for the Obligations.
- 81 -
SECTION 10.3. REGISTRATION IN NOMINEE NAME; DENOMINATIONS.
Upon the occurrence and during the continuation of an Event of Default, the
Lender shall have the right (in its sole and absolute discretion) to hold the
certificates representing any Pledged Securities (a) in its own name or in the
name of its nominee or (b) in the name of the appropriate Pledgor, endorsed or
assigned in blank or in favor of the Lender. The Lender shall have the right to
exchange the certificates representing Pledged Securities for certificates of
smaller or larger denominations for any purpose consistent with this Credit
Agreement.
SECTION 10.4. VOTING RIGHTS; DIVIDENDS; ETC. (a) The
appropriate Pledgor shall be entitled to exercise any and all voting and/or
consensual rights and powers accruing to owners of the Pledged Securities or any
part thereof for any purpose not inconsistent with the terms hereof, at all
times, except as expressly provided in (c) below.
(b) Any dividends or distributions of any kind whatsoever
(other, so long as an Event of Default is not continuing, than cash) received by
a Pledgor, whether resulting from a subdivision, combination, or
reclassification of the outstanding capital stock of the issuer or received in
exchange for Pledged Securities or any part thereof or as a result of any
merger, consolidation, acquisition, or other exchange of assets to which the
issuer may be a party, or otherwise, shall be and become part of the Pledged
Securities pledged hereunder and shall immediately be delivered to the Lender to
be held subject to the terms hereof.
(c) Upon the occurrence and during the continuance of an Event
of Default and notice from the Lender of the transfer of such rights to the
Lender, all rights of the Pledgors to exercise the voting and/or consensual
rights and powers and to receive dividends or distributions which it is entitled
to pursuant to this Section 10.4 shall cease, and all such rights shall
thereupon become vested in the Lender, which shall have the sole and exclusive
right and authority to exercise such voting and/or consensual rights and/or
receive such dividends or distributions until such time as such Event of Default
has been cured. All dividends and distributions which are received contrary to
the provisions of this subsection (c) shall be received in trust for the benefit
of the Lender and shall be delivered.
(d) If the Lender shall receive any cash pursuant to Section
10.4(c) which but for the occurrence of an Event of Default the relevant Pledgor
would be entitled to retain for its own account under Section 10.4(b), then
after and so long as all Events of Default have been cured and only if the
Obligations have not been accelerated, the Lender shall pay over to such Pledgor
any such cash retained by it during the continuance of such Event of Default
which has not been applied to the Obligations pursuant to the terms hereof.
SECTION 10.5. REMEDIES UPON DEFAULT. If the Loans shall have
been accelerated in accordance with Article 7 hereof, the Lender may sell the
Pledged Securities, or any part thereof, at public or private sale or at any
broker's board or on any securities exchange, for cash, upon credit or for
future delivery as the Lender shall deem appropriate subject to the terms hereof
or as otherwise provided in the UCC. The Lender shall be authorized at any such
- 82 -
sale (if it deems it advisable to do so) to restrict to the
full extent permitted by Applicable Law the prospective bidders or purchasers to
Persons who will represent and agree that they are purchasing the Pledged
Securities for their own account for investment and not with a view to the
distribution or sale thereof, and upon consummation of any such sale the Lender
shall have the right to assign, transfer, and deliver to the purchaser or
purchasers thereof the Pledged Securities so sold. Each such purchaser at any
such sale shall hold the property sold absolutely, free from any claim or right
on the part of the Pledgors. The Lender shall give ten (10) days' written notice
of its intention to make any such public or private sale, or sale at any
broker's board or on any such securities exchange, or of any other disposition
of the Pledged Securities. Such notice, in the case of public sale, shall state
the time and place for such sale and, in the case of sale at a broker's board or
on a securities exchange, shall state the board or exchange at which such sale
is to be made and the day on which the Pledged Securities, or portion thereof,
will first be offered for sale at such board or exchange. Any such public sale
shall be held at such time or times within ordinary business hours and at such
place or places as the Lender may fix and shall state in the notice of such
sale. At any such sale, the Pledged Securities, or portion thereof, to be sold
may be sold in one lot as an entirety or in separate parcels, as the Lender may
(in its sole and absolute discretion) determine. The Lender shall not be
obligated to make any sale of the Pledged Securities if it shall determine not
to do so, regardless of the fact that notice of sale of the Pledged Securities
may have been given. The Lender may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. In case the sale of all or any part of the Pledged Securities is made
on credit or for future delivery, the Pledged Securities so sold shall be
retained by the Lender until the sale price is paid by the purchaser or
purchasers thereof, but the Lender shall not incur any liability in case any
such purchaser or purchasers shall fail to take up and pay for the Pledged
Securities so sold and, in case of any such failure, such Pledged Securities may
be sold again upon like notice. At any sale or sales made pursuant to this
Section 10.5, the Lender may bid for or purchase, free from any claim or right
of whatever kind, including any equity of redemption, of the Pledgors, any such
demand, notice, claim, right or equity being hereby expressly waived and
released, any or all of the Pledged Securities offered for sale, and may make
any payment on the account thereof by using any claim for moneys then due and
payable to the Lender by any Credit Party as a credit against the purchase
price; and the Lender, upon compliance with the terms of sale, may hold, retain
and dispose of the Pledged Securities without further accountability therefor to
the Pledgors or any third party (other than the Lender). The Lender shall in any
such sale make no representations or warranties with respect to the Pledged
Securities or any part thereof, and shall not be chargeable with any of the
obligations or liabilities of the Pledgors with respect thereto. Each Pledgor
hereby agrees (i) it will indemnify and hold the Lender harmless from and
against any and all claims with respect to the Pledged Securities asserted
before the taking of actual possession or control of the Pledged Securities by
the Lender pursuant to this Credit Agreement or arising out of any act of, or
omission to act on the part of, any party prior to such taking of actual
possession or control by the Lender (whether asserted before or after such
taking of possession or control), or arising out of any act on the part of any
Pledgor or Affiliates before or after the commencement of such actual possession
- 83 -
or control by the Lender unless due to Lender's gross negligence or wilful
misconduct and (ii) the Lender shall have no liability or obligation arising out
of any such claim unless due to Lender's gross negligence or wilful misconduct.
As an alternative to exercising the power of sale herein conferred upon it, the
Lender may proceed by a suit or suits at law or in equity to foreclose upon the
Collateral and Pledged Securities under this Credit Agreement and to sell the
Pledged Securities, or any portion thereof, pursuant to a judgment or decree of
a court or courts having competent jurisdiction.
SECTION 10.6. APPLICATION OF PROCEEDS OF SALE AND CASH. The
proceeds of sale of the Pledged Securities sold pursuant to Section 10.5 hereof
shall be applied by the Lender as follows:
(i) to the payment of all reasonable out-of-pocket costs and
expenses paid or incurred by the Lender in connection with such sale, including,
without limitation, all court costs and the reasonable fees and expenses of
counsel for the Lender in connection therewith, and the payment of all
reasonable out-of-pocket costs and expenses paid or incurred by the Lender in
enforcing this Credit Agreement, in realizing or protecting any Collateral and
in enforcing or collecting any Obligations or any Guaranty thereof, including,
without limitation, court costs and the reasonable attorney's fees and expenses
incurred by the Lender in connection therewith; and
(ii) to the payment in full of the Obligations in such order
as determined by the Lender;
provided, however, that the Lender may in its discretion apply funds comprising
the Collateral to pay the cost (i) of completing any item of Product owned in
whole or in part by any Credit Party in any stage of production and (ii) of
making delivery to the distributors of such item of Product. Any amounts
remaining after such indefeasible payment in full shall be remitted to the
appropriate Pledgor, or as a court of competent jurisdiction may otherwise
direct.
SECTION 10.7. SECURITIES ACT, ETC. In view of the position of
each Pledgor in relation to the Pledged Securities pledged by it, or because of
other present or future circumstances, a question may arise under the Securities
Act of 1933, as amended, as now or hereafter in effect, or any similar statute
hereafter enacted analogous in purpose or effect (such Act and any such similar
statute as from time to time in effect being hereinafter called the "Federal
Securities Laws"), with respect to any disposition of the Pledged Securities
permitted hereunder, each Pledgor understands that compliance with the Federal
Securities Laws may very strictly limit the course of conduct of the Lender if
the Lender were to attempt to dispose of all or any part of the Pledged
Securities, and may also limit the extent to which or the manner in which any
subsequent transferee of any Pledged Securities may dispose of the same.
Similarly, there may be other legal restrictions or limitations affecting the
Lender in any attempt to dispose of all or any part of the Pledged Securities
under applicable Blue Sky or other state securities laws, or similar laws
analogous in purpose or effect. Under Applicable Law, in the absence of an
- 84 -
Agreement to the contrary, the Lender may perhaps be held to have certain
general duties and obligations to the Pledgors to make some effort towards
obtaining a fair price even though the Obligations may be discharged or reduced
by the proceeds of a sale at a lesser price. Each Pledgor waives to the fullest
extent permitted by Applicable Law any such general duty or obligation to it,
and the Pledgors and/or the Credit Parties will not attempt to hold the Lender
responsible for selling all or any part of the Pledged Securities at an
inadequate price; provided that the Lender, in good faith, shall have obtained
three bids for the purchase of all or part of the Pledged Securities and the
Lender shall have accepted the highest offer of such three bids.
SECTION 10.8. CONTINUATION AND REINSTATEMENT. Each Pledgor
further agrees that its pledge hereunder shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
principal of or interest on any Obligation is rescinded or must otherwise be
restored by the Lender upon the bankruptcy or reorganization of any Pledgor or
otherwise.
SECTION 10.9. TERMINATION. The pledge referenced herein shall
terminate when all of the Obligations shall have been paid in full and the
Commitment shall have terminated, and all Letters of Credit shall have expired
or been terminated or canceled, at which time the Lender shall assign and
deliver to the appropriate Pledgor, or to such Person or Persons as such Pledgor
shall designate, against receipt, such of the Pledged Securities (if any) as
shall not have been sold or otherwise applied by the Lender pursuant to the
terms hereof and shall still be held by it hereunder, together with appropriate
instruments of reassignment and release. Any such reassignment shall be free and
clear of all Liens, arising by, under or through the Lender but shall otherwise
be without recourse upon or warranty by the Lender and at the expense of the
Pledgors.
11. MISCELLANEOUS
SECTION 11.1. NOTICES. Notices and other communications
provided for herein shall be in writing and shall be delivered or mailed (or in
the case of facsimile communication, if by telegram, delivered to the telegraph
company and, if by telex, graphic scanning or other telegraphic or facsimile
communications equipment of the sending party hereto, delivered by such
equipment) addressed, if to the Lender to it at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇ ▇. ▇▇▇▇▇ III, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇,
with a copy to Chase Securities Inc., ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Facsimile No.: (310)
788-5628 or if to any Credit Party at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇ or such other address as such party may from time to time
designate by giving written notice to the other parties hereunder. Any failure
of the Lender giving notice pursuant to this Section 11.1, to provide a courtesy
copy to a party as provided herein, shall not affect the validity of such
notice. All notices and other communications given to any party hereto in
accordance with the provisions of this Credit Agreement shall be deemed to have
been given on the fifth Business Day after the date when sent by registered or
certified mail, postage prepaid, return receipt requested, if by mail, or when
- 85-
delivered to the telegraph company, charges prepaid, if by telegram, or upon
receipt by such party, if by any telegraphic or facsimile communications
equipment, in each case addressed to such party as provided in this Section 11.1
or in accordance with the latest unrevoked written direction from such party.
SECTION 11.2. SURVIVAL OF AGREEMENT, REPRESENTATIONS AND
WARRANTIES, ETC. All warranties, representations and covenants made by any of
the Credit Parties herein or in any certificate or other instrument delivered by
it or on its behalf in connection with this Credit Agreement shall be considered
to have been relied upon by the Lender and, except for any terminations,
amendments, modifications or waivers thereof in accordance with the terms
hereof, shall survive the making of the Loans and issuance of the Letters of
Credit herein contemplated and the execution and delivery to the Lender of the
Note regardless of any investigation made by the Lender and shall continue in
full force and effect so long as any amount due or to become due hereunder is
outstanding and unpaid and so long as any Letter of Credit remains outstanding
and so long as the Commitment has not been terminated. All statements in any
such certificate or other instrument shall constitute representations and
warranties by the Credit Parties hereunder.
SECTION 11.3. SUCCESSORS AND ASSIGNS; LOAN SALES;
PARTICIPATIONS. (a) Whenever in this Credit Agreement any of the parties hereto
is referred to, such reference shall be deemed to include the successors and
assigns of such party; provided, however, that the Borrower may not assign its
rights hereunder without the prior written consent of the Lender, and all
covenants, promises and agreements by or on behalf of the Borrower which are
contained in this Credit Agreement shall bind and inure to the benefit of the
successors and assigns of all such parties.
(b) The Lender may, with the consent of the Borrower (such
consent not to be unreasonably withheld), assign to one or more banks or other
entities, all or a portion of its interests, rights and obligations under this
Credit Agreement (including, without limitation, all or a portion of its
Commitment and the same portion of the Loans at the time owing to it and the
Note held by it). The Lender and such assignee shall execute appropriate
documentation (i) evidencing such assignment, which documentation shall set
forth the respective rights and obligations of the Lender and such assignee and
(ii) to the extent The Chase Manhattan Bank shall retain a portion of the
Commitment, appointing The Chase Manhattan Bank as agent for the Lender and such
assignee(s). Upon the effectiveness of such assignment, the assignee thereunder
shall become a party to this Credit Agreement.
(c) Once there has been an assignment by the Lender pursuant
to this Section 11.3, the Lender shall maintain at its address at which notices
are to be given to it pursuant to Section 11.1 hereof, a register for the
recordation of the names and addresses of the assignees of the Lender hereunder
and the commitments of, and principal amount of the Loans owing to, each such
assignee from time to time (the "Register"). The entries in the Register shall
be conclusive, in the absence of manifest error, and the Borrower and any such
assignee may treat each Person whose name is recorded in the Register as an
assignee of the Lender hereunder for all purposes of the Fundamental Documents.
The Register shall be available for inspection by the Borrower or any such
assignee at any reasonable time and from time to time upon reasonable prior
notice.
- 86 -
(d) The Lender shall give prompt written notice to the
Borrower of each assignment made hereunder. Within five (5) Business Days after
receipt of any such notice, the Borrower, at its own expense, shall execute and
deliver to the Lender in exchange for the Note surrendered by the Lender to the
Borrower, new Notes to the order of the assignee of the Lender and the Lender in
amounts equal to the respective Commitments held by each of them after giving
effect to the applicable assignment. Such new Notes shall be in an aggregate
principal amount equal to the aggregate principal amount of the surrendered
Notes, shall be dated the date of the surrendered Notes and shall otherwise be
in substantially the form of Exhibit A hereto. In addition the Borrower will
promptly, at its own expense, execute such amendments to the Fundamental
Documents to which it is a party and such additional documents, and take such
other actions as the Lender or the assignee of the Lender may reasonably request
in order to give such assignee of the Lender the full benefit of the Liens
contemplated by the Fundamental Documents.
(e) The Lender may, without the consent of the Borrower, sell
participations to one or more banks or other entities in all or a portion of its
rights and obligations under this Credit Agreement (including, without
limitation, all or a portion of its Commitment, the Loans owing to it and the
Note held by it); provided, however, that (i) the Lender's obligations under
this Credit Agreement shall remain unchanged, (ii) such participant shall not be
granted any voting rights under this Credit Agreement, except with respect to
proposed changes to interest rates, amounts of Commitments, maturity of any
Loans, release of all or substantially all the Collateral and fees (as
applicable to such participant), (iii) the Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iv) the participating banks or other entities shall be entitled to the cost
protection provisions contained in Sections 2.9(b), 2.10 and 2.14 hereof;
provided, that the aggregate amount that the Borrower shall be obligated to pay
to the Lender (for the benefit of itself and any participants) pursuant to such
provisions shall be limited to the amount to which the Lender shall be entitled
to receive pursuant to such provisions and (v) the Borrower shall continue to
deal solely and directly with the Lender in connection with the Lender's rights
and obligations under this Credit Agreement.
(f) The Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
11.3, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished to the Lender by
or on behalf of the Borrower; provided that prior to any such disclosure, each
such assignee or participant or proposed assignee or participant shall agree (by
executing a confidentiality letter) to preserve the confidentiality of any
confidential information relating to the Borrower received from the Lender to
the same extent as the Lender as set forth in Section 11.16 hereof.
- 87 -
(g) The Borrower consents that the Lender may at any time and
from time to time pledge or otherwise grant a security interest in any Loan or
in any Note evidencing any Loan (or any part thereof) to any Federal Reserve
Bank.
SECTION 11.4. EXPENSES; DOCUMENTARY TAXES. Whether or not the
transactions hereby contemplated shall be consummated, the Borrower agrees to
pay all reasonable out-of-pocket expenses incurred by the Lender in connection
with performance of due diligence by the Lender in connection with the
transactions hereby contemplated and the preparation, execution, delivery,
waiver or modification and administration of this Credit Agreement and any other
documentation contemplated hereby, the Note and the making of the Loans and the
Letters of Credit, including but not limited to any internally allocated audit
costs, the reasonable fees and disbursements of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP,
counsel for the Lender and any other counsel that the Lender shall retain,
reasonable fees and expenses of technical or other consultants engaged by the
Lender. Such payments shall be made on the date of execution of this Credit
Agreement and thereafter on demand. In addition, the Borrower agrees to pay all
reasonable out-of-pocket expenses incurred by the Lender in the enforcement or
protection of the rights of the Lender in connection with this Credit Agreement,
the Note or the Letters of Credit, and with respect to any action which may be
instituted by any Person other than the Credit Parties against the Lender in
respect of the foregoing, or as a result of any transaction, action or
non-action arising from the foregoing, including but not limited to the
reasonable fees and disbursements of any counsel for the Lender (but excluding
any such expenses to the extent incurred by reason of the gross negligence or
wilful misconduct of the Lender). Such payments shall be made on demand after
the date of execution of this Credit Agreement. The Borrower agrees that it
shall indemnify the Lender from and hold it harmless against any documentary
taxes, assessments or charges made by any Governmental Authority by reason of
the execution and delivery of this Credit Agreement, the Note or the issuance of
Letters of Credit. The obligations of the Borrower under this Section 11.4 shall
survive the termination of this Credit Agreement and/or the payment of the Loans
and/or the expiration of the Letters of Credit.
SECTION 11.5. INDEMNIFICATION OF THE LENDER. The Borrower
agrees (a) to indemnify and hold harmless the Lender and its directors,
officers, employees, trustees and agents (to the full extent permitted by law)
from and against any and all claims, demands, losses, judgments and liabilities
(including liabilities for penalties) of whatsoever nature, and (b) to pay to
the Lender an amount equal to the amount of all costs and expenses, including
reasonable legal fees and disbursements, in each case arising out of or
resulting from any litigation, investigation or other proceedings relating to
the Collateral, this Credit Agreement, the Copyright Security Agreement, the
Pledgeholder Agreements and the Letters of Credit, the making of the Loans, any
attempt to audit, inspect, protect or sell the Collateral, or the administration
and enforcement or exercise of any right or remedy granted to the Lender
hereunder or thereunder but excluding therefrom all claims, demands, losses,
judgments, liabilities, costs and expenses arising out of or resulting from (i)
the gross negligence or willful misconduct of the Lender and (ii) litigation
between the Borrower and the Lender in connection with the Fundamental Documents
or in any way relating to the transactions contemplated hereby if, after final
non-appealable judgment, the Lender is not the prevailing party in such
- 88 -
litigation. The foregoing indemnity agreement includes any reasonable costs
incurred by the Lender in connection with any action or proceeding which may be
instituted in respect of the foregoing by the Lender or by any other Person
either against the Lender or in connection with which any officer, director,
agent or employee of the Lender is called as a witness or deponent, including,
but not limited to, the reasonable fees and disbursements of ▇▇▇▇▇▇, ▇▇▇▇▇ &
▇▇▇▇▇▇▇ LLP, counsel to the Lender and any out-of-pocket costs incurred by the
Lender in appearing as a witness or in otherwise complying with legal process
served upon them. In no event shall the Lender be liable to the Borrower for any
matter or thing in connection with this Credit Agreement other than to make
Loans and account for moneys actually received by them in accordance with the
terms hereof.
Whenever the provisions of this Credit Agreement or any other
Fundamental Document provide that, if any Credit Party shall fail to do any act
or thing which it has covenanted to do hereunder or any representation or
warranty of any of the Credit Parties shall be breached, the Lender may (but
shall not be obligated to) do the same or cause it to be done or remedy any such
breach and if the Lender does the same or causes it to be done, there shall be
added to the Obligations hereunder the cost or expense incurred by the Lender in
so doing, and any and all amounts expended by the Lender in taking any such
action shall be repayable to it upon its demand therefor and shall bear interest
at 2% in excess of the Alternate Base Rate from time to time in effect from the
date advanced to the date of repayment.
All indemnities contained in this Section 11.5 shall survive
the expiration or earlier termination of this Credit Agreement and shall inure
to the benefit of any Person who was a Lender notwithstanding such Person's
assignment of all its Loans and Commitment.
SECTION 11.6. CHOICE OF LAW. THIS CREDIT AGREEMENT AND THE
NOTES SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY,
THE LAWS OF THE STATE OF NEW YORK WHICH ARE APPLICABLE TO CONTRACTS MADE AND TO
BE PERFORMED WHOLLY WITHIN SUCH STATE AND, IN THE CASE OF PROVISIONS RELATING TO
INTEREST RATES, ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. EACH LETTER
OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO
SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICES FOR
DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE,
PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT GOVERNED BY
THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.
- 89 -
SECTION 11.7. WAIVER OF JURY TRIAL. TO THE EXTENT NOT
PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH CREDIT PARTY HEREBY
WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT
OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
CREDIT AGREEMENT OR THE SUBJECT MATTER HEREOF OR ANY FUNDAMENTAL DOCUMENT, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR
TORT OR OTHERWISE. EACH CREDIT PARTY ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY
THE LENDER THAT THE PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL INDUCEMENT
UPON WHICH THE LENDER HAS RELIED, IS RELYING AND WILL RELY IN ENTERING INTO THIS
CREDIT AGREEMENT AND ANY OTHER FUNDAMENTAL DOCUMENT. THE LENDER MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 11.7 WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE CREDIT PARTIES TO THE WAIVER OF THEIR RIGHTS TO
TRIAL BY JURY.
SECTION 11.8. NO WAIVER. No failure on the part of the Lender
to exercise, and no delay in exercising, any right, power or remedy hereunder,
under the Note or any other Fundamental Document or with regards to Letters of
Credit shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. All
remedies hereunder are cumulative and are not exclusive of any other remedies
provided by law.
SECTION 11.9. EXTENSION OF PAYMENT DATE. Should any payment of
principal of or interest on the Note or any other amount due hereunder become
due and payable on a day other than a Business Day, the due date of such payment
thereof shall be extended to the next succeeding Business Day and, in the case
of principal, interest shall be payable thereon at the rate herein specified
during such extension.
SECTION 11.10. AMENDMENTS, ETC. No modification, amendment or
waiver of any provision of this Credit Agreement, and no consent to any
departure by the Credit Parties herefrom, shall in any event be effective unless
the same shall be in writing and signed by the Lender and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given. No notice to or demand on any of the Credit Parties shall entitle
such Credit Party to any other or further notice or demand in the same, similar
or other circumstances. Each holder of a Note shall be bound by any amendment,
modification, waiver or consent authorized as provided herein, whether or not a
Note shall have been marked to indicate such amendment, modification, waiver or
consent and any consent by any holder of a Note shall bind any Person
subsequently acquiring a Note, whether or not a Note is so marked.
SECTION 11.11. SEVERABILITY. Any provision of this Credit
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
- 90 -
SECTION 11.12. SERVICE OF PROCESS. EACH CREDIT PARTY (EACH A
"SUBMITTING PARTY") HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATE
COURTS OF THE STATE OF NEW YORK AND TO THE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSES OF ANY
SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS CREDIT
AGREEMENT (INCLUDING, BUT NOT LIMITED TO THE LETTERS OF CREDIT) OR THE SUBJECT
MATTER HEREOF BROUGHT BY THE LENDER OR ANY OF ITS SUCCESSORS OR ASSIGNS IN
EITHER OF THE ABOVE- REFERENCED FORUMS AT THE SOLE OPTION OF THE LENDER. EACH
SUBMITTING PARTY TO THE EXTENT PERMITTED BY APPLICABLE LAW (A) HEREBY WAIVES,
AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH COURTS, ANY CLAIM THAT IT IS NOT
SUBJECT PERSONALLY TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT ITS
PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION
OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER OR THAT THIS CREDIT AGREEMENT OR THE SUBJECT
MATTER HEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURT, (B) HEREBY WAIVES THE
RIGHT TO REMOVE ANY SUCH ACTION, SUIT OR PROCEEDING INSTITUTED BY THE LENDER IN
STATE COURT TO FEDERAL COURT AND (C) HEREBY WAIVES THE RIGHT TO ASSERT IN ANY
SUCH ACTION, SUIT OR PROCEEDING ANY OFFSETS OR COUNTERCLAIMS EXCEPT
COUNTERCLAIMS THAT ARE COMPULSORY OR OTHERWISE ARISE FROM THE SAME SUBJECT
MATTER. THE SUBMITTING PARTY HEREBY CONSENTS TO SERVICE OF PROCESS BY MAIL AT
ITS ADDRESS TO WHICH NOTICES ARE TO BE GIVEN PURSUANT TO SECTION 11.1 HEREOF.
THE SUBMITTING PARTY AGREES THAT ITS SUBMISSION TO JURISDICTION AND CONSENT TO
SERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF THE LENDER. FINAL
JUDGMENT AGAINST THE SUBMITTING PARTY IN ANY SUCH ACTION, SUIT OR PROCEEDING
SHALL BE CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER JURISDICTION (A) BY SUIT,
ACTION OR PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE
CONCLUSIVE EVIDENCE OF THE FACT AND THE AMOUNT OF INDEBTEDNESS OR LIABILITY OF
THE SUBMITTING PARTY THEREIN DESCRIBED OR (B) IN ANY OTHER MANNER PROVIDED BY OR
PURSUANT TO THE LAWS OF SUCH OTHER JURISDICTION, PROVIDED, HOWEVER, THAT THE
LENDER MAY AT ITS OPTION BRING SUIT, OR INSTITUTE OTHER JUDICIAL PROCEEDINGS
AGAINST THE SUBMITTING PARTY OR ANY OF ITS ASSETS IN ANY ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ OR OF ANY COUNTRY OR PLACE WHERE THE SUBMITTING PARTY OR
SUCH ASSETS MAY BE FOUND.
- 91 -
SECTION 11.13. HEADINGS. Section headings used herein and the
Table of Contents are for convenience only and are not to affect the
construction of or be taken into consideration in interpreting this Credit
Agreement.
SECTION 11.14. EXECUTION IN COUNTERPARTS. This Credit
Agreement may be executed in any number of counterparts, each of which shall
constitute an original, but all of which taken together shall constitute one and
the same instrument.
SECTION 11.15. SUBORDINATION OF INTERCOMPANY ADVANCES. (a)
Each Credit Party hereby agrees that any Indebtedness or other intercompany
receivables or advances of any other Credit Party, directly or indirectly, in
favor of such Credit Party of whatever nature at any time outstanding shall be
completely subordinate in right of payment to the prior payment in full of the
Obligations, and that no payment on any such Indebtedness shall be made (i)
except intercompany receivables and advances permitted pursuant to the terms
hereof may be repaid in the ordinary course of business so long as no Default or
Event of Default, shall have occurred and be continuing and (ii) except as
specifically consented to by the Lender in writing, until the prior payment in
full all Obligations and termination of the Commitment.
(b) In the event that any payment on any such Indebtedness
shall be received by such Credit Party other than as permitted by Section
11.15(a) before payment in full of all Obligations and termination of the
Commitment, such Credit Party shall receive such payments and hold the same in
trust for, segregate the same from its own assets and shall immediately pay over
to, the Lender all such sums to the extent necessary so that the Lender shall
have been paid all Obligations owed or which may become owing.
SECTION 11.16. CONFIDENTIALITY. The Lender understands that
certain information furnished to it pursuant to this Agreement will be received
by it prior to the time that such information shall have been made public, and
the Lender hereby agrees that it will keep, and will direct its officers and
employees to keep, all the information provided to it pursuant to this Credit
Agreement confidential prior to its becoming public except that the Lender shall
be permitted to disclose such information (i) to officers, directors, employees,
representatives, agents, auditors, accountants, consultants, advisors, lawyers
and affiliates of the Lender necessary for the administration of this Credit
Agreement, in the ordinary course of business who have been made aware of the
confidential nature of the information; (ii) to prospective assignees or
participants and their respective officers, directors, employees, agents and
representatives in accordance with Section 11.3(h) herein; (iii) as required by
Applicable Law, or pursuant to subpoenas or other legal process, or as requested
by governmental agencies and examiners; (iv) in proceedings to enforce the
Lender's rights and remedies hereunder or under any other Fundamental Document
or in any proceeding against the Lender in connection with this Credit Agreement
or under any other Fundamental Document or the transactions contemplated
- 92 -
hereunder; (v) to the extent such information (A) becomes publicly available
other than as a result of a breach of this Credit Agreement or (B) becomes
available to the Lender or a participant on a non-confidential basis, not in
breach of any agreement or other obligation to Borrower, from a source other
than Borrower; or (vi) to the extent Borrower shall have consented to such
disclosure in writing.
SECTION 11.17. ENTIRE AGREEMENT. This Credit Agreement,
together with the letter agreement described in Section 2.14(j) hereof,
represents the entire agreement of the parties with regard to the subject matter
hereof, and the terms of any letters and other documentation entered into
between any of the parties hereto (other than the Commitment Letter) prior to
the execution of this Credit Agreement which relate to Loans to be made
hereunder shall be replaced by the terms of this Credit Agreement and such
letter agreement, as applicable.
- 93 -
IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be duly executed as of the day and the year first written.
BORROWER:
NEWSTAR MEDIA INC. (FORMERLY KNOWN AS
DOVE ENTERTAINMENT, INC.)
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President and Chief
Financial Officer
CORPORATE GUARANTORS:
NEWSTAR WORLDWIDE INC. (FORMERLY
KNOWN AS DOVE INTERNATIONAL, INC.)
NEWSTAR TELEVISION INC.
DOVE FOUR POINT, INC.
DOVE ENTERTAINMENT, INC.
DOVE AUDIO, INC.
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President and Chief
Financial Officer
LENDER:
THE CHASE MANHATTAN BANK
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
- 94 -
Schedule 1
MEI OWNERSHIP INTEREST
Individual Guarantor Interest
-------------------- --------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 33.57%
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 33.57%
▇▇▇▇▇ ▇▇▇▇▇▇ 14.11%
▇▇▇▇ ▇▇▇▇▇ 7.05%
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 11.70%
Schedule 3.7(a)
CORPORATE GUARANTORS / PLEDGED INTERESTS
Number of Shares
Corporate Guarantor Jurisdiction of Authorized of Outstanding Ownership of
------------------- Incorporation Capitalization Capital Stock Capital Stock
------------- -------------- ------------- -------------
NewStar Worldwide California 1,000 shares 100 shares common NewStar Media Inc.
Inc. (formerly known as common stock stock (formerly, Dove
Dove International, Entertainment, Inc.)
Inc.)
----------------------------------------------------------------------------------------------------------------------
NewStar Television California 1,000 shares 1,000 shares NewStar Media Inc.
Inc. common stock common stock
----------------------------------------------------------------------------------------------------------------------
Dove Four Point, Inc. Florida 10,000 shares 100 shares common NewStar Television
common stock stock Inc.
10,000 shares
preferred stock
----------------------------------------------------------------------------------------------------------------------
Dove Entertainment, California 1,000 shares 1,000 shares NewStar Media Inc.
Inc. common stock common stock
----------------------------------------------------------------------------------------------------------------------
Dove Audio, Inc. California 1,000 shares 1,000 shares NewStar Media Inc.
common stock common stock
----------------------------------------------------------------------------------------------------------------------
Schedule 3.7(b)
BENEFICIAL INTERESTS
None.
Schedule 3.9
FICTITIOUS NAMES
NewStar*
NewStar Media*
NewStar Worldwide*
NewStar Television*
AudioUniverse*
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇*
Audio Literature*
Dove
Dove Entertainment
Dove Four Point*
Dove International
Four Point
Dove Books
Dove Audio*
Dove Television
Dove Frontlist
Audio Select
Dove Books on Tape
Dove Kids
Olive Branch
Dove Pictures, Inc.
Note: Names with an asterisk (*) are names currently used by the Credit Parties.
Schedule 3.11
PRINCIPAL EXECUTIVE OFFICE; LOCATION OF COLLATERAL
Chief Executive Office and office where ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
"located" for purposes of UCC: ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dove Four Point, Inc. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dove International, Inc. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
NewStar Worldwide Inc. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
NewStar Television Inc. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dove Entertainment, Inc. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dove Audio, Inc. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dove Retail, Inc. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Case Closed, Inc. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Family Blessings Productions Inc. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Places where goods included in the Collateral ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
are regularly kept: ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
International Cine Service,
Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Schedule 3.11
Bonded Services
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Laser Pacific Media Corp.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
GES Exposition Services
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Keep It Self Storage
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Select Storage
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Iron Mountain
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
NewStar Media Inc. does business under the names NewStar Publishing, NewStar
Press, NewStar Audio and Dove Audio.
Dove Four Point, Inc. does business under the name NewStar Television.
Schedule 3.12
LITIGATION
See the description of litigation in NewStar Media Inc.'s Form 10-K-SB for the
year ended December 31, 1998 and Form 10-Q-SB for the quarter ended March 31,
1998, filed with the Securities and Exchange Commission.
The Credit Parties are also parties to various other routine legal proceedings
and claims incidental to their businesses. The Credit Parties believe that the
ultimate resolution of these matters, individually and in the aggregate, will
not have a material adverse effect on the financial position of the Credit
Parties.
Schedule 3.17
MATERIAL AGREEMENTS
(i) Existing Indebtedness
---------------------
None.
(ii) Material Joint Venture Agreements
---------------------------------
None.
(iii) Material Distribution Agreements
--------------------------------
1. Letter Agreement, dated as of February 15, 19995, between
Buena Vista Television and Four Point Entertainment re: "Make
Me Laugh."
2. Letter Agreement, dated October 21, 1996, between Discovery
Communications, Inc. and Dove Four Point Entertainment re:
"Unnatural History."
(iv) Material Contractual Arrangements
---------------------------------
1. Stock Purchase Agreement, dated as of March 27, 1997, among
Dove Entertainment, Inc., and the Purchasers named therein and
the following related agreements:
(a) Warrant to Purchase Shares of Common Stock of Dove
Entertainment, in favor of Media Equities
International, LLC (1,500,000 shares).
(b) Warrant to Purchase Shares of Common Stock of Dove
Entertainment, in favor of Media Equities
International, LLC (500,000 shares).
(c) Warrant to Purchase Shares of Common Stock of Dove
Entertainment, in favor of Media Equities
International, LLC (500,000 shares).
(d) Warrant to Purchase Shares of Common Stock of Dove
Entertainment, in favor of Media Equities
International, LLC (500,000 shares).
(e) Registration Rights Agreement, dated as of March 27,
1997, by and among Dove Entertainment, Inc., Media
Equities International, LLC, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
(f) Pledge Agreement, dated as of March 27, 1997, among
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Media Equities
International, LLC and Dove Entertainment, Inc.
(g) Shareholders Voting Agreement, dated as of March 27,
1997, by and between ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇▇▇, on the one hand, and Media Equities
International, LLC, on the other hand.
(h) Escrow Agreement, dated as of June 10, 1997, by and
between Dove Entertainment, Inc., ▇▇▇▇▇▇▇ ▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
2. Employment Termination Agreement, dated June 10, 1997, among
Dove Entertainment, Inc., ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
3. Key Executive Severance Agreement between Dove Entertainment,
Inc. and ▇▇▇▇▇▇ ▇▇▇▇▇▇, dated September 4, 1996.
4. Employment Agreement between Dove Entertainment, Inc. and ▇▇▇
▇▇▇▇▇▇, dated April 29, 1996.
5. Employment Agreement between Dove Entertainment, Inc. and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, dated September 4, 1996.
6. Dove Four Point, Inc. is a signatory with the Directors Guild
of America.
7. Registration Rights Agreements, between the various purchasers
in the private placement conducted through Whale Securities
Co., L.P. and Dove Audio, Inc. The agreements provide for
piggyback registration rights beginning January 1, 1996 and an
automatic registration on or prior to June 14, 1996.
8. Registration provisions in the Warrant Agreement between Dove
Audio, Inc. and Whale Securities Co., L.P.
9. Registration Rights Agreement, dated as of April ___, 1996,
between ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ Audio, Inc.
10. Registration Rights Agreement, dated as of April ___, 1996,
between ▇▇▇ ▇▇▇▇▇▇ and Dove Audio, Inc.
11. Warrant Certificates of Dove Audio, Inc. to ▇▇▇▇▇▇ ▇▇▇▇▇▇
Capital Group, LLC and others, each dated October 1, 1996.
12. Employment Agreement with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇.
13. Employment Agreement with ▇▇▇▇ ▇▇▇▇▇▇.
14. Insurance Policies.
15. Agreement and Plan of Merger, made and entered into as of
April 12, 1996, by and among Dove Audio, Inc., Dove Four
Point, Inc. and Four Point Entertainment Inc.
16. Stock Option Award Agreement, dated April 1996, by and between
Dove Audio, Inc. and ▇▇▇ ▇▇▇▇▇▇, as amended.
17. See listing of additional material agreements in NewStar Media
Inc.'s Form 10-K- SB for the year ended December 31, 1998 and
Form 10-Q-SB for the quarter ended March 31, 1998, filed with
the Securities and Exchange Commission.
Schedule 3.21
ENVIRONMENTAL LIABILITIES
None.
Schedule 3.22
OUTSTANDING RIGHTS RE: PLEDGED SECURITIES
None.
Schedule 6.2
EXISTING LIENS
1. Operating Leases
(a) ▇▇▇▇▇▇ Infinity -- Infinity QX4 Truck
(b) Various operating leases for Apple Computers,
photocopiers and telephone systems.
2. Liens in favor of Individual Guarantors securing amounts paid
pursuant to the Guaranty. Such Liens will be subordinate to
the Liens of the Lender.
3. UCC-1 financing statement named Dove International, as Debtor,
and BWE Distribution, Inc., as Secured Party, covering a
security interest in Debtor's rights under the motion picture
"Unwed Father."
4. Liens evidenced by the following UCC-1 financing statements:
(a) Where Filed: California Secretary of State
Debtor: Dove International, Inc.
Secured Party: Paramount Pictures Corporation
File No.: 9617660715
(b) Where Filed: California Secretary of State
Debtor: Dove International, Inc.
Secured Party: Paramount Pictures Corporation
File No.: ▇▇▇▇▇▇▇▇▇▇
(c) Where Filed: California Secretary of State
Debtor: Dove International, Inc.
Secured Party: Paramount Pictures Corporation
File No.: 9625060583
(d) Where Filed: California Secretary of State
Debtor: Dove International, Inc.
Secured Party: ▇▇▇▇▇▇▇ ▇▇▇▇▇
File No.: 9631061125
(e) Where Filed: California Secretary of State
Debtor: Dove International, Inc.
Secured Party: Paramount Pictures Corporation
File No.: 9635360269
(f) Where Filed: California Secretary of State
Debtor: Dove International, Inc.
Secured Party: Guiness ▇▇▇▇▇ & Co. Limited
File No.: 9635360521
5. Liens granted to Columbia TriStar Home Video in connection
with worldwide video distribution rights with respect to
"Futuresport."
Schedule 6.3
GUARANTIES
None.
Schedule 6.4
INVESTMENTS
None.
EXHIBIT A
FORM OF AMENDED AND RESTATED NOTE
$10,000,000 New York, New York
as of November 4, 1997
FOR VALUE RECEIVED, NEWSTAR MEDIA INC. (formerly known as Dove
Entertainment, Inc.), a California corporation (the "Obligor"), DOES HEREBY
PROMISE TO PAY to the order of THE CHASE MANHATTAN BANK (the "Lender") at the
office of The Chase Manhattan Bank at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇-▇▇▇▇, in lawful money of the United States of America in immediately
available funds, the principal amount of TEN MILLION DOLLARS ($10,000,000), or
the aggregate unpaid principal amount of all Loans (as defined in the Credit
Agreement referred to below) made by the Lender to the Obligor pursuant to said
Credit Agreement, whichever is less, on such date or dates as is required by
said Credit Agreement, and to pay interest on the unpaid principal amount from
time to time outstanding hereunder, in like money, at such office and at such
times as set forth in said Credit Agreement.
The Obligor and any and all sureties, guarantors and endorsers
of this Note and all other parties now or hereafter liable hereon severally
waive grace, demand, presentment for payment, protest, notice of any kind
(including, but not limited to, notice of dishonor, notice of protest, notice of
intention to accelerate or notice of acceleration) and diligence in collecting
and bringing suit against any party hereto and agree to the extent permitted by
applicable law (i) to all extensions and partial payments, with or without
notice, before or after maturity, (ii) to any substitution, exchange or release
of any security now or hereafter given for this Note, (iii) to the release of
any party primarily or secondarily liable hereon, and (iv) that it will not be
necessary for any holder of this Note, in order to enforce payment of this Note,
to first institute or exhaust such holder's remedies against the Obligor or any
other party liable hereon or against any security for this Note. The nonexercise
by the holder of any of its rights hereunder in any particular instance shall
not constitute a waiver thereof in that or any subsequent instance.
This Note is the Note referred to in that certain Credit,
Security, Guaranty and Pledge Agreement dated as of November 4, 1997 (as the
same may be amended, supplemented or otherwise modified, renewed or replaced
from time to time, the "Credit Agreement") among the Obligor, the Corporate
Guarantors referred to therein and The Chase Manhattan Bank, and is entitled to
the benefits of, and is secured by the security interests granted in the Credit
Agreement and the other security documents and guarantees referred to and
described therein, which among other things, contains provisions for optional
and mandatory prepayment and for acceleration of the maturity hereof upon the
occurrence of certain events, all as provided in the Credit Agreement.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK.
NEWSTAR MEDIA INC. (formerly known as
Dove Entertainment, Inc.)
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President and Chief
Financial Officer
EXHIBIT A
[LAST PAGE OF NOTE]
Unpaid Name of
Principal Person
Payments Balance Making
Date Amount of Loan Principal Interest of Note Notation
---- -------------- --------- -------- ------- --------
EXHIBIT B-1
November 10, 1997
The Chase Manhattan Bank, as Lender
under the Credit Agreement referred to below
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re: Credit, Security, Guaranty and Pledge Agreement, dated as of November 4,
1997 (the "Credit Agreement") among DOVE ENTERTAINMENT, INC., a
California corporation ("Borrower"), the Corporate Guarantors named
therein and THE CHASE MANHATTAN BANK, a New York banking corporation, as
Lender ("Lender)
Ladies and Gentlemen:
We have acted as special counsel to (i) Borrower and (ii) Dove International,
Inc., a California corporation ("DII"), and Dove Foup Point, Inc. a Florida
corporation ("DFP" and, together with DII, the "Corporate Guarantors"), in
connection with the Credit Agreement and the transactions contemplated thereby
(the "Transactions"). This opinion letter is given at the request of Borrower
and the Corporate Guarantors pursuant to Section 4.1(c) of the Credit Agreement.
Capitalized terms not otherwise defined in this opinion letter shall have the
meanings ascribed to them in the Credit Agreement. The term "Collateral", as
used herein shall include the "Pledged Stock", the "copyrights" and the
"collateral", as each such term is hereinafter defined.
We have delivered this opinion letter as counsel admitted to practice in the
States of California, Florida and New York, and we shall not be understood to
have expressed any opinion herein under or with respect to the laws of any
jurisdiction other than the State of New York, the State of California (with
respect to paragraphs 2 (other than the first sentence thereof), 5 and 6 of this
opinion letter), the State of Florida (with respect to paragraph 6 of this
opinion letter) and the Federal laws of the United States of America (with
respect to paragraph 5 of this opinion letter). In addition, except as
specifically set forth in this opinion letter, we are not rendering any opinion
herein as to any legal issue that would be excluded by Section 19 of the Legal
Opinion Accord of the ABA Section of Business Law (1991) were it to govern this
opinion letter.
In connection with this opinion letter, we have reviewed executed
copies of the following documents:
(i) the Credit Agreement;
(ii) the Note;
(iii) the agreement dated as November 4, 1997 made by Borrower
and the Corporate Guarantors in favor of Lender (the "Copyright Security
Agreement");
(iv) the Uniform Commercial Code Form UCC-1 Financing
Statement to be filed with the Secretary of State of California, naming Borrower
as debtor and Lender as secured party ("Borrower Financing Statement");
(v) the Uniform Commercial Code Form UCC-1 Financing Statement
to be filed with the Secretary of State of California, naming DII as debtor and
Lender as secured party (the "DII Financing Statement");
(vi) the Uniform Commercial Code Form UCC-1 Financing
Statement to be filed with the Secretary of State of California, naming DFP as
debtor and Lender as secured party (the "DFP Financing Statement" and, together
with the Borrower Financing Statement and the DII Financing Statement, the
"Financing Statements");
(vii) the Articles of Incorporation and Bylaws of DFP;
(viii) a good standing certificate issued on October 31, 1997
by the Office of the Secretary of State of the State of Florida with respect to
DFP (the "DFP Florida Good Standing Certificate); and
(ix) a good standing certificate issued on October 31, 1997 by
the Office of the Secretary of State of the State of California with respect to
DFP (the "DFP California Good Standing Certificate and, together with the DFP
Florida Good Standing Certificate, the "DFP Good Standing Certificates").
The documents listed in subparagraphs (i) through (iii) above are hereinafter
sometimes referred to collectively as the "Documents."
We have not participated in the negotiations relating to the Documents
or the Transactions and have undertaken no review or investigation in connection
with the opinions expressed herein other than to read each of the Documents. As
to factual matters relevant to such opinions, we have relied with your
permission solely upon the representations and warranties contained in the
Documents and have not made any
2
independent verification thereof. We have made such examinations of law as we
have deemed appropriate in order to render such opinions.
In rendering the opinions set forth herein, we have assumed (a) the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity to authentic originals of all documents
submitted to us as copies; (b) that the Financing Statements have been properly
filed with the California Secretary of State, and that the Copyright Security
Agreement has been properly filed in the United States copyright office within
thirty days after its execution; (c) the legal capacity of each natural person;
(d) that each of Lender and each Credit Party (other than DFP) is a corporation
duly organized and validly existing in good standing under applicable law; (e)
that each Person has all requisite power and authority to execute, deliver and
perform each document executed and delivered by such Person and to do each other
act done or to be done by such Person; (f) the due execution and delivery by
each Person of each document executed and delivered or to be executed and
delivered by such Person; (g) except as specifically set forth in paragraph 1 of
this opinion letter with respect to the Credit Parties, the legality, validity,
binding effect and enforceability against each party thereto of each document
executed and delivered or to be executed and delivered in connection with the
Transactions; (h) that the execution and delivery of each such document do not
breach the certificate or articles of incorporation, by-laws and other
constituent documents of each such party and, except as specifically set forth
in paragraph 3 of this opinion letter, do not violate any law, rule or
regulation applicable to such party or breach any instrument or agreement to
which such party is a party; (i) that all conditions precedent set forth in
Article 4 of the Credit Agreement required as of the Closing Date have been
fully complied with or waived; (j) that Lender has given value, has acted in
good faith without notice of adverse claims or defenses against enforcement of
any rights created by the Documents, has complied with all laws applicable to it
that affect the Transactions or the Documents and has paid all taxes and fees
required to be paid by it in connection therewith; (k) that all statutes,
judicial and administrative decisions and rules and regulations of governmental
agencies constituting the law with respect to which we are rendering opinions
herein are published or otherwise generally accessible; (l) that, with respect
to the Documents or the Transactions, there has been no mutual mistake of fact,
fraud or duress; (m) the constitutionality and validity of all relevant laws,
regulations and governmental actions; (n) that routine procedural matters such
as service of process will be satisfied by the parties seeking to enforce any
right created by the Documents; (o) that the Credit Parties own, free and clear
of any liens or options, the Collateral that they purport to own; and (p) that
the DFP Good Standing Certificates have remained accurate through and including
the date of this opinion letter.
Various issues are addressed in the opinion letter of ▇▇▇▇▇▇ ▇▇▇▇▇▇,
Esq., general counsel of Borrower, a copy of which is attached hereto as Exhibit
A, and we express no opinion with respect to the matters which are addressed in
such opinion letter. To the
3
extent any of the opinions expressed therein are relevant to this opinion
letter, we have, with your permission, relied thereon together with and subject
to any and all assumptions, qualifications and limitations expressed therein and
herein which are relevant to those opinions upon which we have relied.
Based upon the foregoing and subject to the exceptions, qualifications,
limitations and other statements contained herein, it is our opinion that:
1. Under New York law, each of the Documents to which a Credit Party is
a party constitutes the legal, valid and binding obligation of such Credit Party
and is enforceable against such Credit Party in accordance with its terms.
2. The Credit Agreement creates in favor of Lender a valid security
interest in that portion of the collateral in which the creation and attachment
of security interests or liens are governed by Article 9 of the New York Uniform
Commercial Code (the "NYUCC"), as security for the obligations of the Credit
Parties under the Credit Agreement. Upon the filing of the Financing Statements
with the California Secretary of State (the "Filing Office"), Lender will have a
perfected security interest (to the extent that perfection may be accomplished
by filing the Financing Statement in the Filing Office) in that portion of the
collateral described in the Financing Statement other than fixtures (the "UCC
Property") in which the perfection of security interests is governed by Division
9 of the California Uniform Commercial Code ("CAUCC"). Whenever used in this
opinion letter, the term "collateral" shall be limited to "accounts", "general
intangibles", "inventory", "equipment" and "goods" as each of such terms is
defined in Article 9 of the NYUCC and Division 9 of the CAUCC. The Financing
Statements are in appropriate form for filing in the Filing Office.
3. The execution and delivery of the Documents by each Credit Party
that is a party thereto and the performance by such Credit Party of its
obligations thereunder, the grant to Lender of the security interests as
provided in the Credit Agreement and the pledge to Lender of the Pledged Stock
(as hereinafter defined) as provided in the Credit Agreement do not violate any
New York law, statute, rule or regulation applicable to such Credit Party, and
no governmental authorizations, consents, approvals, registrations or filings by
or in the State of New York are required in connection with the execution,
delivery and performance of the Documents by such Credit Party.
4. The delivery in the State of New York to Lender of the certificates
evidencing the shares of stock described in Exhibit B hereto (the "Pledged
Stock"), duly endorsed in the name of Lender or in blank (or accompanied by
stock powers or separate documents of assignment duly executed in favor of
Lender or in blank), together with the execution and delivery by the Credit
Parties of the Credit Agreement, creates in favor of Lender a valid and
perfected security interest in such Pledged Stock
4
as security for the obligations of the Credit Parties under the Credit
Agreement, which security interest will remain perfected for as long as
possession of the Pledged Stock is continuously maintained by Lender in the
State of New York.
5. The Copyright Security Agreement creates in favor of Lender a valid
and enforceable security interest in that portion of the collateral (the
"copyrights") in which the creation and attachment of security interests or
liens are governed by 17 U.S.C. Section 205 and Article 9 of the NYUCC, and such
security interest will become effective against third parties at the later of
the execution and delivery of the Copyright Security Agreement and the filing of
the Financing Statements in the Filing Office.
6. DFP is a corporation duly organized, validly existing and, based
solely on the DFP Good Standing Certificates, in good standing under the laws of
the State of Florida and as a foreign corporation under the laws of the State of
California.
The opinions set forth above in this opinion letter are subject, in all
respects, to the following exceptions, qualifications and limitations:
(a) Our opinion concerning the legality, validity, binding effect and
enforceability of the Documents in accordance with their terms does not mean
that (1) any particular remedy is available upon a material default or (2) every
provision of the Documents will be upheld or enforced in any or each
circumstance by a court. Certain provisions of the Documents may be or are
unenforceable in whole or in part, but in each case the inclusion of such
provisions does not affect the validity of each such Documents taken as whole,
and each such Document taken as a whole contains adequate provisions for the
practical realization of the benefits purported to be created thereby (subject
to the consequences of any judicial, administrative or other delay which may be
imposed by, be related to or arise from applicable laws or equitable
principles). Furthermore, the validity, binding effect and enforceability of the
Documents may be limited or otherwise affected by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws, rules
or regulations affecting the enforcement of creditors' rights and remedies
generally and the unavailability of, or limitation of the availability of, a
particular right or remedy (whether in a proceeding in equity or at law) because
of an equitable principle or a requirement as to commercial reasonableness,
conscionability or good faith. The provisions of any Document which permit any
Person to take action or make determinations (and/or to have such determinations
be binding on other parties to any degree), or to benefit from indemnities,
contributions or similar undertakings, or waivers, exculpatory provisions or
similar provisions, may be subject to limitations imposed by law or by public
policy considerations, including, without limitation, a requirement that such
action be taken or such determination be made, or that any action or inaction by
any Person in respect of which such an indemnity, right of contribution or
similar undertaking, or such a
5
waiver, exculpatory provision or similar provision, be called upon or raised, or
be taken or not taken, as the case may be, on a reasonable and lawful basis and
in good faith.
(b) The use of the term "enforceable" shall not imply any opinion as to
the availability of equitable remedies, including, without limitation, the
remedies of specific performance or injunctive relief, nor is any opinion
regarding the same intended to be expressed herein, and no opinion is expressed
that any particular provision of any of the Documents may not be limited by
defenses such as estoppel, waiver and other equitable considerations.
(c) Under certain circumstances the requirement that the provision of a
Document may be modified or waived only in writing or only in a specific
instance and the provision that failure or delay in exercising any power, right,
privilege or remedy will not impair or waive such power, right, privilege or
remedy may be unenforceable to the extent that an oral agreement has been
effected or a course of dealing has occurred modifying such provisions.
(d) With respect to any Document creating a security interest in UCC
Property, we express no opinion as to the enforceability of the rights and
remedies under such Documents against property located in the State of
California unless the procedural requirements under the CAUCC are followed.
(e) We express no opinion with respect to any security interest in any
Collateral described in the Financing Statements to which the provisions of
Article 9 of the NYUCC or Division 9 of the CAUCC do not apply.
(f) The continuation and perfection of security interests in proceeds
is limited to the extent set forth in Sections 9-306 through 9-309 of the NYUCC
and Sections 9306 through 9309 of the CAUCC.
(g) We express no opinion with respect to the creation, attachment,
validity, perfection or priority of any security interest, except as
specifically set forth in paragraphs 2, 4 and 5 of this opinion letter.
(h) We express no opinion as to (1) the impact of any laws regulating
the type of investments that can be made by, or the legal lending limits of,
Lender or (2) the effect of the laws of any jurisdiction in which Lender or any
Credit Party is located (other than the State of New York) that limit the
interest, fees or other charges Lender may impose.
6
(i) We express no opinion with respect to the enforceability of any
provision of the Documents which provides for (1) acceleration of future amounts
due (other than principal) without appropriate discount to present value, (2)
late charges or (3) increased interest rates upon default, to the extent that
any such provision is determined to be penalty, or which purports to bind a
Person not a party or signatory thereto.
(j) We expressed no opinion as to any Credit Party's rights in, or
title to, any Collateral, the value thereof or the interest of Lender in any
after-acquired property. We call to your attention the fact that Section 552 of
the Federal Bankruptcy Code limits the extent to which property acquired by a
debtor after the commencement of a case under the Federal Bankruptcy Code may be
subject to a security interest arising from a security agreement entered into by
such debtor before the commencement of such case. Our opinions are subject to
the provisions of Sections 9-203 and 9-204 of the NYUCC relating to the time of
attachment of a security interest in an item of Collateral in which the Person
granting the security interest does not presently have rights.
(k) We express no opinion with respect to any provisions in the
Documents (1) authorizing the unilateral appointment of a receiver or (2) which
provide that Lender is appointed as any Credit Party's attorney-in-fact or that
Lender may otherwise act on behalf of in the name of a Credit Party.
(l) We express no opinion as to any Document provision contrary to
Section 9-311 or Part V of Article 9 of the NYUCC or Section 9311 or Chapter 5
of Division 9 of the CAUCC.
(m) We express no opinion as to the enforceability or perfection of any
interest of any Person other than Lender in any property included in the UCC
Property. Our opinion as to the enforceability of an governing law provision
contained in any Document is qualified by the effects of subsection (2) of
Section 1-105 of the NYUCC.
(n) We express no opinion regarding any items of Collateral which are
(1) accessioned to, or commingled or processed with, other goods to the extent
the security interest of Lender is limited by Section 9-314 or 9-315 of the
NYUCC or Section 9314 or 9315 of the CAUCC or (2) subject to or represented by a
certificate of title or a document of title.
(o) Except as specifically set forth in paragraph 5 of this opinion
letter, we express no opinion regarding any items of Collateral which are
subject to a statute, regulation or treaty of the United States which provides
for a national or international registration or a national or international
certificate of title for the perfection of a security interest therein or which
specifies a place of filing different from the place specified in the CAUCC.
7
(p) We express no opinion regarding any Collateral consisting of claims
against any government or governmental agency (including, without limitation,
the United States or any state thereof or any agency or department of the United
States or any state thereof).
(q) In the case of any chattel paper, account or general intangible
which is itself secured by other property, we express no opinion with respect to
Lender's rights in and to such other property.
(r) We express no opinion with respect to Collateral consisting of
mobile goods, goods in possession of a third party, equipment used in farming
operations, farm products, consumer goods, crops growing or to be grown, timber
to be cut or minerals or the like (including oil and gas), accounts subject to
Section 9-103(5) of the NYUCC of Section 9103(5) of the CAUCC, goods which are
or are to become fixtures, an ownership interest in a corporation or partnership
formed for the purpose of cooperative ownership of real estate, policies of
insurance, beneficial interests in a trust or decedent's estate, letters of
credit, instruments, money, cash, deposit accounts (and any items of property in
such accounts), collection accounts (and any items of property in such
accounts), lockboxes, intellectual property (except as specifically set forth in
paragraph 5 of this opinion letter) or securities (except as specifically set
forth in paragraph 4 of this opinion letter).
(s) We have assumed that the collateral, other than accounts and
general intangibles, is located in the State of California and that any part of
such collateral that was brought into the State of California within the last
four months is not subject to a security interest perfected under the law of the
jurisdiction from which such part of the collateral was removed.
(t) We call to your attention that the security interest of Lender in
the collateral and the copyrights may be subject to the rights of lessees,
licensees, assignees or other account debtors, the claims and defenses of such
lessees, licensees, assignees and account debtors and the terms of any leases or
other agreements with such lessees, licensees, assignees and account debtors.
(u) We call to your attention that the perfection and the effect of
perfection and non-perfection of the security interest of Lender may be governed
by laws other than those of the State of California to the extent either the
collateral or a Credit Party is or becomes located in a jurisdiction other than
the State of California.
(v) We call to your attention that the perfection of the security
interest in any UCC Property may be terminated as to any UCC Property acquired
more than four months subsequent to a change in the nature, corporate structure
or identity of a Credit
8
Party and that a continuation statement is required to be filed under the CAUCC
within six months prior to the expiration of five-years from the date of filing
of a financing statement and within six months prior to each fifth anniversary
of the expiration of such five-year period in order to maintain the continuous
perfection of the security interests referred to therein.
(w) We call to your attention that provisions of the Documents which
provide that a guaranty by a party thereto or the grant of a lien or security
interest by a party thereto to secure the obligations of a third party shall not
be affected by changes in or amendments to the Documents or other relevant
documents might be enforceable only to the extent such changes or amendments are
not so material as to constitute a new agreement among the parties to such
documents.
(x) We call to your attention that a court may modify or limit
contractual awards of attorneys' fees.
(y) We express no opinion with respect to any provision contained in
the Documents concerning waiver of inconvenient forum, venue, forum non
conveniens or subject matter jurisdiction, in each case with respect to Federal
courts.
(z) We express no opinion as to the enforceability of any provision of
any Document that purports to establish (or may be construed to establish)
evidentiary standards.
(aa) We express no opinion as to the last sentence of Section 9.1(b) of
the Credit Agreement, the last sentence of the first paragraph of Section 12.5
of the Credit Agreement, the last sentence of Section 12.6 of the Credit
Agreement, Sections 12.7 and 12.11 of the Credit Agreement, the third sentence
of Section 12.12 of the Credit Agreement (unless a reasonable time for
appearance is allowed in connection with any such service of process) or the
fifth sentence of Section 12.12 of the Credit Agreement.
(bb) We express no opinion herein as to the legality, validity or
enforceability of any provisions of the Documents precluding oral waivers or
modifications of provisions of the Documents, precluding waivers of equitable
rights and defenses by the Credit Parties or precluding the Credit Parties from
asserting certain claims or defenses or from obtaining certain rights and
remedies.
The opinions set forth herein are based upon those statutes, rules and
regulations that, in our experience, are normally applicable to transactions of
the type provided for in the Documents, but without our having made any
independent investigation of any other statute, rule or regulation.
9
This opinion is issued as of the date hereof, and we disclaim any
obligation to advise you of changes of law or fact that occur after the date
hereof. This opinion is solely for your benefit in connection with the
Transactions and may not be relied upon for any other purpose or furnished,
circulated or quoted to, or used or referred to by, any other Person without our
prior written consent in each instance.
Very truly yours,
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
EXHIBIT B-2
November 10, ▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Ladies and Gentlemen:
I am Vice President and General Counsel of Dove Entertainment, Inc. (the
"Company"), a California corporation. I am providing this opinion to you
pursuant to Section 4.1(c) of the Credit, Security, Guaranty and Pledge
Agreement (the "Credit Agreement"), dated as of November 4, 1997, among the
Company, the Corporate Guarantors named therein and The Chase Manhattan Bank
(the "Lender"). Except as otherwise indicated, capitalized terms used in this
opinion and defined in the Credit Agreement will have the meanings given in the
Credit Agreement.
In my capacity as General Counsel, I have examined originals or copies of those
corporate and other records and documents I considered appropriate. I have
obtained and relied upon those certificates of public officials I considered
appropriate. I have assumed the genuineness of all signatures (other than with
respect to the Credit Parties), the authenticity of all documents submitted as
originals and the conformity with originals of all documents submitted as
copies. To the extent any Credit Parties' obligations depend on the due
authorization, execution and delivery of any Fundamental Document by any other
person, I have assumed that such Fundamental Document has been so authorized,
executed and delivered by such other person.
The "Individual Guaranty Agreements" are the guaranty agreements, each dated as
of November 4, 1997, between ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and the Lender.
On the basis of such examination, my reliance upon the assumptions in this
opinion and my consideration of those questions of law I considered relevant,
and subject to the limitations and qualifications in this opinion, I am of the
opinion that:
-1-
1. The Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the State of California.
2. Dove International, Inc. ("Dove International") is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California.
3. The Borrower has the power and authority (i) to own and
operate its assets and properties and to carry on its business as now being
conducted, (ii) to execute, deliver and perform its obligations under the Credit
Agreement and other Fundamental Documents to which it is a party and any other
documents contemplated thereby to which it is a party, (iii) to borrow under the
Credit Agreement, (iv) to grant to the Lender the security interests
contemplated by the Fundamental Documents and (v) to pledge to the Lender the
Pledged Securities as contemplated by the Credit Agreement.
4. Each of Dove International and Dove Four Point, Inc. ("Dove
Four Point") has the corporate power and authority (i) to own and operate its
assets and properties and to carry on its business as now being conducted, (ii)
to execute, deliver and perform its obligations under the Fundamental Documents
to which it is a party, (iii) to guarantee the obligations of the Borrower and
(iv) to grant to the Lender the security interests contemplated by the
Fundamental Documents.
5. The execution, delivery and performance of the Fundamental
Documents to which it is a party by each Credit Party, the grant to the Lender
of the security interest as contemplated by the Credit Agreement and the pledge
to the Lender of the Pledged Securities as contemplated by the Credit Agreement:
(a) have been duly authorized by all requisite corporate action on the part of
each Credit Party, (b) will not violate any provision of any State of California
or United States federal law, statute, governmental rule or regulation, or
treaty that I, in the exercise of customary professional diligence, recognized
as applicable to the Credit Parties or to transactions of the type contemplated
in the Fundamental Documents, (c) will not violate any provision of the Articles
of Incorporation or By-laws of any Credit Party, (d) will not violate any
provision of any material indenture, agreement, bond, note or other instrument
to which any Credit Party or by which any Credit Party or any of their
respective properties or assets are bound, or be in conflict with, result in a
breach or termination of, or constitute (with due notice or lapse of time or
both) a default under, or accelerate any performance required by, any such
indenture, agreement, bond, note or other instrument and (e) will not result in
the creation or imposition of (or the obligation to create or impose) any lien,
charge or encumbrance of any nature whatsoever upon any of the properties or
assets of any of any Credit Party, other than pursuant to of the Fundamental
Documents to which such Credit Party is a party.
-2-
6. Each Credit Party has duly executed and delivered to the
Lender all of the Fundamental Documents to which it is a party.
7. No authorizations, consents, approvals, registrations or
filings from or with any California or United States federal governmental
authority that I have, in the exercise of customary professional diligence,
recognized as applicable to the Credit Parties or to transactions of the type
contemplated by the Fundamental Documents, is required in connection with the
execution, delivery and performance by any Credit Party of the Fundamental
Documents to which it is a party.
8. There is no judgment, order, action, suit or other proceeding
at law or in equity, or before any arbitrator or arbitration panel, of any
California state or United States federal governmental authority (and, to my
knowledge, any other Governmental Authority), or, to my knowledge, any
investigation of the affairs of, any Credit Party, or any of their respective
properties or rights which (i) if adversely determined, could reasonably be
expected to materially affect (a) the ability of any Credit Party to carry on
its business, (b) the ability of any Credit Party to perform its respective
obligations under the Fundamental Documents to which it is a party or any other
material contract to which it is a party, (c) the validity or enforceability or
priority of the security interests, rights, remedies or benefits available to
the Lender under any of the Fundamental Documents, or (d) the Collateral or the
Pledged Securities; or (ii) involves any of the transactions contemplated by the
Fundamental Documents.
9. The authorized, issued and outstanding capital stock of Dove
Four Point and Dove International is as set forth on Schedule 3.7(a) to the
Credit Agreement (the "Pledged Securities") and such issued and outstanding
capital stock has been duly authorized, validly issued, is fully paid and
nonassessable and is owned of record by the Borrower.
10. There are no restrictions on the transfer of any Pledged
Securities other than under the Credit Agreement. There are no outstanding
rights, warrants, options or agreements to purchase or otherwise acquire any
shares of stock or securities or obligations of any kind convertible into any
shares of capital stock of Dove International or Dove Four Point.
11. None of the Credit Parties is (a) and "investment company",
within the meaning of the Investment Company Act of 1940, as amended or (b)
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act or any federal statute or regulation limiting such
corporation's ability to incur indebtedness for money borrowed as contemplated
by the Credit Agreement or by any other Fundamental Document. The making of the
Loans and the application of the proceeds thereof as contemplated by the
Fundamental Documents do not violate any of
-3-
Regulations G, T, U or X of the Board of Governors of the Federal Reserve
System, as amended.
12. Assuming that New York law is identical to California law,
each Individual Guaranty Agreement constitutes the legal, valid and binding
obligation of the Individual Guarantor party thereto and is enforceable against
such Individual Guarantor in accordance with its terms, except as may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to or affecting creditors rights generally (including, without limitation,
fraudulent conveyance laws) and by general principles of equity, including,
without limitation, concepts of materiality, reasonableness, good faith and fair
dealing and the possible unavailability of specific performance or injunctive
relief, regardless of whether considered in a proceeding in equity or at law.
13. You have received an opinion letter of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇
(a copy of which is attached hereto) (the "HHR Opinion") with respect to the
creation and perfection of a security interest in the Pledged Stock (as defined
therein). Assuming that New York law is identical with California law, and in
reliance on the HHR Opinion and subject to any and all assumptions,
qualifications and limitations expressed therein, the perfected security
interest of the Lender in the Pledged Stock will be prior to any other security
interest in such Pledged Stock that may be created by the Company under the
Uniform Commercial Code.
I express no opinion as to the effect of non-compliance by the Lender with any
state or federal laws or regulations applicable to the transactions contemplated
by any of the Fundamental Documents because of the nature of its business.
The law covered by this opinion is limited to the present federal law of the
United States and the present law of the State of California. I express no
opinion as to the laws of any other jurisdiction and no opinion regarding the
statutes, administrative decisions, rules, regulations or requirements of any
county, municipality, subdivision or local authority of any jurisdiction.
This opinion is issued as of the date hereof, and I disclaim any obligation to
advise you of changes in law or fact that occur after the date hereof.
This opinion may be relied upon by you only in connection with the execution and
delivery of the Credit Agreement and the other Fundamental Documents. It may not
be used or relied upon by you for any other purpose or by any other person, nor
may copies be delivered to any other person, without in each instance my prior
written consent. You may, however, deliver a copy of this opinion to your
accountants, attorneys, and other professional advisors, to governmental
regulatory agencies having jurisdiction over you and to successors and permitted
transferees under the Credit
-4-
Agreement, and such successors and transferees may rely on this opinion as if it
were addressed and had been delivered to them on the date of this opinion.
Very truly yours,
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
RCM:kms
-5-
EXHIBIT C
FORM OF BORROWING BASE CERTIFICATE
as of ___________
The undersigned (the "Borrower") HEREBY CERTIFIES the
following information as of __________, pursuant to the Amended and Restated
Credit, Security, Guaranty and Pledge Agreement dated as of November 4, 1997, as
amended and restated as of August 16, 1999, among NewStar Media Inc. (formerly
known as Dove Entertainment, Inc.) as Borrower, the Corporate Guarantors named
therein and The Chase Manhattan Bank, as the same may be amended, supplemented
or otherwise modified, renewed or replaced from time to time (herein called the
"Credit Agreement"), the defined terms therein being herein used with the same
meanings:
(from detailed schedules Amount Advance Borrowing
attached) $000's Rate Base
------- ------ -----
a. Eligible L/C Receivables ______x 100% = ________
b. Eligible Receivables ______x 85% = ________
c. Eligible Library Amount ______x 35%= ________
d. Inventory of physical audio
cassettes and printed books ______x 30%= ________
e. Less Amounts Payable to
Third Parties not Already
Deducted 1 (______)
f. Less Amounts of accrued but
unpaid residuals owed to any
trade guilds with respect to
each item of Product included
in the Borrowing Base (______)
TOTAL BORROWING BASE
--------------------
1 To the extent not already deducted in computing the Total
Borrowing Base, the sum of all amounts payable to third
parties from or with regard to the amounts otherwise included
in the Borrowing Base pursuant to items (a) through (d),
including without limitation remaining acquisition payments,
set offs, current profit participations, deferments,
commissions and royalties must be subtracted from the Total
Borrowing Base.
- 1 -
COMMITMENT AVAILABILITY
-----------------------
a. Outstanding Loans _________
b. L/C Exposure _________
Total outstanding _________
Availability _________
The Borrower has no reason to believe that the aggregate
principal amount of all Loans to the Borrower outstanding as of the date of this
certificate would exceed the Borrowing Base if such Borrowing Base was computed
as of the date of this certificate.
IN WITNESS WHEREOF, the undersigned has caused this
certificate to be executed this ____ day of _____________.
NEWSTAR MEDIA INC.
By:
----------------------------
Name:
Title:
- 2 -
EXHIBIT D-1
FORM OF PLEDGEHOLDER AGREEMENT
(ONLY APPLICABLE WITH RESPECT TO UNCOMPLETED PRODUCT
FOR WHICH A COMPLETION GUARANTEE IS REQUIRED)
AGREEMENT dated as of [INSERT DATE] (the "Agreement")
among (i) [INSERT NAME OF LABORATORY] (the "Laboratory"), (ii)
[INSERT NAME OF EACH CREDIT PARTY WHO HAS CONTROL OVER THE
PHYSICAL ELEMENTS OF THE COLLATERAL] (collectively referred to
herein as the "Company"), (iii) [INSERT NAME OF COMPLETION
GUARANTOR] (the "Completion Guarantor") and (iv) The Chase
Manhattan Bank (the "Lender").
Pursuant to the Amended and Restated Credit, Security, Guaranty and
Pledge Agreement dated as of November 4, 1997, as amended and restated as of
August 16, 1999 (as the same may be amended, supplemented or otherwise modified,
renewed or replaced from time to time, the "Credit Agreement"), among NewStar
Media Inc. (formerly known as Dove Entertainment, Inc.), (the "Borrower"), the
Corporate Guarantors named therein and the Lender, the Lender has agreed,
subject to the terms and conditions set forth in the Credit Agreement, to make
loans to the Borrower in connection with, among other things, the acquisition,
production and distribution of the Product (as hereinafter defined).
The Company has granted to the Lender a security interest in, among
other things, all of its right, title and interest in and to the [DESCRIBE
NATURE OF PRODUCT, I.E. MOVIE-OF- THE-WEEK, TELEVISION PROGRAMS, AUDIOBOOKS,
ETC.] listed on Schedule 1 hereto (hereinafter called the "Product") as security
for various obligations of the Company to the Lender. Such security interest
covers, among other things, all physical properties of every kind or nature of,
or relating to, the Product and all versions thereof, including, without
limitation, exposed film, developed film, positives, negatives, prints, positive
prints, answer prints, special effects, preparing materials (including
interpositives, duplicate negatives, internegatives, color reversals,
intermediates, lavenders, fine grain master prints and matrices, and all other
forms of pre-print elements), sound tracks, cutouts, trims and any and all other
physical properties of every kind and nature of, or relating to, the Product,
whether in completed form or in some state of completion, and all audio and
video masters, duplicates, drafts, versions, variations and copies of each
thereof, in all formats whether on film, videotape, disk, cassette, phonorecord
or otherwise
- 1 -
and all music sheets and promotional materials relating to the Product all of
the foregoing items being hereinafter collectively called the "Collateral".
Pursuant to the Completion Guaranty dated as of [INSERT DATE], among
the Completion Guarantor, the Company and the Lender (the "Completion
Guaranty"), the Completion Guarantor has agreed to guaranty the completion and
delivery of the Product. In connection therewith, the Company has granted to the
Completion Guarantor, a security interest in certain assets that are included in
the Collateral, all as specified in, and subject to the terms and conditions of,
the Company's Completion Agreement dated as of [INSERT DATE], between the
Company and the Completion Guarantor (the "Company's Agreement").
From time to time, the Laboratory will have in its possession certain
items of the Collateral.
Accordingly, the parties hereto hereby agree as follows:
1. Each of the Company, the Completion Guarantor, and the Lender hereby
appoints the Laboratory as the pledgeholder of all items of Collateral that may
from time to time come into the possession or control of the Laboratory. The
Laboratory agrees to hold all such items of Collateral as pledgeholder for the
Lender subject to the following terms and conditions:
a. Except as permitted by Section 1(b) below, the Laboratory
will keep all items of Collateral at the laboratories or storage
facilities listed on Schedule 2 hereto, and will not deliver such
property to anyone.
b. Subject to the provisions of Sections 1(c) and 1(d) below,
the Laboratory will permit the Company and/or Completion Guarantor (and
their respective designated affiliates, sublicensees or designees):
i) to have access to the negatives and other
pre-print material of the Product (but not remove them from
the possession of the Laboratory) for purposes of inspecting,
cutting, scoring or similar purposes;
ii) to obtain a reasonable number of positive prints
including without limitation, dailies, for the purposes of
editing and previewing the Product;
iii) to direct the making of pre-print material,
positive prints and video masters of the Product and trailers
thereof and the delivery thereof to the Company or
distributors, licensees or other parties as the Company may
direct;
- 2 -
iv) to remove reasonable amounts of material for
processing by optical and/or sound houses which agree in
writing to be bound by the terms hereof or enter into a
separate laboratory pledgeholder agreement substantially in
the form hereof, and to return such materials when processed
to the Laboratory;
v) with the prior written consent of the Lender, to
forward any item of Collateral to another laboratory. The
Lender's consent contained in this clause (v) may be revoked
at any time by written notice to the Laboratory, the
Completion Guarantor and the Company from the Lender. In
addition, such consent shall be deemed to be revoked at any
time upon receipt by the Laboratory of written notice from the
Lender, that an Event of Default has occurred under the Credit
Agreement; and
vi) to forward any of the above-mentioned property to
another laboratory, approved by the Lender, if the Lender has
previously received a Pledgeholder Agreement executed by such
laboratory.
c. If and when the Laboratory shall receive written notice
from the Lender that an Event of Default shall have occurred and is
continuing under the Credit Agreement, the Laboratory shall take no
further orders from the Company and will hold all items of Collateral
within its possession or under its control as pledgeholder hereunder,
subject only (i) to the order and instruction of the Lender; and (ii)
to the rights of the Lender and/or the Completion Guarantor to have
access to and/or delivery of items referred to in Section 6 below.
d. If and when the Laboratory shall receive written notice
from the Completion Guarantor that the Completion Guarantor has
exercised its right to take over the production of the Product under
the Company's Agreement and, unless and until the Laboratory shall have
received written notice from the Lender to the contrary, the Laboratory
shall allow the Completion Guarantor to exercise the rights set forth
in clauses (i), (ii), (iii) and (iv) of Section 1(b) hereof. Following
such notice from the Completion Guarantor, the Laboratory will not
permit the Company to have any further access to, or direct any further
actions to be taken with respect to, the Collateral in the Laboratory's
possession or under its control or to obtain any prints thereof.
e. If the Completion Guarantor takes over the production of
the Product and requests that the Collateral be moved to a different
laboratory, the Lender agrees to consent to such move so long as a
laboratory pledgeholder agreement is executed by the various parties
hereto (other than the Laboratory)
- 3 -
and by the replacement laboratory, substantially in the form
hereof and so as long as the replacement laboratory is reasonably
satisfactory to the Lender.
2. The Company agrees with the Lender that during production of the
Product it will deliver the daily rushes for the Product to the Laboratory as
soon as practicable and will use their best efforts to deliver the daily rushes
on a weekly basis.
3. The Laboratory shall keep the original negatives of the Product in
film vaults separate from and at a reasonable distance from protective
duplicating materials (whether protective masters, fine grains, duplicate
negatives or otherwise) to afford protection against any loss or damage, whether
by fire or other disaster or otherwise. The Laboratory shall keep the Lender and
the Completion Guarantor advised in writing of the actual location of the film
vaults where all items of the Collateral are kept, including information as to
the separate film vaults utilized for the original negatives and protective
materials as aforesaid.
4. Subject to the rights of the Completion Guarantor, the Laboratory
agrees that in its capacity as pledgeholder it is holding and has possession of
the Collateral and the physical properties thereof constructively for the Lender
and, until such time that the Lender notifies the Laboratory that the Lender no
longer has any rights in the Collateral, upon written notice to the Laboratory
indicating that an Event of Default has occurred and is continuing under the
Credit Agreement (a copy of which will be sent to the Completion Guarantor
unless its rights hereunder have terminated as contemplated by Section 8
hereof), will hold a sale or sales of the Collateral or any part thereof in
accordance with the direction and instruction of the Lender, at the expense of
the Lender, or in the alternative will cause to be delivered or made available
to the Lender or its nominee (in all cases, pursuant to written instructions
from the Lender) the Collateral and all physical properties thereof in the
possession of the Laboratory or under its control for the purpose of enabling
the Lender to deal with the same pursuant to the Credit Agreement. Nothing
herein contained shall be construed to waive any rights of the Laboratory as
specified under Section 9 hereof.
5. Each of the Completion Guarantor and the Company hereby waives any
claim for damages or otherwise which it may have against the Laboratory for any
acts which the Laboratory may take as pledgeholder, pursuant to the written
direction of the Lender made in accordance with the terms of this Agreement.
6. Subject to Section 9 hereof, the Laboratory agrees that, despite the
existence of any other claim which the Laboratory may have against the Company
and/or the Completion Guarantor and/or any third-party distributor of the
Product, the Laboratory shall accept and fulfill orders for laboratory work and
any other material which may be required by the Lender or any other third-party
distributor of the Product, subject to satisfactory credit arrangements being
made with the Laboratory with respect to any charges incurred on behalf of the
Lender or any such third-party distributor, and the Laboratory will not assert
any claim or
- 4 -
lien, statutory or otherwise, against the Lender or against the Product (except
as set forth in Section 9 hereof) with respect to any charges for laboratory
services or materials ordered by the Company, the designees of the Company, any
third-party distributor of the Product or the Completion Guarantor.
7. The parties hereto agree that the Lender and its respective
designees, successors and assigns shall each be entitled to unilaterally remove
from the Laboratory materials made pursuant to an order contemplated by Section
6 hereof, which materials shall not be subject to this Agreement.
8. The rights granted hereunder to the Completion Guarantor shall (i)
at all times be junior and subordinate to the rights hereunder of the Lender and
(ii) terminate upon the completion and delivery of the Product, unless prior to
such completion and delivery of the Product, the Completion Guarantor has
notified the Lender and the Laboratory in writing that it has or anticipates
that it will have to advance its own funds to complete the Product.
Notwithstanding anything to the contrary in this Agreement, the Completion
Guarantor shall have no rights under this Agreement if the Lender gives written
notice to the Laboratory and the Completion Guarantor that the Product has been
completed and delivered without the requirement that the Completion Guarantor
advance any of its own funds pursuant to the Completion Guaranty. The Completion
Guarantor hereby agrees that in the event that the Completion Guarantor shall
have been released in writing from all of its obligations under the Completion
Guaranty for the Product, any amendment or termination of this Agreement
thereafter shall not require the Completion Guarantor's consent.
9. The Laboratory shall hold and/or process the Collateral under its
standard terms of business as set forth in Schedule 3 hereto, except that any
liens arising in favor of the Laboratory shall be limited to an aggregate amount
of $50,000 at any one time outstanding for processing and/or storing the
Collateral and/or materials delivered therefrom for the Company, any of their
designees and/or the Completion Guarantor. Except as provided in the prior
sentence, the rights of the Laboratory in the Collateral shall be subordinate
and junior to the rights of the Lender and the Completion Guarantor in respect
of the Collateral.
10. The Lender shall promptly give written notice to the Laboratory
when the Lender's security interests in the Collateral has terminated. Upon
receipt of such written notice, the Laboratory's obligations hereunder as
pledgeholder for the Lender shall terminate.
11. This Agreement shall be binding on and inure to the benefit of the
parties hereto and the successors and assigns of each of the parties.
12. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK
- 5 -
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN THE STATE OF NEW
YORK.
13. No amendment to this Agreement shall be effective unless in writing
and signed by the Company, the Lender and the Laboratory and if the Laboratory
has not received the notice from the Lender contemplated by Section 8 hereof,
then also the Completion Guarantor. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which
when taken together, shall constitute but one instrument, and shall become
effective on the date on which each of the Completion Guarantor and the Lender
shall have received a fully-executed copy of this Agreement. Promptly
thereafter, the Company shall deliver or mail counterparts of this Agreement
bearing the signature of each of the parties hereto to each party hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first written above.
[LABORATORY]
By
-----------------------------------
Name:
Title:
Address:
Attn:
[LIST APPLICABLE CREDIT PARTY(IES)]
By
----------------------------------
Name:
Title:
Address:
- 6 -
[COMPLETION GUARANTOR]
By
----------------------------------
Name:
Title:
Address:
Attn:
THE CHASE MANHATTAN BANK
By
----------------------------------
Name:
Title:
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇, III
- 7 -
Schedule 1
List of items of Product
Schedule 2
List of Laboratory and Storage Facilities
Schedule 3
[Attach Laboratory's Standard Terms of Business]
EXHIBIT D-2
FORM OF PLEDGEHOLDER AGREEMENT (COMPLETED PRODUCT)
AGREEMENT dated as of [INSERT DATE] (the "Agreement")
among (i) [INSERT NAME OF LABORATORY] (the "Laboratory"), (ii)
[INSERT NAME OF EACH CREDIT PARTY WHO HAS CONTROL OVER THE
PHYSICAL ELEMENTS OF THE COLLATERAL] (collectively referred to
herein as the "Company") and (iii) The Chase Manhattan Bank
(the "Lender").
Pursuant to the Amended and Restated Credit, Security, Guaranty and
Pledge Agreement dated as of November 4, 1997, as amended and restated as of
August 16, 1999 (as the same may be amended, supplemented or otherwise modified,
renewed or replaced from time to time, the "Credit Agreement"), among NewStar
Media Inc. (formerly known as Dove Entertainment, Inc.) (the "Borrower"), the
Corporate Guarantors named therein and the Lender, the Lender has agreed,
subject to the terms and conditions set forth in the Credit Agreement, to make
loans to the Borrower in connection with, among other things, the acquisition,
production and distribution of the Product (as hereinafter defined).
The Company has granted to the Lender a security interest in, among
other things, all of its right, title and interest in and to the [DESCRIBE
NATURE OF PRODUCT, I.E. MOVIE-OF- THE-WEEK, TELEVISION PROGRAMS, AUDIOBOOKS,
ETC.] listed on Schedule 1 hereto (hereinafter called the "Product") as security
for various obligations of the Company to the Lender. Such security interest
covers, among other things, all physical properties of every kind or nature of,
or relating to, the Product and all versions thereof, including, without
limitation, exposed film, developed film, positives, negatives, prints, positive
prints, answer prints, special effects, preparing materials (including
interpositives, duplicate negatives, internegatives, color reversals,
intermediates, lavenders, fine grain master prints and matrices, and all other
forms of pre-print elements), sound tracks, cutouts, trims and any and all other
physical properties of every kind and nature of, or relating to, the Product,
whether in completed form or in some state of completion, and all audio and
video masters, duplicates, drafts, versions, variations and copies of each
thereof, in all formats whether on film, videotape, disk, cassette, phonorecord
or otherwise and all music sheets and promotional materials relating to the
Product all of the foregoing items being hereinafter collectively called the
"Collateral".
From time to time, the Laboratory will have in its possession certain
items of the Collateral.
- 1 -
Accordingly, the parties hereto hereby agree as follows:
1. Each of the Company and the Lender hereby appoints the
Laboratory as the pledgeholder of all items of Collateral that may from time to
time come into the possession or control of the Laboratory. The Laboratory
agrees to hold all such items of Collateral as pledgeholder for the Lender
subject to the following terms and conditions:
a. Except as permitted by Section 1(b) below, the Laboratory
will keep all items of Collateral at the laboratories or storage
facilities listed on Schedule 2 hereto, and will not deliver such
property to anyone.
b. Subject to the provisions of Sections 1(c) below, the
Laboratory will permit the Company and its designated affiliates,
sublicensees and designees:
i) to have access to the negatives and other
pre-print material of the Product (but not remove them from
the possession of the Laboratory) for purposes of inspecting,
cutting, scoring or similar purposes;
ii) to obtain a reasonable number of positive prints
including without limitation, dailies, for the purposes of
editing and previewing the Product;
iii) to direct the making of pre-print material,
positive prints and video masters of the Product and trailers
thereof and the delivery thereof to the Company or
distributors, licensees or other parties as the Company may
direct;
iv) to remove reasonable amounts of material for
processing by optical and/or sound houses which agree in
writing to be bound by the terms hereof or enter into a
separate laboratory pledgeholder agreement substantially in
the form hereof, and to return such materials when processed
to the Laboratory;
v) with the prior written consent of the Lender, to
forward any item of Collateral to another laboratory. The
Lender hereby consents to the Laboratory's forwarding original
material or elements constituting Collateral, if requested to
do so by the Company, to any of the laboratories listed on
Schedule 4 hereto. The Lender's consent contained in this
clause (v) may be revoked at any time by written notice to the
Laboratory and the Company from the Lender. In addition, such
consent shall be deemed to be revoked at any time upon receipt
by the Laboratory of written notice
- 2 -
from the Lender, that an Event of Default has occurred under
the Credit Agreement; and
vi) to forward any of the above-mentioned property to
another laboratory, approved by the Lender, if the Lender has
previously received a Pledgeholder Agreement executed by such
laboratory.
c. If and when the Laboratory shall receive written notice
from the Lender that an Event of Default shall have occurred and is
continuing under the Credit Agreement, the Laboratory shall take no
further orders from the Company and will hold all items of Collateral
within its possession or under its control as pledgeholder hereunder,
subject only (i) to the order and instruction of the Lender; and (ii)
to the rights of the Lender to have access to and/or delivery of items
referred to in Section 5 below.
2. The Laboratory shall keep the original negatives of the Product in
film vaults separate from and at a reasonable distance from protective
duplicating materials (whether protective masters, fine grains, duplicate
negatives or otherwise) to afford protection against any loss or damage, whether
by fire or other disaster or otherwise. The Laboratory shall keep the Lender
advised in writing of the actual location of the film vaults where all items of
the Collateral are kept, including information as to the separate film vaults
utilized for the original negatives and protective materials as aforesaid.
3. The Laboratory agrees that in its capacity as pledgeholder it is
holding and has possession of the Collateral and the physical properties thereof
constructively for the Lender and, until such time that the Lender notifies the
Laboratory that the Lender no longer has any rights in the Collateral, upon
written notice to the Laboratory indicating that an Event of Default has
occurred and is continuing under the Credit Agreement, will hold a sale or sales
of the Collateral or any part thereof in accordance with the direction and
instruction of the Lender, at the expense of the Lender, or in the alternative
will cause to be delivered or made available to the Lender or its nominee (in
all cases, pursuant to written instructions from the Lender) the Collateral and
all physical properties thereof in the possession of the Laboratory or under its
control for the purpose of enabling the Lender to deal with the same pursuant to
the Credit Agreement. Nothing herein contained shall be construed to waive any
rights of the Laboratory as specified under Section 7 hereof.
4. The Company hereby waives any claim for damages or otherwise which
it may have against the Laboratory for any acts which the Laboratory may take as
pledgeholder, pursuant to the written direction of the Lender made in accordance
with the terms of this Agreement.
- 3 -
5. Subject to Section 7 hereof, the Laboratory agrees that, despite the
existence of any other claim which the Laboratory may have against the Company
and/or any third-party distributor of the Product, the Laboratory shall accept
and fulfill orders for laboratory work and any other material which may be
required by the Lender or any other third-party distributor of the Product,
subject to satisfactory credit arrangements being made with the Laboratory with
respect to any charges incurred on behalf of the Lender or any such third-party
distributor, and the Laboratory will not assert any claim or lien, statutory or
otherwise, against the Lender or against the Product (except as set forth in
Section 7 hereof) with respect to any charges for laboratory services or
materials ordered by the Company, the designees of the Company or any
third-party distributor of the Product.
6. The parties hereto agree that the Lender and its respective
designees, successors and assigns shall each be entitled to unilaterally remove
from the Laboratory materials made pursuant to an order contemplated by Section
5 hereof, which materials shall not be subject to this Agreement.
7. The Laboratory shall hold and/or process the Collateral under its
standard terms of business as set forth in Schedule 3 hereto, except that any
liens arising in favor of the Laboratory shall be limited to an aggregate amount
of $50,000 at any one time outstanding for processing and/or storing the
Collateral and/or materials delivered therefrom for the Company and/or any of
their designees. Except as provided in the prior sentence, the rights of the
Laboratory in the Collateral shall be subordinate and junior to the rights of
the Lender in respect of the Collateral.
8. The Lender shall promptly give written notice to the Laboratory when
the Lender's security interests in the Collateral has terminated. Upon receipt
of such written notice, the Laboratory's obligations hereunder as pledgeholder
for the Lender shall terminate.
9. This Agreement shall be binding on and inure to the benefit of the
parties hereto and the successors and assigns of each of the parties.
10. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK.
11. No amendment to this Agreement shall be effective unless in writing
and signed by the Company, the Lender and the Laboratory. This Agreement may be
executed in two or more counterparts, each of which shall constitute an
original, but all of which when taken together, shall constitute but one
instrument, and shall become effective on the date on which the Lender shall
have received a fully-executed copy of this Agreement. Promptly thereafter, the
- 4 -
Company shall deliver or mail counterparts of this Agreement bearing the
signature of each of the parties hereto to each party hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first written above.
[LABORATORY]
By
------------------------------------
Name:
Title:
Address:
Attn:
[LIST APPLICABLE CREDIT PARTY(IES)]
By
------------------------------------
Name:
Title:
Address:
Attn:
THE CHASE MANHATTAN BANK
By
------------------------------------
Name:
Title:
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇, III
- 5 -
Schedule 1
List of Items of Product
Schedule 2
List of Laboratory and Storage Facilities
Schedule 3
[Attach Laboratory's Standard Terms of Business]
Schedule 4
Other Laboratories
EXHIBIT E-1
FORM OF COPYRIGHT SECURITY AGREEMENT
WHEREAS, Dove Entertainment, Inc., a California corporation
("Borrower"), and each Subsidiary of Borrower whose name appears at the foot
hereof (collectively the "Grantors") now own or hold and may hereafter acquire
or hold certain copyrights and rights under copyright with respect to certain
movies-of-the-week, television programs, films, videotapes or other programs
produced for television release or for release in any other medium, shown on
network, free and cable, pay and/or other television medium (including, without
limitation, first-run syndication), certain written works, books and other
published material, and sound recordings and audiobooks, in each case whether
recorded on film, videotape, cassette, cartridge, disc, audio cassette or on or
by any other means, method, process or device whether now owned or hereafter
developed, including, without limitation, those United States copyright
registrations listed on Schedule 1 hereto (the "Product") as such Schedule may
be amended from time to time by the addition of copyrights subsequently arising
or acquired;
WHEREAS, pursuant to that certain Credit, Security, Guaranty
and Pledge Agreement, dated as of November 4, 1997, (as the same may be amended,
modified or otherwise supplemented from time to time, the "Credit Agreement"),
among the Borrower, the Corporate Guarantors named therein and The Chase
Manhattan Bank (the "Lender"), the Lender has agreed to make loans to the
Borrower;
WHEREAS, pursuant to the terms of the Credit Agreement, the
Grantors granted to the Lender a security interest in all of the personal
property of the Grantors including all right, title and interest of the Grantors
in, to and under any copyright or copyright license whether now existing or
hereafter arising or acquired, and all proceeds thereof to secure the payment of
the Obligations (as such term is defined in the Credit Agreement);
NOW THEREFORE, for good and valuable consideration the receipt
and sufficiency of which is hereby acknowledged, Grantors do, as security for
the Obligations, hereby grant to the Lender a continuing security interest in
all the Grantors' right, title and interest in and to each and every item of
Product, the scenario, screenplay or script upon which an item of Product is
based, all of the properties thereof, tangible and intangible, and all domestic
and foreign copyrights and all other rights therein and thereto, of every kind
and character, whether now in existence or hereafter to be made or produced, and
whether or not in possession of such Grantors, including with respect to each
and every item of Product and without limiting the foregoing language, each and
all of the following particular rights and properties (to the extent they are
owned or hereafter created or acquired by Grantors):
-1-
(i) all scenarios, screenplays and/or scripts at every stage
thereof;
(ii) all common law and/or statutory copyright and other
rights in all literary and other properties (hereinafter called "said
literary properties") which form the basis of each item of Product
and/or which are and/or will be incorporated into each item of Product,
all component parts of each item of Product consisting of said literary
properties, all rights in and to the story, all treatments of said
story and said literary properties, together with all preliminary and
final screenplays used and to be used in connection with the item of
Product, and all other literary material upon which the item of Product
is based or from which it is adapted;
(iii) all rights in and to all music and musical compositions
used and to be used in each item of Product, including, each without
limitation, all rights to record, rerecord, produce, reproduce or
synchronize all of said music and musical compositions in and in
connection therewith;
(iv) without limitation, all exposed film, developed film,
positives, negatives, prints, positive prints, answer prints, special
effects, preparing materials (including interpositives, duplicate
negatives, internegatives, color reversals, intermediates, lavenders,
fine grain master prints and matrices, and all other forms of pre-print
elements), sound tracks, cutouts, trims and any and all other physical
properties of every kind and nature relating to such item of Product,
whether in completed form or in some state of completion, and all
masters, duplicates, drafts, versions, variations and copies of each
thereof, in all formats whether on film, videotape, disk or otherwise
and all music sheets and promotional materials relating to such item of
Product (collectively, the "PHYSICAL MATERIALS");
(v) all collateral, allied, subsidiary and merchandising
rights appurtenant or related to each item of Product including,
without limitation, the following rights: all rights to produce remakes
or sequels or prequels to each item of Product based upon each item of
Product, said literary properties or the theme of each item of Product
and/or the text or any part of said literary properties; all rights
throughout the world to broadcast, transmit and/or reproduce by means
of television (including commercially sponsored, sustaining and
subscription or "pay" television) or by any process analogous thereto,
now known or hereafter devised, each item of Product or any remake or
sequel or prequel to the item of Product; all rights to produce
primarily for television or similar use a motion picture or series of
motion pictures, by use of film or any other recording device or medium
now known or hereafter devised, based upon each item of Product, said
literary properties or any part thereof, including, without limitation,
based upon any script, scenario or the like used in each item of
Product; all merchandising rights including, without limitation, all
rights to use, exploit and license others to use and exploit any and
all commercial tieups of any kind arising out of or connected with said
literary properties, each item of Product, the title or titles of each
item of Product, the characters of each item
-2-
of Product or said literary properties and/or the names or
characteristics of said characters and including further, without
limitation, any and all commercial exploitation in connection with or
related to each item of Product, any remake or sequel thereof and/or
said literary properties;
(vi) all statutory copyrights, domestic and foreign, obtained
or to be obtained on items of Product, together with any and all
copyrights obtained or to be obtained in connection with each item of
Product or any underlying or component elements of each item of
Product, including, in each case without limitation, all copyrights on
the property described in subparagraphs (i) through (v) inclusive, of
this paragraph, together with the right to copyright (and all rights to
renew or extend such copyrights) and the right to ▇▇▇ in the name of
any of the Grantors' names for past, present and future infringements
of copyright;
(vii) all insurance policies and completion bonds connected
with each item of Product and all proceeds which may be derived
therefrom;
(viii) all rights to distribute, sell, rent, license the
exhibition of and otherwise exploit and turn to account each item of
Product, the Physical Materials and rights in and to said story, other
literary material upon which each item of Product is based or from
which it is adapted, and said music and musical compositions used or to
be used in each item of Product;
(ix) any and all sums, proceeds, money, products, profits or
increases, including money profits or increases (as those terms are
used in the New York Uniform Commercial Code (the "UCC") or otherwise)
or other property obtained or to be obtained from the distribution,
exhibition, sale or other uses or dispositions of each item of Product
or any part of each item of Product, including, without limitation, all
proceeds, profits, products and increases, whether in money or
otherwise, from the sale, rental or licensing of each item of Product
and/or any of the elements of each item of Product including from
collateral, allied, subsidiary and merchandising rights;
(x) the dramatic, nondramatic, stage, television, radio and
publishing rights, title and interest in and to each item of Product,
and the right to obtain copyrights and renewals of copyrights therein;
(xi) the name or title of each item of Product and all rights
of such Grantor to the use thereof, including, without limitation,
rights protected pursuant to trademark, service ▇▇▇▇, unfair
competition and/or the rules and principles of any other applicable
statutes, common law, or other rule or principle of law;
(xii) any and all contract rights and/or chattel paper which
may arise in connection with each item of Product;
-3-
(xiii) all accounts and/or other rights to payment which such
Grantor presently owns or which may arise in favor of such Grantor in
the future, including, without limitation, any refund under a
completion guaranty, all accounts and/or rights to payment due from
exhibitors in connection with the distribution of each item of Product,
and from exploitation of any and all of the collateral, allied,
subsidiary, merchandising and other rights in connection with each item
of Product;
(xiv) any and all "general intangibles" (as that term is
defined in the UCC) not elsewhere included in this definition,
including, without limitation, any and all general intangibles
consisting of any right to payment which may arise in the distribution
or exploitation of any of the rights set out herein, and any and all
general intangible rights in favor of such Grantor for services or
other performances by any third parties, including actors, writers,
directors, individual producers and/or any and all other performing or
nonperforming artists in any way connected with each item of Product,
any and all general intangible rights in favor of such Grantor relating
to licenses of sound or other equipment, licenses for any photograph or
photographic process, and all general intangibles related to the
distribution or exploitation of each item of Product including general
intangibles related to or which grow out of the exhibition of each item
of Product and the exploitation of any and all other rights in each
item of Product set out in this definition;
(xv) any and all goods, including inventory (as that term is
defined in the UCC), which may arise in connection with the creation,
production or delivery of each item of Product and which goods pursuant
to any production or distribution agreement or otherwise are owned by
such Grantor;
(xvi) all and each of the rights, regardless of denomination,
which arise in connection with the creation, production, completion of
production, delivery, distribution, or other exploitation of each item
of Product, including, without limitation, any and all rights in favor
of such Grantor, the ownership or control of which are or may become
necessary or desirable, in the opinion of the Lender, in order to
complete production of each item of Product in the event that the Agent
exercises any rights it may have to take over and complete production
of each item of Product;
(xvii) any and all documents issued by any pledgeholder or
bailee with respect to the item of Product, or any Physical Materials
(whether or not in completed form) with respect thereto;
(xviii) any and all production accounts or other bank accounts
established by such Grantor with respect to such item of Product;
(xix) any and all rights of such Grantor under contracts
relating to the production or acquisition of each item of Product; and
-4-
(xx) any and all rights of such Grantor under any agreement
entered into by such Grantor pursuant to which such Grantor has sold,
leased, licensed or assigned distribution rights or other exploitation
rights to any item of Product to an unaffiliated person;
(all of the foregoing items or types of property, whether presently existing or
hereafter arising or acquired, shall be referred to herein collectively as the
"Collateral").
Each of the Grantors agrees that if any person, firm,
corporation or other entity shall do or perform any acts which the Lender
believes constitute a copyright infringement of the photoplay or of any of the
literary, dramatic or musical material contained in the Product, or constitute a
plagiarism, or violate or infringe any right of any Grantor or the Lender
therein or if any person, firm, corporation or other entity shall do or perform
any acts which the Lender believes constitute an unauthorized or unlawful
distribution, exhibition, or use thereof, then and in any such event, upon 30
days' prior written notice to such Grantor, while an Event of Default under the
Credit Agreement is continuing, the Lender may and shall have the right to take
such steps and institute such suits or proceedings as the Lender may deem
advisable or necessary to prevent such acts and conduct and to secure damages
and other relief by reason thereof, and to generally take such steps as may be
advisable or necessary or proper for the full protection of the rights of the
parties. The Lender may take such steps or institute such suits or proceedings
in its own name or in the name of such Grantor or in the names of the parties
jointly. The Lender hereby agrees to give the applicable Grantor notice of any
steps taken, or any suits or proceedings instituted, by the Lender pursuant to
this paragraph.
This security interest is granted in conjunction with the
security interests granted to the Lender pursuant to the Credit Agreement. Each
Grantor does hereby further acknowledge and affirm that the rights and remedies
of the Lender with respect to the security interest in the Collateral made and
granted hereby are subject to, and more fully set forth in, the Credit
Agreement, the terms and provisions of which are incorporated by reference
herein as if fully set forth herein.
This Copyright Security Agreement is made for collateral
purposes only. At such time as all of the Loans under the Credit Agreement shall
have been repaid in full, the Commitments (including any commitment to issue any
Letter of Credit) shall have terminated and all Letters of Credit shall have
expired or been terminated or cancelled, the Lender shall execute and deliver to
such Grantors, at the Borrower's or the applicable Grantor's expense, without
representation, warranty or recourse, all releases and reassignments,
termination statements and other instruments as may be necessary or proper to
terminate the security interest of the Lender in the Collateral, subject to any
disposition thereof which may have been made by the Lender pursuant to the terms
hereof or of the Credit Agreement.
The Lender agrees that there will be no assignment of the
Collateral, other than the security interest described herein, unless and until
there shall occur an Event of Default under
-5-
the Credit Agreement and the Lender gives written notice to the applicable
Grantor of its intention to enforce its rights against any of the Collateral.
So long as no Event of Default under the Credit Agreement
shall have occurred and be continuing, and subject to the various provisions of
the Credit Agreement and the other Fundamental Documents to which it is a party,
each Grantor may use, license and exploit the Collateral in any lawful manner.
THIS COPYRIGHT SECURITY AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK.
Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed thereto in the Credit Agreement.
IN WITNESS WHEREOF, the Grantors have caused this Copyright
Security Agreement to be duly executed by its officer thereunto duly authorized
as of November 4, 1997.
DOVE ENTERTAINMENT, INC.
By /s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
Name:
Title:
-6-
DOVE INTERNATIONAL, INC.
By /s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
Name:
Title:
DOVE FOUR POINT, INC.
By /s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
Name:
Title:
Accepted:
THE CHASE MANHATTAN BANK
By /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name:
Title:
-▇-
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇ )
: ss.:
COUNTY OF LOS ANGELES )
On the 4th day of November, in the year 1997, before me personally came
▇▇▇▇ ▇▇▇▇▇▇, to me known, who, being by me sworn, did say that he is the CFO and
Treasurer of Dove Entertainment, Inc. which corporation is described in, and
which corporation executed the above instrument, and that s/he signed his/her
name by order of the Board of Directors of said corporation.
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇
----------------------------
Notary Public
STATE OF )
: ss.:
COUNTY OF )
On the 4th day of November, in the year 1997, before me personally came
▇▇▇▇ ▇▇▇▇▇▇, to me known, who, being by me sworn, did say that he is the CFO and
Treasurer of Dove International, Inc. , which corporation is described in, and
which corporation executed the above instrument, and that s/he signed his/her
name by order of the Board of Directors of said corporation.
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇
----------------------------
Notary Public
STATE OF )
: ss.:
COUNTY OF )
On the 4th day of November, in the year 1997, before me personally came
▇▇▇▇ ▇▇▇▇▇▇, to me known, who, being by me sworn, did say that he is the CFO and
Treasurer of Dove Four Point, Inc. , which corporation is described in, and
which corporation executed the above instrument, and that s/he signed his/her
name by order of the Board of Directors of said corporation.
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇
---------------------------
Notary Public
SCHEDULE 1
to Copyright Security Agreement
See Schedule 3.8 to the Credit Agreement
EXHIBIT E-2
FORM OF
SUPPLEMENT NO. __ TO THE COPYRIGHT SECURITY
AGREEMENT DATED AS OF NOVEMBER 4, 1997
--------------------------------------
WHEREAS, [INSERT NAME OF GRANTOR], a __________ corporation
(the "Grantor") is party to that certain Credit, Security, Guaranty and Pledge
Agreement, dated as of November 4, 1997, (as the same has been amended and
restated as of August 16, 1999 and as the same may be further amended, modified
or otherwise supplemented from time to time, the "Credit Agreement"), among
NewStar Media Inc. (formerly known as Dove Entertainment, Inc.) (the
"Borrower"), the Corporate Guarantors named therein (the "Guarantors") and The
Chase Manhattan Bank, as Lender (the "Lender");
WHEREAS, pursuant to the terms of the Credit Agreement, the
Grantor has granted to the Lender a security interest in all right, title and
interest of the Grantor in and to all personal property, whether now owned,
presently existing or hereafter acquired or created, including, without
limitation, all right, title and interest of the Grantor in, to and under any
item of Product (such term being used herein as defined in the Copyright
Security Agreement referred to below) and any copyright or copyright license,
whether now existing or hereafter arising, acquired or created, and all proceeds
thereof or income therefrom, to secure the payment and performance of the
Obligations (such term being used herein as defined in the Credit Agreement)
pursuant to the Credit Agreement;
WHEREAS, the Grantor is a party to a Copyright Security
Agreement, dated as of November 4, 1997 (as the same has been, or may hereafter
be, amended or supplemented from time to time, the "Copyright Security
Agreement"), pursuant to which the Grantor has granted to the Lender, as
security for the Obligations, a continuing security interest in all of the
Grantor's right, title and interest in and to each and every item of Product,
the scenario, screenplay or script upon which an item of Product is based, all
of the properties thereof, tangible and intangible, and all domestic and foreign
copyrights and all other rights therein and thereto, of every kind and
character, whether now in existence or hereafter to be made or produced, and
whether or not in possession of the Grantor, all as more fully set forth in the
Copyright Security Agreement;
WHEREAS, the Grantor has acquired or created additional items
of Product since the date of execution of the Copyright Security Agreement and
the most recent Supplement thereto and holds certain additional copyrights and
rights under copyright with respect to items of Product;
-1-
WHEREAS, Schedule 1 to the Copyright Security Agreement does
not reflect (i) item(s) of Product acquired or created by the Grantor since the
date of execution of the Copyright Security Agreement and the most recent
Supplement thereto or (ii) all the copyrights and rights under copyright held by
the Grantor;
THEREFORE,
A. The Grantor does hereby grant to the Lender, as security, a
continuing security interest in and to all of the Grantor's right,
title and interest in and to each and every item of Product being added
to Schedule 1 to the Copyright Security Agreement pursuant to paragraph
(b) below, the scenario, screenplay or script upon which such item of
Product is based, all of the properties thereof, tangible and
intangible, and all domestic and foreign copyrights and all other
rights therein and thereto, of every kind and character, whether now in
existence or hereafter to be made or produced, and whether or not in
possession of the Grantor, all as contemplated by, and as more fully
set forth in, the Copyright Security Agreement.
B. Schedule 1 to the Copyright Security Agreement is hereby
supplemented, effective as of the date hereof, so as to reflect all of
the copyrights and rights under copyright with respect to the item(s)
of Product in and to which the Grantor has granted a continuing
security interest to the Lender pursuant to the terms of the Copyright
Security Agreement and the Credit Agreement. The following item(s) of
Product and copyright information are hereby added to Schedule 1 to the
Copyright Security Agreement:
Date of
Title Registration No. Registration
----- ---------------- ------------
Except as expressly supplemented hereby, the Copyright
Security Agreement shall continue in full force and effect in accordance with
the provisions thereof on the date hereof. As used in the Copyright Security
Agreement, the terms "Agreement", "this Agreement", "this Copyright Security
Agreement", "herein", "hereafter", "hereto", "hereof" and words of similar
import, shall, unless the context otherwise requires, mean the Copyright
Security Agreement as supplemented by this Supplement.
Except as expressly supplemented hereby, the Copyright
Security Agreement, all documents contemplated thereby and any previously
executed Supplements thereto, are each hereby confirmed and ratified by the
Grantor.
The execution and filing of this Supplement, and the addition
of the item(s) of Product set forth herein to Schedule 1 to the Copyright
Security Agreement are not intended by
-2-
the parties to derogate from, or extinguish, any of the Lender's rights or
remedies under (i) the Copyright Security Agreement and/or any agreement,
amendment or supplement thereto or any other instrument executed by the Grantor
and heretofore recorded or submitted for recording in the U.S. Copyright Office
or (ii) any financing statement, continuation statement, deed or charge or other
instrument executed by the Grantor and heretofore filed in any state or country
in the United States of America or elsewhere.
IN WITNESS WHEREOF, the Grantor has caused this Supplement No.
___ to the Copyright Security Agreement to be duly executed by its duly
authorized officer as of [INSERT DATE OF EXECUTION].
[NAME OF GRANTOR]
By:
---------------------------
Name:
Title:
-3-
STATE OF ______________ )
: ss.:
COUNTY OF _____________ )
On this the ___ day of __________, ____, before me,
______________________, the undersigned Notary Public, personally appeared
[ ] personally known to me,
[ ] proved to me on the basis of satisfactory evidence, to be
the _________________________ of the corporation known as ______________________
who executed the foregoing instrument on behalf of the corporation, and
acknowledged that such corporation executed it pursuant to a resolution of its
Board of Directors.
WITNESS my hand and official seal.
------------------------------
Notary Public
EXHIBIT F
FORM OF LABORATORY ACCESS LETTER
[DATE]
[ADDRESS TO LABORATORY]
Dear Sir or Madam:
This letter will confirm the terms of an agreement among you
(the "Laboratory"), [LIST APPLICABLE CREDIT PARTY(IES) WITH ACCESS
RIGHTS](collectively, the "Company") and The Chase Manhattan Bank (the "Lender")
relating to the items of Product (the "Product") listed on Schedule 1 hereto.
Reference is hereby made to that certain Amended and Restated
Credit, Security, Guaranty and Pledge Agreement dated as of November 4, 1997, as
amended and restated as of August 16, 1999 (as the same may be amended,
supplemented or otherwise modified, renewed or replaced from time to time, the
"Credit Agreement") among the NewStar Media Inc. (formerly known as Dove
Entertainment Inc.), the Corporate Guarantors named therein and the Lender;
The Laboratory now has or may have in its possession or under
its control certain of the exposed film, developed film, positives, negatives,
prints, positive prints, answer prints, special effects, preparing material
(including interpositives, duplicate negatives, internegatives, color reversals,
intermediates, lavenders, fine grain master prints and matrices, and all other
forms of pre-print elements), sound tracks, cutouts, trims and any and all other
physical properties of every kind and nature, of or relating to, the Product,
whether in completed form or in some state of completion, and all audio and
video masters, duplicates, drafts, versions, variations and copies of each
thereof, in all formats whether on film, videotape, disk, cassette, phonorecord
or otherwise and all materials relating to the Product (all of the foregoing
physical properties now or hereafter in the Laboratory's possession or control
are herein collectively referred to as the "Physical Materials"). The Company
now possesses certain rights in connection with the Product and the Physical
Materials, including, without limitation, non- exclusive rights of access with
respect to the Physical Materials (the "Access Rights").
For good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. The Laboratory hereby agrees and confirms to the Lender
that the Company is entitled to exercise the Access Rights with respect to the
Physical Materials. The Company and
- 1 -
the Lender hereby confirm to the Laboratory, and the Laboratory hereby
acknowledges, that in order to secure certain obligations under the Credit
Agreement, the Company has pursuant to the Credit Agreement, inter alia, granted
to the Lender a security interest in and to the Company's right, title and
interest in and to the Access Rights.
2. The parties hereby agree that, upon written notice from the
Lender to the Laboratory that an Event of Default (as such term is defined in
the Credit Agreement) has occurred and is continuing, and the Lender has
exercised its security interest with respect to Access Rights, the Laboratory
shall accord to the Lender (or the Lender's successors or assigns) instead of
the Company, the non-exclusive right to exercise the Access Rights including,
without limitation, the non-exclusive right to have access to the Physical
Materials and to order and receive from the Laboratory on the Laboratory's
normal and customary terms all materials and services customarily rendered or
furnished by the Laboratory in connection with the Physical Materials.
3. The Laboratory and the other parties hereto hereby agree
that the rights of any party hereunder (including, without limitation, the
Lender's non-exclusive right to exercise the Access Rights) shall not be
affected, diminished, impeded or interfered with by reason of any failure of any
other person or entity to pay for any charges which have heretofore been
incurred or which may hereinafter be incurred in connection with the Product or
the Physical Materials, that the Laboratory will not look to any party hereunder
for payment of any charges incurred by any other person or entity with respect
to the Product or the Physical Materials (it being understood and agreed that
all services or materials ordered by any party shall be at the sole cost and
expense of the party ordering the same) and that any claim or lien which the
Laboratory may assert against any party hereto with respect to services or
materials furnished or rendered by the Laboratory at the request of such party
with respect to the Product or the Physical Materials will not interfere with
any other party's rights of access with respect to the Physical Materials or
other rights referred to hereunder.
4. The parties hereto hereby agree that the Access Rights may
not be terminated without the prior written consent of the Lender or unless the
Laboratory shall have received notice that the Lender's security interest in and
to the Company's right, title and interest in and to the Access Rights has
terminated, and that the Physical Materials may not be released to any other
entity (including another laboratory) without the Lender's prior written consent
(which consent shall not be unreasonably withheld), except that unless and until
the Laboratory shall have received written notice to the contrary, the
Laboratory will permit the Company to remove Physical Materials from its
premises in the ordinary course of business and in a manner consistent with the
Access Rights.
- 2 -
Kindly confirm your agreement to and acceptance of the
foregoing by signing in the space provided below.
Very truly yours,
[LIST APPLICABLE CREDIT PARTY(IES)]
By
--------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK
By:
-------------------------------
Name:
Title:
AGREED AND ACCEPTED BY:
[LABORATORY]
By:
-----------------------------
Name:
Title:
Schedule 1
THE PRODUCT
[LIST TITLES OF PRODUCT]
EXHIBIT G
FORM OF NOTICE OF ASSIGNMENT
AND IRREVOCABLE INSTRUCTIONS
[INSERT NAME AND ADDRESS OF APPLICABLE CREDIT PARTY]
As of __________
[INSERT NAME AND ADDRESS OF ACCOUNT DEBTOR]
Re: [DESCRIBE AGREEMENT BETWEEN THE APPLICABLE CREDIT PARTY (THE "COMPANY")
AND ACCOUNT DEBTOR (THE "AGREEMENT")]
Dear Sir or Madam:
The undersigned has created a security interest in its
benefits and rights to receive payments under the Agreement referred to above,
for the benefit of The Chase Manhattan Bank (the "Lender") pursuant to that
certain Amended and Restated Credit, Security, Guaranty and Pledge Agreement
dated as of November 4, 1997, as amended and restated as of August 16, 1999 (as
the same may be amended, supplemented or otherwise modified, renewed or replaced
from time to time, the "Credit Agreement") among NewStar Media Inc. (formerly
known as Dove Entertainment, Inc.), the Corporate Guarantors named therein and
the Lender.
The Company hereby irrevocably instructs and authorizes you to
pay all monies from time to time owing or to become due from you to us pursuant
to the Agreement (the "Assigned Payments") as follows:
-1-
If by wire transfer, to:
The Chase Manhattan Bank
for credit to NewStar Media Inc. Collection Account
Account No. ▇▇▇-▇▇▇-▇▇▇
ABA No. ▇▇▇▇▇▇▇▇▇
If by mail or hand delivery, to:
The Chase Manhattan Bank
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
for credit to NewStar Media Inc. Collection Account
This authority and instruction is coupled with an interest and
may not be modified, terminated or revoked without the prior written consent of
the Lender.
Upon the occurrence of an Event of Default (as such term is
defined in the Credit Agreement), the Lender shall have the right to modify this
authority and instruction by written notice to the parties hereto.
This Notice of Assignment and Irrevocable Instruction
rescinds, supersedes and replaces in its entirety any prior or previous notice
and/or directions to pay that you may have received with regard to the payment
of all or any portion of the Assigned Payments.
Please signify your acknowledgment hereof by signing and
returning to the Lender at the address below the acknowledgment and confirmation
as set out below.
Very truly yours,
[INSERT NAME OF APPLICABLE CREDIT PARTY]
By:
------------------------------------
Name:
Title:
-2-
To: The Chase Manhattan Bank
c/o ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
WE ACKNOWLEDGE RECEIPT, of the foregoing notice of irrevocable authority and
instruction and undertake to comply with it. We hereby confirm and agree that
all monies owing under the Agreement shall be paid immediately when they are due
subject only to the Agreement between us and the Company.
Dated this ______ day of ______
[NAME OF ACCOUNT DEBTOR]
By:
------------------------------
Name:
Title:
[THE UNDERSIGNED ACKNOWLEDGES THAT
THE NOTICE OF ASSIGNMENT, DATED
AS OF ______, IN FAVOR OF
THE UNDERSIGNED HAS BEEN TERMINATED.
[NAME OF OLD LENDER]
BY:
---------------------------------
NAME:
TITLE:](1)
--------
(1) /Applicable only to receivables previously assigned to another lender.
-3-
EXHIBIT H
FORM OF BORROWING CERTIFICATE
The undersigned HEREBY CERTIFIES with respect to the Borrowing
to be made on the date indicated below pursuant to the Amended and Restated
Credit, Security, Guaranty and Pledge Agreement dated as of November 4, 1997, as
amended and restated as of August 16, 1999, among NewStar Media Inc. (formerly
known as Dove Entertainment, Inc.) (the "Borrower"), the Corporate Guarantors
named therein and The Chase Manhattan Bank (the "Lender") (as the same may be
amended, supplemented or otherwise modified, renewed or replaced from time to
time, the "Credit Agreement"; capitalized terms used herein and not otherwise
defined shall have the meanings set forth in the Credit Agreement) that:
(a) the representations and warranties contained in the Credit
Agreement are true and correct in all material respects on and as of the date
hereof as if such representations and warranties had been made on and as of the
date hereof except to the extent that such representations and warranties
expressly relate to an earlier date and except to the extent that changes have
occurred without breach or default under any of the terms or conditions of the
Credit Agreement;
(b) no Default or Event of Default has occurred or is continuing, nor
shall any such event occur by reason of the making of the Loan(s) requested
herein;
(c) the Borrower requests [A] Loan(s) on the terms and conditions as
stated in the Credit Agreement and the Note:
(i) the requested Business Day of the Loan is [INSERT DATE];
(ii) the type of [INSERT WHETHER AN ALTERNATE BASE RATE OR
EURODOLLAR LOAN] requested, the amounts thereof and the Interest
Period(s) [IF A EURODOLLAR LOAN IS REQUESTED] are as follows:
Type Interest Period Amount
---- --------------- ------
(iii) $_______ of the Loan requested above shall be subject to
the guaranty obligations of the Individual Guarantors pursuant to the
Guaranty Agreements1/; -
---------------
(1) / Applicable for Loans subject to the guaranty obligations of the Individual
Guarantors under the Guaranty Agreements.
-1-
(d) the Borrowing Base on [INSERT DATE] was $__________ as indicated on
the most recent Borrowing Base Certificate delivered to the Lender pursuant to
the Credit Agreement and the undersigned has no reason to believe that the sum
of (x) the Borrowing Base, (y) Maximum Guaranty Amount and (z) amounts currently
held in the Collection Account, if currently computed would be less than the
outstanding principal amount of all Loans under the Credit Agreement (after
giving effect to the Loan requested hereby).
IN WITNESS WHEREOF, the undersigned has caused this certificate to be
executed this ___ day of ___________.
NEWSTAR MEDIA INC.
By
---------------------------
Name:
Title:
-2-
EXHIBIT I
FORM OF INSTRUMENT OF ASSUMPTION AND JOINDER
Instrument of ASSUMPTION AND JOINDER AGREEMENT dated as of
___________ (the "Assumption Agreement") made by [INSERT NAME OF NEW CREDIT
PARTY], a [INSERT STATE OF INCORPORATION] corporation (the "Company") in favor
of The Chase Manhattan Bank, as Lender (the "Lender"), under that certain
Amended and Restated Credit, Security, Guaranty and Pledge Agreement dated as of
November 4, 1997, as amended and restated as of August 16, 1999 (as the same may
be amended, supplemented or otherwise modified, renewed or replaced from time to
time, the "Credit Agreement") among NewStar Media Inc. (formerly known as Dove
Entertainment, Inc.), a California corporation, the Corporate Guarantors
referred to therein and the Lender.
W I T N E S S E T H
- - - - - - - - - -
The Company is a [INSERT STATE OF INCORPORATION] corporation
and is a Subsidiary of [INSERT NAME OF CREDIT PARTY]. Pursuant to Section 6.22
of the Credit Agreement, the Company is required to execute this document (as a
newly [FORMED OR ACQUIRED] Subsidiary of [INSERT NAME OF CREDIT PARTY]).
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Company hereby agrees as follows:
1. ASSUMPTION AND JOINDER.
(a) The Company hereby expressly confirms that it has
assumed, and hereby agrees to perform and observe, each and every one of the
covenants, rights, promises, agreements, terms, conditions, obligations,
appointments, duties and liabilities of (i) a Corporate Guarantor under the
Credit Agreement and all the other Fundamental Documents applicable to it as a
Corporate Guarantor, (ii) a Contributor (as such term is defined in the
Contribution Agreement) under the Contribution Agreement and (iii) a Grantor (as
such term is defined in the Copyright Security agreement) under the Copyright
Security Agreement. By virtue of the foregoing, the Company hereby accepts and
assumes any liability of (x) a Corporate Guarantor and/or a Credit Party related
to each representation or warranty, covenant or obligation made by a Corporate
Guarantor and/or a Credit Party in the Credit Agreement or any other document
and hereby expressly affirms, on the date hereof, for the benefit of the Lender,
each of such representations, warranties, covenants and obligations, (y) a
Contributor related to each covenant
- 1 -
or obligation made by a Contributor in the Contribution Agreement and hereby
expressly affirms, on the date hereof, each of such covenants and obligations
and (z) a Grantor related to each covenant or obligation made by a Grantor in
the Copyright Security Agreement and hereby expressly affirms, on the date
hereof, each of such covenants and obligations.
(b) All references to the term "Corporate Guarantor"
or "Credit Party" in the Credit Agreement or any other Fundamental Document, or
in any document or instrument executed and delivered or furnished, or to be
executed and delivered or furnished, in connection therewith shall be deemed to
be references to, and shall include, the Company.
(c) All references to the term "Contributor" in the
Contribution Agreement, or in any document or instrument executed and delivered
or furnished, or to be executed and delivered or furnished, in connection
therewith shall be deemed to be references to, and shall include, the Company.
(d) All references to the term "Grantor" in the
Copyright Security Agreement, or in any document or instrument executed and
delivered or furnished, or to be executed and delivered or furnished, in
connection therewith shall be deemed to be references to, and shall include, the
Company.
2. REPRESENTATIONS AND WARRANTIES. The Company hereby
represents and warrants to the Lender as follows:
(a) The Company has the requisite corporate power and
authority to enter into this Assumption Agreement and to perform its obligations
hereunder and under the Credit Agreement, the Contribution Agreement, the
Copyright Security Agreement and the other Fundamental Documents to which it is
a party. The execution, delivery and performance of this Assumption Agreement by
the Company and the performance of its obligations under the Credit Agreement
and the other Fundamental Documents have been duly authorized by the Board of
Directors of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize the execution, delivery or performance of
this Assumption Agreement, the transactions contemplated hereby or the
performance of its obligations under the Credit Agreement or any other
Fundamental Document. This Assumption Agreement has been duly executed and
delivered by the Company. This Assumption Agreement and the Credit Agreement
each constitutes a legal, valid and binding obligation of the Company
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors rights generally and
to general principles of equity.
(b) The representations and warranties set forth in
Article 3 of the Credit Agreement are true and correct on and as of the date
hereof (except to the extent that such representations and warranties expressly
relate to an earlier date) with the same effect as if made on and as of the date
hereof.
- 2 -
(c) The authorized capitalization of the Company, the
number of shares of its capital stock outstanding on the date hereof, and the
ownership of the outstanding shares of its capital stock is set forth on
Schedule 1 hereto.
(d) On the date hereof the Company has not done
business, is not doing business and does not intend to do business other than
under its full corporate name, including, without limitation, under any trade
name or other doing business name except as set forth on Schedule 1 hereto, and
is in good standing in all jurisdictions where the failure to be in good
standing as a foreign jurisdiction would give rise to a material liability of
the Company.
(e) The chief executive office of the Company is
located at ________________________. Such office is the place where the Company
keeps the records concerning the Collateral attributable to it on the date
hereof. The only places at which the Company regularly keeps any goods included
in the Collateral attributable to it on the date hereof are the places listed on
Schedule 2 hereto.
3. FURTHER ASSURANCES. At any time and from time to time, upon
the Lender's request and at the sole expense of the Company, the Company will
promptly and duly execute and deliver any and all further instruments and
documents and take such further action as the Lender reasonably deems necessary
to effect the purposes of this Assumption Agreement.
4. BINDING EFFECT; ASSIGNMENT. This Assumption Agreement shall
be binding upon the Company and shall inure to the benefit of the Lender and its
successors and assigns.
5. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered by its duly authorized officer as of
the date first above written.
[NAME OF COMPANY]
By:
-----------------------------
Name:
Title:
- 3 -
SCHEDULE 1
Capital Stock of [NAME OF COMPANY]
----------------------------------
Authorized capitalization:
Number of shares of capital stock
outstanding:
Ownership of the outstanding
capital stock:
SCHEDULE 2
Location of Collateral
----------------------
EXHIBIT J
FORM OF CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT ("Agreement") is entered into as
of November 4, 1997 by and among Dove Entertainment, Inc., a California
corporation (the "Company" or the "Borrower") and each Subsidiary of the
Borrower whose name appears at the foot hereof (collectively, the
"Contributors", individually each a "Contributor"), for the purpose of
establishing the respective rights and obligations of contribution among the
Contributors and the Borrower in connection with the Credit Agreement (as
hereinafter defined). Capitalized terms used herein and not otherwise defined
shall have the meanings set forth in the Credit Agreement.
WHEREAS, the Borrower and the Contributors are parties to a
Credit, Security, Guaranty and Pledge Agreement dated as of November 4, 1997
among the Borrower, the Contributors and The Chase Manhattan Bank (the "Lender")
(said agreement, as it may hereafter be amended, supplemented or otherwise
modified, renewed or replaced from time to time in accordance with its terms
being the "Credit Agreement"), pursuant to which the Lender has made certain
commitments, subject to the terms and conditions set forth therein, to extend a
credit facility to the Borrower;
WHEREAS, pursuant to the Credit Agreement, the Contributors
have guaranteed the Obligations (such term being used herein as defined in the
Credit Agreement) of the Borrower;
WHEREAS, pursuant to the terms of the Credit Agreement, each
of the Borrower and Contributors has granted to the Lender a security interest
in the Collateral (as defined in the Credit Agreement) for their respective
obligations thereunder;
WHEREAS, as a result of the transactions contemplated by the
Credit Agreement, the Borrower and the Contributors will benefit, directly and
indirectly, from the Obligations and in consideration thereof desire to enter
into this Agreement to allocate such benefits among themselves and to provide a
fair and equitable arrangement to make contributions in the event any payments
are made by the Contributors under the Credit Agreement or the Lender exercises
recourse against any of the Collateral owned by the Contributors (such payment
or recourse being referred to herein as a "Contribution");
NOW, THEREFORE, in consideration of the foregoing premises and
for other good and valuable consideration, the receipt of which is hereby
acknowledged, the Contributors and the Borrower hereby agree as follows:
- 1 -
SECTION 1. CONTRIBUTION. In order to provide for just and
equitable contribution among the Contributors and the Borrower in the event any
Contribution is made by a Contributor (a "FUNDING CONTRIBUTOR") under the Credit
Agreement, that Funding Contributor shall be entitled to a contribution from
certain other Contributors and from the Borrower for all payments, damages and
expenses incurred by that Funding Contributor in discharging any of the
Obligations, in the manner and to the extent set forth in this Agreement. The
amount of any Contribution under this Agreement shall be equal to the payment
made pursuant to the Credit Agreement or the fair saleable value of the Funding
Contributor's portion of the Collateral against which recourse is exercised, and
shall be determined as of the date on which such payment is made or recourse is
exercised, as the case may be.
SECTION 2. BENEFIT AMOUNT DEFINED. For purposes of this
Agreement, the "BENEFIT AMOUNT" of any Contributor as of any date of
determination shall be the net value of the benefits to such Contributor from
extensions of credit made by the Lender to the Borrower under the Credit
Agreement. Such benefits shall include benefits of funds constituting proceeds
of Loans which are deposited into the account of the Borrower by the Lender
which are in turn advanced or contributed by the Borrower to such Contributor
(collectively, the "BENEFITS"). In the case of any proceeds of Loans or Benefits
advanced or contributed to a Person (an "OWNED ENTITY") any of the equity
interests of which are owned directly or indirectly by a Contributor, the
Benefit Amount of a Contributor with respect thereto shall be that portion of
the net value of the benefits attributable to Loans or Benefits advanced or
contributed to the Owned Entity equal to the direct or indirect percentage
ownership of such Contributor in its Owned Entity.
SECTION 3. CONTRIBUTION OBLIGATION. Each Contributor and the
Borrower shall be liable to a Funding Contributor in an amount equal to the
greater of (A) the product of (i) a fraction the numerator of which is (x) the
Benefit Amount of such Contributor or Borrower, and the denominator of which is
(y) the total amount of Obligations and (ii) the amount of Obligations paid by
such Funding Contributor and (B) 95% of the excess of the fair saleable value of
the property of such Contributor over the total liabilities of such Contributor
(including the maximum amount reasonably expected to become due in respect of
contingent liabilities), as the case may be, determined as of the date on which
the payment made by a Funding Contributor is deemed made for purposes of this
Agreement or any recourse is exercised against any Contributor's portion of the
Collateral, as the case may be (giving effect to all payments made by other
Funding Contributors and to the exercise of recourse against any other Funding
Contributor's portion of the Collateral as of such date in a manner to maximize
the amount of such contributions).
SECTION 4. ALLOCATION. In the event that at any time there
exists more than one Funding Contributor with respect to any Contribution (in
any such case, the "APPLICABLE CONTRIBUTION"), then payment from other
Contributors and from the Borrower pursuant to this Agreement shall be allocated
among such Funding Contributors in proportion to the total amount of the
Contribution made for or on account of the Borrower by each such Funding
Contributor pursuant to the Applicable Contribution. In the event that at any
time any Contributor pays an
- 2 -
amount under this Agreement in excess of the amount calculated pursuant to
clause (A) of Section 3, that Contributor shall be deemed to be a Funding
Contributor to the extent of such excess and shall be entitled to contribution
from the other Contributors and from the Borrower in accordance with the
provisions of this Agreement.
SECTION 5. SUBROGATION. Any payments made hereunder by the
Borrower shall be credited against amounts payable by the Borrower pursuant to
any subrogation rights of the Contributors which received the payments under
this Agreement.
SECTION 6. PRESERVATION OF RIGHTS. This Agreement shall not
limit any right which any Contributor may have against any other Person which is
not a party hereto.
SECTION 7. SUBSIDIARY PAYMENT. The amount of contribution
payable under this Agreement by any Contributor shall be reduced by the amount
of any contribution paid hereunder by a Subsidiary of such Contributor.
SECTION 8. EQUITABLE ALLOCATION. If as a result of any
reorganization, recapitalization, or other corporate change in the Company or
any Affiliates or Subsidiaries thereof, or as a result of any amendment, waiver
or modification of the terms and conditions governing the Credit Agreement or
the Obligations, or for any other reason, the Contributions under this Agreement
become inequitable, the parties hereto shall promptly modify and amend this
Agreement to provide for an equitable allocation of the Contributions. Any of
the foregoing modifications and amendments to this Agreement shall be in writing
and signed by all parties hereto.
SECTION 9. ASSET OF PARTY TO WHICH CONTRIBUTION IS OWING. The
parties hereto acknowledge that the right to contribution hereunder shall
constitute an asset in favor of the party to which such contribution is owing.
SECTION 10. SUBORDINATION. No payments payable by a
Contributor or by the Borrower pursuant to the terms hereof shall be paid until
all amounts then due and payable by the Borrower to the Lender, pursuant to the
terms of the Fundamental Documents, are paid in full in cash. Nothing contained
in this Agreement shall affect the obligations of any party hereto to the Lender
under the Credit Agreement or any other Fundamental Documents.
SECTION 11. SUCCESSORS AND ASSIGNS; AMENDMENTS. This Agreement
shall be binding upon each party hereto and its respective successors and
assigns and shall inure to the benefit of the parties hereto and their
respective successors and assigns, and in the event of any transfer or
assignment of rights by a Contributor or by the Borrower, the rights and
privileges herein conferred upon that Contributor shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
condition hereof. Except as specifically required under Section 8, this
Agreement shall not be amended without the prior written consent of the Lender.
- 3 -
SECTION 12. TERMINATION. This Agreement, as it may be modified
or amended from time to time, shall remain in effect, and shall not be
terminated until the Credit Agreement has been discharged or otherwise satisfied
in accordance with its terms.
SECTION 13. CHOICE OF LAW. This Agreement, and any instrument
or agreement required hereunder, shall be deemed to be made under, shall be
governed by, and shall be construed and enforced in accordance with, the laws of
the State of New York without regard to principles of conflict of laws.
SECTION 14. COUNTERPARTS. This Agreement, and any
modifications or amendments hereto may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original for all purposes, but all such counterparts shall constitute but one
and the same instrument.
SECTION 15. EFFECTIVENESS. This Agreement shall become
effective on the date on which all of the parties hereto shall have executed
this Agreement. The Company shall deliver counterparts hereof bearing the
signatures of each of the parties hereto to the Lender.
IN WITNESS WHEREOF, the undersigned parties have caused this
Agreement to be duly executed as of the day and year first written above.
DOVE ENTERTAINMENT, INC.
By /s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President & Chief Financial Officer
DOVE INTERNATIONAL, INC.
By /s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President & Treasurer
DOVE FOUR POINT, INC.
By /s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
- 4 -
EXHIBIT J
FORM OF CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT ("Agreement") is entered into as
of November 4, 1997 by and among Dove Entertainment, Inc., a California
corporation (the "Company" or the "Borrower") and each Subsidiary of the
Borrower whose name appears at the foot hereof (collectively, the
"Contributors", individually each a "Contributor"), for the purpose of
establishing the respective rights and obligations of contribution among the
Contributors and the Borrower in connection with the Credit Agreement (as
hereinafter defined). Capitalized terms used herein and not otherwise defined
shall have the meanings set forth in the Credit Agreement.
WHEREAS, the Borrower and the Contributors are parties to a
Credit, Security, Guaranty and Pledge Agreement dated as of November 4, 1997
among the Borrower, the Contributors and The Chase Manhattan Bank (the "Lender")
(said agreement, as it may hereafter be amended, supplemented or otherwise
modified, renewed or replaced from time to time in accordance with its terms
being the "Credit Agreement"), pursuant to which the Lender has made certain
commitments, subject to the terms and conditions set forth therein, to extend a
credit facility to the Borrower;
WHEREAS, pursuant to the Credit Agreement, the Contributors
have guaranteed the Obligations (such term being used herein as defined in the
Credit Agreement) of the Borrower;
WHEREAS, pursuant to the terms of the Credit Agreement, each
of the Borrower and Contributors has granted to the Lender a security interest
in the Collateral (as defined in the Credit Agreement) for their respective
obligations thereunder;
WHEREAS, as a result of the transactions contemplated by the
Credit Agreement, the Borrower and the Contributors will benefit, directly and
indirectly, from the Obligations and in consideration thereof desire to enter
into this Agreement to allocate such benefits among themselves and to provide a
fair and equitable arrangement to make contributions in the event any payments
are made by the Contributors under the Credit Agreement or the Lender exercises
recourse against any of the Collateral owned by the Contributors (such payment
or recourse being referred to herein as a "Contribution");
NOW, THEREFORE, in consideration of the foregoing premises and
for other good and valuable consideration, the receipt of which is hereby
acknowledged, the Contributors and the Borrower hereby agree as follows:
- 1 -
SECTION 1. CONTRIBUTION. In order to provide for just and
equitable contribution among the Contributors and the Borrower in the event any
Contribution is made by a Contributor (a "FUNDING CONTRIBUTOR") under the Credit
Agreement, that Funding Contributor shall be entitled to a contribution from
certain other Contributors and from the Borrower for all payments, damages and
expenses incurred by that Funding Contributor in discharging any of the
Obligations, in the manner and to the extent set forth in this Agreement. The
amount of any Contribution under this Agreement shall be equal to the payment
made pursuant to the Credit Agreement or the fair saleable value of the Funding
Contributor's portion of the Collateral against which recourse is exercised, and
shall be determined as of the date on which such payment is made or recourse is
exercised, as the case may be.
SECTION 2. BENEFIT AMOUNT DEFINED. For purposes of this
Agreement, the "BENEFIT AMOUNT" of any Contributor as of any date of
determination shall be the net value of the benefits to such Contributor from
extensions of credit made by the Lender to the Borrower under the Credit
Agreement. Such benefits shall include benefits of funds constituting proceeds
of Loans which are deposited into the account of the Borrower by the Lender
which are in turn advanced or contributed by the Borrower to such Contributor
(collectively, the "BENEFITS"). In the case of any proceeds of Loans or Benefits
advanced or contributed to a Person (an "OWNED ENTITY") any of the equity
interests of which are owned directly or indirectly by a Contributor, the
Benefit Amount of a Contributor with respect thereto shall be that portion of
the net value of the benefits attributable to Loans or Benefits advanced or
contributed to the Owned Entity equal to the direct or indirect percentage
ownership of such Contributor in its Owned Entity.
SECTION 3. CONTRIBUTION OBLIGATION. Each Contributor and the
Borrower shall be liable to a Funding Contributor in an amount equal to the
greater of (A) the product of (i) a fraction the numerator of which is (x) the
Benefit Amount of such Contributor or Borrower, and the denominator of which is
(y) the total amount of Obligations and (ii) the amount of Obligations paid by
such Funding Contributor and (B) 95% of the excess of the fair saleable value of
the property of such Contributor over the total liabilities of such Contributor
(including the maximum amount reasonably expected to become due in respect of
contingent liabilities), as the case may be, determined as of the date on which
the payment made by a Funding Contributor is deemed made for purposes of this
Agreement or any recourse is exercised against any Contributor's portion of the
Collateral, as the case may be (giving effect to all payments made by other
Funding Contributors and to the exercise of recourse against any other Funding
Contributor's portion of the Collateral as of such date in a manner to maximize
the amount of such contributions).
SECTION 4. ALLOCATION. In the event that at any time there
exists more than one Funding Contributor with respect to any Contribution (in
any such case, the "APPLICABLE CONTRIBUTION"), then payment from other
Contributors and from the Borrower pursuant to this Agreement shall be allocated
among such Funding Contributors in proportion to the total amount of the
Contribution made for or on account of the Borrower by each such Funding
Contributor pursuant to the Applicable Contribution. In the event that at any
time any Contributor pays an
- 2 -
amount under this Agreement in excess of the amount calculated pursuant to
clause (A) of Section 3, that Contributor shall be deemed to be a Funding
Contributor to the extent of such excess and shall be entitled to contribution
from the other Contributors and from the Borrower in accordance with the
provisions of this Agreement.
SECTION 5. SUBROGATION. Any payments made hereunder by the
Borrower shall be credited against amounts payable by the Borrower pursuant to
any subrogation rights of the Contributors which received the payments under
this Agreement.
SECTION 6. PRESERVATION OF RIGHTS. This Agreement shall not
limit any right which any Contributor may have against any other Person which is
not a party hereto.
SECTION 7. SUBSIDIARY PAYMENT. The amount of contribution
payable under this Agreement by any Contributor shall be reduced by the amount
of any contribution paid hereunder by a Subsidiary of such Contributor.
SECTION 8. EQUITABLE ALLOCATION. If as a result of any
reorganization, recapitalization, or other corporate change in the Company or
any Affiliates or Subsidiaries thereof, or as a result of any amendment, waiver
or modification of the terms and conditions governing the Credit Agreement or
the Obligations, or for any other reason, the Contributions under this Agreement
become inequitable, the parties hereto shall promptly modify and amend this
Agreement to provide for an equitable allocation of the Contributions. Any of
the foregoing modifications and amendments to this Agreement shall be in writing
and signed by all parties hereto.
SECTION 9. ASSET OF PARTY TO WHICH CONTRIBUTION IS OWING. The
parties hereto acknowledge that the right to contribution hereunder shall
constitute an asset in favor of the party to which such contribution is owing.
SECTION 10. SUBORDINATION. No payments payable by a
Contributor or by the Borrower pursuant to the terms hereof shall be paid until
all amounts then due and payable by the Borrower to the Lender, pursuant to the
terms of the Fundamental Documents, are paid in full in cash. Nothing contained
in this Agreement shall affect the obligations of any party hereto to the Lender
under the Credit Agreement or any other Fundamental Documents.
SECTION 11. SUCCESSORS AND ASSIGNS; AMENDMENTS. This Agreement
shall be binding upon each party hereto and its respective successors and
assigns and shall inure to the benefit of the parties hereto and their
respective successors and assigns, and in the event of any transfer or
assignment of rights by a Contributor or by the Borrower, the rights and
privileges herein conferred upon that Contributor shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
condition hereof. Except as specifically required under Section 8, this
Agreement shall not be amended without the prior written consent of the Lender.
- 3 -
SECTION 12. TERMINATION. This Agreement, as it may be modified
or amended from time to time, shall remain in effect, and shall not be
terminated until the Credit Agreement has been discharged or otherwise satisfied
in accordance with its terms.
SECTION 13. CHOICE OF LAW. This Agreement, and any instrument
or agreement required hereunder, shall be deemed to be made under, shall be
governed by, and shall be construed and enforced in accordance with, the laws of
the State of New York without regard to principles of conflict of laws.
SECTION 14. COUNTERPARTS. This Agreement, and any
modifications or amendments hereto may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original for all purposes, but all such counterparts shall constitute but one
and the same instrument.
SECTION 15. EFFECTIVENESS. This Agreement shall become
effective on the date on which all of the parties hereto shall have executed
this Agreement. The Company shall deliver counterparts hereof bearing the
signatures of each of the parties hereto to the Lender.
IN WITNESS WHEREOF, the undersigned parties have caused this
Agreement to be duly executed as of the day and year first written above.
DOVE ENTERTAINMENT, INC.
By /s/ ▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President & Chief Financial Officer
DOVE INTERNATIONAL, INC.
By /s/ ▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President & Treasurer
DOVE FOUR POINT, INC.
By /s/ ▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
- 4 -
EXHIBIT K-1
FORM OF GUARANTY AGREEMENT
GUARANTY AGREEMENT, dated as of August 16, 1999 (as
the same may be further supplemented, amended or otherwise
modified, renewed or replaced from time to time, the "Guaranty
Agreement") between (i) ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual
residing in Westchester County, New York (the "Individual
Guarantor") and (ii) THE CHASE MANHATTAN BANK, a New York
banking corporation (the "Lender").
Pursuant to the Amended and Restated Credit, Security,
Guaranty and Pledge Agreement dated as of November 4, 1997, as amended and
restated as of August 16, 1999 (as the same may be further amended,
supplemented, or otherwise modified, renewed or replaced from time to time, the
"Credit Agreement") among NewStar Media Inc. (formerly known as Dove
Entertainment, Inc.), a California corporation (the "Borrower"), the Corporate
Guarantors referred to therein and the Lender, the Lender has agreed to make
Loans to the Borrower and issue Letters of Credit in an amount outstanding at
any one time not in excess of $10,000,000. Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Credit Agreement.
The Individual Guarantor, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ (collectively, the "Guarantors") are
the direct and indirect owners of Media Equities International, L.L.C.
As an inducement to the Lender to make the Loans and issue
Letters of Credit to the Borrower, each of the Guarantors has agreed to guaranty
such obligations of the Borrower in an amount not to exceed the lesser of (x)
$2,000,000 and (y) the amount by which the aggregate of outstanding principal of
and any interest on all Loans and L/C Exposure exceeds the Borrowing Base (as
defined in the Credit Agreement) on the date demand for payment hereunder is
made (the "Maximum Guaranty Amount").
The Individual Guarantor individually has agreed to guaranty
such obligations of the Borrower to the extent and in accordance with the terms
hereof.
-1-
Therefore, for good and valuable consideration, the receipt of
which is hereby acknowledged by the Individual Guarantor, the parties hereto
agree as follows:
1. GUARANTY
SECTION 1.1 GUARANTY. (a) The Individual Guarantor
unconditionally and irrevocably guarantees the due and punctual payment by the
Borrower in an amount not to exceed the product of 110% of the Individual
Guarantor's ownership interest in MEI as of the date hereof (as set forth on
Schedule 1 hereto) multiplied by the Maximum Guaranty Amount (the "Guaranteed
Obligations"), as and when such amounts shall become due and payable whether by
scheduled maturity, acceleration or otherwise and any extensions or renewals
thereof, reimbursement obligations in respect of Letters of Credit, related
costs and attorney's fees, and all other monetary obligations of the Borrower to
the Lender under the Credit Agreement.
(b) In furtherance of the provisions of this Guaranty
Agreement, and not in limitation of any other right which the Lender may have at
law or in equity against the Borrower or any other guarantor of the Guaranteed
Obligations, upon failure of the Borrower to pay any of the Guaranteed
Obligations when and as the same shall become due, whether at maturity, by
acceleration, after notice or otherwise, the Individual Guarantor hereby
promises to and will, upon receipt of written demand by the Lender, forthwith
pay or cause to be paid to the Lender in cash an amount equal to the unpaid
balance of the Guaranteed Obligations then due and payable.
(c) The Individual Guarantor, to the extent permitted by
applicable law, waives presentation to, demand for payment from and protest to
the Borrower and also waives notice of protest for nonpayment, notice of
acceleration and notice of intent to accelerate. The obligations of the
Individual Guarantor hereunder shall not be affected by (i) the failure of the
Lender to assert any claim or demand or to enforce any right or remedy against
the Borrower or any other guarantor of the Guaranteed Obligations under the
provisions of the Credit Agreement or any other agreement or otherwise; (ii) any
extension or renewal of any provision hereof or thereof; (iii) any rescission,
waiver, compromise, acceleration, amendment or modification of any of the terms
or provisions of the Credit Agreement, the Note or any other agreement; (iv) the
release, exchange, waiver or foreclosure of any security held by the Lender for
the Guaranteed Obligations or any of them or (v) the failure of the Lender to
exercise any right or remedy against any other guarantor of the Guaranteed
Obligations.
(d) The Individual Guarantor further agrees that this guaranty
is a continuing guaranty and constitutes a guaranty of performance and of
payment when due and not just of collection, and waives, to the extent permitted
by applicable law, any right to require that any resort be had by the Lender to
any security held for payment of the Guaranteed Obligations or to any balance of
any deposit, account or credit on the books of the Lender in favor of the
Borrower or any other guarantor or to any other person.
-2-
(e) The Individual Guarantor hereby expressly assumes all
responsibilities to remain informed of the financial condition of the Borrower
and each other guarantor of the Guaranteed Obligations and any circumstances
affecting the Collateral or the ability of the Borrower to perform under the
Credit Agreement.
(f) This guaranty shall not be affected by the genuineness,
validity, regularity or enforceability of the Guaranteed Obligations, the Note
or any other instrument evidencing any of the Guaranteed Obligations, or by the
existence, validity, enforceability, perfection or extent of any collateral
therefor or by any other circumstance relating to the Guaranteed Obligations
which might otherwise constitute a defense to the guaranty under this Guaranty
Agreement. The Lender makes no representation or warranty in respect to any such
circumstances nor has any duty or responsibility whatsoever to the Individual
Guarantor in respect to the management and maintenance of the Guaranteed
Obligations or the Collateral.
(g) The Individual Guarantor hereby acknowledges that, subject
to $2,000,000 limit set forth in the definition of "Maximum Guaranty Amount"
above, the Maximum Guaranty Amount may increase or decrease as the amount of the
Borrowing Base (as defined in the Credit Agreement) decreases or increases in
accordance with the terms of the Credit Agreement. In addition, the Individual
Guarantor acknowledges and agrees that neither he nor MEI shall have any
approval rights over extensions of credit by the Lender in excess of the
Borrowing Base, and further acknowledges that such extensions of credit shall be
included within the scope of this Guaranty.
SECTION 1.2 NO IMPAIRMENT OF GUARANTY. The obligations of the
Individual Guarantor hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason, including, without
limitation, any claim of waiver, release, surrender, alteration or compromise,
and shall not be subject to any defense (other than payment of the Guaranteed
Obligations) or set-off, counterclaim, recoupment or termination whatsoever by
reason of the invalidity, illegality or unenforceability of the Guaranteed
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of the Individual Guarantor hereunder shall not be discharged or
impaired or otherwise affected by the failure of the Lender to assert any claim
or demand or to enforce any remedy hereunder or under the Credit Agreement or
any other agreement, by any waiver or modification of any provision thereof, by
any default, failure, or delay, willful or otherwise, in the performance of the
Guaranteed Obligations, or by any other act or thing, or omission or delay to do
any other act or thing, which may or might in any manner or to any extent vary
the risk of the Individual Guarantor or would otherwise operate as a discharge
of the Individual Guarantor as a matter of law, unless and until the Guaranteed
Obligations are paid in full.
SECTION 1.3 CONTINUATION AND REINSTATEMENT, ETC. The
Individual Guarantor further agrees that his guaranty hereunder shall continue
to be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of principal of or interest on any Obligation is rescinded or
must otherwise be restored by the Lender upon the bankruptcy or other
-3-
reorganization of the Borrower or any other guarantor of the Guaranteed
Obligations or otherwise.
SECTION 1.4 SUBROGATION. Subject to the prior final and
indefeasible payment in full of all Obligations and to the extent of payments
received by the Lender from the Individual Guarantor on the Guaranteed
Obligations, the Individual Guarantor (and the other Guarantors) shall be
subrogated to the rights of the Lender to receive payments or distributions of
cash, property or securities of the Borrower applicable to the Obligations;
provided, that all such rights of subrogation shall be subordinated and junior
in right of payment to the prior payment in full of the Obligations to the
Lender.
SECTION 1.5 APPLICATION OF GUARANTEED AMOUNTS. In the event
the Lender receives an amount in excess of the Maximum Guaranty Amount then due
and payable from the Individual Guarantor and the other Guarantors pursuant to
the terms of this Guaranty Agreement and the respective guaranty agreements of
other Guarantors, the Lender shall remit such excess to MEI for disbursement to
the Guarantors in such amounts as the Guarantors shall determine.
SECTION 1.6 PRIOR GUARANTY. This Guaranty Agreement amends and
restates in its entirety the Guaranty Agreement dated as of November 4, 1997
previously executed by the Individual Guarantor.
2. REPRESENTATIONS AND WARRANTIES
The Individual Guarantor makes the following representations
and warranties to the Lender, all of which shall survive the execution and
delivery of the Note and this Guaranty Agreement and the making of the loans
evidenced and to be evidenced by the Note:
(i) The execution, delivery and performance of this Guaranty
Agreement (a) will not violate, or involve the Lender in a violation
of, any provision of applicable law or any order of any governmental
authority or any judgment of any court applicable to the Individual
Guarantor or his property, (b) will not violate any indenture, any
agreement for borrowed money, any bond, note or other similar
instrument or any other material agreement to which the Individual
Guarantor is a party or by which the Individual Guarantor or any of his
property is bound, (c) will not be in conflict with, result in a breach
of or constitute (with due notice or lapse of time or both) a default
under, any such indenture, agreement, bond, note, instrument or other
material agreement to which the Individual Guarantor is a party and (d)
will not result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any property or assets of the
Individual Guarantor other than pursuant to this Guaranty Agreement.
(ii) This Guaranty Agreement constitutes the legal, valid and
binding obligation of the Individual Guarantor, enforceable in
accordance with its terms, subject (a) as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency and
other
-4-
laws affecting creditors' rights generally and to moratorium laws from
time to time in effect, (b) to general equitable principles which may
limit the right to obtain the remedy of specific performance and (c) to
the qualification that the enforceability of indemnification provisions
may be limited by applicable federal and state securities laws, rules
and regulations.
(iii) The Individual Guarantor will realize a direct economic
benefit as a result of the Loans being made to the Borrower pursuant to
the Credit Agreement.
3. MISCELLANEOUS
SECTION 3.1 NOTICES. Notices and other communications provided
for herein shall be in writing and shall be delivered or mailed (or if by
telecopier, delivered by such equipment) addressed (i) if to the Lender, to it
at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇ ▇. ▇▇▇▇▇,
III, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to Chase Securities Inc., ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, (ii) if to the Individual Guarantor, to
him at c/o Apollo Partners, LLC, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇▇▇, or such other address as such party may from time to time designate
by giving written notice to the other party hereunder. All notices and other
communications given to any party hereto in accordance with the provisions of
this Guaranty Agreement shall be deemed to have been given on the fifth Business
Day after the date when sent by registered or certified mail, postage prepaid
return receipt requested, if by mail, or when receipt is acknowledged, if by
telecopier, in each case addressed to such party as provided in this Section 3.1
or in accordance with the latest unrevoked written direction from such party.
SECTION 3.2 SUCCESSORS. Each reference herein to a party
hereto shall be deemed to include its respective successors, assigns, heirs,
executors, administrators and legal representatives including but not by way of
limitation, any party in whose favor the provisions of the Note shall inure, all
of whom shall be bound by the provisions of this Guaranty Agreement.
SECTION 3.3 SERVICE OF PROCESS. THE INDIVIDUAL GUARANTOR
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATE COURTS OF THE STATE
OF NEW YORK IN NEW YORK COUNTY AND TO THE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, FOR THE PURPOSE OF ANY
SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS GUARANTY
AGREEMENT, OR THE SUBJECT MATTER HEREOF BROUGHT BY THE LENDER OR ITS SUCCESSORS
OR ASSIGNS. THE INDIVIDUAL GUARANTOR TO THE EXTENT PERMITTED BY APPLICABLE LAW
(A) HEREBY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR
OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT HE IS NOT
SUBJECT PERSONALLY TO THE JURISDICTION OF THE
-5-
ABOVE-NAMED COURTS, THAT HIS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR
EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT
FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT
THIS GUARANTY AGREEMENT OR THE SUBJECT MATTER HEREOF OR THEREOF MAY NOT BE
ENFORCED IN OR BY SUCH COURT, (B) HEREBY WAIVES THE RIGHT TO REMOVE ANY SUCH
ACTION, SUIT OR PROCEEDING INSTITUTED BY THE LENDER IN STATE COURT TO FEDERAL
COURT, AND (C) HEREBY AGREES NOT TO ASSERT ANY OFFSETS OR COUNTERCLAIMS (OTHER
THAN COMPULSORY COUNTERCLAIMS) IN ANY SUCH ACTION, SUIT OR PROCEEDING. THE
INDIVIDUAL GUARANTOR HEREBY CONSENTS TO SERVICE OF PROCESS BY CERTIFIED MAIL AT
THE ADDRESS TO WHICH NOTICES ARE TO BE GIVEN, AND AGREES THAT THE SUBMISSION TO
JURISDICTION AND THE CONSENT TO SERVICE OF PROCESS BY MAIL IS MADE FOR THE
EXPRESS BENEFIT OF THE LENDER. FINAL JUDGMENT AGAINST THE INDIVIDUAL GUARANTOR
IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE, AND MAY BE ENFORCED
IN OTHER JURISDICTIONS (X) BY SUIT, ACTION OR PROCEEDING ON THE JUDGMENT, A
CERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND OF
THE AMOUNT OF ANY INDEBTEDNESS OR LIABILITY OF THE INDIVIDUAL GUARANTOR THEREIN
DESCRIBED OR (Y) IN ANY OTHER MANNER PROVIDED BY, OR PURSUANT TO, THE LAWS OF
SUCH OTHER JURISDICTION; PROVIDED, HOWEVER, THAT THE LENDER MAY AT ITS OPTION
BRING SUIT OR INSTITUTE OTHER JUDICIAL PROCEEDINGS AGAINST THE INDIVIDUAL
GUARANTOR OR ANY OF HIS ASSETS IN ANY ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ OR OF ANY COUNTRY OR PLACE WHERE THE INDIVIDUAL GUARANTOR OR SUCH ASSETS
MAY BE FOUND.
SECTION 3.4 GOVERNING LAW. THIS GUARANTY AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 3.5 NO WAIVER, ETC. Neither a failure nor a delay on
the part of the Lender in exercising any right, power or privilege under this
Guaranty Agreement shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Lender herein
expressly specified are cumulative and not exclusive of any other rights,
remedies or benefits which it may have under this Guaranty Agreement, at law, in
equity, by statute, or otherwise.
SECTION 3.6 MODIFICATION, ETC. No modification, amendment or
waiver of any provision of this Guaranty Agreement, nor the consent to any
departure by the Individual Guarantor therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific
-6-
instance and for the purpose for which given. No notice to or demand on the
Individual Guarantor in any case shall entitle the Individual Guarantor to any
other or further notice or demand in the same, similar or other circumstances.
SECTION 3.7 SEVERABILITY. If any one or more of the provisions
contained in this Guaranty Agreement should be invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall in no way be affected or impaired thereby.
SECTION 3.8 HEADINGS. Section headings used herein are for
convenience of reference only and are not to affect the construction of, or be
taken into consideration in interpreting, this Guaranty Agreement.
SECTION 3.9 WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED
BY APPLICABLE LAW WHICH CANNOT BE WAIVED, THE INDIVIDUAL GUARANTOR HEREBY
WAIVES, AND COVENANTS THAT HE WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT
OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
GUARANTY AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR OTHERWISE. THE
INDIVIDUAL GUARANTOR ACKNOWLEDGES THAT HE HAS BEEN INFORMED BY THE LENDER THAT
THE PROVISIONS OF THIS SECTION 3.9 CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH
THE LENDER HAS RELIED, IS RELYING AND WILL RELY IN MAKING THE LOANS EVIDENCED BY
THE NOTE AND ENTERING INTO THIS GUARANTY AGREEMENT. THE LENDER MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 3.9 WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE INDIVIDUAL GUARANTOR TO THE WAIVER OF HIS RIGHTS
TO TRIAL BY JURY.
IN WITNESS WHEREOF, the Individual Guarantor and the Lender
have caused this Guaranty Agreement to be executed by its duly authorized
officer, all as of the date first written above.
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-7-
Executed by the Lender THE CHASE MANHATTAN BANK
in New York, New York
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
-8-
Schedule 1
Equity Interests in Media Equities International, L.L.C.
Guarantor Equity Interest
--------- ---------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 33.57% (through ▇▇▇▇▇' 50% interest in
Apollo Partners, LLC, which holds 67.14% of
MEI)
-9-
EXHIBIT K-2
FORM OF GUARANTY AGREEMENT
GUARANTY AGREEMENT, dated as of August 16, 1999 (as
the same may be further supplemented, amended or otherwise
modified, renewed or replaced from time to time, the "Guaranty
Agreement") between (i) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual
residing in Nassau County, New York (the "Individual
Guarantor") and (ii) THE CHASE MANHATTAN BANK, a New York
banking corporation (the "Lender").
Pursuant to the Amended and Restated Credit, Security,
Guaranty and Pledge Agreement dated as of November 4, 1997, as amended and
restated as of August 16, 1999 (as the same may be further amended,
supplemented, or otherwise modified, renewed or replaced from time to time, the
"Credit Agreement") among NewStar Media Inc. (formerly known as Dove
Entertainment, Inc.), a California corporation (the "Borrower"), the Corporate
Guarantors referred to therein and the Lender, the Lender has agreed to make
Loans to the Borrower and issue Letters of Credit in an amount outstanding at
any one time not in excess of $10,000,000. Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Credit Agreement.
The Individual Guarantor, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ (collectively, the "Guarantors") are
the direct and indirect owners of Media Equities International, L.L.C.
As an inducement to the Lender to make the Loans and issue
Letters of Credit to the Borrower, each of the Guarantors has agreed to guaranty
such obligations of the Borrower in an amount not to exceed the lesser of (x)
$2,000,000 and (y) the amount by which the aggregate of outstanding principal of
and any interest on all Loans and L/C Exposure exceeds the Borrowing Base (as
defined in the Credit Agreement) on the date demand for payment hereunder is
made (the "Maximum Guaranty Amount").
The Individual Guarantor individually has agreed to guaranty
such obligations of the Borrower to the extent and in accordance with the terms
hereof.
-1-
Therefore, for good and valuable consideration, the receipt of
which is hereby acknowledged by the Individual Guarantor, the parties hereto
agree as follows:
1. GUARANTY
SECTION 1.1 GUARANTY. (a) The Individual Guarantor
unconditionally and irrevocably guarantees the due and punctual payment by the
Borrower in an amount not to exceed the product of 110% of the Individual
Guarantor's ownership interest in MEI as of the date hereof (as set forth on
Schedule 1 hereto) multiplied by the Maximum Guaranty Amount (the "Guaranteed
Obligations"), as and when such amounts shall become due and payable whether by
scheduled maturity, acceleration or otherwise and any extensions or renewals
thereof, reimbursement obligations in respect of Letters of Credit, related
costs and attorney's fees, and all other monetary obligations of the Borrower to
the Lender under the Credit Agreement.
(b) In furtherance of the provisions of this Guaranty
Agreement, and not in limitation of any other right which the Lender may have at
law or in equity against the Borrower or any other guarantor of the Guaranteed
Obligations, upon failure of the Borrower to pay any of the Guaranteed
Obligations when and as the same shall become due, whether at maturity, by
acceleration, after notice or otherwise, the Individual Guarantor hereby
promises to and will, upon receipt of written demand by the Lender, forthwith
pay or cause to be paid to the Lender in cash an amount equal to the unpaid
balance of the Guaranteed Obligations then due and payable.
(c) The Individual Guarantor, to the extent permitted by
applicable law, waives presentation to, demand for payment from and protest to
the Borrower and also waives notice of protest for nonpayment, notice of
acceleration and notice of intent to accelerate. The obligations of the
Individual Guarantor hereunder shall not be affected by (i) the failure of the
Lender to assert any claim or demand or to enforce any right or remedy against
the Borrower or any other guarantor of the Guaranteed Obligations under the
provisions of the Credit Agreement or any other agreement or otherwise; (ii) any
extension or renewal of any provision hereof or thereof; (iii) any rescission,
waiver, compromise, acceleration, amendment or modification of any of the terms
or provisions of the Credit Agreement, the Note or any other agreement; (iv) the
release, exchange, waiver or foreclosure of any security held by the Lender for
the Guaranteed Obligations or any of them or (v) the failure of the Lender to
exercise any right or remedy against any other guarantor of the Guaranteed
Obligations.
(d) The Individual Guarantor further agrees that this guaranty
is a continuing guaranty and constitutes a guaranty of performance and of
payment when due and not just of collection, and waives, to the extent permitted
by applicable law, any right to require that any resort be had by the Lender to
any security held for payment of the Guaranteed Obligations or to any balance of
any deposit, account or credit on the books of the Lender in favor of the
Borrower or any other guarantor or to any other person.
-2-
(e) The Individual Guarantor hereby expressly assumes all
responsibilities to remain informed of the financial condition of the Borrower
and each other guarantor of the Guaranteed Obligations and any circumstances
affecting the Collateral or the ability of the Borrower to perform under the
Credit Agreement.
(f) This guaranty shall not be affected by the genuineness,
validity, regularity or enforceability of the Guaranteed Obligations, the Note
or any other instrument evidencing any of the Guaranteed Obligations, or by the
existence, validity, enforceability, perfection or extent of any collateral
therefor or by any other circumstance relating to the Guaranteed Obligations
which might otherwise constitute a defense to the guaranty under this Guaranty
Agreement. The Lender makes no representation or warranty in respect to any such
circumstances nor has any duty or responsibility whatsoever to the Individual
Guarantor in respect to the management and maintenance of the Guaranteed
Obligations or the Collateral.
(g) The Individual Guarantor hereby acknowledges that, subject
to $2,000,000 limit set forth in the definition of "Maximum Guaranty Amount"
above, the Maximum Guaranty Amount may increase or decrease as the amount of the
Borrowing Base (as defined in the Credit Agreement) decreases or increases in
accordance with the terms of the Credit Agreement. In addition, the Individual
Guarantor acknowledges and agrees that neither he nor MEI shall have any
approval rights over extensions of credit by the Lender in excess of the
Borrowing Base, and further acknowledges that such extensions of credit shall be
included within the scope of this Guaranty.
SECTION 1.2 NO IMPAIRMENT OF GUARANTY. The obligations of the
Individual Guarantor hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason, including, without
limitation, any claim of waiver, release, surrender, alteration or compromise,
and shall not be subject to any defense (other than payment of the Guaranteed
Obligations) or set-off, counterclaim, recoupment or termination whatsoever by
reason of the invalidity, illegality or unenforceability of the Guaranteed
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of the Individual Guarantor hereunder shall not be discharged or
impaired or otherwise affected by the failure of the Lender to assert any claim
or demand or to enforce any remedy hereunder or under the Credit Agreement or
any other agreement, by any waiver or modification of any provision thereof, by
any default, failure, or delay, willful or otherwise, in the performance of the
Guaranteed Obligations, or by any other act or thing, or omission or delay to do
any other act or thing, which may or might in any manner or to any extent vary
the risk of the Individual Guarantor or would otherwise operate as a discharge
of the Individual Guarantor as a matter of law, unless and until the Guaranteed
Obligations are paid in full.
SECTION 1.3 CONTINUATION AND REINSTATEMENT, ETC. The
Individual Guarantor further agrees that his guaranty hereunder shall continue
to be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of principal of or interest on any Obligation is rescinded or
must otherwise be restored by the Lender upon the bankruptcy or other
-3-
reorganization of the Borrower or any other guarantor of the Guaranteed
Obligations or otherwise.
SECTION 1.4 SUBROGATION. Subject to the prior final and
indefeasible payment in full of all Obligations and to the extent of payments
received by the Lender from the Individual Guarantor on the Guaranteed
Obligations, the Individual Guarantor (and the other Guarantors) shall be
subrogated to the rights of the Lender to receive payments or distributions of
cash, property or securities of the Borrower applicable to the Obligations;
provided, that all such rights of subrogation shall be subordinated and junior
in right of payment to the prior payment in full of the Obligations to the
Lender.
SECTION 1.5 APPLICATION OF GUARANTEED AMOUNTS. In the event
the Lender receives an amount in excess of the Maximum Guaranty Amount then due
and payable from the Individual Guarantor and the other Guarantors pursuant to
the terms of this Guaranty Agreement and the respective guaranty agreements of
other Guarantors, the Lender shall remit such excess to MEI for disbursement to
the Guarantors in such amounts as the Guarantors shall determine.
SECTION 1.6 PRIOR GUARANTY. This Guaranty Agreement amends and
restates in its entirety the Guaranty Agreement dated as of November 4, 1997
previously executed by the Individual Guarantor.
2. REPRESENTATIONS AND WARRANTIES
The Individual Guarantor makes the following representations
and warranties to the Lender, all of which shall survive the execution and
delivery of the Note and this Guaranty Agreement and the making of the loans
evidenced and to be evidenced by the Note:
(i) The execution, delivery and performance of this Guaranty
Agreement (a) will not violate, or involve the Lender in a violation
of, any provision of applicable law or any order of any governmental
authority or any judgment of any court applicable to the Individual
Guarantor or his property, (b) will not violate any indenture, any
agreement for borrowed money, any bond, note or other similar
instrument or any other material agreement to which the Individual
Guarantor is a party or by which the Individual Guarantor or any of his
property is bound, (c) will not be in conflict with, result in a breach
of or constitute (with due notice or lapse of time or both) a default
under, any such indenture, agreement, bond, note, instrument or other
material agreement to which the Individual Guarantor is a party and (d)
will not result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any property or assets of the
Individual Guarantor other than pursuant to this Guaranty Agreement.
(ii) This Guaranty Agreement constitutes the legal, valid and
binding obligation of the Individual Guarantor, enforceable in
accordance with its terms, subject (a) as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency and
other
-4-
laws affecting creditors' rights generally and to moratorium laws from
time to time in effect, (b) to general equitable principles which may
limit the right to obtain the remedy of specific performance and (c) to
the qualification that the enforceability of indemnification provisions
may be limited by applicable federal and state securities laws, rules
and regulations.
(iii) The Individual Guarantor will realize a direct economic
benefit as a result of the Loans being made to the Borrower pursuant to
the Credit Agreement.
3. MISCELLANEOUS
SECTION 3.1 NOTICES. Notices and other communications provided
for herein shall be in writing and shall be delivered or mailed (or if by
telecopier, delivered by such equipment) addressed (i) if to the Lender, to it
at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇ ▇. ▇▇▇▇▇,
III, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to Chase Securities Inc., ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, (ii) if to the Individual Guarantor, to
him at c/o Apollo Partners, LLC, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇▇▇, or such other address as such party may from time to time designate
by giving written notice to the other party hereunder. All notices and other
communications given to any party hereto in accordance with the provisions of
this Guaranty Agreement shall be deemed to have been given on the fifth Business
Day after the date when sent by registered or certified mail, postage prepaid
return receipt requested, if by mail, or when receipt is acknowledged, if by
telecopier, in each case addressed to such party as provided in this Section 3.1
or in accordance with the latest unrevoked written direction from such party.
SECTION 3.2 SUCCESSORS. Each reference herein to a party
hereto shall be deemed to include its respective successors, assigns, heirs,
executors, administrators and legal representatives including but not by way of
limitation, any party in whose favor the provisions of the Note shall inure, all
of whom shall be bound by the provisions of this Guaranty Agreement.
SECTION 3.3 SERVICE OF PROCESS. THE INDIVIDUAL GUARANTOR
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATE COURTS OF THE STATE
OF NEW YORK IN NEW YORK COUNTY AND TO THE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, FOR THE PURPOSE OF ANY
SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS GUARANTY
AGREEMENT, OR THE SUBJECT MATTER HEREOF BROUGHT BY THE LENDER OR ITS SUCCESSORS
OR ASSIGNS. THE INDIVIDUAL GUARANTOR TO THE EXTENT PERMITTED BY APPLICABLE LAW
(A) HEREBY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR
OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT HE IS NOT
SUBJECT PERSONALLY TO THE JURISDICTION OF THE
-5-
ABOVE-NAMED COURTS, THAT HIS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR
EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT
FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT
THIS GUARANTY AGREEMENT OR THE SUBJECT MATTER HEREOF OR THEREOF MAY NOT BE
ENFORCED IN OR BY SUCH COURT, (B) HEREBY WAIVES THE RIGHT TO REMOVE ANY SUCH
ACTION, SUIT OR PROCEEDING INSTITUTED BY THE LENDER IN STATE COURT TO FEDERAL
COURT, AND (C) HEREBY AGREES NOT TO ASSERT ANY OFFSETS OR COUNTERCLAIMS (OTHER
THAN COMPULSORY COUNTERCLAIMS) IN ANY SUCH ACTION, SUIT OR PROCEEDING. THE
INDIVIDUAL GUARANTOR HEREBY CONSENTS TO SERVICE OF PROCESS BY CERTIFIED MAIL AT
THE ADDRESS TO WHICH NOTICES ARE TO BE GIVEN, AND AGREES THAT THE SUBMISSION TO
JURISDICTION AND THE CONSENT TO SERVICE OF PROCESS BY MAIL IS MADE FOR THE
EXPRESS BENEFIT OF THE LENDER. FINAL JUDGMENT AGAINST THE INDIVIDUAL GUARANTOR
IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE, AND MAY BE ENFORCED
IN OTHER JURISDICTIONS (X) BY SUIT, ACTION OR PROCEEDING ON THE JUDGMENT, A
CERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND OF
THE AMOUNT OF ANY INDEBTEDNESS OR LIABILITY OF THE INDIVIDUAL GUARANTOR THEREIN
DESCRIBED OR (Y) IN ANY OTHER MANNER PROVIDED BY, OR PURSUANT TO, THE LAWS OF
SUCH OTHER JURISDICTION; PROVIDED, HOWEVER, THAT THE LENDER MAY AT ITS OPTION
BRING SUIT OR INSTITUTE OTHER JUDICIAL PROCEEDINGS AGAINST THE INDIVIDUAL
GUARANTOR OR ANY OF HIS ASSETS IN ANY ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ OR OF ANY COUNTRY OR PLACE WHERE THE INDIVIDUAL GUARANTOR OR SUCH ASSETS
MAY BE FOUND.
SECTION 3.4 GOVERNING LAW. THIS GUARANTY AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 3.5 NO WAIVER, ETC. Neither a failure nor a delay on
the part of the Lender in exercising any right, power or privilege under this
Guaranty Agreement shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Lender herein
expressly specified are cumulative and not exclusive of any other rights,
remedies or benefits which it may have under this Guaranty Agreement, at law, in
equity, by statute, or otherwise.
SECTION 3.6 MODIFICATION, ETC. No modification, amendment or
waiver of any provision of this Guaranty Agreement, nor the consent to any
departure by the Individual Guarantor therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific
-6-
instance and for the purpose for which given. No notice to or demand on the
Individual Guarantor in any case shall entitle the Individual Guarantor to any
other or further notice or demand in the same, similar or other circumstances.
SECTION 3.7 SEVERABILITY. If any one or more of the provisions
contained in this Guaranty Agreement should be invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall in no way be affected or impaired thereby.
SECTION 3.8 HEADINGS. Section headings used herein are for
convenience of reference only and are not to affect the construction of, or be
taken into consideration in interpreting, this Guaranty Agreement.
SECTION 3.9 WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED
BY APPLICABLE LAW WHICH CANNOT BE WAIVED, THE INDIVIDUAL GUARANTOR HEREBY
WAIVES, AND COVENANTS THAT HE WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT
OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
GUARANTY AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR OTHERWISE. THE
INDIVIDUAL GUARANTOR ACKNOWLEDGES THAT HE HAS BEEN INFORMED BY THE LENDER THAT
THE PROVISIONS OF THIS SECTION 3.9 CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH
THE LENDER HAS RELIED, IS RELYING AND WILL RELY IN MAKING THE LOANS EVIDENCED BY
THE NOTE AND ENTERING INTO THIS GUARANTY AGREEMENT. THE LENDER MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 3.9 WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE INDIVIDUAL GUARANTOR TO THE WAIVER OF HIS RIGHTS
TO TRIAL BY JURY.
IN WITNESS WHEREOF, the Individual Guarantor and the Lender
have caused this Guaranty Agreement to be executed by its duly authorized
officer, all as of the date first written above.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-7-
Executed by the Lender THE CHASE MANHATTAN BANK
in New York, New York
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
-8-
Schedule 1
Equity Interests in Media Equities International, L.L.C.
Guarantor Equity Interest
--------- ---------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 33.57% (through ▇▇▇▇▇▇'▇ 50% interest in
Apollo Partners, LLC, which holds 67.14% of
MEI)
-9-
EXHIBIT K-3
FORM OF GUARANTY AGREEMENT
GUARANTY AGREEMENT, dated as of August 16, 1999 (as
the same may be further supplemented, amended or otherwise
modified, renewed or replaced from time to time, the "Guaranty
Agreement") between (i) ▇▇▇▇▇ ▇▇▇▇▇▇, an individual residing
in Westchester County, New York (the "Individual Guarantor")
and (ii) THE CHASE MANHATTAN BANK, a New York banking
corporation (the "Lender").
Pursuant to the Amended and Restated Credit, Security,
Guaranty and Pledge Agreement dated as of November 4, 1997, as amended and
restated as of August 16, 1999 (as the same may be further amended,
supplemented, or otherwise modified, renewed or replaced from time to time, the
"Credit Agreement") among NewStar Media Inc. (formerly known as Dove
Entertainment, Inc.), a California corporation (the "Borrower"), the Corporate
Guarantors referred to therein and the Lender, the Lender has agreed to make
Loans to the Borrower and issue Letters of Credit in an amount outstanding at
any one time not in excess of $10,000,000. Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Credit Agreement.
The Individual Guarantor, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇ (collectively, the "Guarantors") are
the direct and indirect owners of Media Equities International, L.L.C.
As an inducement to the Lender to make the Loans and issue
Letters of Credit to the Borrower, each of the Guarantors has agreed to guaranty
such obligations of the Borrower in an amount not to exceed the lesser of (x)
$2,000,000 and (y) the amount by which the aggregate of outstanding principal of
and any interest on all Loans and L/C Exposure exceeds the Borrowing Base (as
defined in the Credit Agreement) on the date demand for payment hereunder is
made (the "Maximum Guaranty Amount").
The Individual Guarantor individually has agreed to guaranty
such obligations of the Borrower to the extent and in accordance with the terms
hereof.
-1-
Therefore, for good and valuable consideration, the receipt of
which is hereby acknowledged by the Individual Guarantor, the parties hereto
agree as follows:
1. GUARANTY
SECTION 1.1 GUARANTY. (a) The Individual Guarantor
unconditionally and irrevocably guarantees the due and punctual payment by the
Borrower in an amount not to exceed the product of 110% of the Individual
Guarantor's ownership interest in MEI as of the date hereof (as set forth on
Schedule 1 hereto) multiplied by the Maximum Guaranty Amount (the "Guaranteed
Obligations"), as and when such amounts shall become due and payable whether by
scheduled maturity, acceleration or otherwise and any extensions or renewals
thereof, reimbursement obligations in respect of Letters of Credit, related
costs and attorney's fees, and all other monetary obligations of the Borrower to
the Lender under the Credit Agreement.
(b) In furtherance of the provisions of this Guaranty
Agreement, and not in limitation of any other right which the Lender may have at
law or in equity against the Borrower or any other guarantor of the Guaranteed
Obligations, upon failure of the Borrower to pay any of the Guaranteed
Obligations when and as the same shall become due, whether at maturity, by
acceleration, after notice or otherwise, the Individual Guarantor hereby
promises to and will, upon receipt of written demand by the Lender, forthwith
pay or cause to be paid to the Lender in cash an amount equal to the unpaid
balance of the Guaranteed Obligations then due and payable.
(c) The Individual Guarantor, to the extent permitted by
applicable law, waives presentation to, demand for payment from and protest to
the Borrower and also waives notice of protest for nonpayment, notice of
acceleration and notice of intent to accelerate. The obligations of the
Individual Guarantor hereunder shall not be affected by (i) the failure of the
Lender to assert any claim or demand or to enforce any right or remedy against
the Borrower or any other guarantor of the Guaranteed Obligations under the
provisions of the Credit Agreement or any other agreement or otherwise; (ii) any
extension or renewal of any provision hereof or thereof; (iii) any rescission,
waiver, compromise, acceleration, amendment or modification of any of the terms
or provisions of the Credit Agreement, the Note or any other agreement; (iv) the
release, exchange, waiver or foreclosure of any security held by the Lender for
the Guaranteed Obligations or any of them or (v) the failure of the Lender to
exercise any right or remedy against any other guarantor of the Guaranteed
Obligations.
(d) The Individual Guarantor further agrees that this guaranty
is a continuing guaranty and constitutes a guaranty of performance and of
payment when due and not just of collection, and waives, to the extent permitted
by applicable law, any right to require that any resort be had by the Lender to
any security held for payment of the Guaranteed Obligations or to any balance of
any deposit, account or credit on the books of the Lender in favor of the
Borrower or any other guarantor or to any other person.
-2-
(e) The Individual Guarantor hereby expressly assumes all
responsibilities to remain informed of the financial condition of the Borrower
and each other guarantor of the Guaranteed Obligations and any circumstances
affecting the Collateral or the ability of the Borrower to perform under the
Credit Agreement.
(f) This guaranty shall not be affected by the genuineness,
validity, regularity or enforceability of the Guaranteed Obligations, the Note
or any other instrument evidencing any of the Guaranteed Obligations, or by the
existence, validity, enforceability, perfection or extent of any collateral
therefor or by any other circumstance relating to the Guaranteed Obligations
which might otherwise constitute a defense to the guaranty under this Guaranty
Agreement. The Lender makes no representation or warranty in respect to any such
circumstances nor has any duty or responsibility whatsoever to the Individual
Guarantor in respect to the management and maintenance of the Guaranteed
Obligations or the Collateral.
(g) The Individual Guarantor hereby acknowledges that, subject
to $2,000,000 limit set forth in the definition of "Maximum Guaranty Amount"
above, the Maximum Guaranty Amount may increase or decrease as the amount of the
Borrowing Base (as defined in the Credit Agreement) decreases or increases in
accordance with the terms of the Credit Agreement. In addition, the Individual
Guarantor acknowledges and agrees that neither he nor MEI shall have any
approval rights over extensions of credit by the Lender in excess of the
Borrowing Base, and further acknowledges that such extensions of credit shall be
included within the scope of this Guaranty.
SECTION 1.2 NO IMPAIRMENT OF GUARANTY. The obligations of the
Individual Guarantor hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason, including, without
limitation, any claim of waiver, release, surrender, alteration or compromise,
and shall not be subject to any defense (other than payment of the Guaranteed
Obligations) or set-off, counterclaim, recoupment or termination whatsoever by
reason of the invalidity, illegality or unenforceability of the Guaranteed
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of the Individual Guarantor hereunder shall not be discharged or
impaired or otherwise affected by the failure of the Lender to assert any claim
or demand or to enforce any remedy hereunder or under the Credit Agreement or
any other agreement, by any waiver or modification of any provision thereof, by
any default, failure, or delay, willful or otherwise, in the performance of the
Guaranteed Obligations, or by any other act or thing, or omission or delay to do
any other act or thing, which may or might in any manner or to any extent vary
the risk of the Individual Guarantor or would otherwise operate as a discharge
of the Individual Guarantor as a matter of law, unless and until the Guaranteed
Obligations are paid in full.
SECTION 1.3 CONTINUATION AND REINSTATEMENT, ETC. The
Individual Guarantor further agrees that his guaranty hereunder shall continue
to be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of principal of or interest on any Obligation is rescinded or
must otherwise be restored by the Lender upon the bankruptcy or other
-3-
reorganization of the Borrower or any other guarantor of the Guaranteed
Obligations or otherwise.
SECTION 1.4 SUBROGATION. Subject to the prior final and
indefeasible payment in full of all Obligations and to the extent of payments
received by the Lender from the Individual Guarantor on the Guaranteed
Obligations, the Individual Guarantor (and the other Guarantors) shall be
subrogated to the rights of the Lender to receive payments or distributions of
cash, property or securities of the Borrower applicable to the Obligations;
provided, that all such rights of subrogation shall be subordinated and junior
in right of payment to the prior payment in full of the Obligations to the
Lender.
SECTION 1.5 APPLICATION OF GUARANTEED AMOUNTS. In the event
the Lender receives an amount in excess of the Maximum Guaranty Amount then due
and payable from the Individual Guarantor and the other Guarantors pursuant to
the terms of this Guaranty Agreement and the respective guaranty agreements of
other Guarantors, the Lender shall remit such excess to MEI for disbursement to
the Guarantors in such amounts as the Guarantors shall determine.
SECTION 1.6 PRIOR GUARANTY. This Guaranty Agreement amends and
restates in its entirety the Guaranty Agreement dated as of November 4, 1997
previously executed by the Individual Guarantor. The Individual Guarantor hereby
rescinds the letter dated January 28, 1999 from ▇▇▇▇▇ ▇▇▇▇▇▇ (of The H.A.M.
Group, LLC) to ▇▇▇ ▇▇▇▇▇▇ (of Chase Securities Inc.) relating to the guaranties
of the Individual Guarantor and ▇▇▇▇ ▇. ▇▇▇▇▇, and acknowledges and agrees that
the terms of such letter shall have no force or effect.
2. REPRESENTATIONS AND WARRANTIES
The Individual Guarantor makes the following representations
and warranties to the Lender, all of which shall survive the execution and
delivery of the Note and this Guaranty Agreement and the making of the loans
evidenced and to be evidenced by the Note:
(i) The execution, delivery and performance of this Guaranty
Agreement (a) will not violate, or involve the Lender in a violation
of, any provision of applicable law or any order of any governmental
authority or any judgment of any court applicable to the Individual
Guarantor or his property, (b) will not violate any indenture, any
agreement for borrowed money, any bond, note or other similar
instrument or any other material agreement to which the Individual
Guarantor is a party or by which the Individual Guarantor or any of his
property is bound, (c) will not be in conflict with, result in a breach
of or constitute (with due notice or lapse of time or both) a default
under, any such indenture, agreement, bond, note, instrument or other
material agreement to which the Individual Guarantor is a party and (d)
will not result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any property or assets of the
Individual Guarantor other than pursuant to this Guaranty Agreement.
-4-
(ii) This Guaranty Agreement constitutes the legal, valid and
binding obligation of the Individual Guarantor, enforceable in
accordance with its terms, subject (a) as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency and
other laws affecting creditors' rights generally and to moratorium laws
from time to time in effect, (b) to general equitable principles which
may limit the right to obtain the remedy of specific performance and
(c) to the qualification that the enforceability of indemnification
provisions may be limited by applicable federal and state securities
laws, rules and regulations.
(iii) The Individual Guarantor will realize a direct economic
benefit as a result of the Loans being made to the Borrower pursuant to
the Credit Agreement.
3. MISCELLANEOUS
SECTION 3.1 NOTICES. Notices and other communications provided
for herein shall be in writing and shall be delivered or mailed (or if by
telecopier, delivered by such equipment) addressed (i) if to the Lender, to it
at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇ ▇. ▇▇▇▇▇,
III, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to Chase Securities Inc., ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, (ii) if to the Individual Guarantor, to
him at c/o H.A.M. Media Group LLC, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇▇▇, or such other address as such party may from time to time designate
by giving written notice to the other party hereunder. All notices and other
communications given to any party hereto in accordance with the provisions of
this Guaranty Agreement shall be deemed to have been given on the fifth Business
Day after the date when sent by registered or certified mail, postage prepaid
return receipt requested, if by mail, or when receipt is acknowledged, if by
telecopier, in each case addressed to such party as provided in this Section 3.1
or in accordance with the latest unrevoked written direction from such party.
SECTION 3.2 SUCCESSORS. Each reference herein to a party
hereto shall be deemed to include its respective successors, assigns, heirs,
executors, administrators and legal representatives including but not by way of
limitation, any party in whose favor the provisions of the Note shall inure, all
of whom shall be bound by the provisions of this Guaranty Agreement.
SECTION 3.3 SERVICE OF PROCESS. THE INDIVIDUAL GUARANTOR
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATE COURTS OF THE STATE
OF NEW YORK IN NEW YORK COUNTY AND TO THE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, FOR THE PURPOSE OF ANY
SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS GUARANTY
AGREEMENT, OR THE SUBJECT MATTER HEREOF BROUGHT BY THE LENDER OR ITS SUCCESSORS
OR ASSIGNS. THE INDIVIDUAL GUARANTOR TO THE EXTENT PERMITTED BY APPLICABLE LAW
(A) HEREBY
-5-
WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE,
IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT HE IS NOT SUBJECT
PERSONALLY TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT HIS PROPERTY IS
EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS GUARANTY AGREEMENT OR THE SUBJECT
MATTER HEREOF OR THEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURT, (B) HEREBY
WAIVES THE RIGHT TO REMOVE ANY SUCH ACTION, SUIT OR PROCEEDING INSTITUTED BY THE
LENDER IN STATE COURT TO FEDERAL COURT, AND (C) HEREBY AGREES NOT TO ASSERT ANY
OFFSETS OR COUNTERCLAIMS (OTHER THAN COMPULSORY COUNTERCLAIMS) IN ANY SUCH
ACTION, SUIT OR PROCEEDING. THE INDIVIDUAL GUARANTOR HEREBY CONSENTS TO SERVICE
OF PROCESS BY CERTIFIED MAIL AT THE ADDRESS TO WHICH NOTICES ARE TO BE GIVEN,
AND AGREES THAT THE SUBMISSION TO JURISDICTION AND THE CONSENT TO SERVICE OF
PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF THE LENDER. FINAL JUDGMENT
AGAINST THE INDIVIDUAL GUARANTOR IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE
CONCLUSIVE, AND MAY BE ENFORCED IN OTHER JURISDICTIONS (X) BY SUIT, ACTION OR
PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE
CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF ANY INDEBTEDNESS OR
LIABILITY OF THE INDIVIDUAL GUARANTOR THEREIN DESCRIBED OR (Y) IN ANY OTHER
MANNER PROVIDED BY, OR PURSUANT TO, THE LAWS OF SUCH OTHER JURISDICTION;
PROVIDED, HOWEVER, THAT THE LENDER MAY AT ITS OPTION BRING SUIT OR INSTITUTE
OTHER JUDICIAL PROCEEDINGS AGAINST THE INDIVIDUAL GUARANTOR OR ANY OF HIS ASSETS
IN ANY ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ OR OF ANY COUNTRY OR PLACE
WHERE THE INDIVIDUAL GUARANTOR OR SUCH ASSETS MAY BE FOUND.
SECTION 3.4 GOVERNING LAW. THIS GUARANTY AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 3.5 NO WAIVER, ETC. Neither a failure nor a delay on
the part of the Lender in exercising any right, power or privilege under this
Guaranty Agreement shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Lender herein
expressly specified are cumulative and not exclusive of any other rights,
remedies or benefits which it may have under this Guaranty Agreement, at law, in
equity, by statute, or otherwise.
-6-
SECTION 3.6 MODIFICATION, ETC. No modification, amendment or
waiver of any provision of this Guaranty Agreement, nor the consent to any
departure by the Individual Guarantor therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. No notice to or demand on the Individual Guarantor in
any case shall entitle the Individual Guarantor to any other or further notice
or demand in the same, similar or other circumstances.
SECTION 3.7 SEVERABILITY. If any one or more of the provisions
contained in this Guaranty Agreement should be invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall in no way be affected or impaired thereby.
SECTION 3.8 HEADINGS. Section headings used herein are for
convenience of reference only and are not to affect the construction of, or be
taken into consideration in interpreting, this Guaranty Agreement.
SECTION 3.9 WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED
BY APPLICABLE LAW WHICH CANNOT BE WAIVED, THE INDIVIDUAL GUARANTOR HEREBY
WAIVES, AND COVENANTS THAT HE WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT
OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
GUARANTY AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR OTHERWISE. THE
INDIVIDUAL GUARANTOR ACKNOWLEDGES THAT HE HAS BEEN INFORMED BY THE LENDER THAT
THE PROVISIONS OF THIS SECTION 3.9 CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH
THE LENDER HAS RELIED, IS RELYING AND WILL RELY IN MAKING THE LOANS EVIDENCED BY
THE NOTE AND ENTERING INTO THIS GUARANTY AGREEMENT. THE LENDER MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 3.9 WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE INDIVIDUAL GUARANTOR TO THE WAIVER OF HIS RIGHTS
TO TRIAL BY JURY.
-7-
IN WITNESS WHEREOF, the Individual Guarantor and the Lender
have caused this Guaranty Agreement to be executed by its duly authorized
officer, all as of the date first written above.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
Executed by the Lender THE CHASE MANHATTAN BANK
in New York, New York
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
-8-
Schedule 1
Equity Interests in Media Equities International, L.L.C.
Guarantor Equity Interest
--------- ---------------
▇▇▇▇▇ ▇▇▇▇▇▇ 14.11% (through Maggin's 66 2/3% interest
in H.A.M. Media Group, LLC, which holds
21.16% of MEI)
-9-
EXHIBIT K-4
FORM OF GUARANTY AGREEMENT
GUARANTY AGREEMENT, dated as ofAugust 16, 1999 (as
the same may be further supplemented, amended or otherwise
modified, renewed or replaced from time to time, the "Guaranty
Agreement") between (i) ▇▇▇▇ ▇. ▇▇▇▇▇, an individual residing
in New York County, New York (the "Individual Guarantor") and
(ii) THE CHASE MANHATTAN BANK, a New York banking corporation
(the "Lender").
Pursuant to the Amended and Restated Credit, Security,
Guaranty and Pledge Agreement dated as of November 4, 1997, as amended and
restated as of August 16, 1999 (as the same may be further amended,
supplemented, or otherwise modified, renewed or replaced from time to time, the
"Credit Agreement") among NewStar Media Inc. (formerly known as Dove
Entertainment, Inc.), a California corporation (the "Borrower"), the Corporate
Guarantors referred to therein and the Lender, the Lender has agreed to make
Loans to the Borrower and issue Letters of Credit in an amount outstanding at
any one time not in excess of $10,000,000. Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Credit Agreement.
The Individual Guarantor, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ (collectively, the "Guarantors") are
the direct and indirect owners of Media Equities International, L.L.C.
As an inducement to the Lender to make the Loans and issue
Letters of Credit to the Borrower, each of the Guarantors has agreed to guaranty
such obligations of the Borrower in an amount not to exceed the lesser of (x)
$2,000,000 and (y) the amount by which the aggregate of outstanding principal of
and any interest on all Loans and L/C Exposure exceeds the Borrowing Base (as
defined in the Credit Agreement) on the date demand for payment hereunder is
made (the "Maximum Guaranty Amount").
The Individual Guarantor individually has agreed to guaranty
such obligations of the Borrower to the extent and in accordance with the terms
hereof.
-1-
Therefore, for good and valuable consideration, the receipt of
which is hereby acknowledged by the Individual Guarantor, the parties hereto
agree as follows:
1. GUARANTY
SECTION 1.1 GUARANTY. (a) The Individual Guarantor
unconditionally and irrevocably guarantees the due and punctual payment by the
Borrower in an amount not to exceed the product of 110% of the Individual
Guarantor's ownership interest in MEI as of the date hereof (as set forth on
Schedule 1 hereto) multiplied by the Maximum Guaranty Amount (the "Guaranteed
Obligations"), as and when such amounts shall become due and payable whether by
scheduled maturity, acceleration or otherwise and any extensions or renewals
thereof, reimbursement obligations in respect of Letters of Credit, related
costs and attorney's fees, and all other monetary obligations of the Borrower to
the Lender under the Credit Agreement.
(b) In furtherance of the provisions of this Guaranty
Agreement, and not in limitation of any other right which the Lender may have at
law or in equity against the Borrower or any other guarantor of the Guaranteed
Obligations, upon failure of the Borrower to pay any of the Guaranteed
Obligations when and as the same shall become due, whether at maturity, by
acceleration, after notice or otherwise, the Individual Guarantor hereby
promises to and will, upon receipt of written demand by the Lender, forthwith
pay or cause to be paid to the Lender in cash an amount equal to the unpaid
balance of the Guaranteed Obligations then due and payable.
(c) The Individual Guarantor, to the extent permitted by
applicable law, waives presentation to, demand for payment from and protest to
the Borrower and also waives notice of protest for nonpayment, notice of
acceleration and notice of intent to accelerate. The obligations of the
Individual Guarantor hereunder shall not be affected by (i) the failure of the
Lender to assert any claim or demand or to enforce any right or remedy against
the Borrower or any other guarantor of the Guaranteed Obligations under the
provisions of the Credit Agreement or any other agreement or otherwise; (ii) any
extension or renewal of any provision hereof or thereof; (iii) any rescission,
waiver, compromise, acceleration, amendment or modification of any of the terms
or provisions of the Credit Agreement, the Note or any other agreement; (iv) the
release, exchange, waiver or foreclosure of any security held by the Lender for
the Guaranteed Obligations or any of them or (v) the failure of the Lender to
exercise any right or remedy against any other guarantor of the Guaranteed
Obligations.
(d) The Individual Guarantor further agrees that this guaranty
is a continuing guaranty and constitutes a guaranty of performance and of
payment when due and not just of collection, and waives, to the extent permitted
by applicable law, any right to require that any resort be had by the Lender to
any security held for payment of the Guaranteed Obligations or to any balance of
any deposit, account or credit on the books of the Lender in favor of the
Borrower or any other guarantor or to any other person.
-2-
(e) The Individual Guarantor hereby expressly assumes all
responsibilities to remain informed of the financial condition of the Borrower
and each other guarantor of the Guaranteed Obligations and any circumstances
affecting the Collateral or the ability of the Borrower to perform under the
Credit Agreement.
(f) This guaranty shall not be affected by the genuineness,
validity, regularity or enforceability of the Guaranteed Obligations, the Note
or any other instrument evidencing any of the Guaranteed Obligations, or by the
existence, validity, enforceability, perfection or extent of any collateral
therefor or by any other circumstance relating to the Guaranteed Obligations
which might otherwise constitute a defense to the guaranty under this Guaranty
Agreement. The Lender makes no representation or warranty in respect to any such
circumstances nor has any duty or responsibility whatsoever to the Individual
Guarantor in respect to the management and maintenance of the Guaranteed
Obligations or the Collateral.
(g) The Individual Guarantor hereby acknowledges that, subject
to $2,000,000 limit set forth in the definition of "Maximum Guaranty Amount"
above, the Maximum Guaranty Amount may increase or decrease as the amount of the
Borrowing Base (as defined in the Credit Agreement) decreases or increases in
accordance with the terms of the Credit Agreement. In addition, the Individual
Guarantor acknowledges and agrees that neither he nor MEI shall have any
approval rights over extensions of credit by the Lender in excess of the
Borrowing Base, and further acknowledges that such extensions of credit shall be
included within the scope of this Guaranty.
SECTION 1.2 NO IMPAIRMENT OF GUARANTY. The obligations of the
Individual Guarantor hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason, including, without
limitation, any claim of waiver, release, surrender, alteration or compromise,
and shall not be subject to any defense (other than payment of the Guaranteed
Obligations) or set-off, counterclaim, recoupment or termination whatsoever by
reason of the invalidity, illegality or unenforceability of the Guaranteed
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of the Individual Guarantor hereunder shall not be discharged or
impaired or otherwise affected by the failure of the Lender to assert any claim
or demand or to enforce any remedy hereunder or under the Credit Agreement or
any other agreement, by any waiver or modification of any provision thereof, by
any default, failure, or delay, willful or otherwise, in the performance of the
Guaranteed Obligations, or by any other act or thing, or omission or delay to do
any other act or thing, which may or might in any manner or to any extent vary
the risk of the Individual Guarantor or would otherwise operate as a discharge
of the Individual Guarantor as a matter of law, unless and until the Guaranteed
Obligations are paid in full.
SECTION 1.3 CONTINUATION AND REINSTATEMENT, ETC. The
Individual Guarantor further agrees that his guaranty hereunder shall continue
to be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of principal of or interest on any Obligation is rescinded or
must otherwise be restored by the Lender upon the bankruptcy or other
-3-
reorganization of the Borrower or any other guarantor of the Guaranteed
Obligations or otherwise.
SECTION 1.4 SUBROGATION. Subject to the prior final and
indefeasible payment in full of all Obligations and to the extent of payments
received by the Lender from the Individual Guarantor on the Guaranteed
Obligations, the Individual Guarantor (and the other Guarantors) shall be
subrogated to the rights of the Lender to receive payments or distributions of
cash, property or securities of the Borrower applicable to the Obligations;
provided, that all such rights of subrogation shall be subordinated and junior
in right of payment to the prior payment in full of the Obligations to the
Lender.
SECTION 1.5 APPLICATION OF GUARANTEED AMOUNTS. In the event
the Lender receives an amount in excess of the Maximum Guaranty Amount then due
and payable from the Individual Guarantor and the other Guarantors pursuant to
the terms of this Guaranty Agreement and the respective guaranty agreements of
other Guarantors, the Lender shall remit such excess to MEI for disbursement to
the Guarantors in such amounts as the Guarantors shall determine.
SECTION 1.6 PRIOR GUARANTY. This Guaranty Agreement amends and
restates in its entirety the Guaranty Agreement dated as of November 4, 1997
previously executed by the Individual Guarantor. The Individual Guarantor hereby
rescinds the letter dated January 28, 1999 from ▇▇▇▇▇ ▇▇▇▇▇▇ (of The H.A.M.
Group, LLC) to ▇▇▇ ▇▇▇▇▇▇ (of Chase Securities Inc.) relating to the guaranties
of the Individual Guarantor and ▇▇▇▇▇ ▇▇▇▇▇▇, and acknowledges and agrees that
the terms of such letter shall have no force or effect.
2. REPRESENTATIONS AND WARRANTIES
The Individual Guarantor makes the following representations
and warranties to the Lender, all of which shall survive the execution and
delivery of the Note and this Guaranty Agreement and the making of the loans
evidenced and to be evidenced by the Note:
(i) The execution, delivery and performance of this Guaranty
Agreement (a) will not violate, or involve the Lender in a violation
of, any provision of applicable law or any order of any governmental
authority or any judgment of any court applicable to the Individual
Guarantor or his property, (b) will not violate any indenture, any
agreement for borrowed money, any bond, note or other similar
instrument or any other material agreement to which the Individual
Guarantor is a party or by which the Individual Guarantor or any of his
property is bound, (c) will not be in conflict with, result in a breach
of or constitute (with due notice or lapse of time or both) a default
under, any such indenture, agreement, bond, note, instrument or other
material agreement to which the Individual Guarantor is a party and (d)
will not result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any property or assets of the
Individual Guarantor other than pursuant to this Guaranty Agreement.
-4-
(ii) This Guaranty Agreement constitutes the legal, valid and
binding obligation of the Individual Guarantor, enforceable in
accordance with its terms, subject (a) as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency and
other laws affecting creditors' rights generally and to moratorium laws
from time to time in effect, (b) to general equitable principles which
may limit the right to obtain the remedy of specific performance and
(c) to the qualification that the enforceability of indemnification
provisions may be limited by applicable federal and state securities
laws, rules and regulations.
(iii) The Individual Guarantor will realize a direct economic
benefit as a result of the Loans being made to the Borrower pursuant to
the Credit Agreement.
3. MISCELLANEOUS
SECTION 3.1 NOTICES. Notices and other communications provided
for herein shall be in writing and shall be delivered or mailed (or if by
telecopier, delivered by such equipment) addressed (i) if to the Lender, to it
at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇ ▇. ▇▇▇▇▇,
III, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to Chase Securities Inc., ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, (ii) if to the Individual Guarantor, to
him at c/o H.A.M. Media Group LLC, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇▇▇, or such other address as such party may from time to time designate
by giving written notice to the other party hereunder. All notices and other
communications given to any party hereto in accordance with the provisions of
this Guaranty Agreement shall be deemed to have been given on the fifth Business
Day after the date when sent by registered or certified mail, postage prepaid
return receipt requested, if by mail, or when receipt is acknowledged, if by
telecopier, in each case addressed to such party as provided in this Section 3.1
or in accordance with the latest unrevoked written direction from such party.
SECTION 3.2 SUCCESSORS. Each reference herein to a party
hereto shall be deemed to include its respective successors, assigns, heirs,
executors, administrators and legal representatives including but not by way of
limitation, any party in whose favor the provisions of the Note shall inure, all
of whom shall be bound by the provisions of this Guaranty Agreement.
SECTION 3.3 SERVICE OF PROCESS. THE INDIVIDUAL GUARANTOR
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATE COURTS OF THE STATE
OF NEW YORK IN NEW YORK COUNTY AND TO THE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, FOR THE PURPOSE OF ANY
SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS GUARANTY
AGREEMENT, OR THE SUBJECT MATTER HEREOF BROUGHT BY THE LENDER OR ITS SUCCESSORS
OR ASSIGNS. THE INDIVIDUAL GUARANTOR TO THE EXTENT PERMITTED BY APPLICABLE LAW
(A) HEREBY
-5-
WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE,
IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT HE IS NOT SUBJECT
PERSONALLY TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT HIS PROPERTY IS
EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS GUARANTY AGREEMENT OR THE SUBJECT
MATTER HEREOF OR THEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURT, (B) HEREBY
WAIVES THE RIGHT TO REMOVE ANY SUCH ACTION, SUIT OR PROCEEDING INSTITUTED BY THE
LENDER IN STATE COURT TO FEDERAL COURT, AND (C) HEREBY AGREES NOT TO ASSERT ANY
OFFSETS OR COUNTERCLAIMS (OTHER THAN COMPULSORY COUNTERCLAIMS) IN ANY SUCH
ACTION, SUIT OR PROCEEDING. THE INDIVIDUAL GUARANTOR HEREBY CONSENTS TO SERVICE
OF PROCESS BY CERTIFIED MAIL AT THE ADDRESS TO WHICH NOTICES ARE TO BE GIVEN,
AND AGREES THAT THE SUBMISSION TO JURISDICTION AND THE CONSENT TO SERVICE OF
PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF THE LENDER. FINAL JUDGMENT
AGAINST THE INDIVIDUAL GUARANTOR IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE
CONCLUSIVE, AND MAY BE ENFORCED IN OTHER JURISDICTIONS (X) BY SUIT, ACTION OR
PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE
CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF ANY INDEBTEDNESS OR
LIABILITY OF THE INDIVIDUAL GUARANTOR THEREIN DESCRIBED OR (Y) IN ANY OTHER
MANNER PROVIDED BY, OR PURSUANT TO, THE LAWS OF SUCH OTHER JURISDICTION;
PROVIDED, HOWEVER, THAT THE LENDER MAY AT ITS OPTION BRING SUIT OR INSTITUTE
OTHER JUDICIAL PROCEEDINGS AGAINST THE INDIVIDUAL GUARANTOR OR ANY OF HIS ASSETS
IN ANY ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ OR OF ANY COUNTRY OR PLACE
WHERE THE INDIVIDUAL GUARANTOR OR SUCH ASSETS MAY BE FOUND.
SECTION 3.4 GOVERNING LAW. THIS GUARANTY AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 3.5 NO WAIVER, ETC. Neither a failure nor a delay on
the part of the Lender in exercising any right, power or privilege under this
Guaranty Agreement shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Lender herein
expressly specified are cumulative and not exclusive of any other rights,
remedies or benefits which it may have under this Guaranty Agreement, at law, in
equity, by statute, or otherwise.
-6-
SECTION 3.6 MODIFICATION, ETC. No modification, amendment or
waiver of any provision of this Guaranty Agreement, nor the consent to any
departure by the Individual Guarantor therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. No notice to or demand on the Individual Guarantor in
any case shall entitle the Individual Guarantor to any other or further notice
or demand in the same, similar or other circumstances.
SECTION 3.7 SEVERABILITY. If any one or more of the provisions
contained in this Guaranty Agreement should be invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall in no way be affected or impaired thereby.
SECTION 3.8 HEADINGS. Section headings used herein are for
convenience of reference only and are not to affect the construction of, or be
taken into consideration in interpreting, this Guaranty Agreement.
SECTION 3.9 WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED
BY APPLICABLE LAW WHICH CANNOT BE WAIVED, THE INDIVIDUAL GUARANTOR HEREBY
WAIVES, AND COVENANTS THAT HE WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT
OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
GUARANTY AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR OTHERWISE. THE
INDIVIDUAL GUARANTOR ACKNOWLEDGES THAT HE HAS BEEN INFORMED BY THE LENDER THAT
THE PROVISIONS OF THIS SECTION 3.9 CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH
THE LENDER HAS RELIED, IS RELYING AND WILL RELY IN MAKING THE LOANS EVIDENCED BY
THE NOTE AND ENTERING INTO THIS GUARANTY AGREEMENT. THE LENDER MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 3.9 WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE INDIVIDUAL GUARANTOR TO THE WAIVER OF HIS RIGHTS
TO TRIAL BY JURY.
-7-
IN WITNESS WHEREOF, the Individual Guarantor and the Lender
have caused this Guaranty Agreement to be executed by its duly authorized
officer, all as of the date first written above.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
Executed by the Lender THE CHASE MANHATTAN BANK
in New York, New York
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
-8-
Schedule 1
Equity Interests in Media Equities International, L.L.C.
Guarantor Equity Interest
--------- ---------------
▇▇▇▇ ▇. ▇▇▇▇▇ 7.05% (through ▇▇▇▇▇'▇ 33 1/3% interest in
H.A.M. Media Group, LLC, which holds
21.16% of MEI)
-9-
EXHIBIT K-5
FORM OF GUARANTY AGREEMENT
GUARANTY AGREEMENT, dated as of August 16, 1999 (as
the same may be further supplemented, amended or otherwise
modified, renewed or replaced from time to time, the "Guaranty
Agreement") between (i) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, an individual
residing in Los Angeles County, California (the "Individual
Guarantor") and (ii) THE CHASE MANHATTAN BANK, a New York
banking corporation (the "Lender").
Pursuant to the Amended and Restated Credit, Security,
Guaranty and Pledge Agreement dated as of November 4, 1997, as amended and
restated as of August 16, 1999 (as the same may be further amended,
supplemented, or otherwise modified, renewed or replaced from time to time, the
"Credit Agreement") among NewStar Media Inc. (formerly known as Dove
Entertainment, Inc.), a California corporation (the "Borrower"), the Corporate
Guarantors referred to therein and the Lender, the Lender has agreed to make
Loans to the Borrower and issue Letters of Credit in an amount outstanding at
any one time not in excess of $10,000,000. Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Credit Agreement.
The Individual Guarantor, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ (collectively, the "Guarantors") are the
direct and indirect owners of Media Equities International, L.L.C.
As an inducement to the Lender to make the Loans and issue
Letters of Credit to the Borrower, each of the Guarantors has agreed to guaranty
such obligations of the Borrower in an amount not to exceed the lesser of (x)
$2,000,000 and (y) the amount by which the aggregate of outstanding principal of
and any interest on all Loans and L/C Exposure exceeds the Borrowing Base (as
defined in the Credit Agreement) on the date demand for payment hereunder is
made (the "Maximum Guaranty Amount").
-1-
The Individual Guarantor individually has agreed to guaranty
such obligations of the Borrower to the extent and in accordance with the terms
hereof.
Therefore, for good and valuable consideration, the receipt of
which is hereby acknowledged by the Individual Guarantor, the parties hereto
agree as follows:
1. GUARANTY
SECTION 1.1 GUARANTY. (a) The Individual Guarantor
unconditionally and irrevocably guarantees the due and punctual payment by the
Borrower in an amount not to exceed the product of 110% of the Individual
Guarantor's ownership interest in MEI as of the date hereof (as set forth on
Schedule 1 hereto) multiplied by the Maximum Guaranty Amount (the "Guaranteed
Obligations"), as and when such amounts shall become due and payable whether by
scheduled maturity, acceleration or otherwise and any extensions or renewals
thereof, reimbursement obligations in respect of Letters of Credit, related
costs and attorney's fees, and all other monetary obligations of the Borrower to
the Lender under the Credit Agreement.
(b) In furtherance of the provisions of this Guaranty
Agreement, and not in limitation of any other right which the Lender may have at
law or in equity against the Borrower or any other guarantor of the Guaranteed
Obligations, upon failure of the Borrower to pay any of the Guaranteed
Obligations when and as the same shall become due, whether at maturity, by
acceleration, after notice or otherwise, the Individual Guarantor hereby
promises to and will, upon receipt of written demand by the Lender, forthwith
pay or cause to be paid to the Lender in cash an amount equal to the unpaid
balance of the Guaranteed Obligations then due and payable.
(c) The Individual Guarantor, to the extent permitted by
applicable law, waives presentation to, demand for payment from and protest to
the Borrower and also waives notice of protest for nonpayment, notice of
acceleration and notice of intent to accelerate. The obligations of the
Individual Guarantor hereunder shall not be affected by (i) the failure of the
Lender to assert any claim or demand or to enforce any right or remedy against
the Borrower or any other guarantor of the Guaranteed Obligations under the
provisions of the Credit Agreement or any other agreement or otherwise; (ii) any
extension or renewal of any provision hereof or thereof; (iii) any rescission,
waiver, compromise, acceleration, amendment or modification of any of the terms
or provisions of the Credit Agreement, the Note or any other agreement; (iv) the
release, exchange, waiver or foreclosure of any security held by the Lender for
the Guaranteed Obligations or any of them or (v) the failure of the Lender to
exercise any right or remedy against any other guarantor of the Guaranteed
Obligations.
(d) The Individual Guarantor further agrees that this guaranty
is a continuing guaranty and constitutes a guaranty of performance and of
payment when due and not just of collection, and waives, to the extent permitted
by applicable law, any right to require that any resort be had by the Lender to
any security held for payment of the Guaranteed Obligations or to
-2-
any balance of any deposit, account or credit on the books of the Lender in
favor of the Borrower or any other guarantor or to any other person.
(e) The Individual Guarantor hereby expressly assumes all
responsibilities to remain informed of the financial condition of the Borrower
and each other guarantor of the Guaranteed Obligations and any circumstances
affecting the Collateral or the ability of the Borrower to perform under the
Credit Agreement.
(f) This guaranty shall not be affected by the genuineness,
validity, regularity or enforceability of the Guaranteed Obligations, the Note
or any other instrument evidencing any of the Guaranteed Obligations, or by the
existence, validity, enforceability, perfection or extent of any collateral
therefor or by any other circumstance relating to the Guaranteed Obligations
which might otherwise constitute a defense to the guaranty under this Guaranty
Agreement. The Lender makes no representation or warranty in respect to any such
circumstances nor has any duty or responsibility whatsoever to the Individual
Guarantor in respect to the management and maintenance of the Guaranteed
Obligations or the Collateral.
(g) The Individual Guarantor hereby acknowledges that, subject
to $2,000,000 limit set forth in the definition of "Maximum Guaranty Amount"
above, the Maximum Guaranty Amount may increase or decrease as the amount of the
Borrowing Base (as defined in the Credit Agreement) decreases or increases in
accordance with the terms of the Credit Agreement. In addition, the Individual
Guarantor acknowledges and agrees that neither he nor MEI shall have any
approval rights over extensions of credit by the Lender in excess of the
Borrowing Base, and further acknowledges that such extensions of credit shall be
included within the scope of this Guaranty.
SECTION 1.2 NO IMPAIRMENT OF GUARANTY. The obligations of the
Individual Guarantor hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason, including, without
limitation, any claim of waiver, release, surrender, alteration or compromise,
and shall not be subject to any defense (other than payment of the Guaranteed
Obligations) or set-off, counterclaim, recoupment or termination whatsoever by
reason of the invalidity, illegality or unenforceability of the Guaranteed
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of the Individual Guarantor hereunder shall not be discharged or
impaired or otherwise affected by the failure of the Lender to assert any claim
or demand or to enforce any remedy hereunder or under the Credit Agreement or
any other agreement, by any waiver or modification of any provision thereof, by
any default, failure, or delay, willful or otherwise, in the performance of the
Guaranteed Obligations, or by any other act or thing, or omission or delay to do
any other act or thing, which may or might in any manner or to any extent vary
the risk of the Individual Guarantor or would otherwise operate as a discharge
of the Individual Guarantor as a matter of law, unless and until the Guaranteed
Obligations are paid in full.
-3-
SECTION 1.3 CONTINUATION AND REINSTATEMENT, ETC. The
Individual Guarantor further agrees that his guaranty hereunder shall continue
to be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of principal of or interest on any Obligation is rescinded or
must otherwise be restored by the Lender upon the bankruptcy or other
reorganization of the Borrower or any other guarantor of the Guaranteed
Obligations or otherwise.
SECTION 1.4 SUBROGATION. Subject to the prior final and
indefeasible payment in full of all Obligations and to the extent of payments
received by the Lender from the Individual Guarantor on the Guaranteed
Obligations, the Individual Guarantor (and the other Guarantors) shall be
subrogated to the rights of the Lender to receive payments or distributions of
cash, property or securities of the Borrower applicable to the Obligations;
provided, that all such rights of subrogation shall be subordinated and junior
in right of payment to the prior payment in full of the Obligations to the
Lender.
SECTION 1.5 APPLICATION OF GUARANTEED AMOUNTS. In the event
the Lender receives an amount in excess of the Maximum Guaranty Amount then due
and payable from the Individual Guarantor and the other Guarantors pursuant to
the terms of this Guaranty Agreement and the respective guaranty agreements of
other Guarantors, the Lender shall remit such excess to MEI for disbursement to
the Guarantors in such amounts as the Guarantors shall determine.
SECTION 1.6 PRIOR GUARANTY. This Guaranty Agreement amends and
restates in its entirety the Guaranty Agreement dated as of November 4, 1997
previously executed by the Individual Guarantor.
2. REPRESENTATIONS AND WARRANTIES
The Individual Guarantor makes the following representations
and warranties to the Lender, all of which shall survive the execution and
delivery of the Note and this Guaranty Agreement and the making of the loans
evidenced and to be evidenced by the Note:
(i) The execution, delivery and performance of this Guaranty
Agreement (a) will not violate, or involve the Lender in a violation
of, any provision of applicable law or any order of any governmental
authority or any judgment of any court applicable to the Individual
Guarantor or his property, (b) will not violate any indenture, any
agreement for borrowed money, any bond, note or other similar
instrument or any other material agreement to which the Individual
Guarantor is a party or by which the Individual Guarantor or any of his
property is bound, (c) will not be in conflict with, result in a breach
of or constitute (with due notice or lapse of time or both) a default
under, any such indenture, agreement, bond, note, instrument or other
material agreement to which the Individual Guarantor is a party and (d)
will not result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any property or assets of the
Individual Guarantor other than pursuant to this Guaranty Agreement.
-4-
(ii) This Guaranty Agreement constitutes the legal, valid and
binding obligation of the Individual Guarantor, enforceable in
accordance with its terms, subject (a) as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency and
other laws affecting creditors' rights generally and to moratorium laws
from time to time in effect, (b) to general equitable principles which
may limit the right to obtain the remedy of specific performance and
(c) to the qualification that the enforceability of indemnification
provisions may be limited by applicable federal and state securities
laws, rules and regulations.
(iii) The Individual Guarantor will realize a direct economic
benefit as a result of the Loans being made to the Borrower pursuant to
the Credit Agreement.
3. MISCELLANEOUS
SECTION 3.1 NOTICES. Notices and other communications provided
for herein shall be in writing and shall be delivered or mailed (or if by
telecopier, delivered by such equipment) addressed (i) if to the Lender, to it
at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇ ▇. ▇▇▇▇▇,
III, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to Chase Securities Inc., ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, (ii) if to the Individual Guarantor, to
him at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or such other
address as such party may from time to time designate by giving written notice
to the other party hereunder. All notices and other communications given to any
party hereto in accordance with the provisions of this Guaranty Agreement shall
be deemed to have been given on the fifth Business Day after the date when sent
by registered or certified mail, postage prepaid return receipt requested, if by
mail, or when receipt is acknowledged, if by telecopier, in each case addressed
to such party as provided in this Section 3.1 or in accordance with the latest
unrevoked written direction from such party.
SECTION 3.2 SUCCESSORS. Each reference herein to a party
hereto shall be deemed to include its respective successors, assigns, heirs,
executors, administrators and legal representatives including but not by way of
limitation, any party in whose favor the provisions of the Note shall inure, all
of whom shall be bound by the provisions of this Guaranty Agreement.
SECTION 3.3 SERVICE OF PROCESS. THE INDIVIDUAL GUARANTOR
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATE COURTS OF THE STATE
OF NEW YORK IN NEW YORK COUNTY AND TO THE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, FOR THE PURPOSE OF ANY
SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS GUARANTY
AGREEMENT, OR THE SUBJECT MATTER HEREOF BROUGHT BY THE LENDER OR ITS SUCCESSORS
OR ASSIGNS. THE INDIVIDUAL GUARANTOR TO THE EXTENT PERMITTED BY APPLICABLE LAW
(A) HEREBY
-5-
WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE,
IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT HE IS NOT SUBJECT
PERSONALLY TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT HIS PROPERTY IS
EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS GUARANTY AGREEMENT OR THE SUBJECT
MATTER HEREOF OR THEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURT, (B) HEREBY
WAIVES THE RIGHT TO REMOVE ANY SUCH ACTION, SUIT OR PROCEEDING INSTITUTED BY THE
LENDER IN STATE COURT TO FEDERAL COURT, AND (C) HEREBY AGREES NOT TO ASSERT ANY
OFFSETS OR COUNTERCLAIMS (OTHER THAN COMPULSORY COUNTERCLAIMS) IN ANY SUCH
ACTION, SUIT OR PROCEEDING. THE INDIVIDUAL GUARANTOR HEREBY CONSENTS TO SERVICE
OF PROCESS BY CERTIFIED MAIL AT THE ADDRESS TO WHICH NOTICES ARE TO BE GIVEN,
AND AGREES THAT THE SUBMISSION TO JURISDICTION AND THE CONSENT TO SERVICE OF
PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF THE LENDER. FINAL JUDGMENT
AGAINST THE INDIVIDUAL GUARANTOR IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE
CONCLUSIVE, AND MAY BE ENFORCED IN OTHER JURISDICTIONS (X) BY SUIT, ACTION OR
PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE
CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF ANY INDEBTEDNESS OR
LIABILITY OF THE INDIVIDUAL GUARANTOR THEREIN DESCRIBED OR (Y) IN ANY OTHER
MANNER PROVIDED BY, OR PURSUANT TO, THE LAWS OF SUCH OTHER JURISDICTION;
PROVIDED, HOWEVER, THAT THE LENDER MAY AT ITS OPTION BRING SUIT OR INSTITUTE
OTHER JUDICIAL PROCEEDINGS AGAINST THE INDIVIDUAL GUARANTOR OR ANY OF HIS ASSETS
IN ANY ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ OR OF ANY COUNTRY OR PLACE
WHERE THE INDIVIDUAL GUARANTOR OR SUCH ASSETS MAY BE FOUND.
SECTION 3.4 GOVERNING LAW. THIS GUARANTY AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 3.5 NO WAIVER, ETC. Neither a failure nor a delay on
the part of the Lender in exercising any right, power or privilege under this
Guaranty Agreement shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Lender herein
expressly specified are cumulative and not exclusive of any other rights,
remedies or benefits which it may have under this Guaranty Agreement, at law, in
equity, by statute, or otherwise.
-6-
SECTION 3.6 MODIFICATION, ETC. No modification, amendment or
waiver of any provision of this Guaranty Agreement, nor the consent to any
departure by the Individual Guarantor therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. No notice to or demand on the Individual Guarantor in
any case shall entitle the Individual Guarantor to any other or further notice
or demand in the same, similar or other circumstances.
SECTION 3.7 SEVERABILITY. If any one or more of the provisions
contained in this Guaranty Agreement should be invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall in no way be affected or impaired thereby.
SECTION 3.8 HEADINGS. Section headings used herein are for
convenience of reference only and are not to affect the construction of, or be
taken into consideration in interpreting, this Guaranty Agreement.
SECTION 3.9 WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED
BY APPLICABLE LAW WHICH CANNOT BE WAIVED, THE INDIVIDUAL GUARANTOR HEREBY
WAIVES, AND COVENANTS THAT HE WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT
OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
GUARANTY AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR OTHERWISE. THE
INDIVIDUAL GUARANTOR ACKNOWLEDGES THAT HE HAS BEEN INFORMED BY THE LENDER THAT
THE PROVISIONS OF THIS SECTION 3.9 CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH
THE LENDER HAS RELIED, IS RELYING AND WILL RELY IN MAKING THE LOANS EVIDENCED BY
THE NOTE AND ENTERING INTO THIS GUARANTY AGREEMENT. THE LENDER MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 3.9 WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE INDIVIDUAL GUARANTOR TO THE WAIVER OF HIS RIGHTS
TO TRIAL BY JURY.
-7-
IN WITNESS WHEREOF, the Individual Guarantor and the Lender
have caused this Guaranty Agreement to be executed by its duly authorized
officer, all as of the date first written above.
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Executed by the Lender THE CHASE MANHATTAN BANK
in New York, New York
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
-8-
Schedule 1
Equity Interests in Media Equities International, L.L.C.
Guarantor Equity Interest
--------- ---------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 11.70% in MEI
-9-
SPOUSAL CONSENT
---------------
The undersigned acknowledges that she has read the foregoing
Guaranty Agreement (the "Guaranty Agreement") and that she knows its content.
The undersigned is aware that by its provisions her spouse agrees to guarantee
certain obligations owed by NewStar Media Inc. to The Chase Manhattan Bank (the
"Lender") under that certain Amended and Restated Credit, Security, Guaranty and
Pledge Agreement, dated as of November 4, 1997, as amended and restated as of
June __, 1999, among NewStar Media Inc., as borrower, the Corporate Guarantors
referred to therein and the Lender (as the same may be amended, supplemented or
otherwise modified, renewed or replaced from time to time, the "Credit
Agreement"). The undersigned hereby consents to the Guaranty Agreement and
accepts all of the provisions of such Guaranty Agreement to the extent of her
community property interests in whatever property is subject to the Guaranty
Agreement, and further agrees that the undersigned will take no action at any
time to hinder the enforcement of the Guaranty Agreement, the Credit Agreement,
or any related document or instrument, or any provision contained therein.
Dated: As of June ___, 1999
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-10-