CREDIT AGREEMENT
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THIS CREDIT AGREEMENT (this "Agreement"), dated as of May 8,
1997 is entered into between BANK OF AMERICA ILLINOIS, an Illinois state member
bank (together with its successors and assigns the "Bank") and AUDIO BOOK CLUB,
INC., a Florida corporation ("Borrower").
SECTION 1 CERTAIN DEFINITIONS.
SECTION 1.1 Certain Definitions. When used herein, the
following terms shall have the following meanings (such meanings to be
applicable to both the singular and plural forms of the terms defined):
"Agreement" - means this Agreement as it may be amended,
supplemented or modified from time to time.
"Bank" - means Bank of America Illinois
"Bank Parties" - see Section 9.3.
"Banking Day" means any day on which the Bank is open for
commercial banking business in Chicago, Illinois.
"Borrower" - means Audio Book Club, Inc.
"Collateral" means all property and/or sights on or in which a
lien or security interest is granted to the Bank pursuant to this
Agreement or any of the Collateral Documents or any other instruments
or documents provided for herein or therein or delivered or to be
delivered hereunder or thereunder or in connection herewith or
therewith.
"Collateral Documents" means the Stock Pledge Agreement and
any other documents or instruments as may be required or desirable to
perfect the Bank's lien on or a security interest in Collateral or
pursuant to which a lien or security interest is granted to the Bank as
security for any of the Liabilities as the same may be amended,
modified or supplemented from time to time.
"Commitment" - see Section 2.1.
"Commitment Amount" means $6,000,000.00.
"Contingent Liabilities" means any agreement, undertaking or
arrangement by which Borrower guarantees, endorses or otherwise becomes
or is contingently liable upon (by direct or indirect agreement,
contingent or otherwise, to provide funds for payment, to supply funds
to or otherwise to invest in a debtor, or otherwise to assure a
creditor against loss) any indebtedness, obligation or other
liability of any other Person (other than by endorsements or
instruments in the course of collection), or guarantees the payment of
dividends or other distributions upon the shares of any other Person.
"Debt" of the Borrower means, without duplication, (a) all
indebtedness of the Borrower for borrowed money, whether or not
evidenced by bonds, debentures, notes or similar instruments, (b) all
leases required to be capitalized under generally accepted accounting
principals, (c) all obligations of the Borrower to pay the deferred
purchase price of property or services (other than prepaid interest and
trade accounts payable, of maturity not greater than 90 days, in the
ordinary course of business); (d) all indebtedness secured by a Lien on
the property of the Borrower whether or not such indebtedness shall
have been assumed by the Borrower; (e) all contingent liabilities of
the Borrower.
"Dollars" and the sign "$" means lawful money of the
United States of America.
"Effective Date" means May 9, 1997.
"Event of Default" - see Section 8.1.
"Indemnified Liabilities" - see Section 9.3.
"Liabilities" mean (i) all obligations to the Bank and its
successors and assigns of the Borrower under or in connection with this
Agreement, the Note and the other Loan Documents, and (ii) all other
obligations of the Borrower to the Bank and its successors and assigns,
in each case howsoever created, arising or evidenced, whether direct or
indirect, joint or several, absolute or contingent, or now or hereafter
existing, or due or to become due, and whether or not arising out of or
in connection with this Agreement, the Note or the other Loan
Documents.
"Liens" means, when used with respect to any Person, any
interest granted by such Person in any real or personal property, asset
or the right owned or being purchased or acquired by such Person which
secures payment or performance of any obligation and shall include any
mortgage, lien, encumbrance, charge or other security interest of any
kind, whether arising by contract, as a matter of law, by judicial
process or otherwise.
"Loan Documents" means this Agreement, the Note, the
Collateral Documents and any other documents executed pursuant to or in
connection with the foregoing.
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"Material Adverse Change" means any change, event, action,
condition or effect which could, either individually or in the
aggregate:
(1) materially and adversely affect the assets,
financial condition or prospects of the Borrower;
(2) materially and adversely impair the ability of the
Borrower to perform any of his obligations in connection with the Loan;
(3) materially and adversely affect the existence, perfection
or priority of the Bank's Liens on the Collateral; or
(4) impairs the validity or enforceability of any document
evidencing or securing the repayment of the Loan.
"Person" means any natural person, corporation, partnership,
trust, association, governmental authority, or unit, or any other
entity, whether acting in an individual, fiduciary or other capacity.
"Reference Rate" means at any time the rate per annum then
most recently announced by the Bank as its reference rate at Chicago,
Illinois (or if such rate is not being quoted, the rate which is the
successor to such rate, and if no successor is being quoted, the rate
conceptually equivalent to such rate which the Bank is quoting).
"Termination Date" means May 7, 1998 unless terminated earlier
as provided in this Agreement.
"To the best of Knowledge" means knowledge based on a
reasonable investigation.
"Unmatured Event of Default" means any event which if it
continues uncured will, with lapse of time or notice or both,
constitute an Event of Default.
SECTION 2 COMMITMENT OF THE BANK.
SECTION 2.1 Commitment. On and subject to the terms and
conditions of this Agreement, the Bank agrees to make a loan to the Borrower on
a non-revolving basis ("Loan") in the principal amount of $6,000,000.00 the
foregoing commitment of the Bank to make the Loan is herein called the
"Commitment".
SECTION 2.2 Loan Request. The Borrower shall give the Bank
notice of the proposed borrowing by 11:00 am., Chicago time, at least one
Banking Day prior to the proposed date of such borrowing. Subject to receipt by
the Bank of the documents required under Section 7 with respect to such
borrowing and the
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satisfaction of all other conditions precedent to such borrowing, on the
requested funding date, the Bank shall, as authorized by the Borrower, pay over
such funds by wire transfer on the Borrower's behalf to the Borrower's account
to be designated by the Borrower in accordance with the Bank's wire transfer
procedures.
SECTION 2.3 Conditions. Notwithstanding any other provision of
this Agreement, the Bank shall not have any obligation to make any Loan
hereunder (a) if the conditions to the making of such Loan specified in Section
7 hereof have not been satisfied or (b) an Event of Default or Unmatured Event
of Default exists or would result therefrom.
SECTION 2.4 Fee. The Borrower agrees to pay to the Bank a
facility fee of $10,000.00. Bank acknowledges the receipt of the $10,000.00 fee.
SECTION 2.5 Note. The Loan shall be evidenced by a promissory
note (as amended, supplemented, replaced or otherwise modified from time to
time, the "Note"), substantially in the form of Exhibit A, with appropriate
insertions, payable to the order of the Bank on or before the Termination Date
in an amount equal to the Commitment Amount (or, if less, in the aggregate
unpaid principal amount of the Loan).
SECTION 3 REPAYMENTS; PAYMENTS.
SECTION 3.1 Prepayments. The Borrower may from time to time
prepay, without payment of any penalty or premium, the Loan in whole or in part;
provided that the Borrower shall give the Bank not less than one Banking Day's
prior written notice of such prepayment.
SECTION 3.2 Making of Payments. All payments of principal of,
or interest on, the Loan and all payments other amounts payable hereunder shall
be made by the Borrower to the Bank in immediately available funds at its office
in Chicago not later than 1:00, Chicago time, on the date due; any funds
received after that hour shall be deemed to have been received by the Bank on
the immediately succeeding Banking Day.
SECTION 3.3 Due Date Extension. If any payment hereunder falls
due on a day which is not a Banking Day, then such due date shall be extended to
the immediately succeeding Banking Day.
SECTION 3.4 Setoff. The Borrower agrees that the Bank and each
other holder of a Note has all rights of set-off and bankers' lien provided by
applicable law, and in addition thereto, the Borrower agrees that at any time
Event of Default exists, the Bank and each such holder may apply to the payment
of such payment or other amount any and all balances, credits,
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deposits, accounts or moneys of the Borrower then or thereafter with the Bank or
such holder.
SECTION 4 INTEREST.
SECTION 4.1 Interest Rates. Interest on the unpaid principal
amount of the Loan for the period commencing on the date of the funding of such
Loan until such Loan is paid in full shall be payable at a rate per annum equal
to the sum of the Reference Rate from time to time in effect minus one-half of
one percent (1/2%); provided that during the existence of any Event of Default,
the unpaid principal amount of such Loan shall bear interest at a rate per annum
equal to (i) the Reference Rate from time to-time in effect (but not less than
the Reference Rate as in effect at such due date) plus (ii) 2-1/2% per annum.
Borrower agrees to maintain with Bank at all times an interest reserve in the
principal amount of $100,000.00.
SECTION 4.2 Interest Payment Dates. Accrued interest on each
Loan shall be payable on the last day of each Business Day of each month and at
maturity, commencing June 30, 1997. After maturity, accrued interest on the Loan
shall be payable on demand.
SECTION 4.3 Computation of Interest. Interest on the Loan
shall be computed for the actual number of days elapsed on the basis of an
assumed year of 360 days. The interest rate applicable to the Loan shall change
simultaneously with each change in the Reference Rate.
SECTION 5 WARRANTIES.
To induce the Bank to enter into this Agreement and to make
the Loan the Borrower warrants to the Bank that:
SECTION 5.1 Authority, etc. The Borrower is a corporation duly
formed, validity existing and current under the laws of the State of Florida.
The execution and delivery by the Borrower of this Agreement, the Note, and each
other Loan Document to which it is a party and its performance thereunder have
received all necessary approvals and other consents (if and shall be required),
and do not and will not (a) contravene or conflict with (i) the Articles of
Incorporation and Bylaws of Borrower or (ii) to the best of its knowledge, any
provision of law or any order, decree or judgment of any court or other
governmental agency which is binding on the Borrower or any of his properties;
(b) contravene, conflict with or result in a breach of any agreement, indenture,
instrument or other document to which he Borrower is a party or by which any of
his properties may be bound; or (c) result in, or require, the creation or
imposition of any Lien on any property of the Borrower (other than Liens arising
under the Loan Documents). The Borrower is not aware of any matters which would
cause the Loan Documents not to
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create legal, valid, and binding obligations of the Borrower enforceable in
accordance with their respective terms.
SECTION 5.2 Financial Information. The draft of the audited
financial statement for the Borrower prepared by Peat Marwick LLP for the year
ending December 31, 1996, a copy of which has been delivered to the Bank, has
been prepared on a reasonable basis, consistently applied, and presents fairly
the financial condition of the Borrower and since the date of such financial
statement, no Material Adverse Change has occurred in the Borrower's financial
condition or its ability to perform its obligations under the Loan Documents.
SECTION 5.3 Litigation and Contingent Obligations. No claims,
litigation, (including, without limitation, derivative actions), arbitration,
governmental investigation or proceeding or inquiry is pending or, to the best
of the Borrower's knowledge, threatened against the Borrower which would, if
adversely determined, cause a Material Adverse Change in the financial condition
of the Borrower or its ability to perform its obligation under the Loan
Documents, and there is no reasonable basis known to the Borrower for any of the
foregoing. Except as disclosed on Schedule II, the Borrower has no material
contingent obligations not provided for or disclosed in the financial statements
referred to in Section 5.2.
SECTION 5.4 Ownership of Properties: Liens. The Borrower owns
good and marketable title to, or a valid leasehold interest in, all of its
material properties, real and personal, tangible and intangible, of any and
every nature whatsoever (including patents, trademarks, trade names, service
marks and copyrights), free and clear of all Liens, charges and claims except
for Liens permitted under Section 6.5.
SECTION 5.5 Absence of Default. The Borrower is not in
material default under any contract or contracts to which he is a party or by
which he is bound.
SECTION 5.6 Regulations G. T. U and X. None of the Borrower,
any affiliate of the Borrower or any Person acting on its behalf has taken or
will take action to cause the execution, delivery or performance of this
Agreement or the other Loan Documents, the making or existence of the Loans or
the use of proceeds of the Loan to violate Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System. None of the proceeds of the
Loan shall be directly or indirectly used for the purpose of "purchasing" or
"carrying" any "margin stock" (as each of the quoted terms is defined or used in
Regulations G, T, U or X of the Board of Governors of the Federal Reserve System
as in effect from time to time) or for any purpose which violates or, which
would be inconsistent with, the provisions of Regulations G, T, U or X.
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SECTION 5.7 Taxes. The Borrower has filed all tax returns that
are required to be filed by it and has paid all taxes and governmental charges
thereby shown to be owing (other than those that are not yet delinquent), the
failure to pay of which is likely to cause a Material Adverse Change, in the
reasonable determination of the Bank, on the financial condition of the Borrower
or the ability of the Borrower to perform its obligations under the Loan
Documents. There is no ongoing audit or, to the Borrower's knowledge, other
governmental investigation of the tax liability of the Borrower and there is no
unresolved claim by a taxing authority concerning the Borrower's tax liability,
for any period for which returns have been filed or were due.
SECTION 6 COVENANTS.
Until all obligations of the Borrower hereunder and under the
other Loan Documents are paid in full, the Borrower agrees that, unless at any
time the Bank otherwise expressly consents in writing, it will:
SECTION 6.1 Reports. Certificates and Other Information.
Furnish to the Bank.
6.1.1 Financial Information. Promptly when
available, and in any event within 120 days after the end of each calendar year,
a copy of the unaudited statement of financial conditions of the Borrower,
certified by the Borrower and containing at least a balance sheet, income
statement and cash flow statement for the previous calendar year, prepared on a
reasonable basis consistently applied, and promptly when available, and in any
event within 30 days after filing, federal and state income tax returns of the
Borrower.
6.1.2 Notice of Default, Litigation and Disputes. Immediately
upon becoming aware of any of the following, written notice describing the same
and the steps being taken by the Borrower with respect thereto: (a) the
occurrence of an Event of Default or an Unmatured Event of Default; (b) any
litigation, arbitration or governmental investigation or proceeding involving
amounts in excess of $100,000.00 not previously disclosed by the Borrower to the
Bank which has been instituted or, to the knowledge of the Borrower, is
threatened against the Borrower or to which any of its properties is subject,
which has caused, or could cause, a Material Adverse Change in the financial
condition of the Borrower or of the ability of the Borrower to perform its
obligations under the Loan Documents; (c) any material adverse development which
occurs in any litigation, arbitration or governmental proceeding previously
disclosed to the Bank; (d) the occurrence of any other event or circumstance
which has had or is reasonably likely to cause a Material Adverse Change in the
financial condition of the Borrower or of the ability of the Borrower to perform
its obligations under the Loan Documents; and
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(e) any substantial dispute between Borrower and any governmental authority.
6.1.3 Other Information. From time to time such
other information concerning the Borrower as the Bank may
reasonably request.
SECTION 6.2 Books Records and Inspections. Keep its books and
records in accordance with sound business practices sufficient to allow the
preparation of financial statements on a consistent basis which fairly and
accurately reflects the financial condition of the Borrower; permit on
reasonable notice and at reasonable times (or at any time during the existence
of an Event of Default or an Unmatured Event of Default) the Bank or any
representative thereof to visit the Borrower to discuss financial matters with
the Borrower and its independent auditors (and the Borrower hereby authorizes
such independent auditors to discuss such financial matters with the Bank or
representative thereof and the Bank agrees that the Borrower shall have the
right to be present at such meeting), and to examine (and, at the expense of the
Borrower, photocopy extracts from) any of its books or other records. The
Borrower agrees to pay the fees of its auditors incurred in connection with any
reasonable exercise of the rights cf the Bank pursuant to this Section 6.2.
SECTION 6.3 Compliance with Laws: Payment of Taxes. (a) Comply
in all material respects with all applicable laws, rules, regulations and
orders; and (b) pay, prior to delinquency, all taxes and other governmental
charges against it or any of its property, as well as claims of any kind, the
failure to pay of which is likely to cause a Material Adverse Change, in the
reasonable determination of the Bank, in the financial condition of the Borrower
or the ability of the Borrower to perform its obligations under the Loan
Documents; provided that the foregoing shall not require the Borrower to pay any
such tax or charge so long as it shall contest the validity thereof in good
faith by appropriate proceedings and shall set aside on its books adequate
reserves with respect thereto.
SECTION 6.4 Limitations on Debt. Not create, incur, assume or
allow any security interest or lien on any of its property other than in the
ordinary course of business. The Borrower's indebtedness to its majority
shareholder shall be reduced to at least $7,000,000.00 upon the funding of the
Loan.
SECTION 6.5 Liens. Not create or permit to exist any Lien on
any of its personal properties, assets or rights of whatsoever nature (whether
now owned or hereafter acquired), except (a) Liens for taxes or other
governmental charges not at the time delinquent or thereafter payable without
penalty or being contested in good faith by appropriate proceedings and, in each
case, for which it maintains adequate reserves; (b) Liens in
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the ordinary course of business; and (c) Liens in favor of the Bank.
SECTION 6.6 Security Interest. Promptly from time to time,
execute and deliver such documents and take such other actions as may be
necessary, or as the Bank may reasonably request, to cause all Collateral
granted under the Collateral Documents to be subject to a perfected,
first-priority Lien in favor of the Bank.
SECTION 6.7 Further Assurances. Execute and deliver, or cause
to be executed and delivered, to the Bank in due form for filing or recording
(and pay the cost of filing or recording the same in all public offices deemed
necessary or advisable by the Bank) such security agreements, pledge agreements,
consents, waivers, financing statements, stock or bond powers, and other
documents, and do such other acts and things, all as may from time to time be
necessary or desirable to establish and maintain, to the satisfaction of the
Bank, a valid perfected first Lien on all Collateral now or hereafter existing
or acquired (free of all other Liens whatsoever).
SECTION 6.8 Securities Laws. Not, and not permit anyone acting
on its behalf, to directly or indirectly offer any interest in the Note or any
other Liability for sale to, or solicit any other to acquire any such interest
from, or sell any such interest to any Person that would subject the issuance or
sale of the Note or any other Liability to registration under the Securities Act
of 1933, as amended.
SECTION 6.9 Transfer to Trust. Not transfer any of its assets
to a trust without the prior written consent of the Bank which consent may be
given, conditioned or withheld.
SECTION 6.10 Maintenance of Business. Not discontinue its
business as presently constituted or be merged into any other corporation or
lease or dispose of all, or any substantially part of, its business or assets.
SECTION 7 CONDITIONS.
SECTION 7.1 Loan. The obligation of the Bank to make the Loan
is subject to the following conditions precedent or concurrent the Bank shall
have received all of the following, each duly executed and dated the date hereof
(or such earlier date as shall be satisfactory to the Bank), in form and
substance satisfactory to the Bank:
(a) Agreements. This Agreement, the Note, the Pledge
Agreement, the Unlimited Continuing Guaranty, and each of the
other Loan Documents.
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(b) Financial Statements. The financial statements
referred to in Section 5.2.
(c) Other. Such other documents as the Bank may
reasonably request.
SECTION 8 EVENTS OF DEFAULT AND THEIR EFFECT.
SECTION 8.1 Events of Default. Each of the following shall
constitute an "Event of Default" under this Agreement:
8.1.1 Non-Payment of Loan. Default in the payment
when due of any principal or interest on the Loan or default, and continuance
thereof for 3 business days in the payment when due, of any interest on the Loan
or default, and continuance thereof for 5 business days after Borrower receives
notice of any other amounts payable by the Borrower hereunder or under any other
Loan Document.
8.1.2 Non-Payment of other Debt. Any default
shall occur under any Debt of the Borrower not otherwise referred to in Section
8.1.1 and such default shall (a) consist of the failure to pay such Debt when
due (subject to any applicable grace period), whether by acceleration or
otherwise; or (b) accelerate the maturity of such Debt or permit the holder or
holders thereof, or any trustee or agent for such holder or holders, to cause
such Debt to become due and payable prior to its expressed maturity.
8.1.3 Bankruptcy. Insolvency. etc. (a)(b)(i) The
Borrower becomes insolvent or generally fails to pay, or admits in writing its
inability to pay, debts as they become due; (ii) the Borrower applies for,
consents to, or acquiesces in the appointment of, a trustee, receiver or other
custodian or similar person for the Borrower, or any property thereof, or makes
a general assignment for the benefit of creditors; or (iii) in the absence of
such application, consent or acquiescence, a trustee, receiver or other
custodian or similar person is appointed for the Borrower, or for substantial
part of its property and is not discharged within 60 days; or (iv) any
bankruptcy, reorganization, debt arrangement, or other case or proceeding under
any bankruptcy or insolvency law, or any dissolution or liquidation proceeding
is commenced in respect of the Borrower if such case or proceeding is not
commenced by the Borrower or is not controverted within 10 days of filing or
remains for 60 days undismissed; or (v) the Borrower takes any action to
authorize, or in furtherance of, any of the foregoing.
8.1.4 Non-compliance With Other Provisions.
Failure by the Borrower to comply with or perform any of its nonmonetary
covenants or agreements herein set forth; provided that the Borrower shall have
a period of 30 days following notice
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thereof to the Borrower from the Bank to cure any such noncompliance.
8.1.5 Warranties and Representations. Any warranty or
representation made by or on behalf of the Borrower herein or in any of the
other Loan Documents or otherwise in connection herewith or therewith is
inaccurate or incorrect or is breached or false or misleading in any material
respect as of the date such warranty or representation is made; or any schedule,
certificate, financial statement, report, notice, or other writing furnished by
or on behalf of the Borrower to the Bank is false or misleading in any material
respect on the date as of which the facts therein set forth are stated or
certified, excluding budgets or financial projections.
8.1.6 Loan Documents. At any time after the initial
funding of the Loan, any of the Loan Documents (or Liens granted thereunder)
shall fail to remain in full force and effect; or any action shall be taken to
discontinue any of the ▇▇▇▇ Documents (or Liens granted thereunder) or to
contest the validity binding nature or enforceability of any thereof.
8.1.7 Litigation. There shall be entered against the
Borrower one or more judgments, awards or decrees, or orders of attachment,
garnishment or any other writ, which exceed $100,000 at any time outstanding,
remaining unpaid for more than 30 days, excluding judgments or decrees (i) for
which there is full insurance and with respect to which the insurer has assumed
responsibility in writing; (ii) for which there is full indemnification (upon
terms and by creditworthy indemnitor which are satisfactory to the Bank); or
(iii) which have been in force for less than the applicable period for filing an
appeal so long as execution is not levied thereunder (or in respect of which the
Borrower shall at the time in good faith be prosecuting an appeal or proceeding
for review and in respect of which a stay of execution or appropriate appeal
bond shall have been obtained pending such appeal or review).
8.1.8 Dissolutions. The dissolution of the Borrower.
8.1.9 Cross Default. The Borrower shall be in default
under any agreement involving an indebtedness of over $500,000.00 in the
aggregate.
8.1.10 Lien Priority. Bank fails to have an
enforceable lien on all of the issued and outstanding shares of stock of the
Borrower given as security for the repayment of the Loan.
SECTION 8.2 Effect of Event of Default. If any Event of
Default described in Section 8.1.3 shall occur, the Note and all other
Liabilities shall become immediately due and payable,
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with prior written notice to the Borrower; and, in the case of any other Event
of Default, the Bank may declare the Note and all other Liabilities to be due
and payable, whereupon the Note and all other Liabilities shall become
immediately due and payable, all without presentment, demand, protest of any
kind, and with prior written notice to the Borrower. Notwithstanding the
foregoing, the effect of any Event of Default described in Section 8 may be
waived by the Bank in writing.
SECTION 9 GENERAL.
SECTION 9.1 Waiver; Amendments. No delay on the part of the
Bank or any holder of the Note or other liability in the exercise of any right,
power or remedy shall operate as a waiver thereof, nor shall any single or
partial exercise by any of them of any right, power or remedy preclude other or
further exercise thereof, or the exercise of any other right, power or remedy.
No amendment, modification or waiver of, or consent with respect to, any
provision of this Agreement or the other Loan Documents shall in any event be
effective unless the same shall be in writing and signed and delivered by the
Bank to Borrower and then any such amendment, modification, waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
SECTION 9.2 Notices. Notices shall be sent by facsimile or by
overnight delivery services or courier. Notices forwarded by overnight delivery
services or courier shall be deemed to have been given when received or
accepted, and:
(i) if to the Borrower, addressed to the Borrower
at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, #▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, Attn: Chairman
(ii) if to the Bank, addressed to the Bank at ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn:
Private Banking Group.
in the case of either party, at such other address as such party may, by written
notice received by the other party to this Agreement, have designated as its
address for notices. Notices given by facsimile communication shall be deemed to
have been given when sent and confirmed provided such notice is received prior
to 5:00 p.m. (Miami time), on any Business Day and, if received after 5:00 p.m.,
said notice shall be deemed effective the next succeeding Business Day.
SECTION 9.3 Indemnification. (a) In consideration of the
Bank's execution and delivery of this Agreement and the Bank's making of the
Loan, the Borrower hereby agrees to indemnify, exonerate and hold the Bank and
each of its officers, directors, employees, and agents (herein collectively
called for purposes of this Section 9.3, "Bank Parties" and individually
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called, "Bank Party") free and harmless from and against any and all claims,
demands, actions, causes of action, suits, losses, costs (including, without
limitation, all documentary, recording, filing, mortgage or other stamp taxes or
duties), charges, liabilities and damages, and expenses in connection therewith
(irrespective of whether the Bank Party is a party to the action for which
indemnification hereunder is sought), and including, without limitation,
reasonable attorneys' fees and disbursements (called in this clause (a) the
"Indemnified Liabilities"), incurred by the Bank Parties or any of them as a
result of, or arising out of, or relating to (i) any transaction financed or to
be financed in whole or in part, directly or indirectly, with the proceeds of
the Loan or involving the Loan, or (ii) the execution, delivery, performance or
enforcement of this Agreement, or the other Loan Documents and any instrument,
documents or agreement executed pursuant hereto or thereto by any of the Bank
Parties, except for any such Indemnified Liabilities as shall have been finally
determined by a court of competent jurisdiction to have arisen on account of the
relevant Bank Party's gross negligence or willful misconduct and, to the extent
that the foregoing undertaking may be unenforceable for any reason, the Borrower
agrees to make the maximum contribution to the payment and satisfaction of each
of the Indemnified Liabilities which is permissible under applicable law.
SECTION 9.4 Submission to Jurisdiction. The Bank may enforce
any claim arising out of this Agreement, the Note or the other Loan Documents in
any state or Federal court having subject matter jurisdiction and located in
Chicago, Illinois. For the purpose of any action or proceeding instituted with
respect to any such claim, the Borrower hereby irrevocably submits to the
jurisdiction of such courts. The Borrower further irrevocably consents to the
service of process out of said courts by mailing a copy thereof, by registered
mail, postage prepaid, to the Borrower and agrees that such service, to the
fullest extent permitted by law, (i) shall be deemed in every respect effective
service of process upon it in any such suit, action or proceeding and (ii) shall
be taken and held to be valid personal service upon and personal delivery to it.
Nothing herein contained shall affect the right of the Bank to serve process in
any other manner permitted by law or preclude the Bank from bringing an action
or proceeding in respect hereof in any other county, state or place having
jurisdiction over such action. The Borrower hereby irrevocably waives, to the
fullest extent permitted by law, any objection which it may have or hereafter
have to the laying of the venue of any such suit, action or proceeding brought
in any such court located in Chicago, Illinois and any claim that any such suit,
action or proceeding brought in such a court has been brought in an inconvenient
forum.
SECTION 9.5 Governing Law. THIS AGREEMENT AND THE NOTE SHALL
BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF ThE STATE OF
ILLINOIS WITHOUT REGARD TO CONFLICT OF LAWS
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PRINCIPLES. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement. All obligations of the Borrower
and rights of the Bank and any other holder of the Note or liability expressed
herein or in the other Loan Documents shall be in addition to and not in
limitation of those provided by applicable law or in any other written
instrument or agreement relating to any of the Liabilities.
SECTION 9.6 Sale of Note; Participation. Upon prior written
consent of the Borrower, which shall not be unreasonably withheld or delayed,
the Bank may assign to one or more banks or other persons all or any part of, or
may grant participation to one or more banks or other persons in or to, the Loan
or the Note and to the extent of any such assignment or participation (unless
otherwise stated therein) the assignee or participant of such assignment or
participation shall have the same rights and benefits hereunder and thereunder
as it would have if it were the Bank hereunder.
SECTION 9.7 JURY TRIAL. EACH PARTY HERETO HEREBY EXPRESSLY
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS UNDER THIS AGREEMENT, THE NOTE, OR ANY OTHER LOAN DOCUMENT TO
WHICH IT IS A PARTY, OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
THEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT, THE NOTE OR ANY OTHER LOAN DOCUMENT, AND AGREES THAT ANY SUCH ACTION
OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 9.8 Successors and Assigns. This Agreement shall be
binding upon the Borrower, the Bank and their respective, legal representatives,
successors and assigns, and shall inure to the benefit of the Borrower, the Bank
and their respective, legal representatives, successors and assigns; provided,
however, that the Borrower shall have no right to assign its rights or delegate
its duties under this Agreement. This Agreement and the related documents
contain the entire agreement of the parties hereto with respect to the matters
covered hereby. The use of one gender shall include all other genders and the
singular shall include the plural and vice versa as the context may require.
SECTION 9.9 Costs Expenses and Taxes. The Borrower agrees to
pay on demand all reasonable out-of-pocket costs and expenses of the Bank
(including the fees and out-of-pocket expenses of counsel for the bank and of
local counsel, if any, who may be retained by said counsel not to exceed in
total
-14-
$10,000.00), in connection with the preparation, execution, delivery and
administration of this Agreement, the other Loan Documents and all other
documents provided for herein or delivered or to be delivered hereunder or in
connection herewith, and all reasonable out-of-pocket costs and expenses
(including reasonable attorneys' fees and legal expenses) incurred by the Bank
in connection with the enforcement of this Agreement and the other Loan
Documents. In addition, the Borrower agrees to pay, and to save the Bank
harmless from all liability for, any stamp or other taxes which may be payable
in connection with the execution and delivery of this Agreement, the borrowings
hereunder, the issuance of the Note or the execution and delivery of any other
Loan Documents or other documents provided for herein or delivered or to be
delivered hereunder or in connection herewith.
SECTION 9.10 Counterparts. The Agreement may be executed in
any number of counterparts and by different parties hereto on separate
counterparts and each such counterpart shall be deemed to be an original, but
all such counterparts shall together constitute one and the same Agreement.
SECTION 9.11 Non-Survival. Anything in this Agreement or any
of the other Loan Documents to the contrary notwithstanding, this Agreement and
the other Loan Documents shall automatically terminate and be of no further
force or effect upon the receipt by the Bank of all principal, interest or other
monies, if any, due the Bank under the Promissory Note Stated Rate. Upon such
payment in full, the Bank shall return all of the shares of the Borrower pledged
to the Bank as noted in Section 9.12, below.
SECTION 9.12 Pledge. ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, Trustee of the ▇.
▇▇▇▇▇▇▇ Irrevocable ABC Trust, agrees to pledge to the Bank as security for the
direct or indirect repayment of all principal, interest and other monies, if
any, due the Bank under the Promissory Note - Stated Rate 140 shares of common
stock of the Borrower owned by the Trustee.
SECTION 9.13 Reincorporation. Anything in any of the Loan
Documents to the contrary notwithstanding, the Bank hereby consents to the
Borrower's reincorporating in Delaware as a Delaware corporation and that any
such reincorporation will not represent an Event of Default under any of the
Loan Documents.
-15-
Dated as of the day and year first above written.
BORROWER:
AUDIO BOOK CLUB, INC.
By:___________________________
Chairman
BANK:
BANK OF AMERICA ILLINOIS
By:___________________________
Vice President
-16-
FIRST AMENDMENT
TO
CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT, dated this 2nd day
of August, 1997 by and among BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION ("Bank") successor by merger to Bank of America Illinois; and AUDIO
BOOK CLUB, INC., a Florida corporation ("Borrower").
Preliminary Statements
A. The Bank and the Borrower entered into that certain Credit
Agreement, dated as of May 8, 1997 ("Credit Agreement") by which the Bank
subject to the terms thereof agreed to make a term loan of $6,000,000.00 to the
Borrower ("Loan").
B. Pursuant to the terms of the Credit Agreement, Borrower
signed and delivered to the Bank that certain Promissory Note - Stated Rates,
dated as of May 8, l997 in the original principal amount of $6,000,000.00
("Note").
C. As a condition precedent to the effectiveness of the Credit
Agreement ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ TRUSTEE OF THE ▇. ▇▇▇▇▇▇ IRREVOCABLE ABC TRUST
("Pledgor") signed and delivered to the Bank that certain Pledge Agreement,
dated as of May 8, 1997 by which the Pledgor pledged to the Bank 140 shares of
stock in the Borrower as security for the repayment of the Loan and performance
of the Borrower's other obligations to the Bank under the terms of the Credit
Agreement.
D. The number of shares of the Borrower pledged to the Bank
was, with the Bank's prior consent, reduced from 140 to 130 by letter agreement,
dated July 25, 1997.
E. The Borrower has requested the Bank to make the Borrower an
additional loan of $2,250,000.00 ("Second Loan") to be subject to the terms of
the Credit Agreement.
F. The Bank is agreeable to making the Second Loan but only
upon the terms and conditions set forth in this Amendment.
IN CONSIDERATION OF THE Preliminary Statements and the
following material covenants, the parties agree as follows:
1. All of the Preliminary Statements are true and correct and,
by this reference, republished and confirmed.
2. The Credit Agreement is amended as follows:
A. Definitions
-----------
(i) The term "Loan Documents" is deleted in its
entirety and the following substituted in
place thereof:
"Loan Documents" means the Agreement, the
First Amendment to Credit Agreement, the
Note, the Second Note, the Collateral
Documents and any other documents signed
pursuant to or in connection with the
foregoing.
(ii) "Second Commitment Amount" means
$2,250,000.00,
(iii) "Second Commitment" - See Section 2.6
(iv) "Second Loan" means the loan of
$2,250,000.00 from the Bank to the Borrower.
(v) "Second Termination Date" means October 31,
1998 unless terminated earlier as provided
in this Agreement.
B. Section 2 Commitment of the Bank
----------------------
(i) The following is added to Section Z:
SECTION 2.6 Second Commitment. On and
subject to the terms and conditions of this
Agreement, the Bank agrees to make a loan to
the Borrower ("Second Loan") in the
principal amount of $2,250,000.00 the
foregoing commitment of the Bank to make the
Second Loan is herein called the "Second
Commitment".
SECTION 2.7 Second Loan Request. The
Borrower shall give the Bank notice of the
proposed borrowing by 11:00 am., Chicago
time, at least one Banking Day prior to the
proposed date of such borrowing subject to
receipt by the Bank of the documents
required under Section 3 of this Amendment
with respect to such borrowing and the
satisfaction of all other conditions
precedent to such borrowing, on the
requested funding date, the Bank
-2-
shall, as authorized by the Borrower, pay
over such funds by wire transfer on the
Borrower's behalf to the Borrower's account
to be designated by the Borrower in
accordance with the Bank's wire transfer
procedures.
SECTION 2.8 Conditions. Notwithstanding any
other provision of this Agreement, the Bank
shall not have any obligation to make the
Second Loan hereunder (a) if the conditions
to the making of such Second Loan specified
in Section 3 of this Amendment hereof have
not been satisfied or (b) an Event of
Default or Unmatured Event of Default exists
or would result therefrom.
SECTION 2.9 Facility Fee. The Borrower
agrees to pay to the Bank a facility fee of
$11,250.00 to be paid from the initial
funding of the Second Loan.
SECTION 2.10 Second Note. The Second Loan
shall be evidenced by a promissory note (as
amended, supplemented, replaced or otherwise
modified from time to time, the "Second
Note"), substantially in the form of Exhibit
A, with appropriate insertions, payable to
the order of the Bank on or be(pound)ore the
Second Termination Date in an amount equal
to the Second Commitment Amount (if, less,
in the aggregate unpaid principal amount of
the Second Loan).
SECTION 2.11 Interest Payment Dates. Accrued
interest on the Second Loan shall be payable
monthly commencing September 30, 1997 and on
the Second Termination Date.
C. Section 8.1 Events of Default and their Effect.
SECTION 8.1.9 is amended by deleting the period at
the end thereof and adding thereto the following:
"or in the event the Borrower
is in default under either the
Note or the Second Note."
-3-
D. Section 9 General add thereto Section 9.14 as follows:
SECTION 9.14. Repayment of the Loan Upon the payment
in full of the Loan Upon the payment in full of the
Loan (i.e. $6,000,000.00 plus accrued interest) (i)
all of the terms and conditions of the Credit
Agreement as amended hereby specifically applicable
to the Loan, including, but not limited to, Section
8.1.10 and 9.12 shall terminate and be of no further
force and effect and (ii) the Bank shall redeliver to
the Pledgor all of the shares of the Borrower pledged
to it by the Pledgor. It is understood that the
Second Loan shall remain unsecured and all of the
terms and conditions of this Agreement applicable to
the Second Loan shall continue in full force and
effect.
3. The obligation of the Bank to make and fund the Second Loan
is subject to the following conditions, precedent or concurrent, that the Bank
shall have received all of the following, each duly signed and dated as of the
date hereof in form and substance satisfactory to the Bank.
(a) the First Amendment to Credit Agreement;
(b) the Second Note;
(c) Certificate of Corporate Resolutions and
Incumbency; and
(d) such other documents as the Bank may reasonably
require.
4. Except as amended hereby, all of the other terms and
conditions of the Credit Agreement shall remain in full force and effect and be
as binding on the Second Loan as if it has originally constituted part to the
Credit Agreement; provided, however, in the event of any conflict, inconsistency
or incongruity between the terms of the Credit Agreement and the terms of this
Amendment, the terms of the Amendment shall govern and control.
5. This Agreement shall be governed by the laws of the State
of Illinois.
-4-
IN WITNESS WHEREOF the parties hereto have signed this
Amendment as of the day, month and year first above written.
BANK:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:
-------------------------------
Title:
-------------------------------
Vice President
BORROWER:
AUDIO BOOK CLUB, INC.
By:
-------------------------------
Title:
-------------------------------
Chairman
-5-
CONTINUING UNLIMITED GUARANTY
In order to induce
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(hereinafter called "Bank")
to make or continue a loan or loans to:
AUDIO BOOK CLUB, INC.,
a Florida corporation
(hereinafter called "Borrower"),
the undersigned (hereinafter called "Guarantor") hereby unconditionally
guarantees to Bank and to its participants, indorsees, successors or assigns the
full and prompt payment, whether at stated maturity, upon acceleration or
otherwise, of all principal, interest and other monies, if any, due the Bank
under that certain Promissory Note--Stated Rate of even date herewith in the
original principal amount of $2,250,000.00; PROVIDED, HOWEVER, anything in this
guaranty to the contrary notwithstanding, this guaranty shall only become
operative upon the occurrence of any one of the following events:
a. Failure of Borrower to repay the indebtedness
evidenced by the Note at maturity (whether as
scheduled or upon acceleration);
b. Death of Guarantor in which event his estate shall be
liable under this Guaranty as if estate (by his
personal representative) had been a party to this
Guaranty on the date hereof; provided, however,
Guarantor's death shall not constitute an Event of
Default under the Loan Documents.
The Guarantor further agrees as follows:
Section 1. Indebtedness Guaranteed. The word, "Indebtedness",
is used herein to include only all payments of principal, interest and other
monies, if any, due under that certain Promissory Note - Stated Rate in the
principal amount of $2,250,000.00 dated as of August 2, 1997 and all subsequent
amendments thereto (all such documents are hereafter referred to collectively as
the "Loan Agreements" whether such Indebtedness may be or hereafter become
unenforceable by virtue of any exculpatory provision in any instrument
evidencing or securing said Indebtedness, or otherwise be unenforceable,
TOGETHER WITH all costs and expenses, including reasonable attorneys' fees,
incurred by Bank in enforcing or collecting said Indebtedness.
Section 2. Continuing Guaranty. This is a continuing unlimited
guarantee relating to said Indebtedness, including that arising under subsequent
or successive transactions which shall either continue, reduce or increase the
Indebtedness. This Guaranty may not be revoked, terminated, rescinded, or
avoided by Guarantor and shall continue in full force until all of the
Indebtedness has been paid in full and completely discharged and satisfied
notwithstanding any future changes in condition (including, without limitation,
any change of law or any invalidity of, or irregularity with respect to, any
Indebtedness of Borrower or any other Guarantor to Bank. The Guarantor knowingly
accepts the full range of risk encompassed within a contract of "continuing
guarantee," including, without limitation, the possibility that Borrower will
incur obligations for which the Guarantor will be liable under this Guaranty
after Borrower's financial condition or ability to pay its lawful debts when
they fall due has deteriorated.
Section 3. Unconditional Guaranty. Guarantor guarantees that
the Indebtedness will be paid strictly in accordance with the terms of the Loan
Agreements, or any of them, and the terms of the Loan Agreements will be
performed regardless of any law, regulation or order now or hereafter in effect
in any jurisdiction affecting any of such terms or the rights of Bank with
respect thereto. The liability of Guarantor under this Guaranty shall be
absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of the
Indebtedness because the act creating the Indebtedness is or
is alleged to be ultra ▇▇▇▇▇ or the person signing the Loan
Agreements for Borrower acted, or is alleged to have acted, in
excess of his authority; or
(ii) any change in the time, manner or place of
payment, or in any other term, of all or any part of the
Indebtedness, or any other amendment or waiver of or any
consent to departure from any of the terms and conditions of
the Loan Agreements or any of them; or
(iii) any release or amendment or waiver of or
consent to departure from any other guarantee for all or any
part of the Indebtedness; or
(iv) the existence of any other guarantee for the
Indebtedness; or
(v) any release of any one or more guarantors liable
for the Indebtedness whether or not Bank specifically reserves
its rights against Guarantor or any other unreleased
guarantor; or
(vi) any prohibition against Bank from seeking
payment of the Indebtedness from Borrower upon the
-2-
filing of a voluntary or involuntary petition under the
Bankruptcy Code; or
(vii) the fact that Guarantor may have signed and
delivered this Guaranty prior or subsequent to the signing and
delivery by Borrower to Bank of the Loan Agreements or any of
them or prior or subsequent to Borrower's incurring any
Indebtedness to Bank; or
(viii) the fact that the person signing as Borrower
under any instrument or document evidencing or securing the
Indebtedness does so in the capacity of a trustee or may have
limited or no personal liability under such instrument or
document.
Section 4. Independent Obligation. The obligations hereunder
are independent of the obligations of Borrower to Bank. A separate action or
actions may be brought and prosecuted against Guarantor at any time after the
occurrence of an Event of Default, whether action is brought against Borrower or
whether Borrower be joined in any such action. Guarantor waives the benefit of
any statute of limitations affecting his liability hereunder or the enforcement
thereof.
Section 5. Authority of Bank. Guarantor authorizes Bank from
time to time to: (a) renew, amend, compromise, extend, accelerate, or otherwise
change the time for payment or any other term of the Indebtedness or any part
thereof, including increasing or decreasing the rate of interest thereon or
otherwise change, waive, suspend, cancel, or compromise any of the terms or
provisions of any instrument or agreement evidencing, securing, guaranteeing, or
describing the Indebtedness or any part thereof; (b) take and hold security
(whether real or personal property) for the payment under this Guaranty and/or
of the Indebtedness hereby guaranteed and, with or without consideration,
exchange, subordinate, enforce, compromise, waive, and release any and/or all
such security and/or any interest in same; (c) apply any security for the
Indebtedness and direct the order or manner of sale thereof as Bank in its
discretion may determine; (d) release, substitute, or make a settlement with any
one or more of the indorsers or guarantors of the Indebtedness with or without
specifically reserving its rights against any such indorsers or guarantees not
so released, substituted for or settled with; (e) exercise or decline to
exercise any rights or remedies available to it under the Loan Agreements; and
(f) assign, in whole or in part, any instrument evidencing, securing,
guaranteeing or describing the Indebtedness. Guarantor acknowledges that nothing
in this Section 5 or otherwise in this Guaranty shall obligate Bank to take
property, whether real or personal, as security for the Indebtedness or, if it
does, to perfect or continue perfection of, a security interest in, or lien or
encumbrance on same or to
-3-
protect, secure or insure such collateral or to otherwise deal with it in any
particular way.
Section 6. Exercise of Rights. Guarantor acknowledges and
agrees that, prior to Bank's exercising any rights or remedies against Guarantor
hereunder or in connection with the Indebtedness, Bank shall have no obligation,
liability or need to: (a) prosecute collection or seek to enforce or resort to
any remedies against Borrower or any other party liable to Bank on account of
Borrower's Indebtedness to Bank or any guarantee thereof; (b) proceed against or
exhaust any security for the Indebtedness of Borrower and/or of Guarantor to
Bank; or (c) pursue any other remedy given Bank under the Loan Agreement, by law
or otherwise. Until all Indebtedness of Borrower to Bank shall have been paid in
full, Guarantor shall have no right of subrogation, reimbursement, exoneration,
contribution, indemnification or participation in any claim, right or remedy of
Bank against the Borrower and he waives any right to enforce any remedy which
Bank now has or may hereafter have against Borrower, any benefit of and any
right to participate in any security for the Indebtedness now or hereafter held
by Bank, and any right to set off against the proceeds from the sale of any
collateral given by Borrower or any guarantor as security for the Indebtedness
of Borrower to Bank.
Section 7. Waiver. Guarantor waives all presentments, demands
for performance, notices of non-performance, protests, notices of dishonor in
connection with the Indebtedness or any part thereof and/or any instruments
evidencing same, and notices of acceptance of this Guaranty and of the
existence, creation, or incurring of new or additional Indebtedness of Borrower
to Bank. Guarantor waives any right or claim of right to cause a marshaling of
Borrower's assets or to require Bank to proceed against Guarantor or any other
guarantors of the Indebtedness of Borrower to Bank in any particular order. Bank
has the right to take action against one or more of guarantors of the
Indebtedness of Borrower to Bank without in any manner affecting the obligations
of any other guarantors not then being proceeded against. No delay on the part
of the Bank in the exercise of any right, power or privilege under the Loan
Agreements or under this Guaranty shall operate as a waiver of any such
privilege, power or right. Nothing in this Section 7 shall be deemed a waiver by
Guarantor of any notice required by any of the Loan Agreements.
Section 8. Subordination. Any obligation of Borrower now or
hereafter held by Guarantor shall be subordinate to the Indebtedness of Borrower
to Bank and no such obligations shall be paid in whole or in part so long as
there exists any Indebtedness of Borrower to Bank; provided, however, anything
in this Guaranty to the contrary notwithstanding, the ▇. ▇▇▇▇▇▇▇ Irrevocable ABC
Trust shall have the right to convert the Borrower's indebtedness to it of
$5,975,200.00 into equity in the Borrower in the event the Borrower "goes
public". If Bank so requests, or in the event
-4-
Guarantor otherwise receives anything of value from or on behalf of Borrower as
the result of its obligation to Guarantor, any such obligation shall be
collected, enforced, and received by Guarantor as trustee for Bank and shall be
paid over to Bank on account of the Indebtedness of Borrower to Bank without
reducing or affecting in any manner the liability of Guarantor under the
provisions of this Guaranty.
Section 9. Reinstatement of Amount Guaranteed. Bank shall be
under no obligation to marshal any assets in favor of the Guarantor or against,
or in payment or performance of, any or all of the Indebtedness or any other
obligations guaranteed by this Guaranty. If all or any part of any payment to or
for the benefit of Bank in respect to the Indebtedness shall be invalidated,
declared to be fraudulent or preferential, set aside or required for any reason
to be repaid or paid over to a trustee, receiver or other person under any
insolvency law or any other law or rule of equity, to the extent of payment or
repayment, the indebtedness (or the part thereof) intended to have been
satisfied shall be revived and continued in full force and effect as if that
payment had not been made, and the Guarantor shall be primarily liable for that
obligation.
Section 10. Default. Upon the occurrence and continuation of
any Event of Default (after the expiration of any grace period) under any of the
Loan Agreements, then all or any part of the Indebtedness of Borrower to Bank,
whether direct or contingent, matured or unmatured, and of every kind and
description, shall, without notice to or demand upon Guarantor, at the option of
Bank, become immediately due and payable and Guarantor shall, upon demand of
Bank, forthwith pay same to Bank.
Section 11. Authority of Borrower. Guarantor agrees that if
Borrower is a corporation, a partnership or a trust, Bank need not inquire into
the power or authority of Borrower or of the officers, directors, partners,
trustees or agents acting or purporting to act on behalf thereof; any
Indebtedness made or created in the professed exercise of such power or
authority by Borrower or by any officers, partners, directors, or trustees or
agents thereof is guaranteed hereunder.
Section 12. Interest. Notwithstanding any provisions herein or
in the Loan Agreements, the total liability hereunder for payments in the nature
of interest shall not exceed a rate equal to the maximum rate for loans allowed
by law.
Section 13. Attorneys' Fees. In the event of any enforcement
action or litigation involving this guaranty, the prevailing party shall be
entitled to collect reasonable attorneys' fees and costs.
Section 14. Acknowledgments of Guarantor. Guarantor (including
any married person) acknowledges that (i) he shall be
-5-
benefitted by the credit being extended, renewed or modified by Bank to
Borrower; (ii) both Borrower and himself are solvent and the signing and
delivery of this Guaranty will not cause Guarantor to become insolvent, as such
term is defined in the Bankruptcy Code or to be left with unreasonably small
capital; (iii) he is meeting his current obligations as they mature; (iv) he has
signed this Guaranty in order to induce Bank to make, renew or modify the Loan
to Borrower heretofore described. Guarantor further acknowledges that, but for
the signing and delivery of this Guaranty, the Loan would not have been made,
renewed or modified and that Bank is relying and shall continue to rely on this
Guaranty and on the financial worth of the Guarantor either individually or
jointly with another, whether such other person is a guarantor or not, when
making any advances under the Loan Agreements; (v) there are no conditions to
the full effectiveness of the Guaranty other than those expressly set forth in
this Guaranty; and (vi) he assumes full responsibility for, obtaining any
additional information concerning Borrower's financial condition as he may deem
material to his obligations under the Guaranty and he is not relying upon, nor
expecting Bank to furnish him with any information in Bank's possession
concerning Borrower's financial condition. This Guaranty shall, without further
reference or assignment, pass to, and may be relied upon and enforced by, any
successor or participant or assignee of Bank in connection with any Indebtedness
of Borrower and/ or of Guarantor to Bank.
Section 15. Financial Covenants. The Guarantor warrants and
represents that, as of the date of signing and delivery of this Guaranty, the
most recent financial statements that it has furnished to the Bank are
materially accurate and complete, and there has been no material adverse change
in his financial condition since the date of those financial statements; no
undischarged judgments are pending against him; no federal or state tax liens
have been filed or threatened against him and he is not in default or claimed
default under any agreement for borrowed money. Within seventy-five (75) days of
the end of each calendar year, Guarantor shall deliver to the Bank his personal
financial statement, including balance sheet and statement of cash flow; on or
before October 30th each year, his federal income tax return; and quarterly, a
statement that the Guarantor and his "related companies" are maintaining
unencumbered liquidity (cash and marketable securities with a minimum value of
at lease $15.00 per share) of at least $10,000,000.00. As used herein, the term
"related companies" means those companies which are owned 99% or more by
Guarantor and which have no debt. Guarantor agrees to comply with the terms of
this Section 15 even before this Guaranty becomes operative.
Section 16. Governing Law. This Guaranty shall, for all
purposes, be governed by and construed in accordance with the laws of the State
of Illinois [except as to interest rates or other terms of lending which are or
may be governed by the laws
-6-
of the United States] and shall be deemed to be in addition and cumulative to,
and not in substitution of, any other agreements, including, but not limited to,
any other guarantees, executed by Guarantor in favor of Bank.
Section 17. Rules of Interpretation. Words of the masculine
gender shall be deemed and construed to include correlative words of the
feminine and neuter genders. Words importing the singular number shall include
the plural number and vice versa, unless the context shall otherwise indicate.
If there is more than one person, whether natural or artificial, who either
signs this Guaranty or signs a separate guarantee of the Indebtedness of
Borrower to Bank in connection with the Loan Agreements, then each such
guarantor shall be jointly and severally liable with every other guarantor for
the obligations and Indebtedness of Borrower to Bank. This Guaranty shall be
binding upon Guarantor and his heirs, personal representatives, successors and
permitted assigns. This Guaranty is in addition to, and not in substitution of
or in reduction of, any other Guaranty by Guarantor or any other Guarantor which
may now or hereafter exist in favor of Bank.
Section 18. Jurisdiction. Without limiting the right of the
Lender to bring any action or proceeding against the Guarantor or against
property of the Guarantor arising out of or relating to any Obligation or this
Guaranty (an "Action") in the courts of other jurisdictions, the Guarantor
hereby irrevocably submits to the jurisdiction of any Illinois State or Federal
Court sitting in Chicago, Illinois and the Guarantor hereby irrevocably agrees
that any Action may be heard and determined in such Illinois State court or in
such Federal court. The Guarantor hereby irrevocably waives, to the fullest
extent he may effectively do so, the defense of an inconvenient forum to the
maintenance of any action in any jurisdiction. The Guarantor hereby irrevocably
agrees that the summons and complaint or any other process in any Action in any
jurisdiction may be served by mailing to the address set forth below or by hand
delivery to a person of suitable age and discretion at the address set forth
below. Such service will be complete on the date such process is so mailed or
delivered, and the Guarantor will have thirty days from such completion of
service in which to respond in the manner provided by law. The Guarantor may
also be served in any other manner permitted by law, in which event the
Guarantor's time to respond shall be the time provided by law.
Section 19. Waiver of Jury Trial. NEITHER THE GUARANTOR NOR
BANK (NOR ANY OF THEIR RESPECTIVE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS,
OR ASSIGNS) SHALL SEEK A JURY TRIAL IN ANY ACTION BASED UPON OR ARISING OUT OF
OR OTHERWISE RELATING TO THIS GUARANTY, THE INDEBTEDNESS, ANY OF THE LOAN
DOCUMENTS OR ANY RELATED INSTRUMENT OR AGREEMENT, ANY COLLATERAL FOR THE
INDEBTEDNESS OR FOR THE OBLIGATIONS OF ANY GUARANTOR OR ANY OTHER GUARANTOR, OR
THEIR DEALINGS OR RELATIONSHIPS WITH EACH OTHER.
-7-
TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE GUARANTOR AND BANK, AND EACH OF
THEM, IRREVOCABLY AND EXPRESSLY WAIVE ANY AND ALL RIGHT TO ANY SUCH JURY TRIAL
AND AGREE THAT NO SUCH ACTION FOR WHICH ANY TRIAL HAS BEEN WAIVED SHALL BE
SOUGHT TO BE CONSOLIDATED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT OR
HAS NOT BEEN WAIVED. THIS SECTION HAS BEEN FULLY DISCUSSED BY THE GUARANTOR AND
BANK, EACH OF WHOM HAS BEEN REPRESENTED BY COUNSEL, AND THIS SECTION SHALL NOT
BE SUBJECTED TO ANY EXCEPTIONS.
Section 20. Non-Survival. Anything in this Guaranty to the
contrary notwithstanding upon the payment to the Bank in full of all principal,
interest or other monies, if any, due under the Promissory Note--Stated Rate,
this Guaranty shall automatically terminate and be on no further force or effect
and shall be returned by the Bank to the Guarantor.
Section 21. Additional Guaranty,. THIS GUARANTY IN ADDITION TO
AND IN SUBSTITUTION OF THAT CERTAIN CONTINUING UNLIMITED GUARANTY, DATED AS OF
MAY 8, 1997 WHICH SHALL REMAIN IN FULL FORCE AND EFFECT AND IN NO WAY BE
AFFECTED BY THIS GUARANTY.
IN WITNESS WHEREOF, the undersigned has signed and delivered
this Guaranty as of the 2nd day of August, 1997.
GUARANTOR:
--------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇., #▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-8-
STATE OF NEW JERSEY )
) ss:
COUNTY OF ▇▇▇▇▇▇ )
The foregoing instrument was acknowledged before me this 2nd
day of August, 1997 by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇. He is personally known to me or produced
his driver's license as identification.
----------------------------------
NOTARY PUBLIC
Print Name:
-----------------------
My Commission No.:
----------------
My Commission Expires:
------------
-9-
SECOND AMENDMENT
TO
CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT, dated this 16 day
of September, 1997 by and between BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION ("Bank") successor by merger to Bank of America Illinois; and AUDIO
BOOK CLUB, INC., a Florida corporation ("Borrower").
Preliminary Statements
A. The Bank and the Borrower entered into that certain Credit
Agreement, dated as of May 8, 1997 ("Credit Agreement") by which the Bank
subject to the terms thereof agreed to make a term loan of $6,000,000.00 to the
Borrower ("Loan").
B. Pursuant to the terms of the Credit Agreement, the Borrower
signed and delivered to the Bank that certain Promissory Note - Stated Rates,
dated as of May 8, 1997 in the original principal amount of $6,000,000.00
("Note").
C. As a condition precedent to the effectiveness of the Credit
Agreement, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ TRUSTEE OF THE ▇. ▇▇▇▇▇▇ IRREVOCABLE TRUST
("Pledgor") signed and delivered to the Bank that certain Pledge Agreement,
dated as of May 8, 1997 by which the Pledgor pledged to the Bank 140 shares of
stock in the Borrower as security for the repayment of the Loan and performance
of the Borrower's other obligations to the Bank under the terms of the Credit
Agreement.
D. The number of shares of the Borrower pledged to the Bank
was, with the Bank's prior consent, reduced from 140 to 130 by letter agreement,
dated July 25, 1997.
E. The Bank made an additional loan to the Borrower in the
principal amount of $2,250,000.00 ("Second Loan") which was subject to the terms
of the Credit Agreement.
F. The Borrower has again requested the Bank to make an
additional loan of $750,000.00 ("Third Loan").
G. The Bank is agreeable to making the Third Loan but only
upon the terms and conditions set forth in this Amendment.
IN CONSIDERATION OF THE Preliminary Statements and the
following material covenants, the parties agree as follows:
1. All of the Preliminary Statements are true and correct and,
by this reference, republished and confirmed.
2. The Credit Agreement is amended as follows:
A. Definitions
-----------
(i) The term "Loan Documents" is deleted in its
entirety and the following substituted in
place thereof:
"Loan Documents" means the
Agreement, the First Amendment to
Credit Agreement, the Second
Amendment to Credit Agreement, the
Note, the Second Note, the Third
Note, the Collateral Documents and
any other documents signed pursuant
to or in connection with the
foregoing.
(ii) "Third Commitment Amount" means $750,000.00,
(iii) "Third Commitment" - See Section 2.12 of
this Amendment.
(iv) "Third Loan" means the loan of $750,000.00
from the Bank to the Borrower.
(v) "Third Termination Date" means October 31,
1998 unless terminated earlier as provided
in this Agreement.
B. Section 2 Commitment of the Bank
(i) The following is added to Section 2:
SECTION 2.12 Third Commitment. On and
subject to the terms and conditions of this
Agreement, the Bank agrees to make a loan to
the Borrower in the principal amount of
$750,000.00 ("Third Loan") the foregoing
commitment of the Bank to make the Third
Loan is herein called the "Third
Commitment".
SECTION 2.13 Third Loan Request. The Borrower
shall give the Bank notice of the proposed
borrowing by 11:00 am., Chicago time, at
-2-
least one Banking Day prior to the proposed
date of such borrowing. Subject to receipt
by the Bank of the documents required under
Section 3 of this Amendment with respect to
such borrowing and the satisfaction of all
other conditions precedent to such
borrowing, on the requested funding date,
the Bank shall, as authorized by the
Borrower, pay over such funds by wire
transfer on the Borrower's behalf to the
Borrower's account to be designated by the
Borrower in accordance with the Bank's wire
transfer procedures.
SECTION 2.14 Conditions. Notwithstanding any
other provision of this Amendment, the Bank
shall not have any obligation to make the
Third Loan hereunder (a) if the conditions
to the making of the Third Loan specified in
Section 3 of this Amendment have not been
satisfied or (b) an Event of Default or
Unmatured Event of Default exists or would
result therefrom.
SECTION 2.15 Facility Fee. The Borrower
agrees to pay to the Bank a facility fee of
$3,750.00 to be paid from the initial
funding of the Third Loan.
SECTION 2.16 Third Note. The Third Loan
shall be evidenced by a promissory note (as
amended, supplemented, replaced or otherwise
modified from time to time, the "Third
Note"), substantially in the form of Exhibit
A, to the Second Amendment to Credit
Agreement with appropriate insertions,
payable to the order of the Bank on or
before the Third Termination Date in an
amount equal to the Third Commitment Amount
(or, if less, in the aggregate unpaid
principal amount of the Third Loan).
SECTION 2.17 Interest Payment Dates. Accrued
interest on the Third Loan shall be payable
monthly commencing September 30, 1997 and on
the Third Termination Date.
-3-
C. Section 6.4 The following shall be added to Section
6.4.
"The Borrower may repay any loans from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
and/or the ▇. ▇▇▇▇▇▇▇ Irrevocable ABC Trust to the
Borrower provided the loans were made to the Borrower
after May 8, 1997 and the funds to repay such loans
are not the proceeds of any bank loan obtained by the
Borrower after May 8, 1997. Further, the Borrower may
repay loans from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and/or the M.E.
▇▇▇▇▇▇▇ Irrevocable Trust and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to the
Borrower provided the repayments do not exceed in the
aggregate $800,000.00 which $750,000.00 may be the
proceeds of the Third Loan."
D. Section 8.1 Events of Default and their Effect.
SECTION 8.1.9 is amended by deleting the following:
"or in the event the Borrower is in default
under either the Note or the Second Note.
and adding in place thereof the following;
"or in the event the Borrower is in default
under the Note, the Second Note or the Third
Note."
3. The obligation of the Bank to make and fund the Third Loan
is subject to the following conditions, precedent or concurrent, that the Bank
shall have received all of the following, each duly signed and dated as of the
date hereof in form and substance satisfactory to the Bank.
(a) the Second Amendment to Credit Agreement;
(b) the Third Note;
(c) Certificate of Corporate Resolutions and
incumbency; and
(d) such other documents as the Bank may
reasonably require.
4. Except as amended hereby, all of the other terms and
conditions of the Credit Agreement shall remain in full force and effect and be
as applicable to the Third Loan as if it has originally constituted part of the
Credit Agreement; provided,
-4-
however, in the event of any conflict, inconsistency or incongruity between the
terms of the Credit Agreement and the terms of this Amendment, this terms of the
Amendment shall govern and control.
5. This Agreement shall be governed by the laws of the State
of Illinois.
IN WITNESS WHEREOF the parties hereto have signed this
Amendment as of the day, month and year first above written.
BANK:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:
---------------------------
Title:
------------------------
Vice President
BORROWER:
AUDIO BOOK CLUB, INC.
By:
---------------------------
Title:
------------------------
Chairman
-5-
CONTINUING UNLIMITED GUARANTY
In order to induce
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(hereinafter called "Bank")
to make or continue a loan or loans to:
AUDIO BOOK CLUB, INC.,
a Florida corporation
(hereinafter called "Borrower"),
the undersigned (hereinafter called "Guarantor") hereby unconditionally
guarantees to Bank and to its participants, indorsees, successors or assigns the
full and prompt payment, whether at stated maturity upon acceleration or
otherwise, of all principal, interest and other monies, if any, due the Bank
under that certain Third Promissory Note -- Stated Rate of even date herewith in
the original principal amount of $750,000.00; PROVIDED, HOWEVER, anything in
this Guaranty to the contrary notwithstanding, this Guaranty shall only become
operative upon the occurrence of any one of the following events:
a. Failure of Borrower to repay the indebtedness
evidenced by the Note at maturity (whether as
scheduled or upon acceleration);
b. Death of Guarantor in which event his estate shall be
liable under this Guaranty as if estate (by his
personal representative) had been a party to this
Guaranty on the date hereof; provided, however,
Guarantor's death shall not constitute an Event of
Default under the Loan Documents.
The Guarantor further agrees as follows:
Section 1. Indebtedness Guaranteed. The word, "Indebtedness",
is used herein to include only all payments of principal, interest and other
monies, if any, due under that certain Third Promissory Note -- Stated Rate in
the principal amount of $750,000.00 dated as of the date hereof and all
subsequent amendments thereto (all such documents are hereafter referred to
collectively as the "Loan Agreements" whether such Indebtedness may be or
hereafter become unenforceable by virtue of any exculpatory provision in any
instrument evidencing or securing said Indebtedness, or otherwise be
unenforceable, TOGETHER WITH all costs and expenses, including reasonable
attorneys' fees, incurred by Bank in enforcing or collecting said Indebtedness.
Section 2. Continuing Guaranty. This is a continuing unlimited
guarantee relating to said Indebtedness, including that arising under subsequent
or successive transactions which shall either continue, reduce or increase the
Indebtedness. This Guaranty may not be revoked, terminated, rescinded, or
avoided by Guarantor and shall continue in full force until all of the
Indebtedness has been paid in full and completely discharged and satisfied
notwithstanding any future changes in condition (including, without limitation,
any change of law or any invalidity of, or irregularity with respect to, any
Indebtedness of Borrower or any other Guarantor to Bank). The Guarantor
knowingly accepts the full range of risk encompassed within a contract of
"continuing guarantee," including, without limitation, the possibility that
Borrower will incur obligations for which the Guarantor will be liable under
this Guaranty after Borrower's financial condition or ability to pay its lawful
debts when they fall due has deteriorated.
3. Unconditional Guaranty. Guarantor guarantees that the
Indebtedness will be paid strictly in accordance with the terms of the Loan
Agreements, or any of them, and the terms of the Loan Agreements will be
performed regardless of any law, regulation or order now or hereafter in effect
in any jurisdiction affecting any of such terms or the rights of Bank with
respect thereto. The liability of Guarantor under this Guaranty shall be
absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of the
Indebtedness because the act creating the Indebtedness is or
is alleged to be ultra ▇▇▇▇▇ or the person signing the Loan
Agreements for Borrower acted, or is alleged to have acted, in
excess of his authority; or
(ii) any change in the time, manner or place of
payment, or in any other term, of all or any part of the
Indebtedness, or any other amendment or waiver of or any
consent to departure from any of the terms and conditions of
the Loan Agreements or any of them; or
(iii) any release or amendment or waiver of or
consent to departure from any other guarantee for all
or any part of the Indebtedness; or
(iv) the existence of any other guarantee for the
Indebtedness; or
(v) any release of any one or more guarantors liable
for the Indebtedness whether or not Bank specifically reserves
its rights against Guarantor or any other unreleased
guarantor; or
-2-
(vi) any prohibition against Bank from seeking
payment of the Indebtedness from Borrower upon the filing of a
voluntary or involuntary petition under the Bankruptcy Code;
or
(vii) the fact that Guarantor may have signed and
delivered this Guaranty prior or subsequent to the signing and
delivery by Borrower to Bank of the Loan Agreements or any of
them or prior or subsequent to Borrower's incurring any
Indebtedness to Bank; or
(viii) the fact that the person signing as Borrower
under any instrument or document evidencing or securing the
Indebtedness does so in the capacity of a trustee or may have
limited or no personal liability under such instrument or
document.
Section 4. Independent Obligation. The obligations hereunder
are independent of the obligations of Borrower to Bank. A separate action or
actions may be brought and prosecuted against Guarantor at any time after the
occurrence of an Event of Default, whether action is brought against Borrower or
whether Borrower be joined in any such action. Guarantor waives the benefit of
any statute of limitations affecting his liability hereunder or the enforcement
thereof.
Section 5. Authority of Bank. Guarantor authorizes Bank from
time to time to: (a) renew, amend, compromise, extend, accelerate, or otherwise
change the time for payment or any other term of the Indebtedness or any part
thereof, including increasing or decreasing the rate of interest thereon or
otherwise change, waive, suspend, cancel, or compromise any of the terms or
provisions of any instrument or agreement evidencing, securing, guaranteeing, or
describing the Indebtedness or any part thereof; (b) take and hold security
(whether real or personal property) for the payment under this Guaranty and/or
of the Indebtedness hereby guaranteed and, with or without consideration,
exchange, subordinate, enforce, compromise, waive, and release any and/or all
such security and/or any interest in same; (c) apply any security for the
Indebtedness and direct the order or manner of sale thereof as Bank in its
discretion may determine; (d) release, substitute, or make a settlement with any
one or more of the indorsers or guarantors of the Indebtedness with or without
specifically reserving its rights against any such indorsers or guarantors not
so released, substituted for or settled with; (e) exercise or decline to
exercise any rights or remedies available to it under the Loan Agreements; and
(f) assign, in whole or in part, any instrument evidencing, securing,
guaranteeing or describing the Indebtedness. Guarantor acknowledges that nothing
in this Section 5 or otherwise in this Guaranty shall obligate Bank to take
property, whether real or personal, as security for the Indebtedness or, if it
does, to perfect or continue perfection
-3-
of, a security interest in, or lien or encumbrance on same or to protect, secure
or insure such collateral or to otherwise deal with it in any particular way.
Section 6. Exercise of Rights. Guarantor acknowledges and
agrees that, prior to Bank's exercising any rights or remedies against Guarantor
hereunder or in connection with the Indebtedness, Bank shall have no obligation,
liability or need to: (a) prosecute collection or seek to enforce or resort to
any remedies against Borrower or any ocher party liable to Bank on account of
Borrower's Indebtedness to Bank or any guarantee thereof; (b) proceed against or
exhaust any security for the Indebtedness of Borrower and/or of Guarantor to
Bank; or (c) pursue any other remedy given Bank under the Loan Agreements, by
law or otherwise. Until all Indebtedness of Borrower to Bank shall have been
paid in full, Guarantor shall have no right of subrogation, reimbursement,
exoneration, contribution, indemnification or participation in any claim, right
or remedy of Bank against the Borrower and he waives any right to enforce any
remedy which Bank now has or may hereafter have against Borrower, any benefit of
and any right to participate in any security for the Indebtedness now or
hereafter held by Bank, and any right to set off against the proceeds from the
sale of any collateral given by Borrower or any guarantor as security for the
Indebtedness of Borrower to Bank.
Section 7. Waiver. Guarantor waives all presentments, demands
for performance, notices of non-performance, protests, notices of dishonor in
connection with the Indebtedness or any part thereof and/or any instruments
evidencing same, and notices of acceptance of this Guaranty and of the
existence, creation, or incurring of new or additional Indebtedness of Borrower
to Bank. Guarantor waives any right or claim of right to cause a marshaling of
Borrower's assets or to require Bank to proceed against Guarantor or any other
guarantors of the Indebtedness of Borrower to Bank in any particular order. Bank
has the right to take action against one or more of guarantors of the
Indebtedness of Borrower to Bank without in any manner affecting the obligations
of any other guarantors not then being proceeded against. No delay on the part
of Bank in the exercise of any right, power or privilege under the Loan
Agreements or under this Guaranty shall operate as a waiver of any such
privilege, power or right. Nothing in this Section 7 shall be deemed a waiver by
Guarantor of any notice required by any of the Loan Agreements.
Section 8. Subordination. Any obligation of Borrower now or
hereafter held by Guarantor shall be subordinate to the Indebtedness of Borrower
to Bank and no such obligations shall be paid in whole or in part so long as
there exists any Indebtedness of Borrower to Bank; provided, however, anything
in this Guaranty to the contrary notwithstanding, the ▇. ▇▇▇▇▇▇▇ Irrevocable ABC
Trust shall have the right to convert the Borrower's indebtedness to it of
$5,975,200.00 into equity in the Borrower in the event
-4-
the Borrower "goes public". If Bank so requests, or in the event Guarantor
otherwise receives anything of value from or on behalf of Borrower as the result
of its obligation to Guarantor, any such obligation shall be collected,
enforced, and received by Guarantor as trustee for Bank and shall be paid over
to Bank on account of the Indebtedness of Borrower to Bank without reducing or
affecting in any manner the liability of Guarantor under the provisions of this
Guaranty.
Section 9. Reinstatement of Amount Guaranteed. Bank shall be
under no obligation to marshal any assets in favor of the Guarantor or against,
or in payment or performance of, any or all of the Indebtedness or any other
obligations guaranteed by this Guaranty. If all or any part of any payment to or
for the benefit of Bank in respect of the Indebtedness shall be invalidated,
declared to be fraudulent or preferential, set aside or required for any reason
to be repaid or paid over to a trustee, receiver or other person under any
insolvency law or any other law or rule of equity, to the extent of payment or
repayment, the Indebtedness (or the part thereof) intended to have been
satisfied shall be revived and continued in full force and effect as if that
payment had not been made, and the Guarantor shall be primarily liable for that
obligation.
Section 10. Default. Upon the occurrence and continuation of
any Event of Default (after the expiration of any grace period) under any of the
Loan Agreements, then all or any part of the Indebtedness of Borrower to Bank,
whether direct or contingent, matured or unmatured, and of every kind and
description, shall, without notice to or demand upon Guarantor, at the option of
Bank, become immediately due and payable and Guarantor shall, upon demand of
Bank, forthwith pay same to Bank.
Section 11. Authority of Borrower. Guarantor agrees that if
Borrower is a corporation, a partnership or a trust, Bank need not inquire into
the power or authority of Borrower or of the officers, directors, partners,
trustees or agents acting or purporting to act on behalf thereof; any
Indebtedness made or created in the professed exercise of such power or
authority by Borrower or by any officers, partners, directors, trustees or
agents thereof is guaranteed hereunder.
Section 12. Interest. Notwithstanding any provisions herein or
in the Loan Agreements, the total liability hereunder for payments in the nature
of interest shall not exceed a rate equal to the maximum rate for loans allowed
by law.
Section 13. Attorneys' Fees. In the event of any enforcement
action or litigation involving this Guaranty, the prevailing party shall be
entitled to collect reasonable attorneys' fees and costs.
-5-
Section 14. Acknowledgments of Guarantor. Guarantor (including
any married person) acknowledges that (i) he shall be benefitted by the credit
being extended, renewed or modified by Bank to Borrower; (ii) both Borrower and
himself are solvent and the signing and delivery of this Guaranty will not cause
Guarantor to become insolvent, as such term is defined in the Bankruptcy Code or
to be left with unreasonably small capital; (iii) he is meeting his current
obligations as they mature; (iv) he has signed this Guaranty in order to induce
Bank to make, renew or modify the Loan to Borrower heretofore described.
Guarantor further acknowledges that, but for the signing and delivery of this
Guaranty, the Loan would not have been made, renewed or modified and that Bank
is relying and shall continue to rely on this Guaranty and on the financial
worth of the Guarantor either individually or jointly with another, whether such
other person is a guarantor or not, when making any advances under the Loan
Agreements; (v) there are no conditions to the full effectiveness of the
Guaranty other than those expressly set forth in this Guaranty; and (vi) he
assumes full responsibility for, obtaining any additional information concerning
Borrower's financial condition as he may deem material to his obligations under
the Guaranty and he is not relying upon, nor expecting Bank to furnish him with
any information in Bank's possession concerning Borrower's financial condition.
This Guaranty shall, without further reference or assignment, pass to, and may
be relied upon and enforced by, any successor or participant or assignee of Bank
in connection with any Indebtedness of Borrower and/or of Guarantor to Bank.
Section 15. Financial Covenants. The Guarantor warrants and
represents that, as of the date of signing and delivery of this Guaranty, the
most recent financial statements that it has furnished to the Bank are
materially accurate and complete, and there has been no material adverse change
in his financial condition since the date of those financial statements; no
undischarged judgments are pending against him; no federal or state tax liens
have been filed or threatened against him and he is not in default or claimed
default under any agreement for borrowed money. Within seventy-five (75) days of
the end of each calendar year, Guarantor shall deliver to the Bank his personal
financial statement, including balance sheet and statement of cash flow; on or
before October 30th each year, his federal income tax return; and quarterly, a
statement that the Guarantor and his "related companies" are maintaining
unencumbered liquidity (cash and marketable securities with a minimum value of
at least $15.00 per share) of at least $10,000,000.00. As used herein, the term
"related companies" means those companies which are owned 99% or more by
Guarantor and which have no debt. Guarantor agrees to comply with the terms of
this Section 15 even before this Guaranty becomes operative.
Section 16. Governing Law. This Guaranty shall, for all
purposes, be governed by and construed in accordance with the
-6-
laws of the State of Illinois [except as to interest rates or other terms of
lending which are or may be governed by the laws of the United States] and shall
be deemed to be in addition and cumulative to, and not in substitution of, any
other agreements, including, but not limited to, any other guarantees, executed
by Guarantor in favor of Bank.
Section 17. Rules of Interpretation. Words of the masculine
gender shall be deemed and construed to include correlative words of the
feminine and neuter genders. Words importing the singular number shall include
the plural number and vice versa, unless the context shall otherwise indicate.
If there is more than one person, whether natural or artificial, who either
signs this Guaranty or signs a separate guarantee of the Indebtedness of
Borrower to Bank in connection with the Loan Agreements, then each such
guarantor shall be jointly and severally liable with every other guarantor for
the obligations and Indebtedness of Borrower to Bank. This Guaranty shall be
binding upon Guarantor and his heirs, personal representatives, successors and
permitted assigns. THIS GUARANTY IS IN ADDITION TO, AND NOT IN SUBSTITUTION OF
OR IN REDUCTION OF, ANY OTHER GUARANTY BY GUARANTOR OR ANY OTHER GUARANTOR WHICH
MAY NOW OR HEREAFTER EXIST IN FAVOR OF BANK.
Section 18. Jurisdiction. Without limiting the right of the
Lender to bring any action or proceeding against the Guarantor or against
property of the Guarantor arising out of or relating to any Obligation or this
Guaranty (an "Action") in the courts of other jurisdictions, the Guarantor
hereby irrevocably submits to the jurisdiction of any Illinois State or Federal
Court sitting in Chicago, Illinois and the Guarantor hereby irrevocably agrees
that any Action may be heard and determined in such Illinois State court or in
such Federal court. The Guarantor hereby irrevocably waives, to the fullest
extent he may effectively do so, the defense of an inconvenient forum to the
maintenance of any action in any jurisdiction. The Guarantor hereby irrevocably
agrees that the summons and complaint or any other process in any Action in any
jurisdiction may be served by mailing to the address set forth below or by hand
delivery to a person of suitable age and discretion at the address set forth
below. Such service will be complete on the date such process is so mailed or
delivered, and the Guarantor will have thirty days from such completion of
service in which to respond in the manner provided by law. The Guarantor may
also be served in any other manner permitted by law, in which event the
Guarantor's time to respond shall be the time provided by law.
Section 19. Waiver of Jury Trial. NEITHER THE GUARANTOR NOR
BANK (NOR ANY-OF THEIR RESPECTIVE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS,
OR ASSIGNS) SHALL SEEK A JURY TRIAL IN ANY ACTION BASED UPON OR ARISING OUT OF
OR OTHERWISE RELATING TO THIS GUARANTY, THE INDEBTEDNESS, ANY OF THE LOAN
DOCUMENTS OR ANY RELATED INSTRUMENT OR AGREEMENT, ANY COLLATERAL FOR THE
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INDEBTEDNESS OR FOR THE OBLIGATIONS OF ANY GUARANTOR OR ANY OTHER GUARANTOR, OR
THEIR DEALINGS OR RELATIONSHIPS WITH EACH OTHER. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THE GUARANTOR AND BANK, AND EACH OF THEM, IRREVOCABLY AND
EXPRESSLY WAIVE ANY AND ALL RIGHT TO ANY SUCH JURY TRIAL AND AGREE THAT NO SUCH
ACTION FOR WHICH A JURY TRIAL HAS BEEN WAIVED SHALL BE SOUGHT TO BE CONSOLIDATED
WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT OR HAS NOT BEEN WAIVED. THIS
SECTION HAS BEEN FULLY DISCUSSED BY THE GUARANTOR AND BANK, EACH OF WHOM HAS
BEEN REPRESENTED BY COUNSEL, AND THIS SECTION SHALL NOT BE SUBJECTED TO ANY
EXCEPTIONS.
Section 20. Non-Survival. Anything in this Guaranty to the
contrary notwithstanding upon the payment to the Bank in full of all principal,
interest or other monies, if any, due under the Third Promissory Note--Stated
Rate, this Guaranty shall automatically terminate and be of no further force or
effect and shall be returned by the Bank to the Guarantor.
Section 21. Additional Guaranty. THIS GUARANTY IN ADDITION TO
AND IN SUBSTITUTION OF THAT CERTAIN CONTINUING UNLIMITED GUARANTY, DATED AS OF
MAY 8, 1997 AND CONTINUING UNLIMITED GUARANTY, DATED AS OF AUGUST 2, 1997 WHICH
SHALL REMAIN IN FULL FORCE AND EFFECT AND IN NO WAY BE AFFECTED BY THIS
GUARANTY.
IN WITNESS WHEREOF, the undersigned has signed and delivered
this Guaranty as of the 16th day of September, 1997.
GUARANTOR:
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇., #▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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STATE OF NEW JERSEY)
) SS.:
COUNTY OF ▇▇▇▇▇▇ )
The foregoing instrument was acknowledged before me this 16th
day of September, 1997 by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇. He is personally known to me or
produced his driver's license as identification.
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NOTARY PUBLIC
Print Name:
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My Commission No.:
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My Commission Expires:
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