_________________________________________________________________
Securities and Exchange Commission
Washington, D.C. 20549
_______________________
FORM 8-K
_______________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
August 21, 1996
_______________________
Date of report (Date of earliest event reported)
NETWORK EVENT THEATER, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-80935 13-3864111
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification
incorporation)
149 Fifth Avenue
New York, New York 10010
_______________________________________________________
(Address of principal executive offices) (Zip Code)
(212) 779-2740
____________________________________________________
Registrant's telephone number, including area code
N/A
______________________________________________
(Former name or former address, if changed
since last report)
Item 2. Acquisition of Assets.
On September 13, 1996, American Passage Media, Inc., a newly
organized wholly owned subsidiary of the registrant ("Buyer"),
acquired from American Passage Media Corporation ("Seller")
substantially all of Seller's assets relating to its college and
high school media and marketing and service businesses. The
businesses acquired include Seller's college newspaper placement
operations, college campus postering operations, high school
focused Gymboards operations and various other advertiser and
event sponsorship related activities.
As consideration for the assets (i) Buyer paid Seller
$3,528,860 in cash (representing a $4,000,000 base price adjusted
in accordance with the terms of the Asset Purchase Agreement),
(ii) Buyer delivered to Seller a two-year subordinated promissory
note in the principal amount of $750,000, (iii) the registrant
delivered to Seller a contingent option to purchase up to 100,000
shares of the registrant's common stock pursuant to an option
agreement between the registrant and Seller, (iv) the registrant
delivered to Seller a guaranty of Buyer's obligations to Seller,
and (v) Buyer assumed certain of the contractual obligations of
Seller.
The sources of the cash portion of the purchase price and
transaction costs were a five-year $3,500,000 term loan to Buyer
from Signet Bank and a $500,000 equity contribution to Buyer from
the registrant. The term loan is secured by all of Buyer's
assets and is guaranteed by the registrant, which guarantee is
secured by a pledge by the registrant of all of the shares of
Buyer.
In connection with the acquisition, Buyer and Seller entered
into (i) a Transition Agreement under which Seller has agreed to
provide Buyer with certain transition services for specified
periods after the closing, (ii) a Consulting Agreement under
which Seller has agreed to provide Buyer with certain consulting
services for two years after the closing, and (iii) a Directory
of Classes Representation Agreement providing for Buyer's serving
as the exclusive national advertising representative for Seller's
Directory of Classes publication.
In connection with the acquisition, Seller paid a $150,000
fee to Veronis, Suhler and Associates Inc. ("VS&A"). Don Leeds,
a director of the registrant since December 1994, participated in
the transaction on behalf of VS&A prior to joining the registrant
as its Executive Vice President in June 1996, and was paid
$45,000 by VS&A on account of that participation.
The Asset Purchase Agreement pursuant to which the
acquisition was consummated, and the other documents referred to
above, are attached as exhibits hereto. Reference is made to the
Asset Purchase Agreement and those other documents for all of the
terms of the sale.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
The audited financial statements of the acquired
operating divisions of American Passage Media Corporation for the
years ended June 30, 1996 and 1995, including an Independent
Auditors Report, are provided herewith as Exhibit 1.
(b) Pro Forma financial information.
It is impracticable to provide the required pro forma
financial information at the time of the filing of this report.
The required pro forma financial information will be filed as an
amendment to this Form 8-K as soon as practicable, but not later
than 60 days after the date on which this report is filed.
(c) Exhibits.
Exhibit 1 - Audited Financial Statements of the
acquired operating divisions of American Passage Media
Corporation for the years ended June 30, 1996 and 1995,
including an Independent Auditors Report
Exhibit 2 - Asset Purchase Agreement dated September
13, 1996 among American Passage Media Corporation,
Gilbert Scherer, Network Event Theater, Inc. and
American Passage Media, Inc.
Exhibit 3 - $750,000 Subordinated Promissory Note from
American Passage Media, Inc. to American Passage Media
Corporation
Exhibit 4 - Guaranty by Network Event Theater, Inc. in
favor of American Passage Media Corporation
Exhibit 5 - Option Agreement between Network Event
Theater, Inc. and American Passage Media Corporation
Exhibit 6 - Consulting and Non-Competition Agreement
between American Passage Media, Inc. and American
Passage Media Corporation
Exhibit 7 - Transition Agreement between American
Passage Media, Inc. and American Passage Media
Corporation
Exhibit 8 - Directory of Classes Representation
Agreement between American Passage Media, Inc. and
American Passage Media Corporation
Exhibit 9 - Business Loan Agreement between American
Passage Media, Inc. and Signet Bank
Exhibit 10 - Promissory Note from American Passage
Media, Inc. to Signet Bank
Exhibit 11 - Commercial Security Agreement between
American Passage Media, Inc. and Signet Bank
Exhibit 12 - Commercial Guaranty from Network Event
Theater, Inc. in favor of Signet Bank
Exhibit 13 - Commercial Pledge and Security Agreement
from Network Event Theater, Inc. in favor of Signet
Bank
Item 8. Change in Fiscal Year.
On August 21, 1996, the registrant's board of directors
elected to change the fiscal year of the registrant to a June 30
year end. A report covering the January 1, 1996 to June 30, 1996
transition period will be filed on Form 10-KSB.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
NETWORK EVENT THEATER, INC.
By: /s/Harlan D. Peltz
Harlan D. Peltz
Chairman of the Board and
Chief Executive Officer
Dated: September 27, 1996
EXHIBIT INDEX
Exhibit 1 - Audited Financial Statements of the acquired
operating divisions of American Passage Media Corporation for the
years ended June 30, 1996 and 1995, including an Independent
Auditors Report
Exhibit 2 - Asset Purchase Agreement dated September 13, 1996
among American Passage Media Corporation, Gilbert Scherer,
Network Event Theater, Inc. and American Passage Media, Inc.
Exhibit 3 - $750,000 Subordinated Promissory Note from American
Passage Media, Inc. to American Passage Media Corporation
Exhibit 4 - Guaranty by Network Event Theater, Inc. in favor of
American Passage Media Corporation
Exhibit 5 - Option Agreement between Network Event Theater, Inc.
and American Passage Media Corporation
Exhibit 6 - Consulting and Non-Competition Agreement between
American Passage Media, Inc. and American Passage Media
Corporation
Exhibit 7 - Transition Agreement between American Passage Media,
Inc. and American Passage Media Corporation
Exhibit 8 - Directory of Classes Representation Agreement between
American Passage Media, Inc. and American Passage Media
Corporation
Exhibit 9 - Business Loan Agreement between American Passage
Media, Inc. and Signet Bank
Exhibit 10 - Promissory Note from American Passage Media, Inc. to
Signet Bank
Exhibit 11 - Commercial Security Agreement between American
Passage Media, Inc. and Signet Bank
Exhibit 12 - Commercial Guaranty from Network Event Theater, Inc.
in favor of Signet Bank
Exhibit 13 - Commercial Pledge and Security Agreement from
Network Event Theater, Inc. in favor of Signet Bank
Financial Statements
Young Adult Marketing Divisions
(Operating Divisions of
American Passage Media Corporation)
Years ended June 30, 1996 and 1995
with Report of Independent Auditors
Young Adult Marketing Divisions
(Operating Divisions of American Passage Media Corporation)
Financial Statements
Years Ended June 30, 1996 and 1995
Contents
Report of Independent Auditors
Audited Financial Statements
Balance Sheets
Statements of Income
Statements of Cash Flows
Notes to Financial Statements
Report of Independent Auditors
The Board of Directors
Young Adult Marketing Divisions
We have audited the accompanying balance sheets of the Young
Adult Marketing Divisions (operating divisions of American
Passage Media Corporation) as of June 30, 1996 and 1995, and the
related statements of income and cash flows for the years then
ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the statements referred to above present fairly,
in all material respects, the financial position of the Young
Adult Marketing Divisions (operating divisions of American
Passage Media Corporation) at June 30, 1996 and 1995, and the
results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Seattle, Washington
July 30, 1996
Young Adult Marketing Divisions
(Operating Divisions of American Passage Media Corporation)
Balance Sheets
June 30
Assets 1996 1995
_______________________
Current assets:
Accounts receivable, less allowance
for doubtful accounts of $72,221
(1995 - $85,628) $1,370,651 $1,218,975
Prepaid expenses 32,423 11,807
_______________________
Total current assets 1,403,074 1,230,782
Furniture, fixtures, and equipment,
net of accumulated depreciation of
$91,661 (1995 - $77,721) 49,707 36,967
_______________________
Total assets $1,452,781 $1,267,749
_______________________
_______________________
Liabilities
Current liabilities:
Accounts payable $1,560,288 $1,618,355
Accrued expenses 229,348 295,898
Deferred revenues 464,890 303,519
________________________
Total liabilities 2,254,526 2,217,772
Divisional deficiency of assets (801,745) (950,023)
_______________________
Total liabilities and deficiency
of assets $1,452,781 $1,267,749
_______________________
_______________________
See accompanying notes.
Young Adult Marketing Divisions
(Operating Divisions of American Passage Media Corporation)
Statements of Income
Year Ended June 30
1996 1995
________________________
Net revenues $5,802,209 $5,048,231
Cost of revenues 2,727,246 2,484,272
________________________
Gross margin 3,074,963 2,563,959
Operating expenses:
Selling, general, and
administrative 1,905,535 1,987,050
Corporate administrative
(Note 3) 251,728 236,665
________________________
2,157,263 2,223,715
________________________
Net income $ 917,700 $ 340,244
________________________
________________________
See accompanying notes.
Young Adult Marketing Divisions
(Operating Divisions of American Passage Media Corporation)
Statements of Cash Flows
Year Ended June 30
1996 1995
_______________________
Net income $ 917,700 $ 340,244
Adjustments to reconcile income to
net cash flow from operations:
Depreciation 13,723 12,238
Changes in operating assets and
liabilities:
(Increase) decrease in accounts
receivable (151,676) 380,108
Increase in prepaid expenses (20,616) (11,807)
Decrease in accounts payable and
accrued expenses (124,617) (23,855)
Increase in deferred revenues 161,370 222,318
________________________
Net cash flows from operations 795,884 919,246
Investing activity - purchases of furni-
ture, fixtures, and equipment (26,463) (16,878)
Financing activity - net cash outflow
to the Company (769,421) (902,368)
________________________
Net change in cash 0 0
Cash, beginning of year 0 0
________________________
Cash, end of year $ 0 $ 0
________________________
________________________
See accompanying notes.
Young Adult Marketing Divisions
(Operating Divisions of American Passage Media Corporation)
Notes to Financial Statements
June 30, 1996
1. Organization and Basis of Presentation
On June 7, 1996, American Passage Media Corporation (the Company)
reached agreement with Network Event Theatre, Inc. (NET) to sell
certain divisions of the Company, including the following:
College Newspapers, Campus Postering, Gymboards, Spring Break,
and the national sales group of The Directory of Classes (the
Divisions). These divisions are included in a group that is
collectively referred to as the Young Adult Marketing divisions.
The Divisions provide national advertisers with media services to
facilitate the targeting of specific market segments. The
principal media services provided by the Divisions include
advertising placement in college newspapers, campus postering,
event marketing at college campuses, and sales of national
advertising in college and university class directories.
These financial statements have been prepared as if the Divisions
had operated as independent, standalone entities for all periods
presented. Such divisional financial statements have been
prepared using the historical basis of accounting and include all
of the assets, liabilities, revenues and expenses, and cash flows
of the Divisions previously included in the Company's financial
statements.
In accordance with Securities and Exchange Commission Staff
Accounting Bulletin No. 55 ("SAB 55"), these statements have been
adjusted to include certain corporate expenses incurred by the
Company on the Divisions' behalf. The financial statements may
not necessarily present the Divisions' financial position,
results of operations, and cash flows if the Divisions were a
standalone entity.
2. Summary of Significant Accounting Policies
Furniture, Fixtures, and Equipment
Furniture, fixtures, and equipment are recorded at cost.
Depreciation is provided using the straight-line and accelerated
methods based on estimated useful lives ranging from two to ten
years. Expenditures for major remodeling and improvements are
capitalized as leasehold improvements and amortized over the
shorter of the life of the lease (including option period if
exercised) or the life of the asset. Leased assets are recorded
Young Adult Marketing Divisions
(Operating Divisions of American Passage Media Corporation)
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
at cost and are amortized on a straight-line basis over the
lesser of the related lease terms or their economic lives.
Amortization expense is included with depreciation expense.
Income Taxes
The Company operates under Subchapter S of the Internal Revenue
Code and, consequently, is not subject to federal income tax; the
stockholders include the Company's income or loss in their own
income for tax purposes. For income tax purposes, the Company
has a December 31 year-end. The Divisions are included in the
Company's income tax reporting.
Concentration of Credit Risks
Substantially all of the Divisions' accounts receivable and
revenues are generated from customers in the advertising
industry. The Divisions perform ongoing credit evaluations of
their customers and generally do not require collateral. The
Divisions maintain accounts receivable allowances for potential
credit losses, and such losses have been within management's
expectations.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions which affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Young Adult Marketing Divisions
(Operating Divisions of American Passage Media Corporation)
Notes to Financial Statements (continued)
3. Corporate Allocations
The Company provides services to the Divisions, including general
management, accounting, treasury, tax, financial audit and
reporting, benefits administration, insurance, information
systems management, accounts receivable and credit, and accounts
payable functions. These corporate administrative costs were not
historically allocated to individual divisions. In accordance
with SAB 55, the Company has allocated a portion of these
expenses to the Divisions. For purposes of these financial
statements, the above corporate costs have been allocated based
on the percentage of time corporate administrative personnel were
estimated to spend on the Young Adult Marketing divisions. Such
allocations and corporate charges totaled $251,728 and $236,665
for the years ended June 30, 1996 and 1995, respectively.
Management believes that the basis used for allocating corporate
administrative services is reasonable. However, the amounts
included in these allocations may differ from those that would
result from transactions among unrelated parties. In addition,
these allocations were not based on specific costs attributable
to the Divisions and may not be representative of actual costs
that would have been incurred if the Divisions had been operating
independently.
Young Adult Marketing Divisions
(Operating Divisions of American Passage Media Corporation)
Notes to Financial Statements (continued)
4. Revenues and Directing Operating Expenses-by Division
A breakdown of the gross margin earned by each of the divisions for the year
ended June 30, 1996 and 1995 is as follows:
<TABLE>
Year Ended College Campus Sales
June 30, 1996 Newspapers Postering Gymboards Spring Break Commissions Total
_____________ ________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Net revenues $2,506,244 $1,816,688 $1,075,754 $ 209,300 $ 194,223 $5,802,209
Costs of revenues 692,010 1,182,725 701,915 150,596 - 2,727,246
________________________________________________________________________________
Gross margin $1,814,234 $ 633,963 $ 373,839 $ 58,704 $194,223 $3,074,963
________________________________________________________________________________
________________________________________________________________________________
</TABLE>
<TABLE>
Year Ended
June 30 1995
_____________
<S> <C> <C> <C> <C> <C> <C>
Net revenues $1,855,674 $1,739,971 $1,122,745 $142,195 $187,646 $5,048,231
Costs of revenues 594,973 1,213,970 551,608 123,721 - 2,484,272
________________________________________________________________________________
Gross margin $1,260,701 $ 526,001 $ 571,137 $ 18,474 $187,646 $2,563,959
________________________________________________________________________________
________________________________________________________________________________
</TABLE>
Young Adult Marketing Divisions
(Operating Divisions of American Passage Media Corporation)
Notes to Financial Statements (continued)
5. Savings Plan
The Divisions are included in the Company's 401(k) savings plan,
which covers all employees with at least six months of service.
The Company, at its discretion, matches employee contributions.
The Divisions' share of the Company's contributions was $10,870
and $7,119 for 1996 and 1995, respectively.
ASSET PURCHASE AGREEMENT
September 13, 1996
The parties to this agreement are American Passage Media
Corporation, a Washington corporation ("AP"); Gilbert Scherer,
the majority owner of the outstanding stock of AP ("AP's
Stockholder"); Network Event Theater, Inc., a Delaware
corporation ("NET"); and American Passage Media, Inc., a Delaware
corporation that is a wholly-owned subsidiary of NET ("Buyer").
AP is engaged in various sales and marketing activities
relating to the high school and college-student markets,
including the sale of advertising and of promotional and
sponsorship opportunities, campus postering operations, college
newspaper advertising placement operations, GymBoards operations,
AdRaX operations, the Crux WebSite, Take the Break operations,
Directory of Classes national advertising representation, and
other business activities, such as those set forth in the Job
Choices representation agreement (all such activities and
businesses being referred to collectively as the "Business").
The parties have agreed upon the sale to Buyer of substantially
all of the business and assets relating to the Business
(excluding the business of publishing and distributing Directory
of Classes), on the terms set forth in this agreement.
Accordingly, it is agreed as follows:
1. Sale and Transfer of Assets.
1.1 Assets to be Sold. At the Closing referred to in
section 3, AP shall sell, assign and transfer to Buyer, and Buyer
shall purchase and acquire from AP, all of AP's operations,
rights and assets relating to or used in the Business, as they
exist on the date of the Closing (but excluding the assets
referred to in section 1.2). The assets to be sold (the
"Assets") include, but are not limited to, the following:
(a) all of AP's rights under agreements,
commitments and orders relating to the Business, to the extent
that they remain unperformed or unfulfilled on, or by their terms
continue after, the Closing, including, but not limited to, all
of AP's rights under all (i) agreements with schools,
advertisers, subcontractors and suppliers, (ii) advertising
insertion orders and other agreements, commitments and orders
relating to the sale or placement of advertising or the
distribution of posters, (iii) other agreements, commitments and
orders that are listed on schedule 4.8, and (iv) other
agreements, commitments and orders relating to the Business that
were entered into prior to the date of this agreement in the
ordinary course of business and were not required to be referred
to on schedule 4.8;
(b) all of AP's inventory; all editorial
material, photographs, art work, promotional materials and
archives; and all office supplies, stationery, forms, labels, and
similar supplies relating to or used in the Business;
(c) all computer software and all trademarks,
trade names and logos (including registrations and applications
for registration of any of them) and all other intangible
property and proprietary rights used by AP in connection with the
Business, as set forth on schedule 1.1(c), and all of AP's rights
to use the name "American Passage," together with the good will
of the business associated with those trademarks, trade names and
logos; all of AP's rights in copyrights (including registrations
and applications for registration of any copyrights) relating to
or used in the Business;
(d) all of AP's databases, records, files,
mailing lists, customer lists and other information and data
relating to the Business, including all records relating to
advertising insertion orders and other agreements and commitments
relating to the sale or placement of advertising and to the
postering and GymBoards activities, records of current and former
advertisers, and prospect lists for advertising, except that AP
may retain copies of all such documents and information as it
reasonably determines necessary for archival purposes, shall not
use those documents and information for any other purpose, shall
not furnish copies to any third party (except as required by
law), and shall use reasonable efforts to limit its employees'
access to those documents and information, and except that AP
may, subject to section 6.7, retain copies of and use such
documents and information and the computer software referred to
in section 1.1(c) to the extent used by AP in its other
businesses as of the date of this agreement;
(e) all of AP's computers, equipment (including
office equipment) and furniture relating to or used in the
Business, as set forth on schedule 4.5;
(f) all of AP's other tangible assets used in or
relating to the Business, wherever located;
(g) all of AP's prepaid expenses relating to the
Business;
(h) all claims against third parties arising out
of the operation of the Business, including claims under
manufacturers' and vendors' warranties; and
(i) all of AP's work in process and accounts
receivable arising out of the operation of the Business, but
excluding the accounts receivable described in sections 1.2(b)
and 1.2(c).
1.2 Excluded Assets. The following assets shall be
retained by AP and shall not be sold, assigned or transferred to
Buyer:
(a) all cash, all cash investments, all
certificates of deposit, deposits, commercial paper, treasury
bills and notes, money market accounts and other marketable
securities and all other investments;
(b) all accounts receivable outstanding as of the
Closing Date for advertising published, work completed or events
concluded prior to the close of business on July 31, 1996,
whether or not billed;
(c) all accounts receivable, notes receivable and
other indebtedness from any officer, director, stockholder or
employee of AP, or any other entity in which any officer,
director, stockholder or employee of AP has an interest;
(d) AP's rights under any agreement, commitment
or order as to which consent to assignment is required but has
not been obtained;
(e) any of AP's rights with respect to leases for
real property (except as otherwise provided in section 6.8);
(f) any of AP's rights under the agreements
listed on schedule 1.2;
(g) all of AP's assets relating to Directory of
Classes;
(h) all items of equipment except those listed on
schedule 4.5; and
(i) the T1 telephone line, hardware and server
(including any software not owned by AP) associated with the Crux
WebSite.
2. Purchase Price.
2.1 Amount and Payment of Consideration. As full
consideration for the Assets, at the Closing:
(a) Buyer shall pay to AP, by wire transfer or
certified or bank check, the sum of $4 million;
(b) Buyer shall deliver to AP its subordinated
promissory note in the principal amount of $750,000, in the form
of exhibit 2.1(b) (the "Note"), which provides for payment in
eight quarterly installments payable at the end of each 90 day
period commencing 90 days after the Closing, together with
interest thereon at the rate of 8% a year, and shall be
subordinate only to Buyer's indebtedness to its institutional
lender (the subordination to be on such terms as the
institutional lender, or any successor institutional lender, may
require, provided that those terms permit payment of principal
and interest on the Note so long as no event of default has
occurred and is continuing under the terms of any note or other
agreement or instrument relating to the indebtedness to the
institutional lender);
(c) NET shall deliver to AP an option, pursuant
to an option agreement in the form of exhibit 2.1(c) (the "Option
Agreement"), to purchase, for a price equal to the Market Price
(as defined below), up to 100,000 shares of NET Common Stock;
(d) NET shall deliver to AP a guaranty of Buyer's
obligations in the form of exhibit 2.1(d) (the "Guaranty"); and
(e) Buyer shall assume, and agree to pay, perform
and discharge (subject to the apportionment provisions of section
2.2), all of AP's obligations under the agreements, commitments
and orders referred to on schedule 4.8 (but not the agreements
that are also referred to on schedule 1.2), and under agreements,
commitments and orders relating to the Business that were entered
into prior to the date of this agreement in the ordinary course
of business and were not required to be referred to on schedule
4.8, to the extent that they remain unperformed or unfulfilled
on, or by their terms continue in effect after, the Closing.
As used in this section 2.1, the term "Market Price" means
the average closing bid price (computed and rounded to the third
decimal point) of NET's common shares on NASDAQ as of 4:00 PM
Eastern Standard Time as published by the National Association of
Securities Dealers, Inc. during the 30 trading days ending three
trading days before the Closing Date.
2.2 Apportionment. The parties intend that,
regardless of the Closing Date, the sale of the Assets shall be
considered effective as of the close of business on July 31,
1996. Accordingly, an appropriate adjustment in the purchase
price shall be made to reflect Buyer's entitlement to all income
earned or accrued, and Buyer's responsibility for all liabilities
and obligations incurred or payable, in connection with the
operations of the Business after the close of business on July
31, 1996 (and AP's entitlement to all income earned or accrued,
and AP's responsibility for all liabilities and obligations
incurred or payable, in connection with the operation of the
Business through that time). In calculating the adjustment, all
overlapping items of income or expense shall be apportioned
between AP and Buyer, as of close of business on July 31, 1996,
in accordance with generally accepted accounting principles and
the following:
(a) Buyer shall be entitled to credit for amounts
received by AP (whether before or after the Closing Date) with
respect to advertisements published, work completed, services
rendered, or events that occur, after the close of business on
July 31, 1996;
(b) AP shall be entitled to credit for any
liabilities incurred and paid by AP in connection with the
operation of the Business after the close of business on July 31,
1996, but AP shall bear (and to the extent borne or paid by
Buyer, Buyer shall be entitled to credit for) any liabilities
arising out of the operation of the Business prior to the close
of business on July 31, 1996, including, but not limited to,
liabilities, customarily accrued, for compensation and fringe
benefits of employees (including vacation and severance pay),
utility services, rent, sales commissions, and various business
and professional services;
(c) AP shall be entitled to credit for any
liabilities incurred and paid by AP prior to the close of
business on July 31, 1996 for goods, services or rights that have
not been received prior to that time and with respect to which
Buyer will receive the benefit, such as rents paid in advance for
a rental period extending beyond that time; and
(d) AP shall receive credit for the portion of
its overhead expenses allocable to the operation of the Business
during the period from the close of business on July 31, 1996
until the Closing Date, determined as provided on schedule
2.2(d).
Notwithstanding the foregoing provisions of this
section 2.2, income earned from Per Inquiry responses from
postering or other Business activities shall be apportioned
between AP and Buyer based on the date responses are postmarked,
AP being entitled to all income earned with respect to responses
postmarked prior to July 31, 1996, and Buyer being entitled to
all income earned with respect to responses postmarked on or
after July 31, 1996.
2.3 Determination of Apportionments.
(a) Not later than five days prior to the Closing
Date, AP shall prepare and submit to Buyer a written estimate of
the apportionments pursuant to section 2.2, together with a
statement setting forth in reasonable detail the computation of
the estimate, and at the Closing Buyer shall pay to AP, or AP
shall pay to Buyer, as the case may be, an amount equal to the
estimated net amount payable as a result of the apportionments.
(b) Within 60 days after the Closing Date, Buyer
shall determine all apportionments pursuant to section 2.2 and
shall prepare and deliver to AP a statement of its determinations
(which statement shall set forth in reasonable detail the basis
for such determinations), and within 30 days thereafter Buyer
shall pay to AP, or AP shall pay to Buyer, as the case may be,
the net amount due as a result of the apportionments after taking
account of the payment made under section 2.3(a) (or, if there is
any dispute, the undisputed amount). Each party shall furnish
the other with such information as may be required to make the
determination. If AP disputes Buyer's determinations, or if at
any time after payment is made either AP or Buyer determines that
any item included in the apportionments is inaccurate or that an
additional item should be included in the apportionments, notice
to that effect shall be given to the other party and the parties
shall confer with regard to the matter, and an appropriate
adjustment and payment shall be made as agreed upon by the
parties (or, if they are unable to resolve the matter within 15
days after delivery of the determinations to AP or delivery by a
party of notice that the apportionments were inaccurate, a firm
of independent certified public accountants, whose decision on
the matter shall be binding and whose fees and expenses shall be
borne 50% by AP and 50% by Buyer, shall be designated by
agreement between them; if they fail to agree on the firm to
decide the matter within an additional 10 days, the accountants
shall be selected by the president of the American Institute of
Certified Public Accountants).
2.4 Limitation on Assumption of Liabilities. Except
as specifically provided in section 2.1, Buyer is not assuming,
and shall not have any liability for, any liability or obligation
arising out of the operations of the Business or any other
liability or obligation of AP, and AP shall pay, perform and
discharge all such liabilities and obligations (subject to the
apportionment provisions of section 2.2). Without limiting the
generality of the preceding sentence, subject to the
apportionment provisions of section 2.2, Buyer shall not assume
or be responsible for (a) any liability or obligation arising out
of any claim, litigation or proceeding arising out of the
operations of the Business on or before the Closing Date
(including, but not limited to, the claims and proceedings listed
on schedule 4.11) or any circumstances existing on or prior to
the Closing Date, (b) any liability or obligation to any employee
of the Business for compensation or benefits (including vacation
and severance pay) incurred or accrued on or prior to the Closing
Date, (c) any deferred compensation obligation or any liability
or obligation of AP arising out of or in connection with any
employee benefit plan, or any other liability or obligation for
employee post-retirement life insurance or health care benefits
to employees of AP who do not become employees of Buyer, (d) any
liability or obligation of AP for federal or state income or
sales taxes, or (e) any other liability or obligation of any kind
relating to the operations of the Business or the occurrence of
any event on or before the Closing Date, whether known or
determined as of the Closing Date or unknown or undetermined as
of that date.
2.5 Trade Liabilities. On the day preceding the
Closing Date, AP shall submit to Buyer a complete list of
accounts payable and other liabilities that arose out of the
operations of the Business prior to or on that date, stating as
to each account the nature of the goods or services with respect
to which the payable was incurred, the net amount unpaid, and the
due date for payment. On the Closing Date AP shall pay all
accounts payable and other liabilities that are then due and
payable. In addition, at the Closing AP shall pay to Buyer an
amount equal to the total amount of accounts payable and other
liabilities of the Business that will become due and payable
after the Closing; after the Closing Buyer shall, in good faith,
apply that amount in satisfaction of those accounts payable and
liabilities as and when they become due. Buyer shall provide AP
with a written report 120 days after the Closing Date regarding
the status of such payments and shall provide AP with such other
information with respect to those payments as AP shall reasonably
request. If at any time after the Closing it is determined that
the amount paid to Buyer pursuant to this provision was
insufficient to pay in full all accounts payable and other
liabilities arising out of the operation of the Business prior to
the close of business on the day immediately preceding the
Closing Date, and any such excess amount is paid by Buyer, AP
shall remit to Buyer, promptly upon demand, the excess amount so
paid by it. If at any time after the Closing it is determined
that the amount paid to Buyer pursuant to this provision was more
than was required for Buyer to pay in full all accounts payable
and other liabilities arising out of the operation of the
Business prior to the close of business on the day immediately
preceding the Closing Date, Buyer shall remit to AP the excess
amount so paid to it. Nothing in this provision shall relieve AP
of any liability for payment of any of its accounts payable or
other liabilities, except to the extent of the amount paid to
Buyer as provided above.
2.5 Adjustment of Purchase Price. The purchase price
paid pursuant to section 2.1 shall be subject to adjustment as
provided in the Directory of Classes representation agreement
referred to in section 6.13.
3. Closing.
3.1 Date of Closing. The closing of the sale and
purchase pursuant to this agreement (the "Closing") shall take
place at the offices of Proskauer Rose Goetz & Mendelsohn LLP,
1585 Broadway, New York, New York 10036 on September 11, 1996 (or
at such other place or time as the parties may agree upon in
writing). The date on which the Closing is held is referred to
in this agreement as the "Closing Date." At the Closing, the
parties shall execute and deliver the documents referred to in
section 8.
3.2 Termination. Either AP or Buyer may terminate
this agreement by notice to the other if the Closing has not
occurred by September 23, 1996 (but a party shall not have the
right to terminate if the Closing has not occurred because of
that party's breach of this agreement). Upon such termination
none of the parties shall have any liability of any kind arising
out of this agreement, except that such termination shall not
terminate or limit the rights of any party to enforce this
agreement or to seek any other remedy for breach of this
agreement prior to termination.
4. Representations and Warranties by AP and AP's
Stockholder.
AP and AP's Stockholder jointly and severally represent
and warrant to Buyer and NET as follows:
4.1 AP's Organization and Authority. AP is a
corporation duly organized and validly existing under the law of
the State of Washington and has the full corporate power and
authority to enter into and to perform this agreement and to
carry on its business as it is presently being conducted.
4.2 Authorization of Agreements. The execution,
delivery and performance by AP of this agreement and the Option
Agreement, the Transition Agreement referred to in section 6.8,
the consulting agreement referred to in section 6.10, and the
Directory of Classes representation agreement referred to in
section 6.13 (together, the "AP Ancillary Documents") have been
duly authorized by the board of directors of AP. AP's
Stockholder has full right to enter into and perform his
obligations under this agreement in accordance with its terms.
This agreement and each AP Ancillary Document constitutes the
valid and binding obligation of AP, and this agreement and each
AP Ancillary Document to which AP's Stockholder is a party
constitutes the valid and binding obligation of AP's Stockholder,
enforceable against each of them in accordance with their terms,
except as enforceability may be limited by bankruptcy, insolvency
or other similar laws affecting the enforcement of creditors'
rights in general and subject to general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law). Schedule 4.2 contains a true
and complete list of the stockholders of AP and the number of
shares owned by each of them.
4.3 Consents of Third Parties. Subject to receipt of
the consents and approvals referred to on schedule 4.3, the
execution, delivery and performance of this agreement and the AP
Ancillary Documents by AP and AP's Stockholder will not (i)
conflict with the articles of incorporation or by-laws of AP and
will not conflict with, or result in the breach or termination
of, or constitute a default under, any agreement, commitment,
order or other instrument, or any order, judgment or decree, to
which AP or AP's Stockholder is a party or by which AP or AP's
Stockholder is bound; (ii) constitute a violation by AP or AP's
Stockholder of any law or regulation applicable to either of
them; or (iii) result in the creation of any lien, charge or
encumbrance upon any of the Assets. No consent, approval or
authorization of, or designation, declaration or filing with, any
governmental authority is required on the part of AP or AP's
Stockholder in connection with the execution, delivery and
performance of this agreement and the AP Ancillary Documents.
4.4 Title to Assets. Except as set forth on schedule
4.4, AP has, and at the Closing Buyer will receive, valid title
to all of the Assets, free and clear of any claim, lien, or
encumbrance, except for the lien, if any, of current taxes not
yet due and payable. The Assets include all of the personal
property reflected on the audited balance sheet of the Business
as of June 30, 1996, except property disposed of since that date
in the ordinary course of business, and all assets acquired for
use in the Business between that date and the Closing Date.
4.5 Tangible Assets and Related Matters. Schedule 4.5
contains a true and complete list, as of the date of this
agreement, of inventory and work-in-process of the Business, of
all computers, equipment (including office equipment) and
furniture relating to or used in the Business, and of all other
tangible assets that relate to or are used in the Business and
had a cost to AP for any individual item of more than $1,000.
All of the tangible assets to be purchased by Buyer under this
agreement are in good operating condition and in good condition
of maintenance and repair, subject to normal wear and tear, and
are suitable for continued use in the normal course of business
as conducted by AP. The Assets constitute all of the assets,
tangible and intangible, used in the Business and have been
sufficient to enable AP to operate all aspects of the Business in
the manner in which it has been operated by AP. Except as set
forth on schedule 4.5, the Business is not using any assets,
tangible or intangible, of any of AP's stockholders.
4.6 Financial Statements.
(a) AP has delivered to Buyer true and complete
copies of the audited statements of assets and liabilities of the
Business at June 30, 1995 and June 30, 1996 and the related
statements of operations and cash flows for the years then ended
(prepared on a consolidated basis for the Business and including
detailed breakdowns with respect to each revenue producing
product line), together with complete copies of the related audit
reports of Ernst & Young LLP. All such financial statements
present fairly the financial position of the Business at the
dates indicated and the results of its operations and its cash
flows for the periods then ended (on a consolidated basis and
with respect to each revenue producing product line), in
conformity with generally accepted accounting principles applied
on a consistent basis. All such financial statements have been
prepared in accordance with AP's books and records and show all
income and expenses attributable to the Business during the
respective periods covered by them. All of AP's books of account
relating to the Business have been exhibited or made available to
Buyer, and those books of account accurately record all
transactions of AP during the respective periods covered by them.
Except to the extent reflected or reserved for in the statement
of assets and liabilities of the Business as of June 30, 1996 or
in the notes to that statement, as of the date of that statement
AP did not have any liability or obligation of any kind relating
to the Business, whether accrued, absolute, contingent or
otherwise, other than (a) liabilities and obligations under
orders, commitments, agreements and leases entered into in the
ordinary course of business (which, to the extent required by
section 4.8, are referred to on schedule 4.8), and (b) other
liabilities and obligations that are not material in amount or
are set forth in schedules to this agreement. All of the
accounts receivable reflected in the statement of assets and
liabilities as of June 30, 1996 or that arose from June 30, 1996
to the date of this agreement arose from, and all of the accounts
receivable of the Business that arise from the date of this
agreement to the Closing Date will have arisen from, bona fide
transactions in the ordinary course of business; to the best of
the knowledge of AP and AP's Stockholder, none of the accounts
receivable being sold to Buyer under this agreement is or will be
subject to any defense, counterclaim or setoff.
(b) To the best of the knowledge of AP and AP's
Stockholder, except as specified on schedule 4.6 or 4.9(b), (i)
the pro forma statements of operations contained in schedule 4.6
present fairly on a pro forma basis the results of operations of
the Business for the year ended June 30, 1996, as adjusted to
reflect all costs and expenses that would have been incurred by
the Business if it had been operated on a stand-alone basis
(including, but not limited to, substituting for the cost of
printing, fulfillment and other in-house services the costs that
would have been incurred if those services had been obtained from
an unrelated third party on an arm's length basis), and (ii) the
pro-forma adjustment items shown on schedule 4.6 include all
material additional items of cost or expense that would have been
incurred in connection with the operation of the Business if it
had been operated on a stand-alone basis during the year ended
June 30, 1996.
4.7 Absence of Certain Changes. Since July 1, 1996
there has not been any material adverse change in AP's condition
(financial or otherwise) relating to the Business or the assets
to be acquired by Buyer pursuant to this agreement, and since
July 1, 1995 AP has operated the Business in the ordinary course
and consistent with past practices, and, except as set forth on
schedule 4.7:
(a) AP has not entered into any transaction or
incurred any liability or obligation with respect to the Business
that was unusual in nature or amount, or was entered into or
incurred other than in the ordinary course of business;
(b) AP has not sold or transferred any assets
that are material to the Business or had a cost to AP of more
than $5,000;
(c) AP has not granted or agreed to grant any
general increase in any rate or rates of salaries or compensation
to employees or agents of the Business or any specific increase
in the salary or compensation to any individual employee or agent
of the Business; and
(d) AP has not made any material change in (i)
the manner in which the Business has been operated, (ii) the
accounting principles or practices employed by AP in connection
with the preparation of the financial statements of the Business
or (iii) the manner in which revenue, costs or expenses are
allocated among AP's business operations.
4.8 Lists of Agreements, etc. Schedule 4.8 contains,
with respect to the Business, a true and complete list of: (a)
all commitments and agreements for the purchase of materials or
supplies or the receipt of services that involve an expenditure
by AP of more than $5,000 for any one commitment or two or more
related commitments; (b) all other agreements, commitments and
orders to which AP is a party or by which it is bound that
involve more than $5,000 and cannot be terminated by AP on less
than 30 days' notice without liability or are otherwise material
to the Business or the Assets; (c) all agreements with colleges
and other schools; (d) all material agreements with advertisers
and customers; (e) all leases or other rental agreements relating
to personal property under which AP is lessee or lessor; (f) all
license agreements under which AP is either licensee or licensor;
(g) all employment and consulting agreements and agreements with
independent contractors, written or oral; and (h) all agreements
between AP and any officer, director or shareholder of AP (or any
entity in which any of them has an interest). True and complete
copies of the agreements, commitments and leases referred to on
schedule 4.8 have been delivered to Buyer.
4.9 Agreements Regarding Employees. Except as set
forth on schedules 4.8 and 4.9(a), AP is not, with respect to the
Business, a party to or bound by any employment agreement, or any
collective bargaining or other labor agreement. Except as set
forth on schedule 4.9(a), AP does not have any severance policy
with respect to employees of the Business and no employee of the
Business is entitled to any severance payment, either by law or
by agreement, upon the termination of his or her employment.
Except as set forth in schedule 4.15, AP is not a party to,
involved in or, to the best of the knowledge of AP or AP's
Stockholder, threatened by any labor dispute or unfair labor
practice charge in connection with the operation of the Business.
AP employs approximately 30 employees with respect to the
Business. Schedule 4.9(a) contains a true and complete list of
all current employees of the Business and all employees whose
employment with the Business has terminated since May 1, 1996,
and sets forth their total compensation for the year ended June
30, 1996 and their present compensation arrangements (including
any agreed upon salary or commission increases). Except as set
forth on schedule 4.9(a), since May 1, 1996, AP has not granted a
salary increase to any employee of the Business of more than
$3,000 or any increase in the commission payable to any employee.
The current employees listed on schedule 4.9(a) have been
sufficient to enable AP to operate all aspects of the Business in
the ordinary course, other than the general and administrative
services described on schedule 4.9(b) and as provided for by the
"add-backs" and "deducts" relating to employees listed on
schedule 4.6.
4.10 Status of Agreements. Except as set forth on
schedule 4.10, all of AP's agreements, commitments and orders
were entered into in the ordinary course of operations of the
Business and on an arm's-length basis. Each of the agreements,
commitments and orders referred to in sections 4.8 and 4.9(a) is
presently in full force and effect in accordance with its terms
and, except as set forth on schedule 4.10, AP is not in default,
and, to the best of the knowledge of AP and AP's Stockholder, no
other party is in default under any agreement, commitment or
order referred to in section 4.8 or 4.9(a) and each of those
agreements, commitments and orders is valid and binding upon and
enforceable against each of the parties thereto in accordance
with its terms, except as enforceability may be limited by
bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights in general. No party to any of
the agreements, commitments or orders referred to in section 4.8
or 4.9(a) has made, asserted or, to the best of the knowledge of
AP or AP's Stockholder, has any defense, setoff or counterclaim
under any of those agreements, commitments or orders or has
exercised any option granted to it to cancel or terminate its
agreement, to shorten the term of its agreement, or to renew or
extend the term of its agreement and AP has not received any
notice to that effect.
4.11 Litigation; Compliance with Laws. Except as set
forth on schedule 4.11, there is no claim, litigation, proceeding
or governmental investigation pending or, to the best of the
knowledge of AP or AP's Stockholder, threatened, or any order,
injunction or decree outstanding against or relating to AP or the
Business or any of the Assets. To the best of the knowledge of
AP or AP's Stockholder, AP is not in violation of any applicable
law, regulation, ordinance, or any other requirement of any
governmental body or court arising out of the operation of the
Business, and no notice has been received by AP or any of its
officers or directors alleging any such violation. AP is not
engaged in any dispute with any school or any of its advertisers,
customers, sales representatives, or suppliers and, to the best
of its knowledge, does not have a bad relationship with any of
them.
4.12 Intangible Property. Schedule 1.1(c) contains a
complete list of the trademarks, trade names and logos (and
applications for any of them) and all other intangible property
and proprietary rights used by AP in the Business at any time
since July 1, 1995. AP owns, free and clear of any claims, liens
or encumbrances, each of the trademarks, trade names and logos
listed on schedule 1.1(c), and they constitute all trademarks and
trade names necessary for the continued operation of the Business
in a manner consistent with past practices. Except as set forth
on schedule 4.12, to the best of the knowledge of AP or AP's
Stockholder, (a) there is no violation by others of any right of
AP with respect to any trademark or trade name to be sold and
assigned to Buyer, and (b) AP is not, in connection with the
Business, infringing upon any trademark, trade name or other
rights of any third party; no proceedings are pending or
threatened; and no claim has been received by AP alleging any
such violation.
4.13 Software and Databases. AP owns or possesses
adequate licenses or other rights to use all material computer
software used by it in the Business. Schedule 4.13 contains a
list of all computer software used by it in the Business at any
time since January 1, 1994. AP has not granted to any person or
entity any interest, as licensee or otherwise, in any of its
owned software or databases. Any license of AP to use any
software is valid and does not infringe on the property rights of
any third party. The software listed on schedule 4.13
constitutes all of the material software used in the Business and
has been sufficient to enable AP to operate all aspects of the
Business in the ordinary course.
4.14 Insurance. Schedule 4.14 contains a complete list
of all of AP's insurance policies relating to the Business,
specifying with respect to each policy the policy limit, type of
coverage, location of the property covered, annual premium,
premium payment date, and expiration date.
4.15 Labor Matters. Except as set forth on schedule
4.15, with respect to the Business (a) AP is in compliance in all
material respects with all applicable laws respecting employment
and employment practices, terms and conditions of employment, and
wages and hours, and is not engaged in any unfair labor practice;
(b) there is no unfair labor practice charge or complaint against
AP pending before the National Labor Relations Board, any state
labor relations board or any court or tribunal and, to the best
of the knowledge of AP or AP's Stockholder, none is or has been
threatened; (c) there is no labor strike, dispute, request for
representation, slowdown or stoppage actually pending against or
affecting the Business and, to the best of the knowledge of AP or
AP's Stockholder, none is or has been threatened; and (d) no
grievance which might have an adverse effect on the conduct of
the Business or any arbitration proceeding arising out of or
under any collective bargaining agreement is pending and, to the
best of the knowledge of AP or AP's Stockholder, none is or has
been threatened. To the best of the knowledge of AP and AP's
Stockholder, there has been no sexual harassment or similar claim
against any employee of the Business and no employee of the
Business has at any time within the five years preceding the date
of this agreement asserted against AP any claim of
discrimination.
4.16 Environmental Matters. With respect to the
ownership and operation of the Business:
(a) AP and all of the property (whether owned or
leased) that is included in the Assets is in substantial
compliance with all material federal, state and local laws
relating to pollution, the protection of human health or the
environment, including, but not limited to, laws relating to
emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum and petroleum products (collectively, "Materials of
Environmental Concern"), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental
Concern;
(b) there are no past or present actions,
activities, circumstances, conditions, events or incidents,
including, but not limited to, the release, emission, discharge
or disposal of any Material of Environmental Concern, that could
form the basis of any claim against, or violation by, AP (or,
after the Closing, Buyer); and
(c) except as set forth on schedule 4.16, (i)
there are no underground storage tanks located on property used
in connection with the Business; (ii) there is no asbestos
contained in or forming part of any building, building component,
structure or office space owned or, to the best of the knowledge
of AP or AP's Stockholder, leased by AP with respect to the
Business; (iii) no polychlorinated biphenyls (PCBs) are used or
stored at any property owned or, to the best of the knowledge of
AP or AP's Stockholder, leased by AP in connection with the
Business; and (iv) there are no on-site or off-site locations
where AP has stored, disposed or arranged for the disposal of
Materials of Environmental Concern.
4.17 ERISA.
(a) Schedule 4.17 contains a list of all
"employee benefit plans," within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and any other bonus, profit sharing, pension,
severance, savings, deferred compensation, fringe benefit,
insurance, welfare, post-retirement benefit, health, life, stock
option, stock purchase, restricted stock, tuition refund, service
award, company car, scholarship, relocation, disability,
accident, sick pay, sick leave, vacation, individual employment,
consulting, compensation, incentive, commission, payroll
practices, retention, change in control, noncompetition, or other
plan, agreement, policy, trust fund, or arrangement (whether
written or unwritten, insured or self-insured) established,
maintained, sponsored, or contributed to (or with respect to
which any obligation has been undertaken) by AP on behalf of any
employee, director or shareholder of AP (whether current, former,
or retired) or their beneficiaries (each a "Plan" and,
collectively, the "Plans"). With respect to each Plan, true and
complete copies of the current plan document, trust agreement (if
any) for the specified Plan, summary plan description, and most
recent IRS determination letter (if any) for the specified Plan
and IRS Form 5500, if any, have been delivered to Buyer and are
listed on schedule 4.17.
(b) Neither AP, any of its predecessors, nor any
entity which is, or ever has been, deemed a "single employer"
with AP under Section 414(b), (c), (m) or (o) of the Internal
Revenue Code of 1986, as amended (the "Code") has ever
maintained, contributes to, has ever contributed to, or has ever
been obligated to contribute to a plan which is subject to
Section 412 of the Code, Title IV of ERISA or Section 302(a)(2)
of ERISA including, without limitation, a multiemployer plan
(within the meaning of Section 4001(a)(3) of ERISA or Section
414(f) of the Code). There are no pending, threatened or, to the
best knowledge of AP and AP's Stockholder, anticipated claims
(other than routine claims for benefits) by, on behalf of or
against any of the Plans or any trusts related thereto. To the
best of the knowledge of AP and AP's Stockholder, no "prohibited
transaction" within the meaning of Section 4975 of the Code or
Section 406 of ERISA has occurred or is expected to occur with
respect to any Plan.
(c) To the best of the knowledge of AP and AP's
Stockholder, each of the Plans intended to be "qualified" within
the meaning of Section 401(a) of the Code is so qualified and has
received a determination letter from the Internal Revenue Service
to the effect that such Plan is qualified under Section 401(a) of
the Code with respect to the Tax Reform Act of 1986 and has been
amended to comply with current law, and nothing has occurred or
is expected to occur through the date of the Closing that caused
or could be expected to cause the loss of such qualification.
Each Plan complies and has been maintained and operated in all
material respects in accordance with its terms and applicable
law, including, without limitation, ERISA and the Code. No Plan
is or is expected to be under audit or investigation by the
Internal Revenue Service, Department of Labor or any other
governmental authority and no such completed audit, if any, has
resulted in or could be expected to result in the imposition of
any tax or penalty.
(d) Except as provided in schedule 4.17(d), the
consummation of the transactions contemplated by this agreement
will not give rise to any liability, including, without
limitation, liability for severance pay, unemployment
compensation, termination pay, or withdrawal liability, or
accelerate the time of payment or vesting or increase the amount
of compensation or benefits due to any employee, director or
shareholder of AP (whether current, former, or retired) or their
beneficiaries solely by reason of such transactions. No amounts
payable under any Plan will fail to be deductible for federal
income tax purposes by virtue of Sections 280G or 162(m) of the
Code.
(e) To the best of the knowledge of AP and AP's
Stockholder, except as set forth on schedule 4.17(e), no event,
condition, or circumstance exists that could result in an
increase of the benefits provided under any Plan based on the
Plan documents or the expense of maintaining any Plan from the
level of benefits or expense incurred for the most recent fiscal
year ended before the Closing. Neither AP, nor any officer or
employee thereof, has made any promises or commitments, whether
legally binding or not, to create any additional plan, agreement
or arrangement, or to modify or change any existing Plan.
4.18 Transactions with Affiliates. Except as set forth
on schedule 4.18, (a) AP is not, and since January 1, 1995 has
not been, engaged, with respect to the Business, in any
transaction with any officer, director or shareholder of AP or
any entity in which any of them has an interest and (b) no
officer, director or shareholder of AP (or any entity in which
any of them has an interest) holds any assets used in or relating
to the Business.
4.19 Involvement of Certain Executives. During the two
years preceding the date of this agreement, AP's Stockholder and
Carl Bryant have devoted a diminishing amount of time to the
operation of the Business (averaging no more than an aggregate of
20 hours per month during the earlier year and no more than an
aggregate of 10 hours per month in the more recent year), AP's
Stockholder's involvement primarily having been limited to
periodic consultation (about once every two to three weeks) with
operating executives and participation in approximately quarterly
executive committee meetings and Carl Bryant's involvement
primarily having been limited to occasional advice regarding
media and participation in approximately quarterly executive
committee meetings. Neither AP's Stockholder nor Carl Bryant has
a relationship with any school, advertiser, customer or supplier
of the Business that would be adversely affected by the sale
contemplated by this agreement.
4.20 Customers. Except as set forth on schedule 4.20,
to the best of the knowledge of AP and AP's Stockholder, no
advertiser or customer from which AP has derived revenue of more
than $25,000 in connection with the operation of the Business
during the year prior to the date of this agreement has any plan
to materially reduce the level of its advertising during the two
years following the sale to Buyer, and no school or supplier
intends to discontinue or curtail its relationship with the
Business.
4.21 Miscellaneous.
(a) To the best of the knowledge of AP and AP's
Stockholder, except as set forth in this agreement and the
schedules to this agreement, there is no material fact or
circumstance relating to the Business that AP's Stockholder
reasonably believes is not known to Buyer and that, if known,
would reasonably affect Buyer's decision to purchase the
Business.
(b) Subject to the last sentence of section
9.1(a), the representations and warranties made by AP and AP's
Stockholder in this agreement shall be true and correct as of the
time of Closing with the same effect as though made again at and
as of that time.
(c) As used in this agreement, the phrase "to the
best of the knowledge of AP and AP's Stockholder" means the
actual knowledge of AP's Stockholder and AP's officers after
reasonable inquiry of the individuals listed on schedule 4.21(c);
AP's Stockholder confirms that he has made such an inquiry.
5. Representations and Warranties by Buyer and NET. Buyer
and NET jointly and severally represent and warrant to AP and
AP's Stockholder as follows:
5.1 Organization. Each of Buyer and NET is a
corporation duly organized, validly existing and in good standing
under the law of the State of Delaware and has the full corporate
power and authority to enter into and to perform this agreement.
5.2 Authorization of Agreements. The execution,
delivery and performance by Buyer of this agreement and the Note,
the Transition Agreement referred to in section 6.8, the
consulting agreement referred to in section 6.10, and the
Directory of Classes representation agreement referred to in
section 6.13 (together, the "Buyer Ancillary Documents") have
been duly authorized by all requisite corporate action of Buyer.
The execution, delivery and performance by NET of this agreement
and the Guaranty and Option Agreement (together, the "NET
Ancillary Documents") have been duly authorized by all requisite
corporate action of NET. This agreement and each Buyer Ancillary
Document constitutes the valid and binding obligation of Buyer,
and this agreement and each NET Ancillary Document constitutes
the valid and binding obligation of NET, enforceable against each
of them in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights in general and
subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at
law).
5.3 Consents of Third Parties. The execution,
delivery and performance of this agreement and the Buyer
Ancillary Documents by Buyer, and the execution, delivery and
performance of this agreement and the NET Ancillary Documents by
NET, will not (i) conflict with its certificate of incorporation
or by-laws and will not conflict with, result in the breach or
termination of, or constitute a default under, any lease,
agreement, commitment or other instrument, or any order, judgment
or decree to which it is a party or by which it is bound, or (ii)
constitute a violation by it of any law or regulation applicable
to it. No consent, approval or authorization of, or designation,
declaration or filing with, any governmental authority is
required on the part of Buyer or NET in connection with the
execution, delivery and performance of this agreement and the
Buyer Ancillary Documents and NET Ancillary Documents.
5.4 Litigation. There is no claim, litigation,
proceeding or governmental investigation pending or, to the best
of Buyer's knowledge, threatened, or any order, injunction or
decree outstanding, against Buyer or NET that would prevent the
consummation of the transactions contemplated by this agreement.
5.5 Miscellaneous. The representations and warranties
made by Buyer and NET in this agreement shall be true and correct
as of the time of Closing with the same effect as though made
again at and as of that time.
6. Further Agreements of the Parties; Nondisclosure and
Confidentiality.
6.1 Access to Information; Delivery of Lists.
(a) Prior to the Closing, Buyer and its
representatives may make such investigation of the property,
assets and operations of the Business as it may desire, and AP
shall give to Buyer and to its counsel, accountants and other
representatives, upon reasonable notice, full access during
normal business hours throughout the period prior to the Closing
to all of the assets, books, commitments, agreements, records and
files of AP relating to the Business and AP shall furnish to
Buyer during that period all documents and copies of documents
and information concerning the Business as Buyer reasonably may
request. Buyer shall hold, and shall cause its representatives
to hold, all such information and documents and all other
information and documents delivered pursuant to this agreement
confidential and, if the purchase and sale contemplated by this
agreement is not consummated for any reason, shall return to AP
all such information and documents and any copies as soon as
practicable, and shall not disclose any such information (that
has not previously been disclosed by a party other than Buyer) to
any third party unless required to do so pursuant to a request or
order under applicable laws and regulations or pursuant to a
subpoena or other legal process. Buyer's obligations under this
section shall survive the termination of this agreement.
(b) As promptly as possible after the Closing
Date, AP shall deliver to Buyer (a) a list as of the Closing Date
of all commitments and orders relating to advertising to be
published, services to be rendered, or events to occur after the
Closing and (b) a list as of the Closing Date of all of AP's
prepaid expenses and accounts receivable relating to the Business
(other than the accounts receivable described in sections 1.2(b)
and 1.2(c)).
6.2 Conduct of the Business Pending the Closing.
Until the Closing, AP shall operate the Business in the ordinary
course in a manner consistent with past practices and:
(a) AP shall promptly notify Buyer in writing of,
and furnish any information that Buyer reasonably may request
with respect to, (i) any claim, litigation, proceeding or
governmental investigation threatened by or against AP relating
to the Business or any material development with respect to any
such claim, litigation, proceeding or governmental investigation,
(ii) the occurrence of any event or the existence of any state of
facts that would result in any of the representations and
warranties of AP and AP's Stockholder not being true as of the
Closing Date, and (iii) any other occurrence of any kind
adversely affecting the Business or the Assets;
(b) AP shall not grant or agree to grant any
general increase in the rates of salaries or compensation of its
employees, or any specific increase to any individual employee,
or any increase in the pension, retirement or other employment
benefits of the employees of the Business;
(c) except as otherwise requested by Buyer, AP
shall use reasonable efforts, consistent with its past practices,
(i) to preserve the business organization of the Business intact
and to preserve the goodwill and business of the schools,
advertisers, suppliers and others having business relations with
the Business, (ii) to retain the services of the employees of the
Business, and (iii) to preserve all trademarks, trade names,
logos and copyrights and related registrations of the Business;
(d) except in the ordinary course and consistent
with past practice, AP shall not (i) enter into or renew any
agreement, commitment or lease, or (ii) cause or take any action
to allow any lease, agreement or commitment relating to the
Business to lapse (other than in accordance with its terms), to
be modified in any material adverse respect, or otherwise to
become impaired in any manner;
(e) except in the ordinary course and
substantially consistent with past practice, AP shall not (i)
enter into any transaction or incur any liability or obligation
that is material to the Business or (ii) sell or transfer any of
the assets relating to the Business, other than assets that have
worn out or been replaced with other assets of equal or greater
value or assets that are no longer needed in the operation of the
Business;
(f) AP shall duly comply with all laws,
ordinances, orders, injunctions and decrees applicable to the
operation of the Business;
(g) AP shall maintain all of the tangible Assets
in customary repair, maintenance and condition, except to the
extent of normal wear and tear, and AP shall replace any items of
equipment at time intervals consistent with past practices; and
(h) AP shall maintain insurance on the tangible
Assets and on the Business as set forth on schedule 4.14.
6.3 Other Action. No party to this agreement shall
take any action that would result in any of its or his
representations and warranties not being true as of the Closing
Date. Each of the parties to this agreement shall use its or his
reasonable efforts to cause the fulfillment at the earliest
practicable date of all of the conditions to the obligations of
the parties to consummate the sale and purchase under this
agreement.
6.4 Consents. AP and AP's Stockholder shall use
reasonable efforts to obtain at the earliest practicable date, in
form and substance reasonably satisfactory to Buyer, all consents
and approvals required to assign to Buyer the rights of AP under
any agreement, commitment or order to be assigned to Buyer that
requires consent to assignment (including, but not limited to,
those set forth on schedule 4.3), without any condition
materially adverse to Buyer or the operation of the Business
after the Closing Date, but if any consent is not obtained (and,
accordingly, pursuant to section 1.2(d) is excluded from the sale
pursuant to this agreement), AP shall use reasonable efforts to
keep the agreement in effect and to give Buyer the benefit of the
agreement to the same extent as if it had been assigned to Buyer,
and Buyer shall perform the obligations under the agreement
relating to the benefit obtained by Buyer. Buyer shall cooperate
with AP in obtaining the consents. If AP is unable to obtain
consent to the assignment of any material agreement (including,
but not limited to, the Job Choices representation agreement) and
is unable to give Buyer the benefit of that agreement, AP and
Buyer shall negotiate in good faith a reduction in the
consideration payable by Buyer pursuant to this agreement to
reflect the loss or cost to Buyer of not obtaining the benefit of
such agreement. Nothing in this agreement shall be construed as
an attempt to assign any agreement or other instrument that by
its terms is nonassignable without the consent of the other
party.
6.5 Expenses. Each of the parties shall bear their
own respective expenses incurred in connection with this
agreement and in connection with all obligations required to be
performed by each of them under this agreement, provided,
however, that Buyer and AP shall each bear one-half of the costs
of the divisional audit conducted by Ernst & Young LLP in
connection with the sale of the Business.
6.6 Sales Taxes. AP shall pay any state or local
sales taxes payable in connection with the sale of the Assets.
6.7 Covenants Against Competition, Solicitation and
Disclosure.
(a) To accord to Buyer the full value of its
purchase, for a period of five years after the Closing Date (and,
with respect to the sale of advertising in college newspapers,
for a period of seven years after the Closing Date) neither AP
nor AP's Stockholder shall, directly or indirectly, engage or be
interested in (as owner, stockholder, partner, member, manager,
lender, employee, agent, consultant or otherwise) any business or
entity that engages, anywhere in the world, in sales and
marketing activities targeting primarily high school and college-
student markets substantially similar to those engaged in by the
Business as of the Closing Date, including, but not limited to,
the sale of advertising (in college newspapers and otherwise) and
of promotional and sponsorship opportunities, GymBoards, and
campus postering operations. However, this section shall not
prevent AP or AP's Stockholder from (i) owning as an investment
up to 2% of a class of equity securities issued by any competitor
of NET that is publicly traded and registered under the
Securities Exchange Act of 1934 or subject to Section 15(d) of
such Act, (ii) continuing to publish and distribute the Directory
of Classes, (iii) continuing to operate the GAPS business, (iv)
engaging in a business that recruits United States students for
Israeli corporations and the Israeli government, and (v) college
credit card marketing for MBNA and Kessler Financial Services.
(b) For a period of five years after the Closing
Date, neither AP nor AP's Stockholder shall, directly or
indirectly, employ or solicit for employment or consulting, on
its own behalf or on behalf of any other person or entity, or
otherwise encourage the resignation of, any employee of the
Business, other than an employee of the Business whose employment
is terminated by Buyer or who terminates his or her employment
with Buyer after he or she refuses Buyer's request to relocate to
another city. For a period of five years after the Closing Date,
neither Buyer nor NET shall, directly or indirectly, employ or
solicit for employment or consulting, on its own behalf or on
behalf of any other person or entity, or otherwise encourage the
resignation of, any employee of AP who is not employed primarily
in the Business.
(c) For a period of five years after the Closing
Date, neither AP nor AP's Stockholder shall at any time hereafter
disclose to anyone, or use in competition with the Business, any
confidential information relating to the Business.
(d) AP and AP's Stockholder acknowledge that the
remedy at law for breach of the provisions of this section 6.7
will be inadequate and that, in addition to any other remedy
Buyer may have, it shall be entitled to an injunction restraining
any breach or threatened breach, without any bond or other
security being required and without the necessity of showing
actual damages. If any court construes the covenant in this
section 6.7 or any part thereof, to be unenforceable in any
respect, the court may reduce the duration or area to the extent
necessary so that the provision is enforceable, and the
provision, as reduced, shall then be enforceable.
(e) Notwithstanding anything to the contrary in
this section 6.7, if Buyer shall be required to make one or more
payments into the escrow account provided for in section 9.2(b),
the obligations of AP's Stockholder under this section 6.7 shall
immediately terminate if Buyer defaults in making any such
payment when due.
6.8 Transition Agreement. At the Closing, Buyer and
AP shall enter into the Transition Agreement in the form of
exhibit 6.8.
6.9 ERISA Arrangements. Buyer shall not assume, have
any responsibility for the continuation of, or be a successor
employer with respect to any Plan. With respect to any group
health plan, as defined in Section 5000(b)(1) of the Code, AP
shall retain, and be responsible for, all obligations and
liabilities relating to or arising under the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA"),
including, without limitation, the obligation to provide COBRA
continuation coverage to current or former AP employees who are
currently entitled to coverage under COBRA or who may become
entitled to such coverage.
6.10 Consulting and Employment Agreements. At the
Closing, Buyer and the individuals referred to on schedule
6.10(a) shall enter into employment and non-competition
agreements in the form of exhibit 6.10(a); Buyer, AP and the
individuals referred to on schedule 6.10(b) shall enter into a
consulting and non-competition agreement in the form of exhibit
6.10(b); and Buyer and the individuals referred to on schedule
6.10(c) shall enter into non-competition agreements in the form
of exhibit 6.10(c).
6.11 Employees. Buyer shall offer employment to all
employees of AP employed primarily in the Business on
substantially similar terms and conditions of employment and with
substantially similar benefits (except as otherwise provided in
schedule 6.11) as those presently enjoyed with AP. Within 90
days after the Closing, Buyer shall establish a 401(k) plan for
employees of the Business with substantially similar benefits as
the 401(k) plan offered by AP. Nothing herein shall limit the
right of Buyer to terminate the employment of any such employee
at any time after the Closing, or alter the salary, wages or
benefits payable to any such employee at any time after the
Closing, except that Buyer may not alter the severance policy
with respect to the former employees of AP. AP shall be
responsible for the payment of all compensation and benefits
(including accrued vacation) payable to all employees who are
hired by Buyer through the Closing Date and shall retain (and
discharge at the Closing) all liabilities and obligations with
respect to employees who are not hired by Buyer. AP shall also
pay the amount of any severance payment related to the period of
employment of any employee of the Business prior to the Closing
who becomes an employee of Buyer after the Closing and whose
services are terminated by Buyer within three months after the
Closing Date. Buyer shall not be responsible for the payment of
any severance obligation of AP to any of its employees or former
employees.
6.12 Interim Financial Statements. AP shall promptly
deliver to Buyer copies of any monthly or quarterly financial
statements or other reports relating to the Business that may be
prepared by AP during the period from the date of this agreement
to the Closing Date. All such financial statements shall be
prepared from the books and records of the Business and, to the
best of AP's knowledge, shall show all income and expenses
attributable to the Business and shall fairly present the
financial position and results of operations of the Business as
of and for the periods indicated. AP shall also furnish to Buyer
any other information concerning the financial and operating
condition of the Business as Buyer from time to time reasonably
may request.
6.13 Directory of Classes. At the Closing, Buyer and
AP shall enter into the Directory of Classes national advertising
representation agreement in the form of exhibit 6.13.
6.14 Change of Name. Within ten days after the
Closing Date, AP shall change its name to a name that does not
include the word "American" or the word "Passage" together with
any geographical reference. AP may change its name to "Passage
Media, Inc." or any other name that complies with the preceding
sentence.
6.15 Equipment Purchases. Prior to the Closing AP
shall purchase at its expense, and shall transfer to Buyer at the
Closing without additional consideration, the items of equipment
referred to on schedule 6.15.
6.16 Subordination Agreement. At the Closing, AP shall
execute a subordination agreement, in form and substance
satisfactory to Buyer's institutional lender, pursuant to which
AP agrees to the subordination of the Note as provided in section
2.1(b).
6.17 Further Assurances. At any time and from time to
time after the Closing Date each party shall, without further
consideration, execute and deliver to the other such other
instruments of transfer and assumption and shall take such other
action as the other may reasonably request to carry out the
transfer of AP's operations, rights and assets and assumption of
liabilities contemplated by this agreement.
6.18 Databases. Buyer acknowledges that it will not
acquire any rights with respect to any portions of the databases
to be transferred to it at the Closing that do not relate to the
Business, and Buyer shall only use those databases in connection
with the Business.
6.19 Multi-Market Advertising. If, at any time during
the seven year period commencing on the Closing Date, Buyer or
NET desires to place multi-market non-college newspaper
advertising on behalf of any third party, it shall place that
advertising through AP's ANN division or its successors. The
price to be paid for such advertising shall be ANN's lowest non-
promotional price for similar types of customers placing similar
volumes and types of ads at the time the ad is placed (or such
other price as the parties may agree). Neither Buyer nor NET
shall have any obligation to place advertising or seek to place
advertising on behalf of any third party.
7. Conditions to Closing.
7.1 Conditions Precedent to Obligations of Buyer.
Buyer's obligation to consummate the purchase under this
agreement is subject to the fulfillment, prior to or at the
Closing, of each of the following conditions (any or all of which
may be waived by Buyer):
(a) all representations and warranties of AP and
AP's Stockholder to Buyer and NET shall be true and correct in
every material respect as of the time of the Closing, with the
same effect as though those representations and warranties had
been made again at and as of that time;
(b) AP and AP's Stockholder shall have performed
and complied with all obligations and covenants required by this
agreement to be performed or complied with by them prior to or at
the Closing;
(c) Buyer shall have been furnished with a
certificate (dated the Closing Date and in form and substance
reasonably satisfactory to Buyer) executed by the president and
secretary of AP, certifying to the fulfillment of the conditions
specified in sections 7.1(a) and 7.1(b);
(d) Buyer shall have been furnished with an
opinion of Messrs. Preston Gates & Ellis, counsel to AP, in the
form of exhibit 7.1(d);
(e) AP shall have duly received all consents
required for the transfer of AP's rights under the agreements,
commitments and orders that require consent to transfer (except
as otherwise provided in section 6.4);
(f) the employment agreements, consulting
agreement and non-competition agreements referred to in section
6.10 shall have been executed;
(g) there shall not be in effect any injunction
or restraining order issued by a court of competent jurisdiction
in an action or proceeding against the consummation of the
purchase and sale pursuant to this agreement; and
(h) Buyer shall have obtained debt financing on
terms and conditions satisfactory to Buyer.
7.2 Conditions Precedent to Obligation of AP. AP's
obligation to consummate the sale under this agreement is subject
to the fulfillment, prior to or at the Closing, of each of the
following conditions (any or all of which may be waived by AP):
(a) All representations and warranties of Buyer
and NET shall be true and correct in every material respect as of
the time of the Closing, with the same effect as though those
representations and warranties had been made again at and as of
that time;
(b) Buyer and NET shall have performed and
complied with all obligations and covenants required by this
agreement to be performed or complied with by them prior to or at
the Closing;
(c) AP shall have been furnished with a
certificate (dated the Closing Date and in form and substance
reasonably satisfactory to AP) executed by the president and
secretary of Buyer and the president and secretary of NET,
certifying to the fulfillment of the conditions specified in
sections 7.2(a) and 7.2(b);
(d) AP shall have been furnished with an opinion
of Proskauer Rose Goetz & Mendelsohn LLP, counsel to Buyer and
NET, in the form of exhibit 7.2(d); and
(e) there shall not be in effect any injunction
or restraining order issued by a court of competent jurisdiction
in an action or proceeding against the consummation of the
purchase and sale pursuant to this agreement.
8. Items To Be Delivered at Closing.
8.1 Items To Be Delivered by AP and AP's Stockholder.
At the Closing, AP and AP's Stockholder shall deliver to Buyer
the following:
(a) The amount payable by AP under section 2.5;
(b) such bills of sale, assignments or other
instruments of transfer and assignment as shall be effective to
vest in Buyer title (in accordance with section 4.4) to the
Assets;
(c) a copy of resolutions of the board of
directors of AP authorizing the execution, delivery and
performance of this agreement and the AP Ancillary Documents by
AP, and a certificate of its secretary or assistant secretary,
dated the Closing Date, that such resolutions were duly adopted
and are in full force and effect;
(d) the certificate referred to in section
7.1(c); and
(e) the opinion referred to in section 7.1(d).
8.2 Items To Be Delivered by Buyer. At the Closing,
Buyer shall deliver to AP the following:
(a) the wire transfer of funds referred to in
section 2.1;
(b) the Note;
(c) instruments pursuant to which Buyer assumes
the obligations and liabilities to be assumed by it under section
2.1(e);
(d) a copy of resolutions of the board of
directors of Buyer authorizing the execution, delivery and
performance of this agreement and the Buyer Ancillary Documents
by Buyer, and a certificate of its secretary or assistant
secretary, dated the Closing Date, that such resolutions were
duly adopted and are in full force and effect;
(e) the certificate referred to in section
7.2(c); and
(f) the opinion referred to in section 7.2(d).
8.3 Items to be Delivered by NET. At the Closing, NET
shall deliver to AP the following:
(a) the Guaranty; and
(b) a copy of resolutions of the board of
directors of NET authorizing the execution, delivery and
performance of this agreement and the NET Ancillary Documents by
NET, and a certificate of its secretary or assistant secretary,
dated the Closing Date, that such resolutions were duly adopted
and are in full force and effect.
8.4 Other Items to be Delivered. At the Closing, AP
and AP's Stockholder, as applicable, and Buyer and NET, as
applicable, and the individuals referred to on schedule 6.10
shall deliver the following:
(a) the Subordination Agreement referred to in
section 6.16;
(b) the Option Agreement;
(c) the amount payable in accordance with section
2.3(a);
(d) the Transition Agreement referred to in
section 6.8;
(e) the employment, consulting and non-
competition agreements referred to in section 6.10; and
(f) the Directory of Classes representation
agreement referred to in section 6.13.
9. Survival of Representations and Warranties;
Indemnification.
9.1 Survival.
(a) All statements contained in any certificate
delivered by or on behalf of AP or AP's Stockholder pursuant to
this agreement or in any certificate delivered in connection with
the transactions contemplated by this agreement shall be
considered representations and warranties by them, respectively,
to Buyer and NET with the same force and effect as if contained
in this agreement. All representations, warranties and
agreements by AP and AP's Stockholder shall survive the Closing
notwithstanding any investigation at any time by or on behalf of
Buyer or NET, but Buyer's consummation of the purchase
contemplated by this agreement shall constitute a waiver by Buyer
of any claim of misrepresentation or breach of warranty with
respect to any representation or warranty as to which, as of the
Closing Date, Buyer's or NET's Chairman or Executive Vice
President has actual knowledge of breach.
(b) All statements contained in any certificate
delivered by or on behalf of Buyer or NET pursuant to this
agreement or in any certificate delivered in connection with the
transactions contemplated by this agreement shall be considered
representations and warranties by Buyer and NET to AP with the
same force and effect as if contained in this agreement. All
representations, warranties and agreements by Buyer and NET shall
survive the Closing notwithstanding any investigation at any time
by or on behalf of AP, but AP's consummation of the sale
contemplated by this agreement shall constitute a waiver by AP of
any claim of misrepresentation or breach of warranty with respect
to any representation or warranty as to which, as of the Closing
Date, AP's Chairman has actual knowledge of breach.
9.2 Indemnification.
(a) Subject to sections 9.1, 9.3 and 9.4, AP and
AP's Stockholder jointly and severally shall indemnify and hold
harmless Buyer and NET against all loss, liability, damage or
expense (including reasonable fees and expenses of counsel,
whether involving a third party or between the parties to this
agreement) Buyer or NET may suffer, sustain or become subject to
as a result of (i) any breach of any warranty, covenant or other
agreement of AP or AP's Stockholder contained in this agreement,
or any misrepresentation by AP or AP's Stockholder, or any claim
by a third party which, without regard to the merits of the
claim, would constitute such a breach or misrepresentation, or
(ii) AP's failure to pay, perform or discharge when due any of
AP's obligations, liabilities, agreements or commitments to third
parties not expressly assumed by Buyer pursuant to this agreement
(including, but not limited to, any liability of AP arising out
of the Washington State Department of Revenue business and
occupation tax audit pending against AP).
(b) In addition to any other rights and remedies
it may have, but subject to sections 9.1, 9.3 and 9.4, Buyer may
set-off against any amounts it owes AP under the Note any amount
payable to Buyer pursuant to this section 9.2(a), but no such
set-off shall constitute an accord and satisfaction or otherwise
modify the rights or obligations of AP under this agreement or
the Note or constitute a breach by Buyer of its obligations under
this agreement or the Note. Without limiting the generality of
the preceding sentence, AP acknowledges and agrees that Buyer's
exercise of its rights pursuant to the preceding sentence shall
not limit Buyer's right to recover any amounts owed to it that
exceed the amount obtained by exercise of those rights and such
exercise shall not be in substitution of or in any way limit
Buyer's exercise of its other rights and remedies under this
agreement, any other agreement or applicable law. If Buyer shall
at any time determine to set-off against the Note, it shall so
notify AP within 24 hours after making the determination. If
Buyer receives a notice from AP disputing Buyer's right to set-
off against the Note, Buyer shall thereafter deposit any
scheduled payments under the Note with an escrow agent reasonably
acceptable to Buyer and AP, which amounts shall be held by the
escrow agent pursuant to an escrow agreement in the form of
exhibit 9.2 until the escrow agent receives written instructions
from both Buyer and AP or a copy of a final order of a court of
competent jurisdiction.
(c) Subject to sections 9.1, 9.3 and 9.4, Buyer
shall indemnify and hold harmless AP against all loss, liability,
damage or expense (including reasonable fees and expenses of
counsel, whether involving a third party or between the parties
to this agreement) AP may suffer, sustain or become subject to as
a result of (i) any breach of any warranty, covenant or other
agreement contained in this agreement or any misrepresentation by
Buyer or NET, or any claim by a third party which, without regard
to the merits of the claim, would constitute such a breach or
misrepresentation, (ii) Buyer's failure to pay, perform and
discharge when due any of AP's agreements, commitments or orders
expressly assumed by Buyer pursuant to this agreement, including
the payment obligations assumed by Buyer under section 2.5, or
(iii) any liability or obligation arising out of the operations
of the Business after the Closing Date.
9.3 Notices of Claims. None of the parties to this
agreement shall be liable for misrepresentation or breach of
warranty except to the extent that notice of a claim is asserted
by another party in writing and delivered within two years after
the Closing Date.
9.4 Limitations on Liability.
(a) Neither AP (or AP's Stockholder) nor Buyer
(or NET) shall be liable for misrepresentation or breach of
warranty under this agreement unless and until the aggregate
amount of loss, liability, damage and expense incurred by the
other as a result of all misrepresentations and breaches of
warranty under this agreement exceeds $25,000 (in which event it
shall be liable for the full amount of the loss, liability,
damage or expense).
(b) The obligation of any party to provide
indemnification shall be limited to actual damages and shall
exclude special, incidental, consequential, indirect or similar
damages. AP recognizes, however, that the purchase price
provided for in this agreement has been determined on the basis
of a multiple (five times) of the operating income of the
Business for the year ended June 30, 1996, as adjusted, and that,
whenever it would be appropriate to apply that multiple to
properly calculate Buyer's damages for misrepresentation or
breach of warranty, the amount of damages determined by applying
the multiple shall be considered "actual damages" and not
"special, consequential, indirect or similar damages".
(c) Notwithstanding anything to the contrary in
this agreement, after the Closing the aggregate liability of AP
and AP's Stockholder to Buyer and NET for indemnification under
this agreement shall be limited to $5 million, except for
misrepresentations or breaches of warranty under section 4.4 and
for fraudulent misrepresentation (for which there shall be no
dollar limitation).
9.5 Defense of Claims. If any action, suit or
proceeding shall be commenced against, or any written claim or
demand be asserted against any party claiming indemnification
under this section 9 ("Indemnified Party") in respect of which it
proposes to demand indemnification hereunder, the Indemnified
Party shall promptly send written notice to the indemnifying
party (the "Indemnifying Party") to that effect and shall consult
in good faith with the Indemnifying Party with respect thereto;
the failure to give such notice shall not affect the liability of
the Indemnifying Party under this agreement unless the failure
materially and adversely affects the ability of the Indemnifying
Party to defend the claim. Subject to the Indemnified Party's
right to participate at its own expense, the defense and
settlement of any such action, suit or proceeding shall be under
the sole direction and control of the Indemnifying Party, who
shall reasonably proceed in good faith at all times; provided
that the control by the Indemnifying Party of the defense of such
action, suit or proceeding shall not delay the timely defense
thereof; and provided, further, that the Indemnifying Party shall
not consent to the entry of any judgment or enter into any
settlement which includes any term which shall require any act or
forbearance on the part of the Indemnified Party and which does
not unconditionally release the Indemnified Party from all
liability in respect of such claim, action or proceeding without
the prior written consent of the Indemnified Party, which consent
shall not be unreasonably withheld. In the event the
Indemnifying Party does not proceed in good faith and in a timely
manner to defend any action, suit or proceeding, the Indemnified
Party may assume such defense.
10 Miscellaneous.
10.1 Finders. The parties represent and warrant that
they have not employed or utilized the services of any broker or
finder in connection with this agreement or the transactions
contemplated by it, except that AP and AP's Stockholder have used
the services of Veronis, Suhler & Associates, Inc. and shall be
liable for payment of the fee in the amount of $150,000 payable
to it at the Closing.
10.2 Entire Agreement. This agreement contains, and is
intended as, a complete statement of all of the terms of the
arrangements between the parties with respect to the matters
provided for, supersedes any previous agreements and
understandings between the parties with respect to those matters,
and cannot be changed or terminated orally. Except as
specifically set forth in this agreement, there are no
representations or warranties by any party in connection with the
transactions contemplated by this agreement.
10.3 Governing Law. This agreement shall be governed
by and construed in accordance with the law of the State of
Washington applicable to agreements made and to be performed in
Washington.
10.4 Headings. The section headings of this agreement
are for reference purposes only and are to be given no effect in
the construction or interpretation of this agreement.
10.5 Notices. All notices and other communications
under this agreement shall be in writing and shall be deemed
given when delivered personally, sent by facsimile (with a copy
by any other means permitted for the giving of notices under this
agreement) or mailed by registered mail, return receipt
requested, to the parties at the following addresses (or to such
other address as a party may have specified by notice given to
the other party pursuant to this provision):
(a) If to AP or AP's Stockholder, addressed to
either or both of them at:
American Passage Media Corporation
401 Second Avenue West
Seattle, Washington 98119-4107
Attention: Gilbert Scherer, President
Fax: (206) 281-5993
with a copy to:
Robert S. Jaffe, Esq.
Preston Gates & Ellis
5000 Columbia Center
701 Fifth Avenue
Seattle, Washington 98104-7078
Fax: (206) 623-7022
(b) If to Buyer or NET, addressed to either or
both of them at:
Network Event Theater, Inc.
149 Fifth Avenue
New York, N.Y. 10010
Attention: Harlan D. Peltz, Chairman
Fax: (212) 779-3241
with a copy to:
Bertram A. Abrams, Esq.
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Fax: (212) 969-2900
10.6 Separability. If any provision of this agreement
is held to be invalid or unenforceable, the balance of this
agreement shall remain in effect.
10.7 Waiver. Any party may waive compliance by another
with any of the provisions of this agreement. No waiver of any
provision shall be construed as a waiver of any other provision.
Any waiver must be in writing and must be signed by the party
waiving the provision.
10.8 Publicity. Prior to the Closing neither Buyer (or
NET) nor AP (or AP's Stockholder) shall, without the consent of
the other, make any public statement or disseminate any
information (other than to its attorneys, accountants, advisors
and employees on a need-to-know basis or other than to obtain any
approvals or consents required hereunder) regarding the
transaction contemplated by this agreement, except that Buyer and
NET may release such information regarding the transaction as
they reasonably determine necessary, after consultation with AP,
to comply with applicable law or the requirements of Nasdaq.
After the Closing Buyer and NET may release such information
regarding the transaction as they determine appropriate after
consultation with AP.
10.9 Assignment. Prior to the Closing, none of the
parties may assign any of its rights under this agreement except
that Buyer or NET may assign its rights to a subsidiary or
affiliate of NET. After the Closing, any of the parties may
assign any of its rights under this agreement (including its
rights under section 6.7). No assignment shall relieve the
assignor of its obligations under this agreement. Neither AP,
Buyer nor NET may assign any of its rights under the AP Ancillary
Documents, Buyer Ancillary Documents or NET Ancillary Documents,
except as otherwise expressly provided therein.
10.10 Specific Performance. AP and AP's
Stockholder acknowledge that the Business is of a special, unique
and extraordinary character, and that any material breach by AP
of its obligation to consummate the sale pursuant to this
agreement could not be compensated for by damages. Accordingly,
if AP breaches its obligations under section 1 or 6.3 of this
agreement, Buyer shall be entitled, in addition to any other
remedies that it may have, to enforcement of this agreement by a
decree of specific performance requiring AP to consummate the
sale pursuant to this agreement (and on the terms specified in
this agreement) and no bond or other security shall be required.
10.11 Attorneys' Fees. In any action brought to
enforce or seek damages under this agreement, the prevailing
party shall be entitled to recover from the losing party the
attorneys' fees and all other costs and expenses reasonably
incurred by it.
10.12 Guaranty of Performance. NET guarantees to
AP the prompt and full performance when due of all obligations of
Buyer to AP arising under this agreement.
10.13 No Third Party Beneficiaries. This agreement
does not create, and shall not be construed as creating, any
rights enforceable by any person not a party to this agreement.
NETWORK EVENT THEATER, INC.
By: /s/ Harlan D. Peltz
Harlan D. Peltz
Chairman and Chief Executive Officer
AMERICAN PASSAGE MEDIA, INC.
By: /s/ Harlan D. Peltz
Harlan D. Peltz
Chairman and Chief Executive Officer
AMERICAN PASSAGE MEDIA CORPORATION
By: /s/ Gilbert Scherer
Gilbert Scherer
President and Chief Executive Officer
/s/ Gilbert Scherer
Gilbert Scherer
SUBORDINATED PROMISSORY NOTE
$750,000 September 13, 1996
FOR VALUE RECEIVED, the undersigned American Passage Media,
Inc., a Delaware corporation ("Maker"), located at 149 Fifth
Avenue, New York, NY 10011, promises to pay in lawful money of
the United States to American Passage Media Corporation, a
Washington corporation ("Holder"), at 401 Second Avenue West,
Seattle, WA 98119, or at such other place as Holder hereof may
from time to time designate in writing, the principal sum of
Seven Hundred Fifty Thousand and No/00 Dollars ($750,000), with
interest on the unpaid principal from the date hereof at the rate
of eight percent (8%) per annum. Interest shall be computed on
the basis of a year of 365 days and the actual number of days
elapsed.
This Note shall be paid in eight equal quarterly
installments of Ninety-Three Thousand Seven Hundred Fifty and
No/100 Dollars ($93,750) together with interest thereon. The
first payment shall be due on December 13, 1996 and thereafter
payments shall be due on the first day of each successive
quarter. The entire outstanding principal balance, together with
all accrued interest and any costs or expenses, shall in any
event be payable in full on or before December 13, 1998.
This Note may be prepaid in part or in full, at any time,
without penalty.
In the event Maker fails to pay any amount hereunder when
due, and such failure continues for a period of five (5) days
after the date Holder notifies Maker of such failure ("Notice"),
such failure shall constitute a default hereunder and, at the
option of Holder, without prior notice, the entire indebtedness
hereby represented shall immediately become due and payable and
bear interest at the rate of twelve percent (12%) per annum until
this Note is fully paid. Holder shall be obligated to provide
the Notice only for Maker's initial failure to make payments due
hereunder; thereafter, no Notice shall be required and Holder may
accelerate payments due hereunder in the event Maker fails to pay
any amount when due hereunder or within five (5) days thereafter.
It is specifically acknowledged by Maker that timely payments are
of the essence of this Note.
If suit is brought on this Note, or if it is placed in the
hands of an attorney for collection, after any default, Maker
promises to pay all costs of collection, including reasonable
attorneys' fees and costs incurred thereby, whether or not a suit
is filed.
The waiver by Holder of any breach or violation of or
default under any provisions of this Note shall not constitute a
waiver by Holder of any other provision or any subsequent breach
or violation of this Note or default hereunder.
Maker and all endorsers and all persons liable or to become
liable on this Note, waive demand, presentment and protest, waive
notice of demand, protest, dishonor and nonpayment, consent to
any and all renewals and extensions of the time and payment
hereof and further agree that at any time the terms of payment
hereof may be modified by agreement between the Holder hereof and
Maker without affecting the liability of any party to this Note
or any person liable or to become liable with respect to any
indebtedness evidenced thereby.
This Note and the payments of principal, interest and all
other amounts that may become due under this Note are subordinate
and junior in right of payment, in the manner and to the extent
specified in the Subordination Agreement dated this date among
Holder, Maker and Signet Bank, to the principal of and premium,
if any, and interest on all indebtedness of Maker for money
borrowed on this date from Signet Bank, and any renewals,
extensions, refundings and substitutions of that indebtedness.
This Note and the payment of principal, interest and all other
amounts that may become due under this Note are also subordinate
and junior in right of payment, in the manner and to the extent
required by any financial institution from whom Maker borrows
money in connection with any substitution or replacement in whole
or in part of the indebtedness referred to in the previous
sentence, to the principal and premium, if any, and interest on
all such substitution or replacement indebtedness of Maker to
that financial institution. Notwithstanding the foregoing, Maker
shall continue to make all principal and interest payments as
provided herein as long as no event of default has occurred and
is continuing under the terms of any note or other agreement or
instrument relating to the indebtedness to any institutional
lender referred to above.
This is the subordinated promissory note referred to in, and
is subject to all of the terms of the Asset Purchase Agreement
dated September 13, 1996 among Holder, its majority stockholder,
Gilbert Scherer, Network Event Theater, Inc., and Maker.
Notice is hereby given that oral agreements or oral
commitments to loan money, extend credit, or to forbear from
enforcing repayment of a debt are not enforceable under
Washington law.
This Note is made with reference to and is to be construed
in accordance with the laws of the State of Washington.
American Passage Media, Inc.
By: /s/ Harlan D. Peltz
Harlan D. Peltz
Chairman and
Chief Executive Officer
GUARANTY
THIS GUARANTY is executed by the undersigned, Network Event
Theater, Inc., a Delaware corporation ("Guarantor"), in order to
induce American Passage Media Corporation, a Washington
corporation ("AP") to enter into an Asset Purchase Agreement
dated September 13, 1996, the Subordinated Promissory Note and
other agreements referenced therein (collectively, the
"Agreements") with American Passage Media, Inc. (the "Company").
The Company is a subsidiary of Guarantor. In consideration of
the foregoing, Guarantor hereby guarantees to AP, its successors
and assigns, (i) the full and prompt payment of the Indebtedness,
as hereinafter defined, on the terms and conditions set forth
herein and (ii) the performance of all other obligations of the
Company under the Agreements, as hereinafter defined.
1. The term "Indebtedness" as used in this Guaranty
shall mean and include any and all of the Company's liabilities,
obligations, debts, and indebtedness to AP, direct or contingent,
now existing or hereafter incurred or created arising out of or
in respect of the Agreements, including, without limitation, all
principal amounts, interest, fees, costs, expenses (including,
without limitation, expenses of collection and attorneys' fees),
taxes and indemnities.
2. The obligations of Guarantor hereunder shall not
be impaired, discharged, or in any manner affected as a result
of: (i) the nonexistence of any of the Company as a legal
entity; (ii) any lack of authority of any of the Company to
execute the Agreements; (iii) the voluntary or involuntary
liquidation, sale, or other disposition of all or substantially
all of the assets of the Company; (iv) any receivership,
insolvency, bankruptcy, reorganization or other similar
proceeding affect any of the Company or Guarantor; or (v) any
impairment, modification, release, discharge or limitation of the
liability of the Company, or any modification, discharge or
extension of the terms of any of the Indebtedness resulting from
the operation of the United States Bankruptcy Code or any similar
federal or state statute.
3. This Guaranty is a guaranty of payment and not
collection. The failure of AP to exercise any rights or remedies
it has or may have against the Company shall in no way impair the
obligations of Guarantor hereunder. The liability of Guarantor
under this Agreement is and shall be direct.
4. (A) Upon the happening of any event of default
under the Agreements, including nonpayment of any amounts then
due and the expiration of any applicable grace period, AP may
immediately and at any time thereafter, without notice to the
Company or any other person, make the Indebtedness immediately
due and payable by Guarantor.
(B) Upon telex or other written notice from AP to
Guarantor of any event of default and request for payment,
Guarantor shall immediately pay to AP any and all Indebtedness
then due and payable in immediately available funds.
5. Guarantor hereby consents to the following, none
of which shall affect, change, or discharge the obligations of
Guarantor under this Guaranty: (i) any renewal of, or extension
of the time or times of payment of any portion of the
Indebtedness; (ii) acceptance by AP of any security of any kind;
(iii) surrender, release, reconveyance (partial or otherwise),
exchange, impairment, or alteration of any security of any kind
for the Indebtedness; (iv) acceleration of the maturity of the
Indebtedness; (v) any forbearance, indulgence or waiver by AP
under any of the Agreements; (vi) release (partial or otherwise),
or alteration of the liability of, any maker, endorser, or
guarantor of the Indebtedness; (vii) settlement or compromise of
any claim of AP against the Company; (viii) the amendment,
modification or extension of any of the Agreements, with or
without notice to Guarantor.
6. Guarantor hereby expressly waives (on its own
behalf and not on behalf of the Company) the following: (i)
notice of the acceptance of this Guaranty; (ii) notice of the
amount of the Indebtedness now existing or which may hereafter
exist; (iii) notice or demand for payment, notice of default or
notice of nonpayment related to the Indebtedness; (iv)
presentment, protest and notice of protest, as to the
Indebtedness or as required under any of the Agreements; (v)
notice of assignment or transfer, of any of the Agreements or the
Indebtedness; (vi) all other notices to which Guarantor might
otherwise be entitled in connection with this Guaranty, other
than those expressly provided for in this Guaranty; (vii) any
defense based upon an alleged election of remedies by AP; (viii)
any defense based upon any claim that any exercise of any
remedies by AP has impaired or destroyed Guarantor's rights of
subrogation against the Company; (xi) any right to require AP to
proceed against any of the Company or any other person, to
proceed against or exhaust any security held by AP, or to pursue
or exhaust any other remedy available to AP, before proceeding
against Guarantor; and (x) any claim based upon the failure of AP
to file or enforce a claim against the estate (in administration,
bankruptcy, or any other proceeding) of any party.
7. Guarantor shall reimburse AP for all costs and
expenses, including without limitation, reasonable attorneys'
fees, incurred by AP whether or not suit is instituted, in
enforcing or exercising any rights, powers, privileges or
remedies granted to AP under this Guaranty.
8. This Guaranty shall inure to the benefit of AP,
its successors and assigns.
9. Guarantor acknowledges that it has taken and will
hereafter take all steps necessary to at all times be fully
informed about all aspects of the financial condition and
business affairs of the Company that Guarantor deems relevant to
the obligations of Guarantor hereunder and hereby waives and
fully discharges AP from any and all obligations, if any, to
communicate to Guarantor any information whatsoever regarding the
financial condition or business affairs of the Company.
10. If now or hereafter the Company is or becomes
insolvent, than at no time shall the Guarantor be or become a
"creditor" of the Company within the meaning of II U.S.C.
547(b), or any successor provision of the federal bankruptcy
laws.
11. Guarantor acknowledges and agrees that Guarantor's
obligations under this Guaranty shall apply to and continue with
respect to any amount paid to AP that is subsequently recovered
from AP for any reason whatsoever (including without limitation
as a result of a bankruptcy, insolvency, or fraudulent conveyance
proceeding).
12. This instrument and the Agreements contain the
entire agreement of the parties. It may not be modified or
amended orally, but only by an agreement in writing signed by the
party against whom enforcement of any waiver, modification,
amendment, extension or discharge is sought.
13. This Guaranty shall be governed by and shall be
construed in accordance with the laws of the State of Washington.
14. NOTICE TO GUARANTOR: ORAL AGREEMENTS OR ORAL
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
WASHINGTON LAW.
15. Notwithstanding anything to the contrary in this
Guaranty, the obligations of Guarantor are subject to all the
terms and conditions of the respective Agreements and this
Guaranty is not intended to expand the rights that AP would have
against Guarantor if Guarantor had been a direct obligor to AP
instead of the Company; accordingly with respect to those
provisions of this Guaranty that relate to AP's right to enforce
this Guaranty and to recover the costs incurred by it in
enforcing this Guaranty, AP shall not have any rights under this
Guaranty except to the extent that those rights are provided for
in, or arise out of the express terms of, the Agreements.
Without limiting the generality of foregoing, (a) the obligations
of Guarantor are subject to the subordination provisions of the
Subordinated Promissory Note and the related Subordination
Agreement and Guarantor shall not be obligated to make any
payment under this Guaranty to the extent such payment would be
prohibited under those subordination provisions, (b) AP's rights
to indemnification shall be limited to those expressly stated in
the Asset Purchase Agreement, provided however, any
indemnification obligations of the Company contained in the Asset
Purchase Agreement shall be deemed to be indemnification
obligations of Guarantor, and (c) the Guarantor may assert and
shall be entitled to the benefit of all defenses and
counterclaims available to the Company.
GUARANTOR:
Network Event Theater, Inc.
By: /s/ Harlan D. Peltz
Harlan D. Peltz
Chairman and Chief
Executive Officer
OPTION AGREEMENT
September 13, 1996
The parties to this agreement are Network Event
Theater, Inc., a Delaware corporation (the "Company"), and
American Passage Media Corporation, a Washington corporation
("AP").
Pursuant to an Asset Purchase Agreement dated September
13, 1996 among AP, Gilbert Scherer, the Company and American
Passage Media, Inc., a wholly-owned subsidiary of the Company
("Buyer"), Buyer has today acquired all of AP's business and
assets relating to sales and marketing activities involving the
high school and college-student markets, including the sale of
advertising and of promotional and sponsorship opportunities,
campus postering operations, college newspaper advertising
placement operations, GymBoards operations, AdRaX operations, the
Crux WebSite, Take the Break operations, Directory of Classes
national advertising representation, and other business
activities, such as those set forth in the Job Choices
representation agreement. The specific products and activities
purchased from AP are referred to collectively as the "Business".
As partial consideration for the acquisition of the
Business, the Company has agreed to grant to AP an option to
purchase shares of the Company's common stock on the terms and
conditions set forth in this agreement.
It is therefore agreed as follows:
1. Grant of Option.
(a) Subject to the terms of this agreement, the
Company hereby grants to AP an option to purchase, for a price of
$2.627 per share, up to 100,000 shares of the Company's common
stock (the "Maximum Shares"), subject to the following:
(i) if the Net Revenue of the Business for
the 36 calendar months following June 30, 1996 multiplied by .33
equals 120% or more than $5,802,209 (the "1996 Net Revenue"), the
options shall be exercisable and fully vested as to 100% of the
Maximum Shares;
(ii) if the Net Revenue of the Business for
the 36 calendar months following June 30, 1996 multiplied by .33
equals 115% or more, but less than 120%, of the 1996 Net Revenue,
the options shall be exercisable and fully vested and fully
vested as to 75% of the Maximum Shares and no more;
(iii) if the Net Revenue of the Business for
the 36 calendar months following June 30, 1996 multiplied by .33
equals 110% or more, but less than 115%, of the 1996 Net Revenue,
the options shall be exercisable and fully vested as to 50% of
the Maximum Shares and no more; or
(iv) if the Net Revenue of the Business for
the 36 calendar months following June 30, 1996 multiplied by .33
equals 100% or more, but less than 110%, of the 1996 Net Revenue,
the options shall be exercisable and fully vested as to 25% of
the Maximum Shares and no more.
(b) As used in this agreement, the term "Net
Revenue" means an amount equal to gross revenue, less the sum of
the following: payments to college newspapers for ad placement
costs, agency commissions, cash and trade discounts, credits to
customers, and competitive discounts.
(c) Within 30 days after the expiration of 36
calendar months following June 30, 1996, the Company shall
determine the Net Revenue of the Business for that period and
shall prepare and deliver to AP a statement of its determination
(which statement shall set forth in reasonable detail the basis
for such determination). That statement shall be final and
binding unless, within five days after it is delivered to AP, AP
delivers to the Company a statement disputing the Company's
determination. If AP disputes the Company's determination, the
parties shall confer with regard to the determination and an
appropriate adjustment shall be made as agreed upon by the
parties (or, if they are unable to resolve the matter within ten
days after AP gives a dispute notice, a firm of independent
certified public accountants, whose decision on the matter shall
be binding and whose fees and expenses shall be borne 50% by the
Company and 50% by AP, shall be designated by agreement between
them; if they fail to agree on the firm to decide the matter
within an additional five days, the accountants shall be selected
by the president of the American Institute of Certified Public
Accountants).
(d) In connection with its business dealings with
Buyer after this date, AP shall not take any action that will
result in an artificial or temporary increase in the Net Revenue
of the Business for the 36 calendar months following June 30,
1996. AP represents and warrants to the Company that it has not
taken any such action since June 30, 1996. Buyer covenants that
it shall not take any action that will result in an artificial
decrease in the Net Revenue of the Business for the 36 calendar
months following June 30, 1996. If Buyer sells any revenue
producing division of the Business other than in connection with
a sale of substantially all of its assets, the parties shall in
good faith negotiate an appropriate adjustment to the terms of
section 1(a) to reflect the impact on Net Revenue from that sale
as of the date of sale.
2. Exercise of Option. The option (to the extent
exercisable in accordance with paragraph 2(a)) may be exercised
in whole at any time or in part from time to time during the
period commencing on the date of final determination of Net
Revenue for the 36 calendar months following June 30, 1996 and
ending at 5:00 P.M., New York City time on the 180th day
thereafter (or, if that is not a business day, the next
succeeding business day) (the "Termination Date"). For this
purpose, the Net Revenue for the 36 calendar months following
June 30, 1996 shall be "finally determined" on the fifth day
after the Company's statement is given to AP pursuant to
paragraph 1(c) or, if AP has given the Company notice that it
disputed the statement, on the date the parties agree upon or the
accountants determine the Net Revenue.
3. Procedure for Exercise of Option.
(a) The option may be exercised only by the
delivery to the President of the Company at its principal office,
within the time specified in paragraph 2, of a written notice of
exercise duly signed by AP (which notice shall indicate any
change in the corporate name of AP). The notice shall specify
the number of shares for which the option is being exercised and
shall be accompanied by payment in full of the purchase price of
the shares by (i) certified check payable to the Company, (ii) a
certificate or certificates for publicly traded shares of the
Company's common stock then owned by AP, duly endorsed for
transfer to the Company (which shares shall be valued at the
average closing bid price of the Company's common shares on
Nasdaq as of 4:00 PM Eastern Standard Time during the three
trading days immediately preceding the date the notice is given
(the "Valuation Price")), (iii) an executed agreement of AP
(accompanied by an opinion of AP's counsel to the effect that the
agreement was duly authorized and constitutes the valid and
binding obligation of AP enforceable in accordance with its
terms) exchanging its right pursuant to this option to purchase a
specified number of the shares covered by this option (which
exchanged shares shall be valued by multiplying the number of
exchanged shares by the difference between the Valuation Price
and the exercise price provided for in section 1(a)), or (iv) any
combination of these methods that together amount to the full
purchase price of the shares for which the option is exercised.
Promptly, but in no event more than ten days following the
delivery of notice and payment, after the exercise notice and
payment are delivered to the Company, the Company shall deliver
or cause to be delivered to AP a stock certificate representing
the number of shares purchased.
(b) Upon exercise of the option, AP shall furnish
the Company with such representations and agreements as the
Company may reasonably request to assure compliance with the
Securities Act of 1933 and such undertakings as may be required
by an underwriter of the Company's securities.
4. Non-Transferability. The option provided for in
this agreement may not be transferred by AP and may be exercised
only by AP, and any purported transfer shall be void.
5. Anti-Dilution Provisions.
(a) If there is any stock dividend, stock split,
or combination of shares of Common Stock of the Company, the
number and amount of shares then subject to this option shall be
proportionately adjusted; no change shall be made in the
aggregate purchase price to be paid for all shares subject to
this option, but such aggregate purchase price shall be allocated
among all shares subject to this option after giving effect to
such adjustment.
(b) If there is any other change in the Common
Stock of the Company, including recapitalization, reorganization,
exchange of shares, offering of subscription rights, or a merger
or consolidation in which the Company is the surviving
corporation, such adjustment, if any, shall be made in the shares
then subject to this option as the board of directors of the
Company may deem equitable. Failure of the board of directors to
provide for an adjustment pursuant to this subparagraph prior to
the effective date of the action shall be conclusive evidence
that no adjustment is required upon such action.
(c) If the Company is merged into or consolidated
with any other corporation, or if it transfers all or
substantially all of its assets to any other corporation, at the
election of the Company either (i) the Company shall cause
provision to be made for the continuance of this option after
such event, or for the substitution for this option of an option
covering the number and class of securities which AP would have
been entitled to receive in such merger or consolidation or by
virtue of such sale if AP had been the holder of record of a
number of shares of Common Stock of the Company equal to the
number of shares covered by the then unexercised portion of this
option, or (ii) the Company shall give to AP written notice of
its election not to cause such provision to be made and this
option shall become exercisable in full (or, at the election of
AP, in part) as to the number of shares that have vested under
section 1(a) (or, if the event occurs prior to June 30, 1999, as
to 100% of the Maximum Shares) at any time during a period of 20
days, to be designated by the Company, ending not more than 10
days prior to the effective date of such merger, consolidation or
sale, in which case this option shall not be exercisable to any
extent after the expiration of such 20 day period. In no event,
however, shall this option be exercisable after the Termination
Date.
(d) The Company may engage a firm of independent
certified public accountants of recognized standing, which may be
the Company's regular auditors, to make any computation required
under this paragraph 5 and a certificate of that firm showing the
required adjustment shall be conclusive and binding on the
parties.
6. Reservation of Shares. The Company will at all
times during the term of this agreement reserve and keep
available such number of authorized shares as are required to
satisfy its obligations under this agreement.
7. Certain Rights not Conferred by Option.
(a) Nothing in this agreement shall (i) limit the
right of the Company's board of directors to manage the Company's
business and affairs (including the authorization of the issuance
of additional shares and the determination of the nature and
amount of liabilities and obligations incurred by the Company or
its subsidiaries) without regard for the effect of any action
upon AP or upon the value of the shares subject to, or acquired
upon exercise of, this option, or (ii) give AP any claim against
the Company or any of its officers or directors with respect to
any action or omission relating to the Company's business or
affairs, whether or not that action or omission affects the value
of the shares subject to, or acquired upon exercise of, this
option.
(b) AP shall not, by virtue of holding this
option, be entitled to any rights of a stockholder in the
Company. AP shall not be considered a record holder of any
shares purchased upon exercise of the option until the date on
which it is actually recorded as a holder of the shares upon the
Company's stock records.
8. Miscellaneous.
(a) This agreement shall be governed by and
construed in accordance with the law of the state of New York
applicable to agreements made and to be performed in New York.
(b) The failure of a party to insist upon strict
adherence to any term of this agreement on any occasion shall not
be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any
other term of this agreement. Any waiver must be in writing.
(c) All notices and other communications under
this agreement shall be in writing and shall be deemed given when
delivered personally, sent by facsimile (with a copy by any other
means permitted for the giving of notices under this agreement)
or mailed by registered mail, return receipt requested, to the
parties at the following addresses (or to such other address as a
party may have specified by notice given to the other party
pursuant to this provision):
If to AP:
401 Second Avenue West
Seattle, Washington 98119-4107
Attention: Gilbert Scherer, President
Fax: (206) 281-5993
with a copy to:
Robert S. Jaffe, Esq.
Preston Gates & Ellis
5000 Columbia Center
701 Fifth Avenue
Seattle, Washington 98104-7078
Fax: (206) 623-7022
If to the Company:
149 Fifth Avenue
New York, N.Y. 10010
Attention: Harlan D. Peltz, Chairman
Fax: (212) 779-3241
with a copy to:
Bertram A. Abrams, Esq.
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Fax: (212) 969-2900
(d) This agreement contains a complete statement
of all of the arrangements between the parties with respect to
the option provided for in this agreement, supersedes all
existing agreements relating to the option provided for in this
agreement and cannot be changed or terminated orally.
NETWORK EVENT THEATER, INC.
By: /s/ Harlan D. Peltz
Harlan D. Peltz
AMERICAN PASSAGE MEDIA CORPORATION
By: /s/ Gilbert Scherer
Gilbert Scherer
CONSULTING AND NON-COMPETITION AGREEMENT
September 13, 1996
The parties to this agreement are American Passage
Media Corporation, a Washington corporation ("AP"), and American
Passage Media, Inc., a Delaware corporation ("Buyer").
Pursuant to an Asset Purchase Agreement dated September
13, 1996 (the "Asset Purchase Agreement"), AP has today sold to
Buyer substantially all of the business and assets relating to
sales and marketing activities involving the high school and
college student markets (the "Business"), excluding the business
of publishing and distributing Directory of Classes.
Buyer considers it essential to secure the full value
of its purchase that AP provide consulting services, and that AP
and its principal executives not compete with Buyer, in
connection with Buyer's operation of the Business.
Accordingly, it is agreed as follows:
1. Consulting Services.
(a) For the periods referred to in section 1(b),
AP shall provide consulting services to Buyer in connection with
(i) the transition of the Business to Buyer, (ii) the resolution
of problems that may arise in the Business from time to time
during the Term, and (iii) such other matters relating to the
Business as Buyer reasonably may request. The consulting
services to be provided by AP shall include assisting in the
operation and administration of the Business, providing marketing
advice and analysis, and providing contacts with suppliers and
customers.
(b) AP shall cause Gilbert Scherer and Carl
Bryant to be available to Buyer to perform the services provided
for in section 1(a) for a period of two years commencing on the
date of this agreement and shall cause Linda Naismith, Dan
Brillon, Dean Miles, JoAnn Turnbull and other persons reasonably
requested by Buyer to be available to Buyer to perform the
services provided for in section 1(a) for a period of one year
commencing on the date of this agreement. In the event such
persons are not available to provide such services, AP shall use
its reasonable efforts to substitute persons of comparable
experience, provided, however, AP shall not be required to hire
any persons. Buyer acknowledges that as long as those
individuals remain officers or employees of AP, they shall
continue to devote the major portion of their energies and
efforts to their responsibilities for AP, and that the consulting
services to be provided under this agreement are limited in scope
and not intended to materially interfere with those
responsibilities. AP recognizes that during the first several
months after this date those individuals may be required to
devote a significant amount of time to their services under this
agreement in connection with the transition of the Business.
Notwithstanding the foregoing, none of the individuals referred
to above shall be obligated to provide a minimum time commitment
to the provision of consulting services, to provide the
consulting services in a specific manner, whether in person or
otherwise, or to travel for the performance of the consulting
services.
2. Compensation.
(a) As full consideration for the performance by
AP of its obligations under this agreement, Buyer shall pay AP
the sum of $273,600, payable in equal quarterly installments
commencing on December 13, 1996.
(b) AP shall be reimbursed for all expenses
(other than the salaries and benefits associated with the persons
described in section 1(b)) incurred by AP in connection with the
performance of its services under this agreement, but any expense
anticipated to exceed $500 for which AP will seek reimbursement
must be authorized in advance by Buyer. Buyer shall reimburse AP
for its expenses within two weeks after Buyer's receipt of
invoices from AP accompanied by appropriate supporting
documentation.
3. Non-Competition; Non-Solicitation;
Confidentiality.
(a) For a period of five years commencing on the
date of this agreement (and, with respect to the sale of
advertising in college newspapers, for a period of seven years
after this date), neither AP nor Gilbert Scherer or Carl Bryant
(together with AP, the "Primary Consultants") shall, except as
provided herein, directly or indirectly, engage or be interested
in (as owner, stockholder, partner, member, manager, lender,
employee, agent, consultant or otherwise) any business or entity
that engages, anywhere in the world, in sales and marketing
activities targeting primarily high school and college-student
markets substantially similar to those engaged in by the Business
as of the date of this agreement, including, but not limited to,
the sale of advertising (in college newspapers and otherwise) and
of promotional and sponsorship opportunities, GymBoards, and
campus postering operations. However, this section shall not
prevent the Primary Consultants from (i) owning as an investment
up to 2% of a class of equity securities issued by any competitor
of Buyer or its affiliates that is publicly traded and registered
under the Securities Exchange Act of 1934 or subject to Section
15(d) of such Act, (ii) continuing to publish and distribute the
Directory of Classes, (iii) continuing to operate the GAPS
business, (iv) engaging in a business that recruits United States
students for Israeli corporations and the Israeli government, and
(v) college credit card marketing for MBNA and Kessler Financial
Services.
(b) For a period of five years commencing on the
date of this agreement, none of the Primary Consultants shall,
directly or indirectly, employ or solicit for employment or
consulting, on its or his own behalf or on behalf of any other
person or entity, or otherwise encourage the resignation of, any
employee of the Business, other than an employee of the Business
whose employment is terminated by Buyer or who terminates his or
her employment with Buyer after he or she refuses Buyer's request
to relocate to another city. For a period of five years
commencing on the date of this agreement, neither Buyer nor any
of its affiliates shall, directly or indirectly, employ or
solicit for employment or consulting, on its own behalf or on
behalf of any other person or entity, or otherwise encourage the
resignation of, any employee of AP who is not employed primarily
in the Business.
(c) For a period of five years commencing on the
date of this agreement, none of the Primary Consultants shall
disclose to anyone except to carry out their obligations
hereunder or unless authorized to do so by Buyer, or use in
competition with the Business, any confidential information
relating to the Business. Subject to section 3(a), the foregoing
shall not prohibit the Primary Consultants from using in their
other business ventures information in a non-tangible form,
including ideas, concepts, know-how and techniques, which they
obtained from their participation or experience in the
advertising or media industries.
(d) Each of the Primary Consultants and Buyer
acknowledges that the remedy at law for breach of the provisions
of this section 3 will be inadequate and that, in addition to any
other remedy Buyer or AP may have, it shall be entitled to an
injunction restraining any breach or threatened breach, without
any bond or other security being required and without the
necessity of showing actual damages. If any court construes the
covenant in this section 3 or any part thereof, to be
unenforceable in any respect, the court may reduce the duration
or area to the extent necessary so that the provision is
enforceable, and the provision, as reduced, shall then be
enforceable.
4. Miscellaneous.
(a) Neither party may assign its rights under
this agreement without the prior written consent of the other
party, which consent may be withheld in the other party's sole
discretion.
(b) All notices and other communications under
this agreement shall be in writing and shall be deemed given when
delivered personally, sent by facsimile (with a copy by any other
means permitted for the giving of notices under this agreement)
or mailed by registered mail, return receipt requested, to the
parties at the following addresses (or to such other address as a
party may have specified by notice given to the other party
pursuant to this provision):
If to AP:
American Passage Media Corporation
401 Second Avenue West
Seattle, Washington 98119-4107
Attention: Gilbert Scherer, President
Fax: (206) 281-5993
If to Buyer:
c/o Network Event Theater, Inc.
149 Fifth Avenue
New York, N.Y. 10010
Attention: Harlan D. Peltz, Chairman
Fax: (212) 779-3241
(c) This agreement shall be governed by and
construed in accordance with the law of the State of Washington
applicable to agreements made and to be performed in Washington.
(d) The failure of a party to insist upon strict
adherence to any term of this agreement on any occasion shall not
be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any
other term of this agreement. Any waiver must be in writing.
(e) This agreement, together with the Asset
Purchase Agreement, contains a complete statement of all of the
arrangements between the parties with respect to its subject
matter, supersedes all previous agreements and understandings
between or on behalf of them with respect to that subject matter
and cannot be changed or terminated orally.
(f) AP shall perform the services to be rendered
under this agreement as an independent contractor and neither it
nor any of its officers or employees shall have any authority to
assume or create any obligation or liability on behalf of or in
the name of Buyer or to bind
Buyer in any respect.
AMERICAN PASSAGE MEDIA CORPORATION
By: /s/ Gilbert Scherer
Gilbert Scherer
President and Chief
Executive Officer
AMERICAN PASSAGE MEDIA, INC.
By: /s/ Harlan D. Peltz
Harlan D. Peltz
Chairman and Chief
Executive Officer
The undersigned agree to perform the consulting services
provided for in section 1 and to be bound by the provisions of
section 3 of the foregoing agreement.
/s/ Gilbert Scherer
Gilbert Scherer
/s/ Carl Bryant
Carl Bryant
TRANSITION AGREEMENT
September 13, 1996
The parties to this agreement are American Passage
Media Corporation, a Washington corporation ("AP"), and American
Passage Media, Inc., a Delaware corporation ("Buyer").
Pursuant to an Asset Purchase Agreement dated September
13, 1996, AP has today sold to Buyer substantially all of the
business and assets relating to sales and marketing activities
involving the high school and college student markets (the
"Business"), excluding the business of publishing and
distributing Directory of Classes.
This agreement sets forth the terms upon which AP shall
provide to Buyer certain services required by Buyer to effect the
transition to Buyer of the operation of the Business.
Accordingly, it is agreed as follows:
1. Office Space; Office Services.
(a) AP shall provide Buyer with the office space
currently used by the Business and its employees at 401 Second
Avenue West, Seattle, Washington (the "Seattle Site"), 529 Fifth
Avenue, New York, New York (the "New York Site"), and Columbia
Center II, Suite 290, Rosemont, Illinois (the "Chicago Site")
(together, the Seattle Site, the New York Site, and the Chicago
Site are the "Sites"). Any common areas (e.g., bathrooms and
kitchens) shared with other businesses shall continue to be
shared in the same manner.
(i) As consideration for the office space
to be provided under this section 1(a), Buyer shall make payments
to AP at the rate of $0.67 per square foot per month multiplied
by the square foot usage as set forth in the Allocation, as
defined below, for the Seattle Site, at the rate of $1.67 per
square foot per month multiplied by the square foot usage as set
forth in the Allocation for the New York Site, and at the rate of
$1.34 per square foot per month multiplied by the square foot
usage as set forth in the Allocation for the Chicago Site.
(ii) All Common Area Maintenance charges
for the New York Site and Chicago Site shall be allocated and
payable based on each party's square feet occupancy of the
applicable Site as set forth on schedule 1 ("Allocation").
(iii) All utilities, janitorial services and
real estate-related taxes shall be allocated and payable
according to the Allocation, provided however, the taxes for the
Chicago Site shall be included in the payments set forth in
section 1(a)(i).
(b) AP shall provide the Business and its
employees at each Site with office services substantially similar
to the office services currently provided to the Business and its
employees. Those services shall include, but not be limited to,
mailroom, security, storage, supply, photocopying, messenger,
reception and cafeteria services (including coffee, tea and
Friday assortments as previously provided). All costs for the
office services shall be allocated and payable according to the
Allocation. Additionally, and for the costs set forth herein:
(i) AP shall provide Buyer with the
telephone services (including local, long distance, voice mail
and data link services) at each Site as currently used by the
Business and its employees, provided such services are available
to AP. AP shall use its reasonable efforts to cause the
providers of such telephone services to separately bill to the
appropriate party any dedicated line services. In the event such
separate billing is not possible, all costs of such telephone
services, including basic charges, shall be allocated to the
parties based on the Allocation. Without limiting the foregoing,
Buyer shall be responsible for the cost of all telephone calls
made by its employees (and for the cost of any additional lines
added exclusively to provide for Buyer's needs).
(ii) All telephone and facsimile maintenance
costs shall be allocated and payable according to the Allocation.
(iii) AP shall use its reasonable efforts to
cause all office supplies ordered by Buyer's employees to be
billed separately and directly to Buyer and Buyer shall be
responsible for paying those bills and any associated costs. In
the event such separate billing is not possible, all costs of
such office supplies shall be allocated to the parties based on
the Allocation.
(iv) AP shall provide Buyer with the copier
services at each Site as currently used by the Business and its
employees, provided such services are available to AP. All
copier costs, including lease and maintenance costs, shall be
allocated and payable according to the Allocation.
(c) If Buyer is unable to use the office space at
any Site during the respective periods set forth in section 1(d)
due to the failure of AP to receive the consent of the applicable
landlord, AP shall reimburse Buyer for any reasonable costs
incurred by Buyer in moving to another site and for any amounts
Buyer is required to pay for another site in excess of the
amounts provided for in section 1(a)(i).
(d) AP shall provide the office space and office
services provided for in this section 1 until (i) December 15,
1996, with respect to the Seattle Site, (ii) May 31, 1997, with
respect to the New York Site, and (iii) July 14, 1997, with
respect to the Chicago Site.
2. Accounting Services.
For a period of up to six months after the date of
this agreement, AP shall provide to Buyer the following services:
(a) AP shall provide to Buyer accounting
services necessary to perform the billing, collection and
accounting functions of the Business in a manner consistent with
the manner in which those functions have been performed in the
past. In that connection, AP shall provide to Buyer the services
of the accounts receivable clerk, the accounts payable clerk and
the accounting manager who previously provided accounting
services to the Business. Dan Brillon shall provide limited
oversight responsibilities in connection with the accounting
operations, subject to Buyer's direction and control.
Notwithstanding anything to the contrary contained herein, Buyer
shall bear full responsibility for the accounting functions
associated with the Business. In the event such personnel are not
available to provide such services, AP shall use its reasonable
efforts to substitute such personnel with personnel of comparable
experience, provided, however, AP shall not be required to hire
any personnel. The scope, timing and provision of such services
shall be sufficient to carry on the accounting functions of the
Business consistent with past practices.
(b) Dan Brillon and each of the other accounting
personnel referred to in section 2(a) shall assist Buyer in the
training of its accounting personnel and the establishment of its
accounting systems for the Business.
(c) AP shall continue to perform for the Business
their accounting procedures with respect to the general ledger,
including, but not limited to, posting monthly recurring journal
entries and month end close.
(d) AP shall prepare on a timely basis consistent
with past practices daily, weekly and month-end reports and shall
mail the daily and weekly reports to Buyer not later than seven
days after preparation thereof and shall mail the month-end
reports to Buyer not later than ten days after preparation
thereof. AP shall provide to Buyer's representatives full access
at all times during normal business hours to all accounting
records of the Business, provided, however, in no event shall
such access unduly affect the business of AP.
(e) As consideration for the accounting services
to be provided under this section 2, Buyer shall make payments to
AP at the rate of $6,854 per month ("Accounting Services
Consideration") (which is equal to the sum of the monthly
salaries and benefits of the required number of accounting
personnel as agreed upon by the parties and as set forth by
individual personnel in schedule 2). As Buyer hires the
accounting personnel set forth in section 2(a), the Accounting
Services Consideration shall be payable as follows: for the first
full month following each such hire, AP shall be paid the entire
Accounting Services Consideration; for the second full month
following each such hire, AP shall be paid the Accounting
Services Consideration less one-half (1/2) the amount allocated
in schedule 2 to such hired personnel; and for the third full
month following each such hire and thereafter with respect to
each such hire, AP shall be paid the Accounting Services
Consideration less the amount allocated in schedule 2 to such
hired personnel. Buyer shall also reimburse AP for all out-of-
pocket expenses incurred by it with Buyer's prior approval in
connection with the performance of its accounting services
pursuant to this agreement, including, but not limited to, Dan
Brillon's travel expense to New York for training, if required.
3. Printing Services.
(a) For a period of one year after the date of
this agreement, AP shall provide Buyer with such graphic art and
printing services as Buyer may require as are consistent with
past practices of the Business, provided that AP has the
capability to provide such services. AP shall be under no
obligation to directly or indirectly maintain any such printing
capabilities or capacities. Subject to the foregoing, such
services may include, but not be limited to, art production,
layout, pre-press, and printing services. All film and other
materials provided by Buyer to AP shall be returned to Buyer upon
completion of a job.
(b) For each printing job submitted by Buyer to
AP, AP shall charge Buyer its "in-house" rate, consisting of its
direct labor, materials, and equipment and overhead costs as set
forth on schedule 3, plus a mark-up of 25% (except that the mark-
up for gymboards shall be 13%).
(c) For each art production and/or layout job
submitted by Buyer to AP, AP shall charge Buyer $60 per hour for
the services of an assistant art director and $75 per hour for
the services of a senior art director. Additionally, Buyer shall
pay all costs for materials related to such jobs. For each pre-
press job submitted by Buyer to AP, AP shall charge Buyer $75 per
hour plus the costs of any materials related to such job.
4. Fulfillment Services.
(a) Until June 30, 1997, AP shall provide Buyer
with such fulfillment, warehousing, shipping and related services
at its Seattle warehouse as Buyer may require for the Campus
Postering and Gymboards businesses. The services to be provided
under this section 4 shall be substantially the same as have been
provided to the Business since July 1, 1995.
(b) As consideration for the services to be
provided by AP under this section 4, Buyer shall pay AP a monthly
fee at AP's base rate for all direct costs incurred by AP on
behalf of Buyer, including, without limitation, labor, shipping
materials, freight charges and equipment depreciation, overhead
costs and warehouse space of 4,000 square feet.
(c) Buyer shall be responsible for maintaining
its own post office boxes and permits and for paying its own
postage expenses.
(d) Upon termination of the services provided for
in this section 4, Buyer shall provide AP with detailed
instructions as to the shipping or other disposal of its
warehoused materials. All of Buyer's materials shall be shipped
or otherwise disposed of, at Buyer's expense, within 30 days
after the date of termination.
5. Payment.
(a) AP shall bill Buyer at the end of each
calendar month for the amounts payable by Buyer to AP under this
agreement. Each bill shall include reasonable documentation of
the charges incurred. Buyer shall have the right to audit the
charges and, if it is established that the charges should be more
or less than the bill submitted by AP, the charges shall be
adjusted accordingly and payment made promptly of any amount
owed.
(b) Each bill submitted to Buyer under section
5(a) for office space and accounting services shall be payable in
full within ten days after receipt of the bill and all other
bills submitted to Buyer under section 5(a) shall be paid as soon
as practicable but not later than 30 days after receipt of the
bill, except that Buyer may withhold payment of any disputed
amount until the dispute is resolved.
(c) If any service for which Buyer pays a fixed
monthly fee is commenced or terminated during the month, Buyer
shall only pay a fee for the portion of the month in which it
received that service.
6. Termination of Services. Buyer may elect to
discontinue any of the services provided by AP under this
agreement at any time prior to the termination date specified in
a particular section upon 30 days prior notice to AP, except for
the provision of fulfillment services pursuant to section 4 which
may be discontinued by Buyer prior to the dates specified therein
upon 90 days prior notice to AP provided that if during the 90
day period after the notice is given to AP, AP does not perform
the fulfillment services in a satisfactory manner, Buyer may
terminate the fulfillment services immediately.
7. Delivery of Information. Upon the termination of
any service provided for in this agreement, AP shall deliver to
Buyer all software, databases, records, files and other
information relating to the Business and that service. AP shall
not retain copies of any of those materials, except AP may retain
copies of all such documents and information as it reasonably
determines necessary for archival purposes, shall not use those
documents and information for any other purpose, shall not
furnish copies to any third party (except as required by law),
and shall use reasonable efforts to limit its employees' access
to those documents and information, and except that AP may,
subject to section 6.7 of the Asset Purchase Agreement, retain
copies of and use such documents, information and software to the
extent used by AP in its other businesses as of the date of this
agreement.
8. Confidentiality. AP shall not at any time or in
any manner, either directly or indirectly, use for its benefit or
divulge, disclose or communicate to anyone any confidential
information relating to the Business obtained by AP in connection
with the furnishing of any services or facilities pursuant to
this agreement. AP shall use its reasonable efforts to protect
such information and treat it as strictly confidential.
9. Representation and Warranty; AP's Performance. AP
represents and warrants to Buyer (subject to the applicable
consent requirements set forth on schedule 9) that it has the
full right to execute and deliver this agreement, to perform its
obligations under this agreement, and to and to grant to Buyer
the rights granted to it in this agreement; that the execution
and performance by AP of its obligations under this agreement
will not violate any contractual or other obligation binding upon
AP; and that this agreement is a valid and binding obligation of
AP. AP shall use its reasonable efforts to provide the services
specified in this agreement in a diligent, competent and timely
manner, and in substantially the same manner as they were
provided prior to the sale of the Business to Buyer. AP shall
have no liability to Buyer resulting from the provision of such
services except for claims directly attributable to AP's gross
negligence or willful misconduct, provided, however, AP shall
have liability to Buyer resulting from the provision of the
printing services provided for in section 3 to the extent that
any vendor of such printing services would have liability to an
unrelated third party to which it rendered services pursuant to
an arrangement negotiated at arms-length. Notwithstanding the
foregoing, in no event shall AP's liability hereunder include any
special, incidental, consequential, indirect or similar damages.
10 Miscellaneous.
(a) This agreement contains a complete statement
of all of the terms of the arrangements between the parties with
respect to the matters provided for, supersedes any previous
agreements and understandings between the parties with respect to
those matters, and cannot be changed or terminated orally.
(b) This agreement shall be governed by and
construed in accordance with the law of the State of Washington
applicable to agreements made and to be performed in Washington.
(c) The section headings of this agreement are
for reference purposes only and are to be given no effect in the
construction or interpretation of this agreement.
(d) All notices and other communications under
this agreement shall be in writing and shall be deemed given when
delivered personally, sent by facsimile (with a copy by any other
means permitted for the giving of notices under this agreement)
or mailed by registered mail, return receipt requested, to the
parties at the following addresses (or to such other address as a
party may have specified by notice given to the other party
pursuant to this provision):
If to AP:
American Passage Media Corporation
401 Second Avenue West
Seattle, Washington 98119-4107
Attention: Gilbert Scherer, President
Fax: (206) 281-5993
If to Buyer:
c/o Network Event Theater, Inc.
149 Fifth Avenue
New York, N.Y. 10010
Attention: Harlan D. Peltz, Chairman
Fax: (212) 779-3241
(e) If any provision of this agreement is held to
be invalid or unenforceable, the balance of this agreement shall
remain in effect.
(f) Neither party may assign its rights under
this agreement without the prior written consent of the other
party, which consent may be withheld in the other party's sole
discretion.
(g) In any action brought to enforce or seek
damages under this agreement, the prevailing party shall be
entitled to recover from the losing party the attorneys' fees and
all other costs and expenses reasonably incurred by it.
(h) The failure of a party to insist upon strict
adherence to any term of this agreement on any occasion shall not
be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any
other term of this agreement. Any waiver must be in writing.
(i) Buyer is not a partner or joint venturer of
AP. Nothing in this agreement shall be construed so as to create
either of those relationships or to impose any liability as such
on either party, or to grant either party the right to bind the
other without the other's prior written consent.
AMERICAN PASSAGE MEDIA CORPORATION
By: /s/ Gilbert Scherer
Gilbert Scherer
President and Chief Executive Officer
AMERICAN PASSAGE MEDIA, INC.
By: /s/ Harlan D. Peltz
Harlan D. Peltz
Chairman and Chief Executive Officer
Transition Agreement
Schedule 1
NY Chi Sea
# Personnel 11 2 19
Square Footage Used 3,910 994 4,114
% of Total Office 33% 50% 22%
Annual sq ft rate 20.00 16.11 8.09
Monthly sq ft rate 1.67 1.34 0.67
Monthly base rent 6516.67 1334.45 2773.52
Taxes 417.19 inc. 443.99*
Utilities/Janitorial 733.13 100.00 693.38
10% NY Rent Tax 766.70
Monthly Subtotals 8433.68 1434.45 3910.89 13779.02
+ CAM to be billed
$ per Sq Foot $ 2.16 $ 1.44 $ 0.95
Lease End or Move 5/31/97 7/14/97 12/31/96
Date
(Taxes in Seattle are estimated)
Transition Agreement
Schedule 2
Accounting Personnel
Base Benefits
Salary @ 20% Total % Annual Monthly
Accounts Payable Clerk 20,000 4,000 24,000 80% 19,200 1,600
Accounts Receivable Clerk20,000 4,000 24,000 80% 19,200 1,600
Account Manager 36,542 7,308 43,850 100% 43,850 3,654
82,250 6,854
Transition Agreement
Schedule 3
PRINTING QUOTE GUIDELINE
for STANDARD PRINTING JOB
Update: 7/96
CAMPUS POSTERS
1) Maximum Size: 9 x 12
Make Ready Per/M
Stock 10 Pt C1S $500 4c $95
Plate ready film provided 2c $85
Standard die cut $200 $25/M
ADRAX SIZE
1) Maximum Size: 7 1/2 x 23 $400 4c $60/C
Stock: 10 Pt C1S
Plate ready film provided
No die cut or pocket
Minimum: 100 units
TAKE ONE
1) Flat BRC 3-1/2 x 5-1/2 $500 4c/2c $34/M
Stock: 7 pt. Matte for mailing 2c/2c $30/M
Plate Ready film provided
GYMBOARD SIZE
1) Standard Size: 17 1/2 x 21 3/4 $250 4c $60/C
(per version)
Stock: 10 Pts C1S
Plate ready film provided
Average Run 5500 each of 4 versions
Cost for average run = $1300 per version
Pre-press work required to go from CRA or film that is not plate
ready will be charged at $75 per hour plus materials.
Transition Agreement
Schedule 9
1. Illinois Office Lease
Location: Columbia Center II, Suite 290
9450 West Bryn Mawr
Rosemont, IL 60018
Landlord: American National Bank & Trust Company
Frain Camins & Swartchild, Managers
Lease Expiration: 7/14/97
2. Washington Office Lease
Location: 410 Second Avenue West
Seattle, WA 98119
Landlord: R&A Investments
Lease Expiration: 5/31/98
DIRECTORY OF CLASSES
REPRESENTATION AGREEMENT
September 13, 1996
The parties to this agreement are American Passage
Media Corporation, a Washington corporation ("Publisher"), and
American Passage Media, Inc., a Delaware corporation
("Representative").
Pursuant to an Asset Purchase Agreement dated September
13, 1996, Publisher has today sold to Representative
substantially all of its business and assets relating to sales
and marketing activities involving the high school and college
student markets, excluding the business of publishing and
distributing Directory of Classes (the "Periodical"), but
including the right to sell national advertising for the
Periodical.
This agreement sets forth the terms upon which
Representative shall serve as the exclusive national advertising
representative for the Periodical.
It is agreed as follows:
1. Exclusive Representation.
Publisher appoints Representative as the exclusive
representative for the sale of national advertising in the
Periodical. Advertising customarily regarded as local and
regional is excluded from this agreement. Publisher shall make
available for national advertising various positions in each
issue of the Periodical, including Publisher-produced inserts and
cards and advertiser-supplied inserts and cards and, to the
extent not sold prior to receipt of an insertion order from
Representative, the inside front cover and the inside back cover.
Publisher shall make available for national advertising such
additional positions as may be required to enable Representative
to maximize sales of national advertising for the Periodical,
except to the extent that in any instance Publisher determines
that making available such a position would jeopardize its
relationship with a particular school. Publisher shall not place
any national advertisements in the Periodical except upon orders
submitted by Representative.
2. Commission.
(a) Representative shall be entitled to
commissions on net national advertising sales ("Sales") in
amounts equal to 20% of the total Sales, plus an additional 1% of
the total Sales for each $20,000 of Sales in excess of $800,000,
in each twelve month period during the term of this agreement, up
to maximum commissions for any twelve month period equal to 30%
of total Sales. For this purpose, the term "net national
advertising sales" means gross billings less agency commissions,
extraordinary charges for bindery production, BRC printing and
freight charges (except to the extent that those charges exceed
the actual out-of-pocket cost of the production, printing or
freight), and any cash discounts, where earned.
(b) Representative shall use its best efforts
consistent with industry practice to invoice and collect on
advertising payments. Not later than the 15th and 30th day of
each calendar month Representative shall remit to Publisher all
amounts collected by it during the preceding fifteen days, less
the amount of Representative's commission; each payment shall be
accompanied by a statement showing the total amount collected and
specifying in reasonable detail the computation of the commission
payable to Representative. Publisher shall use reasonable
efforts to assist in collection and promptly shall remit to
Representative the commission due to Representative with respect
to any payments Publisher receives from advertisers or agencies.
Representative shall not be entitled to any commission with
respect to unpaid advertising.
3. Duties of Representative.
(a) Representative shall use its best efforts to
solicit and sell national advertising space in the Periodical.
Representative shall seek to solicit advertising from individuals
and entities of financial integrity, but shall not be responsible
for uncollected or uncollectible accounts except that, if payment
is not made for any advertisement published pursuant to an
insertion order submitted by Representative, Representative shall
reimburse Publisher for its direct out-of-pocket mechanical costs
incurred in connection with the publication of that
advertisement. All advertising solicited by Representative shall
be subject to the policies, terms and conditions, published rates
and advertising levels established by Publisher and shall be
subject to acceptance by Publisher in accordance with its
established procedure. Representative shall maintain payment
terms consistent with Publisher's past practices and, in the
absence of a bona fide dispute with an advertiser or agency,
Representative shall not take any action that would result in
deferral or delay of advertising payments from any advertiser.
Representative shall submit to Publisher for prior approval all
proposals prepared for advertisers containing any merchandising
or sponsorship participation.
(b) Representative acknowledges that Publisher is
required to obtain approval for all advertising in advance of
publication from the registrars' offices of all participating
colleges and Representative shall assist Publisher in complying
with this requirement.
(c) Representative shall keep complete records of
all sales calls and shall provide Publisher with information
regarding its sales calls upon Publisher's request.
4. Publisher's Obligations.
(a) Publisher shall make available to
Representative all information available to it with respect to
prospective national advertisers and shall refer to
Representative all inquiries and requests with respect to
national advertising in the Periodical.
(b) Publisher shall provide to Representative, at
no cost to Representative, copies of the Periodical and all
available promotional aids, including rate cards, media kits and
research information. Publisher shall work with Representative
in developing any new sales materials, media kits, etc., and any
such materials developed by Representative shall require
Publisher's written approval.
(c) Publisher shall provide to national
advertisers make-goods for unsatisfactory advertisements that
result from publishing or manufacturing errors.
5. Expenses. Representative shall bear all expenses
incurred by it in connection with its solicitation and sale of
advertising space in the Periodical, including, but not limited
to, travel, entertainment and telephone. If Publisher in writing
requests Representative to travel, attend trade shows,
conventions or sales meetings, or perform other services not in
the normal course of its duties, Publisher shall reimburse
Representative for its reasonable expenses incurred in that
connection, upon submission of appropriate documentation.
6. Conflicts of Interest. During the term of this
agreement, Representative shall not represent any directory-type
publication that directly competes for advertising sales with the
Periodical in the college student market, unless disclosed in
writing and agreed to by Publisher.
7. Term and Performance Requirements.
(a) Except as otherwise provided in this section
7, Representative's appointment as exclusive representative for
the sale of national advertising shall be in effect for a period
of eight years and may be renewed by Representative for
additional periods of one year each by notice given to Publisher
not later than six months prior to the expiration of the initial
eight year term or three months prior to the expiration of any
renewal year. Representative shall not have the right to renew,
however, unless it has achieved the Minimum Sales Level referred
to in section 7(b) for the year preceding the year during which
the notice of renewal is given.
(b) Representative's appointment as exclusive
representative for the sale of national advertising may be
terminated by Publisher by notice given to Representative within
thirty days after each anniversary of the date of this agreement
(including during any renewal period), commencing with the second
anniversary, if Representative's total Sales for the twelve-month
period or the twenty-four month period preceding that anniversary
were less than the respective "Minimum Sales Levels" for those
periods. The Minimum Sales Level for the twelve month period
preceding any anniversary initially shall be $400,000 and the
Minimum Sales Level for the twenty-four month period preceding
any anniversary initially shall be $1 million, and each of those
amounts shall be (i) proportionately decreased as of each
anniversary (commencing with the first anniversary) to the extent
that the aggregate rate base for all issues published during the
preceding twelve-month period was less than 4,000,000 and (ii)
increased by 5% on each anniversary (commencing with the first
anniversary), except that there shall be no increase on any
anniversary unless the Periodical's rate base with respect to
each issue published during the preceding twelve-month period was
equal to or greater than 1,000,000.
(c) Representative's appointment as exclusive
representative for the sale of national advertising may be
terminated by Representative at any time during the initial term
upon six months notice to Publisher and may be terminated by
Representative at any time during any renewal term upon three
months notice to Publisher.
(d) Representative's appointment as exclusive
representative for the sale of national advertising may be
terminated by either party by notice given to the other if the
other has breached a material provision of this agreement and
failed to cure the breach within 30 days after notice of the
breach given to it by the terminating party.
(e) If Representative's appointment as exclusive
representative for the sale of national advertising is terminated
by either party, other than pursuant to section 7(d),
Representative shall continue to be entitled to receive
commissions on all insertion orders on hand or contracts in force
on the effective date of termination.
8. Representative's Rights Upon Sale or
Discontinuance of Periodical.
(a) If at any time Publisher wishes to sell all
or substantially all of the assets and business of the
Periodical, Publisher shall give notice to Representative of the
proposed sale and Purchaser shall have the right to make an offer
to purchase the assets and business by notice (setting forth the
proposed purchase price and other terms of the purchase) given to
Publisher at any time within 30 days after the date Publisher's
notice is given. If Representative does not make an offer within
that 30 day period, Publisher may sell the assets and business to
an unrelated third party at any price and on any terms. If
Representative does make an offer within that 30 day period,
Publisher may only sell the assets and business to an unrelated
third party at a price and on terms more favorable to Publisher
than the price and terms specified in Representative's offer. If
a sale to a third party pursuant to this section is not
consummated within 120 days following the notice to
Representative, Publisher may not sell all or substantially all
of the assets and business of the Periodical to a third party
unless it again complies with the provisions of this section
8(a).
(b) Notwithstanding the provisions of section
8(a), Publisher may not sell the assets and business of the
Periodical to a third party unless (i) Publisher pays to
Representative the Refund Amount (as defined below) as of the
date of sale or (ii) the third party assumes, pursuant to an
agreement in form and substance reasonably satisfactory to
Representative, Publisher's obligations under this agreement,
Publisher guarantees the payment to Representative of the Refund
Amount as of the date of sale, and Representative approves the
transaction (which approval may not be unreasonably withheld).
(c) If Publisher shall at any time cease
publication of the Periodical without selling the assets of the
Periodical to a third party, Publisher shall within 30 days
thereafter pay Representative the Refund Amount as of the date
publication ceased (but excluding any amount in the nature of
interest provided for in section 8(e)).
(d) If the rate base for the Periodical is less
than 950,000 for any issue, within 30 days after publication of
that issue Publisher shall pay to Representative the Refund
Amount as of the date of payment (but if Publisher ceases
publication of the Periodical within that thirty day period, the
payment shall exclude any amount in the nature of interest
provided for in section 8(e)).
(e) The purchase price of the business and assets
acquired by Representative from Publisher on the date of this
agreement included the amount of $625,000 attributable to the
right to sell national advertising for the Periodical, and the
parties have agreed that, under certain circumstances, as
described above, Representative shall be entitled to the return
of all or a portion of that amount (less net amounts realized by
Representative under this agreement), together with an amount in
the nature of interest on that amount. The amount to which
Representative shall be entitled is referred to above as the
"Refund Amount," which, as of any date, shall be an amount equal
to (i) $625,000 less an amount (the "Shortfall") equal to 60% of
the excess of the total commissions paid to Representative under
this agreement prior to that date over the total direct sales
costs (i.e., commissions, promotion costs, travel and
entertainment expenses) incurred by Representative solely in
connection with the Periodical prior to that date, plus (ii) the
sum of the amounts in the nature of interest that result from
calculating an amount in the nature of interest through the last
day of each calendar quarter after the date of this agreement, at
the rate of 12.5% a year, on (x) the amount of the Shortfall as
of the last day of that quarter plus (y) the total of the amounts
in the nature of interest resulting from the calculation for all
prior quarters.
(f) Any Refund Amount payable to Representative
under this section 8 shall be paid first by offsetting that
amount against the next payments otherwise due under the
promissory note delivered by Representative to Publisher pursuant
to the Asset Purchase Agreement, and any excess amount shall be
paid by Publisher to Representative by wire transfer or certified
or bank check. Upon payment of any Refund Amount this agreement
shall terminate immediately.
9. Confidentiality.
(a) Within 30 days after termination of
Representative's appointment as exclusive representative for the
sale of national advertising, Representative shall return to
Publisher all promotional materials, marketing or sales research,
demographic studies and any and all other data or information
pertaining to the Periodical.
(b) Neither party shall at any time during or
after the term of this agreement divulge to any third party any
confidential information relating to the Periodical or to the
relationship between Publisher and Representative.
10. Miscellaneous.
(a) This agreement contains a complete statement
of all of the terms of the arrangements between the parties with
respect to the matters provided for, supersedes any previous
agreements and understandings between the parties with respect to
those matters, and cannot be changed or terminated orally.
(b) This agreement shall be governed by and
construed in accordance with the law of the State of Washington
applicable to agreements made and to be performed in Washington.
(c) The section headings of this agreement are
for reference purposes only and are to be given no effect in the
construction or interpretation of this agreement.
(d) All notices and other communications under
this agreement shall be in writing and shall be deemed given when
delivered personally, sent by facsimile (with a copy by any other
means permitted for the giving of notices under this agreement)
or mailed by registered mail, return receipt requested, to the
parties at the following addresses (or to such other address as a
party may have specified by notice given to the other party
pursuant to this provision):
If to Publisher:
American Passage Media Corporation
401 Second Avenue West
Seattle, Washington 98119-4107
Attention: Gilbert Scherer, President
Fax: (206) 281-5993
If to Representative:
c/o Network Event Theater, Inc.
149 Fifth Avenue
New York, N.Y. 10010
Attention: Harlan D. Peltz, Chairman
Fax: (212) 779-3241
(e) If any provision of this agreement is
held to be invalid or unenforceable, the balance of this
agreement shall remain in effect.
(f) Representative may assign its rights under
this agreement to (i) any subsidiary or affiliate of
Representative, (ii) any purchaser of all or substantially all of
the assets and business of Representative, or (iii) any other
entity with the prior written consent of Publisher, provided that
the assignee assumes (in a writing satisfactory in form and
substance to Publisher) Representative's obligations under this
agreement. No such assignment shall relieve Representative of
its obligations under this agreement.
(g) In any action brought to enforce or seek
damages under this agreement, the prevailing party shall be
entitled to recover from the losing party the attorneys' fees and
all other costs and expenses reasonably incurred by it.
(h) The failure of a party to insist upon strict
adherence to any term of this agreement on any occasion shall not
be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any
other term of this agreement. Any waiver must be in writing.
(i) Representative is an independent contractor
and not a partner or joint venturer of Publisher. Nothing in
this agreement shall be construed so as to create any of those
relationships or to impose any liability as such on either party,
or to grant either party the right to bind the other without the
other's prior written consent.
AMERICAN PASSAGE MEDIA CORPORATION
By: /s/ Gilbert Scherer
Gilbert Scherer
President and Chief Executive
Officer
AMERICAN PASSAGE MEDIA, INC.
By: /s/ Harlan D. Peltz
Harlan D. Peltz
Chairman and Chief Executive
Officer
SIGNET BANK
BUSINESS LOAN AGREEMENT
Principal Loan Date Maturity Loan No Call
$3,500,000.00 9-13-1996 09-30-2001
Collateral Account Officer Initials
anerican
References in the shaded area are for Lender's use only and do
not limit the applicability of this document to any particular
loan or item.
Borrower: American Passage Media, Inc. Lender: SIGNET BANK
149 Fifth Avenue Suite 500
New York, NY 10010 7799 Leesburg Pike
Falls Church, VA 22043
THIS BUSINESS LOAN AGREEMENT between American Passage Media, Inc.
("Borrower") and SIGNET BANK ("Lender") is made on the following
terms and conditions. Borrower has received prior commercial
loans from Lender or has applied to Lender for a commercial loan
or loans and other financial accommodations, including those
which may be described on any exhibit or schedule attached to
this Agreement. All such loans and financial accommodations,
together with all future loans and financial accommodations from
Lender to Borrower, are referred to in this Agreement
individually as the "Loan" and collectively as the "Loans."
Borrower understands and agrees that: (a) in granting, renewing,
or extending any Loan, Lender is relying upon Borrower's
representations, warranties, and agreements, as set forth in this
Agreement; (b) the granting, renewing, or extending of any Loan
by Lender at all times shall be subject to Lender's sole judgment
and discretion; and (c) all such Loans shall be and shall remain
subject to the following terms and conditions of this Agreement.
TERM. This Agreement shall be effective as of September 11,
1996, and shall continue thereafter until all Indebtedness of
Borrower to Lender has been performed in full and the parties
terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following
meanings when used in this Agreement. Terms not otherwise
defined in this Agreement shall have the meanings attributed to
such terms in the Uniform Commercial Code. All references to
dollar amounts shall mean amounts in lawful money of the United
States of America.
Agreement. The word "Agreement" means this Business Loan
Agreement, as this Business Loan Agreement may be amended or
modified from time to time, together with all exhibits and
schedules attached to this Business Loan Agreement from time
to time.
Borrower. The word "Borrower" means American Passage Media,
Inc. and its successors and assigns. The word "Borrower"
also includes, as applicable, all subsidiaries and
affiliates of Borrower as provided below in the paragraph
titled "Subsidiaries and Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive
Environmental Response, Compensation, and Liability Act of
1980, as amended.
Cash Flow. The words "Cash Flow" mean net income after
taxes, and exclusive of extraordinary gains and income, plus
depreciation and amortization.
Collateral. The word "Collateral" means and includes
without limitation all property and assets granted as
collateral security for a Loan, whether real or personal
property, whether granted directly or indirectly, whether
granted now or in the future, and whether granted in the
form of a security interest, mortgage, deed of trust,
assignment, pledge, chattel mortgage, chattel trust,
factor's lien, equipment trust, conditional sale, trust
receipt, lien, charge, lien or title retention contract,
lease or consignment intended as a security device, or any
other security or lien interest whatsoever, whether created
by law, contract, or otherwise.
Debt. The word "Debt" means all of Borrower's liabilities
excluding Subordinated Debt.
ERISA. The word "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended.
Event of Default. The words "Event of Default" mean and
include without limitation any of the Events of Default set
forth below in the section titled "EVENTS OF DEFAULT."
Grantor. The word "Grantor" means and includes without
limitation each and all of the persons or entities granting
a Security Interest in any Collateral for the Indebtedness,
and their personal representatives, successors and assigns.
Guarantor. The word "Guarantor" means and includes without
limitation each and all of the guarantors, sureties, and
accommodation parties in connection with any Indebtedness
and their personal representatives, successors and assigns.
Indebtedness. The word "Indebtedness" means and includes
without limitation all Loans, including all principal,
interest and other fees, costs and charges, if any, together
with all other present and future liabilities and
obligations of Borrower, or any one or more of them, to
Lender, whether direct or indirect, matured or unmatured,
and whether absolute or contingent, joint, several, or joint
and several, and no matter how the same may be evidenced or
shall arise.
Lender. The word "Lender" means SIGNET BANK, its successors
and assigns.
Liquid Assets. The words "Liquid Assets" mean Borrower's
cash on hand plus Borrower's readily marketable securities.
Loan. The word "Loan" or "Loans" means and includes without
limitation any and all commercial loans and financial
accommodations from Lender to Borrower, whether now or
hereafter existing, and however evidenced, including without
limitation those loans and financial accommodations
described herein or described on any exhibit or schedule
attached to this Agreement from time to time.
Note. The word "Note" means and includes without limitation
Borrower's promissory note or notes, if any, evidencing
Borrower's Loan obligations in favor of Lender, as well as
any substitute, replacement or refinancing note or notes
therefor.
Permitted Liens. The words "Permitted Liens" mean: (a)
liens and security interests securing Indebtedness owed by
Borrower to Lender; (b) liens for taxes, assessments, or
similar charges either not yet due or being contested in
good faith; (c) liens of materialmen, mechanics,
warehousemen, or carriers, or other like liens arising in
the ordinary course of business and securing obligations
which are not yet delinquent; (d) purchase money liens or
purchase money security interests upon or in any property
acquired or held by Borrower in the ordinary course of
business to secure indebtedness outstanding on the date of
this Agreement or permitted to be incurred under the
paragraph of this Agreement titled "Indebtedness and Liens";
(e) liens and security interests which, as of the date of
this Agreement, have been disclosed to and approved by the
Lender in writing; and (f) those liens and security
interests which in the aggregate constitute an immaterial
and insignificant monetary amount with respect to the net
value of Borrower's assets.
Related Documents. The words "Related Documents" mean and
include without limitation all promissory notes, credit
agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust,
and all other instruments, agreements and documents, whether
now or hereafter existing, executed in connection with the
Indebtedness.
Security Agreement. The words "Security Agreement" mean and
include without limitation any agreements, promises,
covenants, arrangements, understandings or other agreements,
whether created by law, contract, or otherwise, evidencing,
governing, representing, or creating a Security Interest.
Security Interest. The words "Security Interest" mean and
include without limitation any and all types of liens and
encumbrances, whether created by law, contract, or
otherwise.
SARA. The word "SARA" means the Superfund Amendments and
Reauthorization Act of 1986 as now or hereafter amended.
Subordinated Debt. The words "Subordinated Debt" mean
indebtedness and liabilities of Borrower which have been
subordinated by written agreement to indebtedness owed by
Borrower to Lender in form and substance acceptable to
Lender.
Tangible Net Worth. The words "Tangible Net Worth" mean
Borrower's total assets excluding all intangible assets
(i.e., goodwill, trademarks, patents, copyrights,
organizational expenses, and similar intangible items, but
including leaseholds and leasehold improvements) less total
Debt.
Working Capital. The words "Working Capital" mean
Borrower's current assets, excluding prepaid expenses, less
Borrower's current liabilities.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to
make the initial Loan Advance and each subsequent Loan Advance
under this Agreement shall be subject to the fulfillment to
Lender's satisfaction of all of the conditions set forth in this
Agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender in form
satisfactory to Lender the following documents for the Loan:
(a) the Note, (b) Security Agreements granting to Lender
security interests in the Collateral, (c) Financing
Statements perfecting Lender's Security Interests; (d)
evidence of insurance as required below; and (a) any other
documents required under this Agreement or by Lender or its
counsel, including without limitation any guaranties
described below and any subordinations described below.
Borrower's Authorization. Borrower shall have provided in
form and substance satisfactory to Lender properly certified
resolutions, duly authorizing the execution and delivery of
this Agreement, the Note and the Related Documents, and such
other authorizations and other documents and instruments as
Lender or its counsel, in their sole discretion, may
require.
Payment of Fees and Expenses. Borrower shall have paid to
Lender all fees, charges, and other expenses which are then
due and payable as specified in this Agreement or any
Related Document.
Representations and Warranties. The representations and
warranties set forth in this Agreement, in the Related
Documents, and in any document or certificate delivered to
Lender under this Agreement are true and correct.
No Event of Default. There shall not exist at the time of
any advance a condition which would constitute an Event of
Default under this Agreement.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants
to Lender, as of the date of this Agreement, as of the date of
each disbursement of Loan proceeds, as of the date of any
renewal, extension or modification of any Loan, and at all times
any Indebtedness exists:
Organization. Borrower is a corporation which is duly
organized, validly existing, and in good standing under the
laws of the State of Delaware and is validly existing and in
good standing in all states in which Borrower is doing
business. Borrower has the full power and authority to own
its properties and to transact the businesses in which it is
presently engaged or presently proposes to engage. Borrower
also is duly qualified as a foreign corporation and is in
good standing in all states in which the failure to so
qualify would have a material adverse effect on its
businesses or financial condition.
Authorization. The execution, delivery, and performance of
this Agreement and all Related Documents by Borrower, to the
extent to be executed, delivered or performed by Borrower,
have been duly authorized by all necessary action by
Borrower; do not require the consent or approval of any
other person, regulatory authority or governmental body; and
do not conflict with, result in a violation of, or
constitute a default under (a) any provision of its articles
of incorporation or organization, or bylaws, or any
agreement or other instrument binding upon Borrower or (b)
any law, governmental regulation, court decree, or order
applicable to Borrower.
Financial Information. Each financial statement of Borrower
supplied to Lender truly and completely disclosed Borrower's
financial condition as of the date of the statement, and
there has been no material adverse change in Borrower's
financial condition subsequent to the date of the most
recent financial statement supplied to Lender. Borrower has
no material contingent obligations except as disclosed in
such financial statements.
Legal Effect. This Agreement constitutes, and any
instrument or agreement required hereunder to be given by
Borrower when delivered will constitute, legal, valid and
binding obligations of Borrower enforceable against Borrower
in accordance with their respective terms.
Properties. Except as contemplated by this Agreement or as
previously disclosed in Borrower's financial statements or
in writing to Lender and as accepted by Lender, and except
for property tax liens for taxes not presently due and
payable, Borrower owns and has good title to all of
Borrower's properties free and clear of all Security
Interests, and has not executed any security documents or
financing statements relating to such properties. All of
Borrower's properties are titled in Borrower's legal name,
and Borrower has not used, or filed a financing statement
under, any other name for at least the last five (5) years.
Hazardous Substances. The terms "hazardous waste,"
"hazardous substance," "disposal," "release," and
"threatened release," as used in this Agreement, shall have
the same meanings as set forth in the Comprehensive
Environmental Response, Compensation, and Liability Act of
1980, as amended, 42 U.S.C. Section 9601, et seq.
("CERCLA"), the Superfund Amendments and Reauthorization Act
of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et
seq., the Resource Conservation and Recovery Act, 49 U.S.C.
Section 6901, et seq., or other applicable state or Federal
laws, rules, or regulations adopted pursuant to any of the
foregoing. Except as disclosed to and acknowledged by
Lender in writing, Borrower represents and warrants that:
(a) During the period of Borrower's ownership of Borrower's
properties, there has been no use, generation, manufacture,
storage, treatment, disposal, release or threatened release
of any hazardous waste or substance by any person on, under,
or about any such properties. (b) Borrower has no knowledge
of, or reason to believe that there has been (i) any use,
generation, manufacture, storage, treatment, disposal,
release, or threatened release of any hazardous waste or
substance by any prior owners or occupants of any such
properties, or (ii) any actual or threatened litigation or
claims of any kind by any person relating to such matters.
(c) Neither Borrower nor any tenant, contractor, agent or
other authorized user of any such properties shall use,
generate, manufacture, store, treat, dispose of, or release
any hazardous waste or substance on, under, or about any
such properties; and any such activity shall be conducted in
compliance with all applicable federal, state, and local
laws, regulations, and ordinances, including without
limitation those laws, regulations and ordinances described
above. Borrower authorizes Lender and its agents to enter
upon such properties to make such inspections and tests as
Lender may deem appropriate to determine compliance of such
properties with this section of the Agreement. Any
inspections or tests made by Lender shall be for Lender's
purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to
Borrower or to any other person. The representations and
warranties contained herein are based on Borrower's due
diligence in investigating such properties for hazardous
waste. Borrower hereby (a) releases and waives any future
claims against Lender for indemnity or contribution in the
event Borrower becomes liable for cleanup or other costs
under any such laws, and (b) agrees to indemnify and hold
harmless Lender against any and all claims, losses,
liabilities, damages, penalties, and expenses which Lender
may directly or indirectly sustain or suffer resulting from
a breach of this section of the Agreement or as a
consequence of any use, generation, manufacture, storage,
disposal, release or threatened release occurring prior to
Borrower's ownership or interest in such properties, whether
or not the same was or should have been known to Borrower.
The provisions of this section of the Agreement, including
the obligation to indemnify, shall survive the payment of
the Indebtedness and the termination or expiration of this
Agreement and shall not be affected by Lender's acquisition
of any interest in any such properties, whether by
foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation,
administrative proceeding or similar action (including those
for unpaid taxes) against Borrower is pending or threatened,
and no other event has occurred which may materially
adversely affect Borrower's financial condition or
properties, other than litigation, claims, or other events,
if any, that have been disclosed to and acknowledged by
Lender in writing.
Taxes. To the best of Borrower's knowledge, all tax returns
and reports of Borrower that are or were required to be
filed, have been filed, and all taxes, assessments and other
governmental charges have been paid in full, except those
presently being or to be contested by Borrower in good faith
in the ordinary course of business and for which adequate
reserves have been provided.
Lien Priority. Unless otherwise previously disclosed to
Lender in writing, Borrower has not entered into or granted
any Security Agreements, or permitted the filing or
attachment of any Security Interests on or affecting any of
the Collateral directly or indirectly securing repayment of
Borrowees Loan and Note, that would be prior or that may in
any way be superior to Lender's Security Interests and
rights in and to such Collateral.
Binding Effect. This Agreement, the Note, all Security
Agreements directly or indirectly securing repayment of
Borrower's Loan and Note and all of the Related Documents
are binding upon Borrower as well as upon Borrower's
successors, representatives and assigns, and are legally
enforceable in accordance with their respective terms.
Commercial Purposes. Borrower intends to use the Loan
proceeds solely for business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to
which Borrower may have any liability complies in all
material respects with all applicable requirements of law
and regulations, and (i) no Reportable Event nor Prohibited
Transaction (as defined in ERISA) has occurred with respect
to any such plan, (ii) Borrower has not withdrawn from any
such plan or initiated steps to do so, (iii) no steps have
been taken to terminate any such plan, and (iv) there are no
unfunded liabilities other than those previously disclosed
to Lender in writing.
Location of Borrower's Offices and Records. Borrower's
place of business, or Borrower's Chief executive office, if
Borrower has more than one place of business, is located at
401 2nd Avenue, Seattle, WA 98119. Unless Borrower has
designated otherwise in writing this location is also the
office or offices where Borrower keeps its records
concerning the Collateral.
Information. All information heretofore or
contemporaneously herewith furnished by Borrower to Lender
for the purposes of or in connection with this Agreement or
any transaction contemplated hereby is, and all information
hereafter furnished by or on behalf of Borrower to Lender
will be, true and accurate in every material respect on the
date as of which such information is dated or certified; and
none of such information is or will be incomplete by
omitting to state any material fact necessary to make such
information not misleading.
Survival of Representations and Warranties. Borrower
understands and agrees that Lender, without independent
investigation, is relying upon the above representations and
warranties in extending Loan Advances to Borrower. Borrower
further agrees that the foregoing representations and
warranties shall be continuing in nature and shall remain in
full force and effect until such time as Borrower's
Indebtedness shall be paid in full, or until this Agreement
shall be terminated in the manner provided above, whichever
is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender
that, while this Agreement is in effect, Borrower will:
Litigation. Promptly inform Lender in writing of (a) all
material adverse changes in Borrower's financial condition,
and (b) all existing and all threatened litigation, claims,
investigations, administrative proceedings or similar
actions affecting Borrower or any Guarantor which could
materially affect the financial condition of Borrower or the
financial condition of any Guarantor.
Financial Records. Maintain its books and records in
accordance with generally accepted accounting principles,
applied on a consistent basis, and permit Lender to examine
and audit Borrower's books and records at all reasonable
times.
Financial Statements. Furnish Lender with, as soon as
available, but in no event later than one hundred twenty
(120) days after the end of each fiscal year, Borrower's
balance sheet and income statement for the year ended,
audited by a certified public accountant satisfactory to
Lender, who shall state that such financial statements
present fairly the consolidated financial position of
Borrower as of the date of such financial statements and the
results of its operations for the period covered by such
financial statements in conformity with generally accepted
accounting principles applied on a consistent basis (except
for changes in the application of which such accountants
concur) and shall not contain any "going concern" or like
qualification or exception or qualifications arising out of
the scope of the audit. All financial reports required to
be provided under this Agreement shall be prepared in
accordance with generally accepted accounting principles,
applied on a consistent basis, and certified by Borrower as
being true and correct.
Additional Information. Furnish such additional information
and statements, lists of assets and liabilities, agings of
receivables and payables, inventory schedules, budgets,
forecasts, tax returns, and other reports with respect to
Borrower's financial condition and business operations as
Lender may request from time to time.
Financial Covenants and Ratios. Comply with the following
covenants and ratios: Except as provided above, all
computations made to determine compliance with the
requirements contained in this paragraph shall be made in
accordance with generally accepted accounting principles,
applied on a consistent basis, and certified by Borrower as
being true and correct.
Insurance. Maintain fire and other risk insurance, public
liability insurance, and such other insurance as Lender may
from time to time reasonably require with respect to
Borrower's properties and operations, in form, amounts,
coverages and with insurance companies acceptable to Lender.
Borrower, upon request of Lender, will deliver to Lender
from time to time the policies or certificates of insurance
in form satisfactory to Lender, including stipulations that
coverages will not be cancelled or diminished without at
least thirty (30) days' prior written notice to Lender.
Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be
impaired in any way by any act, omission or default of
Borrower or any other person. In connection with all
policies covering assets in which Lender holds or is offered
a security interest for the Loans, Borrower will provide
Lender with such loss payable or other endorsements as
Lender may require.
Insurance Reports. Furnish to Lender, upon request of
Lender, reports on each existing insurance policy showing
such information as Lender may reasonably request, including
without limitation the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the
policy; (d) the properties insured; (a) the then current
property values on the basis of which insurance has been
obtained, and the manner of determining those values, and
(f) the expiration date of the policy. In addition, upon
request of Lender (however not more often than annually),
Borrower will have an independent appraiser satisfactory to
Lender determine, as applicable, the actual cash value or
replacement cost of any Collateral. The cost of such
appraisal shall be paid by Borrower.
Guaranties. Prior to disbursement of any Loan proceeds,
furnish executed guaranties of the Loans in favor of Lender,
on Lender's forms, and in the amount and by the guarantor
named below:
Guarantor Amount
Network Event Theater, Inc. Unlimited
Subordination. Prior to disbursement of any Loan proceeds,
deliver to Lender a subordination agreement on Lender's
forms, executed by Borrower's creditor named below,
subordinating all of Borrower's indebtedness to such
creditor, or such lesser amount as may be agreed to by
Lender in writing, and any security interests in collateral
securing that indebtedness to the Loans and security
interests of Lender.
Name of Creditor Amount
American Passage Media Corporation $750,000.00
Other Agreements. Comply with all terms and conditions of
all other agreements, whether now or hereafter existing,
between Borrower and any other party and notify Lender
immediately in writing of any default in connection with any
other such agreements.
Loan Fees and Charges. In addition to all other agreed upon
fees and charges, pay the following: a closing fee equal to
$50,000.00 on the date of this Agreement and a commitment
fee at the rate of .375% per annum on the original unpaid
balance of the Line of Credit, payable in arrears on the 1st
of each calendar quarter after the date hereof.
Loan Proceeds. Use all Loan proceeds solely for Borrower's
business operations, unless specifically consented to the
contrary by Lender in writing.
Taxes, Charges and Liens. Pay and discharge when due all of
its indebtedness and obligations, including without
limitation all assessments, taxes, governmental charges,
levies and liens, of every kind and nature, imposed upon
Borrower or its properties, income, or profits, prior to the
date on which penalties would attach, and all lawful claims
that, if unpaid, might become a lien or charge upon any of
Borrower's properties, income, or profits. Provided
however, Borrower will not be required to pay and discharge
any such assessment, tax, charge, levy, lien or claim so
long as (a) the legality of the same shall be contested in
good faith by appropriate proceedings, and (b) Borrower
shall have established on its books adequate reserves with
respect to such contested assessment, tax, charge, levy,
lien, or claim in accordance with generally accepted
accounting practices. Borrower, upon demand of Lender, will
furnish to Lender evidence of payment of the assessments,
taxes, charges, levies, liens and claims and will authorize
the appropriate governmental official to deliver to Lender
at any time a written statement of any assessments, taxes,
charges, levies, liens and claims against Borrower's
properties, income, or profits.
Performance. Perform and comply with all terms, conditions,
and provisions set forth in this Agreement and in the
Related Documents in a timely manner, and promptly notify
Lender if Borrower learns of the occurrence of any event
which constitutes an Event of Default under this Agreement
or under any of the Related Documents.
Operations. Maintain executive and management personnel
with substantially the same qualifications and experience as
the present executive and management personnel; provide
written notice to Lender of any change in executive and
management personnel; conduct its business affairs in a
reasonable and prudent manner and in compliance with all
applicable federal, state and municipal laws, ordinances,
rules and regulations respecting its properties, charters,
businesses and operations, including without limitation,
compliance with the Americans With Disabilities Act and with
all minimum funding standards and other requirements of
ERISA and other laws applicable to Borrower's employee
benefit plans.
Inspection. Permit employees or agents of Lender at any
reasonable time to inspect any and all Collateral for the
Loan or Loans and Borrower's other properties and to examine
or audit Borrower's books, accounts, and records and to make
copies and memoranda of Borrower's books, accounts, and
records. If Borrower now or at any time hereafter maintains
any records (including without limitation computer generated
records and computer software programs for the generation of
such records) in the possession of a third party, Borrower,
upon request of Lender, shall notify such party to permit
Lender free access to such records at all reasonable times
and to provide Lender with copies of any records it may
request, all at Borrower's expense.
Compliance Certificate. Unless waived in writing by Lender,
provide Lender at least annually and at the time of each
disbursement of Loan proceeds with a certificate executed by
Borrower's chief financial officer, or other officer or
person acceptable to Lender, certifying that the
representations and warranties set forth in this Agreement
are true and correct as of the date of the certificate and
further certifying that, as of the date of the certificate,
no Event of Default exists under this Agreement.
Environmental Compliance and Reports. Borrower shall comply
in all respects with all environmental protection federal,
state and local laws, statutes, regulations and ordinances;
not cause or permit to exist, as a result of an intentional
or unintentional action or omission on its part or on the
part of any third party, on property owned and/or occupied
by Borrower, any environmental activity where damage may
result to the environment, unless such environmental
activity is pursuant to and in compliance with the
conditions of a permit issued by the appropriate federal,
state or local governmental authorities; shall furnish to
Lender promptly and in any event within thirty (30) days
after receipt thereof a copy of any notice, summons, lien,
citation, directive, letter or other communication from any
governmental agency or instrumentality concerning any
intentional or unintentional action or omission on
Borrower's part in connection with any environmental
activity whether or not there is damage to the environment
and/or other natural resources.
Additional Assurances. Make, execute and deliver to Lender
such promissory notes, mortgages, deeds of trust, security
agreements, financing statements, instruments, documents and
other agreements as Lender or its attorneys may reasonably
request to evidence and secure the Loans and to perfect all
Security Interests.
RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change
in any law, rule, regulation or guideline, or the interpretation
or application of any thereof by any court or administrative or
governmental authority (including any request or policy not
having the force of law) shall impose, modify or make applicable
any taxes (except U.S. federal, state or local income or
franchise taxes imposed on Lender), reserve requirements, capital
adequacy requirements or other obligations which would (a)
increase the cost to Lender for extending or maintaining the
credit facilities to which this Agreement relates, (b) reduce the
amounts payable to Lender under this Agreement or the Related
Documents, or (c) reduce the rate of return on Lender's capital
as a consequence of Lender's obligations with respect to the
credit facilities to which this Agreement relates, then Borrower
agrees to pay Lender such additional amounts as will compensate
Lender therefor, within five (5) days after Lender's written
demand for such payment, which demand shall be accompanied by an
explanation of such imposition or charge and a calculation in
reasonable detail of the additional amounts payable by Borrower,
which explanation and calculations shall be conclusive in the
absence of manifest error.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender
that while this Agreement is in effect, Borrower shall not,
without the prior written consent of Lender:
Capital Expenditures. Make or contract to make capital
expenditures, including leasehold improvements, in any
fiscal year in excess of $100,000 or incur liability for
rentals of property (including both real and personal
property) in an amount which, together with capital
expenditures, shall in any fiscal year exceed such sum.
Indebtedness and Liens. (a) Except for trade debt incurred
in the normal course of business and indebtedness to Lender
contemplated by this Agreement, create, incur or assume
indebtedness for borrowed money, including capital leases,
(b) except as allowed as a Permitted Lien, sell, transfer,
mortgage, assign, pledge, lease, grant a security interest
in, or encumber any of Borrower's assets, or (c) sell with
recourse any of Borrower's accounts, except to Lender.
Continuity of Operations. (a) Engage in any business
activities substantially different than those in which
Borrower is presently engaged, (b) cease operations,
liquidate, merge, transfer, acquire or consolidate with any
other entity, change ownership, change its name, dissolve or
transfer or sell Collateral out of the ordinary course of
business, (c) pay any dividends on Borrower's stock (other
than dividends payable in its stock), provided, however that
notwithstanding the foregoing, but only so long as no Event
of Default has occurred and is continuing or would result
from the payment of dividends, if Borrower is a "Subchapter
S Corporation" (as defined in the Internal Revenue Code of
1986, as amended), Borrower may pay cash dividends on its
stock to its shareholders from time to time in amounts
necessary to enable the shareholders to pay income taxes and
make estimated income tax payments to satisfy their
liabilities under federal and state law which arise solely
from their status as Shareholders of a Subchapter S
Corporation because of their ownership of shares of stock of
Borrower, or (d) purchase or retire any of Borrower's
outstanding shares or alter or amend Borrower's capital
structure.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or
advance money or assets, (b) purchase, create or acquire any
interest in any other enterprise or entity, or (c) incur any
obligation as surety or guarantor other than in the ordinary
course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make
any Loan to Borrower, whether under this Agreement or under any
other agreement, Lender shall have no obligation to make Loan
Advances or to disburse Loan proceeds if: (a) Borrower or any
Guarantor is in default under the terms of this Agreement or any
of the Related Documents or any other agreement that Borrower or
any Guarantor has with Lender; (b) Borrower or any Guarantor
becomes insolvent, files a petition in bankruptcy or similar
proceedings, or is adjudged a bankrupt; (c) there occurs a
material adverse change in Borrower's financial condition, in the
financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; (d) any Guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such Guarantor's
guaranty of the Loan or any other loan with Lender; or (e) Lender
in good faith deems itself insecure, even though no Event of
Default shall have occurred.
ADDITIONAL PROVISION. Borrower will have no asset sales greater
than the $100,000.00 without Bank's consent and, if agreed to,
100% of proceeds after expenses reduce the revolving commitment
amount.
CONSOLIDATIONS, MERGERS AND ACQUISITIONS. Borrower will not,
without prior written notice to Lender, purchase or otherwise
acquire any capital stock, assets, obligations, or other
securities, make any capital contribution to, or otherwise invest
in or acquire any interest in, any person, which exceeds the sum
of $500,000.00.
FINANCIAL COVENANTS. The Borrower will be subject to covenants,
calculated quarterly, including a Fixed Charge Coverage ratio of
1.15 to 1, an Interest Coverage ratio of 2.5 to 1.0 and a
declining cash flow leverage test not to exceed: 3.50 to 1 from
closing through December 31, 1996; 3.25 to 1.0 from January 1,
1997 through December 31, 1997; 2.50 to 1.0 from January 1, 1998
through December 31, 1998 and 2.00 to 1.0 throughout the
remaining term of the loan.
Fixed Charge Coverage: Operating Cash Flow divided by total fixed
charges. Interest coverage: Operating Cash Flow divided by total
interest expense. Pro Forma Debt Service Coverage: Operating
Cash Flow divided by Pro Forma Debt Service and Cash Flow
Leverage: Total Funded Debt divided by operating cash flow.
DEFINITIONS.
Funded Debt. All indebtedness for borrowed money,
capitalized leases, deferred purchase price for acquisitions
and guarantees.
Operating Cash Flow. Earnings before interest, taxes,
depreciation and amortization plus changes in deferred
subscription income plus non-recurring acquisition expenses
for the trailing four quarters.
Total Fixed Charges. For the most recently completed twelve
month period, the sum of: (a) interest; (b) mandatory
principal payments or reductions on funded debt; (c) capital
expenditures; and (d) taxes paid.
Interest Expense. The sum of interest expense and
commitment fees on Funded Debt.
Pro forma Debt Service. Mandatory principal payments or
commitment reductions on Funded Debt over the prospective 12
month period; plus Interest Expense based on amounts
outstanding (adjusted for mandatory principal payments or
commitment reductions) and prevailing rates on the date of
determination, computed for the prospective 12 month period.
DIVIDEND DISTRIBUTION. Notwithstanding anything to the contrary
in this Agreement, Borrower agrees there will not be any dividend
distribution from sources other than profits of the Borrower and
distributions to be made only if the indebtedness under this
Agreement is current and in compliance with all terms and
conditions stated herein.
LENDER'S RIGHT OF SETOFF. In addition to all liens upon and
rights of setoff against the moneys, securities or other property
of Borrower given to Lender by law, Lender shall have, with
respect to Borrower's obligations to Lender under this Agreement
and to the extent permitted by law, a contractual possessory
security interest in and a right of setoff against, and Borrower
hereby assigns, conveys, delivers, pledges, and transfers to
Lender all of Borrower's right, title, and interest in and to all
deposits, moneys, securities, and other property of Borrower now
or hereafter in the possession of or on deposit with Lender,
whether held in a general or special account or deposit, whether
held jointly with someone else, or whether held for safekeeping
or otherwise, excluding however all IRA, Keogh, and trust
accounts. Every such security interest and right of setoff may
be exercised without demand upon or notice to Borrower. No
security interest or right of setoff shall be deemed to have been
waived by any act or conduct on the part of Lender or by any
neglect to exercise such right of setoff or to enforce such
security interest or by any delay in so doing. Every right of
setoff and security interest shall continue in full force and
effect until such right of setoff or security interest is
specifically waived or released by an instrument in writing
executed by Lender.
EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default under this Agreement:
Default on Indebtedness. Failure of Borrower to make any
payment when due on the Indebtedness.
Other Defaults. Failure of Borrower or any Grantor to
comply with or to perform when due any other term,
obligation, covenant or condition contained in this
Agreement or in any of the Related Documents, or failure of
Borrower to comply with or to perform any other term,
obligation, covenant or condition contained in any other
agreement between Lender and Borrower.
Default in Favor of Third Parties. Should Borrower or any
Grantor default under any loan, extension of credit,
security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or
Borrower's or any Grantor's ability to repay the Loans or
perform their respective obligations under this Agreement or
any of the Related Documents.
False Statements. Any warranty, representation or statement
made or furnished to Lender by or on behalf of Borrower or
any Grantor under this Agreement or the Related Documents is
false or misleading in any material respect at the time made
or furnished, or becomes false or misleading at any time
thereafter.
Defective Collateralization. This Agreement or any of the
Related Documents ceases to be in full force and effect
(including failure of any Security Agreement to create a
valid and perfected Security Interest) at any time and for
any reason.
Insolvency. The dissolution or termination of Borrower's
existence as a going business, or a trustee or receiver is
appointed for Borrower or for all or a substantial portion
of the assets of Borrower, or Borrower makes a general
assignment for the benefit of Borrower's creditors, or
Borrower files for bankruptcy, or an involuntary bankruptcy
petition is filed against Borrower and such involuntary
petition remains undismissed for sixty (60) days.
Creditor or Forfeiture Proceedings. Commencement of
foreclosure or forfeiture proceedings, whether by judicial
proceeding, self-help, repossession or any other method, by
any creditor of Borrower, any creditor of any Grantor
against any collateral securing the Indebtedness, or by any
governmental agency. This includes a garnishment,
attachment, or levy on or of any of Borrower's deposit
accounts with Lender.
Events Affecting Guarantor. Any of the preceding events
occurs with respect to any Guarantor of any of the
Indebtedness or any Guarantor dies or becomes incompetent,
or revokes or disputes the validity of, or liability under,
any Guaranty of the Indebtedness.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall
occur, except where otherwise provided in this Agreement or the
Related Documents, all commitments and obligations of Lender
under this Agreement or the Related Documents or any other
agreement immediately will terminate (including any obligation to
make Loan Advances or disbursements), and, at Lender's option,
all sums owing in connection with the Loans, including all
principal, interest, and all other fees, costs and charges, if
any, will become immediately due and payable, all without notice
of any kind to Borrower, except that in the case of an Event of
Default of the type described in the "Insolvency" subsection
above, such acceleration shall be automatic and not optional. In
addition, Lender shall have all the rights and remedies provided
in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of
Lender's rights and remedies shall be cumulative and may be
exercised singularly or concurrently. Election by Lender to
pursue any remedy shall not exclude pursuit of any other remedy,
and an election to make expenditures or to take action to perform
an obligation of Borrower or of any Grantor shall not affect
Lender's right to declare a default and to exercise its rights
and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions
are a part of this Agreement:
Amendments. This Agreement, together with any Related
Documents, constitutes the entire understanding and
agreement of the parties as to the matters set forth in this
Agreement. No alteration of or amendment to this Agreement
shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the
alteration or amendment.
Applicable Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the
Commonwealth of Virginia. Lender and Borrower hereby waive
the right to any jury trial in any action, proceeding, or
counterclaim brought by either party against the other.
Caption Headings. Caption headings in this Agreement are
for convenience purposes only and are not to be used to
interpret or define the provisions of this Agreement.
Multiple Parties; Corporate Authority. All obligations of
Borrower under this Agreement shall be joint and several,
and all references to Borrower shall mean each and every
Borrower. This means that each of the Borrowers signing
below is responsible for all obligations in this Agreement.
Consent to Loan Participation. Borrower agrees that Lender
may at any time grant participating interests in the Loans
to one or more purchasers (each a "Participant"). In such
event, whether or not upon notice to Borrower, Lender shall
remain responsible for the performance of its obligations
hereunder, and Lender shall continue to deal solely and
directly with Borrower in connection with Lender's rights
and obligations under this Agreement. Any agreement
pursuant to which Lender may grant such a participation
interest shall provide that Lender shall retain the sole
right and responsibility to enforce the obligations of
Borrower hereunder including, without limitation, the right
to approve any amendment, modification or waiver of any
provision of concerning the Loans; provided that such
participation agreement may provide that Lender will not
agree to any such modification, amendment or waiver which
would have the effect increasing or extending the term
hereof or subjecting Lender to any additional obligation,
reducing the principal of or rate of interest on any Loan,
postponing the date fixed for any payment of principal or of
interest on any Loan or fees hereunder without the consent
of the Participant. Lender may at any time assign all or
any portion of its rights with respect to the Loans to a
Federal Reserve Bank. No such assignment shall release
Lender from its obligations hereunder. Lender may furnish
any information concerning Borrower in its possession from
time to time to Participants (including prospective
Participants) and may furnish such information in response
to credit inquiries consistent with general banking
practice.
Costs and Expenses. Borrower agrees to pay upon demand all
of Lender's out-of-pocket expenses incurred in connection
with this Agreement or in connection with the Loans made
pursuant to this Agreement. Subject to any limits under
applicable law, if Lender hires an attorney to help enforce
this Agreement or to collect any Indebtedness, Borrower
agrees to pay Lender's attorney fees equal to 25.000% of the
principal balance due on the Note, and all of Lender's other
collection expenses, whether or not there is a lawsuit and
including legal expenses for bankruptcy proceedings.
Notices. All notices required to be given under this
Agreement shall be given in writing, may be sent by
telefacsimilie, and shall be effective when actually
delivered if hand delivered or when deposited with a
nationally recognized overnight courier or deposited as
certified or registered mail in the United States mail,
first class, postage prepaid, addressed to the party to whom
the notice is to be given at the address shown above. Any
party may change its address for notices under this
Agreement by giving formal written notice to the other
parties, specifying that the purpose of the notice is to
change the party's address. To the extent permitted by
applicable law, if there is more than one Borrower, notice
to any Borrower will constitute notice to all Borrowers.
For notice purposes, Borrower will keep Lender informed at
all times of Borrower's current address(es).
Severability. If a court of competent jurisdiction finds
any provision of this Agreement to be invalid or
unenforceable as to any person or circumstance, such finding
shall not render that provision invalid or unenforceable as
to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to
be within the limits of enforceability or validity; however,
if the offending provision cannot be so modified, it shall
be stricken and all other provisions of this Agreement in
all other respects shall remain valid and enforceable.
Subsidiaries and Affiliates of Borrower. To the extent the
context of any provisions of this Agreement makes it
appropriate, including without limitation any
representation, warranty or covenant, the word "Borrower" as
used herein shall include all subsidiaries and affiliates of
Borrower. Notwithstanding the foregoing however, under no
circumstances shall this Agreement be construed to require
Lender to make any Loan or other financial accommodation to
any subsidiary or affiliate of Borrower.
Successors and Assigns. All covenants and agreements
contained by or on behalf of Borrower shall bind its
successors and assigns and shall inure to the benefit of
Lender, its successors and assigns. Borrower shall not,
however, have the right to assign its rights under this
Agreement or any interest therein, without the prior written
consent of Lender.
Survival. All warranties, representations, and agreements
of Borrower in this Agreement shall survive the making of
the Loan or Loans contemplated hereby, and shall be deemed
made and redated by Borrower at the time of the making of
each disbursement of Loan proceeds.
Time Is of the Essence. Time is of the essence in the
performance of this Agreement.
Waiver. Indulgence by Lender with respect to any of the
terms and conditions of this Agreement or the failure of
Lender to exercise any of its rights under this Agreement
shall not constitute a waiver thereof, and Borrower shall
remain liable for the strict performance of such terms and
conditions until this Agreement shall be terminated. No
provision of this Agreement may be waived or modified
orally, but all such waivers or modifications shall be in
writing. Whenever the consent of Lender is required under
this Agreement, the granting of such consent by Lender in
one instance shall not constitute Lender's continuing
consent in subsequent instances, and in all cases such
consent may be granted or withheld in the sole discretion of
Lender.
THIS BUSINESS LOAN AGREEMENT IS SIGNED, SEALED AND DELIVERED
EFFECTIVE IN ALL RESPECTS AS OF SEPTEMBER 11, 1996.
BORROWER:
AMERICAN PASSAGE MEDIA, INC.
By: /s/ Don Leeds (SEAL)
Don Leeds
Executive Vice President
By: /s/ Harlan D. Peltz (SEAL)
Harlan D. Peltz
Chief Executive Officer
LENDER:
SIGNET BANK
By: /s/ Jon A Siabaugh
Jon A Siabaugh
Authorized Officer
Notwithstanding the terms of the foregoing Business Loan
Agreement or any of the Related Documents:
1. Lender may not accelerate the loan or otherwise exercise any
remedies against Borrower unless an Event of Default has
occurred and is continuing.
2. With respect to any default by Borrower in the performance
of any covenant under the Business Loan Agreement or Related
Documents (including, without limitation, a payment
covenant), such default will not constitute an Event of
Default and Lender may not accelerate the Loan or otherwise
exercise remedies against Borrower if Borrower fully cures
such default by performing such act or making such payment
within 15 calendar days of the date on which such action or
payment was due to be performed or paid.
3. Once a default occurs under the Business Loan Agreement or
Related Documents, then such default will continue to exist
until it is either cured by Borrower or is otherwise waived
by Lender and once an Event of Default occurs under the
Business Loan Agreement or Related Documents, then such
Event of Default will continue to exist until expressly
waived by Lender which may not be unreasonably withheld by
Lender.
SIGNET BANK
PROMISSORY NOTE
Principal Loan Date Maturity Loan No. Call Collateral
$3,500,000.00 09-13-1996 09-30-2001
Account Officer Initials
anerican
References in the shaded area are for Lender's use only and do
not limit the applicability of this document to any particular
loan or item.
Borrower: American Passage Media, Inc. Lender: SIGNET BANK
149 Fifth Avenue Suite 500
New York, N.Y. 10010 7799 Leesburg
Pike
Falls Church,
VA 22043
IMPORTANT NOTICE
THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH
CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR
AND ALLOWS THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT
ANY FURTHER NOTICE.
Principal Amount: $3,500,000.00 Initial Rate: 8.679% Date
of Note: September 11, 1996
PROMISE TO PAY. American Passage Media, Inc. ("Borrower")
promises to pay to SIGNET BANK ("Lender"), or order, in lawful
money of the United States of America, the principal amount of
Three Million Five Hundred Thousand and 00/100 Dollars
($3,500,000.00) or so much as may be outstanding, together with
interest on the unpaid outstanding principal balance of each
advance. Interest shall be calculated from the date of each
advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all
outstanding principal plus all accrued unpaid interest on
September 30, 2001. In addition, Borrower will pay regular
monthly payments of accrued unpaid interest beginning October 11,
1996, and all subsequent interest payments are due on the same
day of each month after that. Interest on this Note is computed
on a 365/360 simple interest basis; that is, by applying the
ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by
the actual number of days the principal balance is outstanding.
Borrower will pay Lender's address shown above or at such other
place as Lender may designate in writing. Unless otherwise
agreed or required by applicable law, payments will be applied
first to accrued unpaid interest, then to unpaid interest, then
to principal, and any remaining amount to any unpaid collection
costs and late charges.
VARIABLE INTEREST RATE. Subject to designation of a different
interest rate index by Borrower as provided below, the interest
rate on this Note is subject to change from time to time based on
changes in an independent index which is the per annum rate of
interest, quoted by Lender in its sole discretion, as the London
Interbank Offered Rate (adjusted to reflect the cost of insurance
premiums and reserve requirements as they exist from time to
time) as published by Telerate, as BBA LIBOR on page 3750, or
Bloomberg LIBOR index page if Telerate is not available), or such
other page as may replace that page on that service for the
purpose of displaying rates or prices comparable to that Rate
(rounded upwards, if necessary, to the next higher 1/100%) for
deposits in Dollars for a period of ninety (90) days (the
"Index"). The Index is not necessarily the lowest rate charged
by Lender on its loans. If the Index becomes unavailable during
the term of this loan, Lender may designate a substitute index
after notice to Borrower. Lender will tell Borrower the current
Index rate upon Borrower's request. Borrower understands that
Lender may make loans based on other rates as well. The interest
rate change will not occur more often than each 90 days. The
Index currently is 5.679% per annum. The Interest rate to be
applied to the unpaid principal balance of this Note will be at a
rate of 3.000 percentage points over the Index, resulting in an
initial rate of 8.679% per annum. NOTICE: Under no circumstances
will the interest rate on this Note be more than the maximum rate
allowed by applicable law.
INTEREST RATE OPTIONS. The following interest rate options are
available under this Note:
(a) Default Option. The interest rate margin and index
described in the "VARIABLE INTEREST RATE" paragraph above
(the "Default Option").
(b) Prime Rate. A margin of 0.000 percentage points over
Prime Rate. For purposes of this Note, Prime Rate shall
mean an annual percentage rate periodically announced and
recorded by Lender as an index (called prime rate), at,
above or below which interest rates are established for
certain loans.
When the interest rate is based on a fixed rate, the rate shall
be in effect for a period of the number of days or months as
indicated in the rate option description (the "Interest Period"),
in any case extended to the next succeeding business day when
necessary, beginning on a borrowing date, conversion date or
expiration date of the then current Interest Period. Adjustments
in the interest rate due to changes in the maximum nonusurious
interest rate allowed (the "Highest Lawful Rate") shall be made
on the effective day of any change in the Highest Lawful Rate.
Provided Borrower is not in default under this Note, Borrower may
designate in advance which of the above interest rate indexes
shall be applicable to any loan advance under this Note and shall
designate any optional Interest Period applicable to any fixed
rate loan or advance. In the absence of any such designation the
interest rate option shall be the Default Option. Thereafter
unpaid principal balances under this Note may be converted (at
the end of an Interest Period if the index used to determine the
interest rate therefore is a fixed rate) to another of the above
interest rate options, or continued for an additional interest
period, when applicable, as designated by Borrower in advance;
and in the absence of sufficient advance designation as to
conversion to or continuation of a fixed rate index, the index
shall be converted to the Default Option. Notwithstanding the
foregoing, a fixed rate index may not be elected for a loan or
advance under this Note, nor any conversion to or continuation of
a fixed rate index be elected, if the Interest Period thereof
would extend beyond the maturity of this Note.
PREPAYMENT. Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not,
unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued
unpaid interest. Rather, they will reduce the principal balance
due.
DEFAULT. Borrower will be in default if any of the following
happens: (a) the failure of any "Party" (which term shall mean
and include each Borrower, endorser, surety and guarantor of this
Note) to make any payment on this Note or on any other
indebtedness due Lender when due; (b) if any asset(s) of a Party
are attached, levied upon, seized or repossessed or if any
asset(s) of a Party should come into the possession of a
receiver, trustee, custodian or assignee for the benefit of
creditors, or if a Party makes an assignment for the benefit of
creditors; (c) the failure of a Party to observe or perform any
obligation or covenant contained in any agreement, document or
instrument furnished in connection herewith or in any other
agreement between a Party and Lender; (d) any representation or
warranty at any time made by a Party to Lender in connection
herewith or in any other agreement between a Party and Lender, or
in any document or instrument delivered to Lender in connection
herewith or pursuant to such other agreement, shall have been
materially false at the time it was made; (e) the termination or
withdrawal of a Party's guaranty with respect to any indebtedness
due Lender; (f) any Party files a petition in bankruptcy,
petitions or applies to any tribunal for any receiver or any
trustee of a Party or any substantial part of its property, or
commences any proceeding relating to such party under any
insolvency, reorganization, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction,
whether now or hereafter in effect; (g) if, within 30 days after
the filing of a petition in bankruptcy against a Party or the
commencement of any proceeding against a Party seeking any
reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such petition or proceeding
shall not have dismissed, or, if, within 30 days after the
appointment, without the consent or acquiescence of a Party, of
any trustee, receiver or liquidator of such Party or of all or
any substantial part of the properties of the such Party, such
appointment shall not have been vacated; (h) the application for
the appointment of a receiver for a party or for property of a
Party; (i) the making or sending of a notice of an intended bulk
sale by a Party; (j) commencement of any foreclosure, levy,
seizure or forfeiture proceeding, whether by judicial, self-help,
repossession, or any other method, by any creditor of a Party,
any creditor of the owner of any collateral securing this Note,
or by any governmental agency with respect to a Party or such
collateral; (k) if any event occurs which is or, with the passage
of time and/or the giving of notice, could be a default under or
breach of the terms of any instrument or document evidencing a
debt or obligation of a Party to any third party and is not cured
within five (5) days after the occurrence thereof; (l) any
judgment against a Party or any attachment against it or its
property remains unpaid, undischarged, unbonded or undismissed
for a period of 30 days, unless and to the extent that such
judgment is appealed in good faith in a court of higher
jurisdiction and such appeal remains pending; (m) if any
proceeding is filed for the dissolution or liquidation of a
Party; (n) if any Party shall be enjoined or restrained in any
manner from conducting its business in whole or in part, and such
injunction shall not be dismissed or dissolved within thirty (30)
days after the filing thereof; (o) if any tax lien or notice
thereof is filed against a Party or any of the assets of a Party
and remains undismissed, unpaid or unbonded for a period of
thirty (30) days; (p) if, without Lender's prior written consent,
any Party which is not a natural person enters into or becomes a
party to any merger, consolidation or share exchange or if any
Party sells, transfers, conveys or leases, except in the ordinary
course of business, any significant part of its assets or
properties or (if not a natural person) alters its capital
structure, business activities or scope of operations; (q) if,
without Lender's prior written consent, there is a sale, exchange
or transfer of the voting control or any significant portion of
the stock or ownership interests of any Party which is not a
natural person; (r) if any Party who is a natural person shall
die or become incompetent; or (s) the good faith determination by
Lender that a material adverse change in the financial condition
of a Party has occurred since the date hereof or that Lender's
prospect of payment hereunder has been materially impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire
unpaid principal balance on this Note and all accrued unpaid
interest, together with all other applicable fees, costs and
charges, if any, immediately due and payable, without notice, and
then Borrower will pay that amount. Upon default, including
failure to pay upon final maturity, Lender, at its option, may
also, if permitted under applicable law, increase the variable
interest rate on this Note to 6.000 percentage points over the
Index. The interest rate will not exceed the maximum rate
permitted by applicable law. Furthermore, subject to any limits
under applicable law, upon default, Borrower also agrees to pay
Lender's attorney fees equal to 25.000% of the principal balance
due on the Note, and all of Lender's other collection expenses,
whether or not there is a lawsuit and including without
limitation legal expenses for bankruptcy proceedings. This Note
shall be governed by, construed and enforced in accordance with
the laws of the Commonwealth of Virginia. Lender and Borrower
hereby waive the right to any jury trial in any action,
proceeding, or counterclaim brought by either party against the
other.
LENDER'S RIGHT OF SETOFF. In addition to all liens upon and
rights of setoff against the moneys, securities or other property
of Borrower given to Lender by law, Lender shall have, with
respect to Borrower's obligations to Lender under this Note and
to the extent permitted by law, a contractual possessory security
interest in and a right of setoff against, and Borrower hereby
assigns, conveys, delivers, pledges, and transfers to Lender all
of Borrower's right, title, and interest in and to all deposits,
moneys, securities, and other property of Borrower now or
hereafter in the possession of or on deposit with Lender, whether
held in a general or special account or deposit, whether held
jointly with someone else, or whether held for safekeeping or
otherwise, excluding however all IRA, Keogh, and trust accounts.
Every such security interest and right of setoff may be exercised
without demand upon or notice to Borrower. No security interest
or right of setoff shall be deemed to have been waived by any act
or conduct on the part of Lender or by any neglect to exercise
such right of setoff or to enforce such security interest or by
any delay in so doing. Every right of setoff and security
interest shall continue in full force and effect until such right
of setoff or security interest is specifically waived or released
by an instrument in writing executed by Lender.
LINE OF CREDIT. This Note evidences a revolving line of credit.
Advances hereunder shall be conclusively presumed to have been
made to and for the benefit of and at the request of Borrower
when: (1) deposited or credited to an account of Borrower with
Lender, notwithstanding that such advance was requested, orally
or in writing, by someone other than the person(s) signing below
or that someone other than the person(s) signing below is
authorized to draw on such account and may or does withdraw the
whole or part of any such advance; or (2) made in accordance with
oral or written instructions of Borrower or anyone signing below
for or on behalf of Borrower. Lender is hereby authorized to
maintain records of the date and amount of each advance, the date
and amount of any payment of principal or interest and the
principal balance then remaining unpaid hereon. Borrower hereby
agrees that the amount so evidenced in such records shall, for
all purposes, constitute prima facie evidence thereof and shall
be binding upon Borrower, absent manifest error.
LATE CHARGE. Borrower agrees to pay to Lender on demand a late
charge not to exceed 5% of the amount of any payment of principal
or interest, or both, that is more than ten (10) days past due.
REDUCING REVOLVER. Borrower will reduce balance under the
revolver according to the following schedule:
DATE COMMITMENT AMOUNT ANNUAL REDUCTION BY %
December 31, 1996 $3,500,000.00 0.00%
June 30, 1997 $3,325,000.00 0.00%
December 31, 1997 $3,150,000.00 10.00%
June 30, 1998 $2,800,000.00 10.00%
December 31, 1998 $2,450,000.00 20.00%
June 30, 1999 $2,100,000.00 20.00%
December 31, 1999 $1,750,000.00 20.00%
June 30, 2000 $1,312,000.00 20.00%
December 31, 2000 $ 875,000.00 25.00%
June 30, 2001 $ 437,000.00 25.00%
September 30, 2001 $ -0-
APPLICABLE MARGIN. The applicable margin will be based on the
Borrower's ratio of funded debt to operating cash flow and will
be determined according to the following table:
Operating Cash Flow Base Margin LIBOR
Margin
Leverage less than 1 1.00% 300 basis points
Leverage more than = 1.0 and less than 2.5 1.50% 350 basis points
Leverage more than = 2.5 and less than 3.5 2.00% 400 basis points
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of
its rights or remedies under this Note without losing them.
Borrower and any other person who signs, guarantees or endorses
this Note, to the extent allowed by law, waive presentment,
demand for payment, protest and notice of dishonor. Upon any
change in the terms of this Note, and unless otherwise expressly
stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be
released from liability. All such parties agree that Lender may
renew or extend (repeatedly and for any length of time) this
loan, or release any party or guarantor or collateral; or impair,
fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender
without the consent of or notice to anyone. All such parties
also agree that Lender may modify this loan without the consent
of or notice to anyone other than the party with whom the
modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE
PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE.
BORROWER:
AMERICAN PASSAGE MEDIA, INC.
By: /s/ Don Leeds (SEAL)
Don Leeds
Executive Vice President
By: /s/ Harlan D. Peltz (SEAL)
Harlan D. Peltz
Chief Executive Officer
Notwithstanding the terms of the foregoing Business Loan
Agreement or any of the Related Documents:
1. Lender may not accelerate the loan or otherwise
exercise any remedies against Borrower unless an Event
of Default has occurred and is continuing.
2. With respect to any default by Borrower in the
performance of any covenant under the Business Loan
Agreement or Related Documents (including, without
limitation, a payment covenant), such default will not
constitute an Event of Default and Lender may not
accelerate the Loan or otherwise exercise remedies
against Borrower if Borrower fully cures such default
by performing such act or making such payment within 15
calendar days of the date on which such action or
payment was due to be performed or paid.
3. Once a default occurs under the Business Loan Agreement
or Related Documents, then such default will continue
to exist until it is either cured by Borrower or is
otherwise waived by Lender and once an Event of Default
occurs under the Business Loan Agreement or Related
Documents, then such Event of Default will continue to
exist until expressly waived by Lender which may not be
unreasonably withheld by Lender.
SIGNET BANK
COMMERCIAL SECURITY AGREEMENT
Principal Loan Date Maturity Loan No. Call
$3,500,000.00 09-13-1996 09-30-2001
Collateral Account Officer Initials
anerican
References in the shaded area are for Lender's use only and
do not limit the applicability of this document to any
particular loan or item.
Borrower: American Passage Media, Inc. Lender: SIGNET BANK
149 Fifth Avenue Suite 500
New York, N.Y. 10010 7799 Leesburg Pike
Falls Church, VA
22043
THIS COMMERCIAL SECURITY AGREEMENT is entered into between
American Passage Media, Inc. (referred to below as "Grantor");
and SIGNET BANK (referred to below as "Lender"). For valuable
consideration, Grantor grants to Lender a security interest in
the Collateral to secure the Indebtedness and agrees that Lender
shall have the rights stated in this Agreement with respect to
the Collateral, in addition to all other rights which Lender may
have by law.
DEFINITIONS. The following words shall have the following
meanings when used in this Agreement. Terms not otherwise
defined in this Agreement shall have the meanings attributed to
such terms in the Uniform Commercial Code. All references to
dollar amounts shall mean amounts in lawful money of the United
States of America.
Agreement. The word "Agreement" means this Commercial
Security Agreement, as this Commercial Security Agreement
may be amended or modified from time to time, together with
all exhibits and schedules attached to this Commercial
Security Agreement from time to time.
Collateral. The word "Collateral" means the following
described property of Grantor, whether now owned or
hereafter acquired, whether now existing or hereafter
arising, and wherever located:
All Inventory, chattel paper, accounts, equipment and
general intangibles, together with the following
specifically described property: All tangible and
intangible assets (including all copy rights, trade
marks, customer lists, publishing rights and other
intellectual property) of all direct and indirect
subsidiaries of American Passage Media, Inc.
In addition, the word "Collateral" includes all the
following, whether now owned or hereafter acquired, whether
now existing or hereafter arising, and wherever located:
(a) All attachments, accessions, accessories, tools,
parts, supplies, increases, and additions to and all
replacements of and substitutions for any property
described above.
(b) All products and produce of any of the property
described in this Collateral section.
(c) All accounts, general intangibles, instruments,
rents, monies, payments, and all other rights, arising
out of a sale, lease, or other disposition of any of
the property described in this Collateral section.
(d) All proceeds (including insurance proceeds) from
the sale, destruction, loss, or other disposition of
any of the property described in this Collateral
section.
(e) All records and data relating to any of the
property described in this Collateral section, whether
in the form of a writing, photograph, microfilm,
microfiche, or electronic media, together with all of
Grantor's right, title, and interest in and to all
computer software required to utilize, create,
maintain, and process any such records or data on
electronic media.
Event of Default. The words "Event of Default" mean and
include without limitation any of the Events of Default set
forth below in the section titled "Events of Default."
Grantor. The word "Grantor" means American Passage Media,
Inc., its successors and assigns
Guarantor. The word "Guarantor" means and includes without
limitation each and all of the guarantors, sureties, and
accommodation parties in connection with the Indebtedness
and their personal representatives, successors and assigns.
Indebtedness. The word "Indebtedness" means the
indebtedness evidenced by the Note, including all principal,
interest, and fees, costs, and expenses, if any, together
with all modifications of and renewals, replacements and
substitutions for any of the foregoing. "Indebtedness" also
includes all other present and future liabilities and
obligations of Grantor to Lender, whether direct or
indirect, matured or unmatured, and whether absolute or
contingent, joint, several or joint and several, and no
matter how the same may be evidenced or shall arise.
Lender. The word "Lender' means SIGNET BANK, its successors
and assigns.
Note. The word "Note" means the note or credit agreement
dated September 11, 1996, in the principal amount of
$3,500,000.00 from American Passage Media, Inc. to Lender,
together with all modifications of and renewals,
replacements, and substitutions for the note or credit
agreement.
Related Documents. The words "Related Documents" mean and
include without limitation all promissory notes, credit
agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust,
and all other instruments, agreements and documents, whether
now or hereafter existing, executed in connection with the
Indebtedness.
LENDER'S RIGHT OF SETOFF. In addition to all liens upon and
rights of setoff against the moneys, securities or other property
of Grantor given to Lender by law, Lender shall have, with
respect to Grantor's obligations to Lender under this Agreement
and to the extent permitted by law, a contractual possessory
security interest in and a right of setoff against, and Grantor
hereby assigns, conveys, delivers, pledges, and transfers to
Lender all of Grantor's right, title, and interest in and to all
deposits, moneys, securities, and other property of Grantor now
or hereafter in the possession of or on deposit with Lender,
whether held in a general or special account or deposit, whether
held jointly with someone else, or whether held for safekeeping
or otherwise, excluding however all IRA, Keogh, and trust
accounts. Every such security interest and right of setoff may
be exercised without demand upon or notice to Grantor. No
security interest or right of setoff shall be deemed to have been
waived by any act or conduct on the part of Lender or by any
neglect to exercise such right of setoff or to enforce such
security interest or by any delay in so doing. Every right of
setoff and security interest shall continue in full force and
effect until such right of setoff or security interest is
specifically waived or released by an instrument in writing
executed by Lender.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender
as follows:
Perfection of Security Interest. Grantor agrees to execute
such financing statements and to take whatever other actions
are requested by Lender to perfect and continue Lender's
security interest in the Collateral. Upon request of
Lender, Grantor will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and
Grantor will note Lender's interest upon any and all chattel
paper if not delivered to Lender for possession by Lender.
Grantor hereby appoints Lender as its irrevocable attorney-
in-fact for the purpose of executing any documents necessary
to perfect or to continue the security interest granted in
this Agreement. Lender may at any time, and without further
authorization from Grantor, file a carbon, photographic or
other reproduction of any financing statement or of this
Agreement for use as a financing statement. Grantor will
reimburse Lender for all expenses for the perfection and the
continuation of the perfection of Lender's security interest
in the Collateral. Grantor promptly will notify Lender
before any change in Grantor's name including any change to
the assumed business names of Grantor. This is a continuing
Security Agreement and will continue in effect even though
all or any part of the Indebtedness is paid in full and even
though for a period of time Grantor may not be indebted to
Lender.
No Violation. The execution and delivery of this Agreement
will not violate any law or agreement governing Grantor or
to which Grantor is a party, and its certificate or articles
of incorporation and bylaws do not prohibit any term or
condition of this Agreement.
Enforceability of Collateral. To the extent the Collateral
consists of accounts, chattel paper, or general intangibles,
the Collateral is enforceable in accordance with its terms,
is genuine, and complies with applicable laws concerning
form, content and manner of preparation and execution, and
all persons appearing to be obligated on the Collateral have
authority and capacity to contract and are in fact obligated
as they appear to be on the Collateral. At the time any
account becomes subject to a security interest in favor of
Lender, the account shall be a good and valid account
representing an undisputed, bona fide indebtedness incurred
by the account debtor, for merchandise held subject to
delivery instructions or theretofore shipped or delivered
pursuant to a contract of sale, or for services theretofore
performed by Grantor with or for the account debtor; there
shall be no setoffs or counterclaims against any such
account; and no agreement under which any deductions or
discounts may be claimed shall have been made with the
account debtor except those disclosed to Lender in writing.
Location of the Collateral. Grantor, upon request of
Lender, will deliver to Lender in form satisfactory to
Lender a schedule of real properties and Collateral
locations relating to Grantor's operations, including
without limitation the following: (a) all real property
owned or being purchased by Grantor; (b) all real property
being rented or leased by Grantor; (c) all storage
facilities owned, rented, leased, or being used by Grantor;
and (d) all other properties where Collateral is or may be
located. Except in the ordinary course of its business,
Grantor shall not remove the Collateral from its existing
locations without the prior written consent of Lender.
Removal of Collateral. Grantor shall keep the Collateral
(or to the extent the Collateral consists of intangible
property such as accounts, the records concerning the
Collateral) at Grantor's address shown above, or at such
other locations as are acceptable to Lender. Except in the
ordinary course of its business, including the sales of
inventory, Grantor shall not remove the Collateral from its
existing locations without the prior written consent of
Lender. To the extent that the Collateral consists of
vehicles, or other titled property, Grantor shall not take
or permit any action which would require application for
certificates of title for the vehicles outside the
Commonwealth of Virginia, without the prior written consent
of Lender.
Transactions Involving Collateral. Except for inventory
sold or accounts collected in the ordinary course of
Grantor's business, Grantor shall not sell, offer to sell,
or otherwise transfer or dispose of the Collateral. While
Grantor is not in default under this Agreement, Grantor may
sell inventory, but only in the ordinary course of its
business and only to buyers who qualify as a buyer in the
ordinary course of business. A sale in the ordinary course
of Grantor's business does not include a transfer in partial
or total satisfaction of a debt or any bulk sale. Grantor
shall not pledge, mortgage, encumber or otherwise permit the
Collateral to be subject to any lien, security interest,
encumbrance, or charge, other than the security interest
provided for in this Agreement, without the prior written
consent of Lender. This includes security interests even if
junior in right to the security interests granted under this
Agreement. Unless waived by Lender, all proceeds from any
disposition of the Collateral (for whatever reason) shall be
held in trust for Lender and shall not be commingled with
any other funds; provided however, this requirement shall
not constitute consent by Lender to any sale or other
disposition. Upon receipt, Grantor shall immediately
deliver any such proceeds to Lender.
Title. Grantor represents and warrants to Lender that it
holds good and marketable title to the Collateral, free and
clear of all liens and encumbrances except for the lien of
this Agreement. No financing statement covering any of the
Collateral is on file in any public office other than those
which reflect the security interest created by this
Agreement or to which Lender has specifically consented.
Grantor shall defend Lender's rights in the Collateral
against the claims and demands of all other persons.
Collateral Schedules and Locations. As often as Lender
shall require, and insofar as the Collateral consists of
accounts and general intangibles, Grantor shall deliver to
Lender schedules of such Collateral, including such
information as Lender may require, including without
limitation names and addresses of account debtors and agings
of accounts and general intangibles. Insofar as the
Collateral consists of inventory and equipment, Grantor
shall deliver to Lender, as often as Lender shall require,
such lists, descriptions, and designations of such
Collateral as Lender may require to identify the nature,
extent, and location of such Collateral. Such information
shall be submitted for Grantor and each of its subsidiaries
or related companies.
Maintenance and Inspection of Collateral. Grantor shall
maintain all tangible Collateral in good condition and
repair. Grantor will not commit or permit damage to or
destruction of the Collateral or any part of the Collateral.
Lender and its designated representatives and agents shall
have the right at all reasonable times to examine, inspect,
and audit the Collateral wherever located.
Taxes, Assessments and Liens. Grantor will pay when due all
taxes, assessments and liens upon the Collateral, its use or
operation, upon this Agreement, upon any promissory note or
notes evidencing the Indebtedness, or upon any of the other
Related Documents. Grantor may withhold any such payment or
may elect to contest any lien if Grantor is in good faith
conducting an appropriate proceeding to contest the
obligation to pay and so long as Lender's interest in the
Collateral is not jeopardized in Lender's sole opinion. If
the Collateral is subjected to a lien which is not
discharged within fifteen (15) days, Grantor shall deposit
with Lender cash, a sufficient corporate surety bond or
other security satisfactory to Lender in an amount adequate
to provide for the discharge of the lien plus any interest,
costs, attorneys' fees or other charges that could accrue as
a result of foreclosure or sale of the Collateral. In any
contest Grantor shall defend itself and Lender and shall
satisfy any final adverse judgment before enforcement
against the Collateral. Grantor shall name Lender as an
additional obligee under any surety bond furnished in the
contest proceedings.
Compliance With Governmental Requirements. Grantor shall
comply promptly with all laws, ordinances, rules and
regulations of all governmental authorities, now or
hereafter in effect, applicable to the ownership,
production, disposition, or use of the Collateral. Grantor
may contest in good faith any such law, ordinance or
regulation and withhold compliance during any proceeding,
including appropriate appeals, so long as Lender's interest
in the Collateral, in Lender's opinion, is not jeopardized.
Hazardous Substances. Grantor represents and warrants that
the Collateral never has been, and never will be so long as
this Agreement remains a lien on the Collateral, used for
the generation, manufacture, storage, transportation,
treatment, disposal, release or threatened release of any
hazardous waste or substance, as those terms are defined in
the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601,
et seq. ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"),
the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq., or other
applicable state or Federal laws, rules, or regulations
adopted pursuant to any of the foregoing. The terms
"hazardous waste" and "hazardous substance" shall also
include, without limitation, petroleum and petroleum by-
products or any fraction thereof and asbestos. The
representations and warranties contained herein are based on
Grantor's due diligence in investigating the Collateral for
hazardous wastes and substances. Grantor hereby (a)
releases and waives any future claims against Lender for
indemnity or contribution in the event Grantor becomes
liable for cleanup or other costs under any such laws, and
(b) agrees to indemnify and hold harmless Lender against any
and all claims and losses resulting from a breach of this
provision of this Agreement. This obligation to indemnify
shall survive the payment of the Indebtedness and the
satisfaction of this Agreement.
Maintenance of Casualty Insurance. Grantor shall procure
and maintain all risks insurance, including without
limitation fire, theft and liability coverage together with
such other insurance as Lender may require with respect to
the Collateral, in form, amounts, coverages and basis
acceptable to Lender and issued by a company or companies
acceptable to Lender. Grantor, upon request of Lender, will
deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender,
including stipulations that coverages will not be cancelled
or diminished without at least thirty (30) days' prior
written notice to Lender and not including any disclaimer of
the insurer's liability for failure to give such a notice.
Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be
impaired in any way by any act, omission or default of
Grantor or any other person. In connection with all
policies covering assets in which Lender holds or is offered
a security interest, Grantor will provide Lender with such
loss payable or other endorsements as Lender may require.
If Grantor at any time fails to obtain or maintain any
insurance as required under this Agreement, Lender may (but
shall not be obligated to) obtain such insurance as Lender
deems appropriate, including if it so chooses "single
interest insurance," which will cover only Lender's interest
in the Collateral.
Application of Insurance Proceeds. Grantor shall promptly
notify Lender of any loss or damage to the Collateral.
Lender may make proof of loss if Grantor fails to do so
within fifteen (15) days of the casualty. All proceeds of
any insurance on the Collateral, including accrued proceeds
thereon, shall be held by Lender as part of the Collateral.
If Lender consents to repair or replacement of the damaged
or destroyed Collateral, Lender shall, upon satisfactory
proof of expenditure, pay or reimburse Grantor from the
proceeds for the reasonable cost of repair or restoration.
If Lender does not consent to repair or replacement of the
Collateral, Lender shall retain a sufficient amount of the
proceeds to pay all of the Indebtedness, and shall pay the
balance to Grantor. Any proceeds which have not been
disbursed within six (6) months after their receipt and
which Grantor has not committed to the repair or restoration
of the Collateral shall be used to prepay the Indebtedness.
Insurance Reports. Grantor, upon request of Lender, shall
furnish to Lender reports on each existing policy of
insurance showing such information as Lender may reasonably
request including the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the
policy; (d) the property insured; (e) the then current value
an the basis of which insurance has been obtained and the
manner of determining that value; and (f) the expiration
date of the policy. In addition, Grantor shall upon request
by Lender (however not more often than annually) have an
independent appraiser satisfactory to Lender determine, as
applicable, the cash value or replacement cost of the
Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until
default and except as otherwise provided below with respect to
accounts, Grantor may have possession of the tangible personal
property and beneficial use of all the Collateral and may use it
in any lawful manner not inconsistent with this Agreement or the
Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where
possession of the Collateral by Lender is required by law to
perfect Lender's security interest in such Collateral. Until
otherwise notified by Lender, Grantor may collect any of the
Collateral consisting of accounts. At any time and even though
no Event of Default exists, Lender may exercise its rights to
collect the accounts and to notify account debtors to make
payments directly to Lender for application to the Indebtedness.
If Lender at any time has possession of any Collateral, whether
before or after an Event of Default, Lender shall be deemed to
have exercised reasonable care in the custody and preservation of
the Collateral if Lender takes such action for that purpose as
Grantor shall request or as Lender, in Lender's sole discretion,
shall deem appropriate under the circumstances, but failure to
honor any request by Grantor shall not of itself be deemed to be
a failure to exercise reasonable care. Lender shall not be
required to take any steps necessary to preserve any rights in
the Collateral against prior parties, nor to protect, preserve or
maintain any security interest given to secure the Indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due,
Lender may (but shall not be obligated to) discharge or pay any
amounts required to be discharged or paid by Grantor under this
Agreement, including without limitation all taxes, liens,
security interests, encumbrances, and other claims, at any time
levied or placed on the Collateral. Lender also may (but shall
not be obligated to) pay all costs for insuring, maintaining and
preserving the Collateral. All such expenditures incurred or
paid by Lender for such purposes will then bear interest at the
rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Grantor. All such expenses
shall become a part of the Indebtedness and, at Lender's option,
will (a) be payable on demand, (b) be added to the balance of the
Note and be apportioned among and be payable with any installment
payments to become due during either (i) the term of any
applicable insurance policy or (ii) the remaining term of the
Note, or (c) be treated as a balloon payment which will be due
and payable at the Note's maturity. This Agreement also will
secure payment of these amounts. Such right shall be in addition
to all other rights and remedies to which Lender may be entitled
upon the occurrence of an Event of Default.
EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default under this Agreement:
Default on Indebtedness. Failure of Grantor to make any
payment when due on the Indebtedness.
Other Defaults. Failure of Grantor to comply with or to
perform any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related
Documents or in any other agreement between Lender and
Grantor.
Default in Favor of Third Parties. Should Borrower or any
Grantor default under any loan, extension of credit,
security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or
Borrower's or any Grantor's ability to repay the Loans or
perform their respective obligations under this Agreement or
any of the Related Documents.
False Statements. Any warranty, representation or statement
made or furnished to Lender by or on behalf of Grantor under
this Agreement, the Note or the Related Documents is false
or misleading in any material respect, either now or at the
time made or furnished.
Detective Collateralization. This Agreement or any of the
Related Documents ceases to be in full force and effect
(including failure of any collateral documents to create a
valid and perfected security interest or lien) at any time
and for any reason.
Insolvency. The dissolution or termination of Grantor's
existence as a going business, the insolvency of Grantor,
the appointment of a receiver for any part of Grantor's
property, any assignment for the benefit of creditors, any
type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or
against Grantor.
Creditor or Forfeiture Proceedings. Commencement of
foreclosure or forfeiture proceedings, whether by judicial
proceeding, self-help, repossession or any other method, by
any creditor of Grantor or by any governmental agency
against the Collateral or any other collateral securing the
Indebtedness. This includes a garnishment of any of
Grantor's deposit accounts with Lender.
Events Affecting Guarantor. Any of the preceding events
occurs with respect to any Guarantor of any of the
Indebtedness or such Guarantor dies or becomes incompetent.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs
under this Agreement, at any time thereafter, Lender shall have
all the rights of a secured party under the Virginia Uniform
Commercial Code. In addition and without limitation, Lender may
exercise any one or more of the following rights and remedies:
Accelerate Indebtedness. Lender may declare the entire
Indebtedness, including any prepayment penalty which
Grantor, would be required to pay, immediately due and
payable, without notice.
Assemble Collateral. Lender may require Grantor to deliver
to Lender all or any portion of the Collateral and any and
all certificates of title and other documents relating to
the Collateral. Lender may require Grantor to assemble the
Collateral and make it available to Lender at a place to be
designated by Lender. Lender also shall have full power to
enter upon the property of Grantor to take possession of and
remove the Collateral. If the Collateral contains other
goods not covered by this Agreement at the time of
repossession, Grantor agrees Lender may take such other
goods, provided that Lender makes reasonable efforts to
return them to Grantor after repossession.
Sell the Collateral. Lender shall have full power to sell,
lease, transfer, or otherwise deal with the Collateral or
proceeds thereof in its own name or that of Grantor. Lender
may sell the Collateral at public auction or private sale.
Unless the Collateral threatens to decline speedily in value
or is of a type customarily sold on a recognized market,
Lender will give Grantor reasonable notice of the time after
which any private sale or any other intended disposition of
the Collateral is to be made. The requirements of
reasonable notice shall be met if such notice is given at
least ten (10) days before the time of the sale or
disposition. All expenses relating to the disposition of
the Collateral, including without limitation the expenses of
retaking, holding, insuring, preparing for sale and selling
the Collateral, shall become a part of the Indebtedness
secured by this Agreement and shall be payable on demand,
with interest at the Note rate from date of expenditure
until repaid.
Appoint Receiver. To the extent permitted by applicable
law, Lender shall have the following rights and remedies
regarding the appointment of a receiver: (a) Lender may have
a receiver appointed as a matter of right, (b) the receiver
may be an employee of Lender and may serve without bond, and
(c) all fees of the receiver and his or her attorney shall
become part of the Indebtedness secured by this Agreement
and shall be payable on demand, with interest at the Note
rate from date of expenditure until repaid.
Collect Revenues, Apply Accounts. Lender, either itself or
through a receiver, may collect the payments, rents, income,
and revenues from the Collateral. Lender may at any time in
its discretion transfer any Collateral into its own name or
that of its nominee and receive the payments, rents, income,
and revenues therefrom and hold the same as security for the
Indebtedness or apply it to payment of the Indebtedness in
such order of preference as Lender may determine. Insofar
as the Collateral consists of accounts, general intangibles,
insurance policies, instruments, chattel paper, chooses in
action, or similar property, Lender may demand, collect,
receipt for, settle, compromise, adjust, sue for, foreclose,
or realize on the Collateral as Lender may determine,
whether or not Indebtedness or Collateral is then due. For
these purposes, Lender may, on behalf of and in the name of
Grantor, receive, open and dispose of mail addressed to
Grantor; change any address to which mail and payments are
to be sent; and endorse notes, checks, drafts, money orders,
documents of title, instruments and items pertaining to
payment, shipment, or storage of any Collateral. To
facilitate collection, Lender may notify account debtors and
obligors on any Collateral to make payments directly to
Lender.
Obtain Deficiency. If Lender chooses to sell any or all of
the Collateral, Lender may obtain a judgment against Grantor
for any deficiency remaining on the Indebtedness due to
Lender after application of all amounts received from the
exercise of the rights provided in this Agreement. Grantor
shall be liable for a deficiency even if the transaction
described in this subsection is a sale of accounts or
chattel paper.
Other Rights and Remedies. Lender shall have all the rights
and remedies of a secured creditor under the provisions of
the Uniform Commercial Code, as may be amended from time to
time. In addition, Lender shall have and may exercise any
or all other rights and remedies it may have available at
law, in equity, or otherwise.
Cumulative Remedies. All of Lender's rights and remedies,
whether evidenced by this Agreement or the Related Documents
or by any other writing, shall be cumulative and may be
exercised singularly or concurrently. Election by Lender to
pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take
action to perform an obligation of Grantor under this
Agreement, after Grantor's failure to perform, shall not
affect Lender's right to declare a default and to exercise
its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions
are a part of this Agreement:
Amendments. This Agreement, together with any Related
Documents, constitutes the entire understanding and
agreement of the parties as to the matters set forth in this
Agreement. No alteration of or amendment to this Agreement
shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the
alteration or amendment.
Applicable Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the
Commonwealth of Virginia. Lender and Grantor hereby waive
the right to any jury trial in any action, proceeding, or
counterclaim brought by either party against the other.
Attorneys' Fees; Expenses. Grantor agrees that if Lender
hires an attorney to help enforce this Agreement or to
collect any sums owing under this Agreement, Grantor will
pay, subject to any limits under applicable law, Lender's
attorney fees equal to 25.000% of the principal balance due
on the Note, and all of Lender's other collection expenses,
whether or not there is a lawsuit and including without
limitation additional legal expenses for bankruptcy
proceedings.
Caption Headings. Caption headings in this Agreement are
for convenience purposes only and are not to be used to
interpret or define the provisions of this Agreement.
Multiple Parties; Corporate Authority. All obligations of
Grantor under this Agreement shall be joint and several, and
all references to Grantor shall mean each and every Grantor.
This means that each of the Borrowers signing below is
responsible for all obligations in this Agreement.
Notices. All notices required to be given under this
Agreement shall be given in writing, may be sent by
telefacsimilie, and shall be effective when actually
delivered if hand delivered or when deposited with a
nationally recognized overnight courier or deposited as
certified or registered mail in the United States mail,
first class, postage prepaid, addressed to the party to whom
the notice is to be given at the address shown above. Any
party may change its address for notices under this
Agreement by giving formal written notice to the other
parties, specifying that the purpose of the notice is to
change the party's address. To the extent permitted by
applicable law, if there is more than one Grantor, notice to
any Grantor will constitute notice to all Grantors. For
notice purposes, Grantor will keep Lender informed at all
times of Grantor's current address(es).
Power of Attorney. Grantor hereby appoints Lender as its
true and lawful attorney-in-fact, irrevocably, with full
power of substitution to do the following: (a) to demand,
collect, receive, receipt for, sue and recover all sums of
money or other property which may now or hereafter become
due, owing or payable from the Collateral; (b) to execute,
sign and endorse any and all claims, instruments, receipts,
checks, drafts or warrants issued in payment for the
Collateral; (c) to settle or compromise any and all claims
arising under the Collateral, and, in the place and stead of
Grantor, to execute and deliver its release and settlement
for the claim; and (d) to file any claim or claims or to
take any action or institute or take part in any
proceedings, either in its own name or in the name of
Grantor, or otherwise, which in the discretion of Lender may
seem to be necessary or advisable. This power is given as
security for the Indebtedness, and the authority hereby
conferred is and shall be irrevocable and shall remain in
full force and effect until renounced by Lender.
Severability. If a court of competent jurisdiction finds
any provision of this Agreement to be invalid or
unenforceable as to any person or circumstance, such finding
shall not render that provision invalid or unenforceable as
to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to
be within the limits of enforceability or validity; however,
if the offending provision cannot be so modified, it shall
be stricken and all other provisions of this Agreement in
all other respects shall remain valid and enforceable.
Successor Interests. Subject to the limitations set forth
above on transfer of the Collateral, this Agreement shall be
binding upon and inure to the benefit of the parties, their
successors and assigns.
Waiver. Lender shall not be deemed to have waived any
rights under this Agreement unless such waiver is given in
writing and signed by Lender. No delay or omission on the
part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender
of a provision of this Agreement shall not prejudice or
constitute a waiver of Lender's right otherwise to demand
strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Grantor, shall
constitute a waiver of any of Lender's rights or of any of
Grantor's obligations as to any future transactions.
Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent to
subsequent instances where such consent is required and in
all cases such consent may be granted or withheld in the
sole discretion of Lender.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
COMMERCIAL SECURITY AGREEMENT, AND GRANTOR AGREES TO ITS TERMS.
THIS AGREEMENT IS DATED SEPTEMBER 11, 1996.
GRANTOR:
American Passage Media, Inc.
By: /s/ Don Leeds (SEAL) By: /s/ Harlan D. Peltz
(SEAL)
Don Leeds Harlan D. Peltz
Executive Vice President Chief Executive Officer
LENDER:
SIGNET BANK
By: /s/Jon A Siabaugh
Jon A Siabaugh
Authorized Officer
Notwithstanding the terms of the foregoing Business Loan
Agreement or any of the Related Documents:
1. Lender may not accelerate the loan or otherwise
exercise any remedies against Borrower unless an Event
of Default has occurred and is continuing.
2. With respect to any default by Borrower in the
performance of any covenant under the Business Loan
Agreement or Related Documents (including, without
limitation, a payment covenant), such default will not
constitute an Event of Default and Lender may not
accelerate the Loan or otherwise exercise remedies
against Borrower if Borrower fully cures such default
by performing such act or making such payment within 15
calendar days of the date on which such action or
payment was due to be performed or paid.
3. Once a default occurs under the Business Loan Agreement
or Related Documents, then such default will continue
to exist until it is either cured by Borrower or is
otherwise waived by Lender and once an Event of Default
occurs under the Business Loan Agreement or Related
Documents, then such Event of Default will continue to
exist until expressly waived by Lender which may not be
unreasonably withheld by Lender.
By: /s/ Don Leeds By: /s/ Harlan D. Peltz
Don Leeds Harlan D. Peltz
COMMERCIAL GUARANTY
Principal Loan Date Maturity Loan No. Call Collateral
Account Officer Initials
anerican
References in the shaded area are for Lender's use only and do
not limit the applicability of this document to any particular
loan or item.
Borrower: American Passage Media, Inc. Lender: SIGNET BANK
149 Fifth Avenue Suite 500
New York, NY 10010 7799 Leesburg
Pike
Falls Church,
VA 22043
Guarantor: Network Event Theater, Inc.
149 Fifth Avenue
New York, NY 10010
IMPORTANT NOTICE
THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH
CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR
AND ALLOWS THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT
ANY FURTHER NOTICE.
AMOUNT OF GUARANTY. The amount of this Guaranty is Unlimited.
CONTINUING UNLIMITED GUARANTY. For good and valuable
consideration, Network Event Theater, Inc. ("Guarantor")
absolutely and unconditionally guarantees and promises to pay to
SIGNET BANK ("Lender") or its order, in legal tender of the
United States of America, the Indebtedness (as that term is
defined below) of American Passage Media, Inc. ("Borrower") to
Lender on the terms and conditions set forth in this Guaranty.
Under this Guaranty, the liability of Guarantor is unlimited and
the obligations of Guarantor are continuing.
DEFINITIONS. The following words shall have the following
meanings which used in this Guaranty:
Borrower. The word "Borrower" means American Passage Media,
Inc.
Guarantor. The word "Guarantor" mens Network Event Theater,
Inc., and their respective personal representatives,
successors and assigns.
Guaranty. The word "Guaranty" means this Guaranty made by
Guarantor for the benefit of Lender dated September 11,
1996.
Indebtedness. The word "Indebtedness" means all of
Borrower's present and future liabilities and obligations to
Lender, in the most comprehensive sense, and includes
without limitation all such liabilities and obligations,
whether direct or indirect, matured or unmatured, and
whether absolute or contingent, joint, several or joint and
several, and no matter how owned, held or acquired,
including without limitation all such liabilities and
obligations arising from, or in connection with, or
evidenced by, the Note or the Related Documents.
Lender. The word "Lender" means SIGNET BANK, its successors
and assigns.
Note. The word "Note" means the promissory note or credit
agreement dated September 11, 1996, in the original
principal amount of $3,500,000.00 from Borrower to Lender
together with all modifications of and renewals,
replacements, and substitutions for the promissory note or
agreement. Notice to Guarantor: The Note evidences a
revolving line of credit from Lender to Borrower.
Related Documents. The words "Related Documents" mean and
include without limitation all promissory notes, credit
agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust,
and all other instruments, agreements and documents whether
now or hereafter existing, executed in connection with the
Indebtedness.
NATURE OF GUARANTY. Guarantor's liability under this Guaranty
shall be open and continuous for so long as this Guaranty remains
in force. Guarantor intends to guarantee at all times the
performance and prompt payment when due, whether at maturity or
earlier by reason of acceleration or otherwise, of all
Indebtedness. Accordingly, no payments made upon the
Indebtedness will discharge or diminish the continuing liability
of Guarantor in connection with any remaining portions of the
Indebtedness or any of the Indebtedness which subsequently arises
or is thereafter incurred or contracted.
DURATION OF GUARANTY. This Guaranty will take effect when
received by Lender without the necessity of any acceptance by
Lender, or any notice to Guarantor or to Borrower, and will
continue in full force until all Indebtedness incurred or
contracted before receipt by Lender of any notice of revocation
shall have been fully and finally paid and satisfied and all
other obligations of Guarantor under this Guaranty shall have
been performed in full. If Guarantor elects to revoke this
Guaranty, Guarantor may only do so in writing. Guarantor's
written notice of revocation must be mailed to Lender, by
certerfied mail, at the address of Lender listed above or such
other place as Lender may designate in writing. Written
revocation of this Guaranty will apply only to advances or new
Indebtedness created after actual receipt by Lender of
Guarantor's written revocation. For this purpose and without
limitation, the term "new Indebtedness" does not include
Indebtedness which at the time of notice of revocation is
contingent, unliquidated, undetermined or not due and which later
becomes absolute, liquidated, determined or due. This Guaranty
will continue to bind Guarantor for all Indebtedness incurred by
Borrower or committee by Lender prior to receipt of Guarantor's
written notice of revocation, including any extensions, renewals,
substitutions or modifications of the Indebtedness. Release of
any other guarantor or termination of any other guaranty of the
Indebtedness shall not affect the liability of Guarantor under
this Guaranty. A revocation received by Lender from any one or
more Guarantors shall not affect the liability of any remaining
Guarantors under this Guaranty. It is anticipated that
fluctuations may occur in the aggregate amount of Indebtedness
covered by this Guaranty, and it is specifically acknowledged and
agreed by Guarantor that reductions in the amount of
Indebtedness, even to zero dollars ($0.00), prior to written
revocation of this Guaranty by Guarantor shall not constitute a
termination of this Guaranty. This Guaranty is binding upon
Guarantor and Guarantor's heirs, successors and assigns so long
as any of the guaranteed Indebtedness remains unpaid and even
though the Indebtedness guaranteed may from time to time be zero
dollars ($0.00).
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes
Lender, either before or after any revocation hereof, without
notice or demand and without lessening Guarantor's liability
under this Guaranty, from time to time: (a) prior to revocation
as set forth above, to make one or more additional secured or
unsecured loans to Borrower, to lease equipment or other goods to
Borrower, or otherwise to extend additional credit to Borrower;
(b) to alter, compromise, renew, extend, accelerate, or otherwise
change one or more times the time for payment or other terms of
the Indebtedness or any part of the Indebtedness, including
increases and decreases of the rate of interest on the
Indebtedness; (c) to take and hold security for the payment of
this Guaranty or the Indebtedness, and exchange, enforce, waive,
subordinate, fail or decide not to perfect, and release any such
security, with or without the substitution of new collateral; (d)
to release, substitute, agree not to sue, or deal with any one or
more of Borrower's sureties, endorsers, or other guarantors on
any terms or in any manner Lender may choose; (e) to determine
how, when and what application of payments and credits shall be
made on the Indebtedness; (f) to apply such security and direct
the order or manner of sale thereof, including without
limitation, any nonjudicial sale permitted by the terms of the
controlling security agreement or deed of trust, as Lender in its
discretion may determine; (g) to sell, transfer assign, or grant
participations in all or any part of the Indebtedness; and (h) to
assign or transfer this Guaranty in whole or in part.
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents
and warrants to Lender that (a) no representations of agreements
of any kind have been made to Guarantor which would limit or
qualify in any way the terms of this Guaranty; (b) this Guaranty
is executed at Borrower's request and not at the request of
Lender; (c) Guarantor has not and will not, without the prior
written consent of Lender, sell, lease, assign, encumber,
hypothecate, transfer, or otherwise dispose of all or
substantially all of Guarantor's assets, or any interest therein;
(d) Lender has made no representation to Guarantor as to the
creditworthiness of Borrower; (e) upon Lender's request,
Guarantor's assets, or any interest therein; (d) Lender has made
no representation to Guarantor as to the creditworthiness of
Borrower; (e) upon Lender's request, Guarantor will provide to
Lender financial and credit information in form acceptable to
Lender, and all such financial information provided to Lender is
true and correct in all material respects and fairly presents the
financial condition of Guarantor as of the dates thereof, and no
material adverse change has occurred in the financial condition
of Guarantor since the date of the financial statements; and (f)
Guarantor has established adequate means of obtaining from
Borrower on a continuing basis information regarding Borrower's
financial condition. Guarantor agrees to keep adequately
informed from such means of any facts, events, or circumstances
which might in any way affect Guarantor's risks under this
Guaranty, and Guarantor further agrees that Lender shall have no
obligation to disclose to Guarantor any information or documents
acquired by Lender in the course of its relationship with
Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law,
Guarantor waives any right to require Lender (a) to continue
lending money or to extend other credit to Borrower; (b) to make
any presentment, protest, demand, or notice of any kind,
including notice of any nonpayment of the Indebtedness or of any
nonpayment related to any collateral, or notice of any action or
nonaction on the part of Borrower, Lender, any surety, endorser,
or other guarantor in connection with the Indebtedness or in
connection with the creation of new or additional loans or
obligations; (c) to resort for payment or to proceed directly or
at once against any person, including Borrower or any other
guarantor; (d) to proceed directly against or exhaust any
collateral held by Lender from Borrower, any other guarantor, or
any other person; (e) to give notice of the terms, time, and
place of any public or private sale of personal property security
held by Lender from Borrower or to comply with any other
applicable provisions of the Uniform Commercial Code; (f) to
pursue any other remedy within Lender's power; or (g) to commit
any act or omission of any kind, or at any time, with respect to
any matter whatsoever.
If now or hereafter (a) Borrower shall be or become insolvent,
and (b) the Indebtedness shall not at all times until paid be
fully secured by collateral pledge by Borrower, Guarantor hereby
forever waives and relinquishes in favor of Lender and Borrower,
and their respective successors, any claim or right to payment
Guarantor may now have or hereafter have or acquire against
Borrower, by subrogation or otherwise, so that at no time shall
Guarantor be or become a "creditor" of Borrower within the
meaning of 11 U.S.C. section 547(b), or any successor provision
of the Federal bankruptcy laws.
Guarantor also waives any and all rights or defenses arising by
reason of (a) any election of remedies by Lender which destroys
or otherwise adversely affects Guarantor's subrogation rights or
Guarantor's rights to proceed against Borrower for reimbursement,
including without limitation, any loss of rights Guarantor may
suffer by reason of any law limiting, qualifying, or discharging
the Indebtedness; (b) any disability or other defense of
Borrower, of any other guarantor, or of any other person, or by
reason of the cessation of Borrower's liability from any cause
whatsoever, other than payment in full in legal tender, of the
Indebtedness; (c) any right to claim discharge of the
Indebtedness on the basis of unjustified impairment of any
Collateral for the Indebtedness; or (d) any statute of
limitations, if at any time any action or suit brought by Lender
against Guarantor is commenced there is outstanding Indebtedness
of Borrower to Lender which is not barred by any applicable
statute of limitations. Guarantor acknowledges and agrees that
Guarantor's obligations under this Guaranty shall apply to and
continue with respect to any amount paid to Lender which is
subsequently recovered from Lender for any reason whatsoever
(including without limitation as a result of bankruptcy,
insolvency or fraudulent conveyance proceeding), notwithstanding
the fact that all or a part of the Indebtedness may have been
previously paid, or this Guaranty may have been terminated, or
both.
Guarantor further waives and agrees not to assert or claim at any
time any deductions to the amount guaranteed under this Guaranty
for any claim of setoff, counterclaim, counter demand, recoupment
or similar right, whether such claim, demand or right may be
asserted by the Borrower, the Guarantor, or both.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor
warrants and agrees that each of the waivers set forth above is
made with Guarantor's full knowledge of its significance and
consequences and that, under the circumstances, the waivers are
reasonable and not contrary to public policy or law. If any such
waiver is determined to be contrary to any applicable law or
public policy, such waiver shall be effective only to the extent
permitted by law or public policy.
LENDER'S RIGHT OF SETOFF. In addition to all liens upon and
rights of setoff against the moneys, securities or other property
of Guarantor given to Lender by law, Lender shall have, with
respect to Guarantor's obligations to Lender under this Guaranty
and to the extent permitted by law, a contractual possessory
security interest in and a right of setoff against, and Guarantor
hereby assigns, conveys, delivers, pledges, and transfers to
Lender all of Guarantor's right, title and interest in and to,
all deposits, moneys, securities and other property of Guarantor
now or hereafter in the possession of or on deposit with Lender,
whether held in a general or special account or deposit, whether
held jointly with someone else, or whether held for safekeeping
or otherwise, excluding however all IRA, Keogh, and trust
accounts. Every such security interest and right of setoff may
be exercised without demand upon or notice to Guarantor. No
security interest or right of setoff shall be deemed to have been
waived by any act or conduct on the part of Lender or by any
neglect to exercise such right of setoff or to enforce such
security interest or by any delay in so doing. Every right of
setoff and security interest shall continue in full force and
effect until such right of setoff or security interest is
specifically waived or released by an instrument in writing
executed by Lender.
SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees
that the Indebtedness of Borrower to Lender, whether now existing
or hereafter created, shall be prior to any claim that Guarantor
may how have or hereafter acquire against Borrower, whether or
not Borrower becomes insolvent. Guarantor hereby expressly
subordinates any claim Guarantor may have against Borrower, upon
any account whatsoever, to any claim that Lender may now or
hereafter have against Borrower. In the event of insolvency and
consequent liquidation of the assets of Borrower, through
bankruptcy, by an assignment for the benefit of creditors, by
voluntary liquidation, or otherwise, the assets of Borrower
applicable to the payment of the claims of both lender and
Guarantor shall be paid to Lender and shall be first applied by
Lender to the Indebtedness of Borrower to Lender. Guarantor does
hereby assign to lender all claims which it may have or acquire
against Borrower or against any assignee or trust in bankruptcy
of Borrower; provided however, that such assignment shall be
effective only for the purpose of assuring the Lender full
payment in legal tender of the Indebtedness. If Lender so
requests, any notes or credit agreements now or hereafter
evidencing any debts or obligations of Borrower so to Guarantor
shall be marked with a legend that the same are subject to this
Guaranty and shall be delivered to Lender. Guarantor agrees, and
Lender hereby is authorized, in the name of Guarantor, from time
to time to execute and file financing statements and continuing
statements and to execute such other documents and to take such
other actions as Lender deems necessary or appropriate to
perfect, preserve and enforce its rights under this Guaranty.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions
are a part of this Guaranty:
Amendments. This Guaranty, together with any Related
Documents, constitutes the entire understanding and
agreement of the parties as to the matters set forth in the
Guaranty. No alternation of or amendment to this Guaranty
shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the
alteration or amendment.
Applicable Law. This Guaranty shall be governed by,
construed and enforced in accordance with the laws of the
Commonwealth of Virginia. Lender and Guarantor hereby waive
the right to any jury trial in any action, proceeding, or
counterclaim brought by either party against the other.
Attorneys' Fees; Expenses. Guarantor agrees that if Lender
hires an attorney to help enforce this Guaranty or to
collect any sums owing under this Guaranty, Guarantor will
pay, subject to any limits under applicable law, Lender's
attorney fees equal to 25.000% of the amount due under this
Guaranty, and all of Lender's other collection expenses,
whether or not here is a lawsuit and including without
limitation additional legal expenses for bankruptcy
proceedings.
Notices. All notices required to be given by either party
to the other under this Guaranty shall be in writing, may be
sent by telefacsimilie, and, except for revocation notices
by Guarantor, shall be effective if hand delivered when
actually delivered, or when deposited with a nationally
recognized overnight courier, or when deposited in the
United States mail, first class postage prepaid, addressed
to the party to whom the notice is to be given at the
address shown above or to such other addresses as either
party may designate to the other in writing. All revocation
notices by Guarantor shall be in writing and shall be
effective only upon delivery to Lender as provided above in
the section titled "DURATION OF GUARANTY." If there is more
than one Guarantor notice to any Guarantor will constitute
notice to all Guarantors. For notice purposes. Guarantor
agrees to keep Lender informed at all times of Guarantor's
current address.
Interpretation. In all cases where there is more than one
Borrower or Guarantor, then all words used in this Guaranty
in the singular shall be deemed to have been used in the
plural where the context and construction so require; and
where there is more than one Borrower named in this Guaranty
or when this Guaranty is executed by more than one
Guarantor, the words "Borrower" and "Guarantor" respectively
shall mean all and any one or more of them. Caption
headings in this Guaranty are for convenience purposes only
and are not to be used to interpret or define the provisions
of this Guaranty. If a court of competent jurisdiction
finds any provision of this Guaranty to be invalid or
unenforceable as to any person or circumstances, such
finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances, and
all provisions of this Guaranty in all other respects shall
remain valid and enforceable. If any one or more of
Borrower or Guarantor are corporations or partnerships, it
is not necessary for Lender to inquire into the powers of
Borrowers or Guarantor or of the officers, directors,
partners, or agents acting or purporting to act on their
behalf, and any Indebtedness made or created in reliance
upon the professed exercise of such powers shall be
guaranteed under this Guaranty.
Waiver. Lender shall not be deemed to have waived any
rights under this Guaranty unless such waiver is given in
writing and signed by Lender. No delay or omission on the
part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender
of a provision of this Guaranty shall not prejudice or
constitute a waiver of Lender's right otherwise to demand
strict compliance with that provision or any other provision
of this Guaranty. No prior waiver by Lender, nor any course
of dealing between Lender and Guarantor, shall constitute a
wavier of any of Lender's rights or of any of Guarantor's
obligations as to any future transactions. Whenever the
consent of Lender is required under this Guaranty, the
granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where
such consent is required and in all cases such consent may
be granted or withheld in the sole discretion of Lender.
WORKING CAPITAL. Guarantor will infuse cash into accounts
payable sufficient to cover the working capital shortfall
associated with the payover of accounts receivables to the seller
and the obligation for all accounts payable liabilities.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE
PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS. IN
ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS
EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL
TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED
"DURATION OF GUARANTY." NO FORMAL ACCEPTANCE BY LENDER IS
NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS
DATED SEPTEMBER 11,1996.
GUARANTOR:
Network Event Theater, Inc.
By: /s/Don Leeds (SEAL)
Don Leeds, E.V.P.
By: /s/Harlan Peltz (SEAL)
Harlan Peltz, Chairman/CEO
Signed, acknowledged and delivered in
the presence of:
/s/ Jon A Siabaugh
Jon A Siabaugh
Witness
SIGNET BANK
COMMERCIAL PLEDGE AND SECURITY AGREEMENT
Principal Loan Date Maturity Loan No.
$3,500,000.00 09-13-1996 09-30-2001
Call Collateral Account Officer Initials
anerican
References in the shaded area are for Lender's use only and do
not limit the applicability of this document to any particular
loan or item.
- ----------------------------------------------------------------
Borrower: American Passage Media inc. Lender: Signet Bank
149 Fifth Avenue Suite 500
New York, N.Y. 10010 7799 Leesburg Pike
Falls Church, VA
22043
GRANTOR: Network Event Theater, Inc.
149 Fifth Avenue
New York, N.Y. 10010
=================================================================
THIS COMMERCIAL PLEDGE AND SECURITY AGREEMENT is entered into
among American Passage Media, Inc. (referred to below as
"Borrower"); Network Event Theater, Inc. (referred to below as
"Grantor"); and SIGNET BANK (referred to below as "Lender").
GRANT OF SECURITY INTEREST. For valuable consideration, Grantor
grants to Lender a security interest in the Collateral to secure
the Indebtedness and agrees that Lender shall have the rights
stated in this Agreement with respect to the Collateral, in
addition to all other rights which Lender may have by law.
DEFINITIONS. The following words shall have the following
meanings when used in this Agreement:
Agreement. The word "Agreement" means this Commercial
Pledge and Security Agreement, as this Commercial Pledge and
Security Agreement may be amended or modified from time to
time, together with all exhibits and schedules attached to
this Commercial Pledge and Security Agreement from time to
time.
Borrower. The word "Borrower" means each and every person
or entity signing the Note, including without limitation
American Passage Media, Inc.
Collateral. The word "Collateral" means the following
specifically described property, which Grantor has delivered
or agrees to deliver (or cause to be delivered or
appropriate book-entries made) immediately to Lender,
together with all Income and Proceeds as described below:
100.000 shares of American Passage Media, Inc.
Event of Default. The words "Event of Default" mean and
include without limitation any of the Events of Default set
forth below in the section titled "Events of Default."
Grantor. The word "Grantor" means Network Event Theater,
Inc. Any Grantor who signs this Agreement, but does not
sign the Note, is signing this Agreement only to grant a
security interest in Grantor's interest in the Collateral to
Lender and is not personally liable under the Note except as
otherwise provided by contract or law (e.g., personal
liability under a guaranty or as a surety).
Guarantor. The word "Guarantor" means and includes without
limitation each and all of the guarantors, sureties, and
accommodation parties in connection with the Indebtedness
and their personal representatives, successors and assigns.
Income and Proceeds. The words "Income and Proceeds" mean
all present and future income, proceeds, earnings,
increases, and substitutions from or for the Collateral of
every kind and nature, including without limitation all
payments, interest, profits, distributions, benefits,
rights, options, warrants, dividends, stock dividends, stock
splits, stock rights, regulatory dividends, distributions,
subscriptions, monies, claims for money due and to become
due, proceeds of any insurance on the Collateral, shares of
stock of different par value or no par value issued in
substitution or exchange for shares included in the
Collateral, and all other property Grantor is entitled to
receive on account of such Collateral, including accounts,
documents, instruments, chattel paper, and general
intangibles.
Indebtedness. The word "Indebtedness" means the
indebtedness evidenced by the Note, including all principal,
interest, and fees, costs, and expenses, if any, together
with all modifications of and renewals, replacements and
substitutions for any of the foregoing. "Indebtedness" also
includes all other present and future liabilities and
obligations of Borrower to Lender, whether direct or
indirect, matured or unmatured, and whether absolute or
contingent, joint, several or joint and several, and no
matter how the same may be evidenced or shall arise.
Lender. The word "Lender" means SIGNET BANK, its successors
and assigns.
Note. The word "Note" means the note or credit agreement
dated September 11, 1996, in the principal amount of
$3,500,000.00 from Borrower to Lender, together with all
modifications of and renewals, replacements, and
substitutions for the note or credit agreement.
Obligor. The word "Obligor" means and includes without
limitation any and all persons or entities obligated to pay
money or to perform some other act under the Collateral.
Related Documents. The words "Related Documents" mean and
include without limitation all promissory notes, credit
agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust,
and all other instruments, agreements and documents, whether
now or hereafter existing, executed in connection with the
Indebtedness.
BORROWER'S WAIVERS AND RESPONSIBILITIES. Except as otherwise
required under this Agreement or by applicable law, (a) Borrower
agrees that Lender need not tell Borrower about any action or
inaction Lender takes in connection with this Agreement; (b)
Borrower assumes the responsibility for being and keeping
informed about the Collateral; and (c) Borrower waives any
defenses that may arise because of any action or inaction of
Lender, including without limitation any failure of Lender to
realize upon the Collateral or any delay by Lender in realizing
upon the Collateral; and Borrower agrees to remain liable under
the Note no matter what action Lender takes or fails to take
under this Agreement.
GRANTOR'S REPRESENTATIONS AND WARRANTIES. Grantor warrants that:
(a) this Agreement is executed at Borrower's request and not at
the request of Lender; (b) Grantor has the full right, power and
authority to enter into this Agreement and to pledge the
Collateral to Lender; (c) Grantor has established adequate means
of obtaining from Borrower on a continuing basis information
about Borrower's financial condition; and (d) Lender has made no
representation to Grantor about Borrower or Borrower's
creditworthiness.
GRANTOR'S WAIVERS. Grantor waives all requirements of
presentment, protest, demand, and notice of dishonor or
non-payment to Grantor, Borrower, or any other party to the
Indebtedness or the Collateral. Lender may do any of the
following with respect to any obligation of any Borrower, without
first obtaining the consent of Grantor: (a) grant any extension
of time for any payment, (b) grant any renewal, (c) permit any
modification of payment terms or other terms, or (d) exchange or
release any Collateral or other security. No such act or failure
to act shall affect Lender's rights against Grantor or the
Collateral.
If now or hereafter (a) Borrower shall be or become insolvent,
and (b) the Indebtedness shall not at all times until paid be
fully secured by collateral pledged by Borrower, Grantor hereby
forever waives and relinquishes in favor of Lender and Borrower,
and their respective successors, any claim or right to payment
Grantor may now have or hereafter have or acquire against
Borrower, by subrogation or otherwise, so that at no time shall
Grantor be or become a "creditor" of Borrower within the meaning
of 11 U.S.C. section 547(b), or any successor provision of the
Federal bankruptcy laws.
LENDER'S RIGHT OF SETOFF. In addition to all liens upon and
rights of setoff against the moneys, securities or other property
of Grantor given to Lender by law, Lender shall have, with
respect to Grantor's obligations to Lender under this Agreement
and to the extent permitted by law, a contractual possessory
security interest in and a right of setoff against, and Grantor
hereby assigns, conveys, delivers, pledges, and transfers to
Lender all of Grantor's right, title, and interest in and to all
deposits, moneys, securities, and other property of Grantor now
or hereafter in the possession of or on deposit with Lender,
whether held in a general or special account or deposit, whether
held jointly with someone else, or whether held for safekeeping
or otherwise, excluding however all IRA, Keogh, and trust
accounts. Every such security interest and right of setoff may
be exercised without demand upon or notice to Grantor. No
security interest or right of setoff shall be deemed to have been
waived by any act or conduct on the part of Lender or by any
neglect to exercise such right of setoff or to enforce such
security interest or by any delay in so doing. Every right of
setoff and security interest shall continue in full force and
effect until such right of setoff or security interest is
specifically waived or released by an instrument in writing
executed by Lender.
GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE
COLLATERAL. Grantor represents and warrants to Lender that:
Ownership. Grantor is the lawful owner of the Collateral
free and clear of all security interests, liens,
encumbrances and claims of others except as disclosed to and
accepted by Lender in writing prior to execution of this
Agreement.
Right to Pledge. Grantor has the full right, power and
authority to enter into this Agreement and to pledge the
Collateral.
Binding Effect. This Agreement is binding upon Grantor, as
well as Grantor's heirs, successors, representatives and
assigns, and is legally enforceable in accordance with its
terms.
No Further Assignment. Grantor has not, and will not, sell,
assign, transfer, encumber or otherwise dispose of any of
Grantor's rights in the Collateral except as provided in
this Agreement.
No Defaults. There are no defaults existing under the
Collateral, and there are no offsets or counterclaims to the
same. Grantor will strictly and promptly perform each of
the terms, conditions, covenants and agreements contained in
the Collateral which are to be performed by Grantor, if any.
No Violation. The execution and delivery of this Agreement
will not violate any law or agreement governing Grantor or
to which Grantor is a party, and its certificate or articles
of incorporation and bylaws do not prohibit any term or
condition of this Agreement.
LENDER'S RIGHTS AND OBLIGATIONS WITH RESPECT TO COLLATERAL.
Lender may hold the Collateral until all the Indebtedness has
been paid and satisfied and thereafter may deliver the Collateral
to any Grantor. Lender shall have the following rights in
addition to all other rights it may have by law:
Income and Proceeds from the Collateral. Lender may receive
all Income and Proceeds and add it to the Collateral.
Grantor agrees to deliver to Lender immediately upon
receipt, in the exact form received and without commingling
with other property, all Income and Proceeds from the
Collateral which may be received by, paid, or delivered to
Grantor or for Grantor's account, whether as an addition to,
in discharge of, in substitution of, or in exchange for any
of the Collateral.
Application of Cash. At Lender's option, Lender may apply
any cash, whether included in the Collateral or received as
Income and Proceeds or through liquidation, sale, or
retirement, of the Collateral, to the satisfaction of the
Indebtedness or such portion thereof as Lender shall choose,
whether or not matured.
Transactions with Others. Lender may (a) extend time for
payment or other performance, (b) grant a renewal or change
in terms or conditions, or (c) compromise, compound or
release any obligation, with any one or more Obligers,
endorser, or Guarantors of the Indebtedness as Lender deems
advisable, without obtaining the prior written consent of
Grantor, and no such act or failure to act shall affect
Lender's rights against Grantor or the Collateral.
All Collateral Secures Indebtedness. All Collateral shall
be security for the Indebtedness, whether the Collateral is
located at one of more offices or branches of Lender and
whether or not the office or branch where the Indebtedness
is created is aware of or relies upon the Collateral.
Collection of Collateral. Lender, at Lender's option may,
but need not, collect directly from the Obligors on any of
the Collateral all Income and Proceeds or other sums of
money and other property due and to become due under the
Collateral, and Grantor authorizes and directs the Obligors,
if Lender exercises such option, to pay and deliver to
Lender all Income and Proceeds and other sums of money and
other property payable by the terms of the Collateral and to
accept Lender's receipt for the payments.
POWER OF ATTORNEY. Grantor irrevocably appoints Lender as
Grantor's attorney-in-fact, with full power of substitution,
(a) to demand, collect, receive, receipt for, sue and
recover all Income and Proceeds and other sums of money and
other property which may now or hereafter become due, owing
or payable from the Obligors in accordance with the terms of
the Collateral; (b) to execute, sign and endorse any and all
instruments, receipts, checks, drafts and warrants issued in
payment for the Collateral; (c) to settle or compromise any
and all claims arising under the Collateral, and in the
place and stead of Grantor, execute and deliver Grantor's
release and acquittance for Grantor; (d) to file any claim
or claims or to take any action or institute or take part in
any proceedings, either in Lender's own name or in the name
of Grantor, or otherwise, which in the discretion of Lender
may seem to be necessary or advisable; and (e) to execute in
Grantor's name and to deliver to the Obligors on Grantor's
behalf, at the time and in the manner specified by the
Collateral, any necessary instruments or documents.
Perfection of Security Interest. Upon request of Lender,
Grantor will deliver to Lender any and all of the documents
evidencing or constituting the Collateral. When applicable
law provides more than one method of perfection of Lender's
security interest, Lender may choose the method(s) to be
used. Upon request of Lender, Grantor will sign and deliver
any writings necessary to perfect Lender's security
interest. If the Collateral consists of securities for
which no certificate has been issued, Grantor agrees, at
Lender's option, either to request issuance of an
appropriate certificate or to execute appropriate
instructions on Lender's forms instructing the issuer,
transfer agent, mutual fund company, or broker, as the case
may be, to record on its books or records, by book-entry or
otherwise, Lender's security interest in the Collateral.
Grantor hereby appoints Lender as Grantor's irrevocable
attorney-in-fact for the purpose of executing any documents
necessary to perfect or to continue the security interest
granted in this Agreement. This is a continuing Security
Agreement and will continue in effect even though all or any
part of the Indebtedness is paid in full and even though for
a period of time Borrower may not be indebted to Lender.
EXPENDITURES BY LENDER. If not discharged or paid when due,
Lender may (but shall not be obligated to) discharge or pay any
amounts required to be discharged or paid by Grantor under this
Agreement, including without limitation all taxes, liens,
security interests, encumbrances, and other claims, at any time
levied or placed on the Collateral. Lender also may (but shall
not be obligated to) pay all costs for insuring, maintaining and
preserving the Collateral. All such expenditures incurred or
paid by Lender for such purposes will then bear interest at the
rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Grantor. All such expenses
shall become a part of the Indebtedness and, at Lender's option,
will (a) be payable on demand, (b) be added to the balance of the
Note and be apportioned among and be payable with any installment
payments to become due during either (i) the term of any
applicable insurance policy or (ii) the remaining term of the
Note, or (c) be treated as a balloon payment which will be due
and payable at the Note's maturity. This Agreement also will
secure payment of these amounts. Such right shall be in addition
to all other rights and remedies to which Lender may be entitled
upon the occurrence of an Event of Default.
LIMITATIONS ON OBLIGATIONS OF LENDER. Lender shall use ordinary
reasonable care in the physical presentation and custody of the
Collateral in Lender's possession, but shall have no other
obligation to protect the Collateral or its value. In
particular, but without limitation, Lender shall have no
responsibility for (a) any depreciation in value of the
Collateral or for the collection or protection of any Income and
Proceeds from the Collateral, (b) preservation of rights against
parties to the Collateral or against third persons, (c)
ascertaining any maturities, calls, conversions, exchanges,
offers, tenders, or similar matters relating to any of the
Collateral, or (d) informing Grantor about any of the above,
whether or not Lender has or is deemed to have knowledge of such
matters. Except as provided above, Lender shall have no
liability for depreciation or deterioration of the Collateral.
EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default under this Agreement:
Default on Indebtedness. Failure of Borrower to make any
payment when due on the Indebtedness.
Other Defaults. Failure of Borrower or Grantor to comply
with or to perform any other term, obligation, covenant or
condition contained in this Agreement or in any of the
Related Documents or failure of Borrower to comply with or
to perform any term, obligation, covenant or condition
contained in any other agreement between Lender and
Borrower.
Default in Favor of Third Parties. Should Borrower or any
Grantor default under any loan, extension of credit,
security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or
Borrower's or any Grantor's ability to repay the Loans or
perform their respective obligations under this Agreement or
any of the Related Documents.
False Statements. Any warranty, representation or statement
made or furnished to Lender by or on behalf of Borrower or
Grantor under this Agreement, the Note or the Related
Documents is false or misleading in any material respect,
either now or at the time made or furnished.
Defective Collateralization. This Agreement or any of the
Related Documents ceases to be in full force and effect
(including failure of any collateral documents to create a
valid and perfected security interest or lien) at any time
and for any reason.
Insolvency. The dissolution or termination of Borrower or
Grantor's existence as a going business, the insolvency of
Borrower or Grantor, the appointment of a receiver for any
part of Borrower or Grantor's property, any assignment for
the benefit of creditors, any type of creditor workout, or
the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower or Grantor.
Creditor or Forfeiture Proceedings. Commencement of
foreclosure or forfeiture proceedings, whether by judicial
proceeding, self-help, repossession or any other method, by
any creditor of Borrower or Grantor or by any governmental
agency against the Collateral or any other collateral
securing the Indebtedness. This includes a garnishment of
any of Borrower or Grantor's deposit accounts with Lender.
Events Affecting Guarantor. Any of the preceding events
occurs with respect to any Guarantor of any of the
Indebtedness or such Guarantor dies or becomes incompetent.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs
under this Agreement, at any time thereafter, Lender may exercise
any one or more of the following rights and remedies:
Accelerate Indebtedness. Declare all Indebtedness,
including any prepayment penalty which Borrower would be
required to pay, immediately due and payable, without notice
of any kind to Borrower or Grantor.
Collect the Collateral. Collect any of the Collateral and,
at Lender's option and to the extent permitted by applicable
law, retain possession of the Collateral while suing on the
Indebtedness.
Sell the Collateral. Sell the Collateral, at Lender's
discretion, as a unit or in parcels, at one or more public
or private sales. Unless the Collateral is perishable or
threatens to decline speedily in value or is of a type
customarily sold on a recognized market, Lender shall give
or mail to Grantor, or any of them, notice at least ten (10)
days in advance of the time and place of any public sale, or
of the date after which any private sale may be made.
Grantor agrees that any requirement of reasonable notice is
satisfied if Lender mails notice by ordinary mail addressed
to Grantor, or any of them, at the last address Grantor has
given Lender in writing. If a public sale is held, there
shall be sufficient compliance with all requirements of
notice to the public by a single publication in any
newspaper of general circulation in the county where the
Collateral is located, setting forth the time and place of
sale and a brief description of the property to be sold.
Lender may be a purchaser at any public sale.
Register Securities. Register any securities included in
the Collateral in Lender's name and exercise any rights
normally incident to the ownership of securities.
Sell Securities. Sell any securities included in the
Collateral in a manner consistent with applicable federal
and state securities laws. If, because of restrictions
under such laws, Lender is or believes it is unable to sell
the securities in an open market transaction, Grantor agrees
that Lender shall have no obligation to delay sale until the
securities can be registered, and may make a private sale to
one or more persons or to a restricted group of persons,
even though such sale may result in a price that is less
favorable than might be obtained in an open market
transaction, and such a sale shall be considered
commercially reasonable. If any securities held as
Collateral are "restricted securities" as defined in the
Rules of the Securities and Exchange Commission (such as
Regulation D or Rule 144) or state securities departments
under state "Blue Sky" laws, or if Borrower or Grantor is an
affiliate of the issuer of the securities, Borrower and
Grantor agree that neither Grantor nor any agent of Grantor
will sell or dispose of any securities of such issuer
without obtaining Lender's prior written consent.
Foreclosure. Maintain a judicial suit for foreclosure and
sale of the Collateral.
Transfer Title. Effect transfer of title upon sale of all
or part of the Collateral. For this purpose, Grantor
irrevocably appoints Lender as its attorney-in-fact to
execute endorsements, assignments and instruments in the
name of Grantor and each of them (if more than one) as shall
be necessary or reasonable.
Other Rights and Remedies. Have and exercise any or all of
the rights and remedies of a secured creditor under the
provisions of the Uniform Commercial Code, at law, in
equity, or otherwise.
Application of Proceeds. Apply any cash which is part of
the Collateral, or which is received from the collection or
sale of the Collateral, to reimbursement of any expenses,
including any costs for registration of securities,
commissions incurred in connection with a sale, attorney
fees as provided below, and court costs, whether or not
there is a lawsuit and including any fees on appeal,
incurred by Lender in connection with the collection and
sale of such Collateral and to the payment of the
Indebtedness of Borrower to Lender, with any excess funds to
be paid to Grantor as the interests of Grantor may appear.
Borrower agrees, to the extent permitted by law, to pay any
deficiency after application of the proceeds of the
Collateral to the Indebtedness.
Cumulative Remedies. All Lender's rights and remedies,
whether evidenced by this Agreement or by any other writing,
shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall
not exclude pursuit of any other remedy, and an election to
make expenditures or to take action to perform an obligation
of Grantor under this Agreement, after Grantor's failure to
perform, shall not affect Lender's right to declare a
default and to exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions
are a part of this Agreement:
Amendments. This Agreement, together with any Related
Documents, constitutes the entire understanding and
agreement of the parties as to the matters set forth in this
Agreement. No alteration of or amendment to this Agreement
shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the
alteration or amendment.
Applicable Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the
Commonwealth of Virginia. Lender and Borrower and Grantor
hereby waive the right to any jury trial in any action,
proceeding, or counterclaim brought by either party against
the other.
Attorneys' Fees; Expenses. Borrower and Grantor agree that
if Lender hires an attorney to help enforce this Agreement
or to collect any sums owing under this Agreement, Borrower
and Grantor will pay, subject to any limits under applicable
law, Lender's attorney fees equal to 25.000% of the
principal balance due on the Note, and all of Lender's other
collection expenses, whether or not there is a lawsuit and
including without limitation additional legal expenses for
bankruptcy proceedings.
Caption Headings. Caption headings in this Agreement are
for convenience purposes only and are not to be used to
interpret or define the provisions of this Agreement.
Multiple Parties; Corporate Authority. All obligations of
Borrower and Grantor under this Agreement shall be joint and
several, and all references to Borrower shall mean each and
every Borrower, and all references to Grantor shall mean
each and every Grantor. This means that each of the
Borrowers signing below is responsible for all obligations
in this Agreement.
Notices. All notices required to be given under this
Agreement shall be given in writing, may be sent by
telefacsimile, and shall be effective when actually
delivered if hand delivered or when deposited with a
nationally recognized overnight courier or deposited as
certified or registered mail in the United States mail,
first class, postage prepaid, addressed to the party to whom
the notice is to be given at the address shown above. Any
party may change its address for notices under this
Agreement by giving formal written notice to the other
parties, specifying that the purpose of the notice is to
change the party's address. To the extent permitted by
applicable law, if there is more than one Borrower or
Grantor, notice to any Borrower or Grantor will constitute
notice to all Borrower and Grantors. For notice purposes,
Borrower and Grantor will keep Lender informed at all times
of Borrower and Grantor's current address(es).
Severability. If a court of competent jurisdiction finds
any provision of this Agreement to be invalid or
unenforceable as to any person or circumstance, such finding
shall not render that provision invalid or unenforceable as
to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to
be within the limits of enforceability or validity; however,
if the offending provision cannot be so modified, it shall
be stricken and all other provisions of this Agreement in
all other respects shall remain valid and enforceable.
Successor Interests. Subject to the limitations set forth
above on transfer of the Collateral, this Agreement shall be
binding upon and inure to the benefit of the parties, their
successors and assigns.
Waiver. Lender shall not be deemed to have waived any
rights under this Agreement unless such waiver is given in
writing and signed by Lender. No delay or omission on the
part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender
of a provision of this Agreement shall not prejudice or
constitute a waiver of Lender's right otherwise to demand
strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Grantor, shall
constitute a waiver of any of Lender's rights or of any of
Grantor's obligations as to any future transactions.
Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent to
subsequent instances where such consent is required and in
all cases such consent may be granted or withheld in the
sole discretion of Lender.
BORROWER AND GRANTOR ACKNOWLEDGE HAVING READ ALL THE PROVISIONS
OF THIS PLEDGE AND SECURITY AGREEMENT, AND BORROWER AND GRANTOR
AGREE TO ITS TERMS. THIS AGREEMENT IS DATED SEPTEMBER 11, 1996.
BORROWER:
American Passage Media, Inc.
By: /s/ Don Leeds (SEAL) By: /s/ Harlan D. Peltz (SEAL)
Don Leeds, President Harlan D. Peltz,
Chief Executive
Officer
GRANTOR:
Network Event Theater, Inc.
By: /s/ Harlan D. Peltz (Seal)
Harlan D. Peltz, Chairman and
Chief Executive Officer
By: /s/ Don Leeds (Seal)
Don Leeds, EVP
Waiver Language Attached.
/s/ Don Leeds /s/ Harlan D. Peltz
Don Leeds Harlan D. Peltz
Waiver Language
Notwithstanding the terms of the foregoing Business Loan
Agreement or any of the Related Documents:
1. Lender may not accelerate the loan or otherwise exercise any
remedies against Borrower unless an Event of Default has
occurred and is continuing.
2. With respect to any default by Borrower in the performance
of any covenant under the Business Loan Agreement or Related
Documents (including, without limitation, a payment
covenant), such default will not constitute an Event of
Default and Lender may not accelerate the Loan or otherwise
exercise remedies against Borrower if Borrower fully cures
such default by performing such act or making such payment
within 15 calendar days of the date on which such action or
payment was due to be performed or paid.
3. Once a default occurs under the Business Loan Agreement or
Related Documents, then such default will continue to exist
until it is either cured by Borrower or is otherwise waived
by Lender and once an Event of Default occurs under the
Business Loan Agreement or Related Documents, then such
Event of Default will continue to exist until expressly
waived by Lender which may not be unreasonably withheld by
Lender.
By: /s/ Don Leeds By: /s/ Harlan D. Peltz
Don Leeds Harlan D. Peltz
