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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) NOVEMBER 17, 1998
VDI MEDIA
(Exact Name of Registrant as Specified in its Charter)
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<S> <C> <C>
CALIFORNIA 0-21917 95-4272619
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
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6920 SUNSET BOULEVARD
HOLLYWOOD, CALIFORNIA 90028
(Address of Principal Executive Offices) (Zip Code)
(213) 957-5500
Registrant's telephone number, including area code
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ITEM 2. ACQUISITION OF ASSETS
On November 17, 1998 VDI Media (the "Company") consummated an Asset
Purchase Agreement (the "Agreement"), dated as of November 9, 1998, with DUBS
Incorporated (the "Seller") and the Seller's shareholders. Pursuant to the
Agreement, the Company purchased substantially all of the assets of the
Seller, including all of the business, properties, assets and rights of any
kind, whether tangible or intangible, real or personal, owned by the Seller
or in which the Seller has any interest on the closing date. The Seller
provides technical media services (including the duplication and
distribution of broadcast quality video tapes) primarily to owners,
independent producers and distributors of television programming, feature
films and other entertainment content, which business the Company intends to
continue.
The purchase price for this acquisition consisted of (i) a cash payment
of approximately $6.9 million (of which $1.5 million was held back to secure
any required post-closing purchase price adjustments), (ii) the assumption of
the Seller's trade payables, and (iii) the repayment of approximately $4.0
million of the Seller's long term debt. In addition, the Company may be
required to make a contingent earn-out payment (payable in shares of its
common stock) if the acquired business achieves specified EBITDA targets,
subject to certain limitations described in the Agreement (up to a maximum
contingent payment of $3.3 million worth of common stock, valued generally as
of the closing date). The Company paid the cash and repaid indebtedness
portion of the purchase price from the proceeds of its amended and restated
credit agreement with Union Bank of California, N.A., as Agent, which it
entered into on November 17,1998.
The description of the Agreement contained herein, which does not
purport to be complete, is qualified in its entirety by reference to the
Agreement, which is attached as an exhibit hereto.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Financial statements relating to this purchase are not currently
available. To the extent required, the Company intends to file
such financial statements by an amendment to this Current Report on
Form 8-K within 60 days of the date of the filing of this Report.
(b) PRO FORMA FINANCIAL INFORMATION.
Pro forma financial information relating to this purchase is not
currently available. To the extent required, the Company intends to
file such pro forma financial information by an amendment to this
Current Report on Form 8-K within 60 days of the date of the filing
of this report.
(c) EXHIBITS
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10.19 Asset Purchase Agreement, dated as of November 9, 1998, by and
between VDI Media, DUBS Incorporated, Vince Lyons and Barbara
Lyons.
10.20 Amended and Restated Credit Agreement, dated as of November 17,
1998, by and between VDI Media, as Borrower, Fast Forward, Inc.
and Multi-Media Services as Guarantors, and Union Bank of
California, N.A., as Agent.
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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 thereunto duly authorized.
VDI MEDIA
Date: December 2, 1998 /s/ Donald R. Stine
-------------------------------------
Donald R. Stine
Chief Financial Officer and Treasurer
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ASSET PURCHASE AGREEMENT
Dated as of November 9, 1998
by and among
VDI MEDIA,
as Purchaser
and
DUBS, INCORPORATED, VINCENT LYONS
AND BARBARA LYONS,
as Sellers
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Execution Copy
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of November 9, 1998, by and among VDI Media, a California corporation
("Purchaser"), DUBS Incorporated, a California corporation (the "Company"),
Vincent Lyons and Barbara Lyons (each a "Shareholder" and collectively, the
"Shareholders") (the Shareholders and the Company each a "Seller" and
collectively, the "Sellers").
R E C I T A L S
A. The Shareholders are the only record holders and beneficial owners
of the capital stock of the Company.
B. The Company is the owner of the Assets (as hereinafter defined).
C. Purchaser desires to purchase from the Company, and the Company
desires to sell, convey, transfer, assign and deliver to Purchaser, the
Assets of the Company upon the terms and subject to the conditions of this
Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and the provisions set
forth below, and subject to the terms and conditions set forth herein, the
parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
indicated below:
"ACCOUNTS RECEIVABLE" shall have the meaning set forth in Section 5.10.
"ACTION" shall mean any action, claim, suit, litigation, proceeding,
labor dispute, arbitral action, governmental audit, inquiry, criminal
prosecution, investigation or unfair labor practice charge or complaint.
"AFFILIATE" shall mean, in respect of any specified Person, any other
Person that, directly or indirectly, controls, is controlled by, or is under
common control with, such specified Person or if such specified Person bears
a familial relationship with such other Person.
"AFFILIATED PARTIES" shall have the meaning set forth in Section 11.2.
"AGREEMENT" shall have the meaning set forth in the Preamble.
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"AGREEMENT NOT TO COMPETE" shall mean the agreement in the form attached
hereto as Exhibit C.
"ANCILLARY AGREEMENTS" shall mean the Employment Agreement, the
Agreement Not to Compete, the Bill of Sale, the Assignment and Assumption of
Leases, the Assignment and Assumption of Personal Property Leases, the
Assignment and Assumption of Contracts, the Assignment of Business Name, the
Release of Encumbrances, the Shareholder Release and the Assumption of
Liabilities substantially in the forms attached hereto as Exhibits A, B, C,
D, E, F, G, H, and I respectively.
"ASSETS" shall mean all of the right, title and interest in and to all
of the business, properties, assets and rights of any kind, whether tangible
or intangible, real or personal, owned by the Company or in which the Company
has any interest on the Closing Date, excluding the Excluded Assets and any
asset in which a customer of the Company has an ownership or possessory
interest (to the extent of such ownership or possessory interest), but
including without limitation all of the Company's right, title and interest
in the following:
(1) all accounts and notes receivable and contingent rights relating
thereto (whether current or noncurrent), cash-on-hand, refunds, deposits,
advances, advance payments, prepaid expense items and credits, prepayments
or prepaid expenses and all other receivables;
(2) all Contract Rights (to the extent assignable and consistent with
Section 7.18 hereof);
(3) all Leases and Leasehold Estates and Personal Property Leases;
(4) all Leasehold Improvements;
(5) all Fixtures and Equipment;
(6) all Inventory;
(7) all Books and Records;
(8) all Proprietary Rights;
(9) all Permits (to the extent assignable to Purchaser);
(10) all computers and software;
(11) all Insurance Policies and rights thereunder, including rights to
insurance proceeds (to the extent assignable to Purchaser), but only in
connection with the Assumed Liabilities, the Assets and the Business or
(ii) occurrences or events arising on or after the Closing for which the
Sellers have no indemnification obligation pursuant to Article XI.
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(12) all supplies, sales literature, promotional literature, customer,
supplier and distributor lists, art work, display units, telephone and fax
numbers and purchasing records related to the Business;
(13) all rights under or pursuant to all warranties, representations
and guarantees made by suppliers in connection with products or services
furnished to the Company in connection with (i) the Assumed Liabilities or
the Assets or (ii) events or occurrences arising on or after the Closing;
(14) all claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind related to the Assets or the
Assumed Liabilities, against any person or entity, including without
limitation any liens, security interests, pledges or other rights to
payment or to enforce payment in connection with products delivered or
services provided by the Company on or prior to the Closing Date, except to
the extent that any of the foregoing relate to the Excluded Assets or the
Excluded Liabilities; and
(15) all of the Business as a going concern and the goodwill
pertaining thereto.
"ASSIGNED CONTRACT" shall mean those Contracts of the Company identified on
Schedule 1 hereto, which, by their terms, are assignable to the Purchaser
without the consent of the other contracting party and any other Contract
which is assigned to Purchaser in writing following the Closing with the
consent of the other contracting party.
"ASSUMED LIABILITIES" shall have the meaning set forth in Section 2.3.
"ASSUMPTION AGREEMENT" shall have the meaning set forth in Section
4.2(b).
""AUDIT"" shall have the meaning set forth in Section 3.1(b).
"AUDITED CLOSING BALANCE SHEET" shall have the meaning set forth in
Section 3.1(b).
"BALANCE SHEET" or "BALANCE SHEETS" shall have the meaning set forth in
Section 5.7(a).
"BILL OF SALE" shall have the meaning set forth in Section 4.2(a)(3).
"BOOKS AND RECORDS" shall mean correct and complete copies of (a) all
records, files and lists of each Seller pertaining to the Assets, (b) all
records and lists pertaining to the Business, customers, suppliers, vendors,
clients or personnel of the Company, (c) all product, business and marketing
plans of the Company, (d) all books, ledgers, files, reports, plans,
drawings, merchandise and sales promotion literature and promotional and
advertising materials, all catalogues, research material, management
information systems, software, technology and specifications and operating
records of every kind maintained by the Company and (e) the Company's minute
books, stock books, books of account and tax returns, but only to the extent
reasonably necessary or appropriate in order for Purchaser to operate the
Business, to benefit from the ownership of the Assets, to discharge the
Assumed Liabilities or to enforce its rights with respect to the foregoing
and pursuant to this Agreement.
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"BUSINESS" shall mean the business of the Company, including video and
audio tape storage, post-production, duplication, distribution (including
physical, satellite and fiber optic means of distribution), editing,
telecine, color correction, audio sweetening and layback and ancillary
services.
"CASH PAYMENT" shall mean have the meaning set forth in Section 2.5.
"CLOSING" shall have the meaning set forth in Section 4.1.
"CLOSING DATE" shall mean (a) November __, 1998 or (b) such other date
as Purchaser and the Sellers shall mutually agree upon.
"COBRA" shall have the meaning set forth in Section 5.15(e).
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" shall have the meaning set forth in the Preamble.
"CONTRACT" shall mean, other than any Lease or Personal Property Lease,
any agreement, contract, note, loan, evidence of indebtedness, purchase
order, undertaking, obligation or commitment to which the Company is a party
or is bound and which relates to the Business or the Assets, whether oral or
written, including, without limitation, purchase commitments for materials
and other services, whether or not entered into in the ordinary course of
business, relating to the Business, any Company's rights under any
confidentiality agreements relating to the Business (if and to the extent
assignable), all unfilled sales orders, invoices, contracts and commitments
with customers relating to the Business, all unfilled purchase orders,
invoices, contracts and commitments with suppliers relating to the Business.
"CONTRACT RIGHTS" shall mean all of the Company's rights and obligations
under the Contracts, excluding any such Contracts evidencing Financing
Obligations which do not constitute Assumed Liabilities.
"COPYRIGHTS" shall mean registered copyrights, copyright applications
and unregistered copyrights.
"COURT ORDER" shall mean any judgment, decision, consent decree,
injunction, ruling or order of any federal, state or local court or
governmental agency, department or authority that is binding on any person or
its property under applicable law.
"DEFAULT" shall mean (a) a breach of or default under any Contract,
Lease or Permit, (b) the occurrence of an event that with the passage of time
or the giving of notice or both would constitute a breach of or default under
any Contract, Lease or Permit, or (c) the occurrence of an event that with or
without the passage of time or the giving of notice or both would give rise
to a right of termination, renegotiation or acceleration under any Contract,
Lease or Permit.
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"DISCLOSURE SCHEDULE" shall mean the schedule delivered by the Company
to Purchaser as of the date hereof which sets forth the exceptions to the
representations and warranties contained in Article V hereof and certain
other information called for by this Agreement. Unless otherwise specified,
each reference in this Agreement to any numbered schedule is a reference to
that numbered schedule which is included in the Disclosure Schedule.
"DISCONTINUED OPERATIONS" shall mean any businesses or operations
previously sold or otherwise disposed of by any of the Sellers and any
ongoing indemnification obligations in connection therewith.
"EARN-OUT PERIOD" shall mean the period commencing on the first day of
the second full calendar month following the Closing and ending on the first
anniversary of such date.
"EARN-OUT STOCK"shall have the meaning set forth in Section 2.5(a)(iii).
"EMPLOYMENT AGREEMENT" shall mean the employment agreement between
Purchaser and Vincent Lyons, dated the Closing Date, and substantially in the
form of attached hereto as Exhibit A.
"ENCUMBRANCE" shall mean any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement
to give any of the foregoing in the future, and any contingent sale or other
title retention agreement or lease in the nature thereof.
"ENVIRONMENTAL LIABILITIES FOR PRE-CLOSING MATTERS" shall mean any and
all liabilities, damages, losses, costs and expenses arising from any
Pre-Closing Environmental Matters, including, without limitation, costs of
investigation, cleanup, removal, remedial, corrective or response action, the
costs associated with posting financial assurances for the completion of
investigation, cleanup, removal, remedial, corrective or response actions,
attorneys' fees, the preparation of any closure or other necessary or
required plans or analyses, or other necessary reports or analyses submitted
to or prepared for regulating agencies.
"ENVIRONMENTAL PROTECTION LAWS" shall mean all federal, state, local and
foreign laws, statutes, regulations having the force and effect of law,
permits, court decrees, judgments, injunctions and written orders concerning
(i) public health and safety relating to exposure of humans to toxic or
hazardous substances or otherwise relating to Regulated Substances or (ii)
pollution or protection of the environment or natural resources, including,
without limitation, the Comprehensive Environmental Response, Compensation,
and Liability Act ("CERCLA") (42 U.S.C. Section 9601 ET SEQ.); the Hazardous
Materials Transportation Act (49 U.S.C. Section 1801 ET SEQ.); the Resource
Conservation and Recovery Act ("RCRA") (42 U.S.C. Section 6901 ET SEQ.); the
Clean Water Act (33 U.S.C. Section 1251 ET SEQ.); the Safe Drinking Water Act
(14 U.S.C. Section 1401 ET SEQ.); the Toxic Substances Control Act (15 U.S.C.
Section 2601 ET SEQ.), the Federal Insecticide, Fungicide, and Rodenticide
Act (7 U.S.C. Section 136 ET SEQ.), the Clean Air Act (42 U.S.C. Section 7401
ET SEQ.); the Emergency Planning and Community Right-to-Know Act (42 U.S.C.
Sections 11001-11005,
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11021-11023, and 11041-11050); the Porter-Cologne Water Quality Act
(California Water Code Sections 13000-13999.19); the Hazardous Waste Control
Law (California Health & Safety Code Sections 25100-25250.25); the Safe
Drinking Water and Toxic Enforcement Act (California Health & Safety Code
Sections 25249.5-25249.13); California Health & Safety Code Sections
25280-25299.81 (regarding Underground Storage of Hazardous Substances) and
Sections 25500-25545 (regarding Hazardous Materials Inventories and Emergency
Plans); the Hazardous Substance Account Act (California Health & Safety Code
Sections 25300-25393); and California Health & Safety Code Sections
39000-44384 regarding Air Resources; in each case including the regulations
promulgated thereunder, including, without limitation, the regulations
promulgated by the South Coast Air Quality Management District; each as
supplemented or amended from time to time.
"EPA" shall mean the United States Environmental Protection Agency, or
any successor United States governmental agency.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as the same may be amended from time to time.
"ERISA AFFILIATE" shall mean with respect to any person (a) any
corporation that is a member of a controlled group of corporations, within
the meaning of Section 414(b) of the Code, of which that person is a member,
(b) any trade or business (whether or not incorporated) that is a member of a
group of trades or businesses under common control, within the meaning of
Section 414(c) of the Code, of which that person is a member, and (c) any
member of an affiliated service group, within the meaning of Section 414(m)
and (o) of the Code, of which that person or any entity described in clause
(a) or (b) is a member.
"ESTIMATED CLOSING BALANCE SHEET" shall have the meaning set forth in
Section 2.5.
"EXCLUDED ASSETS" shall have the meaning set forth in Section 2.2
"EXCLUDED EMPLOYEE" shall have the meaning set forth in Section 2.4.
"EXCLUDED LIABILITIES" shall have the meaning set forth in Section 2.3.
"FACILITIES" shall mean all plants, offices, manufacturing facilities,
stores, warehouses, improvements, administration buildings, and all real
property and related facilities which are used or held for use in connection
with the Business as of the date of the Letter of Intent.
"FINAL CLOSING BALANCE SHEET" shall have the meaning set forth in
Section 3.1(b)(3).
"FINANCIALS" shall have the meaning set forth in Section 5.7(b).
"FINANCING OBLIGATIONS" shall mean (a) indebtedness of any Seller for
borrowed money, (b) obligations of any Seller evidenced by bonds, notes,
debentures, letters of credit or similar instruments, (c) obligations under
capitalized leases, (d) obligations under conditional sale, title retention
or similar agreements or arrangements creating an obligation of any Seller
with respect to the deferred purchase price of property (other than customary
trade credit), (e) interest rate
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and currency obligation swaps, hedges and similar arrangements and (f) all
obligations of any Seller to guaranty any of the foregoing types of
obligations on behalf of others, in each case as related to the Business.
"FIXTURES AND EQUIPMENT" shall mean all of following that are owned or
leased by the Sellers in connection with the Business as of the date of the
Letter of Intent: (a) all audiovisual, audio and visual recordings and other
materials produced by any technology, manner or means relating to the
Business, including, without limitation, prints, negatives, duplicating
negatives, fine grains, music and sound effects tracks, master tapes and
other duplicating materials of any kind, all various language dubbed and
titled versions, prints and negatives of stills, trailers and television
spots, all promos and other advertising and publicity materials, stock
footage, trims, tabs, outtakes, cells, drawings, (b) all physical properties
relating to the Business, including, without limitation, all editing,
telecine, distribution and duplication equipment, in each case, including,
without limitation, any of the foregoing in the possession, custody or
control of the Company, or in the possession of its assigns, or any film
laboratories, storage facilities or other Persons, (c) any and all
revisionary rights the Company has to the master and duplicate masters of any
original negative or master tape or elements plus (d) furniture, fixtures,
furnishings, machinery, automobiles, trucks, spare parts, supplies,
equipment, tooling, molds, patterns, dies and other tangible personal
property owned by the Company and used, held for use or useful in connection
with the Business, wherever located, and including any such Fixtures and
Equipment in the possession of the Company's suppliers, together with all
warranty rights with respect thereto.
"FORMER FACILITY" shall mean each plant, office, manufacturing facility,
store, warehouse, improvement, administrative building and all real property
and related facilities that were owned, leased or operated by the Company at
any time prior to the date hereof, but excluding any Facilities.
"GAAP" shall mean generally accepted accounting principles consistently
applied as in effect at the time in question.
"HOLDBACK AMOUNT" shall have the meaning set forth in Section 3.1(d).
"HOLLYWOOD LEASE" shall mean the Third Amendment and Restatement of
Lease, dated as of October 6, 1998 between Leon Vahn, as trustee of the Leon
Vahn Living Trust, as sublessor, and the Company, Vincent J. Lyons, Barbara
Lyons, George Cooney and Cynthia Cooney, as sublessees, with respect to that
real property located at 1220 North Highland Avenue, Los Angeles, California,
in the form attached hereto as Exhibit A.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section 11.7.
"INDEMNIFYING PARTY" shall have the meaning set forth in Section 11.7.
"INDEPENDENT ACCOUNTING FIRM" shall have the meaning set forth in
Section 3.1(b)(3).
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"INSURANCE POLICIES" shall mean the insurance policies related to the
Assets and/or the Business listed in Section 5.22 of the Disclosure Schedule.
"INTANGIBLE PERSONAL PROPERTY" shall have the meaning set forth in
Section 5.13(a).
"INVENTORY" shall have the meaning set forth in Section 5.17.
"IRS" shall mean the Internal Revenue Service.
"JULY 1998 BALANCE SHEET" shall have the meaning set forth in Section
5.7(b).
"KNOWLEDGE OF SELLER" with reference to any of the representations and
warranties of any Seller means the actual knowledge of Vincent Lyons or
Barbara Lyons or any employee of the Company.
"LEASE" shall have the meaning set forth in Section 5.11.
"LEASED PERSONAL PROPERTY" shall mean all leased property described in
the Personal Property Leases.
"LEASED REAL PROPERTY" shall mean all leased property described in the
Leases.
"LEASEHOLD ESTATES" shall mean all of each Seller's rights and
obligations as lessee under the Leases.
"LEASEHOLD IMPROVEMENTS" shall mean all leasehold improvements situated
in or on the Leased Real Property and owned by the Company.
"LETTER OF INTENT" shall mean that certain letter agreement among
Purchaser and the Company dated September 23, 1998.
"LIABILITIES" shall mean any liability, including, without limitation,
any direct or indirect liability, indebtedness, obligation, commitment,
expense, claim, deficiency, guaranty or endorsement of or by any person of
any type, whether accrued, absolute, contingent, matured, unmatured, known,
unknown or other, in each case as related to the Business.
"LICENSES" shall have the meaning set forth in Section 5.13(a).
"MATERIAL" when used in connection with a representation, warranty
and/or covenant shall mean (i) an adverse effect which, whether considered
individually or in the aggregate with all other circumstances or events
related to the same representation, warranty and/or covenant, involves an
economic effect of more than $10,000, or (ii) material to the Business
currently being conducted by the Company, taken as a whole.
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"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
operations, property, prospects or condition (financial or other) of the
Business, taken as a whole or (b) the ability of the Sellers to consummate
the Transactions.
"MATERIAL CONTRACTS" shall have the meaning set forth in Section 5.16.
"MULTI-EMPLOYER PLANS" shall have the meaning set forth in Section
5.14(a).
"NET WORKING CAPITAL" shall mean, as of a particular date, the Company's
account and trade receivables, inventory, cash and cash equivalents,
deposits, prepaid expenses and other current assets less its current and
short-term liabilities as of such date, in each case as determined in
accordance with GAAP and consistent with the presentation on the July 1998
Balance Sheet.
"ORDINARY COURSE OF BUSINESS" or "ORDINARY COURSE" or any similar phrase
shall mean the ordinary course of the Business and consistent with the
Company's past practices.
"PACIFIC LOAN" shall have the meaning set forth in Section 2.5(a)(ii).
"PATENTS" shall mean all patents and patent applications and registered
designs and registered design applications.
"PENDING" shall mean, with respect to a representation or warranty, any
claim, action, proceeding or investigation which, to the Knowledge of Seller,
has been or will be asserted or initiated against the Company.
"PERMITS" shall mean all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, or any other person,
necessary or desirable for the past, present or anticipated conduct of, or
relating to the operation of, the Business.
"PERMITTED ENCUMBRANCES" shall mean (i) the Assumed Liabilities (except
to the extent required to be released pursuant to Section 4.2), (ii)
mechanics', carriers', workmen's, repairmen's or other like Encumbrances
arising by operation of law in the ordinary course of business and which
secure liabilities (but not for money borrowed or guaranteed) reflected on
the July 1998 Financials that are not due and payable with appropriate
reserves set aside therefor; (iii) Encumbrances for Taxes which are not due
and payable with appropriate reserves set aside therefor; (iv) zoning, rights
of way, easements, building, encroachments, use restrictions and other
similar restrictions encumbering the real property which is leased to the
Company pursuant to the Leases; (v) Encumbrances arising through the
Purchaser or as a result of the Purchaser's actions on or after the Closing
Date (other than in connection with or relating to the Transactions; provided
that the Encumbrance securing Purchaser's financing of the Transaction with
Union Bank of California, N.A., as Agent shall constitute a Permitted
Encumbrance) and (vi) COBRA benefits that are required by law on the Closing
Date to be offered by Purchaser to any Excluded Employee.
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"PERSON" shall mean any natural person or any corporation, partnership,
joint venture, limited liability company or other entity.
"PERSONAL PROPERTY" shall have the meaning set forth in Section 5.26.
"PERSONAL PROPERTY LEASES" shall have the meaning set forth in Section
5.26.
"PLANS" shall have the meaning set forth in Section 5.15(a).
"PRE-CLOSING ENVIRONMENTAL MATTERS" shall mean (a) the production, use,
generation, storage, treatment, recycling, disposal or other handling or
disposition at any time prior to the Closing Date (collectively "Handling")
of any Regulated Substance, either in, on, under or from any Facility or
Former Facility, including, without limitation, the effects of such Handling
of Regulated Substances on resources, persons or property within or outside
the boundaries of any Facility or Former Facility, (b) any release of
Regulated Substances at any time prior to the Closing Date occurring in, on
or under any Facility or Former Facility regardless of how the Regulated
Substances came to rest in, on or under the Facility or Former Facility, (c)
the failure prior to the Closing Date of any Facility or Former Facility or
any operation of Sellers to be in compliance with any Environmental Laws, and
(d) any other act or omission occurring, or condition existing, with respect
to the Assets or the Business prior to the Closing Date which gives rise to
liability under any Environmental Protection Law.
"PRIME RATE" shall mean the prime rate as reported from time to time by
THE WALL STREET JOURNAL.
"PROPRIETARY RIGHTS" shall mean all of the Company's Copyrights,
Patents, Trademarks, technology rights and licenses, computer software
(including without limitation any source or object codes therefor or
documentation relating thereto), trade secrets, franchises, know-how,
inventions, designs, specifications, plans, drawings and intellectual
property rights, in each case as relates to the Business.
"PURCHASE PRICE" shall have the meaning set forth in Section 2.5(a).
"PURCHASE PRICE ADJUSTMENT" shall have the meaning set forth in Section
2.5(a).
"PURCHASER" shall have the meaning set forth in the Preamble.
"REAL PROPERTY" shall have the meaning set forth in Section 5.11.
"REGULATED SUBSTANCE" shall mean any chemical or substance subject to or
regulated under any Environmental Protection Law including, without
limitation, any "pollutant or contaminant" or "hazardous substance" as those
terms are defined in CERCLA, any "hazardous waste" as that term is defined in
RCRA, and any other hazardous or toxic wastes, substances, or materials,
petroleum (including crude oil and refined and unrefined fractions thereof),
polychlorinated biphenyls ("PCBs"), infectious waste, special waste,
pesticides, fungicides,
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solvents, herbicides, flammables, explosives, asbestos and asbestos
containing material, and radioactive materials, whether injurious by
themselves or in combination with other materials.
"REGULATIONS" shall mean any laws, statutes, ordinances, regulations,
rules, notice requirements, court decisions and orders of any foreign,
federal, state or local government and any other governmental department or
agency.
"RELEASE DOCUMENTS" shall have the meaning set forth in Section
4.2(a)(8).
"REPRESENTATIVE" shall mean any officer, director, principal, attorney,
agent, employee or other representative.
"SELLER" or "SELLERS" shall have the meaning set forth in the Preamble.
"SHAREHOLDER" or "SHAREHOLDERS" shall have the meaning set forth in the
Preamble.
"TAX" or "TAXES" shall mean any and all taxes imposed or required to be
collected by any federal, state or local taxing authority in the United
States, or by any foreign taxing authority under any statute or regulation,
including, without limitation, all income, gross receipts, sales, use,
personal property, use and occupancy, business occupation, mercantile, ad
valorem, transfer, license, withholding, payroll, employment, excise, real
estate, environmental, capital stock, franchise, alternative or add-on
minimum, estimated or other tax of any kind whatsoever, including any
interest, penalties and other additions thereto.
"TRADEMARKS" shall mean registered trademarks, registered service marks,
trademark and service mark applications and unregistered trademarks and
service marks.
"TRANSACTIONS" shall mean, in respect of any party, all transactions
contemplated by this Agreement or the Ancillary Agreements that involve,
relate to or affect such party.
"TRANSFERRED EMPLOYEES" shall have the meaning set forth in Section
7.6(a).
"UNITED STATES GOVERNMENT" shall mean the government of the United
States, including any agencies, commissions, branches, instrumentalities and
departments thereof.
"WARN ACT" shall have the meaning set forth in Section 2.4(a).
ARTICLE II
PURCHASE AND SALE OF ASSETS
SECTION 2.1 TRANSFER OF ASSETS. Upon the terms and subject to the
conditions contained herein, at the Closing, the Company shall sell, convey,
transfer, assign and deliver to Purchaser, and Purchaser shall acquire from
the Company, the Assets (including, without limitation, those assets of the
Company listed on Schedule 2.1 hereto), free and clear of all Encumbrances
other than Permitted Encumbrances.
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SECTION 2.2 ASSETS NOT TRANSFERRED. Notwithstanding anything herein
to the contrary, the following assets are not included in the Assets and
shall be retained by the Company (the "Excluded Assets"):
(a) rights to or claims for refunds or rebates of Taxes and the benefit
of net operating loss carryforwards or carrybacks or credits, with respect to
the period ending the day prior to the Closing Date, whether or not
attributable to the Assets, including, without limitation, any right to or
claim for refund or rebate of the Company in respect of Taxes payable in
connection with the consummation of the Transactions (except that any refund
or rebate of sales or transfer Taxes imposed upon the transfer of the Assets
from the Company to Purchaser will be allocated 50% to the Company and 50% to
Purchaser);
(b) claims or rights against third parties for indemnification,
contribution or reimbursement with respect to events, losses or breaches
occurring prior to the Closing Date, including breaches under the Contracts,
to the extent such claims or rights reduce the amount payable pursuant to the
Company's obligations to indemnify the Purchaser under Article XI;
(c) all Insurance Policies and rights thereunder to the extent
attributable to events or occurrences arising prior to the Closing Date
(other than in respect of the Assumed Liabilities), and any life insurance
policies on the life of Vincent Lyons and any rebates or refunds for premiums
previously paid in connection therewith;
(d) the original Books and Records of the Company;
(e) any benefits accruing under the Company's Employee Benefit Plans;
(f) the Company's claim and/or action to recover damages for stolen
property which was initiated prior to December 31, 1997, the proceeds and
liabilities of which shall remain with the Company; and
(g) all rights of the Company under this Agreement and the Ancillary
Agreements.
The Excluded Assets shall not be reflected on the Estimated Closing Balance
Sheet.
SECTION 2.3 ASSUMPTION OF LIABILITIES. Upon the terms and subject to
the conditions contained herein, at the Closing, Purchaser shall assume (i)
the liabilities reflected on the Estimated Closing Balance Sheet and (ii) the
Company's obligations and Liabilities under the Leases, the Personal Property
Leases, and the Assigned Contracts (collectively, "Assumed Liabilities").
SECTION 2.4 EXCLUDED LIABILITIES. Notwithstanding any other
provision of this Agreement, except for the Assumed Liabilities specified in
Section 2.3 and the expenses or fees to be paid by Purchaser as specified
herein, Purchaser shall not assume, or otherwise be responsible for, any
Liabilities of the Company, whether liquidated or unliquidated, or known or
unknown, whether arising out of occurrences prior to, at or after the date
hereof (the "Excluded Liabilities"), which Excluded Liabilities include,
without limitation, the following:
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(a) any Liability to or in respect of any employees or former employees
of the Company not listed on Schedule 2.4 attached hereto and any employee
listed on Schedule 2.4 who does not accept employment with Purchaser
(collectively, the "Excluded Employees") including without limitation (i) any
employment agreement, whether or not written, between the Company and any
Excluded Employee, (ii) any Liability under any Employee Benefit Plan at any
time maintained, contributed to or required to be contributed to by or with
respect to the Company or under which the Company may incur Liability, or any
contributions, benefits or Liabilities therefor, or any Liability with
respect to the Company's withdrawal or partial withdrawal from or termination
of any Employee Benefit Plan, (iii) any claim of an unfair labor practice, or
any claim under any state unemployment compensation or worker's compensation
law or regulation or under any federal or state employment discrimination law
or regulation, which shall have been asserted on or prior to the Closing Date
or is based on acts or omissions which occurred prior to the Closing Date and
(iv) any liabilities or obligations under the WARN Act including the rules
and regulations promulgated thereunder with respect to actions taken by the
Sellers prior to the Closing with respect to any Excluded Employee;
(b) any Liability of the Company in respect of (i) any income tax or
any interest, penalties or additions pertaining thereto or (ii) any other Tax
relating to any period or portion thereof prior to the Closing Date;
(c) any warranty claims and any Liability arising from any injury to
any person or damage to or destruction of any property, whether based on
negligence, breach of warranty, express or implied representation, strict
liability, enterprise liability or any other legal or equitable theory
arising from defects in products manufactured or from services performed by
or on behalf of the Company prior to the Closing Date;
(d) any Liability of any Seller arising out of or related to any Action
against any Seller or any Action which adversely affects the Assets and which
shall have been asserted prior to the Closing Date or the basis of which
shall have arisen prior to the Closing Date;
(e) any Liability of any Seller resulting from entering into,
performing its obligations pursuant to or consummating the transactions
contemplated by, this Agreement (including without limitation any Liability
of any Seller for fees or expenses incurred in connection with such
transactions (except to the extent otherwise provided herein, I.E., WARN Act
liabilities arising from post-closing actions by Purchaser, transfer taxes
and audit expenses) and any Liability of any Seller pursuant to Article XI
hereof);
(f) any Liability related to any Former Facility or any of the
Discontinued Operations;
(g) except to the extent provided for herein, any Financing Obligation
other than the Assumed Liabilities;
(h) any Environmental Liabilities for Pre-Closing Environmental
Matters, whether or not disclosed in the Disclosure Schedule;
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(i) any Liability of any Seller for fees or expenses incurred by
Sellers in connection with the consummation of the Transactions (except to
the extent otherwise provided herein, I.E., WARN Act liabilities arising from
post-closing actions by Purchaser, transfer taxes and audit expenses) ;
(j) any Liability of any Seller not directly related or incurred with
respect to the conduct of the Business;
(k) except to the extent provided for herein, any indebtedness for
borrowed money;
(l) any amounts payable to any Affiliate of any Seller;
(m) any cash overdraft liability; and
(n) except to the extent provided for herein, I.E. WARN Act liabilities
arising from post-closing actions by Purchaser, transfer taxes and audit
expenses, any liabilities accruing prior to the Closing Date.
SECTION 2.5 PURCHASE PRICE.
(a) PURCHASE PRICE. The purchase price for the Assets and Agreement
Not to Compete (as adjusted as set forth below, the "Purchase Price") shall
consist of:
(i) (x) the sum of (a) Six Million Nine Hundred Sixty Three
Thousand Dollars ($6,963,000), and (b) the Company's long-term debt reflected
on the July 1998 Balance Sheet, (y) plus or minus, as the case may be, the
increase or decrease, as the case may be, in Net Working Capital reflected on
the Estimated Closing Balance Sheet as compared with the Net Working Capital
Reflected on the July 1998 Balance Sheet, minus (z) the payments required by
Section 2.5(a)(ii) below and the amount of any other long-term debt shown on
the Estimated Closing Balance Sheet (the sum of the payments set forth in
(x), (y) and (z) the "Cash Payment"); provided, that One Million Five Hundred
Thousand Dollars ($1,500,000) (the "Holdback Amount") will be withheld from
the Cash Payment;
(ii) payment to Pacific Century Bank, N.A. (the "Company's
Lender") of the indebtedness owed to it by the Company (the "Pacific Loan")
in the amount reflected on the pay-off letter specified in Section 4.2(a)(10);
(iii) the assumption of the other Assumed Liabilities; and
(iv) if earned, the shares of Purchaser's common stock (the
"Earn-Out Stock") specified on Schedule 3.2(a)(1), subject to the terms and
conditions set forth in Section 3.2.
In addition, Purchaser shall pay in cash to the Company at Closing
interest accrued on the Cash Payment from the date hereof to and including
the Closing Date calculated at an annual rate of 5.0% and the interest
accrued on the Pacific Loan between the date hereof and the Closing Date.
The Purchase Price shall be increased or decreased following the Closing
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pursuant to Section 3.1(c) (such net adjustments are referred to herein
collectively as the "Purchase Price Adjustment").
(b) ALLOCATION OF PURCHASE PRICE. Purchaser and the Company shall
allocate the Purchase Price, any Purchase Price Adjustments (to the extent
identifiable or reasonably estimable as of the date hereof) and the Assumed
Liabilities (to the extent properly includible in the tax basis of the
Assets) to broad categories of the Assets and the Agreement Not to Compete in
accordance with Schedule 2.5(b). Purchaser and the Sellers shall report the
purchase and sale of the Assets in accordance with the agreed upon allocation
among such broad categories of Assets for all Tax purposes (including for
sales tax purposes and the filing of the forms prescribed under Section 1060
of the Code and the Treasury Regulations promulgated thereunder). Purchaser,
the Shareholders and the Company shall each file with their respective
federal income tax return for the tax year in which the Closing occurs, IRS
Form 8594 containing the information agreed upon by the parties pursuant to
the immediately preceding sentence. Purchaser agrees to report the purchase
of the Assets, and Sellers agree to report the sale of such Assets for income
tax purposes (including but not limited to, on their respective income tax
returns, before any governmental agency charged with the collection of income
tax or in any judicial proceeding concerning the income tax consequences of
Purchaser's purchase or Sellers' sale of the Assets hereunder) in a manner
consistent with the information agreed upon by the parties pursuant to this
Section 2.5(b) and contained in its IRS Form 8594.
SECTION 2.6 CLOSING COSTS; TRANSFER TAXES AND FEES. Purchaser and the
Company shall cooperate in preparing, executing and filing all tax returns
relating to, and Purchaser and the Company shall share equally and pay when
due any and all sales or transfer taxes and vehicle title registration fees
payable with regard to the purchase and sale of the Assets to Purchaser.
Such tax returns shall be prepared in a manner that is consistent with the
allocation of the Purchase Price and Assumed Liabilities contemplated by
Section 2.5(b). Purchaser shall also furnish Sellers with a form of resale
certificate that complies with the requirements of California and other
applicable California taxation laws with respect to the inventory
constituting part of the Assets. Purchaser and the Company shall share
equally any and all refunds or rebates of the Taxes or fees covered by this
Section 2.6 to the extent paid in respect of the purchase and sale of the
Assets.
ARTICLE III
PURCHASE PRICE ADJUSTMENT AND
EARN-OUT STOCK
SECTION 3.1 PURCHASE PRICE ADJUSTMENT.
(a) ESTIMATED CLOSING BALANCE SHEET. Schedule 3.1(a) contains an
estimated balance sheet dated as of the Closing Date (the "Estimated Closing
Balance Sheet") which sets forth, among other things, the current assets,
current liabilities and outstanding long term debt of the Company as of such
date. The Estimated Closing Balance Sheet shall be prepared in accordance
with GAAP and in a manner consistent with the presentation of the July 1998
Balance Sheet. The Estimated Closing Balance Sheet does not reflect any
provision for income Taxes (whether as an asset or a liability), and all
Excluded Assets (and all related depreciation and reserves) and
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Excluded Liabilities (and related reserves) have been eliminated. The Cash
Payment shall be adjusted pursuant to Section 2.5 based upon the Net Working
Capital and long-term debt shown on the Estimated Closing Balance Sheet.
(b) AUDITED CLOSING BALANCE SHEET.
(1) Within 60 days after the Closing Date, Purchaser shall cause
to be prepared and delivered to the Company an audited balance sheet of the
Company as of the Closing Date in the manner set forth in Section 3.1(a) (the
"Audited Closing Balance Sheet"), which shall set forth the Net Working
Capital and long-term debt of the Company, if any, as of the Closing Date,
and Purchaser's calculation of the Purchase Price Adjustment.
(2) Following delivery of the Audited Closing Balance Sheet to the
Company, the Company shall have a period of 15 days to present in writing to
Purchaser any objections or disagreement with respect to the calculation of
the Purchase Price Adjustment. Such notice shall specify, in reasonable
detail, the nature and extent of such disagreement.
(3) If the Company and Purchaser are unable to resolve any such
disagreement with respect to the calculation of the Purchase Price Adjustment
within 15 days after delivery by the Company of the notice referred to in
Section 3.l(b)(2), the disagreement shall be submitted for final
determination to a "Big Five" accounting firm mutually acceptable to the
Company and Purchaser (the "Independent Accounting Firm"). The Independent
Accounting Firm shall follow such procedures as it deems appropriate for
obtaining the necessary information in considering the positions of the
Company and Purchaser but shall not conduct an independent audit. The
Independent Accounting Firm shall render its determination on the matter
within 30 days of its submission by the Company and Purchaser, and such
determination shall be final, conclusive and binding upon Purchaser and
Sellers. The closing balance sheet of the Company finally agreed upon by the
parties shall be the Final Closing Balance Sheet (the "Final Closing Balance
Sheet"); the parties intend to reach such agreement no later than four months
after the Closing Date.
(4) The fees and expenses of the Independent Accounting Firm shall
be borne by the party whose asserted Purchase Price Adjustment is more at
variance from the actual Purchase Price Adjustment ultimately determined by
the Independent Accounting Firm.
(c) PURCHASE PRICE ADJUSTMENT. The Purchase Price shall be (i)
increased or decreased, on a dollar-for-dollar basis, by the amount by which
Net Working Capital reflected on the Final Closing Balance Sheet exceeds, or
is less than, respectively, the Net Working Capital reflected on the
Estimated Closing Balance Sheet, and (ii) increased or decreased, on a
dollar-for-dollar basis, by the amount by which the outstanding long term
debt repaid or assumed by Purchaser at Closing, is less than, or exceeds,
respectively, the long term debt reflected on the Final Closing Balance Sheet
(such adjustments, the "Purchase Price Adjustment"). If the Purchase Price
Adjustment requires a payment to the Company, Purchaser shall make such
payment in cash within ten days of the agreement as to the Final Closing
Balance Sheet. If the Purchase Price Adjustment requires a payment to the
Purchaser, Purchaser shall be entitled to deduct such payment from the
Holdback Amount.
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(d) HOLDBACK AMOUNT. In order to secure (but not to limit) the
Company's payment obligations regarding any Purchase Price Adjustment and
Sellers' indemnity obligations in this Agreement, Purchaser shall retain the
Holdback Amount from the Cash Portion for the period described below.
Purchaser shall release One Million Dollars ($1,000,000) of the Holdback
Amount, less any Purchase Price Adjustment owed by the Company upon final
determination of the Purchase Price Adjustment, within ten days of the
acceptance of the Final Closing Balance Sheet. Purchaser shall return the
balance of the Holdback Amount, plus any interest earned on the Holdback
Amount, less the amount of any indemnity claims asserted by Purchaser, if
any, to the Company on the date one year from the Closing Date, unless a
dispute then exists in which case Purchaser shall continue to hold the
disputed funds until the dispute is resolved. The Holdback Amount shall be
maintained by Purchaser in one of its bank account and shall bear interest at
the rate earned by Purchaser thereon; Purchaser shall not be required to
segregate such amount from its other funds.
SECTION 3.2 EARN-OUT STOCK.
(a) Purchaser shall calculate the EBITDA (as defined herein) of the
Company as a division of Purchaser for the Earn-Out Period. If the Company's
EBITDA for such period is equal to or greater than $3,500,000 (the "Target"),
Purchaser shall issue to the Company shares of its common stock having a
market value equal to $3,300,000, with such value to be calculated based on
the average closing price of Purchaser's common stock for the 30 days
immediately preceding the Closing (such number of shares to be equitably
adjusted in the event of any intervening stock dividend, stock split,
recapitalization, capital reorganization, reverse stock split or similar
transaction). If the Company's EBITDA for the Earn-Out Period is less than
the Target, Purchaser shall issue such fewer shares of Earn-Out Stock as
detailed on Schedule 3.2(a)(1) hereto. Calculation of EBITDA is set forth on
Schedule 3.2(a)(2) hereto. Purchaser agrees to operate the Company as a
division of Purchaser in a manner in which EBITDA can reasonably be
determined. Purchaser shall maintain accurate books, records and documents
reasonably necessary for the calculation of the Company's EBITDA. The
Company shall, upon request delivered to Purchaser in writing, have
reasonable access during normal business hours to inspect such books and
records at its cost.
(b) Subject to Purchaser's right of offset set forth in Section 11.9,
Purchaser shall issue to the Company the Earn-Out Stock, if earned, within 45
business days after the last day of the last month of the Earn-Out Period.
If Purchaser shall determine, after consultation with its independent
auditors, that the minimum EBITDA set forth on Schedule 3.2(a)(2) was not
achieved, it shall so notify the Company or the Shareholders on or before the
45th business day after the last day of the last month of the Earn-Out
Period, and include in such notification its calculation of EBITDA. The
Company shall have a period of 30 days thereafter to present in writing to
Purchaser any objections or disagreement with respect to the calculation of
EBITDA. Such notice shall specify, in reasonable detail, the nature and
extent of such disagreement.
(c) If the Company and Purchaser are unable to resolve any such
disagreement with respect to the calculation of EBITDA within ten days after
delivery by the Company of the notice referred to above, the disagreement
shall be submitted for final determination of the Independent Accounting
Firm. The Independent Accounting Firm shall follow such procedures as it
deems appropriate for obtaining the necessary information in considering the
positions of
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the Company and Purchaser but shall not conduct an independent
audit. The Independent Accounting Firm shall render its determination on the
matter within thirty 30 days of its submission by the Company and Purchaser,
and such determination shall be final, conclusive and binding upon Purchaser
and Sellers.
(d) The fees and expenses of the Independent Accounting Firm with
respect to a dispute of the Company's EBITDA during the Earn-Out Period shall
be borne by the party whose asserted EBITDA calculation is more at variance
from the actual EBITDA ultimately determined by the Independent Accounting
Firm.
SECTION 3.3 OPERATION OF BUSINESS AFTER CLOSING. From and after the
Closing Date until the end of the Earn-Out Period, Purchaser agrees to (a)
operate, or cause to be operated, the Assets as a separate division
unconsolidated with and apart from Purchaser's other businesses and assets or
(b) to account on the books and records of Purchaser for all such Assets as a
separate division unconsolidated with and apart from Purchaser's other
businesses and assets and (c) to use commercially reasonable efforts to
maximize the profitability of such separate division.
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ARTICLE IV
CLOSING
SECTION 4.1 CLOSING. The Closing of the transactions contemplated
herein (the "Closing") shall be held at 9:00 a.m. local time on the Closing
Date at the offices of Katten Muchin & Zavis, 1999 Avenue of the Stars, Los
Angeles, California, unless the parties hereto otherwise agree.
SECTION 4.2 CONVEYANCES AT CLOSING.
(a) COMPANY DELIVERIES. To effect the sale of the Assets, in addition
to the conditions set forth in Article VIII, the Company shall, at the
Closing, execute and deliver to Purchaser:
(1) Employment Agreement in the form attached hereto as Exhibit A;
(2) Agreement Not to Compete in the form attached hereto as Exhibit
B;
(3) one or more bills of sale, each in the form attached hereto as
Exhibit C (collectively, the "Bill of Sale");
(4) Assignment and Assumption of Real Property Lease, each in the
form attached hereto as Exhibit D (which shall include an
indemnity of Mr. and Mrs. Vincent Lyons and Mr. and Mrs. George
Cooney with regard to their respective obligations under the
Hollywood Lease);
(5) Assignment and Assumption of Personal Property Leases, each in
the form attached hereto as Exhibit E;
(6) Assignment and Assumption of Contracts, each in the form attached
hereto as Exhibit F;
(7) Assignment of Business Name, assigning to Purchaser the
Company's rights, title and interest to the name "DUBS" and
all variations thereof) in the form of Exhibit G;
(8) the releases of any Encumbrances on the Assets other than
Permitted Encumbrances, in the form of UCC-2 Termination
Statements executed by Sony Electronics, Northern Telecom,
and IBM Credit (the "Release Documents");
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(9) release of claims (the "Shareholder Release") executed by all
former shareholders of the Company, including George and Cynthia
Cooney, in the form of Exhibit H hereto;
(10) (a) a pay-off letter from the Company's Lender calculated as of
the Closing Date, including a statement that upon repayment of
the Pacific Loan, it will release its lien on the Assets and (b)
an executed UCC-2 Termination Statement (provided that delivery
of these items to Purchaser's lender or its counsel in escrow
prior to the Closing Date shall satisfy this delivery
requirement); and
(11) such other instruments as shall be reasonably requested by
Purchaser to vest in Purchaser title in and to the Assets in
accordance with the provisions hereof.
(b) PURCHASER DELIVERIES. To effect the sale of the Assets and assumption
of the Assumed Liabilities referred to in Article II hereof, in addition to the
conditions set forth in Article IX herein, Purchaser shall at the Closing
deliver to the Company
(1) the Cash Payment, plus the payment in respect of interest as
specified in the penultimate sentence of Section 2.5(a), less the
Holdback Amount;
(2) the payment required under Section 2.5(a)(ii) to the Company's
Lender;
(3) an instrument or instruments of assumption substantially in the
form attached as an Exhibit I, evidencing Purchaser's assumption,
pursuant to Section 2.3, of the Assumed Liabilities (the
"Assumption Agreement");and
(4) the Ancillary Agreements to which it is a party; and
Pursuant to the Assumption Agreement, Purchaser shall assume and agree to pay,
perform and discharge when due, the Assumed Liabilities.
(c) FORM OF INSTRUMENTS. To the extent that a form of any document to
be delivered hereunder is not attached as an exhibit hereto, such documents
shall be in form and substance, and shall be executed and delivered in a
manner, reasonably satisfactory to Purchaser and the Company.
(d) CERTIFICATES; OPINION. On the Closing Date, Purchaser and Sellers
shall deliver the certificates, opinion of counsel and other matters
described in Articles VIII and IX.
(e) CONSENTS. The Company shall deliver all Permits that are
transferrable and any other third party consents required for the valid
transfer of the Assets and assumption of the Assumed Liabilities as
contemplated by this Agreement, including any consents specified on Schedule
5.4.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller, jointly and severally, hereby represents and warrants to
Purchaser that:
SECTION 5.1 ORGANIZATION AND GOOD STANDING. The Company is a
corporation, duly organized, validly existing and in good standing under the
laws of the jurisdiction of California, and the Company is duly qualified or
authorized to do business in each jurisdiction in which it does business, or
owns property, or where such qualification or authorization is otherwise
required by virtue of its presence or activities. Schedule 5.l sets forth a
complete and correct list of all jurisdictions in which the Company is
required to be qualified or authorized to transact business or own property.
SECTION 5.2 ASSETS. Excluding the Leased Real Property and the
Leased Personal Property and any asset in which a customer has an ownership
or possessory interest, the Company owns, and will transfer good and
marketable title to, the Assets and upon the consummation of the
Transactions, Purchaser will acquire good and marketable title to all of the
Assets, free and clear of any Encumbrances other than Permitted Encumbrances.
The Assets include without limitation all assets used in the conduct of the
Business or located at the Facilities as of the date of the Letter of Intent
(other than assets, such as inventory, sold or consumed in the ordinary
course of business). Schedule 2.1 contains accurate lists and summary
descriptions of all tangible Assets where the value of an individual item
exceeds $5,000. All tangible assets and properties which constitute the
Assets conform in all material respects to all applicable Regulations
(including Environmental Laws) relating to their construction, use and
operation. The only Assets in which a customer of the Company has an
ownership or possessory interest are tape masters or duplicates stored in the
Company's vault and products which are in the process of being worked on.
SECTION 5.3 LICENSES AND PERMITS. The Company is duly licensed, with
all requisite permits and qualifications, as required by applicable law for
the purpose of conducting its business or owning its properties or both, in
each jurisdiction in which it does business or owns property or in which such
license, permit or qualification is otherwise required and where the failure
to have such license, permit or qualification would have a Material Adverse
Effect. The Company is in compliance with all such licenses, permits and
qualifications. Schedule 5.3 sets forth a list of all such licenses, permits
and qualifications, and the expiration dates thereof. There are no
proceedings pending or, to the Knowledge of Seller, threatened, to revoke or
terminate any such presently existing license, permit or qualification, and
each such presently existing license, permit or qualification can be renewed
in the ordinary course of business.
SECTION 5.4 NO BREACH. Except as set forth on Schedule 5.4, neither
the execution and delivery of this Agreement nor the consummation of the
Transactions will (i) violate, result in a breach of any of the terms or
provisions of, constitute a Default (or any event that, with the giving of
notice or the passage of time or both, would constitute a Default) under,
result in the acceleration of any indebtedness under or performance required
by, result in any right of termination of, increase any amounts payable
under, decrease any amounts receivable under, change any other rights
pursuant to, or conflict with, any provision of the Company's articles
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of incorporation or bylaws, any agreement, indenture or other instrument to
which any of the Sellers is a party or by which any of its properties are
bound, or any judgment, decree, order or award of any court, governmental
body or arbitrator (domestic or foreign) applicable to any of the Sellers, or
(ii) require the Company to obtain any authorization, consent, approval or
waiver from, or make any filing with, any Person, court or public body or
authority.
SECTION 5.5 AUTHORITY. The Company has the right to sell, convey,
transfer, assign and deliver the Assets to Purchaser hereunder. This
Agreement and all agreements and instruments herein contemplated to be
executed by any Seller have been duly authorized, executed and delivered by
each such Seller and constitutes the valid and binding obligation of each
Seller, enforceable in accordance with its terms. There exist no outstanding
options, warrants, equity securities, calls, rights, preemptive rights,
commitments or agreements of any character to which the Company is a party or
by which it is bound obligating the Company to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock of
the Company. There are no voting trusts, proxies or other agreements or
understandings with respect to the shares of capital stock of the Company.
SECTION 5.6 SUBSIDIARIES. The Company has no equity interest in any
corporation, partnership, limited liability company or similar entity.
SECTION 5.7 FINANCIAL STATEMENTS.
(a) The balance sheets of the Company, at December 31, 1997, December
31, 1996 and December 31, 1995 (individually, a "Balance Sheet" and
collectively, the "Balance Sheets") and the statements of operations and
retained earnings and the statements of cash flows of the Company for each of
the 12 month periods then ended and notes thereto, true and correct copies of
which are attached hereto as Schedule 5.7(a), (i) have been prepared from the
books and records of the Company in accordance with GAAP consistently applied
with prior periods, and (ii) are complete and correct in all material
respects in accordance with GAAP and fairly present the financial condition
and results of operations of the Company as of the dates and for the periods
indicated thereon. The statements of operations included in such financials
do not contain any items of extraordinary income or any other income not
earned in the ordinary course of business.
(b) The unaudited balance sheet as of July 31, 1998 (the "July 1998
Balance Sheet"), and notes thereto (collectively, the "July 1998 Financials"
and, together with the balance sheets and related statements of operations
and retained earnings described in paragraph 5.7 (a) above, the
"Financials"), true and correct copies of which are attached hereto as
Schedule 5.7(b), (i) have been prepared from the books and records of the
Company in accordance with GAAP consistently applied with prior periods, and
(ii) are complete and correct in all material respects in accordance with
GAAP and fairly present the assets, liabilities and shareholders equity of
the Company as of July 31, 1998.
(c) The Financials have been reviewed by Nabil Barsoum, Certified
Public Accountant whose reports thereon are part of Schedule 5.7. The books
of accounts of the Company have been maintained in all material respects in
accordance with sound business practices, and there have been no transactions
involving the Company that properly should have
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been set forth therein in accordance with generally accepted accounting
principles that have not been accurately so set forth.
SECTION 5.8 ABSENCE OF CERTAIN CHANGES. Except as set forth in
Schedule 5.8, since July 31, 1998, there has not occurred:
(a) Any adverse change in the assets, liabilities (whether absolute,
accrued, contingent or otherwise), condition (financial or otherwise),
results of operations, prospects or business of the Company not reflected in
the July 1998 Financials and that has resulted in or reasonably could result
in a Material Adverse Effect;
(b) Except as disclosed in the Estimated Closing Balance Sheet, any
increase in indebtedness over the level reflected on the July 1998 Balance
Sheet, any guarantee by any of the Sellers of any obligation, or any
mortgage, pledge or encumbrance on any of the properties or assets of the
Company other than the Permitted Encumbrances;
(c) Any amendment or modification of any Material Contract (as defined
below), or any termination of any agreement that would have been a Material
Contract were such agreement in existence on the date hereof (other than
through performance of the agreement in the ordinary course of business, such
as a purchase order);
(d) Any entering into of any written or oral agreements, contracts,
commitments or transactions that extend beyond the first anniversary hereof
or have obligations thereunder in excess of $5,000, including any purchase or
sale of any assets (other than in the ordinary course of business);
(e) Any increase in the compensation (including, without limitation,
the rate of commissions) payable to, or any payment of a cash bonus to, any
employee or agent of, or consultant to the Company;
(f) Any alteration in the manner of keeping the books, accounts or
records of the Company, or in the accounting practices therein reflected;
(g) Any declaration or payment of any dividends or distributions by the
Company, any acquisition or redemption by the Company of any of its equity
securities or any loan by the Company to any Seller;
(h) To the Knowledge of Seller, any loss or, threatened loss of a
customer or customers to which the Company had annual sales in excess of
$5,000 during the past two years or to which the Company expects to have
annual sales in excess of $5,000 during calendar years 1999-2000;
(i) Any material damage or destruction to, or loss of, any assets or
property owned, leased or used by the Company (whether or not covered by
insurance); or
(k) Any agreement to do any of the things described in the preceding
clauses (a) - (h) of this Section 5.8.
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SECTION 5.9 ABSENCE OF UNDISCLOSED LIABILITIES. There are no
liabilities of the Company whether absolute, accrued, contingent or
otherwise, and whether due or to become due, not reflected on or reserved for
on the July 1998 Balance Sheet, except as set forth on the Estimated Closing
Balance Sheet and except for executory obligations under Contracts identified
to Purchaser pursuant to Schedule 5.16(a), the Leases, the Personal Property
Leases. There are no commitments, contracts or undertakings covering the
purchases of items of inventory in excess of the Company's normal operating
requirements or covering the purchases of items of machinery and equipment in
excess of the requirements of the Company. The Company is not a party to,
nor bound by, nor has bid upon any contract or agreement with any customer
that by its terms will require future expenditures (including incurred costs
and allocated overhead and selling, general and administrative expense) in
excess of reasonably anticipated receipts by more than $5,000 in the
aggregate.
SECTION 5.10 ACCOUNTS RECEIVABLE. Schedule 5.10 is an accurate aging
of the accounts, notes and other receivables of the Company (the "Accounts
Receivable") at July 31, 1998 which represent valid obligations arising from
sales actually made or services actually performed in the ordinary course of
business. To the Knowledge of Seller, the Accounts Receivable as of such
date and any Accounts Receivable arising since such date are fully
collectible, net of the reserves set forth in the Estimated Closing Balance
Sheet, all of which reserves are adequate and in accordance with GAAP.
SECTION 5.11 REAL PROPERTY; REAL PROPERTY LEASES. Schedule 5.11 sets
forth a complete and correct summary description of each parcel of real
property (collectively, the "Real Property") owned by or leased to the
Company or otherwise used by the Company in connection with the Business,
which description consists of a legal description for each such parcel owned
by the Company and an identification of each lease (a "Lease") of real
property under which the Company is either a lessee, sublessee, lessor or
sublessor. Except as set forth on Schedule 5.11:
(a) The Company does not own any Real Property;
(b) Each Lease is a valid and binding obligation of the Company, and to
the Knowledge of Seller, each such Lease is a valid and binding obligation of
each of the other parties thereto;
(c) None of the Company nor, to the Knowledge of Seller, any other
party to a Lease is in Default with respect to any material term or condition
thereof, and no event has occurred that, with the passage of time or the
giving of notice or both, would constitute a default thereunder or would
cause the acceleration of any obligation of any party thereto or the creation
of a lien or encumbrance upon any asset of any of the Company;
(d) To the Knowledge of Seller, all of the buildings, fixtures and
other improvements located on the Real Property are in good operating
condition and repair, ordinary wear and tear excepted, and the operation
thereof as presently conducted does not violate any applicable code, zoning
ordinance or other applicable law or regulation, the violation of which would
have a Material Adverse Effect;
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(e) The Company holds valid and effective certificates of occupancy,
underwriters' certificates relating to electrical work, zoning, building,
housing, safety, fire and health approvals and all other permits and
licenses, each of which is required by applicable law to conduct the Business
on the Real Property; and
(f) The Company has not experienced during the two years preceding the
date hereof any material interruption in the delivery of adequate quantities
of any utilities (including, without limitation, electricity, natural gas,
potable water, and fuel oil) or other public services (including, without
limitation, sanitary and industrial sewer service) required by it in the
operation of its business during such period.
SECTION 5.12 ENVIRONMENTAL MATTERS.
(a) The Company is, and at all times has been, in full compliance with
all Environmental Protection Laws;
(b) The Company has obtained or has timely applied for all permits,
licenses and other authorizations under Environmental Protection Laws which
are required in connection with its business and operations, all of which are
in full force and effect. The Company is in material compliance with all
terms and conditions of such permits, licenses and authorizations, no action
or proceeding which reasonably could be expected to result in the revocation
or suspension of any such permits, licenses and authorizations is pending or
threatened, and the Company has not engaged in any conduct which reasonably
could be expected to cause revocation or suspension of any of its permits,
licenses or authorizations under Environmental Protection Laws;
(c) During the period of the Company's ownership, lease, occupation and
operation of the Real Property or any other property previously owned,
leased, occupied or operated by the Company, no portion of the Real Property
or such other property (i) has been or is being used in any manner for the
storage, disposal, or treatment of any Regulated Substance, except for the
temporary storage of Regulated Substances in material compliance with
Environmental Protection Laws; (ii) contained or contains underground tanks
of any type, or any materials containing PCBs or any asbestos; or (iii)
contained or contains any surface or sub-surface conditions that constitute,
or that through the physical effects of the passage of time may constitute, a
public or private nuisance or otherwise caused any liability under
Environmental Protection Laws;
(d) There is not now nor has there been any contamination of soil,
groundwater or other environmental media by or with any Regulated Substance
on, in, under or about the Real Property or any other property previously
owned, leased, occupied or operated by any of the Sellers which could create
liability under the Environmental Protection Laws;
(e) Except for air emissions in material compliance with Environmental
Protection Laws, during the period of the Company's ownership, lease,
occupation and operation of the Real Property or any other property
previously owned, leased, occupied or operated by the Company, there has been
no spill, discharge, disposal, leak, emission, injection, escape, dumping or
release of any Regulated Substance on, in, under or about the Real Property
or such other property by the Company or for which the Company has any
liability;
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(f) No portion of the Real Property or any other property previously
owned, leased, occupied or operated by the Company has been designated,
listed, or identified in any manner by the EPA, or any other federal, state,
local or other governmental agency or instrumentality, or under and pursuant
to any Environmental Protection Law as a hazardous waste or hazardous
substance disposal or removal site, Superfund or clean-up site, or candidate
for clean-up, investigation, removal or closure pursuant to any Environmental
Protection Law;
(g) None of the Sellers has received at any time prior to the date
hereof a summons, citation, notice, directive, letter or other communication,
written or oral, from the EPA or any other federal, state, local or other
governmental agency or instrumentality, authorized pursuant to an
Environmental Protection Law, concerning any intentional or unintentional
action or omission (except any pertaining to emissions of fugitive dust and
other non-hazardous particulates that are routinely corrected) by any of the
Sellers constituting a violation or potential violation of any Environmental
Protection Law, including, without limitation, violations relating to the
releasing, spilling, leaking, pumping, pouring, emitting, emptying, dumping
or otherwise disposing of any Regulated Substance into the environment
resulting in damage thereto or to the wildlife, biota and other natural
resources, and there exist no facts that would form the basis for a finding
of such a violation;
(h) None of the Sellers has received at any time prior to the date
hereof any summons, citation, notice, directive, letter or other
communication, written or oral, of any potential claim or liability under any
Environmental Protection Law, including, without limitation, any notification
as a potentially responsible party with respect to any Superfund or other
clean-up site. There are no events, conditions, circumstances, activities,
practices, incidents, actions or plans at or concerning the Real Property or
the operations of any of the Sellers which may (i) interfere with or prevent
continued compliance by any of the Sellers with any Environmental Protection
Law, (ii) give rise to any claim or liability under any Environmental
Protection Law, or (iii) form the basis for any claim, action, suit,
proceeding, hearing or investigation under any Environmental Protection Law;
and
(i) No Seller has received any notice from a governmental authority or
otherwise of any health problem of any current or former employee which in
any way is or is alleged to be related to the release, spill, leak, omission,
or disposition of any Regulated Substance at the Real Property or the
Facilities.
SECTION 5.13 INTANGIBLE PERSONAL PROPERTY.
(a) There are no (i) patent, patent applications, copyright, copyright
applications, trademark, trademark applications (in any such case, whether
registered or required to be registered in the United States of America or
elsewhere), process, invention, trade secret, trade name, computer program,
formula and customer list (collectively, the "Intangible Personal Property")
of Sellers related to or necessary to continue the operation of the Business,
or (ii) except as set forth on Schedule 5.13, licenses or similar agreements
or arrangements ("Licenses") to which any of the Sellers is a party and which
relates to the Business either as licensee or licensor for each such item of
Intangible Personal Property.
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(b) There are no pending actions or other judicial or adversary
proceedings involving the Company concerning any item of Intangible Personal
Property, and, to the Knowledge of Seller, no such action or proceeding is
threatened and no claim or other demand has been made or, to the Knowledge of
Seller, threatened by any Person relating to any item of Intangible Personal
Property;
(c) The Company has the right and authority to use each item of
Intangible Personal Property in connection with the conduct of its business
in the manner presently conducted and to convey such right and authority, and
such use does not conflict with, infringe upon or violate any patent,
trademark or registration of any other person or entity;
(d) There are no outstanding or threatened disputes or disagreements
with respect to any License; and
(e) The conduct by the Company of its business does not conflict with
the valid patents, trademarks, trade secrets or trade names of others.
SECTION 5.14 LABOR AND EMPLOYMENT AGREEMENTS.
(a) Schedule 5.14 sets forth a complete and correct list of the
following:
(1) Each employment, consulting, collective bargaining and
similar agreement, whether written or oral, with respect to any Transferred
Employee or consultant to which the Company has continuing rights or
obligations; and
(2) The name of (A) each employee of the Company who as of
July 31, 1998 and subsequently, was or is being paid $50,000 or more per
year, and (B) each agent of or consultant to the Company who during either
the 1997 or 1998 fiscal year was or is being paid $25,000.
As used in this Section 5.14, the word "agreement" includes both
oral and written contracts, understandings, arrangements and other agreements.
(b) The Company has complied with all applicable laws, rules and
regulations relating to the employment of labor, including, without
limitation, those related to wages, hours, collective bargaining and the
payment and withholding of taxes and other sums as required by appropriate
governmental authorities and has withheld and paid to the appropriate
authorities, or is holding for payment not yet due to such authorities, all
amounts required to be withheld from such employees and is not liable for any
arrears of wages, taxes, penalties or other sums for failure to comply with
any of the foregoing.
(c) No unfair labor practice complaint is pending against the Company
before the National Labor Relations Board or any federal, state or local
agency and no labor strike, grievance or other labor dispute affecting the
Company is pending or, or to the Knowledge of Seller, threatened.
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(d) Except as set forth on Schedule 5.14, no material organization
effort has been made, and no sex discrimination, racial discrimination, age
discrimination or other employment-related allegation, claim, suit or
proceeding is pending or, to the Knowledge of Seller, threatened with respect
to the employees of the Company and no such effort has been made and no such
allegation, claim, suit or proceeding has been brought or, to the Knowledge
of Seller threatened within the three-year period prior to the date of this
Agreement.
(e) No arbitration proceeding arising out of or under any collective
bargaining agreement applicable to the Company is pending and no basis for
any such proceeding exists.
(f) All reasonably anticipated obligations of the Company, whether
arising by operation of law, contract, past custom or otherwise, for
unemployment compensation benefits, pension benefits, advances, salaries,
bonuses, vacation and holiday pay, sick leave and other forms of compensation
payable to the employees or agents of any of the Company in respect of the
services rendered by any of them on or prior to the date of the Financials
have been paid or adequate accruals therefor have been made in the books and
records of the Company and in the Financials. All such obligations in
respect of services rendered on or prior to the date hereof have been paid as
of the date hereof, or adequate accruals therefor have been made on the
Estimated Closing Balance Sheet, in accordance with GAAP. All accrued
obligations of the Company applicable to its employees, whether arising by
operation of law, contract, past custom or otherwise, for payments to trusts
or other funds or to any governmental agency, with respect to unemployment
compensation benefits, social security benefits or any other benefits for
employees, with respect to employment of said employees through the date of
the Financials have been paid or adequate accruals therefor have been made on
the books and records of the Company and in the Estimated Closing Balance
Sheet or the Financials, as applicable, in accordance with GAAP. All such
obligations with respect to employment of employees through the date hereof
have been paid as of the date hereof, or adequate accruals therefor have been
made on the Estimated Closing Balance Sheet, in accordance with GAAP.
SECTION 5.15 EMPLOYEE BENEFIT PLANS: ERISA.
(a) Except as disclosed in Schedules 5.14 and 5.16, the Company (i) does
not maintain, contribute to or have any obligation with respect to, and none of
the employees of the Business is covered by, any bonus, deferred compensation,
severance pay, pension, profit-sharing, retirement, insurance, or other fringe
benefit plan, arrangement or practice, written or otherwise, or any other
"employee benefit plan," as defined in Section 3(3) of ERISA, whether formal or
informal (collectively, the "Plans"), (ii) is not a party to a contract for the
employment of any employee of the Business or any other person who renders
services to the Business, or (iii) has no ERISA Affiliates other than another
Seller. None of the Plans is, and the Company or any of its ERISA Affiliates
has ever maintained or had an obligation to contribute to, (i) a plan subject to
Section 412 of the Code or Title I, Subtitle B, Part 3 of ERISA, (ii) a "multi
employer plan," as defined in Section 3(37) of ERISA (a "Multi- employer Plan"),
(iii) a "multiple employer plan," as defined in ERISA or the Code, or (iv) a
funded welfare benefit plan, as defined in Section 419 of the Code. The Company
does not have any agreement or commitment to create or contribute to any
additional Plan, enter into any additional employment agreement or, except as
required by law, to modify or change any existing Plan or employment agreement.
Schedule 5.15 contains a complete and accurate list of the following
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information for each employee of the Business (including each employee who is
on a leave of absence or on layoff status): name, job title(s), date of hire,
current salary and current status (E.G., active employee, on leave, etc.).
None of the employees of the Business is a "leased employee," as defined in
Section 414(n) of the Code.
(b) With respect to each Plan, the Company has heretofore delivered or
caused to be delivered to Purchaser true, correct and complete copies of (i)
all documents that comprise the most current version of such Plan, including
any related trust agreements, insurance contracts, or other funding or
investment agreements and any amendments thereto, and (ii) with respect to
each Plan that is an "employee benefit plan," as defined in Section 3(3) of
ERISA, (A) the three most recent Annual Reports (Form 5500 Series) and
accompanying schedules for each of the Plans for which such a report is
required, (B) the most current summary plan description (and any summary of
material modifications), (C) the three most recent certified financial
statements for each of the Plans for which such a statement is required or
was prepared, and (D) for each Plan intended to be "qualified" within the
meaning of Section 401(a) of the Code, all Internal Revenue Service
determination letters issued with respect to such Plan. Since the date of
the foregoing documents, there has not been any material change in the assets
or liabilities of any of the Plans or any material change in their terms and
operations that could reasonably be expected to materially affect or alter
the tax status or materially affect the cost of maintaining such Plan, and
none of the Plans has been or will be amended since the date of the Letter of
Intent and prior to the Closing Date. Each of the Plans will be terminated
by the Company within 60 days following the Closing Date without cost or
liability to Purchaser.
(c) The Company has performed and complied in all material respects
with all of its obligations under and with respect to the Plans, and each of
the Plans has, at all times, in form, operation and administration materially
complied with its terms, and, where applicable, the requirements of all
applicable laws. Each Plan that is intended to be "qualified" within the
meaning of Section 401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified and nothing has occurred that reasonably
could be expected to adversely affect such qualified status.
(d) The Company has made all contributions with respect to a Plan that
are required to have been made as of the date hereof under the terms thereof,
or under the terms of any related insurance contract, or any applicable law.
(e) All Plans that are group health plans have been operated in
material compliance with the continuation coverage requirements of Section
4980B of the Code (and any predecessor provisions) and Part 6 of Title I of
ERISA ("COBRA"). The Company has no obligation to provide health benefits or
other non-pension benefits to any retired or other former employees, except
as specifically required by COBRA.
(f) None of the Sellers nor any other "disqualified person" or "party
in interest," as defined in Section 4975 of the Code and Section 3(14) of
ERISA, respectively, has engaged in any "prohibited transaction," as defined
in Section 4975 of the Code or Section 406 of ERISA, with respect to any
Plan, and none of the Sellers is aware of any fiduciary violations under
ERISA with respect to any Plan, that in either case could subject a Seller
(or any employee
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thereof) to any material penalty or tax under Section 502(i) of ERISA or
Sections 4971 and 4975 of the Code.
(g) Except as set forth on Schedule 5.21, with respect to any Plan:
(i) no filing, application or other matter is pending with the Internal
Revenue Service, the Pension Benefit Guaranty Corporation, the United States
Department of Labor or any other governmental body, (ii) there is no action,
suit or claim pending (and the Company is unaware of any basis for such a
claim), other than routine claims for benefits, and (iii) there are no
outstanding liabilities for taxes, penalties or fees.
(h) The Company has not incurred any liability or taken any action, and
is not aware of any event that has occurred or is likely to occur, that
could cause any one of them to incur any liability (i) under Section 412 of
the Code or Title IV of ERISA with respect to any "single-employer plan" (as
defined in Section 4001(a)(15) of ERISA), (ii) on account of a partial or
complete withdrawal (as defined in Sections 4203 and 4205 of ERISA,
respectively) with respect to any Multi-employer Plan, (iii) on account of
unpaid contributions to any Multi-employer Plan, or (iv) on account of any
reorganization, insolvency or termination of any Multi-employer Plan.
(i) Assuming Purchaser hires the Transferred Employees in the manner
set forth in this Agreement, neither the execution and delivery of this
Agreement nor the consummation of any or all of the Transactions will: (i)
entitle any Transferred Employee to severance pay, unemployment compensation
or any similar payment, (ii) except with respect to a Plan termination (which
will occur without cost or liability to Purchaser), accelerate the time of
payment or vesting or increase the amount of any compensation due to any
Transferred Employee, or (iii) directly or indirectly result in any payment
made or to be made to or on behalf of any person to constitute an "excess
parachute payment" within the meaning of Section 280G of the Code.
SECTION 5.16 MATERIAL CONTRACTS AND RELATIONSHIPS.
(a) Schedule 5.16(a) sets forth a complete and correct list or summary
of the following:
(1) All executory agreements (or groups of agreements with one
or more related entities) between the Company and any customer or supplier
pursuant to which the Company is required to expend $2,000 or more after
the Closing Date, or is entitled to receive $2,000 or more, and all
agreements and purchase orders extending beyond two months from the date of
this Agreement;
(2) All existing agreements that relate to the borrowing or
lending by the Company of any money or that create or continue any material
claim, lien, charge or encumbrance against, or right of any third party
with respect to, any asset of the Company;
(3) All existing agreements by which the Company leases any real
property, has the right to lease any real property or leases capital
equipment or leases any other personal property, and all other leases
involving the Company as lessee or lessor;
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(4) All existing agreements to which the Company is a party not
in the ordinary course of business;
(5) All existing contracts or commitments to which a Seller is a
party (relating to the Business or the Assets) relating to commission
arrangements with others;
(6) All existing license agreements to which a Seller is a party
(relating to the Business or the Assets), whether as licensor or licensee;
(7) All existing agreements between the Company and its sales
representatives;
(8) All existing agreements between the Company and its
customers relating to volume rebates or price reductions;
(9) All other existing agreements to which the Company is a
party or by which it is bound and that involve $2,000 or more or that
extend for a period of two (2) months or more;
(10) All other existing agreements to which the Company is a party or
by which it is bound and that are or may be material to the assets,
liabilities (whether absolute, accrued, contingent or otherwise), condition
(financial or otherwise), results of operations, business or prospects of
the Company; and
(11) A current list of the Company's active customers with sales in
excess of $10,000 for the current fiscal year.
As used in this Section 5.16, the word "agreement" includes both oral and
written contracts, leases, understandings, arrangements and all other
agreements. The term "Material Contracts" means the agreements of any of the
Sellers required to be disclosed on Schedule 5.16(a).
(b) All of the Material Contracts are in full force and effect, are
valid and binding and, as to the Company, are enforceable in accordance with
their terms except as limited by (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally or
by equitable principles (whether considered in an action at law or in equity)
and (ii) limitations imposed by federal or state law or equitable principles
upon the availability of specific performance, injunctive relief or other
equitable remedies. There are no material liabilities of any party to any
Material Contract arising from any breach or Default of any provision thereof
and no event has occurred that, with the passage of time or the giving of
notice or both, would constitute a breach or default by any party thereto.
(c) The Company (i) has fulfilled all material obligations required
pursuant to each existing Material Contract to have been performed by it
prior to the date hereof, and (ii) as far as reasonably foreseeable based on
current conditions, will be able to fulfill all of its obligations under the
Material Contracts that remain to be performed after the date hereof.
(d) Except as set forth on Schedule 5.16(a), the Material Contracts by
their terms are assignable to Purchaser without the consent of any party.
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(e) Schedules 5.16(b), (c) and (d) set forth a complete and correct
list of each (i) customer (or related group of customers) with whom the
Company did $10,000 or more of business during the last fiscal year or the
current fiscal year, (ii) supplier (or related group of suppliers) with whom
the Company did $10,000 or more of business during the current fiscal year,
and (iii) agent (or related group of agents) or Representative (or related
group of Representatives) who was paid $10,000 or more by the Company during
the last fiscal year or the current fiscal year, respectively.
(f) To the Knowledge of the Seller, the Company and Vincent Lyons have
maintained and continue to maintain good relations with the Company's
customers, suppliers and agents and, except as set forth in Schedule 5.8, and
the Company and Vincent Lyons do not reasonably expect that any customer (to
which the Company had annual sales in excess of $10,000 in the 1997 fiscal
year or the current fiscal year), supplier or agent will stop doing business
with Purchaser as a successor to the Business or will materially change the
terms on which such customer, supplier or agent has done business with the
Company since the date of the Letter of Intent.
SECTION 5.17 INVENTORY. Except for inventory that is excess, damaged,
obsolete, or outdated or requires rework, for which the Company has
established an adequate reserve in the July 1998 Balance Sheet in accordance
with GAAP, and except as otherwise set forth in the Estimated Closing Balance
Sheet, the inventory (the "Inventory") reflected in the July 1998 Balance
Sheet and acquired since the date of such balance sheet (and not sold prior
to the date hereof or reserved for in the July 1998 Balance Sheet) is good
and merchantable material, of a quantity and quality useable in the ordinary
course of business, and carried on the books and records of the Company on
the lower of cost (on a first in, first-out basis) or market basis consistent
with the past practices of the Company.
SECTION 5.18 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the
Company nor any employee, agent or other person acting on behalf of the
Company has, directly or indirectly, given or agreed to give any gift or
similar benefit to any customer, supplier, competitor or governmental
employee or official (domestic or foreign) (i) that would subject the Company
to any damage or penalty in any civil, criminal or governmental litigation or
proceeding or (ii) that, if not given in the past, would have had a Material
Adverse Effect.
SECTION 5.19 COMPLIANCE WITH LAWS. The operation, conduct and
ownership of the property or business of the Company are being, and at all
times have been, conducted, in all material respects, in full compliance with
all federal, state, local and other (domestic and foreign) laws, rules,
regulations and ordinances (including without limitation, those relating to
employment discrimination, occupational safety, conservation or corrupt
practices) and all judgments and orders of any court, arbitrator or
governmental authority applicable to it. To the Knowledge of Seller, there
are no proposed federal, state, local and other (domestic or foreign) law,
rule, regulation, ordinance, order, judgment, decree, governmental taking,
condemnation or other proceeding that would be applicable to the business,
operations or properties of the Company and that could have a Material
Adverse Effect.
SECTION 5.20 LITIGATION. Except for litigation claims filed by the
Company as a plaintiff (which constitute an Excluded Asset and an Excluded
Liability), there are no lawsuits, claims,
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legal, administrative, arbitration or other proceeding, or any governmental
investigation, pending or, to the Knowledge of Seller, threatened against or
otherwise affecting the Company, the Business or the Assets.
SECTION 5.21 TAXES. Except as set forth on Schedule 5.21:
(a) The Company has timely filed all Tax returns and reports required
to have been filed by it for all taxable periods ending on or prior to the
date hereof;
(b) All Taxes of the Company for all taxable periods ending on or prior
to the date hereof have been paid or have been adequately reserved for. The
Tax returns and reports filed are true and correct in all material respects;
(c) None of such returns contains, or will contain, a disclosure
statement under Section 6662 of the Code (or any predecessor statute) or any
similar provision of state, local or foreign law;
(d) The Company has not received notice that the IRS or any other
taxing authority has asserted against the Company any deficiency or claim for
additional Taxes;
(e) All Tax deficiencies asserted or assessed against the Company have
been paid or finally settled;
(f) There is no pending or, to the Knowledge of Seller, threatened
action, audit, proceeding, or investigation with respect to (i) the
assessment or collection of Taxes of the Company or a claim for refund made
by the Company with respect to Taxes previously paid in connection therewith;
(g) All amounts that are required to be collected or withheld by the
Company or with respect to Taxes have been duly collected or withheld; all
such amounts that are required to be remitted to any taxing authority have
been duly remitted;
(h) Within the last four years, neither the IRS nor any state, foreign
or local taxing authority has audited any income tax return of the Company;
(i) The Company has not waived any statute of limitations (that have
not expired as of the date hereof) with respect to the assessment of any Tax;
(j) The Company has not taken any action not in accordance with past
practice that would have the effect of deferring any Tax liability of the
Company, from any taxable period ending on or before the date hereof to any
taxable period ending after such date;
(k) The Company has not filed any consent agreement under Section
341(f) of the Code;
(l) There are no liens for Taxes due and payable upon any assets of the
Company;
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(m) The Company has not participated in, or cooperated with, an
international boycott within the meaning of Section 999 of the Code;
(n) The Company is not currently required to include in income any
adjustment pursuant to Section 481(a) of the Code (or similar provisions of
other law or regulations) by reason of a change in accounting method, and
does not have any knowledge that the IRS (or other taxing authority) has
proposed, or is considering, any such change in accounting method;
(o) The Company is not a party to any agreement, contract, arrangement
or plan that would result in the payment of any "excess parachute payment"
within the meaning of Section 280G of the Code;
(p) None of the assets of the Company is property that is required to
be treated as owned by any other person pursuant to the "safe harbor lease"
provisions of former Section 168(f)(8) of the Internal Revenue Code of 1954
as amended and in effect immediately prior to the enactment of the Tax Reform
Act of 1986 and none of the assets of the Company is "tax exempt use
property" within the meaning of Section 168(h) of the Code; and
(q) None of the assets of the Company secures any debt the interest on
which is tax exempt under Section 103 of the Code.
SECTION 5.22 INSURANCE MATTERS.
(a) Schedule 5.22 sets forth a complete and correct list of all
insurance policies currently in force with respect to the Company, the
Business or the Assets and of all claims made by the Company on any liability
or other insurance policies during the past two fiscal years and the current
fiscal year (other than worker's compensation claims). True and correct
copies of the insurance policies currently in force have been submitted to
the Purchaser's Representatives;
(b) There are no outstanding requirements or recommendations by any
insurance company that issued any policy of insurance to the Company or by
any board of underwriters or other similar body exercising similar functions
or by any governmental authority exercising similar functions that require or
recommend any changes in the conduct of the Business or any repairs or other
work to be done on or with respect to the Company's assets that have not been
performed by the Company.
(c) No notice or other communication has been received by the Company
from any insurance company within the two years preceding the date hereof
canceling or materially amending or materially increasing the annual or other
premiums payable under any of its insurance policies, and, to the best of the
Company's knowledge, no such cancellation, amendment or increase of premiums
is threatened.
(d) During the past two years, the Company has maintained claims made
comprehensive general liability and continued operations insurance (including
product liability insurance) with a general aggregate limit of at least
$1,000,000, and no claims have been made
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or paid, and no claims are currently pending, under any of such comprehensive
general liability insurance policies.
(e) No lawsuits have been filed and no claims have been made or, to the
best of Sellers' knowledge, threatened against the Company as a result of
accidents which occurred during the one-year period prior to the date hereof
that would give rise to a claim with respect to any services provided by or
products designed, manufactured, or sold by the Company or the operations of the
Company.
SECTION 5.23 NO POWERS OF ATTORNEY OR SURETYSHIPS. The Company has not
granted any general or special powers of attorney which are currently in effect
nor does it have any obligation or liability (whether actual, contingent or
otherwise) as guarantor, surety, co-signer, endorser, co-maker, indemnitor,
obligor on an asset or income maintenance agreement or otherwise in respect of
the obligation of any person, corporation, partnership, joint venture,
association, organization or other entity.
SECTION 5.24 BROKERAGE FEES. No Person is entitled to any brokerage or
finder's fee or other commission from any of the Sellers in respect of this
Agreement or the Transactions.
SECTION 5.25 BANKING FACILITIES. Schedule 5.25 sets forth a complete and
correct list of:
(a) Each bank, savings and loan or similar financial institution in which
the Company has an account or safety deposit box and the numbers of such
accounts or safety deposit boxes maintained thereat; and
(b) The names of all persons authorized to draw on each such account or to
have access to any such safety deposit box, together with a description of the
authority (and conditions thereto, if any) of each person with respect thereto.
SECTION 5.26 MACHINERY, EQUIPMENT AND OTHER PERSONAL PROPERTY; PERSONAL
PROPERTY LEASES. Except for the Leased Real Property and the Leased Personal
Property and except as set forth in Schedule 5.26, the Company owns all of the
machinery, equipment, vehicles, furniture, fixtures, leasehold improvements,
repair parts, tools and other property (collectively, the "Personal Property")
used by or relating to the Company. All such Personal Property is in good
operating condition and sufficient to carry on the business of the Company in
the normal course as it is presently conducted subject to ordinary wear and tear
and is free from material defects, whether patent or, to the Knowledge of
Seller, latent. Schedule 5.26 sets forth a complete and correct summary
description and identification of each lease (a "Personal Property Lease") of
personal property under which the Company is either a lessee, sublessee, lessor
or sublessor. Except as set forth in Schedule 5.26:
(a) Each Personal Property Lease is a valid and binding obligation of the
Company, and to the Knowledge of Seller, each such Personal Property Lease is a
valid and binding obligation of each of the other parties thereto; and
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(b) The Company is not in default with respect to any material term or
condition thereof, and no event has occurred that, with the passage of time or
the giving of notice or both, would constitute a Default thereunder or would
cause the acceleration of any obligation of any party thereto or the creation of
a lien or encumbrance upon any asset of the Company.
SECTION 5.27 PRODUCT WARRANTY AND LIABILITY. Each product designed,
manufactured, or sold by the Company and all services performed by the Company
have been in conformity in all material respects with all applicable contractual
commitments and all express and implied warranties. The Company has no
liability, and there is no basis for any present or future action, suit or other
proceeding giving rise to any liability, (i) for replacement or repair of any
such product or other damages in connection therewith, or (ii) arising out of
any injury to persons or property as a result of any such product or any
services performed by the Company. None of the Sellers has received any notice
that an action, suit or proceeding has been, or in the future may be, made
alleging that products or services of the Company are or were defective in any
material respect.
SECTION 5.28 STANDARDS AND CERTIFICATIONS. Products previously designed,
manufactured, sold and leased by the Company met and had received at the time of
their design, manufacture and sale, and products currently designed,
manufactured, sold and leased by the Company meet and have received, all
material standards established by relevant standard-setting organizations and
all certifications from all relevant safety and standards testing and certifying
organizations, if any, as were or are, as the case may be, necessary for such
products to comply with all applicable fire, safety and similar codes and
regulations.
SECTION 5.29 DISCLOSURE. The information provided by Sellers in this
Agreement, including, without limitation, the Disclosure Schedule, and in any
other writing delivered pursuant hereto does not and will not contain any untrue
statement of a material fact or, omit to state a material fact required to be
stated herein or therein or necessary to make the statements and facts contained
herein or therein, in light of the circumstances under which they are made, not
false or misleading. Copies of all documents heretofore or hereafter delivered
or made available by Sellers to Purchaser pursuant hereto were or will be
complete and accurate records of such documents.
SECTION 5.30 EARN-OUT STOCK. The Company is an "accredited investor" as
such term is defined in Regulation D promulgated under the Securities Act of
1933, as amended. The Company understands that Purchaser has made no
representation regarding the Company other than as set forth herein. The
Company has made such further investigation as it deems appropriate to evaluate
the merits and risks of receiving common stock in Purchaser. The Company will
acquire, if earned, the Earn-Out Stock for its own account, for investment
purposes only, and not with a view towards the sale or other distribution
thereof (other than to a Shareholder who is also an "accredited investor"). The
Company agrees that there are restrictions under federal and state securities
laws on the transferability of the Earn-Out Stock that may be issued pursuant to
Section 3.2. The Sellers agree and acknowledge that certificates for the
Earn-Out Stock shall bear substantially the following legend:
The Shares represented by this certificate are subject to restrictions
on transferability and resale any may not be transferred or resold
except as permitted
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under the Securities Act of 1933, pursuant to registration under said
Act or pursuant to another applicable exemption from the requirements
of said Act.
SECTION 5.31 EMPLOYEES. As of the Closing Date, the Company has 192
employees, all of whom work within a 75 mile radius of 1220 North Highland
Avenue.
SECTION 5.32 ACKNOWLEDGMENT BY PURCHASER. Without limiting the
representations, warranties, covenants and agreements set forth herein, except
as expressly provided herein, Sellers make no representation or warranty
concerning the Assets or the Business, including as to the quality, condition,
merchantability, salability, obsolescence, working order or fitness for a
particular purpose thereof. It is therefore expressly understood and agreed
that the Purchaser shall accept the condition of the Assets "as is, where is"
without any representation, warranty or guarantee, express or implied, as to
merchantability, fitness for a particular purpose or otherwise as to the
condition, size, extent, quantity, quality, type, value or status of such
Assets; provided, that the Purchaser may rely on the representations and
warranties of the Sellers set forth in Article V and the foregoing shall not
limit the agreements and covenants set forth herein.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser hereby represents and warrants to the Company that:
SECTION 6.1 ORGANIZATION AND CORPORATE AUTHORITY. Purchaser is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of California. Purchaser has all requisite corporate power
and authority to enter into this Agreement and to consummate the Transactions.
SECTION 6.2 AGREEMENT. This Agreement and the Ancillary Agreements
to which it is a party are the valid and binding agreements of Purchaser,
enforceable against Purchaser in accordance with their respective terms
subject to bankruptcy, insolvency, reorganization, moratorium and other laws
of general applicability relating to or affecting creditors' rights and to
general equitable principles (whether considered in a proceeding at law or
otherwise). The execution, delivery and performance of this Agreement and the
Ancillary Agreement to which the Purchaser is a party, and the consummation
of the Transactions contemplated hereby to be consummated by it, will not (i)
conflict with the articles of incorporation, bylaws or other corporate
governance documents of the Purchaser, or (ii) result in the violation of any
provisions of law applicable to the Purchaser the violation of which could
have a material adverse effect upon the business, operations or assets of
Purchaser or upon the consummation of the Transactions.
SECTION 6.3 AUTHORITY. The execution, delivery and performance of
this Agreement by the Purchaser, and all other Ancillary Agreements to which
the Purchaser is a party, and the consummation by the Purchaser of the
Transactions, have been duly authorized by all requisite corporate action and
no further action or approval is required by or in respect of, or filing
with,
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any federal or state governmental body, agency, official or authority in
order to permit Purchaser to consummate the Transactions contemplated hereby
to be consummated by Purchaser.
SECTION 6.4 BROKERAGE FEES. No Person is entitled to any brokerage or
finder's fee or other commission from Purchaser in respect of this Agreement or
the Transactions.
ARTICLE VII
COVENANTS
Sellers and Purchaser each covenant with the other as follows:
SECTION 7.1 FURTHER ASSURANCES. Upon the terms and subject to the
conditions contained herein, the parties agree, both before and after the
Closing, (i) to use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, (ii) to execute any documents, instruments or conveyances of any kind
which may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder, and (iii) to cooperate with each other in
connection with the foregoing. Without limiting the foregoing, the parties
agree to use their respective reasonable efforts (A) to obtain all necessary
waivers, consents and approvals from other parties to the Contracts and Leases
to be assumed by Purchaser; PROVIDED, HOWEVER, that neither Purchaser nor the
Company shall be required to make any payments, commence litigation or agree to
modifications of the terms thereof in order to obtain any such waivers, consents
or approvals, (B) to obtain all necessary Permits as are required to be obtained
under any Regulations, (C) to give all notices to, and make all registrations
and filings with third parties, including without limitation submissions of
information requested by governmental authorities, and (D) to fulfill all
conditions to this Agreement. Purchaser and Sellers shall cooperate with each
other and shall cause their officers, employees, agents, auditors and
representatives to cooperate with each other after the Closing to ensure the
orderly transition of the Business to Purchaser and to minimize any disruption
to the Business that might result from the Transactions.
SECTION 7.2 NO SOLICITATION.
(a) NO SOLICITATION. From the date hereof through the Closing or the
earlier termination of this Agreement, each of the Sellers and their
Representatives shall not, and shall cause each of their respective
Representatives (including, without limitation, investment bankers, attorneys
and accountants), not to, directly or indirectly, enter into, solicit,
initiate or continue any discussions or negotiations with, or encourage or
respond to any inquiries or proposals by, or participate in any negotiations
with, or provide any information to, or otherwise cooperate in any other way
with, any corporation, partnership, person or other entity or group, other
than Purchaser and its Representatives concerning, any sale of all or a
portion of the Assets or the Business, or any merger, consolidation,
liquidation, dissolution or similar transaction involving any Seller (each
such transaction being referred to herein as a "Proposed Acquisition
Transaction"); PROVIDED, HOWEVER, that Sellers may disclose the transactions
contemplated by this Agreement to customers of the Company in connection with
Sellers' efforts to obtain the benefit
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of any Contract, Lease or Permit for Purchaser. The parties agree that in
the event the Company, Sellers or any individual Seller breaches its
obligation under this Section 7.2, the Company shall immediately pay to
Purchaser the sum of (a) Purchaser's expenses incurred in connection with the
Transactions, and (b) $200,000; PROVIDED, HOWEVER, that such amount shall not
exceed $300,000. Each Seller hereby represents that it is not now engaged in
discussions or negotiations with any party other than Purchaser with respect
to any of the foregoing. Each Seller agrees not to release any third party
from, or waive any provision of, any confidentiality or standstill agreement
to which such Seller is a party.
(b) NOTIFICATION. Sellers shall immediately notify Purchaser (orally and
in writing) if any discussions or negotiations are sought to be initiated, any
inquiry or proposal is made, or any information is requested with respect to any
Proposed Acquisition Transaction.
SECTION 7.3 NOTIFICATION OF CERTAIN MATTERS. From the date hereof
through the Closing, Sellers and Purchaser shall give prompt notice to the other
of (i) the occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause any representation or warranty contained in
this Agreement or in any exhibit or schedule hereto to be untrue or inaccurate
in any respect and (ii) any failure by it to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement or any exhibit or schedule hereto; PROVIDED, HOWEVER, that such
disclosure shall not be deemed to cure any breach of a representation, warranty,
covenant or agreement or to satisfy any condition.
SECTION 7.4 INVESTIGATION BY PURCHASER. From the date hereof through
the Closing Date each Seller shall, and shall cause any and all of its
respective employees and agents to, afford the Representatives of Purchaser and
its Affiliates complete access at all reasonable times to the Assets for the
purpose of inspecting the same, and to the employees, agents, attorneys,
accountants, properties, Books and Records, Contracts and Leases of the Company,
and shall furnish Purchaser and its Representatives all financial, operating and
other data and information as Purchaser or its Affiliates, through their
respective Representatives, may reasonably request, including unaudited balance
sheets and the related statements of income, retained earnings and cash flow for
August and September 1998 which financial statements shall (i) fairly present in
all material respects, the financial condition of the Company, (ii) be in
accordance with the books and records of the Company, and (iii) accurately set
forth the assets, Liabilities and financial condition, results of operations and
other information purported to be set forth therein in accordance with generally
accepted accounting principles consistently applied.
SECTION 7.5 CONDUCT OF BUSINESS. From the date hereof through the
Closing, the Company shall, except as contemplated by this Agreement, or as
consented to by Purchaser in writing, operate the Business in the ordinary
course of business and in accordance with past practice and use commercially
reasonable efforts to preserve intact the Business and its goodwill, and
preserve the goodwill and business relationships with suppliers, distributors,
customers and others having business relationships with the Company, and shall
not take any action inconsistent with this Agreement or with the consummation of
the Closing. Without limiting the generality of the foregoing, the Company
shall not, except as specifically contemplated by this Agreement or as consented
to by Purchaser in writing:
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(a) enter into, extend, materially modify, terminate or renew any Contract
or Lease, except in the ordinary course of business;
(b) sell, assign, transfer, convey, lease, mortgage, pledge or otherwise
dispose of or encumber any of the Assets, or any interests therein, except in
the ordinary course of business, and without limiting the generality of the
foregoing, each Seller shall continue to operate the Business consistent with
its past practices;
(c) incur any indebtedness for borrowed money or commitment to borrow
money, other than Financing Obligations, guarantee the obligations of others,
indemnify others or, except in the ordinary course of business, incur any other
Liability;
(d) (1) take any action with respect to the grant of any bonus, severance
or termination pay or with respect to any increase of benefits payable under the
Company's severance or termination pay policies or agreements in effect on the
date hereof or increase in any manner the compensation or fringe benefits of any
employee or pay any benefit not required by any existing Employee Benefit Plan
or policy;
(2) make any change in the key management structure of the
Company, including without limitation the hiring of additional management
personnel or the termination of existing management personnel (except with
respect to the Excluded Employees);
(3) adopt, enter into or amend any Employee Benefit Plan,
agreement (including without limitation any collective bargaining or employment
agreement), trust, fund or other arrangement for the benefit or welfare of any
employee, except for any such amendment as may be required or, in the Company's
reasonable determination, desirable to comply with applicable Regulations; or
(4) fail to maintain all Employee Benefit Plans in accordance
with applicable Regulations in any material respect;
(e) cause the Company to acquire by merger or consolidation with, or merge
or consolidate with, or purchase all or substantially all of the assets of, or
otherwise acquire any material assets or business of any corporation,
partnership, association or other business organization or division thereof;
(f) declare, set aside, make or pay any dividends;
(g) expend funds for budgeted capital expenditures or commitments for or
on behalf of the Company otherwise than in accordance with the capital budget
agreed to by Purchaser and the Company;
(h) willingly allow or permit to be done, any act by which any of the
Insurance Policies may be suspended, impaired or canceled;
(i) (1) fail to pay its accounts payable and any debts owed or
obligations due to it, or pay or discharge when due any Liabilities, in the
ordinary course of business; or
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(2) fail to collect its accounts receivable in the ordinary course
of business;
(j) fail to maintain the Assets in substantially their current state of
repair, excepting normal wear and tear or fail to replace consistent with the
Company's past practice inoperable, worn-out or obsolete or destroyed Assets;
(k) make any loans or advances on behalf of the Company to any
partnership, firm or corporation, or, except for expenses incurred in the
ordinary course of business, any individual;
(l) make any income tax election or settlement or compromise with tax
authorities on behalf of the Company;
(m) fail to comply with all Regulations applicable to it, the Assets and
the Business;
(n) intentionally do any other act which would cause any representation or
warranty of any Seller in this Agreement to be or become untrue in any material
respect;
(o) sell, transfer, assign, pledge or encumber in, or any other ownership
interests of, the Company or repurchase or commit to repurchase, partnership
interests in, or any other ownership interests of, the Company held by any of
the Sellers;
(p) fail to use commercially reasonable efforts to (i) retain the
Company's employees (other than the Excluded Employees) and (ii) maintain the
Business so that such employees will remain available to the Company on and
after the Closing Date, (iii) maintain existing relationships with suppliers,
customers and others having business dealings with any Seller and (iv) otherwise
to preserve the goodwill of the Business so that such relationships and goodwill
will be preserved on and after the Closing Date;
(q) enter into any agreement, or otherwise become obligated, to do any
action prohibited hereunder;
(r) make or change any tax election affecting the Assets in the hands of
Purchaser; or
(s) fail to pay, or cause to be paid, when due all Taxes for which the
Company is or may become liable or that are or may become payable with respect
to any taxable period ending on or prior to the Closing Date.
SECTION 7.6 EMPLOYMENT MATTERS.
(a) Purchaser and Vincent Lyons shall enter into an Employment
Agreement, to be effective as of the Closing, in substantially the form of
Exhibit A hereto. Purchaser shall not be required to hire or offer
employment to any other employee of the Company other than the persons
identified on Schedule 2.4. Those employees of the Company identified on
Schedule 2.4 who accept employment with Purchaser are the "Transferred
Employees" for the purposes of this Agreement.
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(b) Effective as of the Closing (or the date an employee becomes a
Transferred Employee, if later), all Transferred Employees shall cease to
participate in, or accrue benefits under, any of the Company's Plans, and the
Company shall be solely responsible for all of its Plans and all obligations and
liabilities thereunder. Purchaser shall not assume any Plan of the Company or
any obligation or liability thereunder, it being understood that Purchaser will
extend to all Transferred Employees coverage under its employee benefit plans on
the same basis and to the same extent and on the same terms as such coverage is
offered to Purchaser's new employees. The Company shall be responsible for
(i) terminating all of its employees, and (except as provided elsewhere herein)
shall be responsible for any and all obligations and liabilities arising in
connection with the terminations of the Excluded Employees, including without
limitation, any severance or other termination pay, retirement and welfare
benefits, (ii) providing the appropriate notices to the employees of the
Business pursuant to Section 4980B of the Code and Part 6 of Title I of ERISA,
(iii) all liabilities, including without limitation, the cost of extended
insurance coverage, for any employee of the Company not actively employed by the
Company on the Closing Date until such time, if ever, that such employee returns
to active employment and is employed by Purchaser.
(c) Nothing contained in this Agreement shall confer upon any Transferred
Employee (other than Vincent Lyons whose rights shall be set forth in the
Employment Agreement) any right with respect to continuance of employment by
Purchaser, nor shall anything herein interfere with the right of Purchaser to
terminate the employment of any Transferred Employee at any time, with or
without cause, or restrict Purchaser in the exercise of its independent business
judgment in modifying any of the terms and conditions of the employment of the
Transferred Employees after the Closing Date.
(d) No provision of this Agreement shall create any third party
beneficiary rights in any Transferred Employee, any beneficiary or dependents
thereof, or any collective bargaining representative thereof, with respect to
the compensation, terms and conditions of employment and benefits that may be
provided to any Transferred Employee by Purchaser or under any benefit plan
which Purchaser may maintain.
(e) Prior to and until Closing, each Shareholder employee of the Company
shall receive his or her salary and hospitalization, medical, surgical, dental,
life insurance and any other welfare and benefits plans and programs, comparable
to what such Shareholder, as an employee of the Company, is receiving as of the
date of this Agreement.
SECTION 7.7 COLLECTION OF ACCOUNTS RECEIVABLE AND LETTERS OF CREDIT. At
the Closing, Purchaser shall acquire hereunder, and thereafter Purchaser or its
designee shall have the right and authority to collect for Purchaser's or its
designee's account, all receivables, letters of credit and other items which
constitute a part of the Assets, and each Seller shall within 48 hours after
receipt of any payment in respect of any of the foregoing, properly endorse and
deliver to Purchaser any letters of credit, documents, cash or checks received
on account of or otherwise relating to any such receivables, letters of credit
or other items related to the Company or the Business. Each Seller shall
promptly transfer or deliver to Purchaser or its designee any cash or other
property that such Seller may receive in respect of any deposit, prepaid
expense, claim, contract, license, lease, commitment, sales order, purchase
order, letter of credit or receivable of any character, or any other item,
constituting a part of the Assets.
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SECTION 7.8 BOOKS AND RECORDS; TAX MATTERS.
(a) BOOKS AND RECORDS. Purchaser shall retain all Books and Records in
the possession of Purchaser after the Closing Date relating to the operation of
the Facilities and the Business prior to the Closing in accordance with all
applicable records retention Regulations, including without limitation, all
Environment Laws and occupational health and safety laws and regulations. Each
party agrees that it shall cooperate with and make available to the other party,
during normal business hours, all Books and Records, information and employees
(without substantial disruption of employment) retained and remaining in
existence after the Closing which are necessary or useful in connection with any
tax, environmental or occupational health and safety inquiry, audit,
investigation or dispute, any litigation or investigation or any other matter
requiring any such Books and Records, information or employees for any
reasonable business purpose. The party requesting any such Books and Records,
information or employees shall bear all of the out-of-pocket costs and expenses
(including without limitation attorneys' fees) reasonably incurred in connection
with providing such Books and Records, information or employees. All
information received pursuant to this Section 7.8(a) shall be treated as
confidential and not disclosed to any person or entity other than the
Representatives of Sellers or Purchaser, as the case may be, who need to know
such information in connection with the proceedings contemplated by this
Section 7.8(a).
(b) COOPERATION AND RECORDS RETENTION. Sellers and Purchaser shall (i)
each provide the other with such assistance as may reasonably be requested by
any of them in connection with the preparation of any return, audit, or other
examination by any taxing authority or judicial or administrative proceedings
relating to Liability for Taxes in connection with the Assets or the Business,
(ii) each retain and provide the other with any records or other information
that may be relevant to such return, audit or examination, proceeding or
determination, and (iii) each provide the other with any final determination of
any such audit or examination, proceeding, or determination that affects any
amount required to be shown on any tax return of the other for any period.
Without limiting the generality of the foregoing, Purchaser and each Seller
shall each retain, until the applicable statutes of limitations (including any
extensions) have expired, copies of all tax returns, supporting work schedules,
and other records or information that may be relevant to such returns for all
tax periods or portions thereof ending on or before the Closing Date and shall
not destroy or otherwise dispose of any such records without first providing the
other party with a reasonable opportunity to review and copy the same.
SECTION 7.9 BULK SALES. It may not be practicable to comply or attempt
to comply with the procedures of the "Bulk Sales Act" or similar law of any or
all of the states in which the Assets are situated or of any other state which
may be asserted to be applicable to the transactions contemplated hereby.
Accordingly, to induce Purchaser to waive any requirements for compliance with
any or all of such laws, each Seller hereby agrees that the indemnity provisions
of Section 11.2 hereof shall apply to any Damages of Purchaser or any
institution providing financing to Purchaser arising out of or resulting from
the failure of any Seller or Purchaser to comply with any such laws.
SECTION 7.10 CONFIDENTIALITY. The terms of the Confidentiality Agreement
between the Company and Purchaser dated April 22, 1998 shall continue to remain
in full force and effect during the period between the date hereof and the
Closing Date, unless earlier terminated.
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SECTION 7.11 PACIFIC CENTURY BANK GUARANTY. At the Closing, the
indebtedness owed by the Company to Pacific Century Bank, N.A., which the
Company represents to be approximately $4.0 million as of the date hereof, will
be fully paid by Purchaser. As soon as practicable after the Closing, Purchaser
shall make commercially reasonable efforts to obtain the release of the
guarantees of Mr. and Mrs. Vincent Lyons with respect to such loan.
SECTION 7.12 AMENDMENT TO LEASE. Purchaser agrees that it shall not amend
the Leases in a manner adverse to the Shareholders or Mr. and Mrs. George Cooney
without the prior consent of the Shareholders and Mr. and Mrs. Cooney, which
consent shall not be unreasonably withheld or delayed.
SECTION 7.14 EMPLOYEE RETENTION. Purchaser shall offer employment to
commence as of the Closing Date to each Transferred Employee at a salary and
other terms commensurate with such person's corresponding position at
Purchaser. Purchaser assumes all obligations and liabilities, if any, under
the WARN Act relating to or arising out of the termination by Purchaser of
the Transferred Employees (or any employee of Purchaser) following the
Closing Date (including liabilities owed to Excluded Employees as a result of
any such terminations by Purchaser).
SECTION 7.15 PLANS. Effective as of the Closing Date, all Transferred
Employees shall cease accruing any benefits under any Plan of the Company, and
the Company shall take, or cause to be taken, all such action, if any, as may be
necessary or appropriate to effect such cessation of participation. Effective
as of the Closing Date, Purchaser shall offer the Transferred Employees coverage
under the Purchaser's employee benefit plans and shall provide that any expenses
incurred on or after the Closing Date by a Transferred Employee or his covered
dependents with respect to events or occurrences arising after the Closing shall
be taken into account under such employee benefit plans for purposes of
satisfying applicable deductible, coinsurance and maximum out-of-pocket
provisions.
SECTION 7.16 VACATION, HOLIDAY, SICK AND SEVERANCE PAY. As of the
Closing Date, Purchaser shall integrate the Transferred Employees into its
vacation, holiday and sick pay policies. The Company shall be responsible for
all the Company's obligations with respect to sick, vacation, holiday or
severance pay for (i) any Excluded Employee, and (ii) any Transferred Employee
for any period ending prior to the Closing Date.
SECTION 7.17 REQUIRED MODIFICATIONS OR REPLACEMENTS OF PRODUCTS. The
provisions of this Section shall govern the responsibilities of Purchaser and
the Company regarding the Company's warranty obligations with respect to
products delivered or services provided prior to the Closing Date:
(a) Purchaser shall advise the Company promptly after becoming aware of
any required modifications (the "Required Modifications") to the products
shipped or services provided by the Business prior to the Closing Date to the
extent Purchaser intends to assert any claim under Article XI hereof in respect
of such products.
(b) Purchaser shall make any Required Modifications to products shipped or
services provided by the Business prior to the Closing Date which are necessary
or advisable, in the reasonable discretion of the Company and at the Company's
expense. If the cost to the
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Company of implementing any such Required Modification exceeds the cost to
the Company of replacing such products, Purchaser shall replace such products
at the Company's expense. The obligation of Purchaser hereunder shall
include, but not be limited to, such actions as the Company may reasonably
request for (i) the notification of customer and other third parties in
possession of the applicable products, (ii) the shipping of such products, if
necessary, to and from Purchaser's facilities, (iii) the production of
replacement products, parts or supplies necessary for the implementation of
the Required Modification, (iv) the installation, modification or replacement
of the product by personnel of Purchaser, either at the customer's location
or at Purchaser's facilities, as appropriate, and (v) recordkeeping and
reports with respect to such Required Modifications, to the extent required
by law or reasonably requested by the Company.
(c) The Company shall reimburse Purchaser for materials, labor and
overhead incurred by Purchaser in installing or implementing any Required
Modification or in producing any replacement products, parts or supplies,
together with all out-of-pocket shipping, postage and printing costs incurred by
Purchaser in connection therewith.
(d) The foregoing provisions and Purchaser's compliance or attempted
compliance therewith shall in no way diminish or otherwise alter Sellers'
indemnity obligations set forth elsewhere herein.
SECTION 7.18 ACTIONS WITH RESPECT TO CERTAIN CONTRACTS. Purchaser
acknowledges that the Company has not obtained the consent of the other
contracting party to the Contracts specified in Schedule 5.16 which require such
party's consent in order for the contract to be assigned to Purchaser.
Purchaser acknowledges that the Transactions will be consummated without such
consents in part to accommodate the parties' desired closing schedule. With
respect to each such Contract, after the Closing Date, Purchaser shall, to the
extent necessary, continue to deal with the other contracting parties to such
Contracts as the prime contracting party, and the Company shall obtain the
consent of all required parties to the assignment of such Contracts. Such
Contracts shall be deemed assigned by the Company to Purchaser after receipt of
such consent. Any Contract as to which consent is obtained after the Closing
Date shall thereupon comprise an Assigned Contract. Notwithstanding the absence
of any such consent, Purchaser shall be entitled to the benefits of such
Contract accruing after the Closing Date to the extent that the Company may
provide Purchaser with such benefits without violating the terms of such
Contract; and to the extent such benefits are so provided, Purchaser agrees to
perform all of the obligations of the Company to be performed under such
Contract after the Closing Date, such obligations to comprise Assumed
Liabilities hereunder. To the extent such benefits are not so provided or such
consents are not obtained, the Sellers shall remain responsible for all of the
obligations and liabilities of the Company under such Contract after the Closing
Date, such benefits to constitute Excluded Assets and such obligations and
liabilities to comprise Excluded Liabilities hereunder.
SECTION 7.19 POST-CLOSING VAULT INVENTORY. Within two weeks after the
Closing Date Purchaser and Vince Lyons shall commence a joint inventory of the
Company's vaults to ascertain the video tapes on hand as of the Closing Date.
Upon conclusion of such inventory, Purchaser and Mr. Lyons shall agree upon a
listing of all tapes on hand as of the Closing, which itemization shall be
conclusively presumed accurate thereafter for all purposes of this Agreement.
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ARTICLE VIII
CONDITIONS TO THE COMPANY'S OBLIGATIONS
The obligations of the Company to consummate the transactions provided for
hereby are subject, in the discretion of the Company, to the satisfaction, on or
prior to the Closing Date, of each of the following conditions, any of which may
be waived by the Company by written notice to Purchaser:
SECTION 8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties of Purchaser contained in this Agreement shall be
true and correct at and as of the date of this Agreement and at and as of the
Closing Date, except as and to the extent that the facts and conditions upon
which such representations and warranties are based are expressly required or
permitted to be changed by the terms hereof, and Purchaser shall have performed
and satisfied all requirements to be performed by it prior to or on the Closing
Date.
SECTION 8.2 NO ACTIONS OR COURT ORDERS. No Action by any governmental
authority or other person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected to damage the Company materially if the
transactions contemplated hereby are consummated. There shall not be any
Regulation or Court Order that makes the purchase and sale of the Business or
the Assets contemplated hereby illegal or otherwise prohibited.
SECTION 8.3 ASSUMPTION AGREEMENT. Purchaser shall have executed the
Assumption Agreement.
SECTION 8.4 ANCILLARY AGREEMENTS. Purchaser shall have executed and
delivered the Ancillary Agreements and any other agreements to which it is a
party in the forms attached as exhibits hereto.
SECTION 8.5 CASH PAYMENT. Purchaser shall have delivered the Cash
Payment, plus accrued interest thereon, less the Holdback Amount pursuant to
Section 2.5 and the payment required by Section 2.5(a)(ii).
SECTION 8.7 CERTIFICATES. Purchaser shall furnish the Company with such
certificates to evidence compliance with the conditions set forth in this
Article VIII as may be reasonably requested by the Company.
ARTICLE IX
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchaser to consummate the transactions provided for
hereby are subject, in the discretion of Purchaser, to the satisfaction, on or
prior to the Closing Date, of each of the following conditions, any of which may
be waived by Purchaser by written notice to the Company:
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SECTION 9.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties of Sellers contained in this Agreement shall be
true and correct in all respects at and as of the date of this Agreement and at
and as of the Closing Date, except as and to the extent that the facts and
conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms hereof, and Sellers
shall have performed and satisfied all agreements and covenants required hereby
to be performed by them prior to or on the Closing Date.
SECTION 9.2 CONSENTS; REGULATORY COMPLIANCE AND APPROVAL. Any necessary
consents to the assignment of all Contracts and Leases and the assumption of the
Assumed Liabilities shall have been obtained. All Permits, consents, approvals
and waivers from governmental authorities necessary to the consummation of the
Transactions shall have been obtained (other than compliance with bulk sales
law). Purchaser shall be satisfied that all approvals required under any
Regulations to carry out the Transactions shall have been obtained and that the
parties shall have complied with all Regulations applicable to such
transactions.
SECTION 9.3 NO ACTIONS OR COURT ORDERS. No Action by any governmental
authority or other person shall have been instituted or threatened which
questions the validity or legality of the Transactions and which could
reasonably be expected to damage Purchaser, the Assets or the Business
materially if the Transactions are consummated, including without limitation any
material adverse effect on the right or ability of Purchaser to own, operate,
possess or transfer the Assets after the Closing. There shall not be any
Regulation or Court Order that makes the purchase and sale of the Business or
the Assets contemplated hereby illegal or otherwise prohibited.
SECTION 9.4 OPINION OF COUNSEL. The Company shall have delivered to
Purchaser an opinion of Gibson, Dunn & Crutcher LLP, Company counsel, dated as
of the Closing Date, in form and substance reasonably satisfactory to Purchaser,
and upon which Purchaser's lender (Union Bank of California, N.A., as Agent, may
expressly rely) to the effect that:
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of California;
(b) The Company has necessary power and authority to enter into this
Agreement and the Ancillary Agreements to which it is a party and to consummate
the Transactions;
(c) The execution, delivery and performance of this Agreement and the
Ancillary Agreements by the Company have been duly authorized by all necessary
action, and this Agreement and each of the Ancillary Agreements to which each
Seller is a party (other than the Employment Agreement, the Shareholder Release,
the Assignment of Business Name (to the extent such purports to transfer rights
not held by the Company) and the Agreement Not to Compete) constitute legally
valid and binding obligations of the Seller party to such agreement, enforceable
against each of the Company and the Sellers party to such agreements, in
accordance with their terms, except as limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
generally or by equitable principles (whether considered in an action at law or
in equity) and (ii) limitations imposed by federal or state law
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or equitable principles upon the availability of specific performance,
injunctive relief or other equitable remedies;
(d) The documents to be delivered by the Company at the Closing to effect
the transfer and assignment to Purchaser of all right, title and interest in and
to the Assets are effective to do so (other than the Assignment of Business Name
(to the extent such purports to transfer rights not held by the Company)),
subject to the Permitted Encumbrances, except to the extent a third party
consent is required in connection with a particular Asset which third party
consent has not been obtained as of the Closing, the transfer and assignment to
Purchaser may not be effective as to that particular Asset unless and until such
consent is obtained.
SECTION 9.5 CERTIFICATES. The Company shall furnish Purchaser with such
certificates to evidence compliance with the conditions set forth in this
Article IX as may be requested by Purchaser.
SECTION 9.6 MATERIAL CHANGES. In the reasonable judgment of Purchaser,
as of the Closing Date, since July 31, 1998, there shall not have been any
actual or threatened event which could constitute a Material Adverse Effect.
SECTION 9.7 CONVEYANCING DOCUMENTS; RELEASE OF ENCUMBRANCES. Sellers
shall have executed and delivered each of the documents described in Section 4.2
hereof so as to effect the transfer and assignment to Purchaser of all right,
title and interest in and to the Assets, and Sellers shall have filed (where
necessary) and delivered to Purchaser all documents necessary to release the
Assets from all Encumbrances, other than Permitted Encumbrances, which documents
shall be in a form reasonably satisfactory to Purchaser's counsel.
SECTION 9.8 PERMITS. Purchaser shall have obtained or been granted the
right to use all Permits required to operate the Business.
SECTION 9.9 OTHER AGREEMENTS. Sellers shall have executed and delivered
the Ancillary Agreements to which they are a party to in the forms attached as
exhibits hereto.
SECTION 9.10 FRANCHISE TAX BOARD CERTIFICATE. As promptly as possible
after the Closing (it being understood that the foregoing shall not be a
condition to Closing), the Company shall provide Purchaser with a good standing
certificate or similar document(s) issued by the California Franchise Tax Board
in form and content acceptable to Purchaser.
SECTION 9.11 NONFOREIGN AFFIDAVIT. Each Seller shall furnish Purchaser
with an affidavit, stating, under penalty of perjury, such Seller's United
States taxpayer identification number (or social security number) and that such
Seller is not a foreign person, pursuant to Section 1445(b)(2) of the Code.
SECTION 9.12 CERTAIN FINANCIAL ARRANGEMENTS. Purchaser shall have
obtained financing and other credit arrangements with a third party satisfactory
to Purchaser, in its sole discretion, in connection with the Purchase Price
payments and any other costs, fees and expenses of Purchaser hereunder or in
connection with any other document or instrument required to be
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executed and delivered by Purchaser in connection herewith, and the
transactions contemplated hereby or thereby.
ARTICLE X
RISK OF LOSS
SECTION 10.1 RISK OF LOSS. From the date hereof through and including
the Closing Date, all risk of loss or damage to the Assets shall be borne by the
Company, and thereafter shall be borne by Purchaser. If any material portion of
the Assets is destroyed or damaged by fire or any other cause on or prior to the
Closing Date, other than use, wear or loss in the ordinary course of business,
Sellers shall give written notice to Purchaser as soon as practicable after, but
in any event within five (5) calendar days of, discovery of such damage or
destruction, which notice shall set forth in detail the nature of such damage or
destruction, the amount of insurance, if any, covering such Assets and the
amount, if any, which Sellers are otherwise entitled to receive as a
consequence. Prior to the Closing, Purchaser shall have the option, which shall
be exercised by written notice to Sellers within ten (10) calendar days after
receipt of Sellers' notice or if there is not ten (10) calendar days prior to
the Closing Date, as soon as practicable prior to the Closing Date, of (i)
accepting such Assets in their destroyed or damaged condition in which event
Purchaser shall be entitled to the proceeds of any insurance or other proceeds
payable with respect to such loss and the Purchase Price shall be reduced by the
amount, if any, mutually agreed upon between the parties, (ii) excluding such
Assets from this Agreement, in which event the Purchase Price shall be reduced
by the amount allocated to such Assets, as mutually agreed between the parties
or (iii) terminating this Agreement in accordance with Section 12.1. If
Purchaser accepts such Assets, then after the Closing, any insurance or other
proceeds shall belong, and shall be assigned to, Purchaser without any reduction
in the Purchase Price; otherwise, such insurance proceeds shall belong to the
Company.
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ARTICLE XI
INDEMNIFICATION
SECTION 11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF SELLERS.
The representations and warranties made by Sellers in Article V of this
Agreement and any schedule or exhibit attached hereto, respectively, shall
survive the date hereof for a period of two years from the Closing Date.
Notwithstanding anything contained in this Agreement, including, without
limitation, this Section 11.1, any claims with respect to representations and
warranties made by Sellers in this Agreement shall survive and continue
following the expiration of the survival period stated above (i) if such
claim is submitted in writing to the Company prior to the end of the survival
period stated in this Section 11.1 and identified as a claim for
indemnification pursuant to this Agreement (in which case the claim shall
survive indefinitely) or (ii) if such claim ultimately determined to be based
upon fraud or willful breach or misrepresentation by any Seller, in which
event such claims shall survive for a two year period following its discovery
by Purchaser.
SECTION 11.2 INDEMNIFICATION BY SELLERS. Each Seller shall, jointly
and severally, indemnify and hold harmless Purchaser and each of Purchaser's
Affiliates, directors, officers, employees, attorneys, agents and
Representatives (collectively, the "Affiliated Parties") in respect of any
and all claims, losses, damages, liabilities, declines in value of the
assets, penalties, and interest, including, without limitation, reasonable
attorneys', accountants' and consultants' fees and other costs and expenses
(collectively, "Damages"), incurred by Purchaser or Purchaser's Affiliated
Parties, together with interest on cash disbursements in connection
therewith, at an annual rate equal to the Prime Rate then in effect, from the
date such cash disbursements were made by Purchaser or its Affiliated Parties
until paid by such Seller, in connection with, or resulting from, any or all
of the following:
(a) Any breach or inaccuracy of any representation or warranty made by
such Seller in Article V of this Agreement, the Ancillary Agreements or any
Disclosure Schedule;
(b) Any failure to perform or comply with any covenant, agreement or
obligation of such Seller contained in this Agreement or the Ancillary
Agreements;
(c) Any injury to persons or death or property damage resulting from or
contributed to by any products designed, manufactured, sold or leased by the
Company or any services performed by any of the Sellers if the accident,
incident or occurrence giving rise to such claim, action, lawsuit or
proceeding occurred prior to the Closing Date;
(d) With respect to any claim arising out of the failure of any Seller
to comply with the bulk transfer or bulk sales laws of any jurisdiction in
accordance with Section 7.9 (other than by reason of Purchaser's failure to
pay an Assumed Liability); and
(e) Except as provided elsewhere herein, Liabilities of the Sellers
resulting from events occurring prior to the Closing Date, other than a
liability or obligation which is included in the Assumed Liabilities.
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Sellers' obligations set forth in this Section shall not apply to any Damages
that arise from or are related to (i) any willful misconduct or gross
negligence by Purchaser or its Affiliated Parties, or (ii) any Action
asserted between the Purchaser and/or Purchaser's Affiliated Parties.
Notwithstanding anything to the contrary stated herein, Vincent Lyons' and
Barbara Lyons' indemnification obligations under this Agreement shall not
exceed Six Million Nine Hundred Sixty Three Thousand Dollars ($6,963,000).
SECTION 11.3 INDEMNIFICATION BY SELLERS FOR TAX LIABILITIES. In
addition to, and not by way of limitation on, the indemnities set forth in
Section 11.2, except as provided in Section 2.6 Sellers shall, jointly and
severally, indemnify and hold harmless on an after-tax basis Purchaser
against all unpaid Taxes of the Company for all taxable periods ending before
the Closing Date or otherwise attributable to the operations, transactions,
assets, or income of the Company or its predecessors prior to the Closing
Date or otherwise arising from the consummation of the Transactions as of the
date hereof (but excluding any income or franchise or similar Taxes imposed
on Purchaser as a result of the consummation of the Transactions, including
the transfer of the Earn-Out Stock to the Company), together with any
expenses (including, without limitation, reasonable attorneys', accountants'
and consultants' fees and other expenses) incurred in connection with the
contesting, collection or assessment of such Taxes, and together with
interest at an annual rate equal to the Prime Rate then in effect.
SECTION 11.4 INDEMNIFICATION BY SELLERS FOR ENVIRONMENTAL MATTERS.
For a period of five years, in addition to, and not by way of limitation on,
the indemnities set forth in Section 11.2, Sellers shall, jointly and
severally, indemnify and hold harmless Purchaser and Purchaser's Affiliated
Parties in respect of any and all Damages incurred by Purchaser or
Purchaser's Affiliated Parties, together with interest on cash disbursements
in connection therewith, at an annual rate equal to the Prime Rate then in
effect, from the date such cash disbursements were made by Purchaser or any
of Purchaser's Affiliated Parties until paid by Sellers, in connection with,
or resulting from, any Environmental Liabilities for Pre-Closing Matters
including, without limitation, any of the matters described on Schedule 5.12,
regardless of the diligence performed or investigation made by Purchaser or
its Representatives with respect thereto.
SECTION 11.5 INDEMNIFICATION BY PURCHASER. Purchaser shall indemnify
and hold harmless the Company, each Seller and each of the Company's
employees, directors, officers, attorneys, agents and Representatives
(collectively, the "Company Indemnitees") in respect of any and all Damages
incurred by the Company Indemnitees, together with interest on cash
disbursements in connection therewith, at an annual rate equal to the Prime
Rate then in effect, from the date that such cash disbursements were made by
any Company Indemnitee until paid by Purchaser, in connection with, or
resulting from, any or all of the following:
(a) Any breach of any representation or warranty made by Purchaser in
Article VI of this Agreement or in the Ancillary Agreements;
(b) Any breach of any covenant, agreement or obligation of Purchaser
contained in this Agreement or the Ancillary Agreements;
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(c) Except as provided elsewhere herein, Liabilities arising in
relation to the Business, the Assets or the Assumed Liabilities resulting
from events occurring on or after the Closing Date; and
(d) Any injury to persons or death or property damage resulting from or
contributed to by any products designed, manufactured, sold or leased by
Purchaser or any services performed by Purchaser if the accident, incident or
occurrence giving rise to such claim, action, lawsuit or proceeding occurred
on or after the Closing Date.
Purchaser's obligations set forth in this Section shall not apply to any
Damages that arise from or are related to any willful misconduct or gross
negligence by any Seller or Company Indemnitee.
SECTION 11.6 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall
arise for indemnification under this Agreement, the party entitled to
indemnification (the "Indemnified Party") shall promptly notify the party
obligated to provide indemnification (the "Indemnifying Party") of the claim
and, when known, the facts constituting the basis for such claim; PROVIDED,
HOWEVER, that the failure to so notify the Indemnifying Party shall not
relieve the Indemnifying Party of its obligation hereunder to the extent such
failure does not materially prejudice the Indemnifying Party. In the event
of any claim for indemnification hereunder resulting from or in connection
with any claim or legal proceedings by a third party, the notice to the
Indemnifying Party shall specify, if known, the amount or an estimate of the
amount of the liability arising therefrom. The amount of any Damages for
which indemnification is provided under this Article XI shall be net of any
amounts recovered by the Indemnified Party under any agreement with any third
party or any insurance policy with respect to such Damages. If the
Indemnifying Party makes any payment under this Article XI in respect of any
Damages, the Indemnifying Party shall be subrogated, to the extent of such
payment, to the rights of the Indemnified Party against any insurer or third
party with respect to such Damages. The Indemnified Party shall execute any
required documents or instruments or take any other similar steps necessary
to effectuate such subrogation.
SECTION 11.7 DEFENSE OF CLAIMS. In connection with any claim giving rise
to indemnity under this Agreement resulting from or arising out of any claim or
legal proceeding by a person who is not a party to this Agreement, the
Indemnifying Party at its sole cost and expense and with counsel reasonably
satisfactory to the Indemnified Party may, upon written notice to the
Indemnified Party, assume the defense of any such claim or legal proceeding if
(i) the Indemnifying Party acknowledges to the Indemnified Party in writing,
within fifteen (15) days after receipt of notice from the Indemnified Party, its
obligations to indemnify the Indemnified Party with respect to all elements of
such claim based upon the facts then reasonably known to such Indemnifying
Party, (ii) the Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the Indemnifying Party will
have the financial resources to defend against such third-party claims and
fulfill its indemnification obligations hereunder, (iii) the third-party claim
involves only money damages and does not seek an injunction or other equitable
relief, and (iv) settlement or an adverse judgment of the third-party claim is
not, in the good faith judgment of the Indemnified Party, likely to establish a
pattern or practice adverse to the continuing business interests of the
Indemnified Party. The Indemnified Party shall be entitled to participate in
(but not control) the defense of any such
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action, with its counsel and at its own expense; PROVIDED, HOWEVER, that if
there are one or more legal defenses available to the Indemnified Party that
conflict with those available to the Indemnifying Party, or if the
Indemnifying Party fails to take reasonable steps necessary to defend
diligently the claim after receiving notice from the Indemnified Party that
it believes the Indemnifying Party has failed to do so, the Indemnified Party
may assume the defense of such claim; PROVIDED, FURTHER, that the Indemnified
Party may not settle such claim without the prior written consent of the
Indemnifying Party, which consent may not be unreasonably withheld. If the
Indemnified Party assumes the defense of the claim pursuant to this Section
11.7, the Indemnifying Party shall reimburse the Indemnified Party for the
reasonable fees and expenses of counsel retained by the Indemnified Party and
the Indemnifying Party shall be entitled to participate in (but not control)
the defense of such claim, with its counsel and at its own expense. If the
Indemnifying Party thereafter seeks to question the manner in which the
Indemnified Party defended such third party claim or the amount or nature of
any such settlement, the Indemnifying Party shall have the burden to prove by
a preponderance of the evidence that the Indemnified Party did not defend or
settle such third party claim in a reasonably prudent manner. The parties
agree to render, without compensation, to each other such assistance as they
may reasonably require of each other in order to insure the proper and
adequate defense of any action, suit or proceeding, whether or not subject to
indemnification hereunder. If the indemnification provided for in this
Article XI is for any reason unenforceable, the party against whom
indemnification was sought agrees to contribute to the claims for which such
indemnification is unenforceable in such proportion as is appropriate to
reflect the relative fault of such party, on the one hand, and the
Indemnified Party, on the other hand, as well as any other relevant equitable
considerations.
SECTION 11.8 MANNER OF INDEMNIFICATION. All indemnification payments
hereunder shall be effected by payment of cash or delivery of a certified or
official bank check in the amount of the indemnification liability.
SECTION 11.9 SET OFF. To the extent that Purchaser or Purchaser's
Affiliated Parties suffer any Damages for which Sellers are liable to
Purchaser or Purchaser's Affiliated Parties under the provisions of Section
11.2, 11.3 or 11.4, Purchaser shall have the right to set-off such Damages
from the Holdback or the Earn-Out Stock. The parties acknowledge that such
reduction shall not be the exclusive method of receiving indemnification from
Sellers pursuant to this Article XI.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 TERMINATION.
(a) TERMINATION. This Agreement may be terminated at any time prior to
Closing:
(1) By mutual written consent of Purchaser and the Company;
(2) By Purchaser or the Company if the Closing shall not have
occurred on or before November 30, 1998; PROVIDED, HOWEVER, that this
provision shall not be available to Purchaser if Sellers have the right to
terminate this Agreement under clause (4) of this
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Section 12.1, and this provision shall not be available to the Company if
Purchaser has the right to terminate this Agreement under clause (3) of this
Section 12.1;
(3) By Purchaser if there is (i) a material breach of any
representation or warranty set forth in Article V hereof or any covenant or
agreement to be complied with or performed by any Seller pursuant to the
terms of this Agreement prior to the Closing Date or (ii) the failure of a
condition set forth in Article IX to be satisfied (and such condition is not
waived in writing by Purchaser) on or prior to the Closing Date, or (iii) the
occurrence of any event which results or would result in the failure of a
condition set forth in Article IX to be satisfied on or prior to the Closing
Date; PROVIDED that, Purchaser may not terminate this Agreement prior to the
Closing Date if the Company has not had an adequate opportunity (in any
event, not to exceed twenty (20) calendar days) to cure such failure;
(4) By the Company if there is a material breach of any
representation or warranty set forth in Article VI hereof or of any covenant
or agreement to be complied with or performed by Purchaser pursuant to the
terms of this Agreement or the failure of a condition set forth in Article
VIII to be satisfied (and such condition is not waived in writing by the
Company) on or prior to the Closing Date, or the occurrence of any event
which results or would result in the failure of a condition set forth in
Article VIII to be satisfied on or prior to the Closing Date, PROVIDED that,
the Company may not terminate this Agreement prior to the Closing Date if
Purchaser has not had an adequate opportunity (in any event, not to exceed
twenty (20) calendar days) to cure such failure.
(b) IN THE EVENT OF TERMINATION. In the event of termination of this
Agreement:
(1) Each party shall redeliver all documents, work papers and
other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the
party furnishing the same (and shall destroy all copies in their possession);
and
(2) No party hereto shall have any Liability to any other
party to this Agreement, except as stated in subsections (i) and (ii) of this
Section 12.1(b) and Sellers' obligations under Section 7.2, except for any
willful breach of this Agreement occurring prior to the termination of this
Agreement.
SECTION 12.2 NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally or by facsimile transmission (with subsequent letter
confirmation by mail) or three days after being mailed by certified or
registered mail, postage prepaid, return receipt requested, to the parties,
their successors in interest or their assignees at the following addresses,
or at such other addresses as the parties may designate by written notice in
the manner aforesaid:
55
<PAGE>
If to Purchaser: VDI Media
6920 Sunset Boulevard
Los Angeles, California 90028
Telecopy: (213) 957-2164
Attention: Donald R. Stine
With a concurrent copy to: Katten Muchin & Zavis
1999 Avenue of the Stars, Suite 1600
Los Angeles, California 90067
Telecopy: (310) 788-4471
Attention: Brian M. Hoye, Esq.
If to any Seller: DUBS, Incorporated
1220 N. Highland Avenue
Los Angeles, California 90038
Telecopy: (213) 466-4024
Attention: Vincent Lyons
With a concurrent copy to: Gibson Dunn & Crutcher LLP
333 S. Grand Avenue
Los Angeles, California 90071
Telecopy: (213) 229-7520
Attention: J. Nicholson Thomas, Esq.
SECTION 12.3 ASSIGNABILITY AND PARTIES IN INTEREST. This Agreement
shall not be assignable by any of the parties, except that Purchaser may
assign its rights hereunder to, and have its obligations hereunder assumed by
a wholly-owned subsidiary of Purchaser, so long as Purchaser remains
obligated to perform its obligations hereunder. This Agreement shall inure
to the benefit of and be binding upon the parties and their respective
permitted successors and assigns.
SECTION 12.4 GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of California.
SECTION 12.5 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
SECTION 12.6 COMPLETE AGREEMENT. This Agreement, the Ancillary
Agreements, the exhibits and schedules hereto and the documents delivered or to
be delivered pursuant to this Agreement contain or will contain the entire
agreement among the parties with respect to the Transactions and shall supersede
all previous oral and written and all contemporaneous oral negotiations,
commitments and understandings (other than the Confidentiality Agreement).
SECTION 12.7 MODIFICATIONS, AMENDMENTS AND WAIVERS. This Agreement may
be modified, amended or otherwise supplemented only by a writing signed by
Purchaser and the Company. No waiver of any right or power hereunder shall be
deemed effective unless and
56
<PAGE>
until a writing waiving such right or power is executed by the party waiving
such right or power.
SECTION 12.8 EXPENSES. Except as otherwise expressly provided elsewhere
in this Agreement, each party shall pay all fees and expenses incurred by it in
connection with the transactions contemplated by this Agreement including,
without limitation, legal, investment bankers' and brokers' fees, accounting
fees and fees for tax-related work.
SECTION 12.9 INVALIDITY. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
SECTION 12.10 PUBLICITY. Except as provided in the next sentence, neither
Purchaser, on the one hand, nor any Seller, including Representatives or
Affiliates thereof, on the other hand, shall issue any press release or make any
public statement regarding the transactions contemplated hereby, without prior
written approval of the other parties, provided that Purchaser may describe the
Transactions and the Company, and include the Financial Statements, in any
document filed in connection with the offer and sale of its securities under
applicable law. Purchaser and Sellers agree that upon execution of this
Agreement, Purchaser may issue a press release announcing the execution of such
agreement and the salient details thereof.
SECTION 12.11 LIMIT ON INTEREST. Notwithstanding anything in this
Agreement to the contrary, no party shall be obligated to pay interest at a rate
higher than the maximum rate permitted by applicable law. In the event that at
any time an interest rate provided in this Agreement exceeds the maximum rate
permitted by applicable law, such interest rate shall be deemed to be reduced to
such maximum permissible rate.
SECTION 12.12 ATTORNEYS' FEES AND COSTS. Each party shall bear its own
expenses arising from the preparation, negotiation and delivery of this
Agreement and any other document required to be delivered in connection
herewith; PROVIDED, should any party institute any arbitration, action, suit or
other proceeding arising out of or relating to this Agreement, the prevailing
party shall be entitled to receive from the losing party reasonable attorneys'
fees and costs incurred in connection therewith.
SECTION 12.13 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of California, County of Los Angeles, and the parties hereto irrevocably submit
to the jurisdiction of such courts and waive any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.
SECTION 12.14 CONTRACT INTERPRETATION; CONSTRUCTION OF AGREEMENT.
(a) The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Article, section,
57
<PAGE>
exhibit, schedule, preamble, recital and party references are to this
Agreement unless otherwise stated. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without
limitation".
(b) No party, nor its respective counsel, shall be deemed the drafter of
this Agreement for purposes of construing the provisions of this Agreement, and
all language in all parts of this Agreement shall be construed in accordance
with its fair meaning, and not strictly for or against any party.
(c) Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms.
SECTION 12.15 THIRD PARTY BENEFICIARIES. Except with respect to the
indemnification benefits permitted any Indemnified Party pursuant to Article XI
and the indemnification by Purchaser of Mr. and Mrs. George Cooney under the
Assignment and Assumption of Real Property Lease, there are no third party
beneficiaries to this Agreement or the Ancillary Agreements. Furthermore, no
provision of this Agreement shall create any third-party beneficiary rights in
any employee or former employee of the Company (including any Transferred
Employee or any beneficiary or dependent thereof), including, without
limitation, any right to continued employment or employment in any particular
position with Purchaser for any specified period of time after the Closing Date.
[Signatures on next page]
58
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the date first above written.
DUBS INCORPORATED, as a Seller
By: /s/ Vincent Lyons
----------------------------------------
Name: Vincent Lyons
Title: President
/s/ Vincent Lyons
--------------------------------------------
Vincent Lyons, as a Seller
/s/ Barbara Lyons
--------------------------------------------
Barbara Lyons, as a Seller
VDI MEDIA, as Purchaser
By: /s/ R. Luke Stefanko
-----------------------------------------
Name: R. Luke Stefanko
Title: Chief Executive Officer
[Asset Purchase Agreement: Dubs]
59
<PAGE>
Schedule 3.2(a)(1)
<TABLE>
<CAPTION>
EBITDA EARN OUT STOCK 1/ %
------ ----------------- ---
<S> <C> <C>
$3,500,000 $3,300,000 100%
$3,400,000 3,200,000 97%
$3,300,000 3,100,000 93%
$3,200,000 3,000,000 90%
$3,100,000 2,500,000 75%
$3,000,000 2,000,000 60%
$2,900,000 1,500,000 45%
$2,800,000 1,000,000 29%
$2,700,000 500,000 14%
$2,625,000 75,000 2%
< $2,625,000 0 0%
</TABLE>
- ------------------------
1/ Subject to the terms and conditions set forth in the Agreement, if the
Company achieves the specified EBITDA targets, Purchaser shall issue to it a
quantity of its Common Stock with a market value, calculated in accordance
with the Agreement (generally, average closing price for the 30 day period
prior to Closing), equal to the corresponding dollar amounts stated in this
column.
<PAGE>
===============================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
among
VDI MEDIA
as Borrower
THE LENDERS PARTIES HERETO,
and
UNION BANK OF CALIFORNIA, N.A.
as Agent
Dated as of November 17, 1998
===============================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Other Definitional Provisions. . . . . . . . . . . . . . . . . . . .18
SECTION 2. AMOUNT AND TERMS OF LOANS AND LETTERS OF CREDIT; COMMITMENT
AMOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
2.1 Revolving Loans and Letters of Credit; Revolving Loan Commitment
Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
2.2 Term Loans; Term Loan Commitment . . . . . . . . . . . . . . . . . .21
2.3 Issuance of Letters of Credit. . . . . . . . . . . . . . . . . . . .22
2.4 Optional Prepayments.. . . . . . . . . . . . . . . . . . . . . . . .26
2.5 Mandatory Prepayments. . . . . . . . . . . . . . . . . . . . . . . .26
2.6 Conversion and Continuation Options. . . . . . . . . . . . . . . . .26
2.7 Minimum Amounts of Tranches. . . . . . . . . . . . . . . . . . . . .27
2.8 Interest Rates and Payment Dates.. . . . . . . . . . . . . . . . . .27
2.9 Computation of Interest and Fees.. . . . . . . . . . . . . . . . . .28
2.10 Inability to Determine Interest Rate. . . . . . . . . . . . . .28
2.11 Pro Rata Treatment and Payments . . . . . . . . . . . . . . . .29
2.12 Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . .29
2.13 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . .30
2.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
2.15 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . .32
2.16 Mitigation of Costs . . . . . . . . . . . . . . . . . . . . . .33
SECTION 3. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . .33
3.1 Organization and Good Standing.. . . . . . . . . . . . . . . . . . .33
3.2 Power and Authority. . . . . . . . . . . . . . . . . . . . . . . . .33
3.3 Validity and Legal Effect. . . . . . . . . . . . . . . . . . . . . .33
3.4 No Violation of Laws or Agreements.. . . . . . . . . . . . . . . . .34
3.5 Title to Assets; Existing Encumbrances; Legal Names. . . . . . . . .34
3.6 Capital Structure; Equity Ownership. . . . . . . . . . . . . . . . .34
3.7 Subsidiaries and Affiliates. . . . . . . . . . . . . . . . . . . . .34
3.8 Material Contracts.. . . . . . . . . . . . . . . . . . . . . . . . .34
3.9 Taxes and Assessments. . . . . . . . . . . . . . . . . . . . . . . .35
3.10 Litigation and Legal Proceedings. . . . . . . . . . . . . . . .35
3.11 Accuracy of Financial Information . . . . . . . . . . . . . . .35
3.12 Accuracy of Other Information . . . . . . . . . . . . . . . . .36
3.13 Compliance with Laws Generally. . . . . . . . . . . . . . . . .36
3.14 ERISA Compliance. . . . . . . . . . . . . . . . . . . . . . . .36
3.15 Environmental Compliance. . . . . . . . . . . . . . . . . . . .37
3.16 Federal Regulations . . . . . . . . . . . . . . . . . . . . . .38
3.17 Fees and Commissions. . . . . . . . . . . . . . . . . . . . . .38
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C>
3.18 Representations and Warranties in Acquisition Agreement . . . .38
3.19 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . .39
3.20 Investment Company Act; Public Utility Holding Company Act. . .39
3.21 Nature of Business. . . . . . . . . . . . . . . . . . . . . . .39
3.22 Ranking of Loans. . . . . . . . . . . . . . . . . . . . . . . .39
SECTION 4. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . .39
4.1 Conditions to Restatement Date . . . . . . . . . . . . . . . . . . .39
4.2 Conditions to Each Loan or Letter of Credit. . . . . . . . . . . . .41
4.3 Conditions Subsequent. . . . . . . . . . . . . . . . . . . . . . . .42
SECTION 5. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . .43
5.1 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .43
5.2 Certificates; Other Information. . . . . . . . . . . . . . . . . . .44
5.3 Payment of Obligations.. . . . . . . . . . . . . . . . . . . . . . .45
5.4 Conduct of Business and Maintenance of Existence . . . . . . . . . .45
5.5 Maintenance of Property. . . . . . . . . . . . . . . . . . . . . . .46
5.6 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
5.7 Inspection of Property; Books and Records; Discussions . . . . . . .46
5.8 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . .46
5.9 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . .47
5.10 Compliance With Laws, Etc . . . . . . . . . . . . . . . . . . .47
5.11 Certain Obligations Respecting Subsidiaries; Prohibitions on
Certain Agreements. . . . . . . . . . . . . . . . . . . . . . .48
5.12 Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . .48
SECTION 6. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . .49
6.1 Financial Condition Covenants. . . . . . . . . . . . . . . . . . . .49
6.2 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . .49
6.3 Limitation on Liens. . . . . . . . . . . . . . . . . . . . . . . . .50
6.4 Limitation on Fundamental Changes. . . . . . . . . . . . . . . . . .51
6.5 Limitation on Sale of Assets . . . . . . . . . . . . . . . . . . . .51
6.6 Limitation on Dividends. . . . . . . . . . . . . . . . . . . . . . .52
6.7 Limitation on Investments, Loans and Advances. . . . . . . . . . . .52
6.8 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . .53
6.9 Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
6.10 Sale-Leaseback Transactions . . . . . . . . . . . . . . . . . .54
6.11 Lines of Business . . . . . . . . . . . . . . . . . . . . . . .54
SECTION 7. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . .54
SECTION 8. THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . .57
8.1 Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
8.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . .57
8.3 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . .58
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C> <C>
8.4 Reliance by the Agent. . . . . . . . . . . . . . . . . . . . . . . .58
8.5 Notice of Default. . . . . . . . . . . . . . . . . . . . . . . . . .59
8.6 Non-Reliance on the Agent and Other Lenders. . . . . . . . . . . . .59
8.7 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . .59
8.8 The Agent in Its Individual Capacity . . . . . . . . . . . . . . . .60
8.9 Successor Agent. . . . . . . . . . . . . . . . . . . . . . . . . . .60
8.10 Collateral Documents. . . . . . . . . . . . . . . . . . . . . .61
SECTION 9. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . .61
9.1 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . .61
9.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
9.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . .63
9.4 Survival of Representations and Warranties . . . . . . . . . . . . .63
9.5 Payment of Expenses and Taxes. . . . . . . . . . . . . . . . . . . .63
9.6 Successors and Assigns; Participations; Purchasing Lenders . . . . .65
9.7 Adjustments; Set-Off . . . . . . . . . . . . . . . . . . . . . . . .67
9.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . .68
9.9 Severability.. . . . . . . . . . . . . . . . . . . . . . . . . . . .68
9.10 Integration . . . . . . . . . . . . . . . . . . . . . . . . . .68
9.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . .69
9.12 Acknowledgements. . . . . . . . . . . . . . . . . . . . . . . .69
9.13 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . .69
9.14 Copies of Certificates, Etc . . . . . . . . . . . . . . . . . .69
9.15 Treatment of Certain Information; Confidentiality . . . . . . .69
9.16 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . .70
9.17 Effect of Amendment and Restatement . . . . . . . . . . . . . .70
</TABLE>
Exhibits
A-1 Form of Revolving Note
A-2 Form of Term Note
B Form of Assignment and Acceptance
C Form of Continuation Notice
D Form of Letter of Credit Request
E Form of Borrowing Notice
Schedules
2.1 Commitments
3.1 Business Qualification Jurisdictions
3.5 Legal and Trade Names
3.6 Capital Structure; Equity Ownership
3.7 Subsidiaries and Affiliates
3.10 Litigation
3.17 Certain Fees
4.1(g) Repayment of Certain Indebtedness
-iii-
<PAGE>
4.3(c) Landlord Consents
6.2 Indebtedness
6.3 Liens
6.7 Investments
-iv-
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of November 17,
1998, among (1) VDI MEDIA, a California corporation (the "BORROWER"), (2) the
several banks and other financial institutions from time to time parties to
this Agreement (the "LENDERS"), and (3) UNION BANK OF CALIFORNIA, N.A., as
Agent for the Lenders hereunder (in such capacity, the "AGENT").
RECITALS
A. The Borrower and Union Bank of California, N.A. ("UBOC") are
parties to that certain Loan Agreement dated as of December 23, 1997, as
amended by that certain First Amendment to Loan Agreement dated as of May 29,
1998 and that certain Second Amendment to Loan Agreement dated as of July 31,
1998 (the "EXISTING AGREEMENT"), pursuant to which UBOC has made available to
the Borrower a revolving loan facility with a letter of credit subfacility
upon the terms and conditions therein set forth.
B. The Borrower, as purchaser, and Dubs, Incorporated ("DUBS"),
Vincent Lyons and Barbara Lyons, as sellers, have entered into that certain
Asset Purchase Agreement dated as of November 9, 1998 (the "ACQUISITION
AGREEMENT") pursuant to which the Borrower will purchase certain assets of
Dubs (such acquisition, the "DUBS ACQUISITION") for a purchase price of not
more than $14,300,000 (as such price may be adjusted pursuant to the
Acquisition Agreement).
C. The Borrower has requested that UBOC modify various terms and
conditions of the Existing Agreement to extend the maturity date of the
Existing Revolving Loan (as defined below) to November 17, 1998 and to make
available to it a new revolving credit facility with a letter of credit
subfacility and a term loan facility, in an aggregate amount not exceeding
$35,000,000, for the purposes of (i) repaying all unpaid principal of and
interest on the Existing Revolving Loan, (ii) consummating the Dubs
Acquisition and additional Permitted Acquisitions (as defined below), (iii)
funding working capital and capital expenditures and (iv) funding general
corporate purposes, in each case on the terms and conditions set forth below.
D. In order to provide for the modification of various terms and
conditions of the Existing Agreement, the parties have agreed to amend and
restate the representations, warranties, covenants, agreements and
obligations of the Borrower in this Agreement, which completely amends,
restates and replaces the Existing Agreement, all upon the terms and
provisions and subject to the conditions hereinafter set forth.
E. The parties to the Existing Agreement desire to further modify the
Existing Agreement to create the ability to add additional Lenders as parties to
this Agreement
<PAGE>
from time to time in accordance with the terms hereof, and to add as a party
to this Agreement the Agent, as agent for the Lenders hereunder.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms shall
have the following meanings:
"ACCOUNTANTS": PricewaterhouseCoopers or such other firm of independent
certified public accountants of recognized national standing as shall be
selected by the Borrower.
"ACQUISITION AGREEMENT": as defined in the Recitals hereto.
"ADR AGREEMENT": that certain Alternative Dispute Resolution Agreement
dated as of November 17, 1998 among the Borrower, Fast Forward, Multi-Media,
the Lenders and the Agent.
"AFFILIATE": as to any Person, (a) any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control
with, such Person or (b) any Person who is a director, officer or partner (i)
of such Person or (ii) of any Subsidiary of such Person. For purposes of
this definition, "control" of a Person means the power, directly or
indirectly, to direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.
"AGENT": as defined in the preamble hereto.
"AGGREGATE AVAILABLE REVOLVING LOAN COMMITMENT": the sum of the
Available Revolving Loan Commitments of each Lender.
"AGGREGATE COMMITMENT": the sum of the Aggregate Revolving Loan
Commitment and the Aggregate Term Loan Commitment.
"AGGREGATE REVOLVING LOAN COMMITMENT": the sum of the Revolving Loan
Commitments set forth on the signature pages hereto, as the same may be
adjusted from time to time pursuant to the provisions hereof.
"AGGREGATE TERM LOAN COMMITMENT": the sum of the Term Loan Commitments
set forth on the signature pages hereto.
"AGREEMENT": this Amended and Restated Credit Agreement, as amended,
waived, supplemented or otherwise modified from time to time.
-2-
<PAGE>
"APPLICABLE LENDING OFFICE": for any Lender, its offices for LIBOR
Loans, Reference Rate Loans and participations in Letters of Credit,
specified below its signature on the signature pages hereof or in the
Assignment and Acceptance pursuant to which it became a party hereto, as the
case may be, any of which offices may, upon 10 days' prior written notice to
the Agent and the Borrower, be changed by such Lender.
"APPLICABLE REVOLVING LOAN MARGIN": with respect to Revolving Loans,
for each LIBOR Loan, 1.25%.
"APPLICABLE TERM LOAN MARGIN": with respect to Term Loans, for each
LIBOR Loan, 1.25%.
"APPLICABLE MARGIN": the Applicable Revolving Loan Margin or the
Applicable Term Loan Margin, as applicable.
"ASSET DISPOSITION": the sale, sale and leaseback, transfer,
conveyance, exchange, long-term lease accorded sales treatment under GAAP or
similar disposition (including by means of a merger, consolidation,
amalgamation, joint venture or other substantive combination) of any of the
Properties, business or assets (other than marketable securities, including
"margin stock" within the meaning of Regulation U, liquid investments and
other financial instruments but, including, without limitation, the
assignment of any lease, license or permit relating to the Properties) of the
Borrower or any of its Subsidiaries to any Person or Persons other than to
the Borrower or any of its Wholly Owned Subsidiaries; PROVIDED THAT Asset
Dispositions shall not include the sale or other disposition in the ordinary
course of business and on ordinary business terms of assets in an aggregate
amount not exceeding $1,000,000.
"ASSIGNMENT AND ACCEPTANCE": an Assignment and Acceptance substantially
in the form of Exhibit B to this Agreement.
"AVAILABLE REVOLVING LOAN COMMITMENT": with respect to each Lender
having a Revolving Loan Commitment on the date of determination thereof, the
amount by which (a) the Revolving Loan Commitment of such Lender on such date
exceeds (b) the principal sum of such Lender's (i) Revolving Loans
outstanding, (ii) Revolving Loan Commitment Percentage of the aggregate
Letter of Credit Amount of all Letters of Credit outstanding and (iii)
Revolving Loan Commitment Percentage of the aggregate amount of unreimbursed
drawings under all Letters of Credit on such date.
"BORROWER": as defined in the preamble hereto.
"BORROWING NOTICE": a notice from the Borrower to the Agent requesting
a borrowing of Loans, substantially in the form of Exhibit E hereto.
"BUSINESS DAY": a day other than a Saturday, Sunday or other day on which
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commercial banks in the State of California are authorized or required by law
to close and which, in the case of a LIBOR Loan, is a Eurodollar Business Day.
"CAPITAL EXPENDITURES": for any period, expenditures (including,
without limitation, the aggregate amount of Capitalized Lease Obligations
incurred during such period) made by the Borrower or any of its Subsidiaries
to acquire or construct fixed assets, plant and equipment (including
renewals, improvements and replacements, but excluding repairs and excluding
also the Dubs Acquisition or any Permitted Acquisition) during such period
computed in accordance with GAAP.
"CAPITALIZED LEASE OBLIGATIONS": obligations for the payment of rent
for any real or personal property under leases or agreements to lease that,
in accordance with GAAP, have been or should be capitalized on the books of
the lessee and, for purposes hereof, the amount of any such obligation shall
be the capitalized amount thereof determined in accordance with GAAP.
"CAPITAL STOCK": any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and
all equivalent ownership interests in a Person (other than a corporation),
any and all warrants, options or rights to purchase any of the foregoing or
any other securities convertible into any of the foregoing.
"CASH COLLATERAL DEPOSIT": cash deposits made by the Borrower to the
Agent, to be held by the Agent as Collateral in the Collateral Account
pursuant to the Security Agreement, for the reimbursement of drawings under
Letters of Credit.
"CASH INCOME TAXES": cash income taxes paid by the Borrower and its
Subsidiaries during the fiscal quarter most recently ended and the
immediately preceding three fiscal quarters.
"CODE": the Internal Revenue Code of 1986, as amended from time to time.
"COLLATERAL": all of the property (tangible or intangible) purported to
be subject to the lien or security interest purported to be created by any
mortgage, deed of trust, security agreement, pledge agreement, assignment or
other security document heretofore or hereafter executed by the Borrower as
security for all or part of the Obligations.
"COLLATERAL ACCOUNT": as defined in Section 4 of the Security Agreement.
"COLLATERAL DOCUMENTS": the Security Agreement, all notices of security
interests in deposit accounts requested by the Agent pursuant to the Security
Agreement, all Form UCC-1 Financing Statements and amendments thereto and any
other document encumbering the Collateral or evidencing or perfecting a
security interest therein for the benefit of the Lenders executed by the
Borrower.
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"COMMITMENT PERCENTAGE": as to any Lender at any time, the percentage
of the Aggregate Commitment then constituted by such Lender's Commitments.
"COMMITMENTS": as to any Lender, any Revolving Loan Commitment and any
Term Loan Commitment held by it hereunder.
"COMMONLY CONTROLLED ENTITY": as to any Person, an entity, whether or
not incorporated, which is under common control with such Person within the
meaning of Section 4001 of ERISA or is part of a group which includes such
Person and which is treated as a single employer under Section 414 of the
Code.
"CONTINUATION NOTICE": a request for continuation or conversion of a
Loan as set forth in Section 2.6, substantially in the form of Exhibit C.
"CONTRACTUAL OBLIGATION": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"COVENANT COMPLIANCE CERTIFICATE": a certificate of a senior financial
officer of the Borrower, in form, substance and detail satisfactory to the
Agent, with regard to (and setting forth the calculations for) each of the
covenants set forth in Section 6.1.
"DEBT SERVICE": for any period, the sum, for the Borrower and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) all regularly scheduled
payments or regularly scheduled prepayments of principal of Indebtedness
(including, without limitation, the principal component of any payments in
respect of Capitalized Lease Obligations) made during such period PLUS (b)
all Interest Expense for such period.
"DEFAULT": any of the events specified in Section 7, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"DOLLARS" and "$": dollars in lawful currency of the United States.
"DRAWING LENDER": as defined in Section 2.3(c).
"DUBS ACQUISITION": as defined in the Recitals hereto.
"EARN-OUT PAYMENTS": cash payments required to be made by the Borrower
pursuant to earn-out provisions of any acquisition agreement entered into by
the Borrower prior to the date hereof for the purpose of acquiring a business.
"EBITDA": for any period, for the fiscal quarter most recently ended
and the immediately preceding three fiscal quarters, Net Income after
eliminating extraordinary gains and losses, PLUS (i) provisions for income
taxes, (ii) depreciation and amortization
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and (iii) Interest Expense.
"ENVIRONMENTAL CONTROL STATUTES": as defined in Section 3.15.
"EQUITY RIGHTS": with respect to any Person, any subscriptions,
options, warrants, commitments, preemptive rights or agreements of any kind
(including, without limitation, any stockholders' or voting trust agreements)
for the issuance, sale, registration or voting of, or securities convertible
into, any additional shares of capital stock of any class, or partnership or
other ownership interests of any type in, such Person.
"EQUITYHOLDER AGREEMENTS": each shareholder agreement, limited
liability company agreement, partnership agreement, voting agreement,
buy-sell agreement, option, warrant, put, call, or right of first refusal,
and any other agreement or instrument with conversion rights into equity of
the Borrower or any Subsidiary either (a) between the Borrower or any
Subsidiary and any holder or prospective holder of any equity interest of the
Borrower or any Subsidiary (including interests convertible into such equity)
or (b) otherwise between any two or more such holders of equity interests.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA AFFILIATE": as to any Person, each trade or business including
such Person, whether or not incorporated, which together with such Person
would be treated as a single employer under Section 4001(a)(14) of ERISA.
"EURODOLLAR BUSINESS DAY": any day on which banks are open for dealings
in Dollar deposits in the London Interbank Market.
"EVENT OF DEFAULT": any of the events specified in Section 7, PROVIDED
THAT any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"EXCLUDED TAXES": all taxes imposed on or by reference to the net
income of the Agent or any Lender or its Applicable Lending Office by any
Governmental Authority and all franchise taxes, taxes on doing business or
taxes measured by capital or net worth imposed on the Agent or on any Lender
or its Applicable Lending Office by any Governmental Authority and any taxes
imposed by any Governmental Authority arising as a consequence of the failure
of any Lender to provide accurate documentation required to be provided by
such Lender pursuant to Section 2.14(b).
"EXISTING AGREEMENT": as defined in the Recitals hereto.
"EXISTING REVOLVING LOAN": the revolving loan in the original principal
amount of $20,000,000 made by UBOC to the Borrower pursuant to the Existing
Agreement.
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"FAST FORWARD": Fast Forward, Inc., a Delaware corporation.
"FEDERAL FUNDS EFFECTIVE RATE": for any day, the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of
the quotations for the day of such transactions received by the Agent from
three federal funds brokers of recognized standing selected by it.
"FIXED CHARGE COVERAGE RATIO": as at the last day of any fiscal
quarter, the ratio of EBITDA LESS non-financed Capital Expenditures for the
four quarter period ending on such day to Fixed Charges for the four quarter
period ending on such day.
"FIXED CHARGES": for any period, the sum, for the Borrower and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (i) Debt Service for such period,
(ii) the aggregate amount of any cash dividends paid during such period in
respect of any Capital Stock of the Borrower or any of its Subsidiaries,
(iii) Cash Income Taxes for such period and (iv) Earn-out Payments for such
period.
"FUNDED DEBT": the sum of the outstanding principal balance of all
Indebtedness (including, but not limited to, Indebtedness to the Lenders and
Capitalized Lease Obligations) of Borrower and its Subsidiaries on a
consolidated basis.
"GAAP": generally accepted accounting principles in the United States
in effect from time to time.
"GOVERNMENTAL AUTHORITY": any nation or government, any federal, state
or other political subdivision thereof and any federal, state or local entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"GUARANTEE OBLIGATION": as to any Person (the "GUARANTEEING PERSON"),
any obligation (without duplication) of (a) the guaranteeing person or (b)
another Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has issued a
reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or
other obligations (the "PRIMARY OBLIGATIONS") of any other third Person (the
"PRIMARY OBLIGOR") in any manner, whether directly or indirectly, including,
without limitation, any obligation of the guaranteeing person, whether or not
contingent, (i) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (ii) to advance or supply
funds for the purchase or payment of any such primary obligation or to
maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii)
to purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the
primary obligor to
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make payment of such primary obligation or (iv) otherwise to assure or hold
harmless the owner of any such primary obligation against loss in respect
thereof; PROVIDED, HOWEVER, that the term Guarantee Obligation shall not
include endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Guarantee Obligation of any
guaranteeing person shall be deemed to be the lesser of (a) an amount equal
to the stated or determinable amount of the primary obligation in respect of
which such Guarantee Obligation is made and (b) the maximum amount for which
such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person may be
liable are not stated or determinable, in which case the amount of such
Guarantee Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the Borrower in
good faith.
"GUARANTEES": the Amended and Restated Guarantees made by each of Fast
Forward and Multi-Media and all other guarantees executed by a Guarantor in
favor of the Agent for the benefit of the Lenders, in form and substance
reasonably satisfactory to the Agent, as the same may be amended or modified
from time to time in accordance with the terms hereof.
"GUARANTOR COLLATERAL": all of the property (tangible or intangible)
purported to be subject to the lien or security interest purported to be
created by any mortgage, deed of trust, security agreement, pledge agreement,
assignment or other security document heretofore or hereafter executed by any
Guarantor as security for all or part of the Obligations or the Guarantees.
"GUARANTOR COLLATERAL DOCUMENTS": the Guarantor Security Agreements,
all notices of security interests in deposit accounts requested by the Agent
pursuant to the Guarantor Security Agreements, all Form UCC-1 Financing
Statements and amendments thereto and any other document encumbering the
Guarantor Collateral or evidencing or perfecting a security interest therein
for the benefit of the Lenders executed by any Guarantor.
"GUARANTOR SECURITY AGREEMENTS": the security agreements, in form and
substance reasonably satisfactory to the Agent, made by each Subsidiary in
favor of the Agent, for the benefit of the Lenders, as the same may be
amended from time to time in accordance with the terms hereof.
"GUARANTORS": each Subsidiary.
"HAZARDOUS MATERIAL": collectively, (a) any petroleum or petroleum
products, flammable materials, explosives, radioactive materials, asbestos, urea
formaldehyde foam insulation, and transformers or other equipment that contain
polychlorinated biphenyls ("PCB'S"), (b) any chemicals or other materials or
substances that are now or hereafter become defined as or included in the
definition of "hazardous substances", "hazardous wastes", "hazardous materials",
"extremely hazardous wastes", "restricted
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hazardous wastes", "toxic substances", "toxic pollutants", "contaminants",
"pollutants" or words of similar import under any Environmental Control
Statute and (c) any other chemical or other material or substance, exposure
to which is now or hereafter prohibited, limited or regulated under any
Environmental Control Statute.
"INDEBTEDNESS": of any Person at any date, without duplication, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than trade liabilities (other than for
borrowed money) incurred in the ordinary course of business so long as such
trade liabilities are payable within 90 days of the date the respective goods
are delivered or the respective services are rendered) or which is evidenced
by a note, bond, debenture or similar instrument, (b) all obligations of such
Person under Capitalized Lease Obligations, (c) all obligations of such
Person in respect of acceptances issued or created for the account of such
Person, (d) all liabilities secured by any Lien on any property owned by such
Person even though such Person has not assumed or otherwise become liable for
the payment thereof, (e) all obligations of such Person, whether absolute or
contingent, in respect of letters of credit opened for the account of such
Person (other than any letters of credit opened for the purpose of
facilitating the purchase of goods and services in the ordinary course of
business and having a term of not more than 360 days), (f) all obligations of
such Person under Non-Compete Agreements and (g) all Guarantee Obligations of
such Person in respect of any indebtedness, obligations or liabilities of any
other Person of the type referred to in clauses (a) through (g) of this
definition.
"INSOLVENCY": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"INSOLVENT": pertaining to a condition of Insolvency.
"INTEREST EXPENSE": for any period, the sum, for the Borrower and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (i) all interest on Funded Debt
(including, without limitation, the interest component of any payments in
respect of Capitalized Lease Obligations) which was paid, payable and/or
accrued for such period and (ii) all commitment, letter of credit or line of
credit fees paid, payable and/or accrued for such period (without duplication
of previous amounts) to any lender in exchange for such lender's commitment
to lend.
"INTEREST PAYMENT DATE": (a) as to any Reference Rate Loan, the last
day of each month (commencing November 30, 1998) while the Loans are
outstanding, (b) as to any LIBOR Loan having an Interest Period of three
months or less, the last day of such Interest Period, (c) as to any LIBOR
Loan having an Interest Period longer than three months, each day which is at
the end of each three month-period within such Interest Period after the
first day of such Interest Period and the last day of such Interest Period
and (d) for each of (a), (b) and (c) above, on the day on which the Term
Loans and the Revolving Loans become due and payable in full and are paid or
prepaid in full.
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"INTEREST PERIOD": with respect to any LIBOR Loan:
(a) initially, the period commencing on the borrowing or conversion
date, as the case may be, with respect to such LIBOR Loan and ending one,
two, three, six or twelve months thereafter, as selected by the Borrower in
its notice of borrowing or Continuation Notice, as the case may be, given
with respect thereto; and
(b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such LIBOR Loan and ending one, two,
three, six or twelve months thereafter, as selected by the Borrower by
irrevocable notice to the Agent not less than three Eurodollar Business Days
prior to the last day of the then current Interest Period with respect
thereto;
PROVIDED THAT, all of the foregoing provisions relating to Interest Periods
are subject to the following:
(i) if any Interest Period pertaining to a LIBOR Loan would otherwise
end on a day that is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless the result of such
extension would be to carry such Interest Period into another calendar
month in which event such Interest Period shall end on the immediately
preceding Business Day;
(ii) any Interest Period that would otherwise extend beyond the date
final payment is due on the Term Loans or the Revolving Loans, as
applicable, shall end on the date of such final payment; and
(iii) any Interest Period pertaining to a LIBOR Loan that begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of a calendar month.
"LANDLORD CONSENT": a waiver and consent, in form and substance
reasonably satisfactory to the Agent, of each Person who is the owner of real
property leased to the Borrower, any Guarantor or Dubs.
"LENDERS": as defined in the preamble hereto and Section 8.8 hereof.
"LETTER OF CREDIT": as defined in Section 2.1(a).
"LETTER OF CREDIT AMOUNT": the stated maximum amount available to be
drawn under a particular Letter of Credit, as such amount may be reduced or
reinstated from time to time in accordance with the terms of such Letter of
Credit.
"LETTER OF CREDIT REQUEST": a request by the Borrower for the issuance
of a Letter of Credit, on the Agent's standard form of Application for
Irrevocable Standby Letter of Credit, the current form of which is attached
hereto as Exhibit D, and containing terms
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and conditions satisfactory to the Agent in its sole discretion.
"LIBOR": with respect to each day during each Interest Period pertaining
to a LIBOR Loan, the rate of interest determined by the Agent to be the rate per
annum at which deposits in dollars would be offered to the Agent by leading
banks in the London Interbank Market at or about 9:00 a.m., Los Angeles time,
two Eurodollar Business Days prior to the beginning of such Interest Period, for
delivery on the first day of such Interest Period for the number of days
comprised therein and in an amount comparable to the amount of its LIBOR Loan to
be outstanding during such Interest Period.
"LIBOR ADJUSTED RATE": with respect to each day during each Interest
Period pertaining to a LIBOR Loan, a rate per annum determined for such day in
accordance with the following formula (rounded upward to the nearest 1/100th of
1%):
LIBOR
-------------------------------
1.00 - LIBOR Reserve Requirements
"LIBOR LOANS": Loans the rate of interest applicable to which is based
upon LIBOR.
"LIBOR RESERVE REQUIREMENTS": for any day as applied to a LIBOR Loan, the
aggregate (without duplication) of the maximum rates (expressed as a decimal
fraction) of reserve requirements in effect on such day (including, without
limitation, basic, supplemental, marginal and emergency reserves under any
regulations of the Board of Governors of the Federal Reserve System or other
Governmental Authority having jurisdiction with respect thereto) dealing with
reserve requirements prescribed for eurocurrency funding (currently referred to
as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a
member bank of such Federal Reserve System.
"LIEN": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any Capitalized Lease Obligation having substantially the
same economic effect as any of the foregoing, and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction in respect of any of the foregoing).
"LOAN": a Revolving Loan or a Term Loan.
"LOAN DOCUMENTS": this Agreement, the Notes, any Letter of Credit Requests
that are executed by the Borrower, the Collateral Documents, the ADR Agreement,
the Landlord Consents, the Guarantor Collateral Documents and the Guarantees and
any other agreement executed by an Obligor in connection therewith and herewith
including, but not limited to, UCC-1 Financing Statements and amendments
thereto, as such agreements and documents may be amended, supplemented and
otherwise modified from time to time in accordance with the terms hereof.
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"MAJORITY LENDERS": Lenders having at least 66-2/3% of the sum of (a) the
aggregate outstanding principal amounts of the Term Loans or, if the Term Loans
shall not have been made, the aggregate outstanding principal amount of the Term
Loan Commitments, PLUS (b) the sum of (i) the Aggregate Available Revolving Loan
Commitment at such time PLUS (ii) the aggregate outstanding principal amount of
the Revolving Loans PLUS (iii) the aggregate amount of all participations
purchased by lenders in any outstanding Letters of Credit or unreimbursed
drawings under Letters of Credit at such time.
"MAJORITY REVOLVING LOAN LENDERS": Revolving Loan Lenders having at least
66-2/3% of the aggregate amount of the Revolving Commitments or, if the
Revolving Loan Commitments shall have terminated, Lenders holding at least
66-2/3% of the sum of (a) the aggregate unpaid principal amount of the Revolving
Loans PLUS (b) the aggregate amount of all participations purchased by Lenders
in any outstanding Letters of Credit or unreimbursed drawings under Letters of
Credit at such time.
"MARGIN STOCK": as defined in Regulation U.
"MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the business,
operations, property, financial condition, prospects, liabilities of the
Borrower and its Subsidiaries taken as a whole, (b) the ability of any Obligor
to perform its respective obligations under the Loan Documents, (c) the validity
or enforceability of any of the Loan Documents or the rights or remedies of the
Agent and the Lenders hereunder or thereunder or (d) the timely payment of the
principal of or interest on the Loans or other amounts payable in connection
therewith.
"MATERIAL CONTRACTS": each contract and agreement, including, but not
limited to, site leases and licenses, material to the financial condition or
operation of the Borrower or any Subsidiary.
"MAXIMUM FUNDED DEBT RATIO": as at any date, for the Borrower and its
Subsidiaries on a consolidated basis, the ratio of Funded Debt on such date to
EBITDA as at such date.
"MULTI-MEDIA": Multi-Media Services, Inc., a California corporation.
"MULTIEMPLOYER PLAN": a plan which is a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"NET INCOME": net income as determined in accordance with GAAP.
"NET WORTH": net worth as determined in accordance with GAAP.
"NON-COMPETE AGREEMENTS": all agreements pursuant to which the Borrower or
any Subsidiary has agreed to make payments (whether in cash or in kind) to
another
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Person for the agreement of such Person not to compete with the Borrower
or such Subsidiary in a given area.
"NOTE": a Revolving Note or a Term Note, as the case may be, and "NOTES"
shall mean the Revolving Notes and/or the Term Notes, as the case may be.
"OBLIGATIONS": the unpaid principal of and interest on (including, without
limitation, interest accruing after the maturity of the Term Loans and the
Revolving Loans and interest accruing on or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding and whether or not at a
default rate) the Notes, the obligation to reimburse drawings under Letters of
Credit (including the contingent obligation to reimburse any drawings under
outstanding Letters of Credit) and all other obligations and liabilities of the
Obligors to the Agent and the Lenders, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, this Agreement, the Notes, the
Letters of Credit, any other Loan Document and any other document made,
delivered or given in connection herewith or therewith, whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses (including, without limitation, all reasonable fees and disbursements
of counsel (including the allocated reasonable cost of internal counsel) to the
Agent or the Lenders that are required to be paid by the Borrower pursuant to
the terms of this Agreement) or otherwise.
"OBLIGOR": the Borrower, each Guarantor and any other Person (other than a
Lender) obligated under any Loan Document.
"ORGANIC DOCUMENTS": relative to any entity, its certificate or articles
of incorporation or organization, its by-laws or operating agreement, any
Equityholder Agreements, its partnership agreement, and any other agreements or
documents relating to the control or management of any such entity (whether
existing as corporation, a partnership, a limited liability company or
otherwise).
"PARTICIPANT": as defined in Section 9.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA or any successor thereto.
"PERMITTED ACQUISITION": the acquisition (whether by way of purchase of
assets or stock, by merger or consolidation or otherwise) by the Borrower, or
any Wholly Owned Subsidiary of the Borrower, of any video duplication business,
post-production business, audio sweetening business or any business engaged in
the distribution of national television spot advertising, trailers and
electronic press kits for the motion picture and television industries.
"PERSON": any individual, firm, partnership, joint venture, corporation,
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association, limited liability company, business enterprise trust,
unincorporated organization, government or department or agency thereof or other
entity, whether acting in an individual, fiduciary or other capacity.
"PLAN": as to any Person, any plan (other than a Multiemployer Plan)
subject to Title IV of ERISA maintained for employees of such Person or any
ERISA Affiliate of such Person (and any such plan no longer maintained by such
Person or any of such Person's ERISA Affiliates to which such Person or any of
such Person's ERISA Affiliates has made or was required to make any
contributions within any of the five preceding years).
"PROHIBITED TRANSACTION": with respect to any Plan, a prohibited
transaction (as defined in Section 406 of ERISA) with respect to such Plan.
"PROPERTIES": the collective reference to the real and personal (tangible
and intangible) property owned, leased, used, occupied or operated, under
license or permit by the Obligors.
"PURCHASING LENDERS": as defined in Section 9.6(c).
"REFERENCE RATE": the rate of interest per annum publicly announced from
time to time by Union Bank of California, N.A. as its "reference rate" in effect
at its office in Los Angeles, California. Any change in the Reference Rate
shall be effective on the effective date specified in the public announcement of
such change.
"REFERENCE RATE LOANS": Loans the rate of interest applicable to which is
based upon the Reference Rate.
"REGISTER": as defined in Section 9.6(d).
"REGULATION D": Regulation D of the Board of Governors of the Federal
Reserve System, as the same is from time to time in effect, and all official
rulings and interpretations thereunder or thereof and any successor regulation
thereto.
"REGULATION U": Regulation U of the Board of Governors of the Federal
Reserve System, as the same is from time to time in effect, and all official
rulings and interpretations thereunder or thereof and any successor regulation
thereto.
"REORGANIZATION": with respect to any Multiemployer Plan, the condition
that such plan is in reorganization within the meaning of Section 4241 of ERISA.
"REPORTABLE EVENT": any of the events set forth in Section 4043(b) of
ERISA, other than those events as to which the thirty day notice period is
waived under PBGC regulations.
"REQUIREMENT OF LAW": as to any Person, the Organic Documents of such
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Person, and any law, treaty, rule or regulation, determination or policy
statement or interpretation of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
"RESPONSIBLE OFFICER": with respect to the Borrower or any Subsidiary, the
chief executive officer or the president, or, with respect to financial matters,
the chief financial officer, treasurer or controller of such entity.
"RESTATEMENT DATE": the date on which the conditions precedent set forth
in Section 4.1 have been satisfied.
"RESTRICTED PAYMENTS": as defined in Section 6.6.
"REVOLVING LOAN": as defined in Section 2.1(a).
"REVOLVING LOAN COMMITMENT": with respect to each Lender having a
Revolving Loan Commitment, its commitment listed as its "Revolving Loan
Commitment" in Schedule 2.1 hereto to make Revolving Loans and participate in
Letters of Credit hereunder through its Applicable Lending Office, as the same
shall be adjusted from time to time pursuant to this Agreement.
"REVOLVING LOAN COMMITMENT EXPIRATION DATE": November 1, 1999 or such
earlier date as the Aggregate Revolving Loan Commitment shall expire (whether by
acceleration, reduction to zero or otherwise).
"REVOLVING LOAN COMMITMENT PERCENTAGE": with respect to each Revolving
Loan Lender, the percentage equivalent of the ratio which such Revolving Loan
Lender's Revolving Loan Commitment bears to the Aggregate Revolving Loan
Commitment, as such Revolving Loan Lender's Revolving Loan Commitment and the
Aggregate Revolving Loan Commitment may be adjusted from time to time pursuant
to the terms hereof.
"REVOLVING LOAN LENDER": each Lender having a Revolving Loan Commitment
and/or which shall have (i) Revolving Loans outstanding and/or
(ii) participations in Letters of Credit which are outstanding.
"REVOLVING NOTE" AND "REVOLVING NOTES": as defined in Section 2.1(c).
"SECURITY AGREEMENT": the Amended and Restated Security Agreement in form
and substance reasonably satisfactory to the Agent made by the Borrower in favor
of the Agent, for the benefit of the Lenders, in respect of the tangible and
intangible personal property of the Borrower described therein, as the same may
be amended from time to time in accordance with the terms hereof.
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of ERISA,
but
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which is not a Multiemployer Plan.
"SOLVENT": when used with respect to any Person, that:
(i) the present fair salable value of such Person's assets is in
excess of the total amount of the probable liability on such Person's
liabilities;
(ii) such Person is able to pay its debts as they become due; and
(iii) such Person does not have unreasonably small capital to carry on
such Person's business as theretofore operated and all businesses in which
such Person is about to engage.
"SUBSIDIARY": as to any Person at any time of determination, a
corporation, partnership or other entity of which shares of stock or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions of such
corporation, partnership or other entity (other than stock or such other
ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers
of such corporation, partnership or other entity are at the time owned, or
the management of which is otherwise controlled, directly or indirectly
through one or more intermediaries or Subsidiaries, or both, by such Person.
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries
of the Borrower.
"TAXES": as defined in Section 2.14.
"TERM LOAN": as defined in Section 2.2(a).
"TERM LOAN COMMITMENT": with respect to each Lender having a Term Loan
Commitment, the commitment listed as its "Term Loan Commitment" in Schedule
2.1 hereto to make a Term Loan hereunder through its Applicable Lending
Office, as the same may be adjusted pursuant to the provisions hereof.
"TERM LOAN COMMITMENT PERCENTAGE": with respect to each Term Loan
Lender, the percentage equivalent of the ratio which such Term Loan Lender's
Term Loan Commitment bears to the Aggregate Term Loan Commitment.
"TERM LOAN LENDERS": each Lender having a Term Loan Commitment and/or
which shall have Term Loans outstanding.
"TERM LOAN MATURITY DATE": October 31, 2003 or such earlier date as the
Aggregate Term Loan Commitment shall expire (whether by acceleration,
reduction to zero or otherwise).
"TERM LOAN REDUCTION DATES": the last day of each month (commencing
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November 30, 1998) while the Term Loans are outstanding.
"TERM NOTE" AND "TERM NOTES": as defined in Section 2.2(c).
"TERMINATION EVENT": (i) a Reportable Event, (ii) the institution of
proceedings to terminate a Single Employer Plan by the PBGC under Section
4042 of ERISA, (iii) the appointment by the PBGC of a trustee to administer
any Single Employer Plan or (iv) the existence of any other event or
condition that would reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment by the PBGC
of a trustee to administer, any Single Employer Plan.
"TRANCHE": the collective reference to LIBOR Loans the Interest Periods
with respect to all of which begin on the same date and end on the same later
date (whether or not such LIBOR Loans shall originally have been made on the
same day).
"TRANSFEREE": as defined in Section 9.6(g).
"TYPE": as to any Term Loan or any Revolving Loan, its nature as a
Reference Rate Loan or a LIBOR Loan.
"UBOC": as defined in the Recitals hereto.
"WHOLLY OWNED SUBSIDIARY": with respect to any Person, any corporation,
partnership or other entity of which all of the equity securities or other
ownership interests (other than, in the case of a corporation, directors'
qualifying shares) are directly or indirectly owned or controlled by such
Person or one or more Wholly Owned Subsidiaries of such Person.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have such defined meanings
when used in the Notes, any other Loan Document or any certificate or other
document made or delivered pursuant hereto or thereto.
(b) As used herein, in the Notes, in any other Loan Document, and in
any certificate or other document made or delivered pursuant hereto or
thereto, accounting terms not defined in Section 1.1 and accounting terms
partly defined in Section 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
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(e) For the purpose of determining financial covenant compliance
hereunder for any period (including with respect to Permitted Acquisitions
pursuant to Section 6.7(h)(vi)), acquisitions, divestitures, and asset sales
occurring during such period (or intended to occur during such period in the
case of a potential Permitted Acquisition) will be included in the
calculations for such period on a pro forma basis, and will be deemed to have
occurred on the first day of such period.
SECTION 2. AMOUNT AND TERMS OF LOANS AND LETTERS OF CREDIT; COMMITMENT
AMOUNTS
2.1 REVOLVING LOANS AND LETTERS OF CREDIT; REVOLVING LOAN COMMITMENT
AMOUNTS.
(a) Subject to the terms and conditions hereof, each Lender having a
Revolving Loan Commitment severally agrees to (i) make loans on a revolving
credit basis through its Applicable Lending Office to the Borrower from time
to time from and including the Restatement Date to but excluding the
Revolving Loan Commitment Expiration Date (each a "REVOLVING LOAN", and
collectively, the "REVOLVING LOANS") in accordance with the provisions of
this Agreement and (ii) participate through its Applicable Lending Office in
standby letters of credit issued for the account of the Borrower pursuant to
Section 2.3 from time to time from and including the Restatement Date to but
excluding the Revolving Loan Commitment Expiration Date (each a "LETTER OF
CREDIT", and collectively, the "LETTERS OF CREDIT"); PROVIDED, HOWEVER, that
the sum of (A) the aggregate principal amount of all Revolving Loans
outstanding, (B) the aggregate Letter of Credit Amount of all Letters of
Credit outstanding and (C) the aggregate amount of unreimbursed drawings
under all Letters of Credit shall not exceed the Aggregate Revolving Loan
Commitment at any time; and PROVIDED, FURTHER, that the sum of (x) the
aggregate Letter of Credit Amount of all Letters of Credit outstanding and
(y) the aggregate amount of unreimbursed drawings under all Letters of Credit
shall not exceed $100,000 at any time. Within the limits of each Revolving
Loan Lender's Revolving Loan Commitment, the Borrower may borrow, have
Letters of Credit issued for the Borrower's account, prepay Revolving Loans,
reborrow Revolving Loans, and have additional Letters of Credit issued for
the Borrower's account after the expiration of previously issued Letters of
Credit.
The principal amount of each Revolving Loan Lender's (A) Revolving Loan and
(B) participation in a Letter of Credit shall be in an amount equal to the
product of (i) such Revolving Loan Lender's Revolving Loan Commitment Percentage
and (ii) the total amount of the Revolving Loan or Revolving Loans, or the
Letter of Credit or Letters of Credit, requested; PROVIDED THAT in no event
shall any Revolving Loan Lender be obligated to make a Revolving Loan or
participate in a Letter of Credit if after giving effect to such Revolving Loan
or such participation the sum of such Revolving Loan Lender's (x) Revolving
Loans outstanding, (y) Revolving Loan Commitment Percentage of the aggregate
Letter of Credit Amount of all Letters of Credit outstanding and (z) Revolving
Loan Commitment Percentage of the aggregate amount of unreimbursed drawings
under all Letters of Credit would exceed its Revolving Loan Commitment or if
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the amount of such requested Revolving Loan or such Revolving Loan Lender's
Revolving Loan Commitment Percentage of such Letter of Credit is in excess of
such Revolving Loan Lender's Available Revolving Loan Commitment.
(b) Subject to Sections 2.10 and 2.12, the Revolving Loans may from
time to time be (i) LIBOR Loans, (ii) Reference Rate Loans or (iii) a
combination thereof, as determined by the Borrower and notified to the Agent
in accordance with either Section 2.1(d) or 2.6. Each Revolving Loan Lender
may make or maintain its Revolving Loans or participate in Letters of Credit
to or for the account of the Borrower by or through any Applicable Lending
Office.
(c) The Revolving Loans made by each Revolving Loan Lender to the
Borrower shall be evidenced by a promissory note of the Borrower,
substantially in the form of Exhibit A-1 (a "REVOLVING NOTE"), with
appropriate insertions therein as to payee, date and principal amount,
payable to the order of such Revolving Loan Lender and representing the
obligations of the Borrower to pay the aggregate unpaid principal amount of
all Revolving Loans made by such Revolving Loan Lender to the Borrower
pursuant to Section 2.1(a) or 2.3(c), with interest thereon as prescribed in
Sections 2.8 and 2.9. Each Revolving Loan Lender is hereby authorized (but
not required) to record the date and amount of each payment or prepayment of
principal of its Revolving Loans made to the Borrower, each continuation
thereof, each conversion of all or a portion thereof to another Type and, in
the case of LIBOR Loans, the length of each Interest Period with respect
thereto, in the books and records of such Revolving Loan Lender, and any such
recordation shall constitute PRIMA FACIE evidence of the accuracy of the
information so recorded. The failure of any Revolving Loan Lender to make
any such recordation or notation in the books and records of the Revolving
Loan Lender (or any error in such recordation or notation) shall not affect
the obligations of the Borrower hereunder or under the Revolving Notes. Each
Revolving Note shall (i) be dated the Restatement Date, (ii) provide for the
payment of interest in accordance with Sections 2.8 and 2.9 and (iii) be
stated to be payable in full on the Revolving Loan Commitment Expiration Date.
(d) The Borrower shall give the Agent irrevocable written notice,
substantially in the form of a Borrowing Notice (which Borrowing Notice must
be received by the Agent prior to 10:00 A.M., Los Angeles time, one Business
Day prior to each proposed borrowing date or, if all or any part of the
Revolving Loans are requested to be made as LIBOR Loans, three Eurodollar
Business Days prior to each proposed borrowing date) requesting that the
Revolving Loan Lenders make the Revolving Loans on the proposed borrowing
date and specifying (i) the aggregate amount of Revolving Loans requested to
be made, (ii) whether the Revolving Loans are to be LIBOR Loans, Reference
Rate Loans or a combination thereof and (iii) if the Revolving Loans are to
be entirely or partly LIBOR Loans, the respective amounts of each such Type
of Revolving Loan and the respective lengths of the initial Interest Periods
therefor. On receipt of such Borrowing Notice, the Agent shall promptly
notify each Revolving Loan Lender thereof. On the proposed borrowing date,
not later than 10:00 A.M., Los Angeles time, each Revolving Loan Lender shall
make available to the Agent at its
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office specified in Section 9.2 the amount of such Revolving Loan Lender's
pro rata share of the aggregate borrowing amount (as determined in accordance
with the second paragraph of Section 2.1(a)) in immediately available funds.
The Agent may, in the absence of notification from any Revolving Loan Lender
that such Revolving Loan Lender has not made its pro rata share available to
the Agent, on such date, credit the account of the Borrower on the books of
such office of the Agent with the aggregate amount of Revolving Loans.
(e) Neither the Agent nor any Revolving Loan Lender shall be
responsible for the obligation or Available Revolving Loan Commitment of any
other Revolving Loan Lender hereunder, nor will the failure of any Revolving
Loan Lender to comply with the terms of this Agreement relieve any other
Revolving Loan Lender or the Borrower of their obligations under this
Agreement and the Revolving Notes. Nothing herein shall be deemed to relieve
any Revolving Loan Lender from its obligation to fulfill its Commitments
hereunder or to prejudice any rights which the Borrower may have against any
Revolving Loan Lender as a result of any default by such Revolving Loan
Lender hereunder.
(f) The Revolving Loan Commitment of each Revolving Loan Lender and the
Aggregate Revolving Loan Commitment shall terminate on the Revolving Loan
Commitment Expiration Date. All outstanding Revolving Loans shall be due and
payable on the Revolving Loan Commitment Expiration Date.
2.2 TERM LOANS; TERM LOAN COMMITMENT. (a) Subject to the terms and
conditions hereof, each Lender having a Term Loan Commitment severally agrees
to make a term loan (each, a "TERM LOAN" and, collectively, the "TERM LOANS")
to the Borrower on the Restatement Date in a principal amount equal to the
amount of the Term Loan Commitment of such Lender.
(b) Subject to Sections 2.10 and 2.12, the Term Loans may from time to
time be (i) LIBOR Loans, (ii) Reference Rate Loans or (iii) a combination
thereof, as determined by the Borrower and notified to the Agent in
accordance with either Section 2.2(e) or 2.5. Each Term Loan Lender may make
or maintain its Term Loan to the Borrower by or through any Applicable
Lending Office.
(c) The Term Loan made by each Term Loan Lender to the Borrower shall
be evidenced by a promissory note of the Borrower, substantially in the form
of Exhibit A-2 (a "TERM NOTE"), with appropriate insertions therein as to
payee, date and principal amount, payable to the order of such Term Loan
Lender and representing the obligations of the Borrower to pay the aggregate
unpaid principal amount of the Term Loan made by such Term Loan Lender to the
Borrower pursuant to Section 2.2(a), with interest thereon as prescribed in
Sections 2.8 and 2.9. Each Term Loan Lender is hereby authorized (but not
required) to record the date and amount of each payment or prepayment of
principal of its Term Loan made to the Borrower, each continuation thereof,
each conversion of all or a portion thereof to another Type and, in the case
of LIBOR Loans, the length of each Interest Period with respect thereto, in
the books and
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records of such Term Loan Lender, and any such recordation shall constitute
PRIMA FACIE evidence of the accuracy of the information so recorded. The
failure of any Term Loan Lender to make any such recordation or notation in
the books and records of the Term Loan Lender (or any error in such
recordation or notation) shall not affect the obligations of the Borrower
hereunder or under the Term Notes. Each Term Note shall (i) be dated the
Restatement Date, (ii) provide for the payment of interest in accordance with
Sections 2.8 and 2.9 and (iii) be stated to be payable in installments of
principal in accordance with, and subject to the provisions of, Section
2.2(d).
(d) On each Term Loan Reduction Date, the Borrower shall repay the
principal of the Term Notes in an aggregate amount equal to $483,333.33;
PROVIDED, that the final installment paid shall be in an amount equal to all
amounts owed by the Borrower on the Term Notes.
All outstanding Term Loans shall be due and payable, to the extent not
previously paid in accordance with the terms hereof, on the Term Loan
Maturity Date. The aggregate amount payable to any Term Loan Lender on any
Term Loan Reduction Date shall be determined in accordance with the
provisions of Section 2.11.
(e) The Borrower shall give the Agent irrevocable written notice,
substantially in the form of a Borrowing Notice (which Borrowing Notice must
be received by the Agent prior to 10:00 A.M., Los Angeles time, one Business
Day prior to the Restatement Date) requesting that the Term Loan Lenders make
the Term Loans on the Restatement Date. Upon receipt of such Borrowing
Notice the Agent shall promptly notify each Term Loan Lender thereof. Not
later than 10:00 A.M., Los Angeles time, on the Restatement Date each Term
Loan Lender shall make available to the Agent at its office specified in
Section 9.2 the amount of such Term Loan Lender's Term Loan Commitment in
immediately available funds. The Agent may, in the absence of notification
from any Term Loan Lender that such Term Loan Lender has not made its pro
rata share available to the Agent, on such date, credit the account of the
Borrower on the books of such office of the Agent with the aggregate Term
Loans.
(f) Neither the Agent nor any Term Loan Lender shall be responsible for
the obligations or Term Loan Commitment of any other Term Loan Lender
hereunder, nor will the failure of any Term Loan Lender to comply with the
terms of this Agreement relieve any other Term Loan Lender or the Borrower of
their obligations under this Agreement and the Term Notes. Nothing herein
shall be deemed to relieve any Term Loan Lender from its obligation to
fulfill its Commitment hereunder or to prejudice any rights which the
Borrower may have against any Term Loan Lender as a result of any default by
such Term Loan Lender hereunder.
2.3 ISSUANCE OF LETTERS OF CREDIT. (a) The Borrower shall be entitled to
request the issuance of Letters of Credit from time to time from and including
the Restatement Date to but excluding the date which is two Business Days prior
to the Revolving Loan Commitment Expiration Date, by giving the Agent a Letter
of Credit Request at least three Business Days before the requested date of
issuance of such Letter of Credit
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(which shall be a Business Day). Any Letter of Credit Request received by
the Agent later than 10:00 a.m., Los Angeles time, shall be deemed to have
been received on the next Business Day. Each Letter of Credit Request shall
be made in writing, shall be signed by a Responsible Officer, shall be
irrevocable and shall be effective upon receipt by the Agent. Provided that a
valid Letter of Credit Request has been received by the Agent and upon
fulfillment of the other applicable conditions set forth in Section 4.2, the
Agent will issue the requested Letter of Credit from its office specified in
Section 9.2. No Letter of Credit shall have an expiration date later than
two Business Days prior to the Revolving Loan Commitment Expiration Date.
(b) Immediately upon the issuance of each Letter of Credit, the Agent
shall be deemed to have sold and transferred to each Revolving Loan Lender,
and each Revolving Loan Lender shall be deemed to have purchased and received
from the Agent, in each case irrevocably and without any further action by
any party, an undivided interest and participation in such Letter of Credit,
each drawing thereunder and the obligations of the Borrower under this
Agreement in respect thereof in an amount equal to the product of (i) such
Revolving Loan Lender's Revolving Loan Commitment Percentage and (ii) the
maximum amount available to be drawn under such Letter of Credit (assuming
compliance with all conditions to drawing). The Agent shall promptly advise
each Revolving Loan Lender of the issuance of each Letter of Credit, the
Letter of Credit Amount of such Letter of Credit, any change in the face
amount or expiration date of such Letter of Credit, the cancellation or other
termination of such Letter of Credit and any drawing under such Letter of
Credit.
(c) The payment by the Agent of a draft drawn under any Letter of Credit
shall first be made from any Cash Collateral Deposit held by the Agent with
respect to such Letter of Credit. After any such Cash Collateral Deposit has
been applied, the payment by the Agent of a draft drawn under any Letter of
Credit shall constitute for all purposes of this Agreement the making by the
Agent in its individual capacity as a Lender hereunder (in such capacity, the
"DRAWING LENDER") of a Reference Rate Loan in the amount of such payment (but
without any requirement of compliance with the conditions set forth in Section
4.2). In the event that any such Loan by the Drawing Lender resulting from a
drawing under any Letter of Credit is not repaid by the Borrower by 12:00 noon,
Los Angeles time, on the day of payment of such drawing, the Agent shall
promptly notify each other Revolving Loan Lender. Each Revolving Loan Lender
shall, on the day of such notification (or if such notification is not given by
3:00 p.m., Los Angeles time, on such day, then on the next succeeding Business
Day), make a Reference Rate Loan, which shall be used to repay the applicable
portion of the Reference Rate Loan of the Drawing Lender with respect to such
Letter of Credit drawing, in an amount equal to the amount of such Revolving
Loan Lender's participation in such drawing for application to repay the Drawing
Lender (but without any requirement of compliance with the applicable conditions
set forth in Section 4.2) and shall deliver to the Agent for the account of the
Drawing Lender, on the day of such notification (or if such notification is not
given by 3:00 p.m., Los Angeles time, on such day, then on the next succeeding
Business Day) and in immediately available funds, the amount of such Reference
Rate Loan. In the event that any Revolving Loan Lender
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fails to make available to the Agent for the account of the Drawing Lender
the amount of such Reference Rate Loan, the Drawing Lender shall be entitled
to recover such amount on demand from such Revolving Loan Lender together
with interest thereon at the Federal Funds Effective Rate for each day such
amount remains outstanding.
(d) The obligations of the Borrower with respect to any Letter of
Credit, any Letter of Credit Request and any other agreement or instrument
relating to any Letter of Credit and any Reference Rate Loan made under
Section 2.3(c) shall be absolute, unconditional and irrevocable and shall be
paid strictly in accordance with the terms of the aforementioned documents
under all circumstances, including the following:
(i) any lack of validity or enforceability of any Letter of
Credit, this Agreement or any other Loan Document;
(ii) the existence of any claim, setoff, defense or other right
that the Borrower may have at any time against any beneficiary or transferee
of any Letter of Credit (or any Person for whom any such beneficiary or
transferee may be acting), the Agent, any Lender (other than the defense of
payment to a Lender in accordance with the terms of this Agreement) or any
other Person, whether in connection with this Agreement, any other Loan
Document, the transactions contemplated hereby or thereby or any unrelated
transaction;
(iii) any statement or other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect, or any statement therein being untrue or inaccurate in any respect
whatsoever; PROVIDED THAT payment by the Agent under the applicable Letter of
Credit shall not have constituted gross negligence or willful misconduct of
the Agent under the circumstances in question, as determined by a final
determination of a referee in accordance with the terms of the ADR Agreement;
and
(iv) any exchange, release or nonperfection of any Collateral or
other collateral, or any release, amendment or waiver of or consent to
departure from any Guarantee, other Loan Document or other guaranty, for any
of the Obligations of the Borrower in respect of the Letters of Credit.
(e) The Borrower shall pay to the Agent for the account of the
Revolving Loan Lenders with respect to each Letter of Credit issued
hereunder, for the period from and including the day such Letter of Credit is
issued to but excluding the day such Letter of Credit expires, a letter of
credit fee equal to the product of (i) 1.50% PER ANNUM and (ii) the Letter of
Credit Amount of such Letter of Credit from time to time, such letter of
credit fee to be payable quarterly in arrears on the last day of each March,
June, September and December and on the expiration date of such Letter of
Credit.
(f) The Borrower shall pay to the Agent for its own account, with respect
to each Letter of Credit issued hereunder, (i) for the period from and including
the day such Letter of Credit is issued to but excluding the day such Letter of
Credit expires, a
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fronting fee in respect of each Letter of Credit in an amount equal to 1/4 of
1% per annum of the Letter of Credit Amount of such Letter of Credit from
time to time, such fronting fee to be payable quarterly in arrears on the
last day of each March, June, September and December and on the expiration
date of such Letter of Credit and (ii) from time to time such additional fees
and charges (including cable charges) as are generally associated with
letters of credit, in accordance with the Agent's standard internal charge
guidelines and the related Letter of Credit Request.
(g) The Borrower agrees to the provisions in the Letter of Credit
Request form; PROVIDED, HOWEVER, that the terms of the Loan Documents shall
take precedence if there is any inconsistency between the terms of the Loan
Documents and the terms of said form.
(h) The Borrower assumes all risks of the acts or omissions of any
beneficiary or transferee of any Letter of Credit with respect to its use of
such Letter of Credit. Neither the Agent nor any Lender nor any of their
respective officers or directors shall be liable or responsible for (i) the
use that may be made of any Letter of Credit or any acts or omissions of any
beneficiary or transferee in connection therewith; or (ii) the validity,
sufficiency or genuineness of documents, or of any endorsement thereof, even
if such documents should prove to be in any or all respects invalid,
insufficient, fraudulent or forged; PROVIDED THAT, with respect to clause
(ii) of this Section 2.3(h), the Borrower shall retain any and all rights it
may have against the Agent for any liability arising out of the gross
negligence or willful misconduct of the Agent, as determined by a final
determination of a referee in accordance with the terms of the ADR Agreement.
In furtherance and not in limitation of the foregoing, the Agent may accept
any document that appears on its face to be in order, without responsibility
for further investigation, regardless of any notice or information to the
contrary.
(i) The Borrower hereby indemnifies and holds harmless each Revolving
Loan Lender and the Agent from and against any and all claims and damages,
losses, liabilities, costs or expenses that such Lender or the Agent may
incur (or that may be claimed against such Lender or the Agent by any Person
whatsoever) by reason of or in connection with the execution and delivery or
transfer of or payment or refusal to pay by the Agent, as issuer of any
Letter of Credit; PROVIDED THAT the Borrower shall not be required to
indemnify any Lender or the Agent for any claims, damages, losses,
liabilities, costs or expenses to the extent, but only to the extent, caused
by (x) the willful misconduct or gross negligence of the Agent, as issuer of
such Letter of Credit, in determining whether a request presented under any
Letter of Credit complied with the terms of such Letter of Credit or (y) in
the case of the Agent, as issuer of such Letter of Credit, the Agent's
failure to pay under any Letter of Credit after the presentation to it of a
request strictly complying with the terms and conditions of such Letter of
Credit. Nothing in this Section 2.3 is intended to limit the other
obligations of the Borrower, any Lender, or the Agent under this Agreement.
2.4 OPTIONAL PREPAYMENTS. The Borrower may at any time and from time to
time, prepay the Loans, in whole or in part, without premium or penalty, upon at
least
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three Business Days' irrevocable written notice, in the case of LIBOR Loans,
and upon at least one Business Day's irrevocable written notice, in the case
of Reference Rate Loans, from the Borrower to the Agent, specifying the date
and amount of prepayment and whether the prepayment is of LIBOR Loans,
Reference Rate Loans or a combination thereof, and, if of a combination
thereof, the amount allocable to each and whether the prepayment is of Term
Loans or Revolving Loans, or a combination thereof, and, if a combination
thereof, the amount allocable to each. Upon receipt of any such notice from
the Borrower, the Agent shall promptly notify each Lender thereof. If any
such notice is given, the amount specified in such notice shall be due and
payable by the Borrower on the date specified therein, together with accrued
interest to such date on the amount prepaid and any amounts payable pursuant
to Section 2.15. Partial prepayments of Term Loans shall be applied to the
installments of principal thereof in inverse order of maturity. Amounts
prepaid on account of the Term Loans may not be reborrowed. Partial
prepayments of the Term Loans shall be in an aggregate principal amount of
$1,000,000 and integral multiples of $250,000 in excess thereof. Partial
prepayments of the Revolving Loans shall be in an aggregate principal amount
of $250,000 and integral multiples of $100,000 in excess thereof.
2.5 MANDATORY PREPAYMENTS. If at any time the aggregate principal
amount of all Loans outstanding exceeds the Aggregate Commitment, the
Borrower shall immediately, without notice or request by the Agent, prepay
the Loans (together with accrued interest to the date of prepayment on the
principal amount prepaid) in an aggregate amount equal to such excess.
2.6 CONVERSION AND CONTINUATION OPTIONS. (a) The Borrower may elect
from time to time to convert LIBOR Loans to Reference Rate Loans, by the
Borrower giving the Agent at least two Business Days' prior irrevocable
written notice of such election pursuant to a Continuation Notice. The
Borrower may elect from time to time to convert Reference Rate Loans to LIBOR
Loans by the Borrower giving the Agent at least three Eurodollar Business
Days' prior irrevocable written notice of such election pursuant to a
Continuation Notice. Any such notice of conversion to LIBOR Loans shall
specify the length of the initial Interest Period or Interest Periods
therefor. Upon receipt of any such notice the Agent shall promptly notify
each Lender thereof. All or any part of outstanding LIBOR Loans and
Reference Rate Loans may be converted as provided herein, PROVIDED THAT (i)
any such conversion may only be made if, after giving effect thereto, Section
2.7 shall not have been contravened, (ii) no Term Loan may be converted into
a LIBOR Loan after the date that is one month prior to the due date of the
final installment of principal of the Term Loans, (iii) no Revolving Loan may
be converted into a LIBOR Loan after the date that is one month prior to the
Revolving Loan Commitment Expiration Date and (iv) the Borrower shall not
have the right to elect to continue at the end of the applicable Interest
Period, or to convert to, a LIBOR Loan if a Default shall have occurred and
be continuing.
(b) Any LIBOR Loan may be continued as such upon the expiration of the
then current Interest Period with respect thereto by the Borrower giving
notice to the Agent, in accordance with the applicable provisions of the term
"Interest Period" set
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forth in Section 1.1, of the length of the next Interest Period to be
applicable to such LIBOR Loan, PROVIDED THAT no LIBOR Loan may be continued
as such (i) if, after giving effect thereto, Section 2.7 would be
contravened, (ii) with respect to the Term Loans, after the date that is one
month prior to the due date of the final installment of principal of the Term
Loans, (iii) with respect to the Revolving Loans, after the date that is one
month prior to the Revolving Loan Commitment Expiration Date or (iv) if a
Default shall have occurred and be continuing and PROVIDED, FURTHER, that if
the Borrower shall fail to give any required notice as described above in
this Section or if such continuation is not permitted pursuant to the
preceding proviso, such Loans shall be automatically converted to Reference
Rate Loans on the last day of such then-expiring Interest Period.
2.7 MINIMUM AMOUNTS OF TRANCHES. All borrowings, conversions and
continuations of Loans hereunder and all selections of Interest Periods
hereunder shall be in such amounts and be made pursuant to such elections so
that, after giving effect thereto, the aggregate principal amount of the
Loans comprising each Tranche (except Loans made pursuant to Section 2.3(c))
shall be equal to $1,000,000 or a whole multiple of $100,000 in excess
thereof and, in any case, there shall not be more than 8 Tranches.
2.8 INTEREST RATES AND PAYMENT DATES. (a) Each LIBOR Loan shall bear
interest for each day during each Interest Period with respect thereto at a
rate per annum equal to the LIBOR Adjusted Rate plus (i) for LIBOR Loans
which are Revolving Loans, the Applicable Revolving Loan Margin and (ii) for
LIBOR Loans which are Term Loans, the Applicable Term Loan Margin.
(b) Each Reference Rate Loan shall bear interest at a rate per annum
equal to the Reference Rate.
(c) If any Default shall have occurred and be continuing, all amounts
outstanding shall bear interest at a rate per annum which is the rate
described in paragraph (b) of this Section plus 2% from the date of the
occurrence of such Default until such Default is no longer continuing (after
as well as before judgment).
(d) Interest shall be payable in arrears on each Interest Payment Date,
provided that interest accruing pursuant to paragraph (c) of this Section
shall be payable on demand.
2.9 COMPUTATION OF INTEREST AND FEES. (a) Interest on Reference Rate
Loans shall be calculated on the basis of a 365- (or 366-, as the case may
be), day year for the actual days elapsed and interest on LIBOR Loans and all
other Obligations of the Borrower shall be calculated on the basis of a
360-day year for the actual days elapsed. The Agent shall as soon as
practicable notify the Borrower and the Lenders of each determination of a
LIBOR Adjusted Rate. Any change in the interest rate on a Loan resulting
from a change in the Reference Rate or the LIBOR Reserve Requirements shall
become effective as of the opening of business on the day on which such change
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in the Reference Rate is announced or such change in the LIBOR Reserve
Requirements becomes effective, as the case may be. The Agent shall as soon
as practicable notify the Borrower and the Lenders of the effective date and
the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Agent pursuant to any
provision of this Agreement shall be conclusive and binding on the Borrower
and the Lenders in the absence of manifest error.
2.10 INABILITY TO DETERMINE INTEREST RATE. In the event that prior to
the first day of any Interest Period:
(a) the Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower absent manifest error) that, by
reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the LIBOR Adjusted Rate for
such Interest Period, or
(b) the Agent shall have received notice from the Majority Lenders acting
in good faith that the LIBOR Adjusted Rate determined or to be determined for
such Interest Period will not adequately and fairly reflect the cost to such
Lenders (as conclusively certified by such Lenders) of making or maintaining
their affected Loans during such Interest Period, the Agent shall give telecopy
or telephonic notice thereof to the Borrower and the Lenders as soon as
practicable thereafter. If such notice is given (x) any LIBOR Loans requested
to be made on the first day of such Interest Period shall accrue interest at the
Reference Rate, (y) Loans that were to have been converted on the first day of
such Interest Period to LIBOR Loans shall be continued as Reference Rate Loans
and (z) any outstanding LIBOR Loans shall be converted, on the first day of such
Interest Period, to Reference Rate Loans. Until such notice has been withdrawn
by the Agent, no further LIBOR Loans shall be made or continued as such, nor
shall the Borrower have the right to convert Reference Rate Loans to LIBOR
Loans.
2.11 PRO RATA TREATMENT AND PAYMENTS. Each payment (including each
prepayment) by the Borrower on account of principal of and interest on the
Loans shall be made pro rata according to the respective outstanding
principal and interest amounts of such Loans then held by the Lenders. All
payments (including prepayments) to be made by the Borrower hereunder and
under the Notes, whether on account of principal, interest, fees or
otherwise, shall be made without set off or counterclaim and shall be made
prior to 12:00 Noon, Los Angeles time, on the due date thereof to the Agent,
for the account of the applicable Lenders, at the Agent's office specified in
Section 9.2, in Dollars and in immediately available funds. The Agent shall
distribute such payments to the applicable Lenders promptly upon receipt in
like funds as received. If any payment hereunder (other than payments on the
LIBOR Loans) becomes due and payable on a day other than a Business Day, such
payment shall be extended to the next succeeding Business Day, and, with
respect to payments of principal, interest thereon shall be payable at the
then applicable rate during such extension. If any payment on a LIBOR Loan
becomes due and payable on a day other
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than a Eurodollar Business Day, the maturity thereof shall be extended to the
next succeeding Eurodollar Business Day (and interest shall continue to
accrue thereon at the applicable rate) unless the result of such extension
would be to extend such payment into another calendar month, in which event
such payment shall be made on the immediately preceding Eurodollar Business
Day.
2.12 ILLEGALITY. Notwithstanding any other provision herein, if any
change after the Restatement Date in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for any Lender
or Applicable Lending Office to make or maintain LIBOR Loans as contemplated
by this Agreement, (a) the commitment of such Lender hereunder to make LIBOR
Loans, continue LIBOR Loans as such and convert Reference Rate Loans to LIBOR
Loans shall forthwith be suspended during such period of illegality and (b)
the Loans of such Lender or Applicable Lending Office then outstanding as
LIBOR Loans, if any, shall be converted automatically to Reference Rate Loans
on the respective last days of the then current Interest Periods with respect
to such Loans or within such earlier period as required by law. If any such
conversion of a LIBOR Loan occurs on a day which is not the last day of the
then current Interest Period with respect thereto, the Borrower shall pay to
such Lender such amounts, if any, as may be required pursuant to Section
2.15. To the extent that a Lender's LIBOR Loans have been converted to
Reference Rate Loans pursuant to this Section 2.12, all payments and
prepayments of principal that otherwise would be applied to such Lender's
LIBOR Loans shall be applied instead to its Reference Rate Loans.
2.13 INCREASED COSTS. (a) In the event that any change after the
Restatement Date in any Requirement of Law or in the interpretation or
application thereof or compliance by any Lender with any request or directive
(whether or not having the force of law but, if not having the force of law,
generally applicable to and complied with by banks and financial institutions
of the same general type as such Lender in the relevant jurisdiction) from
any central bank or other Governmental Authority made subsequent to the date
hereof:
(i) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirements against assets held by,
letters of credit or guarantees issued by, deposits or other liabilities in
or for the account of, advances, loans or other extensions of credit by, or
any other acquisition of funds by, any office of such Lender or Applicable
Lending Office which is not otherwise included in the determination of the
LIBOR Adjusted Rate hereunder; or
(ii) shall impose on such Lender or Applicable Lending Office any
other condition;
and the result of any of the foregoing is to increase the cost to the Agent
of issuing or maintaining any Letter of Credit by an amount which the Agent
deems to be material, or to such Lender or Applicable Lending Office, by an
amount which such Lender deems to be material, of making, converting into,
continuing or maintaining LIBOR Loans, or
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purchasing or maintaining any participation in a Letter of Credit, or to
reduce any amount receivable hereunder in respect thereof then, in any such
case, the Borrower shall immediately pay to the Agent, for its own account or
on behalf of such Lender or Applicable Lending Office, as applicable, upon
the demand of the Agent for itself or at the request of such Lender, as
applicable, any additional amounts necessary to compensate such Lender or the
Agent, as applicable, for such increased cost or reduced amount receivable.
If the Agent, any Lender or any Applicable Lending Office becomes entitled to
claim any additional amounts pursuant to this Section, it shall promptly
notify the Borrower, through the Agent, of the event by reason of which it
has become so entitled. A certificate as to any additional amounts payable
pursuant to this Section submitted by the Agent or such Lender or Applicable
Lending Office, through the Agent, to the Borrower shall be conclusive
evidence of the accuracy of the information so recorded, absent manifest
error. This covenant shall survive the termination of this Agreement,
expiration of the Letters of Credit and the payment of the Notes and all
other amounts payable hereunder.
(b) If, after the date of this Agreement, the introduction of or any
change in any applicable law, rule, regulation or guideline regarding capital
adequacy, or any change in the interpretation or administration thereof by
any Governmental Authority, central bank or the National Association of
Insurance Commissioners or comparable agency charged with the interpretation
or administration thereof, affects the amount of capital required or expected
to be maintained by any Lender or any corporation controlling any Lender, and
such Lender (taking into consideration such Lender's or such corporation's
policies with respect to capital adequacy) determines that the amount of
capital maintained by such Lender or such corporation which is attributable
to or based upon the Loans, the Letters of Credit, the Commitments or this
Agreement must be increased as a consequence of such introduction or change
by an amount deemed by such Lender to be material, then, upon demand of the
Agent at the request of such Lender, the Borrower shall immediately pay to
the Agent on behalf of such Lender, additional amounts sufficient to
compensate such Lender or such corporation for the increased costs to such
Lender or corporation of such increased capital. Any such demand shall be
accompanied by a certificate of such Lender setting forth in reasonable
detail the computation of any such increased costs, which certificate shall
be conclusive, absent manifest error. This covenant shall survive the
termination of this Agreement, expiration of the Letters of Credit and the
payment of the Notes and all other amounts payable hereunder.
2.14 TAXES. (a) All payments made by the Borrower in respect of the
Obligations shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority or any political subdivision or taxing authority thereof
or therein, other than Excluded Taxes (all such non-Excluded Taxes being
hereinafter called "TAXES"). If any Taxes are required to be withheld from any
amounts payable to the Agent or any Lender in respect of the Obligations, the
amounts so payable to the Agent or such Lender shall be increased to the extent
necessary to
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yield to the Agent or such Lender (after payment of all Taxes) interest or
any such other amounts payable hereunder at the rates or in the amounts
specified in this Agreement and the Notes. The Agent or a Lender, as the
case may be, shall deliver to the Borrower a certificate in good faith
setting forth the amount of such Taxes, the calculation of such Taxes and an
explanation of the requirement therefor, all in reasonable detail and such
certificate shall be conclusive, absent manifest error. Whenever any Taxes
are payable by the Borrower, as promptly as possible thereafter, the Borrower
shall send to the Agent, for its own account or for the account of such
Lender, as the case may be, a copy of an original official receipt received
by the Borrower showing payment thereof or such other evidence of payment
reasonably satisfactory to the Agent. If the Borrower fails to pay any Taxes
when due to the appropriate taxing authority or fails to remit to the Agent
the required receipts or other required documentary evidence, the Borrower
shall indemnify the Agent and the Lenders for any incremental taxes, interest
or penalties (and related reasonable fees and expenses of counsel) that may
become payable by the Agent or any Lender as a result of any such failure.
The agreements in this Section shall survive the termination of this
Agreement and the payment of the Notes and all other amounts payable
hereunder.
(b) Each Lender that is not organized under the laws of the United
States of America or a state thereof agrees that it will deliver to the
Borrower and the Agent (i) two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224 or successor applicable form, as
the case may be, and (ii) an Internal Revenue Service Form W-8 or W-9 or
successor applicable form. Each such Lender also agrees to deliver to the
Borrower and the Agent two further copies of the said Form 1001 or 4224 and
Form W-8 or W-9, or successor applicable forms or other manner or
certification, as the case may be, on or before the date that any such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form previously delivered by it to the Borrower and
the Agent, and such extensions or renewals thereof as may reasonably be
requested by the Borrower or the Agent, unless in any such case an event
beyond the control of such Lender (including, without limitation, any change
in treaty, law or regulation) has occurred prior to the date on which any
such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender so advised the
Borrower and the Agent. Each such Lender shall certify (i) in the case of a
Form 1001 or 4224, that it is entitled to receive payments under this
Agreement without deduction or withholding of any United States federal
income taxes and (ii) in the case of a Form W-8 or W-9, that it is entitled
to an exemption from United States backup withholding tax.
2.15 INDEMNITY. The Borrower agrees to indemnify each Lender and to hold
each Lender harmless from and to pay each Lender within 5 Business Days of such
Lender's demand the amount of any liability, loss or expense arising from the
reemployment of funds obtained by it or from fees payable to terminate the
deposits from which such funds were obtained (including reasonable fees and
expenses of counsel) which such Lender may sustain or incur as a consequence of
(a) default by the Borrower in
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payment when due of the principal amount of or interest on any LIBOR Loan,
(b) default by the Borrower in making a borrowing of, conversion into or
continuation of LIBOR Loans after the Borrower has given a notice requesting
the same in accordance with the provisions of this Agreement, (c) default by
the Borrower in making any prepayment after the Borrower has given a notice
thereof in accordance with the provisions of this Agreement or (d) the making
by the Borrower of a prepayment or conversion of LIBOR Loans on a day which
is not the last day of an Interest Period with respect thereto. A Lender's
certificate as to such liability, loss or expense shall be deemed conclusive,
absent manifest error. This covenant shall survive the termination of this
Agreement, expiration of the Letters of Credit and the payment of the Notes
and all other amounts payable hereunder.
2.16 MITIGATION OF COSTS. If any Lender, by changing its Applicable
Lending Office or taking any other reasonable action, so long as making such
change or taking such other action is not disadvantageous to it in any
financial, regulatory or other respect, can mitigate any adverse effect on
the Borrower under Section 2.10, 2.12, 2.13, or 2.14, such Lender shall take
such action.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make the Loans
and participate in the Letters of Credit, and to induce the Agent to issue
the Letters of Credit, the Borrower hereby represents and warrants to the
Agent and each Lender that:
3.1 ORGANIZATION AND GOOD STANDING. The Borrower and each Subsidiary (a)
is duly incorporated, validly existing and in good standing under the laws of
its jurisdiction of incorporation as indicated on SCHEDULE 3.1, (b) has all
requisite corporate power and authority to own its properties and to conduct its
business as now conducted and as currently proposed to be conducted and (c) is
duly qualified to conduct business as a foreign corporation and is currently in
good standing in each state and jurisdiction in which it conducts business
except, in each case referred to in clause (c), to the extent that the failure
to do so could not reasonably be expected to have a Material Adverse Effect.
Each state and jurisdiction in which the Borrower or any Subsidiary is or should
be qualified to conduct business is listed on SCHEDULE 3.1 hereto.
3.2 POWER AND AUTHORITY. The Borrower and each Subsidiary has all
requisite power and authority under applicable law and under its Organic
Documents to (i) in the case of the Borrower, borrow hereunder and consummate
the Dubs Acquisition in accordance with the terms of the Acquisition Agreement
and (ii) execute, deliver and perform its respective obligations under the Loan
Documents to which it is a party. All actions, waivers and consents (corporate,
regulatory and otherwise) necessary or appropriate for the Borrower to
consummate the Dubs Acquisition in accordance with the terms of the Acquisition
Agreement, and for the Borrower and each Subsidiary to execute, deliver and
perform the Loan Documents to which it is a party have been
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taken and/or received.
3.3 VALIDITY AND LEGAL EFFECT. This Agreement constitutes, and the
other Loan Documents to which the Borrower or any Subsidiary is a party
constitute (or will constitute when executed and delivered), the legal, valid
and binding obligations of the Borrower or such Subsidiary, as applicable,
enforceable against it in accordance with the terms thereof, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or similar laws of general applicability affecting the enforcement
of creditors' rights and (b) the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
3.4 NO VIOLATION OF LAWS OR AGREEMENTS. The execution, delivery and
performance of the Loan Documents and the consummation of the Dubs
Acquisition in accordance with the terms of the Acquisition Agreement (a)
will not violate or contravene any Requirement of Law, (b) will not result in
any material breach or violation of, or constitute a material default under,
any agreement or instrument by which the Borrower or any Subsidiary, or any
of its property, may be bound, and (c) will not result in or require the
creation of any Lien (other than those permitted by Section 6.3) upon or with
respect to any property of the Borrower or any Subsidiary, whether such
property is now owned or hereafter acquired.
3.5 TITLE TO ASSETS; EXISTING ENCUMBRANCES; LEGAL NAMES. The Borrower
and each Subsidiary has good and marketable title to all of its real and
personal properties and assets, free and clear of any Liens (other than those
permitted by Section 6.3). Neither the Borrower nor any Subsidiary has used
(or permitted the filing of any financing statement under) any legal or
operating name at any time during the twelve consecutive calendar months
immediately preceding the execution of this Agreement, except as identified
on SCHEDULE 3.5 hereto.
3.6 CAPITAL STRUCTURE; EQUITY OWNERSHIP. The authorized capital stock
of the Borrower consists of an aggregate of 50,000,000 shares of common
stock, without par value, 9,770,837 shares of which are issued and
outstanding, and 5,000,000 shares of preferred stock, without par value, no
shares of which are issued and outstanding. All of the issued and
outstanding shares of common stock of the Borrower are duly and validly
issued and outstanding, and each of such shares is fully paid and
nonassessable. Except as set forth on SCHEDULE 3.6 hereto, there are no
outstanding Equity Rights with respect to the Borrower or any Subsidiary and
there are no outstanding obligations of the Borrower or any of its
Subsidiaries to repurchase, redeem, or otherwise acquire any shares of
capital stock of the Borrower, nor are there any outstanding obligations of
the Borrower or any of its Subsidiaries to make payments to any Person, such
as "phantom stock" payments, where the amount thereof is calculated with
reference to the fair market value or equity value of Borrower or any of its
Subsidiaries.
3.7 SUBSIDIARIES AND AFFILIATES. SCHEDULE 3.7 hereto accurately and
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completely discloses (i) each Subsidiary and Affiliate of the Borrower (other
than its officers and directors), (ii) each Person holding ownership
interests in such Subsidiary and (iii) the nature of the ownership interests
held by each such Person and the percentage of ownership of such Subsidiary
represented by such ownership interests.
3.8 MATERIAL CONTRACTS. Neither the Borrower nor any Subsidiary has
committed any unwaived breach or default under any Material Contract, and the
Borrower has no knowledge or reason to believe that any other party to any
Material Contract has committed any unwaived breach or default thereof. Each
of the Material Contracts is a legal, valid and binding obligation of the
Borrower or the Subsidiaries party thereto, enforceable in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors' rights
generally or by equitable principles relating to enforceability. The
Borrower has made available to the Lenders and the Agent a complete and
correct copy of each Material Contract (including in each case all exhibits,
schedules and disclosure letters referred to therein or delivered pursuant
thereto, if any) and all amendments thereto and other side letters or
agreements affecting the terms thereof. Except for the Acquisition
Agreement, neither the Borrower nor any of its Subsidiaries is party to any
current agreements or letters of intent providing for the acquisition or
disposition of any assets with a fair market value of $1,000,000 or more.
3.9 TAXES AND ASSESSMENTS. The Borrower and each Subsidiary has timely
filed all required tax returns and reports (federal, state and local) or has
properly filed for extensions of the time for the filing thereof. The
Borrower has no knowledge of any deficiency, penalty or additional assessment
due or appropriate in connection with any such taxes. All taxes (federal,
state and local) imposed upon the Borrower or any Subsidiary or any of its
properties, operations or income have been paid and discharged prior to the
date when any interest or penalty would accrue for the nonpayment thereof,
except for those taxes being contested in good faith by appropriate
proceedings diligently prosecuted and with adequate reserves reflected on the
financial statements in accordance with GAAP. There are no taxes imposed on
the Borrower or its Subsidiaries by any political subdivision or taxing
authority due or payable either on or by virtue of the execution and delivery
by the Borrower, the Subsidiaries, the Agent, or the Lenders of this
Agreement or any other Loan Document to which the Borrower or the
Subsidiaries are party, or on any payment to be made by the Borrower pursuant
hereto or thereto.
3.10 LITIGATION AND LEGAL PROCEEDINGS. Except as disclosed on SCHEDULE
3.10 hereto, there is no litigation, claim, investigation, administrative
proceeding, labor controversy or similar action that is pending or, to the
knowledge of the Borrower, threatened (i) with respect to any Loan Document
or the transactions contemplated thereby, (ii) with respect to the Dubs
Acquisition or the transactions contemplated by the Acquisition Agreement or
(iii) against the Borrower, any Subsidiary or any Property which, if
determined adversely to the Borrower or any Subsidiary, would reasonably be
expected to have a Material Adverse Effect.
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3.11 ACCURACY OF FINANCIAL INFORMATION. (a) All information previously
furnished to the Agent and the Lenders that was prepared by or on behalf of
the Borrower concerning the financial condition and operations of the
Borrower or any Subsidiary, including (i) the audited consolidated financial
statements of the Borrower and its Subsidiaries for the fiscal year ended
December 31, 1997 (including, separately stated, consolidating statements of
income, retained earnings and cash flows of the Borrower and its
Subsidiaries), (ii) the unaudited consolidated financial statements for the
Borrower and its Subsidiaries for the fiscal quarter ended June 30, 1998 and
(iii) the unaudited pro forma consolidated balance sheet for the Borrower and
its Subsidiaries, as at December 31, 1998 and the unaudited pro forma
consolidated opening balance sheet for the Borrower and its Subsidiaries, as
at November 1, 1998, in each case prepared under the assumption that the Dubs
Acquisition occurred on November 1, 1998, (A) have been prepared in
accordance with GAAP consistently applied, (B) are true, accurate and
complete in all material respects, (C) fairly present the financial condition
of the organizations covered thereby as of the dates and for the periods
covered thereby and (D) disclose all material liabilities (contingent and
otherwise) of the Borrower and the Subsidiaries.
(b) Since December 31, 1997 there has been no event or condition
resulting in a Material Adverse Effect.
3.12 ACCURACY OF OTHER INFORMATION. All information contained in any
application, schedule, report, certificate, or any other document given to
the Agent or any Lender by the Borrower or any agent of the Borrower in
connection with the Loan Documents is in all material respects true, accurate
and complete, and no such Person has omitted to state therein (or failed to
include in any such document) any material fact or any fact necessary to make
such information not misleading. All projections given to the Agent, or any
Lender by the Borrower or any other Person have been prepared with a
reasonable basis and in good faith making use of such information as was
available at the date such projection was made. The projections and pro
forma financial information contained in such materials are based upon good
faith estimates and assumptions believed by the Borrower to be reasonable at
the time made and as of the Restatement Date, it being recognized that such
projections as to future events are not to be viewed as facts and that actual
results during the period or periods covered by any such projections may
differ from the projected results.
3.13 COMPLIANCE WITH LAWS GENERALLY. The Borrower and each Subsidiary
is in compliance in all material respects with all Requirements of Law
applicable to it, its operations and its properties.
3.14 ERISA COMPLIANCE.
(a) The Borrower and each Subsidiary is in compliance in all
material respects with all applicable provisions of ERISA, and all rules,
regulations and orders implementing ERISA.
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(b) Neither the Borrower nor any Subsidiary, or any ERISA
Affiliate thereof, maintains or contributes to (or has maintained or
contributed to) any Multiemployer Plan under which the Borrower, any
Subsidiary or any ERISA Affiliate thereof could have any withdrawal liability.
(c) Neither the Borrower nor any Subsidiary, or any ERISA
Affiliate thereof, sponsors or maintains any defined benefit pension plan
under which there is an accumulated funding deficiency within the meaning of
Section 412 of the Code, whether or not waived.
(d) The liability for accrued benefits under each defined benefit
pension plan that will be sponsored or maintained by the Borrower, any
Subsidiary or any ERISA Affiliate thereof (determined on the basis of the
actuarial assumptions utilized by the PBGC) does not exceed the aggregate
fair market value of the assets under each such defined benefit pension plan.
(e) The aggregate liability of the Borrower, each Subsidiary and
each ERISA Affiliate thereof arising out of or relating to a failure of any
employee benefit plan within the meaning of Section 3(2) of ERISA to comply
with provisions of ERISA or the Code will not have a Material Adverse Effect.
(f) There does not exist any unfunded liability (determined on the
basis of actuarial assumptions utilized by the actuary for the plan in
preparing the most recent annual report) of the Borrower, any Subsidiary or
any ERISA Affiliate thereof under any plan, program or arrangement providing
post-retirement, life or health benefits.
(g) No Reportable Event and no Prohibited Transaction (as defined
in ERISA) has occurred or is occurring with respect to any plan with which
the Borrower or any Subsidiary is associated.
3.15 ENVIRONMENTAL COMPLIANCE. (a) The Borrower and each Subsidiary has
received all permits and filed all notifications necessary under and is
otherwise in compliance in all material respects with all federal, state and
local laws, rules and regulations governing the control, removal, storage,
transportation, spill, release or discharge of Hazardous Materials,
including, without limitation, as provided in the provisions of and the
regulations under (i) the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended by the Superfund Amendment and
Reauthorization Act of 1986, (ii) the Solid Waste Disposal Act, (iii) the
Clean Water Act and the Clean Air Act, (iv) the Hazardous Materials
Transportation Act, (v) the Resource Conservation and Recovery Act of 1976
and (vi) the Federal Water Pollution Control Act Amendments of 1972 (all of
the foregoing enumerated and nonenumerated statutes, including without
limitation any applicable state or local statutes, all as amended,
collectively, the "ENVIRONMENTAL CONTROL STATUTES").
(b) Neither the Borrower nor any Subsidiary has given any written
or
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oral notice to the Environmental Protection Agency ("EPA") or any state or
local agency with regard to any actual or imminently threatened removal,
storage, transportation, spill, release or discharge of Hazardous Wastes
either (i) on properties owned or leased by the Borrower or such Subsidiary
or (ii) otherwise in connection with the conduct of its business and
operations.
(c) Neither the Borrower nor any Subsidiary has received notice
that it is potentially responsible for costs of clean-up of any actual or
imminently threatened spill, release or discharge of Hazardous Wastes
pursuant to any Environmental Control Statute.
(d) No judicial proceedings or governmental or administrative
action is pending, or, to the knowledge of the Borrower, threatened, under
any Environmental Control Statute to which the Borrower or any of its
Subsidiaries is named as a party with respect to the Properties or the
business conducted at the Properties, nor are there any consent decrees or
other decrees, consent orders, administrative orders or other orders, or
other administrative or judicial requirements outstanding under any
Environmental Control Statute with respect to the Properties or such business.
3.16 FEDERAL REGULATIONS. No Letter of Credit and no part of the
proceeds of any Loans are intended to be or will be used, directly or
indirectly for any purpose which violates the provisions of the Regulations
of the Board of Governors of the Federal Reserve System. If requested by any
Lender or the Agent, and in any event upon consummation of any acquisition
involving the purchase of stock by the Borrower or any Subsidiary, the
Borrower will furnish to the Agent and each Lender a statement to the
foregoing effect in conformity with the requirements of Form U-1 referred to
in Regulation U.
3.17 FEES AND COMMISSIONS. Except as disclosed on SCHEDULE 3.17 hereto
or the letter referred to in Section 4.1(d), neither the Borrower nor any
Subsidiary owes or will owe any fees or commissions of any kind in connection
with the Dubs Acquisition, this Agreement or the transactions contemplated
hereby or thereby, and the Borrower does not know of any claim (or any basis
for any claim) for any fees or commissions in connection with the Dubs
Acquisition, the Acquisition Agreement, this Agreement or the transactions
contemplated hereby or thereby.
3.18 REPRESENTATIONS AND WARRANTIES IN ACQUISITION AGREEMENT. The Agent
has received a complete and correct copy of the Acquisition Agreement
(including all exhibits, schedules and disclosure letters referred to therein
or delivered or to be delivered pursuant thereto, if any) and all amendments
thereto, waivers relating thereto and other side letters or agreements
affecting the terms thereof. The Acquisition Agreement has been duly
executed and delivered by the parties thereto and is in full force and effect
with no default thereunder. Each representation and warranty made by the
Borrower in the Acquisition Agreement shall be deemed to be made by the
Borrower for the Lenders' benefit as if set forth herein at length.
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3.19 SOLVENCY. Immediately prior to and upon the execution of this
Agreement, the consummation of the Dubs Acquisition, the funding of the Loans
and the issuance of any Letters of Credit to be funded or issued on the
Restatement Date, the Borrower and each Guarantor was, is and will be Solvent.
3.20 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT. (a)
Neither the Borrower nor any Subsidiary is an "investment company", or a
company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
(b) Neither the Borrower nor any Subsidiary is a "holding company," or
an "affiliate" of a "holding company" or a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of
1935, as amended.
3.21 NATURE OF BUSINESS. Neither the Borrower nor any of its
Subsidiaries is engaged in any material business other than as described in
Section 6.11.
3.22 RANKING OF LOANS. This Agreement and the other Loan Documents to
which the Borrower is party, when executed, and the Loans, when borrowed, are
and will be the direct and general obligations of the Borrower. The
Borrower's obligations hereunder and thereunder rank and will rank at least
PARI PASSU in priority of payment to all other Indebtedness.
SECTION 4. CONDITIONS PRECEDENT
4.1 CONDITIONS TO RESTATEMENT DATE. The agreement of each Lender to
make the Loans requested to be made by it on the Restatement Date and
participate in any Letters of Credit issued on the Restatement Date and the
agreement of the Agent to issue any Letters of Credit requested to be issued
on the Restatement Date are subject to the satisfaction, immediately prior to
or concurrently with the making of such Loans and/or the issuance of and
participation in such Letters of Credit on the Restatement Date, of the
following conditions precedent:
(a) CREDIT AGREEMENT. The Agent shall have received this Agreement,
executed and delivered by an officer of the Borrower as of the Restatement
Date.
(b) OTHER LOAN DOCUMENTS. The Agent shall have received the Term
Notes, the Revolving Notes, the Guarantees, the Guarantor Collateral
Documents, the Collateral Documents, the ADR Agreement, all UCC-1 Financing
Statements and amendments thereto and all other agreements or instruments
required to create or perfect a security interest in the Collateral and the
Guarantor Collateral executed in connection herewith, in each case executed
and delivered by an officer of the relevant Obligor.
(c) CORPORATE DOCUMENTS. Certified copies of the charter and by-laws
of each
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Obligor (other than Fast Forward) and of all corporate authority for each
Obligor (including, without limitation, board of director resolutions and
evidence of the incumbency, including specimen signatures, of officers) with
respect to the execution, delivery and performance of such of the Loan
Documents to which such Obligor is intended to be a party and each other
document to be delivered by such Obligor from time to time in connection
herewith and the extensions of credit hereunder.
(d) FEES AND COSTS. The Agent shall have received payment of (i) the
fees set forth in the fee side letter executed by the Borrower and the Agent
in connection herewith and (ii) such other fees, costs and expenses,
including reasonable legal fees, as are requested by the Agent to be paid on
the Restatement Date by the Borrower in connection with this Agreement.
(e) ACQUISITION AGREEMENT. The Agent shall have received a copy of the
Acquisition Agreement, and each agreement and instrument delivered in
connection therewith, all of the foregoing in form and substance satisfactory
to the Agent and all as certified as true and correct by a Responsible
Officer of the Borrower.
(f) LIEN SEARCHES. The Agent shall have received such lien searches as
it shall request from all relevant jurisdictions, listing all effective
financing statements which name the Borrower, any Guarantor or Dubs (or any
predecessor thereto), as debtor, none of which, except for Liens permitted by
Section 6.3, shall cover any of the Collateral.
(g) REPAYMENT OF CERTAIN INDEBTEDNESS; RELEASE OF LIENS. The Agent
shall have received evidence satisfactory to it that (i) all Indebtedness
listed on SCHEDULE 4.1(g) has been repaid in full and (ii) except as set
forth on SCHEDULE 4.1(g), all UCC financing statements which name Dubs as
debtor have been terminated and all Liens on the assets of Dubs (except any
permitted by Section 6.3), have been released.
(h) GOOD STANDING CERTIFICATES. With respect to each Obligor which is
a legal entity, the Agent shall have received a certificate, dated a recent
date, of the Secretary of State of the state of formation of such Obligor and
each other jurisdiction where such Obligor is required to be qualified to do
business under such jurisdiction's law (other than the State of Texas with
respect to the Borrower and the State of Illinois with respect to
Multi-Media), certifying as to the existence and good standing of, and the
payment of taxes by, each such Obligor in such state.
(i) OFFICER'S CERTIFICATE. A certificate of a senior officer of the
Borrower, dated the Restatement Date, to the effect set forth in the first
sentence of Section 4.2 hereof.
(j) INSURANCE POLICIES. The Agent shall have received evidence in form
and substance reasonably satisfactory to the Agent that the insurance
required by Section 5.6 is in full force and effect.
(k) ACQUISITION. The Acquisition Agreement shall have been executed and
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delivered by each party thereto, and the Agent shall have received a
certificate of a Responsible Officer of the Borrower to the effect that all
material transactions contemplated by the Acquisition Agreement to be
consummated on or prior to the Restatement Date have been consummated without
amendment, waiver or modification of the material terms thereof.
(l) ACQUISITION PRICE. The aggregate consideration paid in connection
with the Dubs Acquisition shall not exceed $14,300,000, and the Agent shall
have received a certificate of a Responsible Officer of the Borrower to such
effect.
(m) NECESSARY GOVERNMENTAL AUTHORIZATIONS AND CONSENTS; EXPIRATION OF
WAITING PERIODS, ETC. The Borrower shall have obtained all governmental
authorizations and all consents of other Persons, in each case that are
necessary or advisable in connection with the Dubs Acquisition and the other
transactions contemplated by the Loan Documents and each of the foregoing
shall be in full force and effect, in each case other than those the failure
to obtain or maintain which, either individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect. All applicable
waiting periods shall have expired without any action being taken or
threatened by any competent authority which would restrain, prevent or
otherwise impose adverse conditions on the Dubs Acquisition or the financing
thereof. No action, request for stay, petition for review or rehearing,
reconsideration, or appeal with respect to any of the foregoing shall be
pending, and the time for any applicable agency to take action to set aside
its consent on its own motion shall have expired.
(n) ADDITIONAL PROCEEDINGS. The Agent shall have received such other
approvals, opinions and documents as the Agent may reasonably request and all
legal matters incident to the making of such Loans and issuance of such
Letters of Credit shall be reasonably satisfactory to the Agent.
4.2 CONDITIONS TO EACH LOAN OR LETTER OF CREDIT. The agreement of each
Lender to make each Loan and to participate in each Letter of Credit, and the
agreement of the Agent to issue each Letter of Credit, requested to be made,
issued or participated in by it is subject to the satisfaction, immediately
prior to or concurrently with the making of such Loan or the issuance or
participation in such Letter of Credit, of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The following
statements shall be true and the Borrower's acceptance of the proceeds of
such Loan or its delivery of an executed Letter of Credit Request shall be
deemed to be a representation and warranty of the Borrower on the date of
such Loan or as of the date of issuance of such Letter of Credit, as
applicable, that:
(i) The representations and warranties contained in this Agreement
and in each other Loan Document and certificate or other writing delivered
to the Lenders prior to, on or after the Restatement Date pursuant hereto
and on or prior to the date for such Loan or the issuance of such Letter of
Credit are
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correct on and as of such date in all material respects as though made on
and as of such date except to the extent that such representations and
warranties expressly relate to an earlier date; and
(ii) No Default has occurred and is continuing or would result from
the making of the Loan to be made on such date or the issuance of such
Letter of Credit as of such date.
(b) LEGALITY. The making of such Loan or the issuance of such Letter of
Credit, as applicable, shall not contravene any law, rule or regulation
applicable to any Lender or any Obligor.
(c) BORROWING NOTICE/LETTER OF CREDIT REQUEST. The Agent shall have
received a borrowing notice or Letter of Credit Request, as applicable,
pursuant to the provisions of this Agreement from the Borrower.
4.3 CONDITIONS SUBSEQUENT. Not later than 30 days after the
Restatement Date, in the case of the items listed in Section 4.3(a), not
later than 60 days after the Restatement Date, in the case of the items
listed in Sections 4.3(b) and (c), and not later than 14 days after the
Restatement Date, in the case of the items listed in Sections 4.3(d), (e) and
(f), the Agent shall have received the following:
(a) LEGAL OPINIONS. The Agent shall have received, with a counterpart
for each Lender, the following executed legal opinions:
(i) the executed legal opinion of Katten Muchin & Zavis, counsel to
the Borrower and the Guarantors, in form and substance satisfactory to the
Agent; and
(ii) such other legal opinions as the Agent may reasonably request.
(b) CERTIFIED UCC SEARCHES. The Agent shall have received certified
copies of requests for information from all relevant jurisdictions, listing
all effective financing statements which name the Borrower or any Guarantor
(or any predecessor thereto), as debtor, together with copies of such
financing statements, none of which, except for Liens permitted by Section
6.3, shall cover any of the Collateral or the Guarantor Collateral.
(c) LANDLORD CONSENTS. The Agent shall have received a Landlord
Consent with respect to all real property leased to the Borrower or any
Guarantor and listed on SCHEDULE 4.3(c) hereto, including, without
limitation, with respect to each real property lease assigned to the Borrower
pursuant to the Acquisition Agreement, and all such Landlord Consents shall
have been submitted for recording in the relevant recording offices in each
relevant jurisdiction.
(d) CORPORATE DOCUMENTS. The Agent shall have received certified copies
of
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the charter and by-laws of Fast Forward.
(e) GOOD STANDING CERTIFICATES. The Agent shall have received (i) a
certificate, dated a recent date, of the Secretary of State of the State of
Texas certifying as to the existence and good standing of, and the payment of
taxes by, the Borrower in such state, and (ii) a certificate, dated a recent
date, of the Secretary of State of the State of Illinois certifying as to the
existence and good standing of, and the payment of taxes by, Multi-Media in
such state.
(f) INSURANCE POLICIES. With respect to the insurance required by
Section 5.6, the Agent shall have received appropriate evidence showing the
Agent as an additional named insured or loss payee, as appropriate, in form
and substance reasonably satisfactory to the Agent.
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that from and after the Restatement Date, so
long as any Commitment remains in effect, any Note remains outstanding and
unpaid or any other amount is owing to any Lender or the Agent hereunder, or
any Letter of Credit remains outstanding:
5.1 FINANCIAL STATEMENTS. (a) As soon as available and in any event
within 45 days after the end of each quarterly fiscal period of each fiscal
year of the Borrower, the Borrower shall deliver to the Agent, with
sufficient copies for each Lender, consolidated statements of income,
retained earnings and cash flows of the Borrower and its Subsidiaries for
such period, and the related consolidated balance sheets of the Borrower and
its Subsidiaries as at the end of such period, setting forth in each case in
comparative form the corresponding consolidated figures for the corresponding
periods in the preceding fiscal year (except that, in the case of the balance
sheets, such comparison shall be to the last day of the prior fiscal year),
accompanied by a certificate of a senior financial officer of the Borrower,
which certificate shall state that said consolidated financial statements
fairly present the consolidated financial condition and results of operations
of the Borrower, the Borrower and its Subsidiaries, in each case in
accordance with GAAP consistently applied, as at the end of, and for, such
period (subject to normal year-end audit adjustments); and
(b) as soon as available and in any event within 120 days after the end
of each fiscal year of the Borrower, the Borrower shall deliver to the Agent,
with sufficient copies for each Lender, consolidated statements of income,
retained earnings and cash flows of the Borrower and its Subsidiaries for
such fiscal year and the related consolidated balance sheet of the Borrower
and its Subsidiaries as at the end of such fiscal year, setting forth in
comparative form the corresponding consolidated figures for the preceding
fiscal year, and accompanied by an opinion thereon of the Accountants, which
opinion shall state that said consolidated financial statements fairly
present the consolidated financial condition and results of operations of the
Borrower and its Subsidiaries as at the end of, and for, such fiscal year in
accordance with GAAP, and a
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statement of the Accountants to the effect that, in making the examination
necessary for their opinion, nothing came to their attention that caused them
to believe that the Borrower was not in compliance with Section 6.1, insofar
as such Section relates to accounting matters.
5.2 CERTIFICATES; OTHER INFORMATION. The Borrower shall deliver to
each Lender:
(a) within 45 days after the end of each quarterly fiscal period of
each fiscal year of the Borrower, a Covenant Compliance Certificate as of the
end of such quarter;
(b) within five Business Days after the same are filed, copies of all
financial statements and reports which the Borrower or any Subsidiary may
make to, or file with, the Securities and Exchange Commission or any
successor or analogous Governmental Authority;
(c) promptly but, in any event, within five Business Days after receipt
thereof, copies of all financial reports (including, without limitation,
management letters), if any, submitted to the Borrower or any Subsidiary by
the Accountants in connection with any annual or interim audit of the books
thereof;
(d) as soon as available and in any event within 30 days after
December 31 of each fiscal year, a budget for the next following fiscal year
setting forth anticipated income, expense and capital expenditure items for
each quarter during such fiscal year;
(e) as soon as possible and in any event within five Business Days
after the occurrence of a Default or, in the good faith determination of a
Responsible Officer of the Borrower, a Material Adverse Effect, the written
statement by a Responsible Officer of the Borrower, setting forth the details
of such Default or Material Adverse Effect and the action which the Borrower
proposes to take with respect thereto;
(f) (A) as soon as possible and in any event within 30 days after the
Borrower knows or has reason to know that any Termination Event with respect
to any Plan has occurred, a statement of a Responsible Officer of the
Borrower describing such Termination Event and the action, if any, which the
Borrower proposes to take with respect thereto, (B) promptly and in any event
within ten days after receipt thereof by the Borrower or any ERISA Affiliate
of the Borrower from the PBGC, copies of each notice received by the Borrower
or such ERISA Affiliate of the PBGC's intention to terminate any Plan or to
have a trustee appointed to administer any Plan, (C) promptly and in any
event within 30 days after the filing thereof with the Internal Revenue
Service, copies of each Schedule B (Actuarial Information) to the annual
report (Form 5500 Series) with respect to each Single Employer Plan
maintained for or covering employees of the Borrower or any Subsidiary if the
present value of the accrued benefits under the Plan exceeds its assets by an
amount in excess of $500,000 and (D) promptly and in any event within ten
days after receipt thereof by the Borrower or any ERISA Affiliate of the
Borrower from a sponsor of a Multiemployer Plan or from the PBGC, a copy of
each notice received by the Borrower or such ERISA Affiliates
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concerning the imposition or amount of withdrawal liability under Section 4202
of ERISA or indicating that such Multiemployer Plan may enter reorganization
status under Section 4241 of ERISA;
(g) promptly after the commencement thereof, but in any event not later
than five Business Days after service of process with respect thereto on, or
the obtaining of knowledge by, the Borrower or any Subsidiary, notice of each
material action, suit or proceeding before any Governmental Authority;
(h) within five days following receipt by the Borrower or any
Subsidiary, copies of all notices received by the Borrower or such Subsidiary
from the Internal Revenue Service or other taxing authority relating to any
material dispute regarding deductions, audits or any other material matter;
and
(i) promptly, such additional financial and other information as any
Lender, through the Agent, may from time to time reasonably request.
5.3 PAYMENT OF OBLIGATIONS. The Borrower shall, and shall cause each
of its Subsidiaries to, pay, discharge or otherwise satisfy at or before
maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, except where the failure to so satisfy such
obligations would not have a Material Adverse Effect or except where the
amount or validity thereof is currently being contested in good faith by
appropriate proceedings and reserves in conformity with GAAP with respect
thereto have been provided on the books of the Borrower or its Subsidiaries,
as the case may be.
5.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The Borrower
shall, and shall cause each of its Subsidiaries to, (i) continue to engage in
the video duplication business, the post-production business, the audio
sweetening business, the business of distributing national television spot
advertising, trailers and electronic press kits for the motion picture and
television industries, or engage in the business of owning (and renting)
limited amounts of niche programming and media buying, (ii) preserve, renew
and keep in full force and effect its corporate existence, (iii) take all
reasonable action to maintain all rights, registrations, licenses, privileges
and franchises necessary or desirable in the normal conduct of its business,
and (iv) comply with all Contractual Obligations and Requirements of Law
except to the extent, in the case of this clause (iv), that failure to comply
therewith would not, in the aggregate, have a Material Adverse Effect.
5.5 MAINTENANCE OF PROPERTY. The Borrower shall, and shall cause each
of its Subsidiaries to, keep all property useful or necessary in its business
in good working order and condition (ordinary wear and tear excepted).
5.6 INSURANCE. The Borrower will, and will cause each of its
Subsidiaries to, maintain insurance with financially sound and reputable
insurance companies, and with respect to Property and risks of a character
usually maintained by corporations
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engaged in the same or similar business similarly situated, against loss,
damage and liability of the kinds and in the amounts customarily maintained
by such corporations. The Borrower shall designate the Agent as loss payee
or additional insured, as appropriate with respect to such insurance and
cause such insurance to provide for 30 days' prior written notice to Agent of
any modification or cancellation of such insurance.
5.7 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. The
Borrower shall, and shall cause each of its Subsidiaries to, keep proper
books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all
material dealings and transactions in relation to its business and
activities; and upon reasonable notice and at such reasonable times during
usual business hours, permit representatives of any Lender to visit and
inspect any of its properties and examine and make abstracts from any of its
books and records at any reasonable time and as often as may reasonably be
desired and to discuss the business, operations, properties and financial and
other condition of the Borrower and its Subsidiaries with officers and
employees of the Borrower and its Subsidiaries and with its Accountants.
5.8 ENVIRONMENTAL LAWS. The Borrower shall, and shall cause each of
its Subsidiaries to:
(a) Comply in all material respects with, and ensure compliance by all
tenants and subtenants, if any, with, all applicable Environmental Control
Statutes and obtain and comply in all material respects with any and all
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Control Statutes;
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Control Statutes and promptly comply in all material respects
with all lawful orders and directives of all Governmental Authorities
regarding Environmental Control Statutes except to the extent that the same
are being contested in good faith by appropriate proceedings; and
(c) Defend, indemnify and hold harmless the Agent and the Lenders, and
their respective employees, agents, officers and directors, from and against
any and all claims, demands, penalties, fines, liabilities, settlements,
damages, costs and expenses of whatever kind or nature known or unknown,
contingent or otherwise, arising out of, or in any way relating to the
violation of, noncompliance with or liability under any Environmental Control
Statutes applicable to the operations of the Borrower or any of its
Subsidiaries, or the Borrower's or any of such Subsidiaries' interest in
Properties, or any orders, requirements or demands of Governmental
Authorities related thereto, including, without limitation, attorneys' and
consultants' fees, investigation and laboratory fees, response costs, court
costs and litigation expenses, except to the extent that any of the foregoing
arise out of the gross negligence or willful misconduct of the party seeking
indemnification therefor. This indemnity shall continue in full force and
effect regardless of the termination of this Agreement.
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5.9 USE OF PROCEEDS. The Borrower will use the proceeds of the Loans,
and any Letters of Credit issued hereunder, as follows:
(i) the Term Loans shall be used in full on the Restatement Date
(A) to repay all unpaid principal of and interest on the Existing Revolving
Loan and (B) to pay a portion of the purchase price with regard to the Dubs
Acquisition and expenses associated therewith;
(ii) the Revolving Loans shall be used (A) for capital
expenditures, working capital and general corporate purposes and (B) to fund
Permitted Acquisitions; and
(iii) any Letters of Credit shall be used for general corporate
purposes.
Notwithstanding anything herein to the contrary, no Loan or Letter of Credit
will be used for the purchasing or carrying of any Margin Stock.
5.10 COMPLIANCE WITH LAWS, ETC. The Borrower shall comply, and shall
cause each of its Subsidiaries to comply, in all material respects with all
applicable Requirements of Law, such compliance to include, without
limitation (i) paying before the same become delinquent all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or upon any of its Properties and (ii) paying all lawful
claims which if unpaid might become a Lien upon any of its Properties;
PROVIDED, HOWEVER, that neither the Borrower nor any of its Subsidiaries
shall be required to pay and discharge or to cause to be paid and discharged
any such tax, assessment, charge, levy or claim so long as (A) the validity
or applicability thereof is being contested in good faith by appropriate
proceedings and (B) the Borrower or such Subsidiary shall, to the extent
required by GAAP, have set aside on its books adequate reserves with respect
thereto.
5.11 CERTAIN OBLIGATIONS RESPECTING SUBSIDIARIES; PROHIBITIONS ON
CERTAIN AGREEMENTS. (a) The Borrower will cause each of its Subsidiaries
hereafter formed or acquired to execute and deliver to the Agent promptly
upon the formation or acquisition thereof (i) a Guarantee in form and
substance satisfactory to the Agent, guaranteeing the Obligations,(ii) a
Guarantor Security Agreement, in form and substance satisfactory to the
Agent, granting to the Agent, for the benefit of the Lenders, a security
interest in the tangible and intangible personal property of such Subsidiary,
together with appropriate Lien searches requested by the Agent indicating the
Lenders' first priority Lien on such personal property and (iii) UCC-1
Financing Statements, duly executed by such Subsidiary, in form and substance
satisfactory to the Agent.
(b) The Borrower will not, and will not permit any of its Subsidiaries
to, without the prior written consent of the Majority Lenders, enter into any
indenture, agreement, instrument or other arrangement that, directly or
indirectly, prohibits or restrains, or has the effect of prohibiting or
restraining, or imposes materially adverse conditions upon, the incurrence or
payment of indebtedness, the granting of Liens, the declaration or
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payment of dividends, the making of loans, advances or investments or the
sale, assignment, transfer or other disposition of Property, or which imposes
any financial covenants on the Borrower or any of its Subsidiaries.
5.12 YEAR 2000. The Borrower has implemented, and has caused its
Subsidiaries to implement, a plan to address Year 2000 problems that might occur
in the Borrower's or its Subsidiaries' computer hardware, software, operating
systems, telecommunications, building systems and data exchange with their
respective critical vendors and customers. The Borrower has allocated, and has
caused its Subsidiaries to allocate, adequate staff and financial resources, and
the Borrower and its Subsidiaries will be Year 2000 Complaint with all their
respective mission-critical systems by the earlier of such date as the Borrower
and its Subsidiaries have appointed in their Year 2000 remediation plans, or
midnight, Pacific Coast Time, December 31, 1999. "Year 2000 Complaint" means
the state and point in time when the Borrower's and its Subsidiaries'
information processing, financial and business operations, systems and
technologies (collectively, "Technologies") will accurately process date/time
data (including without limitation calculating, comparing and sequencing) from,
into and between the years 1999 and 2000, for their own accounts and when used
in combination with the Technologies of third parties. Upon request, the
Borrower will provide to the Agent evidence of the Borrower's and its
Subsidiaries' compliance with the terms of this paragraph.
SECTION 6. NEGATIVE COVENANTS
The Borrower hereby agrees that from and after the Restatement Date, so
long as any Commitments remain in effect, any Note remains outstanding and
unpaid or any other amount is owing to any Lender or the Agent hereunder, or any
Letter of Credit remains outstanding:
6.1 FINANCIAL CONDITION COVENANTS. The Borrower shall not:
(a) MAXIMUM FUNDED DEBT TO EBITDA. As of the last day of any fiscal
quarter, commencing with the fiscal quarter ending December 31, 1998, permit the
ratio of Funded Debt to EBITDA, calculated on a cumulative four quarter rolling
basis for such fiscal quarter and the three immediately preceding fiscal
quarters, to exceed 2.50:1.
(b) FIXED CHARGE COVERAGE RATIO. Permit the Fixed Charge Coverage Ratio
as of the last day of any fiscal quarter, commencing with the fiscal quarter
ending December 31, 1998, calculated on a cumulative four quarter rolling basis
for the present fiscal quarter and the three immediately preceding fiscal
quarters, to be less than 1.30:1.
(c) MINIMUM NET WORTH. Permit Net Worth at any time to be less than
$23,900,000.
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6.2 LIMITATION ON INDEBTEDNESS. The Borrower shall not create, incur,
assume or suffer to exist any Indebtedness, and shall not permit any of its
Subsidiaries to create, incur, assume or suffer to exist any Indebtedness,
except for:
(a) Indebtedness created hereunder and under the Notes and the other Loan
Documents;
(b) Indebtedness of the Borrower or any of its Subsidiaries outstanding on
the Restatement Date and listed on SCHEDULE 6.2 (and not referred to in any
other clause of this Section 6.2);
(c) Indebtedness (i) evidenced by performance bonds issued in the ordinary
course of business or reimbursement obligations in respect thereof, (ii)
evidenced by a letter of credit facility related to insurance associated with
claims for work-related injuries or (iii) for bank overdrafts incurred in the
ordinary course of business that are promptly repaid, in an aggregate amount
(under clauses (i), (ii) and (iii)) not to exceed $100,000 at any one time
outstanding;
(d) Indebtedness secured by Liens permitted by Section 6.3(g);
(e) Indebtedness incurred in connection with Capitalized Lease Obligations
permitted pursuant to Section 6.3(g);
(f) Indebtedness of Wholly Owned Subsidiaries of the Borrower to the
Borrower or to other Wholly Owned Subsidiaries of the Borrower;
(g) Guarantee Obligations of the Borrower incurred in the ordinary course
of business in respect of obligations of any Subsidiary; and
(h) other unsecured Indebtedness incurred in the ordinary course of
business in an aggregate amount not to exceed at any time $2,000,000.
6.3 LIMITATION ON LIENS. The Borrower shall not, and shall not permit any
of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon
any of its property, assets or revenues, whether now owned or hereafter
acquired, except for:
(a) Liens created hereunder or under any of the other Loan Documents;
(b) Liens for taxes not yet due or which are being contested in good faith
by appropriate proceedings, PROVIDED THAT adequate reserves with respect thereto
are maintained on the books of the Borrower or its Subsidiaries, as the case may
be, in conformity with GAAP;
(c) Liens created by operation of law not securing the payment of
Indebtedness for money borrowed or guaranteed, including carriers',
warehousemen's,
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mechanics', materialmen's, repairmen's or other like Liens arising in the
ordinary course of business which are not overdue for a period of more than
30 days or which are being contested in good faith by appropriate proceedings;
(d) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(e) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(f) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business which, in the aggregate, would not
cause a Material Adverse Effect;
(g) Liens securing Capitalized Lease Obligations and purchase money
security interests on any property or equipment acquired or held by the Borrower
or its Subsidiaries in the ordinary course of business, securing Indebtedness
incurred or assumed for the purpose of financing all or any part of the cost of
acquiring such property or equipment; PROVIDED THAT (i) any such Lien attaches
to such property or equipment concurrently with or within 20 days after the
acquisition thereof, (ii) such Lien attaches solely to the property or equipment
so acquired in such transaction, (iii) the principal amount of the Indebtedness
secured thereby does not exceed 100% of the cost of such property or equipment
including transportation, installation and sales or use taxes; and
(h) Liens existing on the date hereof and referred to in SCHEDULE 6.3 (and
not referred to in any other clause of this Section 6.3).
6.4 LIMITATION ON FUNDAMENTAL CHANGES. The Borrower shall not, and shall
not permit any of its Subsidiaries to, (i) enter into any merger, consolidation
or amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or (ii) convey, sell, lease, assign, transfer or
otherwise dispose of all or substantially all of its property, business or
assets, or (iii) acquire any business or Property from, or capital stock of, or
be a party to any acquisition of, any Person EXCEPT THAT, so long as no Default
has occurred and is continuing or would result therefrom:
(a) The Borrower may consummate the Dubs Acquisition on or after the
Restatement Date in accordance with the terms of the Acquisition Agreement;
(b) the Borrower may consummate Permitted Acquisitions in accordance with
the terms of Section 6.7(h);
(c) any Subsidiary of the Borrower may be merged or consolidated with or
into: (i) the Borrower, if the Borrower shall be the continuing or surviving
corporation or (ii) any other Subsidiary; PROVIDED THAT if any such transaction
shall be between a
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Subsidiary and a Wholly Owned Subsidiary, the Wholly Owned Subsidiary shall
be the continuing or surviving corporation; and
(d) any Subsidiary may sell, lease, transfer or otherwise dispose of any
or all of its Property (upon voluntary liquidation or otherwise) to the Borrower
or a Wholly Owned Subsidiary of the Borrower.
6.5 LIMITATION ON SALE OF ASSETS. The Borrower will not, nor will it
permit any of its Subsidiaries to, make any Asset Disposition except Asset
Dispositions of obsolete or worn-out Property, tools or equipment no longer used
or useful in its business so long as the aggregate amount thereof sold in any
single fiscal year by the Borrower and its Subsidiaries shall not have a fair
market value in excess of $250,000; PROVIDED THAT in each case, no Default has
occurred and is continuing or would result from such Asset Disposition.
6.6 LIMITATION ON DIVIDENDS. The Borrower shall not, and shall not permit
any of its Subsidiaries to if a corporation, declare or pay any dividend (other
than dividends payable solely in common stock of the Borrower or its
Subsidiaries) on, or make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any shares of any class of Capital Stock of
the Borrower or its Subsidiaries or any warrants or options to purchase any such
Capital Stock, whether now or hereafter outstanding, or any other distribution
in respect thereof, either directly or indirectly, whether in cash or property
or in obligations of the Borrower or any Subsidiary (such declarations,
payments, setting apart, purchases, redemptions, defeasance, retirements,
acquisitions and distributions being herein called "RESTRICTED PAYMENTS"),
EXCEPT THAT any Subsidiary may make Restricted Payments to the Borrower or to
any other Wholly Owned Subsidiary of the Borrower; PROVIDED THAT in each case no
Default has occurred and is continuing or would result from the making of such
Restricted Payment.
6.7 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. The Borrower will not,
and will not permit any of its Subsidiaries to, make any advance, loan,
extension of credit or capital contribution to, or purchase any stock, bonds,
notes, debentures or other securities of or any assets constituting a business
unit of, or make any other investment in (any of the foregoing, an
"INVESTMENT"), any Person, except for:
(a) investments permitted by Section 6.4(a) and (b);
(b) investments in marketable securities, liquid investments and other
financial instruments that are acquired for investment purposes and may be
readily sold or otherwise liquidated, that have a value which may be readily
established and which are investment grade;
(c) investments outstanding on the date hereof and identified in
SCHEDULE 6.7;
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(d) operating deposit accounts with banks;
(e) investments by the Borrower and its Subsidiaries in the Borrower and
its Subsidiaries;
(f) extensions of credit in the nature of accounts receivable or notes
receivable arising from the sale or lease of goods or services in the ordinary
course of business;
(g) extensions of credit to employees evidenced by promissory notes in an
aggregate amount not to exceed $500,000; and
(h) Permitted Acquisitions, so long as:
(i) unless the Majority Lenders shall otherwise consent in writing,
the aggregate purchase price of all Permitted Acquisitions shall not exceed
$4,000,000;
(ii) such acquisition (if by purchase of assets, merger or
consolidation) shall be effected in such manner so that the acquired entity
and the related assets thereof, are owned either by the Borrower or a
Wholly Owned Subsidiary of the Borrower, and, if effected by merger or
consolidation involving the Borrower, the Borrower shall be the continuing
or surviving entity;
(iii) such acquisition (if by purchase of stock) shall be effected in
such manner so that the acquired entity becomes a Wholly Owned Subsidiary
of the Borrower;
(iv) the Agent shall have received, at least 10 Business Days prior to
such acquisition, each of the following, in each case in form and substance
reasonably acceptable to the Agent, (A) all documents as it shall
reasonably request evidencing such acquisition (including the acquisition
agreement therefor), (B) pro forma financial statements combining the
historical results of the Borrower and the business to be acquired, (C)
updated projections of the Borrower reflecting such acquisition, (D) such
security documents, mortgages, pledge agreements, UCC-1 Financing
Statements and related documents as the Agent shall request to create or
confirm a first-priority security interest in favor of the Agent in the
assets to be acquired, (E) a pro forma Covenant Compliance Certificate and
(F) such other documents or evidence as the Agent or any Lender shall
reasonably request;
(v) concurrently with the consummation of such acquisition, all
actions (1) required under Section 5.11 and (2) required by the Agent to
perfect a security interest in all personal property assets acquired shall
have been taken); and
(vi) at the time of such acquisition and after giving effect thereto,
no Default
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shall have occurred and shall be continuing.
6.8 TRANSACTIONS WITH AFFILIATES. The Borrower shall not, and shall not
permit any of its Subsidiaries to, enter into any transaction, including,
without limitation, any purchase, sale, lease or exchange of property, employee
compensation arrangements, or the rendering of any service, with any Affiliate
or any Subsidiary not a Wholly Owned Subsidiary UNLESS such transaction is in
the ordinary course of the Borrower's or such Subsidiary's business and is upon
terms no less favorable to the Borrower or such Subsidiary, as the case may be,
than it would obtain in a comparable arm's length transaction with a Person not
an Affiliate; PROVIDED THAT, if any such transaction has a value in excess of
$500,000 the Majority Lenders shall have consented thereto.
6.9 FISCAL YEAR. Borrower shall not permit its fiscal year or the fiscal
year of any of its Subsidiaries to end on a day other than December 31.
6.10 SALE-LEASEBACK TRANSACTIONS. The Borrower shall not, and shall not
permit any of its Subsidiaries to, sell, assign or otherwise transfer any of its
Properties, rights or assets (whether now owned or hereafter acquired) to any
Person and thereafter directly or indirectly lease back the same or similar
property.
6.11 LINES OF BUSINESS. The Borrower will not, nor will it permit any of
its Subsidiaries to, engage to any substantial extent in any line or lines of
business activity other than the business of video duplication, post-production,
audio sweetening, the distribution of national television spot advertising,
trailers and electronic press kits for the motion picture and television
industries, and the ownership and rental of limited amounts of niche programming
and media buying.
SECTION 7. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall default in the payment when due (whether at stated
maturity or upon mandatory or optional prepayment) of any principal of or
interest on any Loan, any fee or any other amount payable by it hereunder or
under any other Loan Document; or
(b) Any representation or warranty made or deemed made by any Obligor
herein or in any other Loan Document or which is contained in any certificate,
document or financial or other statement furnished at any time under or in
connection with this Agreement or any other Loan Document shall prove to have
been incorrect in any material respect when made or deemed made; or
(c) The Borrower shall default in the observance or performance of any
agreement contained in Section 4.3(a), 4.3(b), 5.4(ii), 5.9 or 5.11 or any
provision of Section 6; or
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(d) Any Obligor shall default in the observance or performance of any
other agreement or obligation contained in this Agreement or the other Loan
Documents (other than as provided in paragraphs (a) through (c) of this
Section), and such default shall continue unremedied for a period of 30 days
after notice thereof from the Agent to the Borrower; or
(e) Any Guarantee shall cease, for any reason, to be in full force and
effect; or
(f) The Borrower or any other Obligor shall default in the payment when
due of principal of or interest on any Indebtedness (other than the Notes)
issued under the same indenture or other agreement, if the original principal
amount of Indebtedness covered by such indenture or agreement is $100,000 or
more; or any event specified in any note, agreement, indenture or other document
evidencing or relating to any such Indebtedness shall occur if the effect of
such event is to cause, or (with the giving of any notice or the lapse of time
or both) to permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause, such Indebtedness to become
due, or to be prepaid in full (whether by redemption, purchase, offer to
purchase or otherwise), prior to its stated maturity; or
(g) (i) The Borrower or any other Obligor shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its assets, or the Borrower or any
other Obligor shall make a general assignment for the benefit of its creditors;
or (ii) there shall be commenced against the Borrower or any other Obligor any
case, proceeding or other action of a nature referred to in clause (i) above
which (A) results in the entry of an order for relief or any such adjudication
or appointment or (B) remains undismissed, undischarged, unstayed or unbonded
for a period of 60 days; or (iii) there shall be commenced against the Borrower
or any other Obligor any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against all or
any substantial part of its assets which results in the entry of an order for
any such relief which shall not have been vacated, discharged, stayed or bonded
pending appeal within 60 days from the entry thereof; or (iv) the Borrower or
any other Obligor shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in clause
(i), (ii), or (iii) above; or (v) the Borrower or any other Obligor shall
generally not, or shall be unable to, or shall admit in writing its inability
to, pay its debts as they become due or there shall be a general assignment for
the benefit of creditors; or
(h) (i) The Borrower or any Commonly Controlled Entity shall engage in
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any non-exempt "prohibited transaction" (as defined in Section 406 of ERISA or
Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall
exist with respect to any Plan, (iii) a Reportable Event shall occur with
respect to, or proceedings shall commence to have a trustee appointed, or a
trustee shall be appointed, to administer or to terminate any Single Employer
Plan, which Reportable Event or commencement of proceedings or appointment of a
trustee would reasonably be expected to result in the termination of such Plan
for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate
for purposes of Title IV of ERISA (other than a standard termination) or (v) the
Borrower or any Commonly Controlled Entity would reasonably be expected to incur
any liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan; and in each case regarding clauses (i)
through (v) above, such event or condition, together with all other such events
or conditions, if any, would reasonably be expected to result in a Material
Adverse Effect; or
(i) One or more judgments or decrees shall be entered against the Borrower
or any Subsidiary involving in the aggregate a liability (not paid or fully
covered by insurance where the insurer has admitted liability in respect of such
judgment) of $500,000 or more, or involving in the aggregate a liability
(regardless of insurance coverage) of $1,000,000 or more, and all such judgments
or decrees shall not have been vacated, discharged, stayed or bonded pending
appeal within 30 days from the entry thereof or in any event five days before
the date of any sale pursuant to such judgment or decree; or
(j) The Liens created by the Collateral Documents and/or the Guarantor
Collateral Documents shall at any time not constitute valid and perfected Liens
on the collateral intended to be covered thereby in favor of the Agent, free and
clear of all other Liens (other than Liens permitted under Section 6.3), or,
except for expiration in accordance with its terms, any of the Collateral
Documents and/or the Guarantor Collateral Documents shall for whatever reason be
terminated or cease to be in full force and effect, or the enforceability
thereof shall be contested by any Obligor; or
(k) (i) R. Luke Stefanko, or another officer of the Borrower as of the
Restatement Date, shall cease to be the Chief Executive Officer of the Borrower,
(ii) R. Luke Stefanko shall cease to beneficially own Capital Stock representing
at least 20% of the votes that may be cast in an election of directors of the
Borrower, or (iii) individuals who constituted the Borrower's Board of Directors
as of the Restatement Date shall cease for any reason to constitute a majority
of the directors then in office;
then, and in any such event, (A) if such event is an Event of Default specified
in paragraph (g) above, automatically the Commitments to the Borrower and the
commitment to issue Letters of Credit shall immediately terminate and the Loans
made to the Borrower hereunder (with accrued interest thereon) and all other
Obligations shall immediately become due and payable, and (B) if such event is
any other Event of Default, with the consent of the Majority Lenders, the Agent
may, or upon the request of
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the Majority Lenders, the Agent shall, take any or all of the following
actions: (i) by notice to the Borrower declare the Commitments to the
Borrower and the commitment to issue Letters of Credit to be terminated
forthwith, whereupon such Commitments and the commitment to issue Letters of
Credit shall immediately terminate; and (ii) by notice of default to the
Borrower, declare the Loans (with accrued interest thereon) and all other
Obligations under this Agreement and the Notes to be due and payable
forthwith, whereupon (x) the same shall immediately become due and payable
and (y) to the extent any Letters of Credit are then outstanding, the
Borrower shall make a Cash Collateral Deposit in an amount equal to the
aggregate Letter of Credit Amount. In all cases, with the consent of the
Majority Lenders, the Agent may enforce any or all of the Liens and security
interests and other rights and remedies created pursuant to any Loan Document
or available at law or in equity. Except as expressly provided above in this
Section, presentment, demand, protest and all other notices of any kind are
hereby expressly waived by the Borrower.
SECTION 8. THE AGENT
8.1 APPOINTMENT. Each Lender hereby irrevocably designates and appoints
Union Bank of California, N.A., as Agent for such Lender under this Agreement
and the other Loan Documents, and each such Lender irrevocably authorizes Union
Bank of California, N.A., as the Agent for such Lender, to take such action on
its behalf under the provisions of this Agreement and the other Loan Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Agent by the terms of this Agreement and the other Loan Documents,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Agent shall have no duties or responsibilities, except those expressly set forth
herein, or any fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against the
Agent.
8.2 DELEGATION OF DUTIES. The Agent may execute any of its duties under
this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
8.3 EXCULPATORY PROVISIONS. Neither the Agent, nor any of the Agent's
officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement or any other Loan Document
(except for its or such Person's own gross negligence or willful misconduct) or
(ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by the Borrower, any Subsidiary
or any other Obligor or any officer thereof contained in this Agreement or any
other Loan Document or in any certificate, report, statement or other
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document referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Loan Document or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or the Notes or any other Loan Document or for any failure of the
Borrower, any Subsidiary or any other Obligor to perform its obligations
hereunder or thereunder. The Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any
of the agreements contained in, or conditions of, this Agreement or any other
Loan Document, or to inspect the properties, books or records of the
Borrower, any Subsidiary or any other Obligor.
8.4 RELIANCE BY THE AGENT. The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Borrower), the Accountants and independent
accountants and other experts selected by the Agent. The Agent may deem and
treat the payee of any Note as the owner thereof for all purposes unless a
written notice of assignment, negotiation or transfer thereof shall have been
filed with the Agent. The Agent shall be fully justified in failing or refusing
to take any action under this Agreement or any other Loan Document unless it
shall first receive such advice or concurrence of the Majority Lenders, the
Majority Revolving Loan Lenders or all Lenders, as it deems appropriate, or it
shall first be indemnified to its satisfaction by the Lenders against any and
all liability and expense (except those incurred solely as a result of the
Agent's gross negligence or willful misconduct) which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement and the Notes and the other Loan Documents in accordance with a
request of the Majority Lenders, the Majority Revolving Loan Lenders or all
Lenders, as may be required, and such request and any action taken or failure to
act pursuant thereto shall be binding upon all the Lenders and all future
holders of the Notes.
8.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default hereunder unless the Agent has received
notice from a Lender or the Borrower referring to this Agreement, describing
such Default and stating that such notice is a "notice of default". In the
event that the Agent receives such a notice, the Agent shall give notice thereof
to the Lenders. The Agent shall take such action with respect to such Default
as shall be reasonably directed by the Majority Lenders, the Majority Revolving
Loan Lenders, or all Lenders as appropriate; PROVIDED THAT unless and until the
Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default as it shall deem advisable in the best interests of the Lenders
or as the Agent shall believe necessary to protect the Lenders' interests in the
Collateral or the Guarantor Collateral.
8.6 NON-RELIANCE ON THE AGENT AND OTHER LENDERS. Each Lender expressly
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acknowledges that neither the Agent, nor any of the Agent's officers,
directors, partners, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the Agent
hereafter taken, including any review of the affairs of the Borrower, any
Subsidiary or any other Obligor, shall be deemed to constitute any
representation or warranty by the Agent to any Lender. Each Lender
represents to the Agent that it has, independently and without reliance upon
the Agent or any other Lender, and based on such documents and information as
it has deemed appropriate, made its own appraisal of and investigation into
the business, operations, property, financial and other condition and
creditworthiness of the Borrower, any Subsidiary and the other Obligors and
made its own decision to make its Loans, and participate in Letters of
Credit, hereunder and enter into this Agreement. Each Lender also represents
that it will, independently and without reliance upon the Agent or any other
Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the
other Loan Documents, and to make such investigation as it deems necessary to
inform itself as to the business, operations, property, financial and other
condition and creditworthiness of the Borrower, its Subsidiaries and the
other Obligors. Except for notices, reports and other documents expressly
required to be furnished to the Lenders by the Agent hereunder, the Agent
shall have no duty or responsibility to provide any Lender with any credit or
other information concerning the business, operations, property, condition
(financial or otherwise), prospects or creditworthiness of the Borrower, any
Subsidiary or any other Obligor which may come into the possession of the
Agent or any of its officers, directors, employees, agents, attorneys-in-fact
or Affiliates.
8.7 INDEMNIFICATION. The Lenders agree to indemnify the Agent in its
capacity as such (to the extent not reimbursed by the Borrower, its
Subsidiaries or the other Obligors and without limiting the obligation of
such Persons to do so), ratably according to the respective amounts of their
Commitments, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs (including, without
limitation, the allocated cost of internal counsel), expenses or
disbursements of any kind whatsoever which may at any time (including,
without limitation, at any time following the payment of the Notes) be
imposed on, incurred by or asserted against the Agent, in its capacity as
Agent, but not as a Lender hereunder, in any way relating to or arising out
of this Agreement, any of the other Loan Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent
under or in connection with any of the foregoing; PROVIDED THAT no Lender
shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements to the extent they arise from the gross negligence
or willful misconduct of the party to be indemnified. The agreements in this
Section shall survive the payment of the Notes and all other amounts payable
hereunder and the expiration of the Letters of Credit.
8.8 THE AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its Affiliates may
make loans to, accept deposits from and generally engage in any kind of business
with the
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Borrower, any Subsidiary and the other Obligors as though the Agent were not
the Agent hereunder and under the other Loan Documents. The Loans made or
renewed and the Letters of Credit issued or participated in by the Agent, and
any Note issued to the Agent shall have the same rights and powers under this
Agreement and the other Loan Documents as any Lender and the Agent may
exercise the same as though it were not the Agent, and the terms "Lender" and
"Lenders" shall include the Agent in its individual capacity.
8.9 SUCCESSOR AGENT. The Agent may resign as Agent upon 30 days' notice
to the Lenders. If the Agent shall resign as Agent under this Agreement and
the other Loan Documents, then the Majority Lenders shall appoint from among
the Lenders a successor agent for the Lenders, which successor agent (so long
as no Default has occurred and is continuing) shall be approved by the
Borrower (which consent shall not be unreasonably withheld), whereupon such
successor agent shall succeed to the rights, powers and duties of the Agent
and the term "Agent" shall mean such successor agent, effective upon its
appointment, and the former Agent's rights, powers and duties as Agent shall
be terminated, without any other or further act or deed on the part of such
former Agent or any of the parties to this Agreement or any holders of the
Notes. After any retiring Agent's resignation as Agent, the provisions of
this Section shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement and the other Loan
Documents. Further, if the Agent no longer has any Loans, Letter of Credit
participations or Commitments hereunder, the Agent shall immediately resign
and shall be replaced, and have the benefits, as set forth in this Section
8.9. In addition, after the replacement of an Agent hereunder, the retiring
Agent shall remain a party hereto and shall continue to have all the rights
and obligations of an Agent under this Agreement with respect to Letters of
Credit issued by it prior to such replacement, but shall not be required to
issue additional Letters of Credit.
8.10 COLLATERAL DOCUMENTS. Anything contained in any of the Loan
Documents to the contrary notwithstanding, the Borrower, the Agent and each
Lender hereby agree that (a) no Lender shall have any right individually to
realize upon any of the Collateral or Guarantor Collateral under any Loan
Document or to enforce any Guarantee, it being understood and agreed that all
powers, rights and remedies under the Collateral Documents and Guarantor
Collateral Documents and the Guarantees may be exercised solely by the Agent
for the benefit of the Lenders in accordance with the terms thereof, and (b)
in the event of a foreclosure by the Agent on any of the Collateral or
Guarantor Collateral pursuant to a public or private sale, the Agent or any
Lender may be the purchaser of any or all of such Collateral or Guarantor
Collateral at any such sale and the Agent, as agent for and representative of
the Lenders (but not any Lender or Lenders in its or their respective
individual capacities unless the Majority Lenders shall otherwise agree in
writing) shall be entitled, for the purpose of bidding and making settlement
or payment of the purchase price for all or any portion of the Collateral or
Guarantor Collateral sold at any such public sale, to use and apply any of
the Obligations as a credit on account of the purchase price for any such
collateral payable by the Agent at such sale.
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SECTION 9. MISCELLANEOUS
9.1 AMENDMENTS AND WAIVERS. Except as otherwise expressly provided in
this Agreement, any provision of the Loan Documents may be modified or
supplemented only by an instrument in writing signed by the Borrower, the
Agent and the Majority Lenders, or by the Borrower and the Agent acting with
the consent of the Majority Lenders, and any provision of any Loan Document
may be waived by the Majority Lenders or by the Agent acting with the consent
of the Majority Lenders; PROVIDED, HOWEVER, that no such waiver and no such
amendment, supplement or modification shall (i) (a) reduce the amount or
extend the maturity of any Note or any installment due thereon, or reduce the
rate or extend the time of payment of interest thereon, or reduce the amount
or extend the time of payment of any fee, indemnity or reimbursement payable
to any Lender hereunder, or change the amount of any Lender's Commitment, or
amend, modify or waive any provision of Section 2.4, without the written
consent of the Lender affected thereby; or (b) amend, modify or waive any
provision of this Section 9.1 or reduce the percentage specified in or
otherwise modify the definition of Majority Lenders or Majority Revolving
Loan Lenders, or consent to the assignment or transfer by any Obligor of any
of its rights and obligations under this Agreement and the other Loan
Documents (except as permitted under Section 6.4); or (c) release any Obligor
from any liability under its respective Loan Documents; or (d) release any
material portion of the Collateral or any material portion of the Guarantor
Collateral, except for any Asset Disposition or release of Lien permitted by
this Agreement or any other Loan Document; or (e) amend, modify or waive,
directly or indirectly, any of the provisions of Section 2.1(e), 2.2(f) or
2.11; or (f) amend, modify or waive any provision of this Agreement requiring
the consent or approval of all Lenders; or (g) increase the Aggregate
Commitment, in each case set forth in clauses (i)(b) through (i)(g) above
without the written consent of all the Lenders; or (ii) amend, modify or
waive any provision of Section 4.2 with respect to the making of a Revolving
Loan, or reduce the percentage specified in, or otherwise modify the
definition of, Majority Revolving Loan Lenders, without the written consent
of the Majority Revolving Loan Lenders; or (iii) amend, modify or waive any
provision of Section 8 without the written consent of the Agent, or any
provision affecting the rights and duties of the Agent as the issuer of
Letters of Credit without the consent of the then Agent. Any such waiver and
any such amendment, supplement or modification shall apply equally to each of
the Lenders and shall be binding upon the Borrower, the other Obligors, the
Lenders, the Agent and all future holders of the Notes. In the case of any
waiver, the Borrower, the other Obligors, the Lenders, and the Agent shall be
restored to their former position and rights hereunder and under the
outstanding Notes and any other Loan Documents, and any Default waived shall
be deemed to be cured and not continuing; but no such waiver shall extend to
any subsequent or other Default, or impair any right consequent thereon.
9.2 NOTICES. All notices, requests and demands or other communications to
or upon the respective parties hereto to be effective shall be in writing
(including by
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telecopy), and, unless otherwise expressly provided herein, shall be deemed
to have been duly given or made when delivered by hand, or 3 days after being
deposited in the United States mail, certified and postage prepaid and return
receipt requested, or, in the case of telecopy notice, when received, in each
case addressed as follows in the case of the Borrower and the Agent, and as
set forth on the signature pages hereto, or in the Assignment and Acceptance
pursuant to which a Person becomes a party hereto, in the case of the
Lenders, or to such other address as may be hereafter notified by the
respective parties hereto and any future holders of the Notes:
The Borrower: VDI Media
6920 Sunset Boulevard
Hollywood, California 90028
Attention: Donald R. Stine
Telecopy: (213) 957-2164
The Agent: Union Bank of California, N.A
445 South Figueroa Street
Los Angeles, California 90071-1100
Attention: Jon E. Strayer
Telecopy: (213) 236-7635
PROVIDED THAT any notice, request or demand to or upon the Agent or the
Lenders pursuant to Section 2.1, 2.2, 2.3, 2.4 or 2.6 shall not be effective
until received.
9.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay
in exercising, on the part of the Agent or any Lender, any right, remedy,
power or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the
execution and delivery of this Agreement and the Notes.
9.5 PAYMENT OF EXPENSES AND TAXES. The Borrower agrees (a) to pay or
reimburse the Agent for all its reasonable costs and out-of-pocket expenses
(including travel and other expenses incurred by it or its agents in connection
with performing due diligence with regard hereto) incurred in connection with
the development, preparation and execution of, and any amendment, supplement or
modification to, this Agreement and the other Loan Documents and any other
documents prepared in connection herewith or therewith, and the consummation and
administration of the transactions contemplated hereby and thereby, including,
without limitation, syndication efforts (whether completed before or after the
Restatement Date) in connection with this
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Agreement and the reasonable fees and disbursements of counsel to the Agent,
(b) after the occurrence and during the continuance of a Default, to pay or
reimburse the Agent and each Lender for all its reasonable costs and
out-of-pocket expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the Notes, the other Loan
Documents and any such other documents or in connection with any refinancing
or restructuring of the credit arrangements provided under this Agreement in
the nature of a "work-out" or of any insolvency or bankruptcy proceeding,
including, without limitation, reasonable legal fees and disbursements of
counsel to the Agent and each Lender (including the allocated costs of
internal counsel to the Agent and the Lenders which costs are not in
duplication of any costs of outside counsel to the Agent and each Lender),
(c) to pay, and indemnify and hold harmless each Lender and the Agent from
any and all recording and filing fees and any and all liabilities with
respect to, or resulting from any delay in paying, stamp, excise and other
taxes, if any, which may be payable or determined to be payable in connection
with the execution and delivery of, or consummation or administration of any
of the transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, this
Agreement, the Notes, the other Loan Documents and any such other documents
and (d) to pay, and indemnify and hold harmless each Lender and the Agent and
the officers, partners, directors, employees, agents and affiliates of the
Agent or any Lender (collectively "INDEMNITEES") from and against, any and
all Indemnified Liabilities, PROVIDED THAT the Borrower shall have no
obligation hereunder to the Agent or any Lender with respect to Indemnified
Liabilities arising from the gross negligence or willful misconduct of the
Agent or any Lender. As used herein, "Indemnified Liabilities" means,
collectively, any and all liabilities, obligations, losses, damages
(including natural resource damages), penalties, actions, judgments, suits,
claims (including environmental claims), costs (including the costs of any
investigation, study, sampling, testing, abatement, cleanup, removal,
remediation or other response action necessary to remove, remediate, clean up
or abate any activities relating to Hazardous Materials), expenses and
disbursements of any kind or nature whatsoever (including the reasonable fees
and disbursements of counsel for Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened
by any Person, whether or not any such Indemnitee shall be designated as a
party or a potential party thereto, and any fees or expenses incurred by
Indemnitees in enforcing this indemnity), whether direct, indirect or
consequential and whether based on any federal, state or foreign laws,
statutes, rules or regulations (including securities and commercial laws,
statutes, rules or regulations and environmental laws), on common law or
equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or
arising out of this Agreement or the other Loan Documents or the Acquisition
Agreement or the transactions contemplated hereby or thereby (including
Lenders' agreement to make the Loans hereunder or the use or intended use of
the proceeds thereof or the issuance of Letters of Credit hereunder or the
use or intended use of any thereof, or any enforcement of any of the Loan
Documents (including any sale of, collection from, or other realization upon
any of the Collateral or the Guarantor Collateral or the enforcement of the
Guarantees)). (To the extent that the undertakings to defend, indemnify, pay
and hold harmless set forth in this Section 9.5 may be unenforceable in whole
or in part because they are violative of any law or public policy, the
Borrower shall contribute the maximum portion that it is permitted to pay and
satisfy under applicable law to the payment and satisfaction of all
Indemnified Liabilities incurred by Indemnitees or any of them.) The
agreements in this Section shall
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survive repayment of the Notes and all other amounts payable hereunder.
9.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; PURCHASING LENDERS. (a)
This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Agent, all future holders of the Notes and their
respective successors and assigns, except that the Borrower may not assign,
transfer or delegate any of its rights or obligations under this Agreement
without the prior written consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial banking or
finance business and in accordance with applicable law, at any time sell to
one or more banks or other entities ("PARTICIPANTS") participating interests
in any Loan owing to such Lender, any Letter of Credit participated in by
such Lender, any Note held by such Lender, any Commitment of such Lender or
any other interest of such Lender hereunder and under the other Loan
Documents; PROVIDED THAT the holder of any such participation, other than an
Affiliate of such Lender, shall not be entitled to require such Lender to
take or omit to take any action hereunder except action directly affecting
the extension of the maturity of any portion of the principal amount of a
Loan or Commitment, the expiration of a Letter of Credit or any portion of
interest or fees related thereto allocated to such participation or a
reduction of the principal amount or principal payment amount of or the rate
of interest payable on the Loans or any fees related thereto or reduction of
the amount to be reimbursed under any Letter of Credit, or a release of any
Obligor or any substantial portion of the Collateral or the Guarantor
Collateral or any increase in participation amounts. In the event of any such
sale by a Lender of participating interests to a Participant, such Lender's
obligations under this Agreement to the other parties to this Agreement shall
remain unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the holder of any such Note and
the participant in any such Letter of Credit for all purposes under this
Agreement and the other Loan Documents, and the Borrower and the Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and the other Loan
Documents. The Borrower agrees that if amounts outstanding under this
Agreement and the Notes are due or unpaid, or shall have been declared or
shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of setoff in respect of
its participating interest in amounts owing under this Agreement and any Note
to the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement or any Note, PROVIDED THAT
such Participant shall only be entitled to such right of setoff if it shall
have agreed in the agreement pursuant to which it shall have acquired its
participating interest to share with the Lenders the proceeds thereof as
provided in Section 9.7. The Borrower also agrees that each Participant
shall be entitled to the benefits of Sections 2.13, 2.14 and 2.15 with
respect to its participation in the Commitments and the Loans and the Letters
of Credit outstanding from time to time; PROVIDED THAT no Participant shall
be entitled to receive any greater amount pursuant to such Sections than the
transferor Lender would have been entitled to receive in respect of the
amount of the participation transferred by such transferor Lender to such
Participant had no such transfer occurred.
(c) Any Lender may, in the ordinary course of its commercial banking
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business and in accordance with applicable law, at any time sell to any of
its Affiliates or to any Lender, any Affiliate thereof or to one or more
additional lenders or financial institutions, which additional lenders shall
be subject to the consent of the Borrower, such consent not to be
unreasonably withheld and not to be required if a Default has occurred and is
continuing, and the Agent ("PURCHASING LENDERS") all or any part of its
rights and obligations under this Agreement, the Notes and the other Loan
Documents pursuant to an Assignment and Acceptance executed by such
Purchasing Lender and such transferor Lender and delivered to the Agent for
its acceptance and recording in the Register (as defined in (d) below),
PROVIDED THAT (i) any such sale must result in the Purchasing Lender having
at least $5,000,000 in aggregate amount of obligations under this Agreement,
the Notes and the other Loan Documents and (ii) each such assignment by a
Lender of its Revolving Loans, Revolving Note, Revolving Commitment or its
participation in Letters of Credit shall be in such manner so that the same
portion of its Revolving Loans, Revolving Note, Revolving Commitment and its
participation in Letters of Credit is assigned to the respective assignee.
Upon such execution, delivery, acceptance and recording, from and after the
transfer effective date determined pursuant to such Assignment and
Acceptance, (x) the Purchasing Lender thereunder shall be a party hereto and,
to the extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder with a Commitment as set forth therein, and
(y) the transferor Lender thereunder shall, to the extent of such assigned
portion and as provided in such Assignment and Acceptance, be released from
its obligations under this Agreement and the other Loan Documents (and, in
the case of an Assignment and Acceptance covering all or the remaining
portion of a transferor Lender's rights and obligations under this Agreement,
such transferor Lender shall cease to be a party hereto). Such Assignment
and Acceptance shall be deemed to amend this Agreement to the extent, and
only to the extent, necessary to reflect the addition of such Purchasing
Lender and the resulting adjustment of Commitment Percentages arising from
the purchase by such Purchasing Lender of all or a portion of the rights and
obligations of such transferor Lender under this Agreement, the Notes and the
other Loan Documents. On or prior to the transfer effective date determined
pursuant to such Assignment and Acceptance, the Borrower, at its own expense,
shall execute and deliver to the Agent in exchange for the surrendered Note
or Notes a new Note or Notes to the order of such Purchasing Lender in an
amount equal to the Commitments assumed by it pursuant to such Assignment and
Acceptance, and if the transferor Lender has retained a Commitment hereunder,
new Notes to the order of the transferor Lender in an amount equal to the
Commitments retained by it hereunder. Such new Notes shall be dated the
Restatement Date and shall otherwise be in the form of the Notes replaced
thereby. The Notes surrendered by the transferor Lender shall be returned by
the Agent to the Borrower marked "canceled."
(d) The Agent shall maintain at its address referred to in Section 9.2 a
copy of each Assignment and Acceptance delivered to it and a register (the
"REGISTER") for the recordation of the names and addresses of the Lenders and
the Commitments of, and principal amount of the Loans owing to, and, if
applicable, the Letters of Credit participated in by, each Lender from time to
time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Agent and the
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Lenders may treat each Person whose name is recorded in the Register as the
owner of the Loans and the participant in the Letters of Credit, if
applicable, recorded therein for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower or any Lender at
any reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed in
accordance with the terms hereof, together with payment to the Agent by the
Purchasing Lender of a registration and processing fee of $2,500, the Agent
shall (i) promptly accept such Assignment and Acceptance and (ii) on the
effective date determined pursuant thereto record the information contained
therein in the Register.
(f) The Borrower authorizes each Lender to disclose to any Participant
or Purchasing Lender (each, a "TRANSFEREE") and any prospective Transferee
any and all financial information in such Lender's possession concerning the
Borrower, its Subsidiaries, and their Affiliates which has been delivered to
such Lender by or on behalf of the Borrower pursuant to this Agreement or any
other Loan Document or which has been delivered to such Lender by or on
behalf of the Borrower in connection with such Lender's credit evaluation of
the Borrower, its Subsidiaries, and their Affiliates prior to becoming a
party to this Agreement.
(g) Nothing herein shall prohibit any Lender from pledging or assigning
any of its rights under its Notes, or, if applicable, its participation in
any Letter of Credit, to any Federal Reserve Bank in accordance with
applicable law.
9.7 ADJUSTMENTS; SET-OFF. (a) If any Lender (a "BENEFITTED LENDER")
shall at any time receive any payment of all or part of its Loans, its
participations in Letters of Credit, or interest thereon, or fees, or receive
any collateral in respect thereof (whether voluntarily or involuntarily, by
set-off, pursuant to events or proceedings of the nature referred to in
Section 7(g), or otherwise), in a greater proportion than any such payment to
or collateral received by any other Lender, if any, in respect of such other
Lender's Loans, its participations in Letters of Credit, or interest thereon,
or fees, such benefitted Lender shall purchase for cash from the other
Lenders such portion of each such other Lender's Loans, participations in
Letters of Credit, or fees, or shall provide such other Lenders with the
benefits of any such collateral, or the proceeds thereof, as shall be
necessary to cause such benefitted Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of the Lenders;
PROVIDED, HOWEVER, that if all or any portion of such excess payment or
benefits is thereafter recovered from such benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the
extent of such recovery, but without interest. The Borrower agrees that each
Lender so purchasing a portion of another Lender's Loan or its participations
in Letters of Credit may exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such portion as fully as if
such Lender were the direct holder of such portion.
(b) In addition to any rights and remedies of the Lenders provided by law,
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with the prior consent of the Majority Lenders, each Lender shall have the
right, exercisable upon the occurrence and during the continuance of an Event
of Default and acceleration of the Obligations pursuant to Section 7, without
prior notice to the Borrower, any such notice being expressly waived by the
Borrower to the extent permitted by applicable law, to set-off and
appropriate and apply against any such Obligations any and all deposits
(general or special, time or demand, provisional or final), in any currency,
and any other credits, indebtedness or claims in any currency, in each case
whether direct or indirect, absolute or contingent, matured or unmatured, at
any time held or owing by such Lender or any branch or agency thereof or bank
controlling such Lender to or for the credit or the account of the Borrower.
Each Lender agrees promptly to notify the Borrower after any such set-off and
application made by such Lender, PROVIDED THAT the failure to give such
notice shall not affect the validity of such set-off and application.
9.8 COUNTERPARTS. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the
same instrument. Delivery by telecopier of an executed counterpart of a
signature page to this Agreement shall be effective as delivery of an
originally executed counterpart of this Agreement.
9.9 SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
9.10 INTEGRATION. This Agreement represents the entire agreement of the
Borrower, the Agent and the Lenders with respect to the subject matter
hereof, and there are no promises, undertakings, representations or
warranties by the Agent or any Lender relative to the subject matter hereof
not expressly set forth or referred to herein or in the other Loan Documents.
9.11 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.
9.12 ACKNOWLEDGEMENTS. The Borrower hereby acknowledges that: (a) it
has been advised by counsel in the negotiation, execution and delivery of
this Agreement and the Notes and the other Loan Documents;(b) neither the
Agent nor any Lender has any fiduciary relationship to the Borrower solely by
virtue of any of the Loan Documents, and the relationship pursuant to the
Loan Documents between the Agent and the Lenders, on one hand, and the
Borrower on the other hand, is solely that of creditor and debtor; and (c)
no joint venture exists among the Lenders or among the Borrower, on one hand
and the Lenders, on the other hand.
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9.13 HEADINGS. Section headings herein are included for convenience of
reference only and shall not constitute a part of this Agreement for any
other purpose.
9.14 COPIES OF CERTIFICATES, ETC. Whenever the Borrower is required to
deliver notices, certificates, opinions, statements or other information
hereunder to the Agent for delivery to any Lender, it shall do so in such
number of copies as the Agent shall reasonably specify.
9.15 TREATMENT OF CERTAIN INFORMATION; CONFIDENTIALITY.
(a) The Borrower acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
the Borrower or one or more of its Subsidiaries (in connection with this
Agreement or otherwise) by any Lender, or by one or more Subsidiaries or
affiliates of such Lender and the Borrower hereby authorizes each Lender to
share any information delivered to such Lender by the Borrower and its
Subsidiaries pursuant to this Agreement, or in connection with the decision
of such Lender to enter into this Agreement, to any such Subsidiary or
affiliate, it being understood that any such Subsidiary or affiliate
receiving such information shall be bound by the provisions of clause (b)
below as if it were a Lender hereunder. Such authorization shall survive the
repayment of the Loans, the expiration of the Letters of Credit and the
termination of the Commitments.
(b) Each Lender and the Agent agrees (on behalf of itself and each of
its affiliates, directors, officers, employees and representatives) to use
reasonable precautions to keep confidential, in accordance with their
customary procedures for handling confidential information of the same nature
and in accordance with safe and sound banking practices, any non-public
information supplied to it by the Borrower pursuant to this Agreement that is
identified by the Borrower as being confidential at the time the same is
delivered to the Lenders or the Agent, PROVIDED THAT nothing herein shall
limit the disclosure of any such information (i) to the extent required by
statute, rule, regulation or judicial process, (ii) to counsel for any of the
Lenders or the Agent, (iii) to bank examiners or other regulatory
authorities, auditors or accountants, (iv) to the Agent or any other Lender,
(v) in connection with any litigation to which any one or more of the Lenders
or the Agent is a party, (vi) to a subsidiary or affiliate of such Lender as
provided in clause (a) above or (vii) to any assignee or participant (or
prospective assignee or participant), and PROVIDED FURTHER that in no event
shall any Lender or the Agent be obligated or required to return any
materials furnished by the Borrower.
9.16 WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND THE LENDERS
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR
ANY OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH AND FOR ANY COUNTERCLAIM
THEREIN.
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9.17 EFFECT OF AMENDMENT AND RESTATEMENT. This Agreement is intended to
completely amend, restate and replace the Existing Agreement, without
novation. The Borrower hereby acknowledges, certifies and agrees that if,
pursuant to the Existing Agreement the Lender party thereto has made advances
on a revolving basis to the Borrower that are outstanding as of the date as
of this Agreement, or the Agent has issued letters of credit that are
outstanding as of the date of this Agreement, the Borrower's respective
obligations to repay those advances to the Lender and to reimburse the Agent
in respect of drawings under such letters of credit are not subject to any
defense, counterclaim, set-off, right of recoupment, abatement or other claim
or determination.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
BORROWER
VDI MEDIA
By: /s/ R. Luke Stefanko
-----------------------------
Name: R. Luke Stefanko
---------------------------
Title: Chief Executive Officer
--------------------------
AGENT
UNION BANK OF CALIFORNIA, N.A.,
as Agent
By: /s/ John E. Strayer
-----------------------------
Name: John E. Strayer
---------------------------
Title:
--------------------------
LENDERS
UNION BANK OF CALIFORNIA, N.A.,
as a Lender
By: /s/ John E. Strayer
-----------------------------
Name: John E. Strayer
---------------------------
Title:
--------------------------
ADDRESS FOR NOTICES
Commercial Portfolio Administration
445 South Figueroa Street, 10th Floor
Los Angeles, California 90071-1100
Attention: Jon E. Strayer
Telephone: (213) 236-7760
Facsimile: (213) 236-7635
<PAGE>
APPROVED LENDING OFFICES
Applicable Lending Office for Reference
Rate Loans:
445 South Figueroa Street
Los Angeles, California 90071-1100
Applicable Lending Office for LIBOR
Loans:
445 South Figueroa Street
Los Angeles, California 90071-1100
Applicable Lending Office for
Participations in Letters of Credit:
445 South Figueroa Street
Los Angeles, California 90071-1100
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SCHEDULE 2.1
COMMITMENTS
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<CAPTION>
Term Loan Revolving Loan
Lender Commitment Commitment
------ ---------- ----------
<S> <C> <C>
Union Bank of
California, N.A. $29,000,000 $6,000,000
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