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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ----- SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended AUGUST 31, 1997
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
- ----- THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-8654
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UNITEL VIDEO, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 23-1713238
- ----------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
555 WEST 57TH STREET, NEW YORK, NEW YORK 10019
- --------------------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 265-3600
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Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, $.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K (X).
(Cover Page: 1 of 2 Pages)
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The aggregate market value of the voting stock (based on the closing price of
such stock on the American Stock Exchange) held by non-affiliates of the
Registrant at November 21, 1997 was approximately $16,090,000.
There were 2,674,665 shares of Common Stock outstanding at November 21, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
PART III Certain portions of the Registrant's Proxy Statement for the
Registrant's 1997 Annual Meeting of Stockholders.
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PART I
ITEM 1. BUSINESS
GENERAL
Unitel Video, Inc. (the "COMPANY") provides a full range of services to the
video and film communications industry for the recording, editing, creation of
digital effects and duplication of television programs, commercials and
corporate and other communications on videotape. The Company's services are
provided primarily in the following areas: studio videotape recording, mobile
videotape recording and live telecasting, film to videotape transfer, editing,
digital effects and videotape duplication. The Company also designs and
produces custom internet, CD-ROM, DVD, videodisc and networked multimedia
presentations.
The Company's services are provided at facilities located in New York City
and Los Angeles and through the Company's Mobile division based in Pittsburgh,
Pennsylvania, Burbank, California, and Montreal, Canada. The Mobile division
provides "on-location" services (the "Mobile Business"), including technical
personnel, for videotape recording and live telecasting of sports,
entertainment, cultural and other events throughout North America. In fiscal
1997, the Company established Unitel Video Canada Inc., a wholly owned
subsidiary of the Company, to engage in the Mobile Business in Canada.
As the Company is in a service industry it does not use raw materials. It
does, however, use videotape. Videotape is readily available from numerous
sources and the Company has not experienced, nor does it anticipate
experiencing, difficulty in obtaining videotape for its operations. In
addition, the Company has service contracts with its customers, generally for
facilities and personnel at specific times or on a project or job-by-job basis
(as more fully described below under the caption "Marketing") and, accordingly,
does not have backlog as such.
The Company's cost structure is such that depreciation, selling expenses
and general and administrative expenses do not generally fluctuate from quarter
to quarter during a fiscal year based on sales volume. Furthermore, a majority
of production costs are fixed. Accordingly, relatively small variations in
quarterly sales historically have resulted in disproportionately greater
variations in net earnings. In part due to the foregoing, during fiscal years
1997, 1996 and 1995, the Company recognized a significantly greater proportion
of net earnings in the first quarter, when sales are traditionally higher, as
compared to the other quarters of the fiscal year. See Note L to Notes to
Consolidated Financial Statements.
SERVICES
The Company provides services in two broad categories, production services
and post production services. In 1995, the Company made a decision to refocus
its resources toward the entertainment and corporate communications areas, its
traditional strengths. As part of this strategy the Company has reduced its
post production assets that service the highly competitive commercial
advertising segment of the industry. As a result of this change, revenues
generated from post production services have declined from 63% of sales in 1995
to 50% of sales in 1997, while revenues from the production area have increased
from 37% of sales in 1995 to 50% of sales in 1997. The Company anticipates that
this trend will continue in fiscal 1998.
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PRODUCTION SERVICES
STUDIO VIDEOTAPE RECORDING. The Company provides the studios, equipment
and skilled technical personnel needed to record television programs,
commercials and corporate and other videotape communications. The equipment
provided by the Company includes color television cameras, videotape recorders,
sound monitoring and mixing equipment and lighting equipment. The Company does
not generally provide program direction or other artistic or non-technical
production services, such as the preparation of scripts, the hiring of
performers or the supplying of special props or scenery. The Company operates
eight studios in New York City.
Among the programs produced at the Company's studio facilities are "The Sally
Jessy Raphael Show", "Inside Edition", "The Montel Williams Show", "The Chris
Rock Show" and "American Journal". Studio recording accounted for approximately
18%, 18% and 16% of the Company's revenues during the fiscal years ended August
31, 1997, 1996 and 1995, respectively.
MOBILE VIDEOTAPE RECORDING AND LIVE TELECASTING. The Company's Mobile
division provides videotape recording and live telecasting services "on-
location" by transporting videotape and other related equipment in its mobile
vehicles. These vehicles have been designed to serve as the production control
center for events in sports arenas, concert halls, theaters and other locations.
The Company also arranges for the skilled technical personnel required to
perform these services. The Company's ten mobile vehicles are equipped to
travel on a continuous basis throughout North America and can be maintained in
the field. The Company's Mobile division accounted for approximately 32%, 27%
and 21% of the Company's revenues during the fiscal years ended August 31, 1997,
1996 and 1995, respectively. Some of the events handled by the Company's mobile
production units include "Live from the Met", "Live from Lincoln Center", "The
Grammy Awards", "The Emmy Awards", "The Academy Awards", major golf and tennis
tournaments, broadcast of Pittsburgh Pirates, Montreal Expos and Toronto Blue
Jays major league baseball games and the international broadcast of the "Super
Bowl".
POST PRODUCTION SERVICES.
FILM TO VIDEOTAPE TRANSFER. The Company provides the facilities and
technical personnel for transferring 16mm and 35mm motion picture positive and
negative film and slides to videotape. Through the use of computers, the color
of the picture may be corrected, altered or enhanced frame by frame to meet
client needs. Film to videotape transfer accounted for approximately 8%, 10%
and 9% of the Company's revenues during the fiscal years ended August 31, 1997,
1996 and 1995, respectively. The Company has performed this service for major
theatrical motion pictures such as "Amistad" and "The Jackal", and television
programs such as "Star Trek:Voyager", "Star Trek: Deep Space Nine" and "The
Simpsons".
EDITING. The Company provides editing equipment and skilled personnel
required to perform the editing, special optical and audio effects, titling and
other technical work necessary to produce a master videotape suitable for
broadcast, cablecast, duplication or other distribution. Using
computer-controlled electronic editing equipment, video and audio tape recorders
and special effects and titling equipment, videotape recorded by the Company or
others is processed into a finished product. Editing accounted for
approximately 26%, 30% and 35% of the Company's revenues during the fiscal years
ended August 31, 1997, 1996 and 1995, respectively. Among the programs edited
at the Company's facilities are "Star Trek:Voyager", "Star Trek: Deep Space
Nine" and "The Sally Jessy Raphael Show".
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DIGITAL EFFECTS. The Company offers creative consultation, technical
assistance and full-service facilities for the creation of computer-generated
graphics, special effects and animation in the digital format in both 2-D and
3-D. These services accounted for approximately 7%, 8% and 9% of the Company's
revenues during the fiscal years ended August 31, 1997, 1996 and 1995,
respectively. The Company's projects in this area include various commercials
for Toyota, Sears and Nike and major theatrical motion pictures such as "Air
Force One", "Star Ship Troopers" and "Devils Advocate".
VIDEOTAPE DUPLICATION. The Company furnishes videotape duplication
services in all formats, including formats available for broadcast and cablecast
in the United States as well as the multiple formats used abroad. Duplication
services accounted for approximately 5%, 4% and 4% of the Company's revenues
during the fiscal years ended August 31, 1997, 1996 and 1995, respectively.
NEW MEDIA SERVICES. The Company designs and produces custom internet
websites and DVD, CD-ROM, videodisc and networked multimedia presentations for
clients in the publishing, financial services, pharmaceutical, entertainment,
advertising, retail, telecommunications and utility industries. Extensive use
of other Company resources are integrated into these productions, including
video compression, digital to video transfers, digital effects and studio and
location recording. The Company also provides MPEG compression services for
Softkey, Sony Interactive and Grey Advertising. New Media Services accounted
for approximately 1% of the Company's revenues during each of the fiscal years
ended August 31, 1997, 1996 and 1995.
MARKETING
The Company markets its services principally to cable television program
suppliers, independent producers, national television networks, local television
stations, motion picture studios, advertising agencies, and program syndicators
and distributors through the direct efforts of its internal sales personnel and
through advertising in certain trade publications. The Company has no material
patents. The Company markets its services through the use of the Unitel and
Editel names.
Customers for editing services, film-to-tape transfer, digital effects and
videotape recording of television commercials generally make arrangements for
the Company's services without significant advance notice, on a project or
job-by-job basis. Customers for studio and "on-location" videotape recording or
live telecasting of programs generally make arrangements longer in advance of
the time when the facilities and services are required. The Company has entered
into arrangements with several customers for periods ranging up to three years
to provide editing, mobile videotape recording and/or studio videotape recording
services. No customer accounted for more than 10% of the Company's total sales
for the fiscal years ended August 31, 1997, 1996 and 1995.
COMPETITION
The video services industry is highly competitive. Certain videotape
service businesses (both independent companies and divisions of diversified
companies) provide most of the same services provided by the Company, while
others specialize in one or several of these services. Editing and videotape
recording services are also subject to competition from the film industry.
While the Company does not perform any services directly on film it does provide
services for the motion picture industry, including film to videotape transfer,
film in film out and special high resolution digital effects work on feature
films.
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Many competitors of the Company, some with greater financial resources, are
located in the New York City and the Los Angeles areas, the principal markets
for the Company's services other than "on-location" video services. The Company
provides "on-location" video services throughout North America and competes with
companies providing similar services throughout that area.
The Company competes on the basis of the overall quality of the services it
provides, state-of-the-art equipment, breadth of services, reputation in the
industry and location. The Company also competes on the basis of its ability to
attract and retain qualified, highly skilled personnel. The Company believes
that prices for its services are competitive within its industry, although some
competitors may offer certain of their services at lower rates than the Company.
The video services industry has been and is likely to continue to be subject to
technological change to which the Company must respond in order to remain
competitive.
EMPLOYEES
On August 31, 1997 the Company had 292 full-time employees. A portion of
the Company's New York post-production personnel (25 employees) are represented
by the National Association of Broadcast Employees and Technicians, AFL-CIO
("NABET"). The contract between NABET and the Company expired on April 17,
1997. The Company and NABET are continuing to negotiate a new contract. The
technical personnel of the Company's Editel Los Angeles division (55 employees)
are represented by the International Alliance of Theatrical Stage Employees
("IATSE"). The contract between IATSE and the Company expired on November 30,
1997. Negotiations for a new contract are underway. The technical personnel of
the Company's Mobile division (39 employees) are represented by the
International Brotherhood of Electrical Workers, under a contract which expires
in August 2000.
The Company believes that its employee relations are generally
satisfactory.
DEVELOPMENTS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("FASB Statement
No. 121") which provides guidance on when to assess and how to measure
impairment of long-lived assets, certain intangibles and goodwill related to
those assets to be held and used, and for long-lived assets and certain
identifiable intangibles to be disposed of. The Company adopted FASB Statement
No. 121 as of August 31, 1995.
The Company has determined to focus its resources toward providing services
to the entertainment and corporate communications areas, which represent the
Company's strength. As part of this strategy, the Company decided to sell its
Editel New York, Editel Chicago and Editel Los Angeles divisions, which
specialize in the highly competitive commercial advertising portion of the video
facilities industry. During the 1995 fiscal year, the three Editel divisions
incurred a pretax loss of $3,682,000. As a result of its decision to sell these
divisions, the Company identified associated property, plant and equipment,
which after an impairment charge of $4,700,000 recorded as of August 31, 1995
had a carrying value of approximately $19,300,000, that it no longer needed for
its current and future operations. During the fourth quarter of fiscal 1995,
the Company committed to a plan to dispose of the Editel divisions and in the
first quarter of fiscal 1996 began marketing these divisions to potential
buyers.
6
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Based on the Company's decision to sell the Editel divisions, the Company
recorded an impairment charge of approximately $2,000,000 in fiscal 1996
relating to the assets at all three Editel divisions. The impairment charge
recorded represents management's estimate of the decrease in value of these
assets during the period such assets were held for sale based upon the
depreciation method which the Company has used in the past and which management
has found to be reasonable and appropriate.
In February 1996, the Company announced the closure of its Editel Chicago
division and subsequently distributed the majority of that division's assets
throughout the Company. The balance of the Editel Chicago division equipment
was sold in an auction which was held in May 1996. In March 1996, the Company
terminated the lease for its Editel Chicago division by making a lump sum
payment to the landlord of $1,600,000. The restructuring charge of $1,246,000
recorded in the quarter ended May 31, 1996 reflects this payment less the
reversal of $354,000 of accrued rent which would have been due under the terms
of the lease. Previously, in May of 1995, the Company adopted a plan to
downsize the operations of its Editel Chicago division and reorganize and reduce
its corporate management which resulted in recording a restructuring charge of
$400,000 for severance and early retirement expense.
During the months of March through May 1996, the editorial and computer
graphics departments of the Editel New York division were closed. In May 1996,
the Company reached an agreement in principle to sell the film-to-tape transfer
business of Editel New York, which was the remaining operating department, to a
group of employees backed by a private investor. The Company operated the
film-to-tape transfer business through August 1996, at which time discussions
with the employee led group were terminated and the business was closed. During
the negotiations, the majority of the editorial and computer graphics assets
were distributed throughout the Company. At August 31, 1996, the Company
estimated the revised value of the remaining assets held for sale to be
approximately $1,587,000 and classified them on the balance sheet as short-term.
In November 1996, the Company sold the majority of those assets to an unrelated
third party for $1,400,000. The balance of the assets were redeployed
throughout the Company or disposed of through an auction. Proceeds from the
sale of assets from both the Editel Chicago and Editel New York divisions were
used by the Company to repay outstanding debt.
In May 1996, after reevaluating the potential of the Editel Los Angeles
division, the Company decided to retain and expand this division and,
accordingly, discontinued seeking a buyer for this business.
In April 1997, the Company renamed its Windsor Video division "Unitel Post
38" and reorganized its New York operations into three divisions: the Unitel
New York Post Production division, the Unitel New York Studios division and the
Unitel Interactive division.
In June 1997, the Company merged its Unitel Hollywood and Editel Los
Angeles divisions, moving a significant portion of the Unitel Hollywood assets
into the Company owned Editel Los Angeles building. Additional equipment was
moved to the Company's New York based post production facilities for future use.
The balance of the equipment was sold, with approximately $1,700,000 in proceeds
used to repay long term debt. As a result of the merger, the Company recorded a
$1,055,000 restructuring charge in the third quarter of 1997. Additionally,
after a reassessment of the Company's New York post production assets, the
Company recorded an impairment charge of $300,000 in the fourth quarter of 1997.
7
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In fiscal 1997 the Company announced the construction of two new digital
mobile production units. One of the mobile units has been completed. It is
anticipated that the second mobile unit will be completed in fiscal 1998.
Completion of the second mobile unit is expected to be financed from the
proceeds of a second series of industrial revenue bonds to be issued by the
Allegheny County (Pennsylvania) Industrial Development Authority. (See Note B
to Notes to Consolidated Financial Statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations).
On August 12, 1997 and on September 8, 1997 the Company issued press
releases concerning, among other things, certain unsolicited, non-binding
expressions of interest in acquiring the Company and announcing that the Company
had retained the investment banking firm of Legg Mason Wood Walker,
Incorporated, as its financial advisor in connection with these expressions of
interest and any possible transactions that may result. While the Company
continues discussions concerning these expressions of interest, there can be no
assurance that these discussions will result in a definitive agreement or that a
transaction with any party will ultimately be consummated.
8
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ITEM 2. PROPERTIES.
The following table sets forth, as of August 31, 1997, certain information
concerning the Company's facilities. The lease expiration dates exclude option
extension periods which exist in certain leases.
<TABLE>
<CAPTION>
APPROXIMATE LEASE EXPIRATION
LOCATION SQUARE FEET PRIMARY USE DATE
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<S> <C> <C> <C>
555 West 57th Street 3,000 Office space. Dec 2000
New York, New York
515 West 57 Street 40,000 Television studios and post-production Owned
New York, New York facilities.
508-510 West 57 Street 15,000 Television studio and support space. Jun 2001
New York, New York
841 Ninth Avenue 21,000 Television studio and support space. Aug 2003
New York, New York
503 West 33 Street 8,000 Television studio and support space. Apr 2001
New York, New York
402 East 76 Street 30,000 Television studio and support space. Jun 1998
New York, New York
5 West 37 Street 13,000 Post-production facilities and
New York, New York administrative offices. Mar 2001
8 West 38 Street 10,000 Post-production facilities and
New York, New York administrative offices. Mar 2001
222 East 44 Street 43,000 Former Editel New York facility
New York, New York subleased to third parties. Dec 1999
433-435 West 53 Street 14,000 Television studio and support space. Owned
New York, New York
423 West 55 Street 21,000 Studio support space. Aug 1999
New York, New York
4100 Steubenville Pike 18,000 Mobile production headquarters Sep 1997
Pittsburgh, Pennsylvania and garage.
729 North Highland 26,000 Post-production, film-to-tape transfer Owned
Los Angeles, California and computer graphics facilities
and administrative offices.
1101 Isabel Street 15,000 Mobile field shop and garage. Month to Month
Burbank, California
</TABLE>
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<TABLE>
<S> <C> <C> <C>
3540 Griffith Street 8,000 Mobile offices and garage. Jun 2002
Saint-Laurent, Quebec
Canada
</TABLE>
All of the Company's facilities are well maintained structures, in good
physical condition and are adequate to meet the Company's current and reasonably
foreseeable needs.
ITEM 3. LEGAL PROCEEDINGS.
(a) There are no material pending legal proceedings to which the Company
or any of its subsidiaries is a party or of which any of their property is the
subject.
(b) No material pending legal proceeding was terminated during the fourth
quarter of the Company's fiscal year ended August 31, 1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
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<CAPTION>
EXECUTIVE OFFICERS OF THE REGISTRANT
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OFFICER
NAME AGE SINCE POSITIONS WITH THE COMPANY
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<S> <C> <C> <C>
Barry Knepper 47 1982 President, Chief Executive
Officer and Director
Richard L. Clouser 57 1982 Senior Vice President - Corporate,
President of the Mobile Division and
Director
Karen Ceil Lapidus 40 1994 Vice President, General Counsel
and Secretary
Jill Debin Cohen 45 1995 President of the Unitel New York
Post Production Division
Albert Walton 52 1995 President of the Editel Los Angeles
Division
Tom Eyring 45 1995 Chief Technology Officer
Edwin Levine 58 1996 President of the Unitel New York
Studios Division
George C. Horowitz 45 1996 Chief Financial Officer
</TABLE>
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CERTAIN INFORMATION CONCERNING THE EXECUTIVE OFFICERS OF THE COMPANY
Mr. Knepper has been President and Chief Executive Officer of the Company since
April 1996 and a Director since May 1995. He has served as Senior Vice
President-Finance and Administration from April 1995 to May 1996 and as Chief
Financial Officer from January 1982 to April 1995.
Mr. Clouser has been President of the Mobile division of the Company since 1982,
Senior Vice President-Corporate since April 1996 and a Director since October
1996.
Ms. Lapidus has been General Counsel and Secretary of the Company since January
1994 and a Vice President since April 1996. From 1984 until joining the
Company, Ms. Lapidus was an associate attorney at Mudge Rose Guthrie Alexander &
Ferdon, a New York law firm.
Ms. Debin Cohen has been President of the Unitel New York Post Production
division since August 1996. From June 1995 to August 1996 she was President of
the Windsor Video division which became a part of the Unitel New York Post
Production division in August 1996. From November 1993 to June 1995 she was the
Vice President/General Manager of the Windsor Video division. Ms. Debin Cohen
was the Vice President of Operations for the Editel New York division from 1988
through November 1993.
Mr. Walton has been President of the Editel Los Angeles division since July
1995. From May 1994 through July 1995 he was the Director of New Business
Development for the Editel Los Angeles division. He served as Vice President of
CIS from 1988 through 1994, a Hollywood based specialized visual effects
company.
Mr. Eyring has been Chief Technology Officer since June 1995. From 1991 to June
1995 he was Vice President of Engineering of the Editel New York division and
from 1982 through 1991 he was Director of Engineering Services for the Editel
New York division.
Mr. Levine has been President of the Unitel New York Studios division since
August 1996. From June 1975 to August 1996 he was Vice President of Technical
Operations for the Unitel New York division of the Company.
Mr. Horowitz has been Chief Financial Officer of the Company since April 1996.
From May of 1993 through June of 1996 he was Director of Finance for the
Company.
The term of office of each executive director of the Company expires as
specified by the Board of Directors of the Company and when his or her
respective successor is elected and has qualified.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company's Common Stock is traded on the American Stock Exchange under
the symbol UNV. The following table sets forth, for fiscal years 1997 and 1996,
the high and low sales prices of the Common Stock as furnished by the American
Stock Exchange:
Fiscal Year 1997: LOW HIGH
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First Quarter.......................... 5 3/4 8 1/2
Second Quarter......................... 6 8 3/8
Third Quarter.......................... 5 7/8 6 3/4
Fourth Quarter......................... 5 1/8 8
Fiscal Year 1996: LOW HIGH
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First Quarter.......................... 4 7/8 6 13/16
Second Quarter......................... 5 1/8 8
Third Quarter.......................... 4 7/8 7 3/8
Fourth Quarter......................... 5 1/4 6 1/4
As of November 21, 1997 there were approximately 358 holders of the
Company's Common Stock.
Since its inception in 1969, the Company has not declared or paid cash
dividends on its Common Stock, and it does not anticipate declaring or paying
cash dividends in the foreseeable future. The declaration, payment and amount
of future dividends will be determined by the Board of Directors in light of
conditions then existing, including the Company's earnings, financial condition,
capital requirements and other factors. In connection with its financing
arrangements, the Company is subject to certain restrictions which prohibit the
payment of cash dividends. (See Note B to Notes to Consolidated Financial
Statements, and Management's Discussion and Analysis of Financial Condition and
Results of Operations).
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<TABLE>
<CAPTION>
ITEM 6. Selected Financial Data
1997 1996 1995 1994 1993
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OPERATIONS:
<S> <C> <C> <C> <C> <C>
Sales $58,767,000 $79,287,000 $83,285,000 $80,498,000 $79,390,000
Cost of sales $49,708,000 $65,501,000 $69,219,000 $64,391,000 $62,418,000(b)
Interest expense $ 3,430,000 $ 3,686,000 $ 3,649,000 $ 2,388,000 $ 2,815,000
Earnings(loss)before
income taxes $(4,398,000) $(5,084,000) $(9,341,000) $ 1,519,000 $ 924,000
Net earnings(loss)(a) $(4,436,000) $(5,124,000) $(6,547,000) $ 859,000 $ 711,000
FINANCIAL POSITION:
Total assets $63,083,000 $67,618,000 $74,186,000 $73,245,000 $69,052,000
Working capital
(deficiency) $(9,655,000)(f) $(8,356,000)(d) $(3,467,000)(d) $(8,055,000)(c) $ (705,000)
Current ratio .41 to 1 .60 to 1 (d) .82 to 1(d) .64 to 1 (c) .95 to 1
Property & equipment-net $51,907,000 $50,466,000(e) $34,491,000(e) $55,425,000 $51,166,000
Long-term debt, less
current maturities $26,525,000 $19,706,000 $19,936,000 $14,142,000(c) $21,835,000
Stockholders' equity $13,392,000 $17,810,000 $22,526,000 $28,828,000 $27,673,000
DATA PER COMMON SHARE:
Net earnings(loss)per
common share $ (1.66) $ (1.96) $ (2.53) $ .33 $ .30
Weighted average number of
common and common equivalent
shares outstanding 2,665,000 2,613,000 2,582,000 2,617,000 2,066,000
</TABLE>
(a) Federal and state tax credits of approximately $14,000 in 1997,
$15,000 in 1996, $28,000 in 1995, $58,000 in 1994 and $30,000 in 1993
have been applied as a reduction of the provision for income taxes.
(b) Gain on sale or disposal of equipment and amortization of goodwill
have been reclassified to depreciation expense to conform with fiscal
1994, 1995, 1996 and 1997 presentation. (See Note H to Notes to
Consolidated Financial Statements)
(c) The revolving credit portion of the long-term debt, which expired in
May 1995, was included in current liabilities. In December 1995, the
Company refinanced its revolving credit and term loans outstanding
with its bank lenders.
(d) The working capital deficiency is primarily due to the inclusion of
$3,750,000 in 1995 and $6,588,000 in 1996 of Term Loan B in current
liabilities. (See Note B to Notes to Consolidated Financial
Statements).
(e) The decrease in fiscal 1996 in property and equipment is due to the
reclassification of the Editel divisions' net assets to assets held
for sale, a separate line in the long-term asset section of the
balance sheet. In 1996 the Company decided to retain its Editel Los
Angeles division and also redeployed the majority of the assets of the
Editel New York and Editel Chicago divisions throughout the Company.
These assets were no longer considered assets held for sale and were
reclassified to property and equipment.
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(f) The increase in the working capital deficiency in fiscal 1997 is due
primarily to (1) the decrease in accounts receivable resulting from
(i) the closure of the Editel New York facility in August 1996, (ii)
the merger of the Los Angeles divisions in June 1997 and (iii) the
reduction in sales of the Company's Studio and Mobile divisions in
fiscal 1997 (See Management's Discussion and Analysis of Financial
Condition and Results of Operations), (2) the reduction in net assets
held for sale in fiscal 1997 due to the completion of the sale of such
assets prior to August 31, 1997 and (3) an increase in other current
items, all of which was offset by a reduction in the current portion
of long-term debt.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES.
The Company is committed to keeping pace with technological developments as
well as taking advantage of new business opportunities in the video
communications industry. Capital expenditures were $12,936,000 during fiscal
1997 as compared to $9,134,000 during fiscal 1996 and $9,738,000 (exclusive of
the acquisition of GC & Co.) during fiscal 1995. Expenditures made during
fiscal 1997 were primarily for two new mobile units of approximately $7,252,000
(one completed and one under construction) and equipment used in the production,
post production and computer graphics service areas throughout the Company. It
is anticipated that the second mobile unit will be completed in fiscal 1998.
Completion of the second mobile unit is expected to be financed from the
proceeds of a second series of industrial revenue bonds to be issued by the
Allegheny County (Pennsylvania) Industrial Development Authority. (See Note B
to Notes to Consolidated Financial Statements).
The net change in cash in the fiscal years ended August 31, 1997, 1996 and
1995 was ($55,000), $31,000 and $(1,132,000), respectively. The net cash
decrease in 1997 resulted from cash provided by operating activities of
$9,271,000 offset by cash used in investing activities of $9,132,000, (primarily
capital expenditures net of equipment sales) and $194,000 used in financing
activities. For the fiscal year ended August 31, 1997, the decrease in accounts
receivable resulted from the closure of the Editel New York facility in August
1996, the merger Editel Los Angeles and Unitel Hollywood divisions in June 1997
and the reduction in sales of the Company's Studio and Mobile divisions in
fiscal 1997 due to the cancellation of two television shows in 1996 and the
non-recurring nature of the Atlanta Summer Olympics and the Republican and
Democratic National Conventions in 1996 for which the Mobile division provided
production services. The net cash increase in fiscal 1996 was the result of net
cash provided by operating activities of $7,130,000 and financing activities of
$884,000 which was offset by $7,983,000 related to investing activities. For
the year ended August 31, 1996, the large reduction in accounts receivables and
payables was primarily due to the closing of the Company's Editel Chicago and
Editel New York divisions. The increase in deferred financing costs and the
majority of the net cash provided by financing activities were due to the
refinancing of the Company's debt in December of 1995. The majority of the
proceeds generated from the disposal of equipment was related to the closure of
the Editel Chicago and Editel New York divisions. The net cash decrease in
fiscal 1995 was the result of cash provided by operating activities of
$8,134,000 and financing activities of $1,420,000 less cash used in investing
activities of $10,686,000. The net cash decrease in fiscal 1995 was primarily
due to the Company's fixed asset expenditures for the year exceeding the cash
generated by operations.
In December 1995, the Company entered into a $26 million revolving credit
and term loan agreement with a financial institution, consisting of an $11
million revolving credit facility and two $7.5 million term loans (Term Loans A
and B). In May 1997, Term Loan A was revised by the inclusion of $2,500,000 of
the original Term Loan B and the advance of $518,000 of new funds, resulting in
a revised Term Loan A balance of $9,000,000. Term Loan A is payable in fifty
five (55) equal monthly principal installments of $100,000 plus interest, with
the balance of $3,500,000 due December 2001. In November 1997 Term Loan B was
repaid, in part from the proceeds of a new Term Loan D in the amount of
$2,500,000 which is due on January 31, 1998. $3,742,000 of the original Term
Loan B was repaid from sales of equipment from Editel Chicago, Editel New York
and Unitel Hollywood. The Company is currently in negotiations to refinance or
sell certain of its owned real estate and anticipates
15
<PAGE>
using a portion of the proceeds of the refinancing or sale to repay Term Loan D
and other indebtedness and the balance of the proceeds for working capital
purposes.
In July 1997 the credit facility was further amended by the issuance of a
$5,080,000 letter of credit to secure payment of principal and interest on
$5,000,000 in principal amount of Allegheny County (Pennsylvania) Industrial
Development Authority Variable Rate Demand Revenue Bonds. The proceeds from the
sale of the Bonds were loaned to the Company and were used by the Company to
build a new digital mobile production unit. The letter of credit requires
quarterly principal payments of $179,000 commencing August 1998 to be applied to
the redemption in equal principal amount of the Bonds. The Bonds mature on July
1, 2009 and, to the extent not redeemed in full as described in the prior
sentence, are required to be repaid by the Company on that date. The terms of
the overall credit agreement with the financial institution provide that the
lender receive a first lien on all property and equipment and accounts
receivable that are not encumbered by another lender. The Company anticipates
that funds generated from operations together with funds available under its
existing credit facility, proceeds from the refinancing of its owned real estate
currently being negotiated and noted above in this item and proceeds from a
second series of industrial revenue bonds expected to be issued by the Allegheny
County (Pennsylvania) Industrial Development Authority will be sufficient to
meet the Company's anticipated working capital and investing needs in fiscal
1998.
Additionally, in December 1995 the Company obtained from a bank a
$4,000,000 mortgage on its property located on West 57th Street in New York
City. The mortgage is payable in equal monthly installments of $22,000 through
November 2002, with a final payment of $2,152,000 due in December 2002.
In February 1995 the Company purchased the business and assets of GC & Co.
(formerly known as Greene, Crowe & Company), a Burbank, California based
supplier of "on-location" services for the videotaping and live telecasting of
concerts, cultural and other events, including " The Academy Awards", "The
Grammy Awards" and "The American Music Awards". The purchase price was
$6,750,000, consisting of $6,000,000 in cash and $750,000 of convertible
subordinated promissory notes. The cash portion of the purchase price was
financed by a $4,700,000, five-year capital lease and a $1,800,000 loan with a
fixed interest rate of 9.3% payable in sixty equal monthly payments of principal
and interest of $33,000 and a balloon payment at the end of the five-year period
of $360,000. The promissory notes bear interest at 1% over prime, were due in
full in August 1997 and are convertible into the Company's common stock at
$10.00 per share. In August, 1997, noteholders of $640,000 principal
outstanding extended the maturity date of their notes to August, 1998 on the
same terms and conditions. The balance of the notes have been paid in full.
In connection with certain of its financings, the Company must adhere to
particular financial ratios and restrictions including restrictions on the
future payment of dividends. The Company anticipates that the restrictions will
not impair its ability to keep pace with technological developments.
See Note B to Notes to Consolidated Financial Statements with respect to
compliance with certain financial covenants.
The enactment of the Tax Reform Act of 1986 has limited the Company's
ability to defer the payment of taxes due to the imposition of an alternative
minimum tax which effectively results in the treatment of certain timing
differences as tax preference items.
16
<PAGE>
RESULTS OF OPERATIONS
Sales were $58,767,000, $79,287,000 and $83,285,000 for the fiscal years
ended August 31, 1997, 1996 and 1995, respectively. The sales decrease of
$20,520,000 was primarily due to the closing of the Editel New York and Editel
Chicago divisions in 1996 and the merging of the Unitel Hollywood and Editel Los
Angeles Divisions in June 1997. Sales from continuing operations were lower by
approximately $5,000,000 in the aggregate in fiscal 1997 primarily due to lower
studio sales as a result of the cancellation of the "Mark Walberg" and "Rush
Limbaugh" television shows in 1996 and from lower Mobile sales due in part to
the non-recurring nature of the Atlanta Summer Olympics and the Republican and
Democratic National Conventions in 1996.
The Company recorded net losses of $4,436,000, $5,124,000 and $6,547,000 in
the fiscal years ended August 31, 1997, 1996 and 1995, respectively. The net
loss of $4,436,000 in 1997 is attributable to a loss in the Company's post
production operations and the merger related costs in Los Angeles. The net loss
of $5,124,000 incurred in fiscal 1996 was attributable to costs relating to the
closure of the Company's Editel New York and Editel Chicago divisions and the
operating costs of running these divisions until they were closed. The net loss
of $6,547,000 incurred in fiscal 1995 was due primarily to the pretax charge of
$7,681,000 taken for the impairment of assets of the Editel New York, Editel
Chicago, Editel Los Angeles and Unitel Post 38 divisions and the pretax charge
of $400,000 for the restructuring of the Editel Chicago division.
Throughout fiscal 1997, 1996 and 1995 the Company's New York Studio and
Mobile divisions operated profitably.
Production costs, the main component of cost of sales, consist primarily of
direct labor, equipment maintenance expenses and occupancy costs. The Company's
production costs, as a percentage of sales, were 70.4%, 72.7% and 71.1%, for the
fiscal years ended August 31, 1997, 1996 and 1995, respectively. The decrease
in production costs in fiscal 1997 is primarily due to the closure of the
Company's Editel New York and Editel Chicago divisions in fiscal 1996.
Production costs as a percentage of sales increased in fiscal 1996 due to the
incremental severance costs associated with the closure of the Company's Editel
New York and Editel Chicago divisions. During 1996, the Company implemented a
program to reduce production costs by closing unprofitable divisions and
streamlining operations wherever possible. The increase in production costs for
fiscal 1995, as compared with the prior years, is due primarily to an increase
in studio and mobile production revenues which incur variable expenses at a
higher rate than the Company's other services. Since most of the Company's
costs are fixed and a large portion of the costs are subject to price increases,
flat sales from year to year result in production costs which are an increased
percentage of sales. This same dynamic applies for both selling expenses and
general and administrative expenses.
Depreciation, as a percentage of sales, was 14.2%, 9.9% and 12.1% in fiscal
1997, 1996 and 1995, respectively. Depreciation expense increased in fiscal
1997 by approximately $500,000 compared to 1996. In fiscal 1997, depreciation
decreased approximately $1,500,000 due to the closure in 1996 of the Editel New
York and Editel Chicago divisions. In fiscal 1996, $2,000,000 of depreciation
was reclassified to impairment charge in connection with the closure of the
Editel New York and Editel Chicago divisions. Depreciation in the Company's
other divisions in 1997 was approximately the same as in 1996. Depreciation
expense decreased in fiscal 1996 due to the reclassification of the net property
and equipment of the Editel divisions to net assets held for sale at August 31,
1995. The impairment charge recorded represents management's estimate of the
decrease in value of these
17
<PAGE>
assets during the period such assets were held for sale in fiscal 1996 based
upon the method of depreciation which the Company has used in the past and which
management has found to be reasonable and appropriate. The Editel Chicago
division was closed in February 1996 and the Editel New York division was closed
in August 1996. Depreciation expense increased in 1995 as a result of the
$4,750,000 equipment portion of the GC & Co. acquisition and capital
expenditures made during the year totaling $9,738,000. Depreciation includes a
gain (loss) on disposal of equipment of $220,000, ($58,000) and $352,000 in
fiscal 1997, 1996 and 1995, respectively. Had the gain (loss) on disposal of
equipment been excluded from depreciation expense, depreciation as a percentage
of sales would have been 14.5%, 12.3% and 12.4% in fiscal 1997, 1996 and 1995,
respectively.
Selling expenses, as a percentage of sales, during fiscal years 1997, 1996
and 1995 were 3.0%, 2.9% and 3.4%, respectively. Selling expense decreased
$541,000 in 1997 compared to 1996 as a result of the closure of the Editel New
York and Editel Chicago divisions in 1996 and the merger of the Unitel Hollywood
and Editel Los Angeles divisions in 1997. Since there was a comparable percent
decrease in sales in 1997, selling expense as a percent of sales was essentially
the same. The decrease in selling expenses during fiscal 1996 is primarily due
to a decrease in the sales staff at the Editel Chicago and Editel New York
divisions. In 1995, selling expense as a percentage of sales decreased due to
significant cost reductions.
General and administrative expenses as a percentage of sales during fiscal
years 1997, 1996 and 1995 were 12.4%, 12.2% and 10.6%, respectively. General
and Administrative expenses decreased $2,426,000 in 1997 principally from
reduced administrative payroll in 1997 due to the closure of the Editel New York
and Editel Chicago divisions and the recognition in 1996 of severance pay and
other costs in connection with the closure. In addition, there were decreases
in allowance for doubtful accounts and corporate expenses. The increase in
general and administrative costs in fiscal 1996 is due primarily to severance
payments at the Editel Chicago and Editel New York divisions. Cost reductions
put into effect in 1994 were reflected in fiscal 1995 by a decrease of
approximately 1% from the prior year.
Interest expense, as a percentage of sales, during fiscal years 1997, 1996,
and 1995 was 5.8%, 4.6% and 4.4%, respectively. Although interest expense
decreased 6.9% from 1996, the percent to sales increased due to the decrease in
sales resulting from the closing of the Editel Chicago and Editel New York
divisions in 1996 and the merger of the Hollywood and Los Angeles divisions in
June 1997. Although interest expense increased slightly in 1996, the percent to
sales increase to 4.6% in 1996 versus 4.4% in 1995 is due to lower sales in the
1996 fiscal year. The increase in interest expense in fiscal 1995 was due to
additional interest incurred relating to the mortgage financings for the Editel
Los Angeles building purchased by the Company in June 1994 and financing
obtained for the acquisition of GC & Co. in February 1995. During fiscal 1995
the Company wrote off $214,000 of deferred financing costs related to its bank
debt which was refinanced in December 1995. Additionally, interest rates were
significantly higher in 1995 as compared with the prior year resulting in higher
interest payments on the floating rate portion of the Company's debt.
The Company's effective tax rates were 1%, 1% and (30%) in fiscal years
1997, 1996 and 1995, respectively. The 1997 and 1996 effective tax rates
reflect current year net operating losses for which no tax benefit was provided.
The effective tax rate in 1995 differs from prior years primarily due to the
impact of the nondeductible goodwill write off and the impairment of assets
charge. (See Note F to Notes to Consolidated Financial Statements.)
18
<PAGE>
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements which are based
upon current expectations and involve certain risks and uncertainties. Under
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995, readers are hereby cautioned that these statements may be impacted by
several factors, and, consequently, actual results may differ materially from
those expressed herein.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Not Applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
UNITEL VIDEO, INC.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGE
REPORT OF GRANT THORNTON LLP INDEPENDENT ACCOUNTANTS.........20
CONSOLIDATED FINANCIAL STATEMENTS:
BALANCE SHEETS - AUGUST 31, 1997 AND 1996................21-22
STATEMENTS OF OPERATIONS - YEARS ENDED
AUGUST 31, 1997, 1996 AND 1995......................23
STATEMENT OF STOCKHOLDERS' EQUITY - YEARS ENDED
AUGUST 31, 1997, 1996 AND 1995......................24
STATEMENTS OF CASH FLOWS - YEARS ENDED
AUGUST 31, 1997, 1996 AND 1995......................25-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...............28-42
SUPPLEMENTARY FINANCIAL SCHEDULE.............................50
Selected Quarterly Financial Data is set forth in Note L to Notes to the
Consolidated Financial Statements.
19
<PAGE>
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Unitel Video, Inc.
We have audited the accompanying consolidated balance sheets of Unitel Video,
Inc. (a Delaware corporation) at August 31, 1997 and 1996 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended August 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Unitel
Video, Inc. as of August 31, 1997 and 1996, and the consolidated results of its
operations and its consolidated cash flows for each of the three years in the
period ended August 31, 1997, in conformity with generally accepted accounting
principles.
We have also audited Schedule II of Unitel Video, Inc. for each of the three
years in the period ended August 31, 1997. In our opinion, this schedule
presents fairly, in all material respects, the information required to be set
forth therein.
/S/GRANT THORNTON LLP
- --------------------------------
New York, New York
November 4, 1997
20
<PAGE>
UNITEL VIDEO, INC.
CONSOLIDATED BALANCE SHEETS
August 31,
ASSETS 1997 1996
- ------ ---- ----
Current assets:
Cash $ 137,000 $ 192,000
Accounts receivable, less
allowance for doubtful accounts
of $412,000 in 1997 and
$712,000 in 1996 5,139,000 8,701,000
Other receivables 19,000 333,000
Prepaid income taxes 75,000 142,000
Prepaid expenses 564,000 735,000
Net assets held for sale -- 1,587,000
Deferred tax asset 844,000 844,000
------------ -----------
Total current assets 6,778,000 12,534,000
Property and equipment - at cost
Land, buildings and
improvements 20,799,000 19,915,000
Video equipment 87,745,000 97,023,000
Furniture and fixtures 2,591,000 3,502,000
----------- -----------
111,135,000 120,440,000
Less accumulated depreciation
and amortization 59,228,000 69,974,000
----------- -----------
51,907,000 50,466,000
Deferred tax asset 1,625,000 1,625,000
Goodwill 1,721,000 1,859,000
Other assets 1,052,000 1,134,000
----------- ----------
$63,083,000 $67,618,000
----------- -----------
----------- -----------
See accompanying notes.
21
<PAGE>
UNITEL VIDEO, INC.
CONSOLIDATED BALANCE SHEETS
(Continued)
August 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
- ------------------------------------ ---- ----
Current liabilities:
Accounts payable $ 6,754,000 $ 4,967,000
Accrued expenses 998,000 1,450,000
Payroll and related taxes 2,038,000 2,947,000
Current maturities of long-term
debt 3,530,000 8,362,000
Current maturities of subordinated debt 1,167,000 1,166,000
Current maturities of ESOP loan -- 166,000
Current maturities of capital lease
obligations 1,946,000 1,832,000
------------- ------------
Total current liabilities 16,433,000 20,890,000
Deferred rent 121,000 325,000
Long-term debt, less current maturities 26,525,000 19,706,000
Subordinated debt, less current
maturities 1,770,000 1,979,000
Long-term leases, less current
maturities 3,666,000 5,604,000
Accrued retirement 1,176,000 1,304,000
Stockholders' equity:
Common stock, par value $.01 per
share:
Authorized-5,000,000 shares
Issued 3,540,954 shares in 1997
and 3,532,554 shares in 1996,
and outstanding 2,674,665 shares
in 1997 and 2,666,265 shares in
1996 27,000 26,000
Additional paid-in capital 27,367,000 27,545,000
Accumulated deficit (6,028,000) (1,592,000)
Common stock held in treasury, at cost
(866,289 shares in 1997 and 1996) (7,974,000) (7,974,000)
-------------- -------------
13,392,000 18,005,000
Unearned employee benefit expense -- (195,000)
--------------- -------------
Total stockholders' equity 13,392,000 17,810,000
------------- -------------
$ 63,083,000 $ 67,618,000
------------- -------------
------------- -------------
See accompanying notes.
22
<PAGE>
<TABLE>
<CAPTION>
UNITEL VIDEO, INC.
------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
Year ended August 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Sales $58,767,000 $79,287,000 $83,285,000
----------- ------------ -----------
Cost of sales:
Production costs 41,380,000 57,661,000 59,174,000
Depreciation and
amortization 8,328,000 7,840,000 10,045,000
----------- ------------ ----------
49,708,000 65,501,000 69,219,000
----------- ------------ ----------
Gross profit 9,059,000 13,786,000 14,066,000
Operating expenses:
Selling 1,734,000 2,275,000 2,843,000
General and
administrative 7,264,000 9,690,000 8,832,000
Interest 3,430,000 3,686,000 3,649,000
Restructuring charge 1,055,000 1,246,000 400,000
Impairment charge 300,000 2,000,000 7,681,000
----------- ------------ ----------
13,783,000 18,897,000 23,405,000
----------- ------------ ----------
Earnings(loss)from
operations (4,724,000) (5,111,000) (9,339,000)
Other income (loss) 326,000 27,000 (2,000)
----------- ------------ -----------
Earnings(loss)before
income taxes (4,398,000) (5,084,000) (9,341,000)
Income taxes (benefit) 38,000 40,000 (2,794,000)
----------- ------------ -----------
Net earnings (loss)
applicable to common
stock $(4,436,000) $(5,124,000) $(6,547,000)
----------- ------------ ------------
Net earnings (loss)
per common share $ (1.66) $ (1.96) $ (2.53)
----------- ------------ ------------
----------- ------------ ------------
Weighted average number
of common and common
equivalent shares
outstanding 2,665,000 2,613,000 2,582,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying notes.
23
<PAGE>
<TABLE>
<CAPTION>
UNITEL VIDEO, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
----------------------------------------------
YEARS ENDED AUGUST 31, 1997, 1996 AND 1995
------------------------------------------
COMMON STOCK ADDITIONAL
------------- PAID-IN RETAINED COMMON STOCK UNEARNED EMPLOYEE
SHARES AMOUNT CAPITAL EARNINGS HELD IN TREASURY BENEFIT EXPENSE
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, August 31, 1994 2,616,465 $26,000 $27,386,000 $10,079,000 $ (7,974,000) $ (689,000)
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
Net loss (6,547,000)
Exercise of stock options 5,000 32,000
Employee stock purchase plan 3,700 20,000
Allocation of ESOP shares (87,000) 280,000
----------------------------------------------------------------------------------------------
BALANCE, August 31, 1995 2,625,165 26,000 27,351,000 3,532,000 (7,974,000) (409,000)
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
Net loss (5,124,000)
Exercise of stock options 30,000 174,000
Employee stock purchase plan 11,100 49,000
Allocation of ESOP shares (29,000) 214,000
----------------------------------------------------------------------------------------------
BALANCE, August 31, 1996 2,666,265 26,000 27,545,000 (1,592,000) (7,974,000) (195,000)
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
Net loss (4,436,000)
Employee stock purchase plan 8,400 1,000 38,000
Allocation of ESOP shares (216,000) 195,000
----------------------------------------------------------------------------------------------
BALANCE, August 31, 1997 2,674,665 $ 27,000 $27,367,000 $(6,028,000) $(7,974,000) $ -0-
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
See accompanying notes.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
UNITEL VIDEO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
Year Ended August 31,
1997 1996 1995
---- ---- ----
Cash Flows From Operating
Activities:
<S> <C> <C> <C>
Net (loss) $(4,436,000) $(5,124,000) $(6,547,000)
------------ ------------ ------------
Adjustments to reconcile
net (loss) to net
cash provided by
operating activities:
Depreciation and
amortization 8,548,000 7,782,000 10,397,000
Net loss (gain) on disposal
of equipment ( 220,000) 58,000 (352,000)
Impairment and restructuring
charge 1,080,000 2,000,000 7,681,000
Amortization of deferred
financing costs 153,000 252,000 603,000
Recognition of
deferred gain -- -- (117,000)
Deferred rent (204,000) (539,000) (123,000)
Accrued retirement
expense (128,000) 163,000 172,000
Accrued restructuring -- -- 273,000
Deferred income taxes -- 36,000 (2,520,000)
Decrease (increase), net
of acquired assets and
liabilities, in:
Accounts receivable, net 3,562,000 3,999,000 (1,928,000)
Other receivables 314,000 29,000 20,000
Prepaid expenses 171,000 605,000 213,000
Prepaid taxes 67,000 425,000 (486,000)
Other assets (63,000) (30,000) (222,000)
Increase (decrease), net
of acquired assets and
liabilities, in:
Accounts payable 1,788,000 (2,372,000) 835,000
Accrued expenses (452,000) (170,000) 559,000
Payroll and related
taxes (909,000) 16,000 (324,000)
------------ ------------ ------------
13,707,000 12,254,000 14,681,000
------------ ------------ ------------
Net cash provided by operating
activities 9,271,000 7,130,000 8,134,000
------------ ------------ ------------
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
UNITEL VIDEO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
-------------------------------------
Year Ended August 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash Flows From Investing
Activities:
Capital expenditures $ (12,936,000) $ (9,134,000) $(9,738,000)
Acquisition of GC & Co.
assets -- -- (1,300,000)
Proceeds from disposal
of equipment 3,804,000 1,151,000 352,000
------------- ------------- -----------
Net cash used in investing
activities (9,132,000) (7,983,000) (10,686,000)
-------------- ------------- ------------
Cash Flows From Financing
Activities:
Proceeds from long-term
financing 15,976,000 25,717,000 6,120,000
Principal repayments (16,022,000) (24,495,000) (4,187,000)
Deferred Financing Costs -- (574,000) (90,000)
Repayment of note to Banta -- -- (500,000)
Proceeds from issuance of
common stock 39,000 223,000 52,000
Repayment of loan to ESOP (166,000) (172,000) (168,000)
Release of ESOP quarterly
shares (21,000) 185,000 193,000
-------------- ------------- -----------
Net cash (used) provided by
financing activities (194,000) 884,000 1,420,000
-------------- ------------- -----------
Net Increase(Decrease) In Cash (55,000) 31,000 (1,132,000)
Cash, Beginning of Year 192,000 161,000 1,293,000
------------- ------------ -----------
Cash, End of Year $ 137,000 $ 192,000 $ 161,000
------------- ------------ -----------
------------- ------------ -----------
Schedule of income taxes and
interest paid:
Income Taxes Paid $ 38,000 $ 85,000 $ 162,000
Interest Paid 3,685,000 3,374,000 3,256,000
------------- ------------ -----------
$ 3,723,000 $ 3,459,000 $ 3,418,000
------------- ------------ -----------
------------- ------------ -----------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
UNITEL VIDEO, INC.
------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(continued)
Year Ended August 31,
1997 1996 1995
---- ---- ----
Supplemental schedule of non-
cash investing and financing
activities:
<S> <C> <C> <C>
Capital lease obligations: $2,622,000
----------
----------
Detail of acquisition of GC & Co.:
Fair value of assets acquired $6,750,000
Subordinated note to seller (750,000)
Capital lease obligation (4,700,000)
-----------
Net cash paid for acquisition $1,300,000
-----------
-----------
</TABLE>
See accompanying notes.
27
<PAGE>
UNITEL VIDEO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED AUGUST 31, 1997, 1996 AND 1995
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) Business -- The Company provides facilities for studio production,
videotape editing, mobile production, digital effects, film-to-tape transfer and
duplication of videotape in all formats to the entire video communications
industry. The Company's facilities are used to produce television programs,
corporate communications and commercials on videotape. The Company's mobile
division provides "on-location" services for the videotape recording and live
telecasting of sports, cultural and other events throughout North America. The
Company also designs and produces custom internet, CD-ROM, DVD, videodisc and
networked multimedia presentations. Customers for the Company's services
include cable television program suppliers, independent producers, national
television networks, local television stations, motion picture studios, program
syndicators and distributors and advertising agencies.
(2) Consolidation -- The consolidated financial statements include the accounts
of the Company and its two wholly-owned subsidiaries. Significant intercompany
accounts and transactions have been eliminated.
(3) Depreciation -- Depreciation is provided on a straight-line basis over the
estimated useful lives of assets which are: 30-40 years for buildings; 15-30
years for building improvements; length of lease for leasehold improvements; 5-7
years for video equipment; 5-7 years for furniture and fixtures; and 3 years for
automobiles. Gain on disposal of equipment is included in depreciation and
amortization expense for all years reported. (See Note H to Notes to
Consolidated Financial Statements).
(4) Goodwill -- Goodwill relating to acquisitions represents the excess of cost
over the fair value of net assets acquired and is amortized over 15 years.
Accumulated amortization at August 31, 1997, 1996 and 1995 totaled $345,000,
$207,000 and $69,000, respectively. (See Note J to Notes to Consolidated
Financial Statements).
(5) Deferred Financing Costs -- Costs incurred in obtaining long-term debt
financing are included in other assets. These costs are being amortized using
the interest method over the term of the related obligations.
(6) Interest Cost -- The Company had capitalized construction period interest
costs of $211,000 in 1997.
(7) Income Taxes -- Deferred income taxes arise primarily from the use of
different depreciation methods and lives for tax and financial statement
purposes, differences in the timing of the deduction for the impairment charge
and net operating loss and alternative minimum tax credit carryforwards.
(8) Receivables -- The Company grants credit to customers, substantially all of
whom are in the entertainment, advertising or corporate communications
industries.
28
<PAGE>
(9) Earnings per common share were determined by dividing net earnings by the
weighted average of common and common equivalent shares outstanding. In
February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share, which is effective
for financial statements for both interim and annual periods ending after
December 15, 1997. The new standard eliminates primary and fully diluted
earnings per share and requires presentation of basic and, if applicable,
diluted earnings per share. Basic earnings per share is computed by dividing
income available to common shareholders by the weighted average common shares
outstanding and dilutive potential common shares such as stock options. The
adoption of this new standard is not expected to have a material impact on the
disclosure of earnings per share in the financial statements.
(10) Revenue Recognition -- Revenue is recorded when services are provided.
(11) Financial Instruments -- The Company's principal financial instruments
consist of accounts receivable, accounts payable and long-term debt. The
Company believes that the carrying amount of such instruments approximates fair
value.
(12) Use of Estimates -- In preparing financial statements in conformity
with generally accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(13) Stock-Based Compensation -- Statement of Financial Accounting
Standards No. 123 (SFAS No. 123), "Accounting for Stock Based Compensation,"
provided companies a choice in the method of accounting used to determine
stock-based compensation. Companies may account for such compensation either
by using the intrinsic value-based method provided by APB Opinion No. 25
("APB No. 25"), "Accounting for Stock Issued to Employees," or the fair
market value-based method provided in SFAS No. 123. This statement is
required to be adopted by the Company during its fiscal year ending August
31, 1997. The Company has determined to use the intrinsic value-based method
provided in APB No. 25 to determine stock-based compensation. The sole
effect of the adoption of SFAS No. 123 is the obligation imposed on the
Company to comply with the new disclosure requirements provided thereunder.
(14) New Accounting Pronouncements -- In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" (SFAS 130), and Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (SFAS 131). The Company will implement SFAS 130 and SFAS
131 as required in fiscal 1999, which require the Company to report and display
certain information related to comprehensive income and operating segments,
respectively. Adoption of SFAS 130 and SFAS 131 will not impact the Company's
financial position or results of operations.
(15) Reclassifications - Certain amounts in 1996 have been reclassified to
conform to 1997 presentation.
29
<PAGE>
<TABLE>
<CAPTION>
B. LONG-TERM DEBT
AUGUST 31,
----------
1997 1996
---- ----
Notes payable to financial institution:
<S> <C> <C>
Term portion A payable in monthly installments of
$100,000 through November 2001 plus interest on
the declining balance at Prime plus 1.00% or LIBOR
plus 2.75% and final payment of $3,500,000 due
December 2001. $ 8,701,000 $ 6,787,000
Term portion B payable from the sale of assets with
interest payable monthly at Prime plus 1.25% or
LIBOR plus 3.00%. Repaid November 1997. 1,259,000 6,588,000
Revolving portion payable in full in December 2001
with interest payable monthly at Prime plus .75% or
LIBOR plus 2.50%. 5,871,000 5,706,000
Mortgage payable to a bank, due in monthly installments
of principal of $22,000 through November 2002, plus
interest on the declining balance at Prime Plus .75%
or LIBOR plus 2.50% with a final payment of $2,152,000
due December 2002. 3,555,000 3,822,000
Mortgage payable to a bank, at a fixed interest rate of
8.6%, due in monthly installments of principal of $6,250,
plus interest on the declining balance, through June 2019. 1,644,000 1,719,000
Mortgage payable to an insurance company, at a fixed
interest rate of 8.9%, due in monthly installments of
$22,000 through July 2009. 1,930,000 2,010,000
Note payable to an insurance company, at a fixed rate
of 9.3%, due in monthly installments of $33,000
through February 2000. 1,164,000 1,436,000
Note payable to a financial institution at a fixed rate of
10.6%, due in monthly installments of $25,000 through
April, 2001. 923,000 --
</TABLE>
30
<PAGE>
<TABLE>
<S> <C> <C>
Subordinated debt consisting of convertible subordinated
promissory notes payable to prior owners of GC & Co.
at an interest rate of Prime plus 1% due in full August
1998 and a subordinated promissory note payable to
Scanline Communications at an interest rate of Prime
plus 2% due in monthly installments of principal of
$35,000 with a final payment of $1,458,000 due
May 1999. 2,937,000 3,145,000
Allegheny County Industrial Development Authority
Variable Rate Demand Revenue Bonds. Interest
payable monthly based on a weekly remarketing rate,
estimated currently at 3.8%. Quarterly principal
payments of $179,000, commencing August 1998, to
be applied to the redemption of bonds which mature
July, 2009. 5,008,000 --
----------- ------------
32,992,000 31,213,000
Less current maturities 4,697,000 9,528,000
----------- ------------
$28,295,000 $ 21,685,000
----------- ------------
----------- ------------
</TABLE>
In December 1995, the Company entered into a $26 million revolving credit
and term loan agreement with a financial institution, consisting of an $11
million revolving credit facility and two $7.5 million term loans (Term Loans A
and B). In May 1997, Term Loan A was revised by the inclusion of $2,500,000 of
the original Term Loan B and the advance of $518,000 of new funds, resulting in
a revised Term Loan A balance of $9,000,000. Term Loan A is payable in fifty
five (55) equal monthly principal installments of $100,000 plus interest, with
the balance of $3,500,000 due December 2001. In November 1997 Term Loan B was
repaid, in part from the proceeds of a new Term Loan D in the amount of
$2,500,000 which is due January 31, 1998. $3,742,000 of the original Term Loan
B was repaid from sales of equipment from the Company's Editel Chicago, Editel
New York and Unitel Hollywood divisions. The Company is currently in
negotiations to refinance or sell certain of its owned real estate and
anticipates using a portion of the proceeds of the refinancing or sale to repay
Term Loan D and other indebtedness and the balance of the proceeds for working
capital purposes.
In July 1997 the credit facility was further amended by the issuance of a
$5,080,000 letter of credit to secure payment of principal and interest on
$5,000,000 principal amount of Allegheny County (Pennsylvania) Industrial
Development Authority Variable Rate Demand Revenue Bonds. The proceeds from the
sale of the Bonds were loaned to the Company and were used by the Company to
build a new digital mobile production unit. The letter of credit requires
quarterly principal payments of $179,000 commencing August 1998 to be applied to
the redemption in equal principal amount of the Bonds. The Bonds mature on July
1, 2009 and, to the extent not previously redeemed in full as provided in the
prior sentence, are required to be repaid by the Company on that date. The
terms of the overall credit agreement with the financial institution provide
that the lender receive a first lien on all property and equipment and accounts
receivable that are not encumbered by another lender.
Additionally, in December 1995 the Company obtained a $4,000,000 mortgage
on its property located on West 57th Street in New York City from a bank. The
mortgage is payable in equal monthly installments of $22,000 through November
2002, with a final payment of $2,152,000 due in December 2002.
31
<PAGE>
In February 1995 the Company purchased the business and assets of GC & Co.
The purchase price was $6,750,00, consisting of $6,000,000 in cash and $750,000
of convertible subordinated promissory notes. The cash portion of the purchase
price was financed by a $4,700,000, five-year capital lease and a $1,800,000
loan with a fixed interest rate of 9.3% payable in sixty equal monthly payments
of principal and interest of $33,000 and a balloon payment at the end of the
five-year period of $360,000. The promissory notes bear interest at 1% over
prime, were due in full in August 1997 and are convertible into the Company's
common stock at $10.00 per share. In August 1997, noteholders of $640,000
principal outstanding extended the maturity date of their notes to August 1998
on the same terms and conditions. The balance of the notes have been paid in
full.
The costs associated with the merger of the Unitel Hollywood and Editel Los
Angeles divisions necessitated the waiver at August 31, 1997 of compliance with
certain financial covenants, and amendment of those covenants, by the Company's
lenders of its revolving credit and term loan facility and its mortgage on the
Company's property on West 57th Street, New York City.
Property, equipment and accounts receivable with a carrying value of
$57,046,000 at August 31, 1997 are pledged as collateral for all long-term debt
outstanding.
The agreements relating to certain of these long-term obligations include
covenants which, among other terms, place restrictions on the Company's capital
expenditures, the maintenance of certain financial ratios (including minimum
levels of net worth and debt-to-equity restrictions, all as defined in the
agreements) and the payment of dividends.
At August 31, 1997, maturities of long-term debt for the next five years
are as follows:
YEAR ENDED AUGUST 31,
----------------------
1998 $ 4,697,000
1999 4,762,000
2000 3,174,000
2001 2,576,000
2002 10,965,000
2003 and thereafter 6,818,000
------------
$ 32,992,000
------------
------------
C. OBLIGATIONS UNDER CAPITAL LEASE AGREEMENTS
The Company has entered into various capital lease agreements for video
equipment. The leases expire at various times through 2000.
Property recorded under capital leases includes the following:
August 31,
1997 1996
---- ----
Video equipment $10,312,000 $10,447,000
Accumulated depreciation (4,539,000) (2,496,000)
------------ ------------
$ 5,773,000 $ 7,951,000
----------- ------------
----------- ------------
32
<PAGE>
Future minimum lease payments, as of August 31, 1997 are as follows:
YEAR ENDED CAPITAL
AUGUST 31, LEASES
- ---------- ------
1998 $ 2,345,000
1999 1,815,000
2000 2,158,000
2001 28,000
2002 -0-
------------
Net minimum lease payments 6,346,000
Amount representing interest ( 734,000)
------------
Obligation under capital
lease agreements $ 5,612,000
------------
------------
Current portion $ 1,946,000
Long-term portion 3,666,000
------------
$ 5,612,000
------------
------------
D. STOCK OPTION PLANS
In January 1986 the Company's Board of Directors approved a Non-Statutory
Stock Option Plan (the "Non-Statutory Plan") to grant options to purchase up to
50,000 shares of the Company's Common Stock to the Company's non-employee
directors. Under the Non-Statutory Plan options to purchase 10,000 shares were
outstanding at August 31, 1997.
In July 1988 the Company's Board of Directors approved a Non-Qualified
Stock Option Plan (the "Non-Qualified Plan") to grant options to purchase up to
125,000 shares of the Company's Common Stock primarily to key employees.
Options to purchase 10,000 shares granted to several officers under the
Non-Qualified Plan were outstanding at August 31, 1997.
In July 1992 the Company's shareholders approved the adoption of the 1992
Stock Option Plan (the "1992 Plan") to grant options to purchase up to 350,000
shares of the Company's Common Stock primarily to key employees and non-employee
directors. Prior to July 1992, the Company granted options under the plans
described above. All future stock option grants will be made under the 1992
Plan. Options to purchase 215,500 shares were outstanding to key employees and
non-employee directors under the 1992 Plan at August 31, 1997.
Under all plans, options have generally been granted to purchase stock at
the fair market value of the shares at the date of grant as determined by the
Board of Directors. Options expire ten years after the date of grant.
33
<PAGE>
The Company has adopted the disclosure only provisions of SFAS No. 123,
"Accounting for Stock Based Compensation." Accordingly, no compensation cost
has been recognized for the stock options granted to employees and directors.
Had compensation cost been determined based on the fair value at the grant date
for stock option awards in fiscal 1996 and 1997, consistent with the provisions
of SFAS No. 123 the Company's net loss and loss per share for the years ended
August 31, 1996 and 1997 would have been increased by approximately $427,570 and
$69,230 or ($.16) and $(.03) per share, respectively. During the initial
phase-in period of SFAS No. 123, such compensation may not be representative of
the future effects of applying this statement. The weighted average fair value
at date of grant for options granted during 1996 and 1997 was $3.73 and $4.07
per option. The fair value of each option at date of grant was estimated using
the Black - Scholes option pricing model with the following weighted average
assumptions for grants in:
1996 1997
Expected stock price volatility 50% 45%
Expected lives of options 10 10
Risk-free interest rate 6.9% 6.9%
Expected dividend yield 0% 0%
34
<PAGE>
The following table summarizes option activity for the years ended August
31, 1995, 1996 and 1997:
<TABLE>
<CAPTION>
Weighted
Average
Number of Option Price Exercise
Shares Per Share Price
- ---------------------------------------------------------------------------------------------
Options Outstanding, August 31, 1994 239,700 $ 5.75 - $13.18 $8.20
<S> <C> <C> <C> <C>
Granted 34,000 $ 6.63 - $ 7.25 $7.13
Exercised (5,000) $ 6.50 $6.50
Expired and canceled (43,000) $ 5.88 - $13.18 $8.35
-------
Options Outstanding, August 31, 1995 225,700 $ 5.75 - $13.18 $8.05
Granted 111,500 $ 5.13 - $ 5.28 $5.25
Exercised (30,000) $ 5.75 - $ 5.87 $5.81
Expired and canceled (91,700) $ 5.75 - $10.81 $9.15
-------
Options Outstanding, August 31, 1996 215,500 $ 5.13 - $13.18 $6.27
Granted 25,000 $ 5.28 - $ 6.13 $5.79
Expired and canceled (5,000) $ 5.25 - $ 5.25 $5.25
-------
Options Outstanding, August 31, 1997 235,500 $ 5.13 - $13.18 $5.80
-------
-------
</TABLE>
At August 31, 1997, a total of 284,500 shares were reserved for future
option grants for all plans and options to purchase 235,500 shares were
outstanding.
The following table summarizes information about stock options outstanding as of
August 31, 1997:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
RANGE OF EXERCISE NUMBER REMAINING CONTRACTUAL WEIGHTED AVERAGE
PRICES OUTSTANDING LIFE EXERCISE PRICE
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 5.13-$7.25 179,500 8 years $ 5.66
$ 8.25-$8.63 54,000 5 years $ 8.62
$ 13.18 2,000 5 years $13.18
</TABLE>
E. EMPLOYEE STOCK OWNERSHIP PLAN
In June 1987, the Employee Stock Ownership Plan (the "ESOP") obtained
financing from a bank amounting to $1,250,000, which was used in acquiring
115,849 shares of newly issued Company stock. The bank loan was repaid in full
in June 1997. The loan obligation of the ESOP was considered unearned employee
benefit expense and is recorded as a separate reduction of the Company's
shareholders' equity.
In fiscal 1991, the ESOP purchased 25,810 shares of the Company's Common
Stock. These purchases have been financed by a ten-year loan from the Company
for $229,193. The loan from the Company was repaid in full in 1997.
35
<PAGE>
401(K) EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
Effective July 1, 1992, the ESOP merged into the Unitel Video, Inc.
Retirement Investment Plan (a 401(k) Plan), which became the Unitel Video, Inc.
401(k) Employee Savings and Stock Ownership Plan (the "Plan"). The Plan
requires the Company to match employee contributions to the 401(k) portion of
the Plan in shares of the Company's Common Stock up to the maximum amount set
forth in the Plan. The minimum contribution required to be made each year by
the Company is the amount necessary to meet its debt service requirements. The
Plan combines a 401(k) plan with certain features of an employee stock ownership
plan.
Total contributions to the ESOP and the Plan for each of the years ended
August 31 are as follows:
1997 ............................. $223,000
1996 ............................. $248,000
1995 ............................. $336,000
The Company adopted Statement of Position 93-6 (SOP 93-6), "Employers'
Accounting for Employee Stock Ownership Plans" during fiscal 1995. In accordance
with SOP 93-6, compensation cost and liabilities associated with providing the
employer's 401(k) match are recognized the way they would be if an ESOP had not
been used to fund the benefit.
The Plan's compensation expense was $167,000 and $158,000 for the years ended
August 31, 1997 and 1996, respectively. A summary of the Plan's shares is as
follows:
Year ended August 31,
1997 1996
---- ----
---- ----
----
Allocated shares 116,881 96,666
Shares released for allocation 6,807 8,608
Unreleased shares -0- 27,575
------- -------
123,688 132,849
------- -------
Fair value of unreleased shares
at August 31 -0- $155,000
------- --------
------- --------
Prior to adoption of SOP 93-6, the unreleased shares were considered outstanding
for the earnings per share computation. Accordingly, for the years ended August
31, 1997 and 1996, shares were no longer considered outstanding. The effect of
adopting SOP 93-6 was not material on the net loss.
36
<PAGE>
F. INCOME TAXES
Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
and the amounts used for income tax purposes. Significant components of the
Company's deferred tax liabilities and assets are as follows:
Year ended August 31,
1997 1996
Current portion of deferred
tax assets
Employee medical benefits $ 231,000 $ 449,000
Bad debt reserve 264,000 395,000
----------- ----------
495,000 844,000
----------- ----------
Long-term portion of deferred
tax assets (liabilities)
Accrued retirement 504,000 560,000
Net assets held for sale -- 1,646,000
Net operating loss
carryforwards 3,242,000 3,062,000
ITC carryforwards-Federal
and State (net of ITC valuation
allowance) 467,000 467,000
AMT credit carryforwards 2,540,000 2,540,000
Other - net 228,000 501,000
Fixed assets basis difference between
book and tax (1,166,000) (5,086,000)
----------- ----------
5,815,000 3,690,000
Valuation Allowance (3,841,000) (2,065,000)
----------- ----------
1,974,000 1,625,000
----------- ----------
Net deferred tax asset $ 2,469,000 $2,469,000
----------- ----------
----------- ----------
37
<PAGE>
The provision for income taxes is comprised of the following:
Year Ended August 31,
1997 1996 1995
---- ---- ----
Current:
Federal $ -0- $ -0- $ (270,000)
State 38,000 40,000 36,000
---------- --------- ----------
38,000 40,000 (234,000)
Deferred:
Federal -0- -0- 1,610,000)
State -0- -0- (950,000)
---------- --------- ----------
-0- -0- (2,560,000)
---------- --------- ----------
$ 38,000 $ 40,000 $(2,794,000)
---------- --------- ----------
---------- --------- ----------
The Company's effective tax rate was (1%) in 1997, (1%) in 1996 and (30%) in
1995. The components of the reconciliation of the Company's effective tax rate
to the U.S. statutory rate of 34% are as follows:
Year Ended August 31,
1997 1996 1995
---- ---- ----
Tax expense computed
at statutory rate $(1,495,000) $(1,729,000) $(3,176,000)
State income tax, net of
Federal income tax
benefit 25,000 26,000 (607,000)
Loss without benefit 1,410,000 1,634,000 -0-
Goodwill 47,000 47,000 649,000
Other 51,000 62,000 340,000
----------- ----------- -----------
Actual tax expense $ 38,000 $ 40,000 $(2,794,000)
----------- ----------- -----------
----------- ----------- -----------
The Company's total alternative minimum tax credit carryforward is
approximately $2,400,000, which can be used against the Company's future regular
tax liability.
At August 31, 1997, the Company had available for tax purposes in excess of
$2,000,000 of State of New York tax credits that will expire through August 31,
2002. The State of New York limits the use of these credits on an annual basis.
For financial reporting purposes, a valuation allowance of $1,900,000 has been
recognized to offset the deferred tax assets related to those carryforwards for
the fiscal year ended August 31, 1997.
The deferred tax asset relating to the net operating loss carryforward is
attributable to the unused portions of Federal net operating losses generated in
fiscal 1997, 1996 and 1993 of $74,000, $665,000 and $515,000, respectively,
which are scheduled to expire in 2012, 2011 and 2008, respectively, as well as
state net operating losses generated in fiscal 1995 of various amounts scheduled
to expire at various times through 2008.
38
<PAGE>
Internal Revenue Code Section 382 places a limitation on the utilization of
Federal net operating loss and other credit carryforwards when an ownership
change, as defined by the tax law, occurs. Generally, this occurs when a
greater than 50 percentage point change in ownership occurs. Accordingly, the
actual utilization of the alternative minimum tax credit carryforwards and other
deferred tax assets for tax purposes may be limited annually to the percentage
(about 6%) of the fair market value of the Company at the time of any such
ownership changes.
G. COMMITMENTS AND CONTINGENCIES
Operating Leases -- The following is a schedule by years of future minimum
rental payments under operating leases that have an initial non-cancelable lease
term in excess of one year:
1998 $ 3,644,000
1999 2,787,000
2000 1,992,000
2001 1,282,000
2002 613,000
2003 and thereafter 500,000
-------------
$ 10,818,000
-------------
-------------
The aggregate rental expense for the years ended August 31, 1997, 1996, and
1995 was $3,385,000, $3,874,000 and $3,867,000, respectively.
The Company maintains cash balances at financial institutions located in
New York, New York, Pittsburgh, Pennsylvania, Los Angeles, California and
Montreal, Canada. These balances are insured by the Federal Deposit Insurance
Corporation up to $100,000 in the United States and by the Canada Deposit
Insurance Corporation up to $60,000 (Canadian) in Canada. At August 31, 1997,
uninsured amounts held at these financial institutions were approximately
$221,000 (USD).
The Company had a contract with a union that expired on April 17, 1997 and
another that expired on November 30, 1997. The Company and the unions are
continuing to negotiate new contracts.
There are various lawsuits claiming amounts against the Company. It is the
opinion of the Company's management that the ultimate liabilities, if any, in
these cases will not have a material effect on the Company's financial
statements.
H. NET GAIN ON DISPOSITION OF EQUIPMENT
In June 1990, the Company sold to CBS Inc. a building it owned at 508-510
West 57th Street, New York, New York. The sale price of the property was
$4,650,000 payable in cash at the closing. As part of the transaction, the
Company entered into an Indenture of Lease with CBS, pursuant to which the
Company, as tenant, leased back the premises. The Company recognized a net gain
on the disposition of $2,277,000. In addition, under the provisions of
Statement of Financial Accounting Standards No. 98, the Company deferred
$922,000 of additional gain from the sale, representing the present value of the
future minimum rental payment under the portion of the lease which was not
subject to early termination. The remaining balance of the deferred gain of
$117,000 was recognized in the year ended August 31, 1995 as a reduction of rent
expense.
39
<PAGE>
The Company has accelerated its efforts to sell equipment which is not
fully utilized. In order to properly reflect the sale of equipment as part of
the Company's operations, in 1997, 1996 and 1995, $220,000, $(58,000) and
$352,000, respectively, of (loss) gain on disposal of assets was included in
depreciation expense.
I. ACCRUED RETIREMENT
Under the terms of employment agreements with two former officers of the
Company, retirement payments commenced September 1, 1996. At August 31, 1997, a
liability of approximately $1,176,000 has been recorded, based upon the present
value of these payments. Approximately $55,000, $163,000 and $172,000 has been
charged to operations for the years ended August 31, 1997, 1996 and 1995,
respectively.
J. IMPAIRMENT AND RESTRUCTURING CHARGES
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("FASB Statement
No. 121") which provides guidance on when to assess and how to measure
impairment of long-lived assets, certain intangibles and goodwill related to
those assets to be held and used, and for long-lived assets and certain
identifiable intangibles to be disposed of. The Company adopted FASB Statement
No. 121 as of August 31, 1995.
The Company has determined to focus its resources toward providing services
to the entertainment and corporate communications areas, which represent the
Company's strength. As part of this strategy, the Company decided to sell its
Editel New York, Editel Chicago and Editel Los Angeles divisions, which
specialize in the highly competitive commercial advertising portion of the video
facilities industry. During the 1995 fiscal year, the three Editel divisions
incurred a pretax loss of $3,682,000. As a result, the Company identified
property, plant and equipment associated with these divisions, which after an
impairment charge of $4,700,000 recorded as of August 31, 1995 had a carrying
value of approximately $19,300,000, that it no longer needed for its current and
future operations. During the fourth quarter of fiscal 1995, the Company
committed to a plan to dispose of the Editel divisions and in the first quarter
of fiscal 1996 began marketing these divisions to potential buyers.
Additionally, the Company reevaluated its investment in the Unitel Post 38
division in the fourth quarter of fiscal 1995 and determined that, based upon
this division's operating results, the goodwill associated with the purchase of
this division, and certain property, plant and equipment that will not provide
any future benefits to the Company, were impaired. The Company recognized an
impairment charge of approximately $3,000,000 included in impairment charges
during the fourth quarter of fiscal 1995 which represents the remaining balances
of these assets.
Based on the Company's decision to sell the Editel divisions, the Company
recorded an impairment charge of approximately $2,000,000 in fiscal 1996
relating to the assets at all three Editel divisions. The impairment charge
recorded represents management's estimate of the decrease in value of these
assets during the period such assets were held for sale based upon the
depreciation method which the Company has used in the past and which management
has found to be reasonable and appropriate.
40
<PAGE>
On February 22, 1996, the Company announced the closure of its Editel
Chicago division and subsequently distributed the majority of that division's
assets throughout the Company. The balance of the Editel Chicago division
equipment was sold in an auction which was held in May 1996. In March 1996, the
Company terminated the lease for its Editel Chicago division by making a
lump-sum payment to the landlord of $1,600,000. The restructuring charge of
$1,246,000 recorded in the quarter ended May 31, 1996, reflects this payment
less the reversal of $354,000 of accrued rent which would have been due under
the terms of the lease. Previously, in May of 1995, the Company adopted a plan
to downsize the operations of the Editel Chicago division and reorganize and
reduce its corporate management which resulted in recording a restructuring
charge of $400,000 for severance and early retirement expense.
During the months of March through May 1996, the editorial and computer
graphics departments of the Company's Editel New York division were closed. In
May 1996, the Company reached an agreement in principle to sell the film-to-tape
transfer business of Editel New York, which was the remaining operating
department, to a group of employees backed by a private investor. The Company
operated the film-to-tape transfer business through August 31, 1996, at which
time discussions with the employee-led group were terminated and the business
was closed. During the negotiations, the majority of the editorial and computer
graphics assets were distributed throughout the Company. At August 31, 1996,
the Company estimated the revised value of the remaining assets held for sale to
be approximately $1,587,000 and classified them on the balance sheet as
short-term. In November 1996, the Company sold the majority of those assets to
an unrelated third party for $1,400,000. The balance of the assets were
redeployed throughout the Company or disposed of through an auction. Proceeds
from the sale of assets were used by the Company to repay outstanding debt.
In May 1996, after reevaluating the potential of the Editel Los Angeles
division, the Company decided to retain and expand this division and,
accordingly, discontinued seeking a buyer for this business.
In June 1997 the Company merged its Unitel Hollywood and Editel Los Angeles
divisions. A significant portion of the equipment from Unitel Hollywood was
moved to the Editel Los Angeles location. Additionally, a portion of the
equipment was transferred to the Company's New York Post Production division for
future use. The balance of the equipment was sold and the proceeds in the
amount of $1,700,000 were used to repay long term debt. As a result of the
merger and sale, the company recorded a restructuring charge of $1,055,000 in
the fourth quarter of 1997. Additionally, after a reassessment of its New York
post production assets, the Company recorded an impairment charge of $300,000 in
the fourth quarter of 1997 with respect to those assets.
K. FOURTH QUARTER ADJUSTMENTS
During the fourth quarter of fiscal 1997, the Company recorded certain
adjustments which resulted in restructuring ($1,055,000) and impairment
($300,000) charges being recorded in the amount of $1,355,000. $1,055,000 of
these adjustments or $.39 per share, related to previously issued quarterly data
for the third quarter of 1997, which the Company is restating on Form 10-Q/A.
See Note L to Notes to Consolidated Financial Statements.
41
<PAGE>
<TABLE>
<CAPTION>
L. QUARTERLY FINANCIAL DATA (UNAUDITED)
------------------------------------
YEAR ENDED PRIMARY NET
AUGUST 31, GROSS NET EARNINGS LOSS
1997 SALES PROFIT EARNINGS(LOSS) PER SHARE
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1st quarter $ 16,370,000 $3,603,000 $ 935,000 $ .35
2nd quarter 15,000,000 2,514,000 (572,000) (.21)
3rd quarter 15,840,000 2,746,000 (1,579,000) (.59)
4th quarter 11,557,000 196,000 (3,220,000) (1.21)
YEAR ENDED PRIMARY NET
AUGUST 31, GROSS NET EARNINGS LOSS
1996 SALES PROFIT EARNINGS(LOSS) PER SHARE
----------------------------------------------------------------------------------
1st quarter $22,940,000 $5,805,000 $ 522,000 $ .20
2nd quarter 20,529,000 3,171,000 (1,379,000) (.53)
3rd quarter 19,281,000 3,166,000 (2,290,000) (.88)
4th quarter 16,537,000 1,644,000 (1,977,000) (.75)
YEAR ENDED PRIMARY NET
AUGUST 31, GROSS NET EARNINGS(LOSS)
1995 SALES PROFIT EARNINGS(LOSS) PER SHARE
----------------------------------------------------------------------------------
1st quarter $21,233,000 $4,548,000 $ 439,000 $ .17
2nd quarter 20,581,000 3,560,000 50,000 .02
3rd quarter 20,831,000 3,345,000 (798,000) (.31)
4th quarter 20,640,000 2,613,000 (6,238,000) (2.41)
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Not Applicable.
42
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT.
The information required by this item is incorporated herein by
reference to the Company's definitive Proxy Statement relating to the
Registrant's 1997 Annual Meeting of Stockholders to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated herein by
reference to the Company's definitive Proxy Statement relating to the
Registrant's 1997 Annual Meeting of Stockholders to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is incorporated herein by
reference to the Company's definitive Proxy Statement relating to the
Registrant's 1997 Annual Meeting of Stockholders to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.
ITEM 13. CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS.
The information required by this item is incorporated herein by
reference to the Company's definitive Proxy Statement relating to the
Registrant's 1997 Annual Meeting of Stockholders to by filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.
43
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1. The following financial statements of the Company are
included in Part II, Item 8:
PAGE
Report of Grant Thornton LLP Independent Accountants.................20
Consolidated Balance Sheets - August 31, 1997 and 1996...............21-22
Consolidated Statements of Operations - Years Ended
August 31, 1997, 1996, and 1995....................................23
Consolidated Statement of Stockholders' Equity - Years
Ended August 31, 1997, 1996 and 1995...............................24
Consolidated Statements of Cash Flows -
Years Ended August 31, 1997, 1996 and 1995.........................25-27
Notes to Consolidated Financial Statements...........................28-42
2. The following schedule is included
in Part IV:
Consolidated Financial Statement
Schedule
Schedule II - Valuation and Qualifying Accounts and Reserves...50
All other schedules are omitted because they are not applicable, not
required or the required information is included in the consolidated financial
statements or notes thereto.
(b) Reports on Form 8-K. No reports on Form 8-K were filed by
the Company during the three months ended August 31, 1997.
(c) Exhibits required to be filed by Item 601 of Regulation S-K:
1. Exhibit 3(A). Certificate of Incorporation, as amended
(incorporated by reference to Exhibit 3(A) of the Registrant's Annual Report on
Form 10-K filed November 24, 1992 (File No. 1-8654)).
2. Exhibit 3(B). Amended and Restated By-laws (incorporated by
reference to Exhibit 3(ii) of the Registrant's Quarterly Report on form 10-Q
filed April 15, 1996 (file No. 1-8654)).
3. Exhibit 4(A). Specimen of Stock Certificate (incorporated
by reference to Exhibit 4 of the Registrant's Annual Report on form 10-K filed
November 29, 1984 (File No. 1-8654)).
44
<PAGE>
4. Exhibit 4(B). Amended and Restated Loan and Security
Agreement dated as of December 12, 1995 among Unitel Video, Inc., R Squared,
Inc., and Heller Financial, Inc. as agent and lender (incorporated by reference
to Exhibit 4(B) of the Registrant's Annual Report on form 10-K filed December
14, 1995 (File No. 1-8654)).
5. Exhibit 4(C). First Amendment and Limited Waiver to Loan
and Security Agreement dated November 26, 1996.
6. Exhibit 4(D). Second Amendment to Loan and Security
Agreement and Limited Waiver dated as of February 24, 1997 (incorporated by
reference to Exhibit 4(A) of the Registrant's Quarterly Report on Form 10-Q
filed July 9, 1997 (File No. 1-8654)).
7. Exhibit 4(E). Third Amendment and Limited Waiver to Amended
and Restated Loan and Security Agreement dated as of March 21, 1997
(incorporated by reference to Exhibit 4(B) of the Registrant's Quarterly Report
on Form 10-Q filed July 9, 1997 (File No. 1-8654)).
8. Exhibit 4(F). Fourth Amendment to Amended and Restated Loan
and Security Agreement dated as of May 7, 1997 (incorporated by reference to
Exhibit 4(C) of the Registrant's Quarterly Report on Form 10-Q filed July 9,
1997 (File No. 1-8654)).
9. Exhibit 4(G). Fifth Amendment to Amended and Restated Loan
and Security Agreement dated as of July 24, 1997.
10. Exhibit 4(H). Reimbursement Agreement dated as of July 1,
1997 between Unitel Video, Inc. and Heller Financial, Inc., as agent.
11. Exhibit 4(I). Second Amended and Restated Credit Agreement
dated as of December 12, 1995 between Unitel Video, Inc. and The Chase Manhattan
Bank, N.A. (incorporated by reference to Exhibit 4(C) of the Registrant's Annual
Report on Form 10-K filed December 14, 1995 (File No. 1-8654)).
12. Exhibit 4(J). Waiver to Loan and Security Agreement dated
April 12, 1996 (incorporated by reference to Exhibit 4(D) of the Registrant's
Annual Report on Form 10-K filed November 27, 1996 (File No. 1-8654)).
13. Exhibit 4(K). Waiver and Agreement to Amend Financial
Covenants dated November 27, 1996 (incorporated by reference to Exhibit 4(E) of
the Registrant's Annual Report on Form 10-K filed November 27, 1996 (File No.
1-8654)).
14. Exhibit 4(L). First Amendment to Second Amended and Restated
Credit Agreement dated as of May 31, 1997.
15. Exhibit 4(M). Loan Agreement dated as of July 1, 1997
between Unitel Video, Inc. and the Allegheny County Industrial Development
Authority.
16. Exhibit 4(N). Pledge Agreement dated as of July 1, 1997
among Unitel Video, Inc., PNC Bank, National Association and Heller Financial,
Inc., as agent.
17. Exhibit 10. Material Contracts:
45
<PAGE>
10(A). Amended Non-Qualified Stock Option Plan of Unitel Video,
Inc. (incorporated by reference to Exhibit 10(A) of the Registrant's Annual
Report on Form 10-K filed November 27, 1996 (File No. 1-8654)).*
10(B). Lease Agreement between Unitel Video, Inc. and
Educational Broadcasting Corporation dated July 16, 1993 (incorporated by
reference to Exhibit 10(B) of the Registrant's Annual Report on Form 10-K filed
November 26, 1993 (File No. 1-8654)).
10(C). Amended Non-Statutory Stock Option Plan of Unitel Video,
Inc. (incorporated by reference to Exhibit 10(C) of the Registrant's Annual
Report on Form 10-K filed November 27, 1996 (File No. 1-8654)).*
10(D). Amended Employee Stock Purchase Plan of Unitel Video,
Inc. (incorporated by reference to Exhibit 10(D) of the Registrant's Annual
Report on Form 10-K filed November 27, 1996 (File No. 1-8654)).*
10(E). Employment & Consulting Agreement between Unitel Video,
Inc. and Herbert Bass dated as of May 26, 1988 (incorporated by reference to
Exhibit 10(R) of the Registrant's Annual Report on Form 10-K filed December 13,
1989 (File No. 1-8654)).*
10(F). Employment & Consulting Agreement between Unitel Video,
Inc. and Alex Geisler dated as of May 26, 1988 (incorporated by reference to
Item 14(C)4(S) of the Registrant's Annual Report on form 10K filed December 13,
1989 (File No. 1-8654)).*
10(G). Amendment to Employment and Consulting Agreement dated as
of February 14, 1996 between Unitel Video, Inc. and Alex Geisler. (incorporated
by reference to Exhibit 10(G) of the Registrant's Annual Report on Form 10-K
filed November 27, 1996 (File No. 1-8654)).*
10(H). Lease Agreement between UNV, Inc. and HBWC Limited
Partnership dated as of August 12, 1988 (incorporated by reference to Exhibit
10(U) of the Registrant's Annual Report on Form 10-K filed December 13, 1989
(File No. 1-8654)).
10(I). Lease Agreements between Windsor Video, Inc. and Time
Equities Inc. dated as of September 4, 1986 (incorporated by reference to
Exhibit 10(V) of the Registrant's Annual Report on form 10-K filed December 13,
1989 (File No. 1-8654)).
10(J). Amendment to each Lease Agreement between Windsor Video,
Inc. and Time Equities Inc. dated as of July 13, 1994 and July 18, 1994
(incorporated by reference to Exhibit 10(K) of the Registrant's Annual Report on
form 10-K filed November 28, 1994 (File No. 1-8654)).
10(K). Lease Agreement between Unitel Video, Inc. and CBS, Inc.
dated as of June 15, 1990 (incorporated by reference to Exhibit 10(Y) of the
Registrant's Annual Report on Form 10-K filed November 26, 1990 (File No.
1-8654)).
10(L). Amendment to Lease Agreement dated July 11, 1996 between
Unitel Video, Inc. and CBS, Inc. (incorporated by reference to Exhibit 10(L) of
the Registrant's Annual Report on Form 10-K filed November 27, 1996 (File No.
1-8654)).
46
<PAGE>
10(M). Assumption and Assignment of Lease between Unitel Video,
Inc. and VCA/Teletronics Inc. dated May 19, 1990 (incorporated by reference to
Exhibit 10(AA) of the Registrant's Annual Report on Form 10-K filed November 26,
1990 (File No. 1-8654)).
10(N). Amendment to Lease between Unitel Video, Inc. and Stage
57 Co. dated May 14, 1990 (incorporated by reference to Exhibit 10(BB) of the
Registrant's Annual Report on Form 10-K filed November 26, 1990 (File No.
1-8654)).
10(O). Second Amendment to Lease between Unitel Video, Inc. and
Stage 57 Co. dated as of May 1, 1994 (incorporated by reference to Exhibit 10(O)
of the Registrant's Annual Report on Form 10-K filed November 28, 1994 (File No.
1-8654)).
10(P). Amended 1992 Stock Option Plan. (incorporated by
reference to Exhibit 10 to the Registrant's Quarterly Report on Form 10-Q filed
April 7, 1997 (File No. 1-8654)).*
10(Q). Lease Termination and Release Agreement dated as of March
13, 1996 between Unitel Video, Inc. and Putman Publishing Company (Incorporated
by reference to Exhibit 10(Q) of the Registrant's Annual Report on Form 10-K
filed November 27, 1996 (File No. 1-8654)).
10(R). Assignment, Assumption and Acceptance of Lease between
Scanline Communications and Unitel Video, Inc. (incorporated by reference to
Exhibit 10(V) of the Registrant's Annual Report on Form 10-K filed November 24,
1992 (File No. 1-8654)).
10(S). Asset Purchase Agreement dated as of May 5, 1992 between
Unitel Video, Inc. and Scanline Communications (incorporated by reference to
Exhibit 2.1 of the Registrant's Current Report on Form 8-K dated May 15, 1992
(File No. 1-8654)).
10(T). Amendment dated as of October 29, 1992 to Asset Purchase
Agreement dated as of May 5, 1992 between Unitel Video, Inc. and Scanline
Communications (incorporated by reference to Exhibit 10(X) of the Registrant's
Annual Report on Form 10-K filed November 24, 1992 (File No. 1-8654)).
10(U). Lease Agreement between First East Associates and Unitel
Video, Inc. dated May 26, 1993 and Sublease dated May 26, 1993 between Unitel
Video, Inc. and KingWorld Productions, Inc.(incorporated by reference to Exhibit
10(U) of the Registrant's Annual Report on Form 10-K filed November 26, 1993
(File No. 1-8654)).
10(V). Sublease Agreement dated April 1, 1987 between R.E.
Graphics, Inc. (f/k/a Micor, Inc.) and Scanline Communications, together with
Modification dated February 1989 of Sublease Agreement (incorporated by
reference to Exhibit 10(AA) of the Registrant's Annual Report on Form 10-K filed
November 24, 1992 (File No. 1-8654)).
10(W). Sublease Agreement dated January 1, 1982 between Columbia
Pictures Industries, Inc. and Bell & Howell/Columbia Pictures Video Services,
together with letter dated April 3, 1989 from Columbia Pictures to Scanline
Communications and undated Letter from Columbia Pictures to 43rd Street Estates
Corp. (incorporated by reference to Exhibit 10(BB) of the Registrant's Annual
Report on Form 10-K filed November 24, 1992 (File No. 1-8654)).
47
<PAGE>
10(X). Third Tier Sublease, dated May 14, 1996, between Unitel
Video, Inc. and Photo-Magnetic Sound Studios Inc. (incorporated by reference to
Exhibit 10(X) of the Registrant's Annual Report on Form 10-K filed November 27,
1996 (File No. 1-8654)).
10(Y). Sublease Agreement dated as of July 3, 1996 between
Unitel Video, Inc. and Henry Dreyfuss Associates and Second Tier Sublease dated
as of July 3, 1996 between Unitel Video, Inc. and Paramount Pictures Corporation
(incorporated by reference to Exhibit 10(Y) of the Registrant's Annual Report on
Form 10-K filed November 27, 1996 (File No. 1-8654)).
10(Z). 401K Employee Savings and Stock Ownership Plan of Unitel
Video, Inc. effective July 1, 1992 (incorporated by reference to Exhibit 10(X)
of the Registrant's Annual Report on Form 10-K filed November 26, 1993 (File No.
1-8654)).*
10(AA). Asset Purchase Agreement dated as of February 24, 1995
between Jee See & Co., Inc. and Unitel Video, Inc. (incorporated by reference to
Exhibit 2-1 of the Registrant's Current Report on Form 8-K dated February 24,
1995 (File No. 1-8654)).
10(BB). Two Third Tier Sublease agreements dated November 22,
1996 between Unitel Video, Inc. and Digital Universe II, Inc. (incorporated by
reference to Exhibit 10(BB) of the Registrant's Annual Report on Form 10-K filed
November 27, 1996 (File No. 1-8654)).
10(CC). Employment Agreement between Editel Los Angeles and
Albert Walton dated as of March 20, 1997 (incorporated by reference to Exhibit
10(A) to the Registrant's Quarterly Report on Form 10-Q filed July 9, 1997 (File
No. 1-8654)).
10(DD). Deed of Lease dated June 16, 1997 between Olymbec
Construction Inc. and Unitel Video Canada Inc.
10(EE). Remarketing Agreement, dated as of July 1, 1997, among
Allegheny County Industrial Development Authority, PNC Bank, National
Association, Unitel Video, Inc. and RRZ Public Markets, Inc.
18. Exhibit 23. Accountant's consent.
19. Exhibit 24. Power of Attorney from officers and directors to
Barry Knepper (included on signature page).
20. Exhibit 27. Financial Data Schedule.
* Management contract or compensatory plan or arrangement required to be noted
as provided in Item 14(a)(3).
48
<PAGE>
UNDERTAKING
The Company hereby undertakes to furnish to the Securities and Exchange
Commission, upon request, all constituent instruments defining the rights of
holders of long-term debt of the Company and its consolidated subsidiaries not
filed herewith. Such instruments have not been filed since none are, nor are
being, registered under Section 12 of the Securities and Exchange Act of 1934
and the total amount of securities authorized under any of such instruments does
not exceed 10% of the total assets of the Company and its subsidiary on a
consolidated basis.
49
<PAGE>
<TABLE>
<CAPTION>
UNITEL VIDEO, INC.
------------------
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
------------------------------------------------------------
COLUMN A COLUMN B COLUMN C1 COLUMN D COLUMN E
-------- -------- --------- -------- --------
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
----------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
YEAR ENDED AUGUST 31, 1997
Allowance for doubtful accounts $712,000 $(10,000) $290,000 $412,000
-------- -------- -------- --------
-------- -------- -------- --------
YEAR ENDED AUGUST 31, 1996
Allowance for doubtful accounts $686,000 $407,000 $381,000 $712,000
-------- -------- -------- --------
-------- -------- -------- --------
YEAR ENDED AUGUST 31, 1995
Allowance for doubtful accounts $690,000 $125,000 $129,000 $686,000
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
COLUMN D
- --------
Uncollectible accounts written off.
COLUMN E
- --------
Deducted in balance sheet from accounts receivable.
50
<PAGE>
For the purposes of complying with the amendments to the rules governing Form
S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned
Registrant hereby undertakes as follows, which undertaking shall be incorporated
by reference into registrant's Registration Statement on form S-8 Nos. 33-7306
(filed July 15, 1986), 33-13660 (filed April 20, 1987), 33-14654 (filed May 28,
1987) and 33-00613 (filed February 8, 1996).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such directors, officers or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1993 and will be governed by the final adjudication of such issue.
51
<PAGE>
SIGNATURE AND POWER OF ATTORNEY
Pursuant to the requirements of Section 13 or 15(d) 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.
UNITEL VIDEO, INC.
December 12, 1997 By: /s/ Barry Knepper
-------------------------
Barry Knepper
Chief Executive Officer
December 12, 1997 By: /s/ George Horowitz
-------------------------
George Horowitz
Chief Financial Officer
52
<PAGE>
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Barry Knepper and George Horowitz, and each of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this report, and to
file the same, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in fact and
agents, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
53
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.
SIGNATURE TITLE DATE
/s/ Barry Knepper Chief Executive Officer; December 12, 1997
- -------------------------
Barry Knepper President and Director
/s/ Richard L. Clouser Senior Vice President - December 12, 1997
- -------------------------
Richard L. Clouser Corporate, President
of the Mobile Division
and Director
/s/ Herbert Bass Director December 12, 1997
- -------------------------
Herbert Bass
/s/ Alex Geisler Director December 12, 1997
- -------------------------
Alex Geisler
/s/ Walter G. Arader Director December 12, 1997
- -------------------------
Walter G. Arader
/s/ Philip Birsh Director December 12, 1997
- -------------------------
Philip Birsh
54
<PAGE>
Exhibit 4(C)
FIRST AMENDMENT AND LIMITED WAIVER
TO LOAN AND SECURITY AGREEMENT
This First Amendment and Waiver to Loan and Security Agreement ("Amendment") is
dated November 26, 1996, and entered into by and among HELLER FINANCIAL, INC.,
as Agent ("Agent") and Lender ("Lender"), UNITEL VIDEO, INC. ("Borrower") and R
Squared, Inc. ("Corporate Guarantor").
WHEREAS, Agent, Lender, Borrower and Corporate Guarantor have entered into
a Loan and Security Agreement (the "Agreement") dated December 12, 1995; and
WHEREAS, Events of Default are in existence under subsection 8.1(C) of the
Agreement as a result of Borrower's breach of (i) the Tangible Net Worth
covenant contained in subsection 6.1 for the fiscal quarter ending August 31,
1996, (ii) the Fixed Charge Coverage covenant contained in subsection 6.3 for
the three fiscal quarters ending August 31, 1996 and (iii) the Leverage Ratio
covenant contained in subsection 6.4 for the fiscal quarter ending August 31,
1996 (collectively, the "Existing Events of Default"); and
WHEREAS, Borrower and Corporate Guarantor have requested that Agent and
Requisite Lenders waive the Existing Events of Default and amend the covenants
set forth above; and
WHEREAS, Borrower and Corporate Guarantor have requested that Agent and
Requisite Lenders defer the payment due date of Term Loan B from October 31,
1996 to December 31, 1996; and
WHEREAS, Agent and Requisite Lenders have agreed to waive the Existing
Events of Default, amend the Tangible Net Worth, Fixed Charge and Leverage Ratio
covenants and defer the payment due date of Term Loan B until December 31, 1996,
subject to the following terms and conditions;
NOW THEREFORE, in consideration of the mutual conditions and agreements
set forth in the Agreement and this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound, hereby agree as follows:
ARTICLE I. DEFINITIONS
Section 1.01. Definitions. Capitalized terms used in this Amendment, to
the extent not otherwise defined herein, shall have the same meanings as in the
Agreement, as amended hereby.
<PAGE>
ARTICLE II. AMENDMENTS
Section 2.01. Amendment to Subsection 1.1 "Certain Defined Terms".
Subsection 1.1 shall be, and the same is hereby amended by adding the following
new definitions, in proper alphabetical order, to said subsection:
"Excess Availability" means, as of any date, the A amount (if any) by
which the Maximum Revolving Loan Amount exceeds the outstanding principal
balance of the Revolving Loan.
"Special Reserve" means a reserve in the amount $500,000, which shall be
in effect until the earlier to occur of (a) the repayment in full of Term
Loan B or (b) Agent's receipt of equipment appraisals, which in Agent's
sole discretion, reflect equipment values sufficient to adequately
collateralize the Term Loans.
Section 2.02. Amendment to Subsection 2.1(A)(2) "Term Loan B". Subsection
2.1(A)(2) shall be, and the same is hereby amended by deleting the defined term
"Scheduled Installment of Term Loan B" appearing in the second paragraph of said
subsection and substituting the following therefor:
"Scheduled Installment of Term Loan B" means the principal installment in
an amount equal to $6,581,452.70, payable, subject to the provisions of
subsection 2.4(B), on or before December 31, 1996 or earlier to occur of
(i) the Termination Date or (ii) the acceleration of the Obligations in
accordance with the provisions of subsection 8.3, at which time the entire
unpaid principal amount thereof plus accrued interest thereon shall be due
and payable.
Section 2.03. Amendment to Subsection 2.1(B) "Revolving Loan". Subsection
2.1(B) shall be, and the same is hereby amended by deleting the definition of
"Maximum Revolving Loan Amount" appearing in paragraph (1) in its entirety and
substituting the following therefor:
"Maximum Revolving Loan Amount" means, as of any date of determination,
the lesser of (a) the Revolving Loan Commitment minus (i) the Letter of
Credit Reserve and (ii) the Special Reserve and (b) the Borrowing Base
minus the Letter of Credit Reserve.
Section 2.04. Amendment to Subsection 6.1 "Tangible Net Worth". Subsection
6.1 shall be, and the same is hereby deleted in its entirety and the following
substituted therefor:
2
<PAGE>
Borrower shall at all times maintain Tangible Net Worth plus Subordinated
Debt of at least $18,000,000.
Section 2.05. Amendment to Subsection 6.3 "Fixed Charge Coverage".
Subsection 6.3 shall be, and the same is hereby deleted in its entirety and the
following substituted therefor:
Borrower shall not permit its Fixed Charge Coverage to be less than the
ratios set forth below for the periods set forth below:
Period Ratio
------ -----
The fiscal quarter ending 2/29/96 1.0: 1.0
The 2 fiscal quarters ending 5/31/96 1.0: 1.0
The 3 fiscal quarters ending 8/31/96 1.0: 1.0
The fiscal quarter ending 11/30/96 .8: 1.0
The 2 fiscal quarters ending 2/28/97 .8: 1.0
The 3 fiscal quarters ending 5/31/97 .8: 1.0
The 4 fiscal quarters ending 8/31/97 1.0: 1.0
and each fiscal quarter thereafter,
on a rolling four quarter basis
Section 2.06. Amendment to Subsection 6.4 "Leverage Ratio". Subsection 6.4
shall be, and the same is hereby amended by deleting the table appearing in said
subsection and the substituting the following therefor:
Period Ratio
------ -----
Closing Date and on the last day of each 3.25 to 1.00
fiscal quarter thereafter, through
and including 8/31/96
The fiscal quarter ending 11/30/96 4.00 to 1.00
The fiscal quarter ending 2/28/97 3.75 to 1.00
The fiscal quarter ending 5/31/97 3.50 to 1.00
The fiscal quarter ending 8/31/97 3.25 to 1.00
On the last day of each fiscal quarter 2.75 to 1.00
thereafter
Section 2.07. Amendment to Section 6 "Financial Covenants". A new
subsection 6.5, entitled "Excess Availability" shall be added to section 6
immediately after subsection 6.4, as follows:
3
<PAGE>
6.5 "Excess Availability". Borrower shall not permit at any time its
Excess Availability to be less than $250,000 for the period commencing
September 1, 1996 and ending May 31, 1997.
ARTICLE III. LIMITED WAIVER
Section 3.01. Waiver of Financial Covenant Defaults. Agent and Requisite
Lenders hereby waive the Existing Events of Default. This is a limited waiver
and shall not be deemed to constitute a waiver of any other existing Events of
Default or any future breach of the Agreement or any of the other Loan Documents
(including, without limitation, a breach of the covenants causing the Existing
Events of Default for any periods other than those specified herein).
ARTICLE IV. MISCELLANEOUS
Section 4.01. Conditions. The effectiveness of this Amendment is subject
to the satisfaction of the following conditions precedent (unless specifically
waived in writing by Agent and Requisite Lenders):
(a) there shall have occurred no material adverse change in the business,
operations, financial conditions, profits or prospects, or in the
Collateral of the Borrower;
(b) Borrower and Corporate Guarantor shall have executed and delivered such
other documents and instruments as Agent may require;
(c) all corporate proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments and other
legal matters incident thereto shall be satisfactory to Agent and its
legal counsel.
Section 4.02 Ratification. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Agreement and, except as expressly modified and superseded by this
Amendment, the terms and provisions of the Agreement, are ratified and confirmed
and shall continue in full force and effect.
Section 4.03 Corporate Action. The execution, delivery and performance of
this Amendment have been authorized by all requisite corporate action on the
part of Borrower and Corporate Guarantor and will not violate the Articles of
Incorporation or Bylaws of either Borrower or Corporate Guarantor.
4
<PAGE>
Section 4.04 Severability. Any provision of this Amendment held by a court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 4.05 Successors and Assigns. This Amendment is binding upon and
shall inure to the benefit of Agent, Lender, Borrower and Corporate Guarantor
and their respective successors and assigns.
Section 4.06 Counterparts. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment on the date
first above written.
HELLER FINANCIAL, INC.,
as Agent and Lender
By: /s/ Jerome P. Sepich
----------------------------
Title: Vice President
UNITEL VIDEO, INC.
as Borrower
By: /s/ Barry Knepper
----------------------------
Title: CEO
R SQUARED, INC.,
as Corporate Guarantor
By: /s/ Barry Knepper
----------------------------
Title: CEO
5
<PAGE>
Exhibit 4(G)
FIFTH AMENDMENT
TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS FIFTH AMENDMENT ("Amendment") is entered into as of July 24,
1997, by and among UNITEL VIDEO, INC., a Delaware corporation having its
principal place of business at 555 West 57th Street, New York, New York 10019
("Borrower"), R SQUARED, INC., a California Corporation having its principal
place of business at 3330 Cahuenga Boulevard West, Los Angeles, California 90068
("Corporate Guarantor") and HELLER FINANCIAL, INC., a Delaware corporation
having an office at 500 West Monroe Street, Chicago, Illinois 60661, as agent
("Agent") for Lender (as hereafter defined).
BACKGROUND
Borrower, Corporate Guarantor, Agent and Heller Financial, Inc.
("Lender") are parties to an Amended and Restated Loan and Security Agreement
dated as of December 12, 1995 (as amended, supplemented or otherwise modified
from time to time, the "Loan Agreement") pursuant to which Lender provides
Borrower with certain financial accommodations.
Borrower has requested that Agent cause the issuance of an
irrevocable letter of credit in favor of PNC Bank, National Association, as
trustee, in connection with the issuance by the Allegheny County Industrial
Development Authority of Variable Rate Demand Revenue Bonds, Series 1997 (Unitel
Mobile Video Project) to finance Borrower's costs of constructing up to two
mobile video television production units to be based at Borrower's Allegheny
County office. Agent is willing to do so on the terms and conditions hereafter
set forth.
NOW, THEREFORE, in consideration of any loan or advance or grant of
credit heretofore or hereafter made to or for the account of Borrower by Lender,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions. All capitalized terms not otherwise defined herein
shall have the meanings given to them in the Loan Agreement.
2. Amendment to Loan Agreement. Subject to satisfaction of the
conditions precedent set forth in Section 3 below, the Loan Agreement is hereby
amended as follows:
(a) Section 1.1 of the Loan Agreement is hereby amended by:
(i) adding the following defined terms in their appropriate
alphabetical order:
<PAGE>
"Bond Amortizing Availability Amount" means $5,080,547.95 less
$178,571 per quarter commencing on August 5, 1998 and on the fifth
day of each quarter thereafter.
"Bond Documentation" means the Bond Loan Agreement, the Bond Pledge
Agreement, the Bond Trust Indenture, the Reimbursement Agreement,
the Remarketing Agreement and the Purchase Contract.
"Bond Letter of Credit" means Irrevocable Letter of Credit No.
____________, dated July 24, 1997, in the original face amount of
$5,080,547.95 issued by Bank of America National Trust and Savings
Association in favor of the Trustee and any Bond Letter of Credit
caused to be issued by Agent in replacement thereof.
"Bond Letter of Credit Loans" means advances made pursuant to
subsection 2.1(A)(4).
"Bond Letter of Credit Note" means the promissory note of Borrower
in substantially the form of Exhibit 2.1(A)(4).
"Bond Letter of Credit Reimbursement Obligations" means all amounts
due and owing by Borrower to Agent, from time to time, under and in
accordance with the provisions of the Reimbursement Agreement.
"Bond Loan Agreement" means the Loan Agreement dated as of July 1,
1997 by and between Borrower and the Issuer, as amended, modified or
supplemented from time to time with the prior written consent of
Agent.
"Bond Loan Commitment" means (a) as to any Lender, the commitment of
such Lender to make a portion of the Bond Letter of Credit Loans in
an amount equal to such Lender's Pro Rata Share of the aggregate
commitment of all Lenders to make Bond Letter of Credit Loans and
(b) as to all Lenders, the aggregate commitment of all Lenders to
make Bond Letter of Credit Loans.
"Bonds" means the Issuer's Variable Rate Demand Revenue Bonds,
Series 1997 (Unitel Mobile Video Project) in the original principal
amount of Five Million Dollars ($5,000,000).
"Bond Pledge Agreement" means the Pledge Agreement dated as of the
Fifth Amendment Effective Date, as amended, modified and
supplemented from time to time, among Borrower, the Trustee, as
escrow agent, and Agent.
"Bond Trust Indenture" means the Trust Indenture dated as of July 1,
1997 between the Issuer and the Trustee, as amended, modified or
supplemented from time to time with the prior written consent of
Agent.
"Fifth Amendment Effective Date" means July 24, 1997.
"Issuer" means the Allegheny County Industrial Development
Authority.
-2-
<PAGE>
"Purchase Contract" means the Private Placement Agreement dated as
of July 1, 1997 among the Issuer, Borrower and RRZ Public Markets,
Inc. as underwriter for the Bonds, as amended, modified or
supplemented from time to time with the prior written consent of
Agent.
"Reimbursement Agreement" means the Reimbursement Agreement dated as
of the Fifth Amendment Effective Date between Borrower and Agent, as
amended, modified and supplemented from time to time.
"Remarketing Agent" means RRZ Public Markets, Inc. and any successor
Remarketing Agent under the Bond Trust Indenture.
"Remarketing Agreement" means the Remarketing Agreement dated as of
July 1, 1997 among the Issuer, the Borrower, the Trustee and the
Remarketing Agent, as the same may be amended, modified or
supplemented from time to time with the prior written consent of
Agent.
"Tender Advance" has the meaning set forth in Section 2(c) of the
Reimbursement Agreement.
"Tender Drawing" means a drawing under the Bond Letter of Credit to
pay the purchase price of Bonds in the amount set forth in Sections
501 through 505 of the Bond Trust Indenture and not remarketed by
the Remarketing Agent on the date such Bonds are to be purchased.
"Trustee" means PNC Bank, National Association, or any successor
trustee under the Bond Trust Indenture.
(ii) amending the following defined terms in their entirety to
provide as follows:
"Loan Documents" means this Agreement, the Notes, the Corporate
Guaranty, the Subordinated Notes, the Reimbursement Agreement, the
Bond Pledge Agreement and all other instruments, documents and
agreements executed by or on behalf of Borrower or any Loan Party
and delivered concurrently herewith or at any time hereafter to or
for the benefit of Agent or any Lender in connection with the Loans
and other transactions contemplated by this Agreement, all as
amended, restated, supplemented or modified from time to time.
"Loan" or "Loans" means an advance or advances under the Term Loan
Commitment, the Revolving Loan Commitment or the Bond Loan
Commitment, as applicable.
"Notes" means the Amended and Restated Revolving Note, the Amended
and Restated Term Notes and the Bond Letter of Credit Note.
-3-
<PAGE>
"Obligations" means all obligations, liabilities and indebtedness of
every nature of each Loan Party from time to time owed to Agent or
to any Lender under the Loan Documents including, without
limitation, all Bond Letter of Credit Reimbursement Obligations, the
principal amount of all debts, claims and indebtedness (whether
incurred before or after the Termination Date), accrued and unpaid
interest and all fees, costs and expenses, whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now
and/or from time to time hereafter owing, due or payable.
"Total Loan Commitment" means the aggregate commitments of any
Lender with respect to the Revolving Loan Commitment, the Term Loan
Commitment and the Bond Loan Commitment.
(b) A new Section 2.1(A)(4) is hereby added to the Loan Agreement to
provide as follows:
"(A)(4) Bond Letter of Credit Loans. Simultaneously with the
execution of the Fifth Amendment to this Agreement, Borrower and
Agent entered into a Reimbursement Agreement pursuant to which,
among other things, Agent agreed to cause the issuance of the Bond
Letter of Credit and Borrower agreed to reimburse Agent for all Bond
Letter of Credit Reimbursement Obligations. Subject to the terms and
conditions of this Agreement, in reliance upon the representations
and warranties of Borrower herein set forth and for the sole purpose
of enabling Borrower to reimburse Agent for all Bond Letter of
Credit Reimbursement Obligations, each Lender, severally, agrees to
lend to Borrower, on the date each Bond Letter of Credit
Reimbursement Obligation becomes due, its Pro Rata Share of the
lesser of (i) the Bond Letter of Credit Reimbursement Obligation
then due and (ii) the Bond Amortizing Availability Amount as of such
date ("Bond Letter of Credit Loans"). Borrower acknowledges that on
the date each Bond Letter of Credit Reimbursement Obligation becomes
due (i) Agent shall charge Borrower's loan account as a Bond Letter
of Credit Loan an amount equal to such Bond Letter of Credit
Reimbursement Obligation and (ii) Borrower shall be deemed to have
irrevocably requested a Bond Letter of Credit Loan in an amount
equal to such Bond Letter of Credit Reimbursement Obligation. The
outstanding balance of all Bond Letter of Credit Loans together with
accrued interest thereon shall be due and payable on the earlier to
occur of (i) the Termination Date or (ii) acceleration of the
Obligations in accordance with the provisions of subsection 8.3;
provided, however, the outstanding balance of all Bond Letter of
Credit Loans constituting Tender Advances together with accrued
interest thereon shall be due and payable on the earlier to occur of
(i) the remarketing, pursuant to Section 507 of the Bond Trust
Indenture, of the Bonds purchased with the proceeds of the related
Tender Drawing, (ii) the Termination Date or (iii) acceleration of
the Obligations in accordance with the provisions of subsection 8.3.
Borrower shall be permitted to prepay the Bond Letter of Credit
Loans at any time, in whole or in part, subject to the provisions of
subsection 2.3(C). Notwithstanding anything to the contrary
contained in this Agreement,
-4-
<PAGE>
no references in this Agreement to "Lender Letters of Credit" shall
include or be deemed to include Bond Letters of Credit."
(c) Subsection 2.1(B) of the Loan Agreement is hereby amended by
deleting the reference to "$11,000,000" and replacing the same with "8,500,000".
(d) A new sentence is hereby added after the first sentence of
subsection 2.1(E) of the Loan Agreement to provide as follows:
"Borrower shall execute and deliver to each Lender a Bond Letter of
Credit Note to evidence such Lender's portion of the Bond Letter of
Credit Loans, such Bond Letter of Credit Note to be in the principal
amount of the respective Bond Loan Commitment of such Lender and
with other appropriate insertions."
(e) Subsection 2.1(F) of the Loan Agreement is hereby amended in its
entirety to provide as follows:
"(F) Evidence of Revolving Loan and Bond Letter of Credit Loan
Obligations. The advances constituting Revolving Loans and Bond
Letter of Credit Loans shall be evidenced by this Agreement, the
Amended and Restated Revolving Note, the Bond Letter of Credit Note
and notations made from time to time by Agent in its books and
records, including computer records. Agent shall record in its books
and records, including computer records, the principal amount of the
Revolving Loans and Bond Letter of Credit Loans owing to each Lender
from time to time. Agent's books and records shall constitute
presumptive evidence, absent manifest error, of the accuracy of the
information contained therein. Failure by Agent to make any such
notation or record shall not affect the obligations of Borrower to
Lenders with respect to the Revolving Loans and the Bond Letter of
Credit Loans."
(f) A new sentence is hereby added to the end of subsection
2.2(A)(i) of the Loan Agreement to provide as follows:
"Bond Letter of Credit Loans shall bear interest from the date such
Loan is made to the date paid in full at a rate per annum equal to
the interest rate set forth in this subsection 2.2(A) applicable to
Term Loan A."
(g) Subsection 2.3(C) of the Loan Agreement is hereby amended by
adding the words "plus the amount of the then outstanding Bond Letter of Credit
Loans" to the end of clause "(1)" thereof.
(h) A new sentence is hereby added to the end of subsection
2.4(B)(1) of the Loan Agreement to provide as follows:
"At any time that the principal balance of the Bond Letter of Credit
Loan exceeds the Bond Amortizing Availability Amount, Borrower
shall, upon demand by
-5-
<PAGE>
Agent, immediately repay the Bond Letter of Credit Loan to the
extent necessary to reduce the principal balance to an amount that
is equal to or less than the Bond Amortizing Availability Amount."
(i) A new sentence is hereby added at the end of subsection 2.4(C)
of the Loan Agreement to provide as follows:
"Borrower shall be permitted to prepay the Bond Letter of Credit
Loans at any time, in whole or in part, subject to the provisions of
subsection 2.3(C)."
(j) A new sentence is hereby added at the end of subsection 5.12 of
the Loan Agreement to provide as follows:
"Within five (5) days after the issuance thereof, Borrower shall (a)
deliver to Agent the original certificate of title relating to each
mobile video unit constructed by Borrower utilizing the proceeds of
the Bonds and based at Borrower's Allegheny County office and (b)
take all such other action and execute all such documentation as
Agent shall reasonably request to evidence Agent's perfected first
priority lien in each such mobile video unit."
(k) Subsection 7.1 of the Loan Agreement is hereby amended by:
(i) adding after clause (a)(iii) thereof a new clause (a)(iv) to
provide as follows:
"and (iv) Indebtedness incurred under the Bond Loan Agreement,
the Bond Indenture and the Loan and Security Agreement dated
May 1, 1997 between Borrower and Charter Financial, Inc. which
Indebtedness may be paid only in accordance with the terms of
such agreements as originally executed or modified with the
prior written consent of Agent".
(ii) adding after clause (b)(v) thereof a new clause (b)(vi) to
provide as follows:
"and (vi) Indebtedness incurred under the Bond Loan Agreement
and the Bond Indenture and the Loan and Security Agreement
dated May 1, 1997 between Borrower and Charter Financial, Inc.
which Indebtedness may be paid only in accordance with the
terms of such agreements as originally executed or modified
with the prior written consent of Agent".
(l) A new subsection 8.1(V) is hereby added to provide as follows:
"(V) Cross Default to Bond Documentation. An event of default shall
occur and be continuing under any Bond Documentation which is not
cured within any applicable grace period.
(m) Exhibit 2.1(A)(4) to this Amendment is hereby added to the Loan
Agreement as Exhibit 2.1(A)(4).
-6-
<PAGE>
3. Conditions of Effectiveness. This Amendment shall become
effective when and only when Agent shall have received (a) four (4) copies of
this Amendment executed by Borrower and Corporate Guarantor; (b) a fully
executed copy of each of the following documents: (i) the Reimbursement
Agreement, (ii) the Bond Pledge Agreement, (iii) the Bond Trust Indenture, (iv)
the Remarketing Agreement, (iv) the Bond Letter of Credit Note, (v) the Bond
Loan Agreement, (vi) the Purchase Contract and (vii) the Bond Loan Agreement;
(c) all documents set forth in Section 3(b) of the Reimbursement Agreement and
(d) such other certificates, instruments, documents, agreements and opinions of
counsel as may be required by Agent or its counsel, each of which shall be in
form and substance satisfactory to Agent and its counsel.
4. Representations and Warranties. Borrower hereby represents and
warrants as follows:
(a) This Amendment and the Agreement, as amended hereby,
constitute legal, valid and binding obligations of Borrower and are
enforceable against Borrower in accordance with their respective
terms.
(b) Upon the effectiveness of this Amendment, Borrower hereby
reaffirms that all covenants, representations and warranties made in
the Loan Agreement to the extent the same are not specifically
amended hereby or otherwise notified to Lender in writing, are
correct in all material respects and agrees that all covenants,
representations and warranties shall be deemed to have been remade
as of the effective date of this Amendment.
(c) No Event of Default or Default has occurred and is
continuing or would exist after giving effect to this Amendment.
(d) Borrower has no defense, counterclaim or offset with
respect to the Loan Agreement or the Obligations thereunder.
5. Effect on the Loan Agreement.
(a) Upon the effectiveness of Section 2 hereof, each reference
in the Loan Agreement to "this Agreement," "hereunder," "hereof," "herein" or
words of like import shall mean and be a reference to the Loan Agreement as
amended hereby.
(b) Except as specifically amended herein, the Loan Agreement,
and all other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of Agent
or Lender, nor constitute a waiver of any provision of the Loan Agreement, or
any other documents, instruments or agreements executed and/or delivered under
or in connection therewith.
-7-
<PAGE>
(d) Notwithstanding anything to the contrary in this
Amendment, at such time as the Bond Letter of Credit shall be of no further
force and effect and all Bond Letter of Credit Reimbursement Obligations shall
have been paid in full, the provisions of this Amendment which require the
consent of Agent or any other action by Agent with respect to the Bond
Documentation or the Bonds shall be of no force and effect.
6. Governing Law. This Amendment shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns
and shall be governed by and construed in accordance with the laws of the State
of New York.
7. Headings. Section headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
8. Counterparts. This Amendment may be executed by the parties
hereto in one or more counterparts, each of which shall be deemed an original
and all of which taken together shall be deemed to constitute one and the same
agreement. Any signature received by facsimile transmission shall be deemed an
original signature hereto.
[SIGNATURES LINES ON FOLLOWING PAGE]
-8-
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed as of the
day and year first written above.
UNITEL VIDEO, INC., as Borrower
By: /s/ Barry Knepper
--------------------------------
Name: Barry Knepper
Title: CEO
R SQUARED, INC., as Corporate Guarantor
By: /s/ Karen Lapidus
--------------------------------
Name: Karen Lapidus
Title: Vice President
HELLER FINANCIAL, INC., as Agent and
Lender
By:
--------------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed as of the
day and year first written above.
UNITEL VIDEO, INC., as Borrower
By:
--------------------------------
Name:
Title:
R SQUARED, INC., as Corporate Guarantor
By:
--------------------------------
Name:
Title:
HELLER FINANCIAL, INC., as Agent and
Lender
By: /s/ Jerome P. Sepich
--------------------------------
Name: Jerome P. Sepich
Title: Vice President
<PAGE>
EXHIBIT 2.1(A)(4)
BOND LETTER OF CREDIT NOTE
$5,080,547.95 New York, New York
July __, 1997
This Bond Letter of Credit Note is executed and delivered under and
pursuant to the terms of that certain Amended and Restated Loan and Security
Agreement dated December 12, 1995 (as amended, supplemented or modified from
time to time, the "Loan Agreement") by and among UNITEL VIDEO, INC., a Delaware
corporation with its principal place of business at 555 West 57th Street, New
York, New York 10019 ("Borrower"), R Squared, Inc., a California corporation
with its principal place of business at 3300 Cahuenga Boulevard West, Los
Angeles, California 90068, Heller Financial, Inc. ("Heller"), each of the
financial institutions named in or which hereafter became a party to the Loan
Agreement (Heller and such financial institutions, collectively "Lenders") and
Heller as agent for Lenders (Heller, in such capacity, "Agent"). Capitalized
terms not otherwise defined herein shall have the meanings given them in the
Loan Agreement.
FOR VALUE RECEIVED, Borrower hereby promises to pay to the order of
Heller at its offices located at 500 West Monroe Street, 10th Floor, Chicago,
Illinois 60661 or at such other place as holder may from time to time designate
to Borrower in writing:
(i) the principal sum of FIVE MILLION EIGHTY THOUSAND FIVE HUNDRED
FORTY-SEVEN and 95/100 DOLLARS $5,080,547.95 or, if different, such amount of
Bond Letter of Credit Loans as may be due and owing under the Loan Agreement,
payable in full on the Termination Date, subject to acceleration upon the
occurrence of an Event of Default under the Loan Agreement or earlier repayment
as permitted or required by the Loan Agreement; and
(ii) interest on the principal amount of this Note from time to time
outstanding at the Interest Rate with respect to Bond Letter of Credit Loans in
accordance with the provisions of the Loan Agreement. Upon the occurrence and
during the continuance of an Event of Default and notice thereof by Agent to
Borrower (except that no notice shall be required upon the occurrence of an
Event of Default under subsection 8.1(G) or 8.1(H) of the Loan Agreement),
interest may at Agent's election be payable at the Default Rate. In no event,
however, shall interest hereunder exceed the maximum interest rate permitted by
law.
This Note is the Bond Letter of Credit Note referred to in the Loan
Agreement and is secured by the Liens granted pursuant to the Loan Agreement and
the Loan Documents, is entitled to the benefits of the Loan Agreement and the
Loan Documents and is subject to all of the agreements, terms and conditions
therein contained.
<PAGE>
This Note may be voluntarily prepared, in whole or in part, on the
terms and conditions set forth in the Loan Agreement.
If an Event of Default under Section 8.1 (G) or (H) of the Loan
Agreement shall occur, then this Note shall immediately become due and payable,
without notice, together with reasonable attorneys' fees if the collection
hereof is placed in the hands of an attorney to obtain or enforce payment
hereof. If any other Event of Default shall occur and be continuing under the
Loan Agreement or any of the Loan Documents, which is not cured within any
applicable grace period, then this Note may, as provided in the Loan Agreement,
be declared to be immediately due and payable, with notice to the extent
provided in the Loan Agreement, together with reasonable attorneys' fees, if the
collection hereof is placed in the hands of an attorney to obtain or enforce
payment hereof.
This Note shall be governed by and construed in accordance with the
laws of the State of New York.
Borrower expressly waives any presentment, demand, protest, notice
of protest, or notice of any kind except as expressly provided in the Loan
Agreement.
UNITEL VIDEO, INC.
By:______________________________
Its:_____________________________
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the ____ day of July, 1997, before me personally came
__________________ to me known, who being by me duly sworn, did depose and say
that he/she is a _______________ of UNITEL VIDEO, INC., the corporation
described in and which executed the foregoing instrument; and that he/she signed
his/her name thereto by order of the board of directors of said corporation.
-------------------------------
Notary Public
<PAGE>
Exhibit 4(H)
REIMBURSEMENT AGREEMENT
dated as of
July 1, 1997
between
UNITEL VIDEO, INC.
and
HELLER FINANCIAL, INC., as Agent
-----------------------------------------------------------------------
Allegheny County Industrial Development Authority
Variable Rate Demand Revenue Bonds, Series 1997
(Unitel Mobile Video Project)
-----------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. Definitions; Accounting Terms.................................. 1
SECTION 2. Reimbursement and Other Payments; Bond Letter of Credit Loans.. 3
(a) Reimbursement; Other Payments.................................. 3
(c) Tender Advances................................................ 4
(d) Interest....................................................... 4
(e) Statements of Account.......................................... 4
(f) Commission..................................................... 4
(g) Increased Costs................................................ 4
(h) Reduced Return................................................. 4
(i) Overdue Amounts................................................ 5
SECTION 3. Issuance of the Letter of Credit; Conditions Precedent to
Issuance ...................................................... 5
SECTION 4. Reduction of Letter of Credit Amount; Reinstatement of Letter
of Credit Amount; Extension of Letter of Credit. .............. 6
SECTION 5. Obligations Absolute........................................... 7
SECTION 6. Representations and Warranties................................. 7
(a) Credit Agreement Representations............................... 7
(b) Corporate Authorization; Contravention......................... 7
(c) Binding Effect................................................. 8
(d) No Material Adverse Change..................................... 8
(e) Litigation..................................................... 8
(f) Government Authorization....................................... 8
(g) Related Documents.............................................. 8
(h) Full Disclosure................................................ 8
SECTION 7. Covenants...................................................... 8
(a) Certain Covenants.............................................. 8
(b) Use of Proceeds................................................ 8
(c) Governmental Authorizations.................................... 8
(d) Amendments, Etc................................................ 9
(e) Compliance with Bond Documents................................. 9
(f) Independence of Covenants and Representations.................. 9
(g) Independence of Covenants and Representations.................. 9
SECTION 8. Events of Default.............................................. 9
SECTION 9. Amendments and Waivers......................................... 10
SECTION 10. Notices....................................................... 10
SECTION 11. No Waiver; Remedies Cumulative................................ 11
SECTION 12. Right of Set-Off.............................................. 11
SECTION 13. Indemnification............................................... 11
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<PAGE>
SECTION 14. Continuing Obligation......................................... 12
SECTION 16. Credit Agreement Provisions................................... 12
SECTION 17. Transfer of the Letter of Credit.............................. 13
SECTION 18. Limited Liability............................................. 13
SECTION 19. Costs, Expenses and Taxes..................................... 13
SECTION 20. Severability.................................................. 13
SECTION 21. Agent's Agreements............................................ 13
SECTION 22. Governing Law................................................. 14
SECTION 23. CONSENT TO JURISDICTION....................................... 14
SECTION 24. Headings...................................................... 14
SECTION 25. Counterparts.................................................. 14
-ii-
<PAGE>
REIMBURSEMENT AGREEMENT
REIMBURSEMENT AGREEMENT, dated as of July 1, 1997, between UNITEL VIDEO,
INC., a Delaware corporation (the "Company"), and HELLER FINANCIAL, INC.
("Heller"), as agent for the financial institutions party to the Credit
Agreement (as hereafter defined).
It is hereby agreed as follows:
SECTION 1. Definitions; Accounting Terms.
(a) Capitalized terms used herein and undefined shall have the
respective meanings specified in the Credit Agreement (as hereinafter defined).
(b) The following terms, as used herein, shall have the following
respective meanings:
"Agent" means Heller Financial, Inc. in its capacity as agent for the
Lenders under the Credit Agreement.
"Board of Directors" means either the board of directors of the Company or
a duly authorized committee of that board.
"Bond Letter of Credit Loans" means advances made from time to time by
Lenders to the Company under and in accordance with the provisions of Section
2.1(A)(4) of the Credit Agreement to be utilized by the Company to reimburse
Lenders for all amounts payable by Agent on behalf of Lenders to the Letter of
Credit Bank on account of all drawings made under the Letter of Credit and all
related Letter of Credit charges, fees and expenses which Agent may pay or incur
relative to the Letter of Credit (including interest thereon as provided in
Section 2(d) of this Agreement).
"Bonds" means the Issuer's Variable Rate Demand Revenue Bonds, Series 1997
(Unitel Mobile Video Project) in the original principal amount of $5,000,000.
"Code" means the United States Internal Revenue Code of 1986, as from time
to time amended.
"Company Agreement" means the Loan Agreement, dated as of July 1, 1997,
between the Company and the Issuer, as the same may from time to time be
amended, supplemented or modified.
"Contractual Obligation" means, as to any Person, any provision of any
Security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its property is bound.
"Credit Agreement" means the Amended and Restated Loan and Security
Agreement dated as of December 12, 1995 (as amended, modified and supplemented
from time to time) among the Company, R Squared, Inc., the lenders named therein
(the "Lenders") and Agent.
"Credit Agreement Representations" has the meaning set forth in Section
6(a) hereof.
"Date of Issuance" means the date on which the Letter of Credit is issued
pursuant to Section 3(a) hereof.
"Default" means any event or condition which, with the lapse of time or
the giving of notice, or both, would constitute an Event of Default.
"Disclosure Documents" means (i) the Preliminary Private Placement
Memorandum, (ii) the Private Placement Memorandum, (iii) all other materials
distributed to the public and used in connection with the original
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sale of the Bonds or, thereafter, in the remarketing of tendered Bonds and (iv)
all amendments and supplements to any of the foregoing.
"Event of Default" shall have the meaning specified in Section 8 hereof.
"Fee Percentage" means 1.75% per annum.
"Fixed Rate" has the meaning assigned to such term in the Indenture.
"GAAP" means generally accepted accounting principles in effect from time
to time in the United States.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, and any Person exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Indenture" means the Trust Indenture, dated as of July 1, 1997, between
the Issuer and PNC Bank, National Association, as trustee, as the same may from
time to time be amended, supplemented or modified.
"Issuer" means the Allegheny County Industrial Development Authority, and
its successors and assigns.
"Lenders" has the meaning set forth in the defined term "Credit
Agreement."
"Letter of Credit" means the letter of credit substantially in the form of
Exhibit A hereto issued by the Letter of Credit Bank, as the same may from time
to time be amended, supplemented or modified.
"Letter of Credit Amount" means $5,080,547.95, as reduced and reinstated
as provided in the Letter of Credit.
"Letter of Credit Bank" means Bank of America, and its successors and
assigns.
"Participant" means any entity to which a Lender has granted a
participation in such Lender's rights and benefits under this Agreement.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or political subdivision or an agency
thereof.
"Pledge Agreement" means the Pledge Agreement, dated as of July 1, 1997,
among the Company, PNC Bank, National Association, as escrow agent, and Agent,
as the same may from time to time be amended, supplemented or modified.
"Preliminary Private Placement Memorandum" means the Preliminary Private
Placement Memorandum relating to the Bonds (including any documents incorporated
therein by reference and any amendments or supplements thereto) dated July 18,
1997.
"Private Placement Memorandum" means the Private Placement Memorandum
relating to the Bonds (including any documents incorporated therein by reference
and any amendments or supplements thereto) dated July 23, 1997.
"Project" has the meaning given to such term under the Indenture.
"Purchase Contract" means the Private Placement Agreement, dated July 23,
1997, among the Issuer, the Company and RRZ Public Markets, Inc., as the same
may from time to time be amended, supplemented or modified.
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"Related Documents" means the Company Agreement, the Indenture, the
Purchase Contract, the Remarketing Agreement, the Pledge Agreement, the Bonds
and any other agreement or instrument relating thereto or otherwise executed and
delivered in connection with the issuance of the Bonds.
"Remarketing Agent" means RRZ Public Markets, Inc. and any successor
Remarketing Agent under the Indenture.
"Remarketing Agreement" means the Remarketing Agreement, dated as of July
1, 1997, among the Issuer, the Company, the Trustee and the Remarketing Agent,
as the same may from time to time be amended, supplemented or modified.
"Requirement of Law" means as to any Person, the Certificate of
Incorporation and By-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation, judgment, injunction, order,
decree or other determination 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" means, at any particular time, the President, Vice
President, Chief Financial Officer, the treasurer, the chief accounting officer
or the controller of the Company duly authorized to act on behalf of the Company
with respect to the matters specified and, with respect to any other entity, an
officer of equivalent status.
"Security" has the meaning ascribed in the Securities Act of 1933, as
amended.
"Tender Agent" has the meaning given to the term "Trustee's Agent" under
the Indenture.
"Tender Drawing" means a drawing under the Letter of Credit to pay the
purchase price of Bonds in the amount set forth in Sections 501 through 505 of
the Indenture and not remarketed by the Remarketing Agent on the date such Bonds
are to be purchased.
"Termination Date" means the earliest of (i) July 24, 1999, (ii) the date
on which the principal amount of and interest on the Bonds shall have been paid
in full (or on which no Bonds are outstanding under the Indenture other than
Bonds secured by an Alternate Credit Facility (as defined in the Indenture) or
Bonds bearing interest at a Fixed Rate) or no Letter of Credit is required for
the Bonds in accordance with the Indenture, (iii) the close of business on the
first Business Day following the effective date of the conversion of the Bonds
to a Fixed Rate, (iv) the close of business on the tenth day following receipt
by the Trustee of notice from Agent that an Event of Default has occurred and is
continuing, (v) the date the Letter of Credit is surrendered to the Letter of
Credit Bank by the Trustee for cancellation or (vi) the date the Letter of
Credit Bank honors the final drawing available under the Letter of Credit in
respect of principal of the Bonds and interest accrued thereon.
(c) Unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all accounting determinations hereunder shall be
made, and all financial statements required to be delivered hereunder shall be
prepared in accordance with GAAP as in effect from time to time, applied on a
basis consistent (except for changes approved by the Company's independent
public accountants) with the most recent consolidated and consolidating
financial statements of the Company and its Subsidiaries delivered to Agent.
SECTION 2. Reimbursement and Other Payments; Bond Letter of Credit Loans.
(a) Reimbursement; Other Payments. The Company shall pay to Agent,
for the ratable benefit of Lenders, which payments shall be charged by Agent to
the Company's loan account with Agent under the Credit Agreement as a Bond
Letter of Credit Loan and shall be deemed paid hereunder when so charged, when
due:
(i) subject to the provisions of subsection (c) below,
immediately after (and on the same Business Day as) any amount is drawn under
the Letter of Credit, a sum (and interest on such amount as provided in
subsection (d) below) equal to the amount so drawn under such Letter of Credit;
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(ii) any and all fees, charges, interest and expenses which
Agent may pay or incur relative to the Letter of Credit; and
(iii) upon any transfer of the Letter of Credit in accordance
with its terms, such amount as
shall be necessary to cover the costs and expenses of Agent incurred in
connection with such transfer, together with a fixed charge of $1,000.
(b) Repayment of Bond Letter of Credit Loans. Bond Letter of Credit
Loans shall be due and payable by the Company to Agent in accordance with the
terms and provisions of the Credit Agreement.
(c) Tender Advances. The amount of each Tender Drawing shall
constitute a Bond Letter of Credit Loan on the date and in the amount of such
drawing, each such advance being hereinafter referred to as a "Tender Advance."
The Company shall repay to Agent, for the ratable benefit of Lenders, the amount
of each Tender Advance (and unpaid accrued interest on such amount, if any) on
the earlier of (i) the remarketing, pursuant to Section 507 of the Indenture, of
the Bonds purchased with the proceeds of the related Tender Drawing and (ii) the
date for such payment as provided for in the Credit Agreement.
(d) Interest. The Company shall pay to Agent, for the ratable
benefit of Lenders, interest on all outstanding Bond Letter of Credit Loans at a
rate per annum equal to the interest rate applicable to Term Loan A. Such
interest shall be payable in accordance with the procedures and on the dates
established in the Credit Agreement for the payment of interest on Term Loan A.
(e) Statements of Account. Agent shall maintain in accordance with
its usual practice an account or accounts evidencing each Bond Letter of Credit
Loan and the amounts of principal and interest with respect thereto payable and
paid from time to time hereunder. In any legal action or proceeding such
accounts shall, in the absence of manifest error, be conclusive evidence of the
existence and amounts of the obligations of the Company therein recorded.
Notwithstanding the foregoing, the failure of Agent so to maintain such account
or accounts or any error in maintaining such accounts shall not affect the
obligations of any party hereto with respect to any Bond Letter of Credit Loan.
(f) Commission. The Company will pay to Agent, for the ratable
benefit of Lenders, a commission with respect to the Letter of Credit computed
(on the basis of a year of 360 days for the actual number of days elapsed) at a
rate per annum equal to the Fee Percentage on the Letter of Credit Amount. Such
commission will be calculated on the basis of a 360 day year for the actual
number of days elapsed and will be payable monthly in arrears on the first day
of each month.
(g) Increased Costs. If any change in any law or regulation or in
the interpretation thereof by any Governmental Authority charged with the
administration thereof shall either (i) impose, modify or deem applicable any
reserve, special deposit or similar requirement against letters of credit issued
by, or assets held by, or deposits in or for the account of, any Lender or the
Letter of Credit Bank or (ii) impose on any Lender or the Letter of Credit Bank
any other condition regarding this Agreement or the Letter of Credit, and the
result of any event referred to in clause (i) or (ii) of this subsection shall
be to increase the cost to any Lender or the Letter of Credit Bank of issuing or
maintaining the Letter of Credit, then, within ten days of receipt of written
demand from Agent, the Company shall pay to Agent (on behalf of any such Lender
or the Letter of Credit Bank, as the case may be) all additional amounts which
are necessary to compensate such Lender or the Letter of Credit Bank, as the
case may be, for such increased cost incurred by such Person. All payments of
increased cost pursuant to this subsection shall bear interest thereon if not
paid within ten days of such notice until payment in full thereof at the Default
Rate. A certificate as to such increased cost incurred by any such Lender or the
Letter of Credit Bank, as the case may be, as a result of any event mentioned in
clause (i) or (ii) of this subsection and setting forth the additional amount or
amounts to be paid to Agent hereunder shall be prepared in good faith and
submitted by Agent to the Company and shall be conclusive (absent manifest
error) as to the amount thereof. In determining such amount, Agent may use any
reasonable averaging and attribution methods.
(h) Reduced Return. If after the date hereof any Lender shall have
determined that the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change therein, or any change
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in the interpretation or administration thereof by any Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Lender with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such Governmental Authority, central bank or comparable agency has the
effect of reducing the rate of return on the capital of such Lender as a
consequence of such Lender's obligations to reimburse the Letter of Credit Bank
for drawings under the Letter of Credit to a level below that which such Lender
could have achieved but for such adoption, change or compliance (taking into
consideration such Lender's policies with respect to capital adequacy) then,
upon notice of such change by Agent by submission to the Company of the
certificate hereinafter described, the Company shall within ten days of receipt
of such notice, pay to Agent (on behalf of such Lender) such additional amount
or amounts as will compensate such Lender for such reduction. All payments
pursuant to this subsection (g) shall bear interest thereon if not paid within
ten days of such notice until payment in full at the Default Rate. A certificate
of Agent claiming compensation under this subsection (g) and setting forth the
additional amount or amounts to be paid to it hereunder shall be prepared in
good faith and submitted by Agent to the Company and shall be conclusive in the
absence of manifest error. In determining such amount, Agent may use any
reasonable averaging and attribution method.
(i) Overdue Amounts. The Company shall pay to Agent, for the ratable
benefit of Lenders, interest on any and all amounts unpaid by the Company when
due hereunder (in the case of amounts in respect of interest, to the maximum
extent permitted by law) for each day from the date such amounts become due
until payment in full, payable on demand, at the Default Rate; provided, that
such fluctuating interest rate shall in no event be higher (with respect to each
amount due and payable hereunder, from the date such amount is due and payable
until the date such amount is paid in full) than the maximum rate permitted by
applicable law.
SECTION 3. Issuance of the Letter of Credit; Conditions Precedent to
Issuance.
(a) Upon satisfaction of the conditions precedent set forth in
subsections (b), (c) and (d) of this Section, Agent shall cause the Letter of
Credit Bank to issue on the date requested by the Company (the "Date of
Issuance") the Letter of Credit in the initial aggregate amount equal to the
initial Letter of Credit Amount, effective on the Date of Issuance and expiring
on the Termination Date.
(b) As a condition precedent to Agent's causing the Letter of Credit
Bank to issue the Letter of Credit, Agent shall have received on or before the
Date of Issuance the following, each dated such date, in form and substance
satisfactory to Agent:
(i) an opinion of Karen Ceil Lapidus, Esq., General Counsel of
the Company, substantially in the form of Exhibit B hereto;
(ii) opinion of Klett Lieber Rooney & Schorling, bond counsel,
in form and substance satisfactory to Agent;
(iii) a copy of the resolutions of the Company's Board of
Directors authorizing the execution, delivery and performance by the Company of
this Agreement and the Related Documents to which the Company is, or is to be, a
party, as the case may be, certified by the Secretary or an Assistant Secretary
of the Company (which certificate shall state that such resolutions are in full
force and effect on the Date of Issuance);
(iv) certified copies of all approvals, authorizations, or
consents of, or notices to or registrations with, any Governmental Authority
required for the Company to enter into this Agreement and the Related Documents
to which it is, or is to be, a party;
(v) a certificate of a Secretary or Assistant Secretary of the
Company certifying the names and true signatures of the officers of the Company
authorized to sign this Agreement and the other documents to be delivered by the
Company pursuant hereto;
(vi) executed copies (or duplicates thereof) of the Related
Documents, each of which shall be in form and substance satisfactory to Agent;
and
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<PAGE>
(vii) a duly executed Pledge Agreement, substantially in the
form of Exhibit C hereto; and
(viii) such other documents, instruments, approvals (and, if
requested by Agent, certified duplicates of executed copies thereof) or opinions
as Agent may reasonably request.
(c) The following statements shall be true and correct on the Date
of Issuance and Agent shall have received a certificate signed by a Responsible
Officer, dated the Date of Issuance, stating that:
(i) the representations and warranties contained in Section 6
hereof are true and correct on and as of the Date of Issuance as though made on
and as of such date;
(ii) no Event of Default or Default has occurred and is
continuing or would result from the issuance of the Letter of Credit; and
(iii) no Event of Default or Default has occurred and is
continuing under and as defined in the Credit Agreement.
(d) On or before the Date of Issuance:
(i) the Company shall have paid or caused to be paid all
accrued costs and expenses of Agent, including the reasonable fees and expenses
of its counsel in connection with the preparation, execution and delivery of
this Agreement and the Related Documents and the consummation of the
transactions contemplated thereby;
(ii) the Issuer shall have duly adopted resolutions
authorizing the execution, delivery and performance by the Issuer of the Bonds
and each of the Related Documents to which the Issuer is, or is to be, a party
and certified copies of such resolutions shall have been delivered to Agent;
(iii) the Issuer and the Trustee shall have duly authorized
and executed the Indenture and the Indenture shall be in full force and effect;
(iv) all conditions precedent to the issuance of the Bonds
(and to their purchase under the Purchase Contact as specified therein) shall
have occurred; and
(v) the Issuer shall have duly executed, issued and delivered
the Bonds.
SECTION 4. Reduction of Letter of Credit Amount; Reinstatement of Letter
of Credit Amount; Extension of Letter of Credit.
(a) The Letter of Credit Amount shall be reduced or reinstated, as
the case may be, as specified in the Letter of Credit.
(b) (i) The initial term of the Letter of Credit shall commence on
July 24, 1997 and subject to the occurrence of any of the events referred to in
the definition of "Termination Date", end on July 24, 1999 (the "Stated
Expiration Date"). Notwithstanding the foregoing, the Stated Expiration Date may
be extended as provided in paragraph (ii) below.
(ii) At least four (4) months prior to the Stated Expiration
Date, Agent shall send written notice to the Company indicating whether it shall
cause the Letter of Credit Bank to extend the Stated Expiration Date (the "Agent
Notice"). In the event the Agent Notice indicates that the Stated Expiration
Date shall be extended, such notice shall specify the terms and conditions,
including fees and the extension period, to be applicable to such extension. The
Company may accept the terms and provisions contained in the Agent Notice by
notice to Agent in writing within 30 days after receipt of the Agent Notice. If
the Company accepts the extension (including the terms
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and conditions specified in the Agent Notice as aforesaid), the Stated
Expiration Date shall be extended for the period set forth in the Agent Notice;
provided, that, if the terms and conditions to be applicable to such extension
differ from those then in effect, such extension shall be conditioned upon the
prompt preparation, execution and delivery of documentation, satisfactory to
Agent, the Letter of Credit Bank and their respective counsel, incorporating
such terms and conditions. The Stated Expiration Date may thereafter be
successively so extended pursuant to the foregoing procedure upon receipt by the
Company of the aforesaid notice from Agent at least four (4) months prior to the
then applicable Stated Expiration Date, acceptance by the Company as aforesaid
and compliance with any further conditions specified above. Upon the
effectiveness of any extension of the Stated Expiration Date, Agent will give
the Trustee written notice of the Stated Expiration Date as so extended, which
notice the Trustee shall affix to the Letter of Credit and it shall become a
part thereof.
(iii) Agent may determine from time to time whether or not
(and on what terms and conditions) to cause the Letter of Credit Bank to extend
the Stated Expiration Date and no course of dealing or other circumstances shall
require Agent to cause the Letter of Credit Bank to extend the Stated Expiration
Date.
(c) The Company may at any time cause the Trustee to surrender the
Letter of Credit to the Letter of Credit Bank for cancellation in accordance
with the terms of the Letter of Credit.
SECTION 5. Obligations Absolute. The obligations of the Company under this
Agreement and the Pledge Agreement shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms hereof
and thereof, under all circumstances whatsoever, including without limitation
the following:
(a) any lack of validity or enforceability of this Agreement, the
Letter of Credit, the Bonds or any of the Related Documents; or any lack of
perfection, release or discharge, in whole or in part, of any collateral
security provided or purported to be provided by any therein;
(b) any amendment or waiver of or any consent to departure from this
Agreement, the Letter of Credit, the Bonds or all or any of the Related
Documents;
(c) the existence of any claim, set-off, defense or other rights
which the Company or any other Person may have at any time against the Trustee,
the Tender Agent, any beneficiary or any transferee of the Letter of Credit (or
any Person for whom the Trustee, any such beneficiary or any such transferee may
be acting), Agent, any Lender, the Letter of Credit Bank, any Participant or any
other Person, whether in connection with this Agreement, the Related Documents
or any unrelated transaction; provided that nothing herein shall prevent the
assertion of any claim by a separate suit or compulsory counterclaim;
(d) any statement or any other document presented under the Letter
of Credit proving to be forged, fraudulent or invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect
whatsoever;
(e) payment by the Letter of Credit Bank under the Letter of Credit
against presentation of a draft or certificate which does not comply with the
terms of the Letter of Credit; or
(f) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.
SECTION 6. Representations and Warranties. The Company represents and
warrants to Agent and Lenders:
(a) Credit Agreement Representations. The representations and
warranties set forth in the Credit Agreement (the "Credit Agreement
Representations") are each true and correct in all material respects (except as
disclosed in writing by the Company to Agent) on and as of the date hereof and
are hereby incorporated herein by reference and made to Agent and Lenders on and
as of the date hereof as if set forth herein in full together with the related
definitions.
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(b) Corporate Authorization; Contravention. The execution, delivery
and performance by the Company of this Agreement and the Related Documents to
which it is, or is to be, a party are within the Company's corporate powers,
have been duly authorized by all necessary corporate action, and do not and will
not contravene, or constitute a default under, any Contractual Obligation or
Requirement of Law of the Company, or result in the creation or imposition of
any Lien on any asset of the Company or any Subsidiary (other than pursuant to
the Related Documents).
(c) Binding Effect. This Agreement and the Related Documents to
which the Company is, or is to be, a party constitute, or will constitute, when
executed and delivered in accordance with their terms, valid and binding
agreements of the Company.
(d) No Material Adverse Change. Since May 31, 1997, there has been
no material adverse change in the business, financial condition, results of
operations or prospects of the Company and its Subsidiaries, taken as a whole.
(e) Litigation. There is no action, suit or proceeding pending, or
to the knowledge of the Company, threatened against or affecting the Company or
any Subsidiary before any court or arbitrator or any Governmental Authority in
which there is a reasonable possibility of an adverse decision which could
reasonably be expected to materially adversely affect the ability of the Company
to perform its obligations under this Agreement or any Related Document to which
it is, or is to be, a party, or which in any manner questions the validity of
this Agreement or any such Related Document.
(f) Government Authorization. No authorization or approval of, or
other action by, and no notice to or filing with, any Governmental Authority is
required to be obtained or made by the Company for the due execution, delivery
and performance of this Agreement or the Related Documents to which it is, or is
to be, a party, except as have been obtained or made prior to the date of
execution hereof.
(g) Related Documents. The representations and warranties of the
Company set forth in the Related Documents are true and correct on and as of the
date hereof and are hereby made to Agent and Lenders on and as of the date
hereof as if set forth herein in full together with the related definitions.
(h) Full Disclosure. All information heretofore furnished by the
Company to Agent for purposes of, or in connection with, this Agreement or any
transaction contemplated hereby is, and all such information hereafter furnished
by the Company to Agent will be, true and accurate in all material respects on
the date as of which such information is stated or certified. The Company has
disclosed to Agent in writing any and all facts that could reasonably be
expected to materially and adversely affect or may affect (to the extent the
Company can now reasonably foresee), the business, financial condition, results
of operations or prospects of the Company and its Subsidiaries, taken as a
whole, or the ability of the Company to perform its obligations under this
Agreement and the Related Documents.
The representations and warranties contained or incorporated herein shall
be deemed repeated as true and correct in all material respects on and as of the
date of each drawing under the Letter of Credit.
The Company may, at any time and from time to time, update the accuracy of
any representation or warranty contained herein by providing written notice
thereof to Agent, provided, however, in no event may the Company so amend any
such representation or warranty if the existence of the information contained in
such amendment would reflect or evidence a Default or Event of Default.
SECTION 7. Covenants. The Company agrees that during the term of this
Agreement:
(a) Certain Covenants. Except as may be otherwise provided in this
Section 7, the Company will perform, comply with and be bound by, for the
benefit of Agent and Lenders, each of its agreements, covenants and obligations
contained in the Credit Agreement, each of which (together with the related
definitions and ancillary provisions) is hereby incorporated herein by
reference.
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(b) Use of Proceeds. The proceeds of the sale of the Bonds shall not
be used in such a manner as to cause any of the Bonds to be treated as
"arbitrage bonds" within the meaning of Section 148 of the Code (or any
successor provision thereto) and the regulations promulgated or proposed
thereunder.
(c) Governmental Authorizations. The Company will do and cause to be
done all things necessary to comply with all Requirements of Law applicable to
it, and obtain, and take all necessary or appropriate action to ensure the
continuance of, all consents, licenses, filings, registrations, approvals or
authorizations of or with any Governmental Authority which may at any time be
required with respect to the validity and enforceability of this Agreement and
the Related Documents to which the Company is, or is to be, a party, the
obligations of the Company hereunder and thereunder and the performance hereof
and thereof.
(d) Amendments, Etc. The Company will not amend or otherwise permit
to occur any amendment, modification or waiver of any of the terms of any of the
Related Documents which could in any way affect the rights of Agent, any Lender
or the Letter of Credit Bank without the prior written consent of Agent.
(e) Compliance with Bond Documents. The Company will comply with all
of its covenants and agreements under the Related Documents and comply with, or
cause to be complied with, all requirements and conditions of all contracts and
insurance policies which relate to the Company or the Project.
(f) Independence of Covenants and Representations. The Company will
not exercise its rights under the Related Documents to direct the Issuer to call
the Bonds (or any portion thereof) for optional redemption, unless the Company
first demonstrates to the reasonable satisfaction of Agent that at the time of
such redemption the Letter of Credit Bank and each Lender will be fully
reimbursed with respect to all drawings under the Letter of Credit in connection
with such redemption.
(g) Independence of Covenants and Representations. All covenants and
representations contained herein shall be given independent effect, so that if
any action or condition would violate any of such covenants (or would breach any
of such representations at any time made or deemed made), the fact that such
action or condition would not violate or breach another covenant or
representation shall not avoid the violation or breach of any such covenant or
representation.
SECTION 8. Events of Default. The occurrence of and continuance of any of
the following events shall be Events of Default hereunder:
(a) the Company shall fail to pay any amount due hereunder within
five (5) days of the date when due; or
(b) for any reason (other than termination or release by Agent), the
Pledge Agreement shall cease to be in full force and effect or the Company shall
assert that it is not liable thereunder or the pledge and security interest
under the Pledge Agreement shall at any time cease to constitute in favor of
Agent a prior and perfected lien on and first pledge of the Collateral (as
therein defined); or
(c) the Company shall default in the observance or performance of
any agreement, covenant or term (other than in Section 7(a) hereof) contained in
this Agreement; or
(d) any representation, warranty, certificate or statement made by
the Company in this Agreement, the Pledge Agreement or in any certificate,
financial statement or other document delivered pursuant to any of the Related
Documents shall prove to have been incorrect in any material respect when made
or deemed made; or
(e) an event of default under any Related Document shall occur; or
(f) an Event of Default under and as defined in the Credit Agreement
shall be declared by Agent in writing to the Company; or
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(g) (1) A court shall enter a decree or order for relief with
respect to the Company or any of its Subsidiaries in an involuntary case under
the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, which decree or order is not stayed or other
similar relief is not granted under any applicable federal or state law; or (2)
the continuance of any of the following events for sixty (60) days unless
dismissed, stayed during such period, bonded or discharged: (a) an involuntary
case shall be commenced against the Company or any of its Subsidiaries under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect; or (b) a decree or order of a court for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having similar
powers over the Company or any of its Subsidiaries, or over all or a substantial
part of their respective property, shall be entered; or (c) an interim receiver,
trustee or other custodian shall be appointed without the consent of the Company
or any of its Subsidiaries, for all or a substantial part of the property of the
Company or any such Subsidiary;
(h) (1) An order for relief shall be entered with respect to the
Company or any of its Subsidiaries or the Company or any of its Subsidiaries
commences a voluntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in an involuntary case or to the
conversion of an involuntary case to a voluntary case under any such law or
consents to the appointment of or taking possession by a receiver, trustee or
other custodian for all or a substantial part of its property; or (2) the
Company or any of its Subsidiaries shall make any assignment for the benefit of
creditors; or (3) the board of directors of the Company or any of its
Subsidiaries shall adopt any resolution or otherwise authorize action to approve
any of the actions referred to in this subsection (h); or
(i) an Event of Default under and as defined in the Reimbursement
Agreement dated as of July 24, 1997 between Heller and Bank of America National
Trust and Savings Association.
If an Event of Default occurs and is continuing (except an Event of
Default described in clause (i) above), Agent may, in its sole discretion:
(i) declare all amounts due hereunder and under the Pledge
Agreement to be immediately due and payable, and upon such declaration, the same
shall become and be immediately due and payable, without presentment, protest or
other notice of any kind, all of which are hereby waived by the Company
(provided, that, upon the occurrence of an Event of Default described in clause
(g) or (h) of this Section 8 no action shall be necessary to accelerate the
same, which shall automatically become due and payable);
(ii) notify the Trustee of the occurrence of an Event of
Default;
(iii) pursue all remedies available to it at law, by contract,
at equity or otherwise.
Notwithstanding anything to the contrary in the Credit Agreement, the occurrence
of an Event of Default described in Event of Default "(i)" shall not result in a
Default or an Event of Default under the Credit Agreement or any other document
or agreement to which the Company is a party or otherwise subject other than the
Letter of Credit
SECTION 9. Amendments and Waivers. Subject to Section 16(a) hereof, no
amendment or waiver of any provision of this Agreement or consent to any
departure by the Company therefrom shall in any event be effective unless the
same shall be in writing and signed by Agent and the Company. Any such
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
SECTION 10. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including bank wire, telecopy, telex or
similar writing) and shall be given to such party at its address, telecopier
number or telex number set forth below or such other address, telecopier number
or telex number as such party may hereafter specify for the purpose by notice to
the other party. Each such notice, request or other communication shall be
effective (i) if given by telex, when such telex is transmitted to the telex
number specified below and the appropriate answerback is received, (ii) if given
by mail, 10 days after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid, (iii) if given by telecopier,
when
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<PAGE>
telecopied with confirmation of receipt or (iv) if given by any other means,
when delivered at the address specified in this Section.
If to the Company:
Unitel Video, Inc.
555 West 57th Street
New York, New York 10019
Attention: Barry Knepper, President
Telecopier: 212-581-7748
with a copy to:
Unitel Video, Inc.
555 West 57th Street
New York, New York 10019
Attention: Karen Ceil Lapidus, Esq., General Counsel
Telecopier: 212-581-7748
If to Agent:
Heller Financial, Inc.
500 West Monroe
Chicago, Illinois 60661
Attention: HBC Portfolio Manager
Telecopier: 312-441-6133
with a copy to:
Heller Financial, Inc.
500 West Monroe
Chicago, Illinois 60661
Attention: Legal Department
Telecopier: 312-441-7652
If to the Trustee:
PNC Bank, National Association
One Oliver Plaza, 27th Floor
Pittsburgh, Pennsylvania
Attention: Corporate Trust Division
Telecopier: (412) 762-8226
SECTION 11. No Waiver; Remedies Cumulative. No failure on the part of
Agent to exercise, and no delay in exercising, any right hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law or otherwise.
SECTION 12. Right of Set-Off. Without limiting any other right of Agent or
any Lender, Agent or any Lender at its sole election may set off against and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held, and other indebtedness or moneys at any time owing, by
Agent or such Lender to or for the credit or account of the Company, whether or
not due, against any and all amounts due Agent and
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<PAGE>
Lenders hereunder, and Agent and Lenders shall be deemed to have exercised the
right of setoff immediately at the time of such election.
SECTION 13. Indemnification. The Company hereby indemnifies and holds
harmless Agent, Lenders and the Letter of Credit Bank, as applicable, from and
against any and all claims, damages, losses, liabilities, costs or expenses
whatsoever which such Person may incur (or which may be claimed against Agent,
any Lender or the Letter of Credit Bank, as applicable by any Person or entity
whatsoever) (i) by reason of any untrue statement or alleged untrue statement of
any material fact contained or incorporated by reference in any Disclosure
Document, or in any supplement or amendment to any thereof, or the omission (or
alleged omission) to state in any therein a material fact necessary to make such
statements, in the light of the circumstances under which they are or were made,
not misleading; or (ii) by reason of or in connection with the execution and
delivery or transfer of, or payment or failure to pay under, the Letter of
Credit; provided, that the Company shall not be required to indemnify Agent, any
Lender or the Letter of Credit Bank, as applicable, for any such claims,
damages, losses, liabilities, costs or expenses in the case of indemnification
pursuant to (1) clause (i) above, with respect to any information provided by
Agent and contained in (a) the Preliminary Private Placement Memorandum or in
the Private Placement Memorandum under the heading "THE INITIAL LETTER OF
CREDIT" or (b) in Appendix B to the Preliminary Private Placement Memorandum or
the Private Placement Memorandum or (2) clause (ii) above, to the extent, but
only to the extent, caused by the willful misconduct or gross negligence of
Agent, any Lender or the Letter of Credit Bank, as applicable. The
indemnification provided above is in addition to any other rights (including
without limitation rights to indemnity) which Agent, each Lender and the Letter
of Credit Bank, as applicable, may be entitled to at law, by contract (including
without limitation the Credit Agreement) in equity or otherwise. Nothing in this
Section is intended to limit the Company's payment obligations contained in
subsection (a) of Section 2 hereof.
SECTION 14. Continuing Obligation.
(a) The obligations of the Company under this Agreement shall
continue until the later of (i) the Termination Date or (ii) the date upon which
all amounts due or to become due to Agent and Lenders hereunder shall have been
paid and satisfied in full and shall (x) be binding upon the Company and its
successors and assigns and (y) inure to the benefit of and be enforceable by
Agent, each Lender and their respective successors, transferees and assigns;
provided, however, that (i) the Company may not assign all or any part of its
rights or obligations under this Agreement without the prior written consent of
Agent and (ii) the obligations of the Company pursuant to Section 13 shall
survive the termination of this Agreement.
(b) Any Lender may at any time sell or grant participations to any
Participant of all or any part of, or any interest (undivided or divided) in,
such Lender's rights and benefits under this Agreement in which event the
Participant shall not have any rights hereunder (the Participant's rights
against such Lender to be as set forth in the agreement executed by such Lender
in favor of the Participant) and all amounts payable by the Company hereunder
shall be determined as if such lender had not sold or granted any participation.
SECTION 15. Grant of Security Interest. To secure the Company's
obligations to Agent and Lenders hereunder and all other Obligations, the
Company (1) has caused the Issuer to grant to the Trustee under the Indenture,
for the equal and ratable benefit of the owners of the Bonds and the Agent, a
security interest in all of the Trust Estate under and as defined in the
Indenture and (2) hereby grants to Agent, for the ratable benefit of Lenders, a
security interest in all of the Company's goods hereafter acquired with the
proceeds of the Bonds and all replacements and substitutions therefor and all
proceeds and products thereof. The Company covenants and agrees that it will
defend Agent's rights and security interests created by this Section against the
claims and demands of all Persons. In addition to its other rights and remedies
under this Agreement and the Bond Documents, Agent shall have all the rights and
remedies of a secured party under the Uniform Commercial Code or other
applicable law with respect to the security interests created by this Section.
Agent's rights under this Section are in addition to, and not in lieu of, its
rights and security interests under the Credit Agreement.
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<PAGE>
SECTION 16. Credit Agreement Provisions.
(a) Notwithstanding any provision of this Agreement to the contrary,
Agent and the Company hereby agree that on or after the date hereof any
amendment to, or waiver of, (i) the Credit Agreement Representations, (ii) an
Event of Default under and as defined in the Credit Agreement or (iii) the
covenants from the Credit Agreement referred to in Section 7(a) hereof, which
has been consented to by Agent, shall be deemed to be incorporated herein by
reference and shall become effective hereunder when such amendment or waiver
becomes effective thereunder, without any further action necessary by either the
Company or Agent. Any such amendment or waiver shall be effective only in the
specific instance and for the specific purpose for which given.
(b) The Credit Agreement Representations and the covenants from the
Credit Agreement referred to in Section 7(a) hereof incorporated herein by
reference, will be deemed to continue in effect for the benefit of Agent and
Lenders until the Letter of Credit has terminated and all amounts due hereunder
have been paid in full, including, without limitation, whether or not the Credit
Agreement or any commitment thereunder remains in effect or whether or not the
Credit Agreement is amended or restated after the date hereof. For purposes of
the foregoing, (i) references in the provisions of the Credit Agreement
incorporated herein by reference to the "Borrower" shall refer to the Company;
and (ii) the terms "Agreement," "hereto" and "hereof" when used in the
provisions of the Credit Agreement incorporated herein by reference shall refer
to this Agreement.
SECTION 17. Transfer of the Letter of Credit. The Letter of Credit may be
transferred in accordance with the provisions set forth therein.
SECTION 18. Limited Liability. The Company assumes all risks of the acts
or omissions of the Trustee, the Tender Agent and any transferee of the Trustee
with respect to its use of the Letter of Credit. Neither Agent, any Lender, the
Letter of Credit Bank nor any of its officers or directors shall be liable or
responsible for: (a) the use which may be made of the Letter of Credit or for
any acts or omissions of the Trustee, the Tender Agent and any beneficiary or
transferee in connection therewith; (b) the validity, or genuineness of
documents, or of any endorsement(s) thereon, even if such documents should in
fact prove to be in any or all respects invalid, fraudulent or forged; or (c)
any other circumstances whatsoever in making or failing to make payment under
the Letter of Credit, except only that the Company shall have a claim against
Agent, any Lender or the Letter of Credit Bank, as applicable, to the extent,
but only to the extent, of any direct, as opposed to consequential, damages
suffered by the Company which the Company proves were caused by (i) Agent's, any
Lender's or the Letter of Credit Bank's, as applicable, willful misconduct or
gross negligence in determining whether documents presented under the Letter of
Credit comply with the terms thereof or (ii) the Letter of Credit Bank's willful
failure to pay under the Letter of Credit after the presentation to it by the
Trustee (or a successor under the Indenture to whom the Letter of Credit has
been transferred in accordance with its terms) of a draft and certificate
strictly complying with the terms and conditions of the Letter of Credit. In
furtherance and not in limitation of the foregoing, the Letter of Credit Bank,
may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
SECTION 19. Costs, Expenses and Taxes. The Company agrees to pay on demand
all out-of-pocket expenses of Agent, Lenders and the Letter of Credit Bank,
including reasonable fees and disbursements of counsel, in connection with: (i)
the preparation of this Agreement and the Letter of Credit and otherwise in
connection with the issuance of the Bonds and the preparation, authorization,
execution and delivery of the Related Documents, (ii) any amendments,
supplements, consents or waivers hereto or thereto, and (iii) the administration
or enforcement of this Agreement, the Related Documents and any other documents
which may be delivered in connection herewith or therewith. In addition, the
Company shall pay any and all stamp and other taxes and fees payable or
determined to be payable in connection with the execution, delivery, filing and
recording of this Agreement and such other documents and agrees to save Agent
and Lenders harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes and fees.
-13-
<PAGE>
SECTION 20. Severability. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
SECTION 21. Agent's Agreements. The Agent acknowledges that (a) during the
term of this Agreement and so long as no Event of Default has occurred and is
continuing hereunder, it will comply with the terms and conditions of its
agreement with the Letter of Credit Bank regarding the Letter of Credit so as
not to permit a default to occur thereunder and (b) so long as no Event of
Default has occurred and is continuing under the Credit Agreement, the Agent
shall charge the Company's loan account with Agent under the Credit Agreement as
a Bond Letter of Credit Loan at the times and in the amounts necessary to pay
all amounts payable hereunder when due so as not to cause a default hereunder
with respect to the payment of such amounts.
SECTION 22. Governing Law. This Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New York.
SECTION 23. CONSENT TO JURISDICTION. THE COMPANY IRREVOCABLY SUBMITS TO
THE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN THE CITY OF
NEW YORK OVER ANY SUIT, ACTION, OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE
OF ANY SUCH SUIT, ACTION, OR PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM
THAT ANY SUCH SUIT, ACTION, OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
SECTION 24. Headings. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
SECTION 25. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same agreement.
[SIGNATURES LINES ON FOLLOWING PAGE]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
UNITEL VIDEO, INC.
By /s/ Barry Knepper
----------------------------
Title: CEO
HELLER FINANCIAL, INC., as Agent
By
----------------------------
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
UNITEL VIDEO, INC.
By
----------------------------
Title:
HELLER FINANCIAL, INC., as Agent
By /s/ Jerome P. Sepich
----------------------------
Title: Vice President
<PAGE>
Exhibit 4(L)
Execution Copy
FIRST AMENDMENT TO SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
("First Amendment") dated as of May 31, 1997 among UNITEL VIDEO, INC. (the
"Borrower") and THE CHASE MANHATTAN BANK (successor by merger to The Chase
Manhattan Bank, N.A., the "Bank").
PRELIMINARY STATEMENT. Reference is made to the Second Amended and
Restated Credit Agreement dated as of December 12, 1995, between the Borrower
and the Bank, as waived by Letter Agreement dated as of April 12, 1996, as
further waived by a Letter Agreement dated as of July 29, 1996, and as further
waived by a Letter Agreement dated November 27, 1996 (as so waived, the "Credit
Agreement"). Any term used herein and not otherwise defined herein shall have
the meaning assigned to such term in the Credit Agreement.
The parties hereto have agreed to amend certain terms and provisions
of the Credit Agreement as hereinafter set forth.
SECTION 1. Amendments to Credit Agreement. The Credit Agreement is,
effective as of the date hereof and subject to the satisfaction of the
conditions precedent set forth in Section 2 hereof, hereby amended as follows:
(1) Section 1.01, Defined Terms, is amended by deleting the
following definitions in their entirety: "Affiliate", "Capital Lease", "Cash
Dividends", "Consolidated Capital Expenditures", "Consolidated Current Portion
of Long Term Debt", "Consolidated Deferred Financing Costs", "Consolidated
Defined Liabilities", "Consolidated Depreciation", "Consolidated Earnings Before
Interest, Taxes and Depreciation", "Consolidated Earnings from Operations",
"Consolidated Interest Expense", "Consolidated Subsidiaries", "Consolidated
Tangible Net Worth", "Consolidated Taxes", "Consolidated Total Liabilities",
"Fiscal Year", "GAAP", "Long Term Debt", "Person" and "Subsidiary".
(2) Section 101, Defined Terms, is further amended by adding the
following definitions in their proper alphabetical order:
"Affiliate" means any Person (other than Bank): (a) directly or
indirectly controlling, controlled by, or under common control with, the
Borrower; (b) directly or indirectly owning or holding five percent (5%)
or more of any equity interest in the Borrower; or (c) five percent (5%)
or more of whose voting stock or other equity interest is directly or
indirectly owned or held by the Borrower. For purposes of this definition,
"control" (including with correlative meanings, the terms "controlling",
"controlled by" and "under common control
<PAGE>
with") means the possession directly or indirectly of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities or by contract or otherwise.
"Asset Disposition" means the disposition, whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise, of any or
all of the assets of the Borrower or any of its Subsidiaries.
"Capital Expenditures" means all expenditures (including deposits)
for, or contracts for expenditures (excluding contracts for expenditures
under or with respect to Capital Leases, but including cash down payments
for assets acquired under Capital Leases) with respect to any fixed assets
or improvements, or for replacements, substitutions or additions thereto,
which have a useful life of more than one year, including the direct or
indirect acquisition of such assets by way of increased product or service
charges, offset items or otherwise.
"Capital Lease" means any lease of any property (whether real,
personal or mixed) that, in conformity with GAAP, should be accounted for
as a capital lease.
"Chicago Lease" means the Indenture dated April 16, 1987 between La
Salle National Trust, N.A. (as successor trustee to La Salle National
Bank), as trustee under Trust No. 52082, as landlord and the Borrower (as
assignee of Scanline Communications), as tenant, related to the premises
located at 301 East Erie Street, Chicago, Illinois, as amended, modified,
restated or supplemented from time to time.
"Closing Date" means December 12, 1995.
"EBITDA" means, for any period, without duplication, the total of
the following for the Borrower and its Subsidiaries on a consolidated
basis, each calculated for such period: (1) net income determined in
accordance with GAAP; plus, to the extent included in the calculation of
net income, (2) the sum of (a) income and franchise taxes paid or accrued;
(b) Interest Expenses, net of interest income, paid or accrued; (c)
interest paid in kind; (d) amortization (including, without limitation,
amortization of fees and costs with respect to transactions contemplated
under the Heller Loan Agreement on the Closing Date which have been
capitalized as transaction costs) and depreciation and (e) other non-cash
charges (excluding accruals for cash expenses made in the ordinary course
of business); less, to the extent included in the calculation of net
income, (3) the sum of (a) the income of any Person (other than wholly
owned Subsidiaries of the Borrower) in which the Borrower or a wholly
owned Subsidiary of the Borrower has an ownership interest unless such
income is received by the Borrower or such wholly owned Subsidiary in a
cash distribution; (b) gains or losses from sales or other dispositions of
assets; and (c) extraordinary or non-recurring gains, but not net of
extraordinary or non-recurring "cash" losses.
2
<PAGE>
"Fiscal Year" means each twelve month period ending on the last day
of August in each year.
"Fixed Charge Coverage" means, for any period, Operating
Cash Flow divided by Fixed Charges.
"Fixed Charges" means, for any period, and each calculated for such
period (without duplication), (a) Interest Expenses paid or accrued by the
Borrower and its Subsidiaries; plus (b) scheduled payments of principal
with respect to all Indebtedness of the Borrower and its Subsidiaries
(other than scheduled principal payments under Term Loan B); plus (c) any
provision for (to the extent it is greater than zero) income or franchise
taxes included in the determination of net income, excluding any provision
for deferred taxes; plus (d) Restricted Junior Payments made in cash to
the extent permitted under Section 6.07 hereof; plus (e) payment of
deferred taxes accrued in any prior period.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board that are
applicable to the circumstances as of the date of determination.
"Impairment Add Back Amount" means an amount equal to the sum of (1)
the lesser of (a) $1,000,000 and (b) the actual cost incurred by the
Borrower in connection with its buy-out of the Chicago Lease, (2) the
lesser of (a) $200,000 and (b) the actual employee severance pay costs
incurred by the Borrower in connection with its permanent cessation of its
Editel-Chicago division and (3) the lesser of (a) $500,000 and (b) the
actual employee severance pay costs incurred by the Borrower in connection
with its permanent cessation of its Editel New York division.
"Indebtedness", as applied to any Person, means without duplication:
(a) all indebtedness for borrowed money; (b) obligations under leases
which in accordance with GAAP constitute Capital Leases; (c) notes payable
and drafts accepted representing extensions of credit whether or not
representing obligations for borrowed money; (d) any obligation owed for
all or any part of the deferred purchase price of property or services if
the purchase price is due more than six months from the date the
obligation is incurred or is evidenced by a note or similar written
instrument; and (e) all indebtedness secured by any Lien on any property
or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person.
"Intangible Assets" means all intangible assets (determined in
conformity with GAAP) including, without limitation, goodwill, trademarks,
tradenames, licenses, organizational costs, deferred amounts, covenants
not to compete, unearned income and restricted funds.
3
<PAGE>
"Interest Expenses" means, without duplication, for any period, the
following, for the Borrower and its Subsidiaries each calculated for such
period: interest expenses deducted in the determination of net income
(excluding (i) the amortization of fees and costs with respect to the
transactions contemplated under the Heller Loan Agreement on the Closing
Date which have been capitalized as transaction costs; and (ii) interest
paid in kind).
"Lender" or "Lenders" means the lenders signatory to the Heller Loan
Agreement.
"Leverage Ratio" means for any period: the ratio of (a) Indebtedness
for borrowed money for the Borrower and its Subsidiaries (exclusive of the
then outstanding Revolving Loan amount) to (b) EBITDA.
"Net Worth" means, as of any date, the sum of the capital stock and
additional paid-in capital plus retained earnings (or minus accumulated
deficit) less unearned employee benefit expense and common stock held in
treasury calculated in conformity with GAAP.
"Operating Cash Flow" means, for any period, (a) EDITDA; less (b)
Capital Expenditures (exclusive of any portion of any Capital Expenditures
(a) financed by a Person other than Lenders as permitted under the Heller
Loan Agreement, (b) made from the cash proceeds of an Asset Disposition
not required herein to pay down any Term Loan or (c) that consist of
commitments or contracts to make Capital Expenditures which have not
created a cash obligation so long as such amount does not exceed $500,000
in the aggregate at any time outstanding).
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint
stock companies, joint ventures, associations, companies, trusts, banks,
trust companies, land trusts, business trusts or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"Restricted Junior Payment" means: (a) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
stock of the Borrower or any of its Subsidiaries now or hereafter
outstanding, except a stock dividend; (b) any payment or prepayment of
principal of, premium, if any, or interest on, or any redemption,
conversion, exchange, retirement, defeasance, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, of
any Subordinated Debt or any shares of any class of stock of the Borrower
or any of its Subsidiaries now or hereafter outstanding; (c) any payment
made to retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire shares of any class of stock of the
Borrower or any of its Subsidiaries now or hereafter outstanding; and (d)
any payment by the Borrower or any of its Subsidiaries of any management
fees or similar fees to any Affiliate, whether pursuant to a management
agreement or otherwise.
4
<PAGE>
"Revolving Loan" means all advances made by Lenders pursuant to
subsection 2.1(B) of the Heller Loan Agreement and any amounts added to
the principal balance of the Revolving Loan pursuant to such Agreement.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than fifty percent
(50%) of the total voting power of shares of stock (or equivalent
ownership or controlling interest) entitled (without regard to the
occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly
or indirectly, by that Person or one or more of the other subsidiaries of
that Person or a combination thereof.
"Tangible Net Worth" means an amount equal to: (a) Net Worth; less
(b) Intangible Assets (excluding deferred tax assets); less (c) prepaid
expenses; less (d) all obligations owed to such Person by any Affiliate of
such Person or any of its Subsidiaries; and less (e) all loans by such
Person to its officers, stockholders or employees.
"Term Loans" means the advances made pursuant to subsections
2.1(A)(1), (A)(2), (A)(3) and (A)(4) of the Heller Loan Agreement.
"Term Loan B" means the advance made pursuant to subsection
2.1(A)(2) of the Heller Loan Agreement.
(3) Section 6.03, Investments, is amended by deleting "and" prior to
clause "(8)" thereof and inserting after "Works" in the last line thereof the
following:
", (9) the Borrower's ownership of Unitel Video Canada Inc., and
(10) loans or advances made to Unitel Video Canada Inc. provided
that the aggregate amount of all such loans or advances outstanding
at any time does not exceed One Hundred Thousand Dollars
($100,000)."
(4) Article VII, Financial Covenants, is amended in full to read as
follows:
"So long as any portion of the Amended and Restated Term Loan
remains outstanding or any obligation under any Loan Document remains
outstanding:
Section 7.01. Tangible Net Worth. The Borrower shall at all
times during the fiscal quarters set forth below maintain Tangible Net
Worth plus Subordinated Debt of not less than the amounts set forth
opposite such fiscal quarters:
Fiscal Quarter End Amount
------------------ ------
May 31, 1997 $18,000,000
August 31, 1997 $17,000,000
5
<PAGE>
November 30, 1997 $17,500,000
February 28, 1998 $18,000,000
May 31, 1998 $18,500,000
August 31, 1998 $19,500,000
November 30, 1998 and
each fiscal quarter
and thereafter $20,000,000
Section 7.02. Capital Expenditure Limits. The aggregate
amount of all Capital Expenditures of the Borrower and its Subsidiaries
(excluding trade-ins, excluding Capital Expenditures in respect of
replacement assets to the extent funded with casualty insurance proceeds
and excluding Capital Expenditures that consist of commitments or
contracts to make Capital Expenditures which have not created a cash
obligation so long as such amount does not exceed $500,000 in the
aggregate at any time outstanding) will not exceed an amount equal to
$10,000,000 in any Fiscal Year of the Borrower (the "Annual Amount");
provided, fifty percent (50%) of the unused portion of any Annual Amount
(the "Carryover Amount") may be used by the Borrower (in addition to the
Annual Amount) in the calculation hereof in the next succeeding Fiscal
Year of the Borrower and no subsequent Fiscal Years provided no Default or
Event of Default shall have occurred; and provided, further, any Capital
Expenditures in such succeeding Fiscal Year shall be allocated first to
the Annual Amount for such Fiscal Year and second, to the Carryover Amount
from such preceding Fiscal Year. In the event that the Borrower or any of
its Subsidiaries enters into a Capital Lease or other contract with
respect to fixed assets, for purposes of calculating Capital Expenditures
under this subsection only, the amount of the Capital Lease or contract
initially capitalized on the Borrower's or any Subsidiary's balance sheet
prepared in accordance with GAAP shall be considered expended in full on
the date that the Borrower or any of its Subsidiaries enters into such
Capital Lease or contract. Notwithstanding anything contained in this
Section 7.02 of the Loan Agreement to the contrary, the Annual Amount
applicable to the Borrower's 1997 Fiscal Year shall be $15,000,000.
Section 7.03. Fixed Charge Coverage. The Borrower shall not
permit its Fixed Charge Coverage to be less than (a) .80 to 1.00 at all
times during the three fiscal quarters ending May 31, 1997, (b) .50 to
1.00 at all times during the four fiscal quarters ending August 31, 1997,
(c) .50 to 1.00 at all times during the fiscal quarter ending November 30,
1997, calculated on a rolling four quarter basis, (d) .50 to 1.00 at all
times during the fiscal quarter ending February 28, 1998, calculated on a
rolling four quarter basis, (a) .75 to 1.00 at all times during the fiscal
quarter ending May 31, 1998, calculated on a rolling four quarter basis,
(f) 1.00 to 1.00 at all times during the fiscal quarter ending August 31,
1998, calculated on a rolling four quarter basis and (g) 1.00 to 1.00 at
all times during each fiscal quarter ending thereafter, calculated on a
rolling four
6
<PAGE>
quarter basis.
For purposes of the covenant calculations under this
Section 7.03, Operating Cash Flow shall exclude financed Capital
Expenditures utilized by the Borrower to finance its construction of
mobile teleproduction units with the proceeds of industrial revenue bonds
to be issued by the Allegheny County Industrial Development Authority.
Section 7.04. Leverage Ratio. The Borrower shall not permit
its Leverage Ratio at the end of each fiscal quarter set forth below
(calculated on a rolling four quarter basis) to be greater than the amount
set forth below for such fiscal quarter end:
Fiscal Quarter End Ratio
------------------ -----
May 31, 1997 3.75 to 1.00
August 31, 1997 3.75 to 1.00
November 30, 1997 3.25 to 1.00
February 28, 1998 3.00 to 1.00
May 31, 1998 2.75 to 1.00
August 31, 1998 and
each fiscal quarter end
thereafter 2.75 to 1.00
Section 7.05. Interest Coverage. During each fiscal period
when the Borrower's Fixed Charge Coverage is less than 1.00 to 1.00, the
Borrower shall not permit the ratio of (a) Operating Cash Flow to (b)
Interest Expense to be less than 1.30 to 1.00. For purposes of the
covenant calculations under this Section 7.05, Operating Cash Flow shall
exclude financed Capital Expenditures utilized by the Borrower to finance
its construction of mobile teleproduction units with the proceeds of
industrial revenue bonds to be issued by the Allegheny County Industrial
Development Authority."
SECTION 2. Conditions of Effectiveness. This First Amendment shall
become effective as of the date on which each of the following conditions has
been fulfilled:
(1) This First Amendment. The Borrower and the Bank shall each have
executed and delivered this First Amendment;
(2) Officer's Certificate. The following statements shall be true
and the Bank shall have received a certificate signed by a duly authorized
officer of the Borrower dated the date hereof stating that, after giving effect
to this First Amendment and the transactions contemplated hereby:
(a) The representations and warranties contained in each of the
Loan Documents are correct in all material respects on and as
of the date hereof as though made on and as of such date; and
7
<PAGE>
(b) After giving effect to this First Amendment, no Default or
Event of Default has occurred and is continuing; and
(3) Legal Bills. Dewey Ballantine has been paid in full for all past
due legal fees, costs and expenses and for all fees, costs and expenses in
connection with this First Amendment.
(4) Other Documents. The Bank shall have received such other
approvals, opinions or documents as the Bank may reasonably request.
SECTION 3. Reference to and Effect on the Loan Documents. (a) Upon
the effectiveness of Section 1 hereof, on and after the date hereof each
reference in the Credit Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import, and each reference in the other Loan Documents
to the Credit Agreement, shall mean and be a reference to the Credit Agreement
as amended hereby.
(b) Except as specifically amended above, the Credit Agreement and
all other Loan Documents shall remain in full force and effect and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this First
Amendment shall not operate as a waiver of any right, power or remedy of the
Bank under any of the Loan Documents, nor constitute a waiver of any provision
of any of the Loan Documents, and, except as specifically provided herein, the
Credit Agreement and each other Loan Document shall remain in full force and
effect and are hereby ratified and confirmed.
SECTION 4. Costs, Expenses and Taxes. The Borrower agrees to
reimburse the Bank on demand for all costs, expenses and charges (including,
without limitation, all reasonable fees and expenses of external legal counsel
for the Bank) incurred by the Bank in connection with the preparation,
reproduction, execution and delivery of this First Amendment and any other
instruments and documents to be delivered hereunder. All such costs, expenses,
fees and charges paid by the Borrower shall be non-refundable.
SECTION 5. Governing Law. This First Amendment shall be governed by
and construed in accordance with the laws of the State of New York.
SECTION 6. Headings. Section headings in this First Amendment are
included herein for convenience of reference only and shall not constitute a
part of this First Amendment for any other purpose.
SECTION 7. Counterparts. This First Amendment may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any party hereto may execute this First Amendment by
signing any such counterpart.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed as of the day and year first above written.
UNITEL VIDEO, INC.
By: /s/ Barry Knepper
---------------------------------
Name: Barry Knepper
Title: CEO
THE CHASE MANHATTAN BANK
By:
---------------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed as of the day and year first above written.
UNITEL VIDEO, INC.
By:
---------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK
By: /s/ George Catallo
---------------------------------
Name: George Catallo
Title: Second Vice President
<PAGE>
Exhibit 4(M)
==============================================================================
LOAN AGREEMENT
between
ALLEGHENY COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
and
UNITEL VIDEO, INC.
Dated as of July 1, 1997
Relating to the
ALLEGHENY COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
Variable Rate Demand Revenue Bonds, Series 1997
(Unitel Mobile Video Project)
==============================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS - ACCEPTANCE OF INDENTURE..............................3
Section 1.01. Definitions..................................................3
Section 1.02. Acceptance of Indenture......................................4
Section 1.03. Assignment to Trustee........................................4
Section 1.04. Accounting Principles........................................4
ARTICLE II THE PROJECT.......................................................5
Section 2.01. The Project..................................................5
Section 2.02. Costs of Project.............................................5
ARTICLE III LOAN OF BOND PROCEEDS............................................6
Section 3.01. Sale and Delivery of Bonds...................................6
Section 3.02. Loan of Bond Proceeds........................................6
Section 3.03. Use of Bond Proceeds.........................................6
Section 3.04. Corporation Contribution.....................................6
Section 3.05. Security.....................................................6
Section 3.06. Conditions Precedent.........................................6
ARTICLE IV INSTALLMENT PAYMENTS..............................................7
Section 4.01. Repayment of Loan............................................7
Section 4.02. Time and Manner of Repayment.................................7
Section 4.03. Payment Credits..............................................9
Section 4.04. Additional Amounts Payable by the Corporation................9
Section 4.05. Payments to Trustee.........................................10
Section 4.06. Payments Unconditional; No Defense or Set-Off...............10
Section 4.07. Optional Prepayments By Corporation.........................10
ARTICLE V WARRANTIES, REPRESENTATIONS AND COVENANTS OF CORPORATION..........12
Section 5.01. General Representations, Warranties and Covenants...........12
Section 5.02. Indemnification of Authority and Trustee....................13
Section 5.03. Reports and Audits..........................................13
Section 5.04. Taxes and Claims............................................14
Section 5.05. Compliance with Laws........................................14
Section 5.06. Tax-Exempt Bond Covenants...................................14
Section 5.07. Insurance...................................................15
Section 5.08. Observance of Terms of Documents............................15
Section 5.09. Covenant With Bondholders...................................15
Section 5.13. Investments.................................................15
Section 5.14. Filings to Protect Security Interest in Trust Estate........16
<PAGE>
Section 5.12. Renewal Letter of Credit; Alternate Letter of Credit........16
Section 5.13. Remarketing Agent...........................................16
Section 5.14. Purchase of Bonds...........................................16
ARTICLE VI DEFAULTS AND REMEDIES............................................17
Section 6.01. Events of Default by Corporation............................17
Section 6.02. Remedies Upon Event of Default..............................17
Section 6.03. Remedies of Authority and Control of Remedies by Bank.......18
Section 6.04. Waiver of Errors and Exemptions.............................18
Section 6.05. No Remedy Exclusive.........................................18
Section 6.06. No Waiver Implied...........................................18
Section 6.07. Agreement to Pay Attorney's Fees and Expenses...............18
ARTICLE VII MISCELLANEOUS...................................................20
Section 7.01. Representations and Special Covenants of Authority..........20
Section 7.02. Assignment..................................................20
Section 7.03. Term of Agreement...........................................21
Section 7.04. Notices.....................................................21
Section 7.05. Parties in Interest.........................................22
Section 7.06. Survival of Covenants, Conditions and Representations.......22
Section 7.07. Amendments..................................................22
Section 7.08. Severability................................................23
Section 7.09. Counterparts................................................23
Section 7.10. Applicable Law..............................................23
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of July 1, 1997 (the "Agreement") between
the ALLEGHENY COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY (the "Authority"), a body
corporate and politic duly organized, existing and in good standing under the
laws of the Commonwealth of Pennsylvania (the "Commonwealth") and UNITEL VIDEO,
INC., a for-profit corporation organized under the laws of the State of Delaware
(the "Corporation").
WITNESSETH:
WHEREAS, the Authority is a body corporate and politic existing under the
laws of the Commonwealth of Pennsylvania pursuant to the Economic Development
Financing Law, amended December 17, 1993, P.L. 490, No. 74, as amended
(hereinafter called the "Act"), having been duly organized by the County of
Allegheny, Pennsylvania (hereinafter called the "County"); and
WHEREAS, the Corporation has, by duly authorized resolution, undertaken a
project consisting of constructing and equipping up to two mobile video
television production units to be based at its Allegheny County, Pennsylvania
offices (the "Project"); and
WHEREAS, the Authority is authorized under the Act to issue its bonds for
the purposes of (i) financing all or a portion of the costs of the Project and
(ii) paying all or a portion of the costs of issuance of the Bonds (defined
hereinafter) and the Authority has determined that the public interest will be
best served and that the purposes of the Act can be more advantageously obtained
by the Authority's issuance of bonds in order to obtain funds to loan to the
Corporation for the foregoing purposes; and
WHEREAS, it has been determined that in order to accomplish such purposes
the Authority will issue its revenue bonds pursuant to a Trust Indenture dated
as of July 1, 1997 (the "Indenture") between the Authority and PNC Bank,
National Association, as trustee (the "Trustee"), in an initial aggregate
principal amount of $5,000,000, which shall be designated Allegheny County
Industrial Development Authority Variable Rate Demand Revenue Bonds, Series 1997
(Unitel Mobile Video Project) (the "Bonds"); and
WHEREAS, the Authority and the Corporation hereby agree to enter into this
Agreement, under the terms of which the Authority will lend the proceeds from
the sale of the Bonds to the Corporation (the "Loan") to finance the costs of
the Project and the Corporation will repay the Loan by making installment
payments to the Authority in an aggregate amount sufficient to pay the principal
of, premium, if any, and interest on the Bonds as the same become due and
payable; and
WHEREAS, the Bonds shall be secured by, among other things, the
installment payments to be paid pursuant to this Agreement (except for the
Unassigned Rights) to the Authority by the Corporation, which payments are to be
assigned to the Trustee; and
WHEREAS, the Corporation has obtained an Initial Letter of Credit (as
hereinafter defined) from Bank of America, (the "Initial Bank") which can be
drawn upon prior to the expiration thereof in an amount up to (a) an amount
equal to the outstanding principal amount of the Bonds to be used (i) to pay the
principal of the Bonds at maturity, earlier redemption or upon acceleration, and
(ii) to enable the Trustee's Agent (as hereinafter defined) to pay the portion
of the purchase price equal to the principal amount of Bonds delivered or deemed
delivered for purchase and not remarketed, plus (b) an initial amount equal to
49 days' accrued interest on the Bonds (calculated at a rate
- --------------------------------------------------------------------------------
Loan Agreement, Series 1997 Bonds
Unitel Video, Inc.
<PAGE>
of 12% per annum) to be used (i) to pay interest on the Bonds and (ii) to pay
the portion of the purchase price equal to the accrued interest, if any, on the
Bonds properly delivered or deemed delivered for purchase and not remarketed;
and
WHEREAS, the issuance, sale and delivery of the Bonds and the execution
and delivery of this Agreement have been in all respects duly and validly
authorized in accordance with the Act by the resolutions of the Authority and as
approved by the County; and
NOW, THEREFORE, in consideration of the promises and of the mutual
representations, covenants and agreements herein set forth, the Authority and
the Corporation, each intending to legally bind themselves and their respective
successors and assigns, do mutually promise, covenant and agree as follows:
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Loan Agreement, Series 1997 Bonds Page 2
Unitel Video, Inc.
<PAGE>
ARTICLE I
DEFINITIONS - ACCEPTANCE OF INDENTURE
Section 1.01. Definitions. All terms which are defined in the recitals
hereto shall have the meaning assigned to them therein, unless otherwise defined
herein or unless the context clearly requires otherwise. Capitalized terms used
in this Agreement and not defined herein, unless the context clearly requires
otherwise, shall have the same meanings as set forth in the Indenture.
In addition, the following terms shall have the meanings specified below:
"Audited Financial Statements" means financial statements of the
Corporation prepared in accordance with generally accepted accounting principles
which have been examined and reported on by an independent public accountant.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time. Each reference to a section of the Code herein shall be deemed to include
the United States Treasury Regulations, including temporary and proposed
regulations, relating to such section which are applicable to the Bonds or the
use of the proceeds thereof.
"Cost" or "Costs" shall have the meaning ascribed to such term in the
Indenture.
"Documents" means this Agreement, the Indenture, the Bonds, the Letter of
Credit Agreement, the Pledge Agreement and all other documents executed by the
Corporation or the Authority in connection therewith.
"GAAP" shall mean generally accepted accounting principles as defined more
specifically in Section 1.04 hereof.
"Loan" means the loan to the Corporation by the Authority, concurrently
with the issuance of the Bonds, of the gross proceeds from the sale of the Bonds
for the purpose of financing all or a portion of the Project.
"Officer's Certificate" means a certificate signed, in the case of a
certificate delivered by the Corporation, by the Chief Executive Officer, Chief
Financial Officer, any Vice President, Secretary or Assistant Secretary of the
Corporation or, in the case of a certificate delivered by any other Person, the
chief executive or chief financial officer of such other Person, in either case
whose authority to execute such Certificate shall be evidenced to the
satisfaction of the Trustee.
"Person" shall mean an individual, a corporation, a partnership, an
association, a joint stock company, a joint venture, a trust, an unincorporated
organization, a governmental unit or an agency, political subdivision or
instrumentality thereof or any other group or organization of individuals.
"Unassigned Rights" means the fees and expenses payable to the Authority,
the Authority's right to indemnification under Section 5.02 of this Agreement
and the Authority's right to execute and deliver supplements and amendments to
this Agreement.
All definitions of documents herein shall include any and all amendments
and supplements thereto and all definitions of persons or entities shall include
their respective successors and assigns.
- --------------------------------------------------------------------------------
Loan Agreement, Series 1997 Bonds Page 3
Unitel Video, Inc.
<PAGE>
All accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP in effect from time to time, as
modified by Section 1.04 hereof.
Section 1.02. Acceptance of Indenture. The Corporation acknowledges that
it has received an executed copy of the Indenture and that it is familiar with
the terms and conditions of the Indenture. The Corporation further covenants
that it will comply with all the conditions and covenants contained in the
Indenture relating to the Corporation and the Project, and that it will not take
any action which would cause a default thereunder or jeopardize the rights of
the Trustee, the Authority or the Bondholders.
Section 1.03. Assignment to Trustee. The Authority hereby notifies the
Corporation, and the Corporation hereby acknowledges, that all of the
Authority's right, title and interest in this Agreement (except the Unassigned
Rights) are being assigned and pledged to the Trustee as security for the Bonds
and the Bank or the Bank's Agent, as applicable. The Corporation consents to
such assignment and acknowledges that the Bonds are being issued in reliance by
the Trustee upon the assignment of the Authority's rights under this Agreement.
The Corporation agrees that it shall perform all obligations and pay all amounts
due from the Authority under the Bonds and the Indenture so that at all times
there shall be no default thereunder.
Section 1.04. Accounting Principles. Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation, combination or other accounting computation is required to be
made for the purposes of this Agreement or any agreement, document or
certificate executed and delivered in connection with or pursuant to this
Agreement, such determination or computation shall be done in accordance with
GAAP.
- --------------------------------------------------------------------------------
Loan Agreement, Series 1997 Bonds Page 4
Unitel Video, Inc.
<PAGE>
ARTICLE II
THE PROJECT
Section 2.01. The Project. The Project consists of constructing and
equipping up to two mobile video television production units to be based at the
Corporation's Allegheny County, Pennsylvania offices.
Section 2.02. Costs of Project. The Corporation agrees and acknowledges
that there is no implied or express warranty that the proceeds of the Bonds will
be sufficient to pay the Costs of the Project.
- --------------------------------------------------------------------------------
Loan Agreement, Series 1997 Bonds Page 5
Unitel Video, Inc.
<PAGE>
ARTICLE III
LOAN OF BOND PROCEEDS
Section 3.01. Sale and Delivery of Bonds. In order to provide the funds
necessary to finance the Project as provided for in this Agreement, the
Authority agrees that it will use its best efforts to cause the Bonds to be
issued, sold and delivered. All proceeds received from the sale of the Bonds
shall be deposited by the Authority in trust with the Trustee in accordance with
the requirements of the Indenture, for the benefit, however, of the Corporation,
and in consideration of such issuance, sale and delivery of the Bonds, and such
deposit, the Corporation shall apply such funds as provided herein and in the
Indenture and shall make the payments specified in Article IV hereof and observe
all other conditions and provisions hereof.
Section 3.02. Loan of Bond Proceeds. Subject to the conditions hereof, the
Authority will concurrently with the issuance of the Bonds lend the proceeds
from the sale of the Bonds to the Corporation for the purpose of financing the
Project.
Section 3.03. Use of Bond Proceeds. The Authority shall deposit the
proceeds from the sale of the Bonds with the Trustee to be expended and
deposited all in accordance with the provisions of the Indenture.
Section 3.04. Corporation Contribution. In the event the Loan should not
be sufficient to pay the costs of the Project, the Corporation shall pay those
costs in excess of the amount of the Loan.
Section 3.05. Security. This Agreement is a general obligation of the
Corporation and the full faith and credit of the Corporation is pledged to the
payment of all sums due hereunder.
Section 3.06. Conditions Precedent. The obligation of the Authority to
provide the Loan is subject to the satisfaction of the following conditions:
(a) The representations and warranties set forth herein shall be
true and correct on and as of the date of the issuance of the Bonds and on such
date no Event of Default as hereinafter defined and no condition or act which
with the giving of notice or the lapse of time or both, would constitute such an
Event of Default, shall have occurred and be continuing or shall exist;
(b) The Corporation shall furnish to the Authority an Opinion of
Counsel for the Corporation in form and substance satisfactory to the Authority
as to matters which the Authority shall reasonably request; and
(c) All legal details and proceedings in connection with the
issuance of the Bonds and the making of the Loan shall be in form and substance
satisfactory to the Authority and the Authority shall have received all
originals or certified or other copies of such documents and proceedings in
connection therewith in form and substance satisfactory to it as it may
reasonably request.
- --------------------------------------------------------------------------------
Loan Agreement, Series 1997 Bonds Page 6
Unitel Video, Inc.
<PAGE>
ARTICLE IV
INSTALLMENT PAYMENTS
Section 4.01. Repayment of Loan. The Corporation hereby covenants and
agrees that it shall repay the Loan to the Authority by making installment
payments, in the manner and at the times hereinafter set forth, in sums
sufficient to pay the principal of, premium, if any, and interest payable on the
Bonds, and to pay all other amounts payable by the Corporation under the terms
of this Agreement.
Section 4.02. Time and Manner of Repayment. The Corporation agrees to make
the following payments on the following dates:
(a) Interest:
(i) At all times while the Bonds are secured by a Letter of
Credit.: On each Interest Payment Date for the Bonds while the Bonds are
secured by a Letter of Credit, an amount which, after taking into
consideration any amount on deposit in the Bond Fund (other than in the
LOC Debt Service Account), is equal to the amount of the interest to
become due on the Bonds on such Interest Payment Date; provided, however,
that the Corporation may be entitled to certain credits on or reductions
of such payments as permitted under Section 4.03 hereof and Section 408 of
the Indenture.
(ii) At all times while the Bonds are NOT secured by a Letter
of Credit following the Conversion Date: In the event that the Letter of
Credit is terminated on and after the Conversion Date in accordance with
Section 403 of the Indenture, the Corporation agrees to make the following
payments on the following dates:
(A) On the 20th day of each month, beginning with the
first month following the month in which the Conversion Date for the
Bonds occurs, an amount which, together with an equal amount to be
paid on the 20th day of each month, if any, occurring before the
next succeeding Semiannual Date, will not be less than the interest
to become due on the Bonds on the next succeeding Semiannual Date;
and
(B) on the 20th day of each month thereafter, an amount
equal to one-sixth (1/6) of the interest to become due on the Bonds
on the next succeeding Semiannual Date; provided, however, that the
Corporation may be entitled to certain credits on the payments in
this Section 4.02(a)(ii) as permitted under Section 4.03 hereof.
(b) Principal:
(i) At all times while the Bonds are secured by a Letter of
Credit: On each July 1, an amount equal to the principal to become due on
the Bonds secured by a Letter of Credit on such date by Maturity;
provided, however, that the Corporation may be entitled to certain credits
on or reductions of such payments as permitted under Section 4.03 hereof
and Section 408 of the Indenture.
(ii) At all times while the Bonds are NOT secured by a Letter
of Credit following the Conversion Date: On the 20th day of each month
beginning with the first month following the month in which the Conversion
Date for the Bonds occurs, an amount which, together with an equal amount
to be paid on the 20th day of each
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Loan Agreement, Series 1997 Bonds Page 7
Unitel Video, Inc.
<PAGE>
month, if any, occurring before the next succeeding July 1, will not be
less than the principal to become due on the Bonds on the next succeeding
July 1 by Maturity or mandatory redemption, and thereafter on the 20th day
of each month an amount equal to one-twelfth (1/12) of the next
installment of the principal becoming due on the Bonds on the next
succeeding July 1 by Maturity or mandatory redemption; provided, however,
that the Corporation may be entitled to certain credits on such payments
as permitted under Section 4.03 hereof.
(c) The Corporation shall provide for the payment of the principal
of, interest and premium, if any, on the Bonds other than Pledged Bonds,
Corporation Bonds and Bonds bearing interest at a Fixed Rate (subject to the
provisions of Section 403(i) of the Indenture permitting the termination of the
Letter of Credit in the Fixed Mode in certain situations) by delivery of a
Letter of Credit to the Trustee which complies with the requirements of the
Indenture. Simultaneously with the original issuance and delivery of the Bonds,
the Corporation shall deliver the Initial Letter of Credit to the Trustee. The
Corporation hereby authorizes and directs the Trustee to draw moneys under the
Letter of Credit in accordance with the provisions of the Indenture and the
Letter of Credit to the extent necessary to pay the principal of, premium, if
any, and interest on the Bonds other than Pledged Bonds and Corporation Bonds if
and when due.
(d) The Corporation shall pay to the Trustee amounts equal to the
amounts to be paid by the Trustee and the Trustee's Agent pursuant to Section
506 of the Indenture to purchase outstanding Bonds, such amounts to be paid by
the Corporation to the Trustee and the Trustee's Agent, as the case may be, on
the dates such payments pursuant to Section 506 of the Indenture are to be made;
provided, however, that the obligation of the Corporation to make any such
payment hereunder shall be reduced by the amount of any moneys available for
such payment under clauses (i) or (ii) of Section 506(a) of the Indenture.
(e) The Corporation shall provide for the payment of amounts to be
paid by the Trustee or the Trustee's Agent pursuant to Section 506 of the
Indenture by the delivery of the Letter of Credit to the Trustee. Simultaneously
with the original issuance and delivery of the Bonds, the Corporation shall
deliver the Initial Letter of Credit to the Trustee. The Corporation hereby
authorizes and directs the Trustee to draw moneys under the Letter of Credit in
accordance with the provisions of the Indenture and the Letter of Credit to the
extent necessary to provide moneys payable under Section 506 of the Indenture if
and when due.
(f) Payments Required to Effect Optional Redemption. On or before
the Business Day next preceding the date of redemption of any Bonds to be
optionally redeemed pursuant to Section 511(a) of the Indenture, an amount not
less than the full amount required to pay the principal of and premium, if any,
on such Bonds to be optionally redeemed; provided, however, that the Corporation
may be entitled to certain credits on or reductions of such payments as
permitted under Section 408 of the Indenture.
(g) Trustee's Fee. While the Bonds remain Outstanding, the
reasonable compensation and expenses of the Trustee under the Indenture shall be
paid directly to such Trustee by the Corporation upon the receipt by the
Corporation of a bill for such services from the Trustee.
(h) Authority's Annual Administrative Fee. The Corporation shall pay
an initial closing fee in the amount of $5,000 together with a legal fee in the
amount of $2,500 on the Closing Date. Commencing on the Closing Date and on
August 1 of each year thereafter while the Bonds remain Outstanding, an amount
equal to the Administrative Fee of the Authority shall be payable by (and not
subject to refund) the Corporation. The Administrative Fee shall be in the
amount of $1,250, together with any other administrative expenses
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Loan Agreement, Series 1997 Bonds Page 8
Unitel Video, Inc.
<PAGE>
(including reasonable legal fees) reasonably incurred by the Authority in
connection with inquiring into, or enforcing, the performance by the Corporation
of its obligations hereunder. The payment of any such administrative expenses
shall be due within 30 days of receipt of an itemized statement from the
Authority.
(i) Rebate to the United States. If there is any amount required to
be paid to the United States pursuant to Section 148(f) of the Code and Section
5.06(d) hereof, the Corporation shall pay such amount to the United States.
Section 4.03. Payment Credits. Notwithstanding any provision contained in
this Loan Agreement or in the Indenture to the contrary, the Corporation shall
be entitled to receive a credit against the payments required by Section 4.02 in
the following situations:
(a) Principal and Interest: Any moneys on deposit in the Bond Fund,
other than the LOC Debt Service Account, shall be credited against the
obligation of the Corporation under Section 4.02(a) and/or (b) hereof for the
payment of principal of and interest on the Bonds.
(b) Purchase of Bonds: The principal amount of Bonds purchased by
the Corporation and delivered to the Trustee, or purchased by the Trustee and
canceled, shall be credited against the obligation of the Corporation to pay
amounts equal to the principal due on the Bonds in such order as the Corporation
shall elect prior to such purchase or if no such election is made prior to such
purchase, in the inverse order thereof; provided, however, that deposit of a
Bond of one Maturity may not be credited against an obligation which would be
used, in the normal course, to retire a Bond of another Maturity; and provided
further, however, that so long as a Letter of Credit is in effect with respect
to all or a portion of the Bonds, the Corporation shall be entitled to the
credit provided in this Section 4.03(b) only to the extent that Bonds the
payment of which is secured by such Letter of Credit which are purchased by the
Corporation and delivered to the Trustee, or purchased by the Trustee and
canceled, are (in each instance) purchased with Eligible Moneys drawn under the
Letter of Credit.
(c) In addition, the Corporation shall be entitled to a credit
during the year immediately preceding the final maturity date of the Bonds to
the extent that any payment required to be made pursuant to Section 4.02 of this
Agreement would, together with the amount held by the Trustee in all Funds under
the Indenture, other than the LOC Debt Service Account, exceed the principal
amount of the Bonds Outstanding and the amount of the interest due both at the
final maturity date and the interest payment date immediately preceding the
final maturity date.
(d The Corporation shall also be entitled to a credit against
payments required to be made pursuant to Section 4.02 hereof to the extent that
the required payment due on the Bonds has been paid from moneys advanced under
the Letter of Credit and the Corporation has directly reimbursed the Bank for
such draw.
Section 4.04. Additional Amounts Payable by the Corporation. It is the
intention of the Authority and the Corporation that, notwithstanding any other
provision of this Agreement, the Trustee, on the Authority's behalf, shall
receive funds from the Corporation at such times and in such amounts as will
enable the Authority to meet all of its obligations under the Bonds, including
obligations surviving payment of the Bonds pursuant to the terms thereof.
Accordingly, the Corporation agrees (but such agreement shall not limit the
generality of the preceding sentence) that if any additional amounts become
payable by the Authority pursuant to the terms of the Bonds to any holder of the
Bonds, then additional amounts shall be due and payable by the Corporation to
the Authority hereunder equal to any additional amounts that may be payable by
the Authority under the Bonds, before or after payment of
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principal on the Bonds, all of which amounts shall be paid by the Corporation on
the date that the comparable amounts are due by the Authority to such owner of
the Bonds. The Corporation further agrees to pay any other amounts which the
Authority is obligated under the Indenture to pay to the Trustee.
Section 4.05. Payments to Trustee. All installment payments and other
amounts payable by the Corporation hereunder shall be paid directly to the
Trustee, except that indemnification payments due to the Authority pursuant to
Section 5.02 hereof shall be paid to the Authority and the Administrative Fee of
the Authority shall be paid directly to the Authority.
Section 4.06. Payments Unconditional; No Defense or Set-Off.
(a) The obligations of the Corporation to pay the installments and
other amounts payable hereunder shall be absolute and unconditional without
defense or set-off by reason of any default by the Authority under this
Agreement or under any other agreement between the Corporation and the Authority
or for any other reason, including, without limitation, any acts or
circumstances that may constitute failure of consideration, destruction of or
damage to the Project, commercial frustration of purpose or failure of the
Authority to perform and observe any agreement, whether express or implied, or
any duty, liability or obligation arising out of or in connection with this
Agreement, it being the intention of the parties that such installment payments
and other amounts will be paid in full when due without any delay and will be
received by the Authority and the Trustee as a net sum without deductions,
abatements, diminution or set-off of any kind whatsoever.
(b) Damage to or destruction of all or any portion of the Project by
fire or any other cause shall not terminate this Agreement or cause any
abatement of or reduction in the payments to be made by the Corporation
hereunder, or otherwise alter the respective obligations of the Authority or the
Corporation as set forth herein,
Section 4.07. Optional Prepayments By Corporation.
(a) The Corporation may prepay all or any portion of the Loan to the
same extent and upon the same conditions that the Authority has the right to
prepay the indebtedness evidenced by the Bonds. Any such amounts prepaid by the
Corporation to the Trustee shall be credited against the outstanding balance of
the Loan hereunder. Partial prepayments of the Loan made by the Corporation
hereunder shall be credited against the obligation of the Corporation to pay
amounts equal to the principal due on the Bonds in such order as the Corporation
shall elect prior to such payment or if no such election is made prior to such
payment, in the inverse order thereof. Payments of principal installments and
interest falling due shall continue to be made in accordance with Sections 4.01
and 4.02 hereof until the entire outstanding balance of the Loan and all accrued
interest have been paid or provision satisfactory to the Trustee has been made
for the defeasance of the Bonds in accordance with Section 1201 of the
Indenture.
(b) If there are sufficient moneys available with the Trustee to
meet the payment of principal of, premium, if any, and interest on all the
Outstanding Bonds and sufficient funds available with the Trustee to meet all
remaining obligations of the Corporation to the Authority and the Trustee, the
Trustee shall so notify the Corporation in writing, and the Corporation shall
then be relieved of making any further payments hereunder, and this Agreement
shall terminate.
(c) With respect to Bonds bearing interest at a Weekly Rate, the
Corporation shall give the Trustee and the Authority not less than 35 days'
prior written notice of any optional prepayment, which notice shall designate
the date of prepayment and the amount
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thereof and direct the redemption of Bonds in the amount corresponding to the
prepayment. Such notice may be withdrawn by the Corporation prior to delivery of
the Trustee's notice of redemption to Bondholders pursuant to Section 512 of the
Indenture. No such notice from the Corporation shall be required in the case of
prepayments required to be made in order to provide for the payment of the
redemption of Bonds required to be redeemed. The Corporation shall provide to
the Bank a copy of any notice given pursuant to this Section 4.07(c).
(d) In the case of a prepayment to be applied to the redemption of
Bonds bearing interest at a Fixed Rate, the Corporation shall give the Trustee
and the Authority not less than 50 days' prior written notice, which notice
shall designate the date of prepayment and the amount thereof and direct the
redemption of Bonds in the amount corresponding to the prepayment. Such notice
may be withdrawn by the Corporation prior to delivery of the Trustee's notice of
redemption to Bondholders pursuant to Section 512 of the Indenture. No such
notice from the Corporation shall be required in the case of prepayments
required to be made in order to provide for the payment of the redemption of
Bonds required to be redeemed. The Corporation shall provide to the Bank a copy
of any notice given pursuant to this Section 4.07(d).
(e) Notwithstanding subsections (c) and (d) above, in the case of a
prepayment to be applied to the special optional redemption of Pledged Bonds
pursuant to Section 511(b) of the Indenture, the Corporation shall give the
Trustee not less than one Business Days' prior written notice, which notice
shall designate the date of prepayment and the amount thereof and direct the
redemption of Pledged Bonds in the amount corresponding to the prepayment. The
Corporation shall provide to the Bank a copy of any notice given pursuant to
this Section 4.07(e).
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ARTICLE V
WARRANTIES, REPRESENTATIONS AND COVENANTS OF CORPORATION
Section 5.01. General Representations, Warranties and Covenants. The
Corporation represents warrants and agrees that:
(a) All information, representations and warranties set forth in the
certificates, executed and delivered by the Corporation in connection with the
issuance of the Bonds by the Authority is true, correct and complete in all
material respects as of the date of execution of this Agreement.
(b) The Corporation shall not take any action that would cause the
occurrence of an Event of Default under the terms of the Indenture.
(c) The Corporation has full power and authority to execute and
deliver the Documents executed and delivered by the Corporation, and to incur
and perform the obligations provided for therein, all of which have been duly
authorized by all proper and necessary action and all material governmental
licenses, authorizations, consents and approvals required in each case of and
for the Corporation in connection with its obligation under the Documents have
been obtained. No consent or approval of any other person or public authority or
regulatory body (other than the Authority) is required as a condition to the
validity or enforceability of any of the Documents against the Corporation, or
if required the same has been duly obtained.
(d) Each of the Documents executed and delivered by the Corporation
has been properly executed by the Corporation, constitutes the valid and legally
binding obligation of the Corporation, and is fully enforceable against the
Corporation in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights.
(e) There is no litigation or proceeding pending or, so far as the
Corporation knows, threatened, before any court or administrative agency which,
in the opinion of the Corporation, will materially adversely affect the
financial condition or operations of the Corporation or the authority of the
Corporation to enter into, or the validity or enforceability of, any of the
Documents executed and delivered by the Corporation.
(f) There is (i) no provision of any existing mortgage, indenture,
contract or agreement binding on the Corporation or affecting its property, and
(ii) no law binding upon the Corporation or affecting any of its property, which
would conflict with or in any way prevent the execution, delivery or performance
of any of the Documents executed and delivered by the Corporation or which would
be in default or violated as a result of such execution, delivery or
performance.
(g) The Corporation has filed all federal, state and local tax
returns which are required to be filed by the Corporation or has received
extensions for filing the same and has paid all taxes as shown on such returns
as they have become due. No claims have been assessed and are unpaid with
respect to such taxes.
(h) There is no default by the Corporation under this Agreement or
any other Documents and, no event has occurred and is continuing, and no
condition exists which with notice or the passage of time or both would
constitute a default under any thereof.
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Section 5.02. Indemnification of Authority and Trustee. The Corporation
agrees that (i) the Authority and the members, officers and employees thereof;
and (ii) the Trustee and its officers, directors, employees and agents, shall
not be liable for and the Corporation covenants and agrees to protect,
exonerate, defend, indemnify and save the Authority and the members, officers,
employees and agents thereof and the Trustee, its officers, directors, employees
and agents, harmless from and against any and all costs, damages or liabilities
(including the reasonable fees and expenses of legal counsel) which may arise
out of the issuance of the Bonds or interpretations or performance of any
provision of this Agreement, the Indenture or the Tax Regulatory Certificate, or
arising from any breach or default on the part of the Corporation in the
performance of any covenant or agreement on the part of the Corporation to be
performed pursuant to the terms of this Agreement; and from and against all
reasonable costs, counsel fees, expenses and liabilities incurred in or about
the defense of any such claims or action or proceedings brought thereon. The
Corporation may, at its cost and in its name or in the name of the Authority
and/or the Trustee, prosecute or take any other action involving third persons
which the Corporation deems necessary in order to insure or protect the
Corporation's rights under this Agreement; in such event, the Authority and the
Trustee will reasonably cooperate with the Corporation, but at the sole expense
of the Corporation.
The Authority or Trustee, as the case may be, shall give prompt written
notice to the Corporation of any claim asserted against the Authority, its
members, officers, employees or agents or the Trustee, its officers, directors,
employees or agents, when such claim becomes known and which, if sustained, may
result in liability of the Corporation hereunder; provided, however, that the
failure by the Authority or the Trustee to give such notice shall not relieve
the Corporation from its obligations to protect, exonerate, defend, indemnify
and save the Authority and its members, officers or employees or the Trustee,
its officers, directors, employees, and agents harmless as aforesaid, except to
the extent that the failure to give such notice results in actual loss or damage
to the Corporation; and in case any action or proceeding be brought against the
Authority, its members, officers, employees or agents or the Trustee, its
officers, directors, employees or agents, by reason of any such claim, the
Corporation, upon notice as aforesaid, covenants and agrees diligently to resist
or defend such action or proceedings; provided, however, that the indemnified
party or parties will cooperate and assist in the defense of such action or
proceeding if reasonably requested to do so by the Corporation.
Notwithstanding anything contained herein to the contrary, the Corporation
shall not be obligated to indemnify or hold harmless the Authority or its
members, officers, employees or agents for its or their gross negligence or
willful misconduct or the Trustee, it's officers, directors, agents and
employees for its gross negligence or willful misconduct.
Section 5.03. Reports and Audits. The Corporation shall:
(a) as soon as practicable but in no event later than five months
after the end of each of its fiscal years, file with the Trustee and the
Authority Audited Financial Statements of the Corporation prepared as of the end
of such fiscal year;
(b) as soon as practicable but in no event later than five months
after the end of each fiscal year, file with the Trustee and the Authority an
Officer's Certificate stating whether to the best knowledge of the signers the
Corporation is in default in the performance of any covenant contained in this
Agreement and, if so, specifying each such default of which the signers may have
knowledge;
(c) if an Event of Default hereunder shall have occurred and be
continuing, (i) file with the Trustee and the Authority such other financial
statements and information concerning the operations and financial affairs of
the Corporation (or of any consolidated
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group of companies of which the Corporation is a member) as the Trustee or the
Authority may from time to time reasonably request, and (ii) provide access to
the facilities of the Corporation for the purpose of inspection by the Trustee
or the Authority during regular business hours or at such other times as the
Trustee or the Authority may reasonably request.
Section 5.04. Taxes and Claims. The Corporation shall pay and discharge
all taxes, assessments and governmental charges or levies imposed upon it or on
its income or properties prior to the date on which penalties attach thereto,
and all lawful claims which, if unpaid, might become a lien or charge upon any
of its properties, provided that the Corporation shall not be required to pay
any such tax, assessment, charge, levy or claim, the payment of which is being
contested in good faith and by proper proceedings, so long as the security for
the Bonds is not, in the opinion of the Trustee, materially impaired during the
period of contest.
Section 5.05. Compliance with Laws. The Corporation shall comply with all
applicable federal, state and local laws, rules, regulations and orders of any
governmental authority, subject to its right to contest the same in good faith,
including, without limitation, the applicable requirements of Rule 15(c)2-12 as
promulgated by the Securities and Exchange Commission (Such Rule not being
applicable to the Corporation or the Bonds unless and until the Bonds convert to
the Fixed Mode) and recognizing that the Authority is not an "obligated person"
within the meaning of said Rule.
Section 5.06. Tax-Exempt Bond Covenants.
(a) The Corporation hereby covenants and agrees that:
(i) it shall at all times do and perform all acts and things
necessary or desirable in order to assure that interest paid on the Bonds
shall, for purposes of federal income taxation, be and remain excludable
from the gross income of the recipients thereof and that it will refrain
from doing or performing any act or thing that will cause such interest
not to be so excludable.
(ii) it will not make any investment or other use of the
proceeds (as that term is defined in Section 148 of the Code and all
applicable regulations promulgated thereunder) of the Bonds which would
cause the Bonds to be "arbitrage bonds" (as that term is defined in
Section 148 of the Code and all applicable regulations promulgated
thereunder), and that it will comply with the requirements of such Code
section and regulations throughout the term of the Bonds.
(b) The Corporation hereby covenants that the average maturity of
the Bonds does not exceed 120% of the average reasonably expected economic life
of the facilities financed with the net proceeds of the Bonds.
(c) Interest with respect to the Bonds is not guaranteed (in whole
or in part) by the United States or any agency or instrumentality thereof; no
portion of the proceeds of the Bonds are to be (a) used in making loans the
payment of principal or interest with respect to which is to be guaranteed (in
whole or in part) by the United States (or any agency or instrumentality
thereof), or (b) invested (directly or indirectly) in federally insured deposits
or accounts except to the extent permitted under Section 149(b)(3) of the Code
which provides exceptions which include (i) investments during any initial
temporary period permitted under Section 148 of the Code, such as for certain
construction periods, until such proceeds are needed for the purpose for which
the Bonds were issued; (ii) investments in a bona fide debt service fund, within
the meaning of Section 149(b)(3) of the Code, (iii) investments in a reasonably
required reserve or replacement fund, within the meaning of Section 148(d) of
the Code or (iv) investments in obligations issued by the United States
Treasury; and the payment
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of principal of or interest on the Bonds is not otherwise indirectly guaranteed
(in whole or in part) by the United States or any agency or instrumentality
thereof.
(d) The Corporation hereby covenants that it will perform all
undertakings of and pay all amounts due to the Internal Revenue Service pursuant
to the requirements of Section 148(f) of the Internal Revenue Code and will, in
accordance with the Tax Regulatory Certificate:
(i) deliver to the Trustee and the Authority, a written
statement, with appropriate supporting schedules, of the amount, if any,
determined as of any computation date specified in such Tax Regulatory
Certificate to be payable to the United States government with respect to
the Bonds pursuant to Section 148(f) of the Code (which written statement
and supporting schedules may be prepared by the Corporation or by an
accounting, consulting or financial advisory firm retained by it for such
purpose), and
(ii) submit to the Internal Revenue Service sufficient funds
to make any payment required to be made under Section 148(f) of the Code,
as disclosed in the written statement delivered pursuant to (i) above,
accompanied by such related documentation as may be required to be filed
with such payment; and
will retain records of all determinations made pursuant to the foregoing with
regard to the Bonds until six years after the retirement of the last Bond.
Section 5.07. Insurance. The Corporation will maintain, or cause to be
maintained, insurance with respect to the Project covering such risks and in
such amounts as is required by the Letter of Credit Agreement, and which
liability policies shall name the Authority as additional insured. The
Corporation will deliver evidence of such coverage to the Trustee and the
Authority at the times and in the manner specified in the Letter of Credit
Agreement.
Section 5.08. Observance of Terms of Documents. The Corporation shall
comply with all of the terms and conditions and covenants applicable to the
Corporation contained in this Agreement and the Indenture.
Section 5.09. Covenant With Bondholders. The Authority and the Corporation
agree that this Agreement is executed in part to induce the purchase by others
of the Bonds and accordingly, all representations, warranties, covenants and
agreements on the part of the Corporation and the Authority as set forth herein
are declared to be for the benefit of the Trustee and the registered owners from
time to time of the Bonds and their respective successors and assigns.
Section 5.13. Investments. The Authority and the Corporation agree that
all moneys in any fund established under the Indenture may be invested in such
Qualified Investments as the Corporation may direct in writing; provided,
however, that any such directions shall conform to the requirements of the
Indenture. The Trustee is hereby authorized to trade with itself in the purchase
and sale of securities as provided in Section 404 of the Indenture.
Section 5.11. Filings to Protect Security Interest in Trust Estate. The
Corporation hereby agrees to file and refile such instruments as shall, in the
Opinion of Counsel, be necessary to preserve the lien of the Indenture upon the
Trust Estate or any part thereof granted in the Indenture until the principal of
and interest on the Bonds secured by the Indenture shall have been paid and to
furnish satisfactory evidence to the Trustee of recording, registering, filing
and refiling of such instruments and of every additional instrument which shall,
in the Opinion of Counsel, be necessary to preserve the lien of the Indenture
upon
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the Trust Estate or any part thereof until the principal of and interest on the
Bonds secured by the Indenture and all amounts payable under the Letter of
Credit Agreement shall have been paid.
Section 5.12. Renewal Letter of Credit; Alternate Letter of Credit.
(a) The Corporation covenants and agrees not to permit any of the
Bonds prior to the Conversion Date to be remarketed unless a Letter of Credit
satisfying the requirements of the Indenture is in full force and effect.
Similarly, prior to the Conversion Date, the Corporation may not cancel the
Letter of Credit then in effect unless it provides a Renewal Letter of Credit or
an Alternate Letter of Credit satisfying the requirements of the Indenture.
(b) At any time, the Corporation may, at its option, subject to the
provisions of the Letter of Credit Agreement, provide for the delivery to the
Trustee of a Renewal Letter of Credit or an Alternate Letter of Credit in lieu
of the Letter of Credit then in effect, which Letter of Credit shall meet the
requirements of Section 403 of the Indenture.
Section 5.13. Remarketing Agent. The Corporation covenants and agrees that
it will comply with the provisions of Section 918 of the Indenture with respect
to the removal and replacement of the Remarketing Agent.
Section 5.14. Purchase of Bonds. So long as a Letter of Credit is in
effect, the Corporation shall not acquire, and shall not permit any other
Affiliate or Insider to acquire, any Bonds (other than Pledged Bonds or Bonds
which bear interest at a Fixed Rate) except with Eligible Moneys or as otherwise
required by Section 4.02(d) of this Loan Agreement.
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ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.01. Events of Default by Corporation. The occurrence of any of
the following shall constitute an Event of Default hereunder:
(a) Failure by the Corporation to make any payments under Sections
4.01 and 4.02 of this Agreement when due and such default shall not be cured
within five days after such payment becomes due hereunder; or
(b) Failure by the Corporation to make any payment hereunder or in
the performance of or compliance with any of the provisions, warranties,
covenants, agreements, terms or conditions contained in this Agreement, other
than those specified in (a) above, which continues for thirty (30) days
following written notice thereof to the Corporation from the Authority or the
Trustee except in the case of a default which cannot be cured within such thirty
(30) days, in which case the period shall be extended for such period as is
reasonable to cure the same with due diligence, provided the Corporation
commences such performance or compliance within thirty (30) days and proceeds
diligently to cure the same; or
(c) If the Corporation shall make an assignment of substantially all
of its assets for the benefit of creditors or is adjudicated a bankrupt or shall
file a bill in equity or otherwise initiate proceedings for the appointment of a
receiver of its assets, or shall file a case under the Federal Bankruptcy Code
to be declared a bankrupt or for reorganization or otherwise initiate any
proceedings in any court for a composition with its creditors or for relief in
any manner from the payment of its debts when due under any state or federal
laws; or if any proceedings in bankruptcy or for the appointment of a receiver
shall be instituted against the Corporation under any state or federal law and
shall not be dismissed within sixty (60) days; or
(d) the occurrence of an Event of Default (after notice and passage
of any applicable cure period) under any of the Documents.
Unless and until the Authority or the Trustee shall have exercised any remedies
upon an Event of Default, and subject to the rights of the Bank to control all
remedies, including any waiver of an Event of Default pursuant to the Indenture,
the Corporation (or any other person on behalf of the Corporation) may at any
time (a) pay all accrued unpaid payments then due and owing on the outstanding
balance of the Loan and all other sums which the Corporation is obligated to pay
hereunder; and (b) cure all other existing defaults hereunder, and in every such
case, such payment and cure shall be deemed to constitute a waiver of the
default and its consequences as though the default had not occurred.
Section 6.02. Remedies Upon Event of Default. Upon the occurrence and
continuance of an Event of Default:
(a) Subject to Section 6.03 hereof, the entire outstanding balance
of the Loan and any other sums which the Corporation is obligated to pay to the
Authority hereunder shall immediately be due and payable; provided, however,
that the Trustee shall have declared the acceleration of the Bonds in accordance
with the Indenture.
(b) The Trustee, after ten (10) days notice to the Corporation, may
perform for the account of the Corporation any covenant of the Corporation
hereunder in the performance of which the Corporation is in default or make any
payment for which the Corporation is in default. The Corporation shall pay to
the Trustee upon demand any amount paid by it in the performance of such
covenant and any amounts which the Trustee shall have
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paid by reason of failure of the Corporation to comply with any covenant or
provision of this Agreement, including reasonable counsel fees incurred in
connection with prosecution or defense of any proceedings instituted by reason
of default of the Corporation, together with interest at a rate equal to the
lesser of the highest rate permitted by applicable law and the cost of the money
to the Trustee, from the date of payment until repayment by the Corporation.
(c) The Authority and the Trustee, as assignee, may pursue any other
right/remedy available at law or in equity.
6.03. Remedies of Authority and Control of Remedies by Bank.
(a) In addition to the rights of the Trustee under Section 6.02
hereof, the Authority shall have the right to proceed against the Corporation
for payment of Administrative Fees pursuant to Section 4.02(h) hereof and for
indemnification pursuant to Section 5.02 hereof.
(b) Control of Remedies by Bank. Anything herein to the contrary
notwithstanding, if the Bank has not failed to make any payment required under
the Letter of Credit, the Bank shall have the exclusive right to exercise or
direct the exercise of remedies with respect to the Bonds and the Loan Agreement
in accordance with the terms hereof following an Event of Default.
Section 6.04. Waiver of Errors and Exemptions. The Corporation hereby
waives and releases all technical errors, defects and imperfections whatsoever
of a procedural nature in the entering of any judgment or any process or
proceedings arising out of this Agreement. The Corporation also waives the
benefit of any law which now or hereafter might authorize the stay of any
execution to be issued or any judgment recovered hereunder or the exemption of
any property from levy or sale thereunder.
Section 6.05. No Remedy Exclusive. No right or remedy herein conferred
upon or reserved to the Authority or the Trustee is intended to be exclusive of
any other right or remedy herein or by law provided, but each shall be
cumulative and in addition to every other right or remedy given herein or now or
hereafter existing at law or in equity or by statute.
Section 6.06. No Waiver Implied. No waiver by the Authority, the Bank or
the Trustee of any breach by the Corporation of any of its obligations,
agreements or covenants hereunder shall be a waiver of any subsequent breach of
any obligation, agreement or covenant, nor shall any forbearance by the
Authority, the Bank or the Trustee to seek a remedy for any breach by the
Corporation be a waiver by the Authority, the Bank or the Trustee of its rights
and remedies with respect to any subsequent breach.
Section 6.07. Agreement to Pay Attorney's Fees and Expenses. In the event
the Corporation should default under any of the provisions of this Agreement and
the Authority, the Bank or the Trustee (in its own name or in the name and on
behalf of the Authority) should employ attorneys or incur other expenses for the
collection of the payments required hereunder or the enforcement of performance
or observance of any obligation or agreement on the part of the Corporation
herein contained, the Corporation will, on demand therefor, pay to the Authority
or the Trustee (as the case may be) the reasonable fee of such attorneys and
such other reasonable expenses so incurred.
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ARTICLE VII
MISCELLANEOUS
Section 7.01. Representations and Special Covenants of Authority. The
Authority represents, warrants and agrees that:
(a) It is a public body corporate and politic constituting an
instrumentality of the Commonwealth and is authorized under the Act to enter
into the transactions contemplated by this Agreement and to carry out its
obligations hereunder. The Authority has duly authorized the execution and
delivery of this Agreement and all other Documents to which the Authority is a
party, and will do or cause to be done all things necessary to preserve and keep
such Documents in full force and effect. Each of the Documents to which the
Authority is a party constitutes the legal, valid and binding obligation of the
Authority, enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights heretofore and
hereafter enacted to the extent constitutionally applicable and except that its
enforcement may also be subject to the exercise of judicial discretion in
appropriate cases
(b) The execution and delivery by the Authority of the Bonds, this
Agreement, the Indenture and all other Documents to which it is a party and
compliance with the provisions of such instruments will not conflict with or
constitute a breach of, or default under, any indenture, commitment, agreement
or other instrument to which the Authority is a party or by which it is bound,
or, as presently construed, any constitutional or statutory provision, or rule,
regulation, ordinance, judgment, order or decree to which the Authority or any
of its property, is subject.
(c) There is no action, suit, proceeding, inquiry or investigation
at law or in equity, before or by any court, public board or body, pending or,
to the best of its knowledge, threatened against the Authority (nor is there any
basis therefor) (i) which in any way questions the powers of the Authority to
enter into this transaction, or the validity of the proceedings taken by the
Authority in connection with the issuance of the Bonds, (ii) wherein an
unfavorable decision, ruling or finding would materially adversely affect the
transaction contemplated by this Agreement, the Indenture or the Bonds or (iii)
which in any way would adversely affect the validity or enforceability of the
Bonds, this Agreement or the Indenture (or of any other instrument required or
contemplated for use in consummating the transactions contemplated thereby or
hereby).
(d) The Authority has full power and authority to execute and
deliver the Documents executed and delivered by the Authority, and to incur and
perform the obligations provided for therein, all of which have been duly
authorized by all proper and necessary action and all material governmental
licenses, authorizations, consents and approvals required in each case of and
for the Authority in connection with its obligation under the Documents have
been obtained. No consent or approval of any other person or public authority or
regulatory body is required as a condition to the validity or enforceability of
any of the Documents against the Authority, or if required the same has been
duly obtained.
Section 7.02. Assignment. The Corporation will not assign all or any part
of its obligations under this Agreement to another Person or Persons; provided
that the Corporation may assign all or a part of the Corporation's obligations
under this Agreement to another Person or Persons subject to the requirement
that (a) the assignee assumes in writing all of the obligations of the
Corporation, or in the case of an assignment of a part of the Corporation's
obligations under this Agreement, that portion of the obligations assigned,
under this
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Loan Agreement, Series 1997 Bonds Page 19
Unitel Video, Inc.
<PAGE>
Agreement; (b) there is delivered to the Trustee, the Authority and the Bank
prior to the consummation of such assignment an Opinion of Counsel to the effect
that such assignment is permitted hereunder and does not subject the interest
payable on the Bonds to United States income taxes or cause the Bonds to be
deemed "arbitrage bonds" within the meaning of Section 148 of the Code and the
regulations thereunder, and (c) there is delivered to the Trustee prior to the
consummation of such assignment written evidence from the Bank that it consents
to such assignment. Every assignee shall be bound by all of the covenants and
agreements of the Corporation herein. Upon satisfaction with the preconditions
to assignment contained in this Section 7.02 and the execution and delivery of
such documents as are reasonably necessary to effect such assignment, the
Corporation shall no longer be liable for such portion of its obligations under
this Agreement properly assigned to another Person or Persons.
Section 7.03. Term of Agreement. This Agreement shall remain in full force
and effect for a term commencing on the date of the issuance of the Bonds and
terminating at such time as there are no Bonds Outstanding under the provisions
of the Indenture; provided, however, that this Agreement and the obligation of
the Corporation to make payments pursuant to the provisions of Article IV hereof
shall continue following the discharge of the Bonds until such time as any
amounts due to the Internal Revenue Service for rebate required by the Indenture
and the Tax Regulatory Certificate and any other amounts due under this
Agreement have been satisfied.
Section 7.04. Notices. Except as otherwise provided in this Agreement, all
notices, directions, certificates, requests, requisitions and other
communications hereunder shall be in writing and shall be sufficiently given and
shall be deemed given when received following mailing, addressed as follows or
hand delivered to the following addresses:
If to the Authority:
Allegheny County Industrial Development Authority
400 Fort Pitt Commons
445 Fort Pitt Blvd.
Pittsburgh, Pennsylvania 15219
Attention: Authorities Manager
If to the Corporation:
Unitel Video, Inc.
555 West 57th Street, Suite 1240
New York, NY 10019
Attention: Chief Financial Officer
with a copy to:
Karen Ceil Lapidus, General Counsel
at the above address
If to the Trustee:
PNC Bank, National Association
One Oliver Plaza, 27th Floor
Pittsburgh, PA 15265
Attn: Corporate Trust Division
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Loan Agreement, Series 1997 Bonds Page 20
Unitel Video, Inc.
<PAGE>
If to the Initial Bank:
Bank of America
c/o Heller Financial, Inc.
500 Monroe Street
Chicago, IL 60661
Attn: Jerry Sepich
A copy of each notice, direction, certificate, request or other communication
given hereunder to the Authority, the Corporation or the Trustee shall also be
given to the others. Any of the foregoing may, by notice given hereunder,
designate any further or different addresses to which subsequent notices,
directions, certificates, requests or other communications shall be sent.
Section 7.05. Parties in Interest. This Agreement shall inure to the
benefit of the Authority, the Corporation, the Trustee and their respective
successors and assigns, and shall be binding upon the Authority, the Corporation
and their respective successors and assigns, and no other Person, other than the
Trustee, the Authority, the Bondholders and the Bank and their respective
successors and assigns, shall have any right, remedy or claim under or by reason
of this Agreement; provided, however, that, except as provided in the Act,
neither the Authority, the County, the Commonwealth nor any political
subdivision thereof shall be liable for the payment of the principal of or
interest on the Bonds or for the performance of any pledge, mortgage, obligation
or agreement created by or arising out of this Agreement or the issuance of the
Bonds, except as specifically provided herein, and, further, that neither the
Bonds nor any such obligation or agreement of the Authority shall be construed
to constitute an indebtedness of the Authority, the County, the Commonwealth or
any political subdivision thereof or a charge against their general credit or
taxing powers within the meaning of any constitutional or statutory provisions
whatsoever, but shall be limited obligations of the Authority payable solely out
of the Trust Estate, including the revenues derived from this Agreement, or from
the sale of the Bonds or income earned on invested funds, as provided herein and
in the Indenture. It is further understood and agreed by the Corporation, that
the Authority shall incur no pecuniary liability hereunder, and shall not be
liable for any expenses related hereto, including administrative expenses and
fees and disbursements of Bond Counsel retained in connection therewith, all of
which expenses the Corporation has agreed to pay. The Authority has no taxing
power.
Section 7.06. Survival of Covenants, Conditions and Representations.
Notwithstanding anything herein to the contrary, all covenants, conditions and
representations of the Corporation and the Authority contained herein which, by
nature, impliedly or expressly involve performance in any particular manner
after the settlement pursuant to Article III or which cannot be ascertained to
have been performed until after the said settlement shall survive said
settlement.
Section 7.07. Amendments.
(a) Except for the amendments provided for by Section 7.07(b)
hereof, this Agreement may not be amended except in accordance with and to give
effect to Article XI of the Indenture as evidenced by an instrument in writing
signed by the parties.
(b) Section 5.06(d) hereof concerning the Corporation's obligation
to comply with the rebate requirements of Section 148(f) of the Code, may be
amended by an instrument in writing signed by the parties hereto in the event
that the Corporation delivers to the Trustee an Officer's Certificate
accompanied by an Opinion of Counsel addressed to the
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Loan Agreement, Series 1997 Bonds Page 21
Unitel Video, Inc.
<PAGE>
Trustee to the effect that amendments to such section are necessary or desirable
to comply with the provisions of Section 148(f) of the Code.
(c) The Corporation shall reimburse the Authority and the Trustee
for all reasonable costs and expenses, including, without limitation, reasonable
attorney's fees, paid or incurred by the Authority or the Trustee in connection
with any amendments or modifications of this Agreement or to the Indenture and
any document, instrument or agreement related hereto or thereto, and the
discussion, negotiation, preparation, approval, execution and delivery of any
and all documents necessary or desirable to effect such amendments or
modifications. A copy of any amendments shall be sent to the Rating Agency, if
any.
Section 7.08. Severability. If any clause, provision or section of this
Agreement shall be ruled invalid, illegal or unenforceable for any reason, the
invalidity of such clause, provision or section shall not affect any of the
remaining clauses, provisions or sections hereof, and this Agreement shall be
construed as if such clause, provision or section had not been contained herein.
Section 7.09. Counterparts. This Agreement may be executed in several
counterparts, any or all of which shall constitute one and the same instrument.
Section 7.10. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth.
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Loan Agreement, Series 1997 Bonds Page 22
Unitel Video, Inc.
<PAGE>
IN WITNESS WHEREOF, the ALLEGHENY COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
and UNITEL VIDEO, INC. have caused this Loan Agreement to be duly executed as of
the day and year first above written.
ATTEST: ALLEGHENY COUNTY INDUSTRIAL DEVELOPMENT
AUTHORITY
By: /s/ Gregg Bernaciak By: /s/ James M. Edwards
--------------------------- -------------------------------
Authorized Designate Chairman
ATTEST: UNITEL VIDEO, INC.
By: /s/ Karen Ceil Lapidus By: /s/George Horowitz
--------------------------- -------------------------------
Authorized Officer Authorized Officer
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Loan Agreement, Series 1997 Bonds
Unitel Video, Inc.
<PAGE>
Exhibit 4(N)
PLEDGE AGREEMENT
dated as of
July 1, 1997
among
UNITEL VIDEO, INC.,
PNC BANK, NATIONAL ASSOCIATION,
as Escrow Agent
and
HELLER FINANCIAL, INC.,
as Agent
<PAGE>
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of July 1, 1997, among UNITEL VIDEO, INC.
(the "Pledgor"), PNC BANK, NATIONAL ASSOCIATION, as escrow agent (in its
capacity as such, the "Escrow Agent") and HELLER FINANCIAL, INC., as agent
("Agent") for the financial institutions party to the Credit Agreement (as
hereafter defined) ("Heller).
W I T N E S S E T H :
WHEREAS, the Pledgor has requested the Allegheny County Industrial
Development Authority (the "Issuer") to issue and sell $5,000,000 aggregate
principal amount of its Variable Rate Demand Revenue Bonds (Unitel Mobile Video
Project) Series 1997, issued pursuant to a Trust Indenture, dated as of Jlu 1,
1997 (the "Indenture") between the Issuer and PNC Bank, National Association, as
Trustee (in its capacity as such, the "Trustee"), and to lend the principal
amount of the Bonds to the Pledgor pursuant to a Loan Agreement, dated as of
July 1, 1997 (the "Loan Agreement") between the Issuer and the Pledgor;
WHEREAS, in order to provide for payment when due of the principal
of, and interest on, the Bonds, and to provide for the payment of the purchase
price of Bonds tendered or required to be tendered pursuant to the Indenture,
the Pledgor, pursuant to a Reimbursement Agreement (the "Reimbursement
Agreement"), dated as of July 1, 1997, between the Pledgor and Agent, has
requested Agent to cause Bank of America (the "Letter of Credit Bank') to issue
a letter of credit (the "Letter of Credit"), in the initial amount of
$5,080,547.95 to support payments of principal of, and interest on, the Bonds
and the purchase price of Bonds so tendered or required to be tendered; and
WHEREAS, the Pledgor, to induce Agent to enter into the
Reimbursement Agreement and to cause the Letter of Credit Bank to issue the
Letter of Credit, is willing to pledge the Collateral (as herein defined) and to
enter into this Agreement.
NOW, THEREFORE, the Pledgor, the Escrow Agent and Agent hereby agree
as follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in
the Reimbursement Agreement and the Indenture shall have the respective meanings
assigned to such terms when used herein.
2. Registration and Beneficial Ownership of Specified Bonds.
Promptly following the Letter of Credit Bank's honoring any Tender Drawing under
the Letter of Credit, the Escrow Agent in its capacity as Tender Agent under the
Indenture will, in accordance with the provisions of Section 508(a)(iii) of the
Indenture (i) register Bonds purchased with the proceeds of such drawing and not
remarketed (the "Specified Bonds") in the name of Agent or (ii) cause to be
indicated on its records Agent's beneficial ownership of the Specified Bonds.
3. Pledge. Each delivery to the Escrow Agent of Bonds pursuant to
Section 2 hereof shall constitute, without further act or deed of any kind, the
pledge, assignment, hypothecation and transfer to Agent of all of the Pledgor's
right, title and interest in and to such Bonds (hereinafter referred to as the
"Pledged Bonds"), and the Pledgor hereby grants to Agent, for the ratable
benefit of Lenders, a first lien on, and security interest in, its right, title
and interest in and to the Pledged Bonds, the interest thereon and all proceeds
thereof, as collateral security for the prompt and complete payment when due
from time to time by the Pledgor (upon acceleration, at stated maturity or
otherwise) of all amounts payable from time to time by the Pledgor to Agent
under the Reimbursement Agreement, the Indenture and hereunder, including all
amounts reinstated as a result of any rescission or other restoration or return
of any payment upon the insolvency, bankruptcy or reorganization of the Pledgor
(all the foregoing being hereinafter referred to as the "Obligations").
4. Interest on the Pledged Bonds. All interest payable to Agent in
respect of Pledged Bonds shall be paid by the Pledgor or the Escrow Agent, in
accordance with the provisions of Section 2.02(a) of the Indenture, by wire
transfer to the account of Agent and shall be credited first against the
obligation of the Pledgor
<PAGE>
to pay interest to Agent under the Reimbursement Agreement and applied by Agent
to the payment of such interest and thereafter to the payment of other
Obligations in such order as Agent shall, in its sole discretion, determine.
5. The Collateral. All Pledged Bonds pledged to Agent hereunder and
all interest thereon and the proceeds of any or all thereof are herein
collectively sometimes referred to as the "Collateral."
6. Release of Pledged Bonds. Pledged Bonds shall not be released by
the Escrow Agent except as provided in this Section 6 and Section 509(b)(iii) of
the Indenture. If the Escrow Agent has received (a) written notice from Agent
that the Pledgor has made or caused to be made a payment or prepayment of its
principal obligations with respect to a Tender Advance and interest accrued
thereon or (b) written notice from Agent that the Letter of Credit has been
reinstated by an amount equal to such Tender Advance, the Escrow Agent is hereby
directed to (x) release from the lien and security interest of this Agreement
Pledged Bonds the aggregate principal amount of which shall be equal to the
principal amount of such Tender Advance so repaid or prepaid (or of such
reinstatement, as the case may be), in either case as so notified to the Escrow
Agent, and (y) deliver such Pledged Bonds to the Tender Agent for transfer in
accordance with the written instructions of Pledgor or the Tender Agent. The
Escrow Agent is hereby authorized, for and on behalf of the Pledgor and Agent,
as their attorney-in-fact, to execute any endorsements, bond powers or such
other documents and to take such other actions as the Escrow Agent deems
appropriate to effect such release, delivery and transfer. Pledged Bonds so
released shall cease to be "Pledged Bonds" for purposes of this Agreement unless
and until the same are repledged to Agent pursuant hereto.
7. Rights of Agent. Agent shall not be liable for any failure to
collect or realize upon the Obligations or any collateral security or guaranty
therefor, or any part thereof, or for any delay in so doing, nor shall it be
under any obligation to take any action whatsoever with regard thereto. If an
Event of Default under the Reimbursement Agreement has occurred and is
continuing, Agent may thereafter without notice exercise all rights, privileges
or options pertaining to any Pledged Bonds as if it were the absolute owner
thereof, upon such terms and conditions as it may determine, all without
liability. Agent shall have no duty to exercise any of the aforesaid rights,
privileges or options and shall not be responsible for any failure to do so or
delay in so doing.
8. Remedies.
(a) General. In the event that any portion of the Obligations
has become due and payable (upon acceleration, at stated maturity or otherwise)
or upon any other Event of Default under the Reimbursement Agreement, Agent,
without demand of performance or other demand, advertisement or notice of any
kind (except the notice specified below of time and place of public or private
sale) to or upon the Pledgor or any other Person (all and each of which demands,
advertisements and/or notices are hereby expressly waived), may forthwith
collect, receive, appropriate and realize upon the Collateral, or any part
thereof, and/or may forthwith sell, assign, give an option or options to
purchase, contract to sell or otherwise dispose of and deliver said Collateral,
or any part thereof, in one or more lots at public or private sale or sales, at
any exchange, broker's board or at any of Agent's offices or elsewhere upon such
terms and conditions as it may deem advisable and at such prices as it may deem
best, for cash or on credit or for future delivery without assumption of any
credit risk, with the right to Agent, upon any such sale or sales, public or
private, to purchase the whole or any part of said Collateral so sold. The net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable costs and expenses of every kind
incurred therein or incidental to the care, safekeeping or otherwise of any and
all of the Collateral or in any way relating to the rights of Agent hereunder,
including reasonable attorneys' fees and disbursements, shall be applied first
to the satisfaction of the Obligations, the Pledgor remaining liable for any
deficiency remaining unpaid after such application, and only after so applying
such net proceeds and after the payment by Agent of any other amount required by
any provision of law, including, without limitation, Section 9-504(1)(c) of the
Uniform Commercial Code of the State of New York, need Agent account for the
surplus, if any, to the Pledgor. The Pledgor agrees that Agent need not give
more than ten (10) days' notice of the time and place of any public sale or of
the time after which a private sale or other intended disposition is to take
place and that such notice is reasonable notification of such matters. No
notification need be given to the Pledgor if it has signed after default a
statement renouncing or modifying any right to notification of sale or other
intended disposition. In addition to the rights and remedies granted to it in
this Agreement and in any other instrument or agreement securing, evidencing or
relating to any of the Obligations, Agent shall have the authority to exercise
all the rights and remedies of a secured party under the Uniform Commercial
Code. The Pledgor shall be liable for the deficiency if the
-2-
<PAGE>
proceeds of any sale or other disposition of the Collateral are insufficient to
pay all amounts to which Agent is entitled, and the fees and disbursements of
any attorneys employed by Agent to collect such deficiency.
(b) Additional Provisions Concerning Pledged Bonds.
(i) The Pledgor recognizes that Agent may not deem it
desirable to effect a public sale of any or all of the Pledged Bonds by reason
of certain prohibitions contained in the Securities Act of 1933, as amended (the
"Securities Act") and applicable state securities laws or otherwise, but may
deem it desirable to resort to one or more private sales thereof to a restricted
group of purchasers which will be obliged to agree, among other things, to
acquire such securities for their own account for investment and not with a view
to the distribution or resale thereof. The Pledgor acknowledges and agrees that
any such private sale may result in prices and other terms less favorable to the
seller than if such sale were a public sale, and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner; provided, the conduct of the sale is
otherwise commercially reasonable. Agent shall be under no obligation to delay a
sale of any of the Pledged Bonds for the period of time necessary to permit the
Issuer to register the Pledged Bonds for public sale under the Securities Act,
or under applicable state securities laws, even if the Issuer would agree to do
so.
(ii) The Pledgor further agrees to do or cause to be
done all such other acts and things as may be necessary to make such sale or
sales of any portion or all of the Pledged Bonds valid and binding and in
compliance with any and all applicable laws, regulations, orders, writs,
injunctions, decrees or awards of any and all courts, arbitrators or
governmental instrumentalities, domestic or foreign, having jurisdiction over
any such sale or sales, all at the Pledgor's expense. The Pledgor further agrees
that a breach of any of the covenants contained in this Section 8(b) will cause
irreparable injury to Agent and that Agent has no adequate remedy at law in
respect of such breach and, as a consequence, agrees that each and every
covenant contained in this Section 8(b) shall be specifically enforceable
against the Pledgor and the Pledgor hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants except for
a defense that no Event of Default has occurred. The Pledgor further
acknowledges the impossibility of ascertaining the amount of damages which would
be suffered by Agent by reason of a breach of any of such covenants and,
consequently, agrees that, if Agent shall sue for damages for breach, it shall
pay, as liquidated damages and not as a penalty, an amount equal to the
outstanding principal amount of the Pledged Bonds on the date Agent shall demand
compliance with this Section 8(b).
(c) Escrow Agent. The Escrow Agent shall have no
responsibility to assist Agent in any remedies pursuant to this Section 8 but
may (upon reasonable notice to Agent), and shall (upon the request of Agent),
deliver all Collateral held by it to Agent and thereafter have no further
liability hereunder.
9. Representations, Warranties and Covenants of the Pledgor. The
Pledgor represents and warrants that: (a) on the date of delivery to the Escrow
Agent of any Pledged Bonds, neither the Tender Agent nor any other Person (other
than Agent or the Escrow Agent on behalf of Agent) will have any right, title or
interest in and to the Pledged Bonds; (b) the Pledgor has, and on the date of
delivery to the Escrow Agent of any Pledged Bonds will have, full power,
authority and legal right to pledge all of its right, title and interest in and
to the Pledged Bonds pursuant to this Pledge Agreement; (c) on the date of
delivery thereof to the Escrow Agent the Pledged Bonds and the proceeds thereof
will not be subject to any prior pledge, lien, mortgage, hypothecation, security
interest, charge, option or encumbrance or to any agreement purporting to grant
to any third party a security interest in the property or assets of the Pledgor
which would include the Pledged Bonds; and (d) Agent has and will have a first
and prior perfected security interest in all Collateral delivered to, or held
by, Agent or the Escrow Agent or as provided in the Indenture, and no filing or
other action is necessary to preserve, perfect or protect such interest or the
priority thereof. The Pledgor covenants and agrees that it will defend Agent's
and the Escrow Agent's right, title and security interest in and to the Pledged
Bonds, the interest thereon and the proceeds thereof against the claims and
demands of all Persons whomsoever; and covenants and agrees that it will have
like title to and right to pledge any other property at any time hereafter
pledged to Agent as Collateral hereunder and will likewise defend Agent's and
the Escrow Agent's right thereto and security interest therein.
-3-
<PAGE>
10. No Disposition by the Pledgor. Except as contemplated herein,
without the prior written consent of Agent, the Pledgor agrees that it will not
sell, assign, transfer, exchange, or otherwise dispose of, or grant any option
with respect to, the Collateral, nor will it create, incur or permit to exist
any pledge, lien, mortgage, hypothecation, security interest, charge, option or
any other encumbrance with respect to any of the Collateral, or any interest
therein, or any proceeds thereof, except for the lien and security interest
provided for by this Pledge Agreement or created pursuant to any Related
Document.
11. Disposition of Collateral by Agent. The Pledgor further agrees
to do or cause to be done all such other reasonable acts and things as may be
necessary to make any disposition of any portion or all of the Collateral
permitted by this Agreement valid and binding and in compliance with any and all
applicable laws, regulations, orders, writs, injunctions, decrees or awards of
any and all courts, arbitrators or governmental instrumentalities, domestic or
foreign, having jurisdiction over any such disposition or sale, all at such
Pledgor's expense.
12. Further Assurances. The Pledgor agrees that at any time and from
time to time upon the written request of Agent or the Escrow Agent, the Pledgor
will execute and deliver such further documents and do such further acts and
things as Agent or the Escrow Agent may reasonably request in order to effect
the purposes of this Agreement.
13. The Escrow Agent.
(a) The Escrow Agent may rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper party or parties.
(b) Any request, direction, order or demand of Agent shall be
sufficiently evidenced by an instrument signed in the name of Agent by one who
purports to be an officer thereof.
(c) The Escrow Agent may consult with counsel and the advice
of such counsel or any opinion of counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in accordance with such advice or opinion of
counsel.
(d) The Escrow Agent shall be under no obligation to assist
Agent in the exercise of any of the rights or powers vested in it pursuant to
Section 8 hereof under circumstances which, in the reasonable judgment of the
Escrow Agent, may subject the Escrow Agent to pecuniary liability unless Agent
shall have offered to the Escrow Agent reasonable security or indemnity against
the costs, expenses and liabilities which might be incurred therein or thereby.
The Pledgor agrees to promptly reimburse Agent for all reasonable costs, fees,
expenses or liabilities incurred in connection with providing any such security
or indemnity.
(e) The Escrow Agent shall not be liable for any action taken
by it in good faith and believed by it to be authorized or within the discretion
or rights or powers conferred upon it pursuant hereto.
(f) The Escrow Agent may perform any duties hereunder either
directly or by or through agents or attorneys, and the Escrow Agent shall not be
responsible for any misconduct or negligence on the part of any agent or
attorney appointed with due care by it hereunder.
(g) The Escrow Agent shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, advice, opinion, report, notice, request, direction,
consent, order, bond, or other paper or document, but the Escrow Agent, in its
discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit.
(h) The Escrow Agent makes no representation as to the
validity or sufficiency of this Agreement or the Collateral or otherwise.
-4-
<PAGE>
(i) The Escrow Agent in its individual or any capacity, may
become the owner or pledgee of Bonds and may otherwise engage in transactions
with, and collect obligations owing to it by, the Pledgor with the same rights
it would have if it were not Escrow Agent.
(j) The Pledgor covenants to indemnify the Escrow Agent for,
and to hold it harmless against, any loss, liability or expense incurred without
gross negligence or willful misconduct on the part of the Escrow Agent arising
out of or in connection with the acceptance of administration of this Agreement
and its duties hereunder, including the costs and expenses of defending itself
against any claim of liability in the premises (except any liability incurred
with gross negligence or willful misconduct on the part of the Escrow Agent).
The obligations of the Pledgor hereunder shall survive payment of the Bonds and
termination of the Agreement and shall be entitled to a prior lien on the
Collateral.
(k) It is understood and agreed that should any dispute arise
with respect to the payment and/or ownership or right of possession of the
Collateral, the Escrow Agent is authorized and directed to retain in its
possession, without liability to anyone, all or any part of said Collateral
until such dispute shall have been settled either by mutual agreement by the
parties concerned or by the final order, decree or judgment of a court or other
tribunal of competent jurisdiction in the United States of America and time for
appeal has expired and no appeal has been perfected, but the Escrow Agent shall
be under no duty whatsoever to institute or defend any such proceedings.
(l) The Escrow Agent may resign at any time by giving written
notice thereof to other parties hereto, but such resignation shall not become
effective until a successor Escrow Agent shall have been appointed and shall
have accepted such appointment in writing. If an instrument of acceptance by a
successor Escrow Agent shall not have been delivered to the Escrow Agent within
30 days after the giving of such notice of resignation, the resigning Escrow
Agent may petition any court of competent jurisdiction for the appointment of a
successor escrow agent. Any successor Escrow Agent shall promptly notify the
Trustee and the Agent of its succession hereunder and of its address for
purposes hereof.
14. 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 or any provision of the
Reimbursement Agreement or any Related Document, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
15. No Waiver; Cumulative Remedies. No act, delay or omission of
Agent or the Escrow Agent shall be deemed to be a waiver of any rights or
remedies granted hereunder and no waiver shall be valid unless in writing,
signed by Agent, and then only to the extent therein set forth. A waiver of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which Agent would otherwise have on any future occasion. No
failure to exercise or any delay in exercising on the part of Agent or the
Escrow Agent any right, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other right, power or privilege. The rights and
remedies herein provided are cumulative and may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.
16. Waivers, Amendments; Applicable Law. None of the terms or
provisions of this Agreement may be waived, altered, modified or amended except
by an instrument in writing, duly executed by the parties hereto. This Agreement
shall be governed by, and be construed and interpreted in accordance with, the
laws of the State of New York.
-5-
<PAGE>
17. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute but one
and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, all as of the day and year first above written.
The Agent: HELLER FINANCIAL, INC., as Agent
By:
-----------------------------
Title:
500 West Monroe
Chicago, Illinois 60661
Attn: HBC Portfolio Manager
Telecopy: (312) 441-7026
The Pledgor: UNITEL VIDEO, INC.
By: /s/ George Horowitz
-----------------------------
Title: CHIEF FINANCIAL OFFICER
555 West 57th Street
New York, New York 10019
Attn: Barry Knepper, President
Telecopy: (212) 581-7748
The Escrow Agent: PNC BANK, NATIONAL ASSOCIATION
By: /s/ Richard Ranii
-----------------------------
Title: Vice President
One Oliver Plaza, 27th Floor
Pittsburgh, Pennsylvania 15265
Attn: Corporate Trust Division
Telecopy: (412) 762-8226
<PAGE>
17. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute but one
and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, all as of the day and year first above written.
The Agent: HELLER FINANCIAL, INC., as Agent
By: /s/ Jerome P. Sepich
-----------------------------
Title: Vice President
500 West Monroe
Chicago, Illinois 60661
Attn: HBC Portfolio Manager
Telecopy: (312) 441-7026
The Pledgor: UNITEL VIDEO, INC.
By:
-----------------------------
Title:
555 West 57th Street
New York, New York 10019
Attn: Barry Knepper, President
Telecopy: (212) 581-7748
The Escrow Agent: PNC BANK, NATIONAL ASSOCIATION
By:
-----------------------------
Title:
One Oliver Plaza, 27th Floor
Pittsburgh, Pennsylvania 15265
Attn: Corporate Trust Division
Telecopy: (___) _________
<PAGE>
Exhibit 10(DD)
DEED OF LEASE
BETWEEN
OLYMBEC CONSTRUCTION INC.
(THE "LESSOR")
AND
UNITEL
(THE "LESSEE")
5584 Cote de Liesse Suite # 208, Town of Mount Royal, Quebec, H4P 1A9.
<PAGE>
TABLE OF CONTENTS
1. LEASED PREMISES .................................................... 1
2. TERM OF LEASE ...................................................... 1
3. INTENTION OF THE PARTIES ........................................... 1
3.1 RENT ............................................................... 2
3.2 FREE RENTAL ........................................................ 2
3.3 WATER TAX, BUSINESS TAX AND SURTAX ................................. 2
3.2.1 Taxes .............................................................. 3
3.2.2 Operating Expenses ................................................. 3
3.2.3 Charges ............................................................ 4
3.5 CONTEST OF TAXES AND ASSESSMENTS ................................... 5
4. USE OF PREMISES .................................................... 6
5. UTILITIES .......................................................... 6
6. MAINTENANCE AND REPAIRS ............................................ 6
7. SUBLETTING AND ASSIGNMENT .......................................... 6
8. ODOURS, DUST OR NOISE .............................................. 7
9. INSPECTION AND REPAIR, CHARGE, ADDITIONS, IMPROVEMENTS ............. 7
10. INSURANCE .......................................................... 8
11. IMPROVEMENTS AND ALTERATIONS BY LESSEE ............................. 9
12. DESERTION AND SURRENDER ............................................ 11
13. EXPIRATION OF LEASE ................................................ 11
14. COMPLIANCE WITH LAWS AND REGULATIONS ............................... 11
15. FAILURE OF LESSEE TO PERFORM ....................................... 12
16. RENT COLLECTION .................................................... 12
17. FURNISH STATEMENT .................................................. 12
18. DEFAULT ............................................................ 12
19. SIGNS .............................................................. 13
20. ENVIRONMENT ........................................................ 13
21. ASSIGNMENT OR HYPOTHECATION BY LESSOR .............................. 14
22. CONDITION OF PREMISES .............................................. 14
<PAGE>
23. WAIVER ............................................................. 14
24. NOTICES AND DEMANDS ................................................ 14
25. DESCRIPTIVE HEADINGS ............................................... 15
26. INTERPRETATION ..................................................... 15
27. CHANGES TO BE IN WRITING ........................................... 15
28. HEATING ............................................................ 15
29. EXPROPRIATION ...................................................... 15
30. EXTENSIONS ......................................................... 16
31. PERMITS, ETC ....................................................... 16
32. RULES AND REGULATIONS .............................................. 16
33. OUTSIDE AREAS & PARKING ............................................ 16
34. RENTAL TAX ("G.S.T/Q.S.T.") ........................................ 17
35. POST-DATED CHEQUES ................................................. 17
36. LESSORS LEGAL HYPOTHEC ............................................. 17
37. COMPENSATION, CLAIMS AND SET-OFF ................................... 17
38. LEASE ENTIRE AGREEMENT ............................................. 17
39. INDEMNIFICATION .................................................... 17
40. FORCE MAJEURE ...................................................... 18
41. SPECIAL CONDITIONS ................................................. 18
41.1 Security Deposit ................................................... 18
41.2 Lessor's Responsibility ............................................ 18
41.3 Improvements ....................................................... 18
41.4 Real Estate Broker ................................................. 19
42. LANGUAGE ........................................................... 19
<PAGE>
LEASE AGREEMENT
BETWEEN: OLYMBEC CONSTRUCTION INC., having its principal place of
business in the Province of Quebec at 5584 Cote de Liesse,
Suite 208, in the Town of Mount Royal, H4P 1A9. (hereinafter
called the "Lessor")
Of the first part,
AND: UNITEL, a corporation duly constituted and having a place of
business in the Province of Quebec, at 800 Rene Levesque
Blvd., Suite 1100, in the city of Montreal, H3B 1X9 herein
acting and represented by Brian Harty, its Vice President
and General Manager, duly authorized as he herein declares,
(hereinafter called the "Lessee")
Of the second part,
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. LEASED PREMISES
The Lessor hereby leases unto the Lessee and the Lessee hereby takes and accepts
the Premises, outlined on Schedule "A" attached hereto, having rentable area of
approximately EIGHT THOUSAND SQUARE FEET (8,000 square feet) (which includes an
allowance for service areas), representing 11.92% of the total rentable area of
the Building of which the Leased Premises (hereinafter the "Premises") forms
part of the Building owned by the Lessor, bearing Civic Number 3540 Griffith
Street, in the City of Saint-Laurent, Province of Quebec, H4T 1A7.
2. TERM OF LEASE
The term of this Lease shall be for a period of five (5) years and one (1)
month, and shall commence on the 1st day of June 1997 and shall terminate on the
30th day of June 2002, unless sooner terminated under the provisions hereof.
Lessee shall have occupancy of the Premises on June 1st, 1997 (hereinafter the
"Date of Occupancy").
3. INTENTION OF THE PARTIES
The Lessor and Lessee hereby agree that the term "net net" as herein applied is
intended to mean that the rent provided for herein shall be a net net rent to
the Lessor for the term of the Lease, and that the Lessee shall be responsible
during the term of the Lease for all costs, charges, expenses and outlays of any
nature whatsoever arising from or relating to the Premises, or the contents
thereof, excepting Lessor's income tax in respect of income received from
leasing the Premises and any payments made in connection with any mortgage or
mortgages affecting the Premises, and the Lessee shall pay all charges,
impositions, costs and expenses of every nature and kind relating to the
Premises.
3.1 RENT
Lessee covenants and agrees to pay to Lessor in lawful money of Canada without
deduction, abatement or set-off, the following rent:
<PAGE>
(i) for the period starting June 1, 1997 and terminating June 30, 2002, an
annual net net rental of $4.25 per square foot, plus G.S.T. and P.S.T.
(hereinafter referred to as the "minimum rental");
The minimum monthly rental shall be payable in advance on the first day of each
month.
In addition to the minimum monthly rental, Lessee shall have the obligation to
pay to Lessor in virtue of the terms and conditions of this present Lease the
following additional rental:
(i) Proportionate share of Taxes, the whole, as more fully defined in Article
3.2.1 of the present Lease;
(ii) Proportionate share of Operating Expenses, the whole, as more fully
defined in Article 3.2.2 of the present Lease;
(iii) All other sums that may be payable by Lessee in virtue of the terms and
conditions contained in the present Lease.
The rent as herein provided shall be paid to Lessor and/or its nominee at the
Office of the Lessor, 5584 Cote de Liesse, Suite: 208, Town of Mount Royal, Qc.,
or at such other place in Canada as shall be designated by Lessor in writing
to Lessee.
No tacit renewal - Should the Lessee continue to occupy the Premises after the
expiry of the term without a written agreement there shall be no tacit renewal
and the Lessee shall pay the Lessor rent and all other charges for the period of
occupancy as set out in this Lease plus fifty percent (50%) thereof, without
prejudice to such further damage claims as may be available to the Lessor
against Lessee. However, the Lessee does not have the right to such occupancy
beyond the expiry of the term.
3.2 FREE RENTAL
Notwithstanding the provisions contained in Article 3.1 of the Lease, there
shall be no minimum rental and no operating expenses payable by the Lessee for
the month of June 1997; however, during the free rental period Lessee shall be
responsible for surtax and utility charges.
3.3 WATER TAX, BUSINESS TAX AND SURTAX
The Lessee shall pay surtax, business taxes & water taxes which may be levied or
imposed upon the Premises during the said term, and also all other rates, taxes,
licenses, permits fees, public charges, duties, penalties, and all other legal
impositions of any kind which may be levied during the term of this Lease or any
renewal thereof against the Premises, the Lessee, the occupant or the property
or fixtures placed by the Lessee, or which are or may be payable by the Lessee
as the tenant and occupant of the premises under the provisions of the charter
and/or by-laws of the City of Montreal and of any other laws, whether provincial
or federal.
Should the mode of collecting taxes, surtax, business taxes or any other levies
or assessments be such that the Lessor shall be required to pay for the same,
the Lessee undertakes to repay the Lessor within seven (7) days of being called
upon to do so, the amount of the benefit derived from such payment by the
Lessor. In the event that the surtax is abolished then no abatement in the rent
shall apply and any other new taxes imposed shall be the sole responsibility of
the Lessee.
2
<PAGE>
3.2.1 Taxes
The Lessee shall be responsible for:
For the purpose of this Article:
(i) "real estate taxes" or "taxes" (hereinafter referred to as "taxes") means
all taxes, special or general, property taxes, municipal taxes, school
taxes, ecclesiastical taxes, Montreal Urban Community taxes, rates
including local improvement rates, duties and assessments that may be
levied, rated, charged or assessed against the Building and/or all
equipment and facilities thereon or therein, and/or the Land relating
thereto and/or any property on or in the Building owned or brought thereon
or therein by Lessor, by Lessee and any and every of its assignees or
sublessees, whether such taxes, rates, duties or assessments are charged
by a municipal, parliamentary, school, or any other body of competent
jurisdiction.
(ii) "proportionate share" means the proportion resulting from the percentage
obtained from the ratio between the total area of the Premises and the
total area of the Building.
Within thirty (30) days of receipt from the Lessor of a written statement of the
taxes set out in this paragraph, the Lessee will in each and every year during
the term of this Lease pay to the Lessor as additional rental, whether they be
special or general, its proportionate share of all taxes, property taxes,
municipal taxes, school taxes, ecclesiastical taxes, Montreal Urban Community
taxes, rates including local improvement rates, duties and assessments that may
be levied, rated, charged or assessed against the Building and/or all equipment
and facilities thereon or therein, and/or the Land relating thereto and/or any
property on or in the Building owned or brought thereon or therein by Lessor, by
Lessee and any and every of its assignees or sublessees, whether such taxes,
rates, duties or assessments are charged by a municipal, parliamentary, school,
or any other body of competent jurisdiction.
If the system of real estate taxation shall be altered or varied and any new tax
or levy shall be levied or imposed on the Building and/or the Land relating
thereto and/or the revenues therefrom and/or the Lessor in substitution for
and/or in addition to the real estate taxes presently levied or imposed on
immoveables in the City or Urban Community in which the Building and the said
Land are situated, then any such new tax or levy shall be included within the
definition of real estate taxes or taxes as contained in this Article and the
provisions of this paragraph shall apply mutatis mutandis. The said taxes,
property taxes, municipal taxes, school taxes, ecclesiastical taxes, Montreal
Urban Community taxes, rates including local improvement rates, duties and
assessments in respect of the first and last years of the term hereby leased
shall be adjusted between Lessor and Lessee.
3.2.2 Operating Expenses
The Lessee shall be responsible for:
For the purpose of this Article:
(i) "operating expenses" means any and all expenses incurred by the Lessor in
connection with the operation, cleaning, maintenance, or repair of the
Building and the Land, including, but without limiting the generality of
the foregoing: casualty, liability, rental and other insurance premiums;
repairs and replacements to, and maintenance, management and operation of
the Building and the Land and the systems and facilities serving the
Building and the Land; replacement and improvements relating to all common
areas forming part of the Building and the Land relating thereto,
including the parking areas, roadways, sidewalks; the heating and
air-conditioning systems serving the Building (except as charged to
tenants); roof
3
<PAGE>
repairs; window and brick repairs; snow removal; gardening; sprinkler
alarm costs and maintenance thereof; landscaping; repair and maintenance
of grounds; service of management fees and expenses; depreciation of
equipment used for management and maintenance of the Building; general
overhead; administrative expenses; legal and auditing fees with regard to
administration and operation of the Building and Land; total or partial
remuneration of all personnel, including management, supervisors and
salaried employees responsible for the maintenance, cleaning, management
and administration of the Building and Land, including all employer
contributions for employment insurance, C.S.S.T. premiums, pension
premiums, vacation pay and premiums; and all other costs incurred in the
administration, repairs and maintenance of the Building and Land; provided
that operating expenses shall not include repairs or replacements
occasioned by structural defects or structural weaknesses; and an
administrative fee equal to five percent (5%) of the aggregate of the
surtaxes, charges (as hereinafter defined) and minimum monthly rentals.
(ii) "proportionate share" means the proportion resulting from the percentage
obtained from the ratio between the total area of the Premises and the
total area of the Building.
The Lessee will in each and every year during the term of this Lease pay to the
Lessor as additional rental operating expenses as hereinabove defined.
3.2.3 Charges
For the purpose of this Article:
(i) "charges" means the aggregate of all taxes and operating expenses incurred
by the Lessor with respect to the Building and the Land relating thereto
in the year in question.
(ii) "proportionate share" means the proportion resulting from the percentage
obtained from the ratio between the total area of the Premises and the
total area of the Building.
Notwithstanding anything to the contrary herein contained, the Lessor may, prior
to the commencement of each year, or so soon thereafter as is reasonably
possible, furnish to the Lessee an estimate of the charges as is herein defined
for such year; and the Lessee shall pay to the Lessor on the first day of each
month in advance during the year, additional rental equal to one twelfth (1/12)
of the Lessee's share of the estimated charges. Should the first year of the
term not commence on the first day of January, or should the last year of the
term not terminate on the 31st day of December, then prior to the commencement
of the term, or of the last year of the term, as the case may be, or as soon
thereafter as is reasonably possible, the Lessor shall furnish to the Lessee an
estimate of the charges for the part of the year in question; and the Lessee
shall pay to the Lessor on the first day of each month in advance during the
part of the year in question forming part of the term, additional rental equal
to the Lessee's share of the estimated charges divided by the number of months
during the part of the year in question.
After the end of the year, or after the end of the term, in the case of the
final year, the Lessor shall furnish the Lessee with a financial statement
setting forth the actual charges for such year (or part of the year, as the case
may be) and the Lessee shall pay to the Lessor forthwith an amount equal to its
share of the excess of the actual charges over the estimated charges. Should the
estimated charges exceed the actual charges, the Lessee shall receive credit for
its share of the excess. The appropriate adjustments shall be made between the
parties hereto within thirty days after the date on which the Lessor has
furnished the Lessee with such statement.
4
<PAGE>
Upon final determination of the actual amounts payable by Lessee the parties
shall adjust any difference between the estimated amounts so paid and the actual
amounts payable.
3.3 Upon any termination of this Lease as a condition precedant to being
permitted by Lessor to vacate the Premises, Lessee shall, in addition to all
other amounts as it is obliged to pay hereunder, pay to Lessor such amount as is
estimated by Lessor to represent that portion of the aggregate amount of taxes
and operating expenses payable and to become payable by Lessee in virtue of this
present Lease, as had not yet been paid.
3.4 Operating Expenses, Taxes and Surtax 1997
3.4.1 The operating expenses and taxes for 1997 to be paid by the Lessee are
estimated to be $1.35 per square foot, plus G.S.T. and P.S.T.
3.4.2 The surtax for 1997 to be paid by the Lessee is estimated to be $0.65 per
square foot, plus G.S.T. and P.S.T.
3.5 CONTEST OF TAXES AND ASSESSMENTS
Lessee shall not be in default hereunder in respect of the payment of any tax,
rate, charge, assessment, duty or license fee which Lessee is required by any
provision hereof to pay so long as Lessee shall in good faith contest at its own
expense the same by appropriate proceedings to prevent the collection thereof;
Lessee may file in the name of Lessor, with Lessor's consent, which consent
shall not be withheld unreasonably, or in the name of Lessee, all protests or
other instruments and institute and prosecute proceedings for the purpose of
such contest and Lessor agrees to execute, on the request of Lessee and at
Lessee's expense, all necessary deeds and documents for the purpose of such
contest. In the event of any such contest, Lessee shall, at the request of
Lessor, deposit with Lessor an amount sufficient, in the opinion of Lessor, to
fully secure the payment of such tax, rate, charge, assessment, duty or license
fee together with any interest, fine or penalty and to prevent the sale or
seizure of the Premises by reason of nonpayment. If at any time during the
pendency of any such contest, it shall be, in Lessor's sole judgement, necessary
or proper to prevent the sale or seizure of the Premises or any part thereof, or
to prevent the sale or seizure of the Premises by the holder of any lien, prior
right or charge of any mortgage or hypothec affecting the Premises by virtue of
the nonpayment of such tax, rate, charge, assessment, duty or license fee, or if
such nonpayment shall constitute a default under the terms of any such lien,
prior right, charge, mortgage or hypothec Lessor may, after written notice to
Lessee, apply the sums so deposited or so much thereof as may be required to
prevent such default. If the amount so deposited as aforesaid shall exceed the
amount of such payment the excess shall be returned to Lessee, or in case there
shall be any deficiency, the amount of such deficiency shall be promptly paid by
Lessee to Lessor and if not so paid, shall be forthwith collectible as
additional rental. Notwithstanding the foregoing, Lessor shall have the right to
contest the taxes levied against the Building and the Land relating thereto and
then Lessee shall contribute to the reasonable legal costs of such contestation
in the proportion that the area of the Premises bears to the total leasable area
of the Building of which the Premises form part. The Lessee shall receive the
benefits in the same proportion of Lessor's successful contestation.
Lessor shall have no obligation to contest, object to or litigate the levying or
imposition of any real estate taxes and may settle, compromise, consent to,
waive or otherwise determine in its discretion any real estate taxes without
notice to, consent or approval of Lessee.
Nothing contained in this Article shall be construed at any time so as to reduce
the monthly installments of rent payable under the provisions of the present
Lease.
5
<PAGE>
4. USE OF PREMISES
The Premises shall be used for general offices and repairs of equipment, and for
no other purpose whatsoever. Lessee shall upon commencement date and throughout
the term of the Lease, be open for business with adequate staff and equipment
and shall continuously, actively and diligently operate and conduct business on
the whole of the Premises in an up-to-date and reputable manner. Lessee will
conduct its business in the Premises in good faith during normal business hours.
5. UTILITIES
The Lessee shall pay for its electricity consumed in the Premises (electricity
includes, without limitation any electricity used for heating and/or air
conditioning the Premises). Lessee shall also pay for its water, heat, gas,
telephone and all public utilities with respect to the Premises.
6. MAINTENANCE AND REPAIRS
Notwithstanding the provisions of Articles 1854 and 1864 of the Quebec Civil
Code, the Lessee, at its own expense shall operate, maintain and keep the
Premises including all facilities, equipment and services, both inside and
outside, available to the Lessee exclusively in such good order and condition
both inside and outside, as they would be kept by a careful owner and shall
promptly make all needed repairs and replacements to the Premises (save and
except for repairs caused by structural weaknesses and latent defects or
negligent acts or omissions of the Lessor or of others for whom the Lessor is in
law responsible) which a careful owner would make, including without
limitations, broken glass (regardless of how it was broken), the water, gas,
drain and sewer connections, pipes and mains, electrical wiring, water closets,
sinks and accessories thereof, the heating system, the air-conditioning system,
if any, and all equipment belonging to or connected with the Premises or used in
its operation.
The Lessee shall furthermore pay the cost of the expense required to keep the
exterior of the Building in good order and condition and to keep the sidewalks,
curbs, lawns and grounds in and about the Building in good condition, clean and
free of snow and ice. Such cost is included in the operating expenses.
7. SUBLETTING AND ASSIGNMENT
It is agreed between the parties herein, that in the event the Lessee herein
desires to assign or sublet the Premises herein or any part therof, it shall
give to the Lessor a thirty (30) day written notice of its intention to sublet
during which time the Lessor shall have the option to cancel the Lease is Lessee
indicates its intention to sublet the entire Premises or that part which the
Lessee desires to sublet. However, in the event the Lessor fails to respond
during the said thirty (30) day period, the Lessee shall then have the right to
sublet the Premises or part thereof sublet to the following:
The Lessee shall have the right to assign the Lease or sublet the Premises or
any part thereof subject to the Lessee obtaining the prior written consent of
the Lessor, which consent shall not be unreasonably withheld. The Lessee shall
submit to the Lessor in its notice to sublet the name of the proposed assignee
or sublessee at least five (5) clear business days prior to the date upon which
the Lessee desires to assign or sub-let the Premises or part thereof. In the
event of any such assignment or subletting, the Lessee shall remain jointly and
severally responsible with any such sublessee of all other terms, clauses and
conditions of the contemplated lease, waiving the benefit of division and
discussion.
6
<PAGE>
The Lessee may sublet the Premises or assign the Lease to a parent, subsidiary
or affiliate company without seeking the consent of the Lessor provided,
however, that such sublessee or assignee shall remain bound jointly and
severally (solidarily) with the Lessee for all the terms and covenants of this
Lease and provided further that Lessee shall notify Lessor in writing prior to
such sublet or assignment.
8. ODOURS, DUST OR NOISE
Lessee warrants that no noxious odors, dust or noise will emanate from the
Premises as a result of the operations conducted by the Lessee thereon.
Accordingly, the Lessee agrees that should such odor, dust or noise conditions
exist, it will at its own cost and expense take such steps as may be necessary
to rectify the same, and such steps may include the installation of equipment,
which installation and purchase of equipment shall be at the cost and expense of
the Lessee, and which equipment must be in conformity with provincial
legislation and regulations and municipal by-laws and regulations. However, if
the Lessee shall fail to commence the rectification of the situation within
seven (7) days of receipt of written notice and complete the same within a
reasonable time after notice is received by the Lessee from the Lessor, then the
Lessor may at its option proceed forthwith to take reasonable measures to
correct the situation (which reasonable measures shall not include the
installation or purchase of equipment as hereinabove mentionned), and the Lessor
shall be entitled to recover the cost thereof from the Lessee forthwith upon
demand, such cost to be considered as additional rental hereunder or declare
this Lease null and void, terminated and no longer binding the parties. These
recourses may be cumulative at the option of the Lessor.
9. INSPECTION AND REPAIR, CHARGE, ADDITIONS, IMPROVEMENTS
Lessor and its agent shall have the right, at all reasonable business hours,
Monday to Friday, during the term of this Lease to enter the Premises to examine
the condition thereof and to regulate, repair, install electrical, plumbing or
otherwise, and to ascertain whether Lessee is performing its obligations
hereunder, and Lessee shall make any repairs which Lessee is obliged to make
pursuant to the terms of this Lease. In the case of an emergency, the Lessor
shall have the right to enter the Premises at any time.
If Lessee fails to make any such repairs within thirty (30) days after written
notice from Lessor requesting Lessee to do so, provided that such repairs may
reasonably be made within the said period, Lessor may, without prejudice to any
other rights or remedies it may have, make such repairs and charge the
reasonable cost thereof to Lessee.
Nothing in this Lease shall be construed to obligate or require Lessor to make
any repairs for which the Lessee is responsible hereunder but Lessor shall have
the right at any time to make emergency repairs without prior notice to Lessee
and charge the reasonable cost thereof to Lessee. Any costs chargeable to Lessee
hereunder shall be payable forthwith on written demand as additional rental and
shall bear interest at the rate of four percent (4%) above the prime rate as set
by the Royal Bank of Canada from the date of such written demand, or twenty-four
percent (24%) per annum, whichever is the greater. Moreover, Lessor may, but
shall not be obliged, to make any repairs of an urgent nature without prior
notice to Lessee, provided that the Lessor advises the Lessee thereof as soon as
is reasonably possible thereafter, but for the account of Lessee and shall
charge all reasonable costs to Lessee which costs shall be payable forthwith to
Lessor on written demand as additional rental and shall bear interest in the
manner hereinbefore provided.
In addition to the foregoing, Lessor shall have the right to install and
maintain in the Premises whatever is reasonable, useful or necessary for the
equipment, use and convenience of the Building or other tenants, and Lessee
shall have no claim against Lessor in respect thereof provided that same does
not interfere with Lessee's enjoyment of the premises.
7
<PAGE>
10. INSURANCE
During the whole of the said term, the Lessee will pay as additional rental all
premiums with respect to insurance to be placed by Lessor at competitive rates,
which premiums are included in the operating expenses herein, and described as
follows:
(i) Fire, Extended Coverage and Malicious Damage insurance for the full
insurable value procurable at the time, of the Building, its improvements
and equipment and in addition upon the full annual rental income thereof;
(ii) Broad Boiler and Unfired Pressure Vessels insurance, including repair or
replacement and rental income coverage in an amount reasonably
satisfactory to Lessor;
(iii) Such other insurance as institutional lenders may require or as it may be
or may become customary for owners of property to carry as respects loss
of or damage to the Premises or liability arising therefrom, specifically
including any insurance required by reason of the introduction by or on
behalf of Lessee and/or its subtenants of any radioactive materials or
substances into the Premises or exposing them.
In the event of the failure of the parties hereto to agree on the
replacement value of the Building, its improvements and equipment, the
same shall be determined by an appraisal company to be agreed upon between
Lessor and Lessee, which has at least ten (10) years experience and the
cost of said appraisal shall be born equally by Lessor and Lessee.
Lessee will pay the amount of any increase in insurance premiums on the
whole of the Building of which the Premises form part if such increase is
caused by Lessee's operations in the Premises.
Lessee covenants that nothing will be done or omitted to be done whereby
any policy shall be cancelled or the Premises rendered uninsurable.
The Lessee shall, at its expense, procure and maintain at all times during the
continuance of this Lease, such insurance as will protect the Lessee and the
Lessor from any claim for personal injury including death, and for property
damage in any way arising out of or attributable to the exercise by the Lessee,
or others, of any of the privileges or rights herein granted. This insurance
shall provide a combined limit of two million dollars ($2,000,000.00) for
personal injury and property damage and shall extend to cover any liability
assumed by the Lessee under this Lease. The Lessee shall forward to the Lessor a
certificate of insurance and evidence of renewals thereof during the continuance
of this Lease. The Lessee hereby agrees and understands that the placing of such
insurance shall in no way relieve the Lessee from any obligation assumed under
this Lease. In the event of a forced entry into the Premises any damages caused
to the immoveable including but not limited to broken windows, walls and/or
roofs shall be the sole responsibility of the Lessee to repair or replace said
damage. If these repairs are not performed within a seventy-two hour period from
the time of the incident then the Lessor may at its option repair the damages
and charge the Lessee for the work including an administration fee of ten (10%)
percent due immediately.
Provided, and it is hereby expressly agreed that if and whenever during the term
hereby leased, the Premises shall be destroyed or damaged by fire, lightning or
tempest, or any of the perils insured against under the provisions of this
Article 10 or otherwise, then and in every such event:
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(a) If the damage or destruction is such that the Premises are rendered wholly
unfit for occupancy or it is impossible or unsafe to use and occupy them
and if in either event the damage cannot be repaired with reasonable
diligence within one hundred and eighty (180) days from the happening of
such damage or destruction, then Lessor may within five (5) days next
succeeding the destruction terminate this Lease by giving to the Lessee
notice in writing of such termination, in which event this Lease and the
term hereby leased shall cease and be at an end as of the date of such
destruction or damage and the rent and all other payments for which Lessee
is liable under the terms of this Lease shall be apportioned and paid in
full to the date of destruction or damage; in the event that Lessor does
not terminate this Lease, the Lessor shall repair the Premises with all
reasonable diligence and the minimum rental and additional rental hereby
reserved shall abate from the date of the happening of the damage until
the damage shall be made good to the extent of enabling Lessee to use and
occupy the Premises plus an additional thirty (30) day period to permit
the Lessee to refixture the Premises.
(b) If the damage be such that the Premises are wholly unfit for occupancy, or
if it is impossible or unsafe to use or occupy them, but if in either
event the damage can be repaired with reasonable diligence within one
hundred and eighty (180) days of the happening of such damage, then the
minimum rental and additional rental hereby reserved shall abate from the
date of the happening of such damage until the damage shall be made good
to the extent of enabling Lessee to use and occupy the Premises plus an
additional thirty (30) day period to permit the Lessee to refixture the
Premises and Lessor shall repair the damage with all reasonable speed.
(c) If, the damage can be made good as aforesaid, within one hundred and
eighty (180) days of the happening of such destruction or damage and the
damage is such that the Premises are capable of being partially used for
the purposes for which they are hereby leased, then until such damage has
been repaired the minimum rental and additional rental shall abate in the
proportion that the part of the Premises rendered unfit for occupancy
bears to the whole of the Premises and Lessor shall repair the damage with
all reasonable speed.
Notwithstanding the above, should the Building and/or Premises be totally
destroyed then Lessor shall have the right to relocate Lessee in comparable
space in the vicinity of the Building within a reasonable time period but in no
case later than the dates mentioned above.
11. IMPROVEMENTS AND ALTERATIONS BY LESSEE
The Lessee shall have the right to make at its own expense, only with the prior
written consent of the Lessor, which consent shall not be unreasonably withheld,
additions, alterations and changes in the Premises (hereinafter referred to as
the "work"), provided the following conditions are complied with:
(i) Lessee shall furnish to Lessor plans and specifications showing in
reasonably complete detail the work proposed to be carried out and the
estimated cost thereof and Lessor shall approve or reject such plans and
specifications within thirty (30) days after receipt of the same. If such
plans and specifications are approved, all work shall be carried out in
compliance with the same;
(ii) Lessee shall obtain, at its own expense, all necessary permits and
authorizations from the governmental authorities having jurisdiction over
such work;
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(iii) Lessee shall provide general comprehensive liability insurance for the
mutual benefit of the Lessor and the Lessee expressly covering hazards
due to such work, either by issuance of separate policies or endorsements
to policies otherwise required to be maintained by the Lessee under this
Lease. Such insurance shall name the Lessor as the insured and shall
furthermore stipulate that the policy shall not be cancelled without a
prior 15 day written notice being sent by the insurer to the Lessor; the
Lessee undertakes to furnish written evidence to the Lessor as to its
compliance with the foregoing;
(iv) The value of the Premises shall not, as a result of the work proposed to
be carried on by Lessee, be less than the value of the Premises before
the commencement of such work and the Lessor shall be the sole judge of
such value;
(v) All work shall be carried out with reasonable dispatch and in a good
workmanlike manner and in compliance with all applicable permits,
authorizations and building and zoning bylaws and with all regulations
and requirements of all competent authorities having jurisdiction over
the Premises;
(vi) The Premises shall at all times be free of all conditional bills of sale,
pledges, legal construction hypothecs, prior rights, and other similar
liens and charges;
(vii) The Lessee shall obtain from each contractor, subcontractor, workman,
supplier of materials and architect for the work a complete waiver of
liens, and legal hypothecs which it might otherwise have or become
entitled to against the Building and/or Land;
(viii) If at any time during the construction or performance of such work any
legal hypothec or lien is placed on or filed against the Building and/or
the Land on account of work or materials furnished to or at the request
of the Lessee, the Lessee, shall within five (5) days after notice of the
filing of such lien or legal hypothec, cause same to be discharged by
payment, bonding or otherwise, provided same is to the satisfaction of
the Lessor. If the Lessee shall fail to have any such lien or legal
hypothec discharged within the said five (5) days, the Lessor may, but
shall not be obligated to, cause same to be discharged by payment, bond
or otherwise, the whole without prejudice to any other rights and
recourses available to the Lessor in the circumstances. Any amount paid
or expenses incurred by the Lessor in connection with the discharge of
such legal hypothec or lien by it shall be repaid to the Lessor by the
Lessee upon demand and will be treated by the Lessor as additional rental
under the present Lease;
(ix) If the cost of any work shall be in excess of five thousand dollars
($5,000.00) as reasonably estimated by Lessor, Lessor may require Lessee
to furnish security satisfactory to Lessor guaranteeing the completion of
the work and the payment of the cost thereof free and clear of all
conditional bills of sale, pledges, legal construction hypothecs, prior
rights, and other similar liens and charges;
(x) Lessee shall maintain Workmen's Compensation insurance covering all
persons employed in connection with the work and shall produce evidence
of such insurance to Lessor;
(xi) Lessor shall not, for any reason whatsoever, be liable for any damage
arising from or through any defects in the said work;
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(xii) All work, when completed, shall be comprised in, and form part of the
Premises and shall be subject to all the provisions of this Lease and
Lessee shall not have any right to claim compensation therefore and the
same shall not be removed by Lessee on termination of this Lease.
12. DESERTION AND SURRENDER
The Lessee shall not leave the Premises unoccupied or vacant during the term of
the Lease. Acceptance of the surrender of this Lease shall not be effective
unless made in writing and signed by the Lessor. Acceptance of the keys shall
not constitute acceptance of the desertion or surrender of the Premises.
13. EXPIRATION OF LEASE
Lessee shall at the expiration or sooner termination of the term of this Lease
peaceably surrender and yield up unto Lessor the Premises together with all
buildings, alterations or erections which at any time during the term hereof
shall be made therein or thereon in good repair and condition, subject to
reasonable wear and tear only. Such wear and tear excludes carpet wear from
caster chairs that have not been placed atop a plastic protective covering or
covering of equal purpose.
Notwithstanding the foregoing, at the termination of the Lease for whatever
reason, the Lessee shall, if so required by the Lessor, remove all or specified
additions, alterations and changes, and Lessee shall thereupon become obliged to
restore the Premises to their original condition, save for such additions,
alterations and changes as Lessor permits to remain, ordinary wear and tear
excepted. Should Lessee not be required to remove the whole or any part of such
additions, alterations and changes, they shall remain without any compensation
being allowed to the Lessee for same.
The Lessee shall at or prior to the expiration of the term hereof remove its
moveable fixtures or other moveable articles belonging to or brought upon the
Premises by the Lessee and the Lessee shall repair any damages caused by such
removal.
14. COMPLIANCE WITH LAWS AND REGULATIONS
The Lessee shall, at its own expense, promptly comply with the requirements of
every applicable statute, law and ordinance and with every applicable lawful
regulation or order with respect to the removal of any encroachment placed by
the Lessee, or to the condition, equipment, maintenance, or use or occupation of
the Premises, including the making of any alteration, addition in or to any
structure upon, connected with or appurtenant to the Premises, whether or not
such alteration be structural or be required on account of any particular use to
which the Premises or part thereof may be put and whether or not such
requirement, regulation or order be of a kind now existing or within the
contemplation of the parties hereto; and shall comply with any applicable
regulation, recommendation or order of the Canadian Fire Underwriters'
Association, or any body having similar functions or any liability or fire
insurance company by which the Lessor and/or the Lessee may be insured.
15. FAILURE OF LESSEE TO PERFORM
If Lessee fails to pay when due any taxes, rates, insurance premiums, charges or
debts which it owes or has herein covenanted to pay, Lessor may pay the same and
shall be entitled to charge to Lessee the sums so paid and the Lessee shall be
bound to pay them forthwith on written demand, as additional rental and Lessor,
in addition to any other rights, shall have the same remedies and may
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take the same steps for the recovery of all such sums as it might have and take
for the recovery of rent in arrears under the terms of this Lease; all arrears
of rent and any monies paid by Lessor hereunder shall bear interest at the rate
of four percent (4%) above the prime rate as set by the Royal Bank of Canada
from the date of such written demand, or twenty-four percent (24%) per annum,
whichever is greater. Moreover, Lessor may demand such sums from the Lessee
before payment by the Lessor, with interest at the rate charged by the Taxing
Authority or other creditor in question.
16. RENT COLLECTION
Should any rental payments under this Lease be unpaid for more than ten (10)
days, or cheques covering same be returned by the bank, Lessee agrees to remit a
further amount equivalent to fifteen percent (15.0%) of that late or returned
payment to cover Lessor's administrative costs. Such additional sums shall be
payable in addition to any judicial costs and fees which the Lessee is obliged
to pay to Lessor's attorneys and in addition to any damage for which the Lessee
may be liable to the Lessor. Such additional sums shall be deemed to be
additional rental and may be collected as such.
17. FURNISH STATEMENT
Lessee shall from time to time at the request of Lessor produce to Lessor
satisfactory evidence of the due payment by Lessee of all payments required to
be made by Lessee under this Lease.
18. DEFAULT
The following shall be considered defaults under the terms of this Lease:
(a) In the event that Lessee shall be in default under any provision of this
Lease providing for the payment of rent or additional rental, and such
default shall continue for ten (10) days after written notice thereof from
Lessor to Lessee; or
(b) In the event that Lessee shall be adjudicated a bankrupt or make any
general assignment for the benefit of creditors, or take or attempt to
take the benefit of any insolvency or bankruptcy legislation; or if a
receiver or trustee be appointed for the property of Lessee, or any part
thereof, or any execution be issued pursuant to a judgement rendered
against Lessee or pursuant to this Lease, or if the estate of Lessee
hereunder be transferred or pass to or devolve upon any other person or
corporation by operation of law; or
(c) In the event that Lessee shall be in default in observing any covenant
herein contained and/or performing any of its obligations contained in
this Lease (other than a default in the payment of rent or additional
rental) or should any prior claim or legal hypothec be registered or made
against the Premises as a result of any act or omission on the part of the
Lessee, or should the Lessee or any other person at any time during the
term of this Lease remove or try to remove from the Premises, without the
written consent of the Lessor, any of the moveable property of the Lessee,
except during the ordinary course of its activities or when replacement or
renovation work is being done, and should any such default continue for
fifteen (15) days after written notice specifying such default shall have
been given to Lessee by Lessor, unless such default is incapable of being
remedied with due diligence within such period of fifteen (15) days, in
which case Lessee shall be entitled to such reasonable extension of time
to enable such default to be remedied.
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In the event of any default under the terms of this Lease, the Lessor without
prejudice to any rights or remedies it may have hereunder or by law shall have
the right to terminate this Lease forthwith upon written notice given to Lessee
by Lessor. Lessee upon such a termination of this Lease shall thereupon quit and
surrender the Premises to Lessor. The Lessor, its agents and/or servants, may
immediately or at any time thereafter, re-enter the Premises and disposes
Lessee, and remove any and all persons and any or all property therefrom whether
by summary dispossession proceeding or by any suitable action or proceeding at
law. The exercise by the Lessor of any right it may have hereunder or by law
shall not preclude the exercise by the Lessor of any other right it may have
hereunder or by law.
In case of any termination resulting from a default of the Lessee pursuant to
the terms of this Lease, or in case Lessee in the absence of such termination
shall be dispossessed by or at the instance of Lessor in any lawful manner, rent
for the then current month and for the six (6) months next succeeding the date
of such termination or dispossession shall immediately become due and payable
and this Lease shall immediately, at the option of the Lessor become forfeited
and terminated, and the Lessor may, without notice or any form of legal
process, forthwith re-enter upon and take possession of the Premises and remove
the Lessee's effects therefrom, the whole without prejudice to and under reserve
of all of the rights and recourses of the Lessor to claim any and all losses and
damages sustained by the Lessor by reason of and arising from any default of the
Lessee.
19. SIGNS
Lessor
Lessor shall have the right at all times during the term of this Lease to place
upon the Land or Building a notice of reasonable dimensions and reasonably
placed so as not to interfere with the business of the Lessee, stating that the
Premises are for sale and for six (6) months prior to the termination of this
Lease, Lessor shall have the right to place upon the Premises a similar notice
that the Premises are for rent, and Lessee will not remove such notice or
knowingly permit same to be removed. Lessor shall have the right to exhibit the
Premises from time to time to any prospective mortgagee or purchaser or lessee
(in case of lessee, only six (6) months prior to the termination of the Lease)
during all reasonable business hours.
Lessee
The Lessee shall be entitled to install on the Premises such signs as are
normally installed in connection with its business, provided such signs comply
with municipal by-laws and are approved by the Lessor, which approval shall not
be unreasonably withheld. Installation, if approved, will be at the sole expense
of the Lessee. Any sign installed by the Lessee shall be maintained by it at its
own expense. At the termination of the Lease any sign installed by the Lessee
will be removed by Lessee, at its own cost, should Lessor request same.
20. ENVIRONMENT
The Lessee hereby declares and agrees as follows:
(a) that all activities carried on in the Premises shall conform to all laws
and regulations respecting the environment;
(b) that the property installed by the Lessee in the Premises shall be and
shall remain free of any contamination or damage to the environment;
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(c) that no complaint, suit, investigation or proceedings shall be taken
relating to the activities of the Lessee;
(d) that it shall inform the Lessor as soon as it becomes aware of any problem
relating to the environment;
(e) that it shall provide the Lessor with a copy of all its communications
with any government official concerning environmental issues and a copy of
all studies, reports or evaluations prepared by the Lessee, and in
addition the Lessee consents to letting the Lessor communicate with such
officials or appraisers and obtain information from them.
21. ASSIGNMENT OR HYPOTHECATION BY LESSOR
Lessor declares that it may hypothecate or assign its rights under this Lease to
a lending institution as collateral security for a loan to Lessor and in the
event that such a hypothec or assignment is given and executed by Lessor and
notification thereof is given to Lessee by or on behalf of Lessor, it is
expressly agreed between Lessor and Lessee that this Lease shall not be
cancelled or modified for any reason whatsoever without the consent in writing
of such lending institution. Lessee hereby covenants and agrees that it will
whenever reasonably required by Lessor and at Lessor's expense, consent to and
become a party to any instrument or instruments permitting a mortgage, trust
deed or hypothec to be placed on the Building and the Land relating thereto, or
any part thereof of which the Premises are a part and/or on the rents from same,
as security for any indebtedness covered by the said trust deed, mortgage or
hypothec in order to subordinate this Lease to the said trust deed, mortgage or
hypothec. However, no subordination by the Lessor shall have the effect of
permitting the holder of any trust deed, hypothec or mortgage to disturb the
Lessee's enjoyment of the Premises as long as the Lessee shall comply with the
covenants and agreements to be kept and performed by it under this Lease.
22. CONDITION OF PREMISES
The Lessee represents that it has examined and viewed the Premises and accepts
same in their present condition, save and except for the Improvements outlined
in Article 41.3 of the Lease.
23. WAIVER
The failure of either party hereto to insist upon a strict performance of any of
the agreements, terms, covenants and conditions hereof shall not be deemed a
waiver of any rights or remedies that such party may have and shall not be
deemed a waiver or subsequent breach or default in any such agreements, terms,
covenants and conditions.
24. NOTICES AND DEMANDS
Any notice or demand given by Lessor to Lessee or Lessee to Lessor shall be
deemed to be duly given if served upon Lessee or Lessor in accordance with the
Code of Civil Procedure of Quebec, or if mailed by prepaid registered mail to:
(a) LESSOR: (5584 Cote de Liesse Road Suite # 208, Town of
Mount Royal, Quebec, H4P 1A9)
(b) LESSEE: (at the Premises).
Either of the parties hereto may, by notice in writing to the other, change the
address to which any notice or demand intended for the party giving such notice
shall be addressed.
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25. DESCRIPTIVE HEADINGS
The descriptive headings of this Lease are inserted for convenience in reference
only and do not constitute a part of this Lease.
26. INTERPRETATION
This Lease shall be constructed and governed by the laws of the Province of
Quebec. Should any of the provisions of this Lease and/or its conditions be
illegal or not enforceable under the laws of the Province of Quebec, it or they
shall be considered severable and the Lease and its conditions shall remain in
force and be binding upon the parties as though the said provisions or
conditions had never been included.
Words importing the singular number only shall include the plural and vice versa
and words importing the masculine gender shall include the feminine gender and
words importing persons shall include firms and unless the contrary intention
appears, the words "Lessor" and "Lessee" wherever they appear in this Lease
shall mean respectively "Lessor, its executors, administrators, successors
and/or assigns", and "Lessee, its executors, administrators, successors and/or
assigns" and if there is more than one Lessee or Lessor or the Lessee or Lessor
is a female person or a corporation, this Lease shall be read with all
grammatical changes appropriate by reason thereof, and all covenants,
liabilities and obligations shall be joint and several (solidary).
27. CHANGES TO BE IN WRITING
No assent or consent or waiver or amendment or addendum or change of any part of
this Lease shall be deemed or taken as made and legally binding the Lessor or
the Lessee unless the same be done in writing and signed thereon by the Lessor.
Failure on the part of the Lessor to avail itself of any of the provisions of
this Lease shall in no manner constitute a waiver, modificiation or renunciation
of the Lessor's rights stipulated in this Lease.
28. HEATING
Lessee shall suitably heat the Premises at its own cost and expense. The
freezing of any water, heating, sprinklers or other pipes or radiators caused by
the failure of the Lessee to take necessary precautions to prevent same, shall
be the direct responsibility of the Lessee, and the Lessee agrees to indemnify
and save harmless the Lessor from any and all causes of actions and demands
whatsoever which may arise as a result of any damage by water leaking from the
Lessee premises, so caused, including and not limiting blocked toilets, broken
pipes, clean up costs, removal of debris and damaged ceilings, floors and walls.
29. EXPROPRIATION
In the event that all or part of the Premises are expropriated, homologated or
requisitioned by any governmental body or agency or public utility (amongst
others), which would prevent the use or occupation of the inside floor space of
the Building (which forms the major part of the Premises), in whole or in part,
then the Lessee shall be entitled to a diminution of the rental payable
hereunder during the period and for the area of eviction only. Such diminution
of rent shall be reckoned from the date the Lessee is forced to vacate the
inside floor space and shall be calculated on a prorata basis, the whole without
any other claims by the Lessee against the Lessor for any loss or damages
occasioned by said eviction and/or loss of use.
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30. EXTENSIONS
The Lessor shall have the right at its option and from time to time during the
Lease term to make extensions and/or additions and/or to add one or more
additional floors or storeys onto all or part of the Building comprising the
Premises and this, only if requested by the Lessee in writing.
In the event the Lessor exercises said option the Lessee agrees to permit the
Lessor to install and/or extend and/or add all the required improvements
including supports, beams, wiring, piping, stairways, elevators, ramps, vents,
ducts, shafts and openings for view or light and the like and to close all
borrowed lights and the windows and openings which may be required to be closed
as a consequence of such construction, the whole without any claims for
disturbance and/or inconveniences and the like which may be caused to the
Lessee, provided always that the required work is carried out within a
reasonable delay and that this clause shall not absolve or release the Lessor
from liability in respect for damages or any loss caused to the Lessee as a
consequence of any negligence of the Lessor, its employees or representatives.
If the Lessee loses the use of any part of the Premises during the making of
such additions and/or extensions the Lessee shall be granted a proportionate
rent reduction as compensation for loss of use (during the period and for the
area of loss of use only), all of the foregoing without any other claims by the
Lessee against the Lessor for damage and loss of use.
31. PERMITS, ETC.
The Lessee shall obtain all necessary permits and licenses required for the
occupancy and carrying on of its business, the Lessor making no warranties
whatsoever regarding permits and licenses, which may be required by the Lessee.
Should the Lessee fail to obtain any required permit and/or license, it shall
remain bound to perform its obligations under the present Lease.
32. RULES AND REGULATIONS
The Lessor shall have the right to make reasonable rules and regulations,
provided that same are in accordance with the spirit and intent of this Lease,
at its discretion and provided that the said rules and regulations are necessary
for the safety, care, cleanliness and proper administration of the Building
and/or the Premises, and for the preservation of good order therein, and the
same shall be observed and performed by the Lessee and by the clerks, servants,
employees, agents and customers of the Lessee, and all such rules and
regulations now or hereafter to be established by the Lessor as herein provided
shall form part of this Lease as if now set forth at length herein.
33. OUTSIDE AREAS & PARKING
The Lessee shall not use any part of the exterior parking and loading areas or
any other areas outside the Premises for any purpose other than daytime parking,
garbage removal, shipping or receiving.
The Lessee shall have the right to occupy eight (8) parking spaces in front of
the Premises.
34. RENTAL TAX ("G.S.T/Q.S.T.")
The Lessee agrees to pay and discharge, to the entire exoneration of the Lessor,
any sales tax, rental tax, value added tax or any similar levy or duty or any
replacement or modification thereof (herein collectively referred to as the
"Tax") that may be imposed upon the rental payable by the Lessee to the Lessor
(other than income tax on such rental, and/or any tax on capital which shall be
payable by the Lessor), whether such Tax is imposed upon the Lessor or the
Lessee.
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35. POST-DATED CHEQUES
If requested, the Lessee shall provide the Lessor on the first day of each Lease
year with 12 postdated cheques dated the first day of each of the twelve
subsequent months, each representing 1/12 of the minimum monthly rental and
additional rental as described herein.
36. LESSOR'S LEGAL HYPOTHEC
Lessee hereby grants to the Lessor as security for the payment of all amounts of
rent herein described and charges under this Lease and the complete fulfillment
of all of the Lessee obligations hereunder a first ranking moveable hypothec on
the universality of all moveables and moveable effects belonging to the Lessee.
37. COMPENSATION, CLAIMS AND SET-OFF
Lessee hereby waives and renounces any and all existing and future claims,
set-off and compensation against any rent and additional rental or other amounts
due hereunder and agrees to pay such rent and other amounts regardless of any
claim, set-off or compensation which may be asserted by Lessee or on its behalf.
38. LEASE ENTIRE AGREEMENT
The Lessee acknowledges that there have been no representations made by the
Lessor which are not set out in this Lease. The Lessee further acknowledges that
this Lease constitutes the entire agreement between the Lessor and the Lessee
and acknowledges that this Lease may not be modified except as herein explicitly
provided and/or by agreement in writing duly signed by the Lessor and the
Lessee.
39. INDEMNIFICATION
Except if caused directly by the gross negligence of the Lessor, its agents,
employees, or representatives, or by any breach, violation or nonperformance by
the Lessor of any covenant, term or provision hereof, the Lessor shall not be
liable nor responsible in any way for any injury of any nature whatsoever that
may be suffered or sustained by the Lessee or any employee, agent or customer of
the Lessee or any other person who may be upon the Premises or for any loss,
theft, damage or destruction to any property belonging to the Lessee or to its
employees or to any other person while such property is on the Premises and in
particular (but without limiting the generality of the foregoing) the Lessor
shall not be liable for any damage or damages of any nature whatsoever to any
such property caused by the failure by reason of a breakdown or other cause to
supply adequate drainage, snow or ice removal, or by reason of the interruption
of any public utility or service or in the event of steam, water, rain or snow
which may leak into, issue or flow from any part of the Building or from the
water, steam, sprinkler, or drainage pipes or plumbing works of the same, or
from any other place or quarter or for any damage caused by anything done or
omitted by any tenant, but the Lessor shall use all reasonable diligence to
remedy such condition, failure or interruption of service when not directly or
indirectly attributable to the Lessee, after notice of same, when it is within
its power and obligation so to do. Nor shall the Lessee be entitled to any
abatement of rental in respect of any such condition, failure or interruption of
service, except if caused by the gross negligence of Lessor, its agents,
employees or representatives.
The Lessee will indemnify and save harmless the Lessor from and against all
fines, liability, damage suits, claims, demands and actions of any kind or
nature which the Lessor shall or may become liable for or suffer by reason of
any breach, violation or non-performance by the Lessee of any covenant, term,
provision, or law hereof or by reason of any injury (including death resulting
at any time
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therefrom) or damage to property occasioned to or suffered by any person or
persons including the Lessor by reason of any such breach, violation or
nonperformance or of any wrongful act, neglect, or default on the part of the
Lessee or any of its employees or officers.
40. FORCE MAJEURE
Lessor shall not be required to perform any convenant or obligation in this
Lease, or be liable in damages to Lessee, so long as the performance or
non-performance of the convenant or obligation is delayed, caused by or
prevented by an act of God or force majeure.
41. SPECIAL CONDITIONS
41.1 Security Deposit
The Lessor and Lessee acknowledge that the Lessee has deposited and honored a
cheque payable to Royal LePage Commercial Inc. "in trust" in the sum of
$9,496.23, including G.S.T. and P.S.T., which said cheque amount shall be
applied towards the minimum rental, surtax and taxes to become due for the first
and last months of the Term.
41.2 Lessor's Responsibility
The Lessor warrants that at the Date of Occupancy the washroom, HVAC system,
electrical equipment, shipping doors, and mechanical equipment are in good
working order, and that the roof is in good state and not leaking.
41.3 Improvements
The Lessor, at its costs, shall execute the following improvements to the
Premises:
(1) Install a new garage door on the truck level side. The door is to be same
size as the one beside it on the ramp side.
(2) Make a ramp on the truck level side and level both ramps.
(3) Install a night lamp on the back wall close to the ramps.
(4) Knock down wall "A" as outlined on Schedule "B" attached hereto.
(5) Build a new wall "B" up to the ceiling as outlined on Schedule "B"
attached hereto.
(6) Move the electric panel and upgrade it under the Lessee specifications and
install a 45 KVA transformer.
(7) Install a drainage system under the Lessee specifications that will run
between column 1 and 2 as outlined on Schedule "A" attached hereto.
(8) Repair the ceiling.
(9) Repair the washroom.
(10) Change the carpet in the office section and install a 20-22 oz carpet and
carpet base.
18
<PAGE>
(11) Paint office section.
(12) Change floor tiles in the washrooms and the kitchen area.
(13) Remove and change kitchen cabinet and counter and paint the kitchen
walls.
The foregoing Improvements are to be completed before June 15th, 1997.
41.4 Real Estate Broker
41.4.1 Lessee warrants that save and except for Royal LePage Commercial Inc.,
the present Lease was not negotiated through any broker or agent, and
undertakes to hold Lessor harmless from any commission or fee claimed.
41.4.2 Lessor agrees to pay to Royal LePage Commercial Inc. a real estate
leasing commission of five percent (5%) of the first three (3) years of
the total minimum rental value and two and one-half percent (2.5%) of the
total minimum rental value of the Lease Term thereafter. Such commission
shall be due and payable at the signing of the Lease or occupancy by the
Lessee, whichever is earlier.
42. LANGUAGE
The parties acknowledge having expressly required that this Lease and all
writings relating thereto be drawn up in English. Les parties declarent avoir
expressement requis que ce Bail et tous les documents s'y rapportant soient
rediges en anglais.
IN WITNESS WHEREOF WE HAVE SIGNED AT MONTREAL, QUEBEC,
THIS 16th DAY OF June, 1997.
OLYMBEC CONSTRUCTION INC.
"Lessor"
/s/ Richard Stern
-----------------------------------
Per: Richard Stern
/s/ Jack Gilman
_____________________________
Witness
_____________________________
Witness
UNITEL
"Lessee"
/s/ Brian Harty
-----------------------------------
Per: Brian Harty
/s/ Jack Gilman
_____________________________
Witness
_____________________________
Witness
<PAGE>
[GRAPHIC OMITTED]
<PAGE>
PLAN
[GRAPHIC OMITTED]
<PAGE>
Exhibit 10(EE)
REMARKETING AGREEMENT
Among
ALLEGHENY COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY,
PNC BANK, NATIONAL ASSOCIATION,
UNITEL VIDEO, INC.
and
RRZ PUBLIC MARKETS, INC.
Dated as of July 1, 1997
Relating to
ALLEGHENY COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
VARIABLE RATE DEMAND REVENUE BONDS
SERIES 1997
(UNITEL MOBILE VIDEO PROJECT)
1
<PAGE>
This REMARKETING AGREEMENT, dated as of July 1, 1997 (the "Agreement"),
among the ALLEGHENY COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY (the "Authority"),
PNC BANK, NATIONAL ASSOCIATION (the "Trustee"), UNITEL VIDEO INC. (the
"Corporation") and RRZ PUBLIC MARKETS, INC. (the "Remarketing Agent").
W I T N E S S E T H :
WHEREAS, the Authority has issued its $5,000,000 Variable Rate Demand
Revenue Bonds, Series 1997 (Unitel Mobile Video Project) (the "Bonds") pursuant
to a Trust Indenture, dated as of July 1, 1997 (the "Indenture"), between the
Authority and PNC Bank, National Association (the "Trustee");
WHEREAS, the Bonds and the Indenture provide among other things, that the
owners of the Bonds (the "Owners"), may elect (or may be required) in certain
instances to tender their Bonds for purchase upon the terms and conditions
contained in the Bonds and the Indenture;
WHEREAS, the Indenture provides for the appointment of a remarketing agent
to perform certain duties, including the use of its best efforts to remarket any
Bonds tendered for purchase by the Owners; and
WHEREAS, the Remarketing Agent has agreed to accept the duties and
responsibilities of the remarketing agent under the Indenture and this
Agreement;
NOW, THEREFORE, for and in consideration of the mutual covenants made
herein and other valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions. Unless otherwise defined herein, all
capitalized terms shall have the meanings ascribed to them in the Indenture.
Section 2. Appointment of Remarketing Agent. Subject to the terms and
conditions contained herein, the Authority hereby appoints RRZ PUBLIC
MARKETS, INC. as exclusive Remarketing Agent for the Bonds, and RRZ PUBLIC
MARKETS, INC. hereby accepts such appointment.
Section 3. Responsibilities of Remarketing Agent. Subject to the terms and
conditions set forth in this Agreement, the Remarketing Agent agrees to perform
the duties of Remarketing Agent set forth in the Indenture. It is understood
that in undertaking to perform such duties, and in the performance thereof, it
is the intention of the parties that the Remarketing Agent will act solely as an
agent and not as a principal except as expressly provided in Section 12.
(a) Determination of Interest Rates. The Remarketing Agent shall
determine the interest rates on the Bonds in the manner and at the times
specified therefor in the Indenture.
(b) Remarketing of Tendered Bonds.
(i) The Remarketing Agent shall use its best efforts to
remarket Bonds to be purchased as described in the Indenture and to
continue to remarket on an ongoing basis any Bonds purchased by the
Bank's Agent or the Bank.
(ii) The Remarketing Agent
2
<PAGE>
(A) will suspend its remarketing efforts upon the
receipt of notice of the occurrence and continuation of an
event of default under the Letter of Credit Agreement, the
Indenture or the Loan Agreement; and
(B) may suspend its remarketing efforts immediately upon
the occurrence of any of the following events, which
suspension will continue so long as the situation continues to
exist:
(1) suspension or material limitation in trading
in securities generally on the New York Stock Exchange;
(2) a general moratorium on commercial banking
activities in Pennsylvania or New York is declared by
either federal, Commonwealth of Pennsylvania or New York
State authorities;
(3) the engagement by the United States in
hostilities if the effect of such engagement, in the
Remarketing Agent's judgment, makes it impractical or
inadvisable to proceed with the solicitation of offers
to purchase the Bonds;
(4) legislation shall be introduced by committee,
by amendment or otherwise, in, or be enacted by, the
House of Representatives or the Senate of the Congress
of the United States, or a decision by a court of the
United States shall be rendered, or a stop order,
ruling, regulation or Private Placement Memorandum by,
or on behalf of, the United States Securities and
Exchange Commission or other governmental agency having
jurisdiction of the subject matter shall be made or
proposed, to the effect that the offering or sale of
obligations of the general character of the Bonds, as
contemplated hereby, is or would be in violation of any
provision of the Securities Act of 1933, as amended (the
"Securities Act") and as then in effect, or the
Securities Exchange Act of 1934, as amended (the
"Exchange Act") and as then in effect, or the Trust
Indenture Act of 1939, as amended (the "Trust Indenture
Act") and as then in effect, or with the purpose or
effect of otherwise prohibiting the offering or sale of
obligations of the general character of the Bonds, or
the Bonds, as contemplated hereby;
(5) any event shall occur or information shall
become known, which, in the Remarketing Agent's
reasonable opinion, makes untrue, incorrect or
misleading in any material respect any statement or
information contained in the disclosure documents
provided to the Remarketing Agent in connection with the
performance of its duties hereunder, whether provided
pursuant to Section 5 or otherwise, or causes such
documents to contain an untrue, incorrect or misleading
statement of a material fact or to omit to state a
material fact required to be stated therein or necessary
to make the statements made therein, in light of the
circumstances under which they were made, not
misleading;
(6) any governmental authority shall impose, as to
the Bonds, or obligations of the general character of
the Bonds, any material restrictions not now in force,
or increase materially those now in force;
3
<PAGE>
(7) any of the representations and warranties of
the Trustee made hereunder shall not have been true and
correct, in all material respects, on the date made; or
(8) the Authority in all material respects, fails
to observe any of the covenants or agreements made
herein.
Section 4. Resignation and Removal of Remarketing Agent. The Remarketing
Agent may at any time resign and be discharged of the duties and obligations
created by this Indenture by giving at least 60 days' notice to the Authority,
the Bank, the Bank's Agent, the Corporation, the Trustee and the Trustee's
Agent. The Remarketing Agent may be removed at any time upon 30 days' notice, at
the direction of the Corporation, by an instrument, signed by the Corporation,
filed with the Remarketing Agent, the Bank, the Bank's Agent, the Trustee and
the Trustee's Agent
In the event of the resignation or removal of the Remarketing Agent, the
Remarketing Agent shall pay over, assign and deliver any moneys and Bonds held
by it in such capacity to its successor or, if there be no successor, to the
Trustee.
Section 5. Disclosure Materials.
General. If the Remarketing Agent determines that it is necessary or
desirable to use an Private Placement Memorandum or other disclosure document in
connection with its remarketing of the Bonds, the Remarketing Agent will notify
the Trustee and the Authority which will provide the Remarketing Agent with a
disclosure document in respect of the Bonds satisfactory to the Remarketing
Agent and its counsel. The Trustee will supply the Remarketing Agent with such
number of copies of the disclosure document as the Remarketing Agent requests
from time to time and the Trustee will amend the document (and all documents
incorporated by reference) so that at all times the document will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. In connection with the use of any
disclosure document by the Remarketing Agent in its remarketing of the Bonds,
the Trustee will furnish to the Remarketing Agent such certificates,
accountants' letters and opinions of counsel as the Remarketing Agent reasonably
requests. In addition, the Trustee at its own expense, will take all steps
reasonably requested by the Remarketing Agent that the Remarketing Agent or its
counsel may consider necessary or desirable to (a) register the sale of the
Bonds by the Remarketing Agent under any federal or state securities law or
qualify the Indenture under the Trust Indenture Act, or (b) enable the
Remarketing Agent to establish a "due diligence" defense to any action commenced
against the Remarketing Agent in respect of any disclosure document.
Section 6. Indemnification and Contribution. (a) Trustee will indemnify
and hold harmless the Remarketing Agent and each of its directors, officers and
employees and each person who controls the Remarketing Agent within the meaning
of Section 15 of the Securities Act, against any and all losses, claims, damages
or liabilities, joint or several, to which any such indemnified party may become
subject under any statute or at law or in equity or otherwise, and will
reimburse any such indemnified party for any reasonable legal or other expenses
incurred by it in connection with investigating any claims against it and
defending any actions, insofar as such losses, claims, damages, liabilities or
actions arise out of or are based upon (i) an allegation or determination that
the Bonds should have been registered under the Securities Act or the Indenture
should have been qualified under the Trust Indenture Act, or (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
disclosure documents furnished pursuant to Section 5 hereof or the omission or
alleged omission to state therein a material fact necessary to make the
statements therein not misleading, but the Trustee will not be liable in any
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made in the document in reliance upon and in
conformity with written information furnished to the Trustee by the Remarketing
Agent specifically
4
<PAGE>
for use in connection with the preparation of the documents. This indemnity
agreement will not limit any other liability to any such indemnified party the
Trustee otherwise may have; provided that in no event will the Trustee be
obligated for double indemnification.
(b) An indemnified party shall, promptly after receipt of notice of
the commencement of any action against such indemnified party in respect of
which indemnification may be sought against an indemnifying party, notify the
indemnifying party in writing of the commencement of the action. Failure of the
indemnified party to give such notice will not relieve the indemnifying party
from any liability it may have to such indemnified party. If such an action is
brought against an indemnified party and such indemnified party notifies the
indemnifying party of its commencement, the indemnifying party may, or if so
requested by such indemnified party will, participate in or assume its defense,
with counsel reasonably satisfactory to the indemnified party and, after notice
from the indemnifying party to such indemnified party of an election to assume
the defense, the indemnifying party will not be liable to the indemnified party
under this Section 6 for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense other than reasonable costs
of investigation. Until the indemnifying party assumes the defense of any such
action at the request of such indemnified party, the indemnified party may
participate at its own expense in the defense of such action. If the
indemnifying party does not retain counsel to take charge of the defense or if
the indemnified party reasonably concludes that there may be defenses available
to it different from or in addition to those available to the indemnifying party
(in which case the indemnifying party will not have the right to assume the
defense of such action on behalf of such indemnified party), legal and other
expenses reasonably incurred by the indemnified party shall be borne by the
indemnifying party. Any obligation under this Section of an indemnifying party
to reimburse an indemnified party for expenses shall be payable in reasonable
amounts and at reasonable periodic intervals not more often than monthly as
required by the indemnified party, but if the indemnified party is later
determined not to be entitled to indemnification under this Section or
otherwise, the indemnified party will promptly return any moneys paid pursuant
to this sentence. No party will be liable with respect to any settlement
effected without its consent.
Section 7. Fees and Expenses. In connection with the remarketing of Bonds
for an Interest Period equal to or less than one year, the Trustee shall pay the
Remarketing Agent a reasonable remarketing fee acceptable to the Authority, the
Corporation and the Remarketing Agent.
In connection with the remarketing of Bonds for an Interest Period greater
than one year, the Trustee shall pay the Remarketing Agent a reasonable
remarketing fee mutually acceptable to the Authority, the Corporation and the
Remarketing Agent.
The Trustee will pay all expenses of delivering remarketed Bonds and
reimburse the Remarketing Agent for all direct, out-of-pocket expenses incurred
by it as Remarketing Agent, including reasonable counsel fees and disbursements.
Section 8. Representations, Warranties, Covenants and Agreements of the
Remarketing Agent. The Remarketing Agent, by its acceptance hereof, represents,
warrants and covenants and agrees with the Trustee as follows:
(a) the Remarketing Agent is a member of the National Association of
Securities Dealers and meets the requirements for the Remarketing Agent set
forth in the Indenture;
(b) the Remarketing Agent has been duly incorporated, is validly
existing and is in good standing under the laws of the Commonwealth of
Pennsylvania and is authorized by law to perform all the duties and obligations
imposed upon it as Remarketing Agent by this Agreement and the Indenture; and
5
<PAGE>
(c) the Remarketing Agent has full power and authority to take all
actions required or permitted to be taken by the Remarketing Agent by or under,
and to perform and observe the covenants and agreements on its part contained
in, this Agreement and the Indenture.
(d) the Remarketing Agent will perform and observe the covenants and
agreements on its part contained in this Agreement and the Indenture in
compliance with all applicable Federal and State laws.
Section 9. Representations, Warranties, Covenants and Agreements of the
Trustee. The Trustee, by its acceptance hereof, represents, warrants, covenants,
and agrees with the Remarketing Agent that it:
(a) in its individual capacity is a national banking association
duly organized and validly existing under the laws of the United States of
America;
(b) has full power and authority to take all actions required or
permitted to be taken by the Trustee by or under, and to perform and observe the
covenants and agreements on its part contained in, this Agreement and any other
instrument or agreement relating thereto to which the Trustee is a party; and
(c) has, on or before the date hereof, duly taken all action
necessary to be taken by it prior to such date to authorize (i) the execution,
delivery and performance of this Agreement, the Loan Agreement and any other
instrument or agreement to which the Trustee is a party and which has been or
will be executed in connection with the transactions contemplated by the
foregoing documents; and (ii) the carrying out, giving effect to, consummation
and performance of the transactions and obligations contemplated by the
foregoing agreements and by the Private Placement Memorandum.
Section 10. Term of Agreement. This Agreement shall become effective on
the date hereof and shall continue in full force and effect until the payment in
full of the Bonds or the earlier conversion of all Bonds to the Fixed Mode,
subject to the right of termination as provided herein.
Section 11. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania.
Section 12. Dealing in Bonds by the Remarketing Agent. The Remarketing
Agent, in its individual capacity, may in good faith buy, sell, own, hold and
deal in any of the Bonds, including, without limitation, any Bonds offered and
sold by the Remarketing Agent pursuant to this Agreement, and may join in any
action which any Owner may be entitled to take with like effect as if it did not
act in any capacity hereunder. The Remarketing Agent, in its individual
capacity, either as principal or agent, may also engage in or be interested in
any financial or other transaction with the Trustee and may act as depositary,
trustee, or agent for any other obligations of the Trustee as freely as if it
did not act in any capacity hereunder.
Section 13. Intention of Parties. It is the express intention of the
parties hereto that any purchase, sale or transfer of any Bonds, as herein
provided, shall not constitute or be construed to be the extinguishment of any
Bonds or the indebtedness represented thereby or the reissuance of any Bonds.
Section 14. Miscellaneous. (a) Except as otherwise specifically provided
in this Agreement, all notices, demands and formal actions under this Agreement
shall be in writing and either (i) hand-delivered, (ii) sent by electronic
means, or (iii) mailed by registered or certified mail, return receipt
requested, postage prepaid, to:
6
<PAGE>
The Remarketing Agent:
RRZ PUBLIC MARKETS, INC.
625 Liberty Avenue
3100 CNG Tower
Pittsburgh, Pennsylvania 15222
Attention: Gregory R. Zappala
Telephone: (412) 562-1000
Telecopy: (412) 562-0222
The Authority:
Allegheny County Industrial Development Authority
400 Fort Pitt Commons
445 Fort Pitt Boulevard
Pittsburgh, PA 15219
Attention: Gregg Bernaciak
Telephone: (412) 350-1067
Telecopy: (412) 642-2217
The Trustee and Paying Agent:
PNC Bank, National Association
One Oliver Plaza, 23rd Floor
Corporate Trust Department
Pittsburgh, Pennsylvania 15222
Attention: Corporate Trust Manager
Telephone: (412) 762-5540
Telecopy: (412) 762-8226
The Bank's Agent:
Heller Financial, Inc.
500 West Monroe Lane
Chicago, IL 60661
Attention: HBC Portfolio Manager
Telephone: (312) 441-6916
Telecopy: (312) 441-7026
The Corporation
Unitel Video, Inc.
555 West 57th Street
New York, NY 10019
Telephone: (212) 265-3600
Telecopy: (212) 581-7748
Attention: General Counsel
7
<PAGE>
The Remarketing Agent, the Trustee, the Authority, the Corporation, the Paying
Agent and the Agent may, by notice given under this Agreement, designate other
addresses to which subsequent notices, requests, reports or other communications
shall be directed.
(b) This Agreement shall inure to the benefit of and be binding only upon
the parties hereto and their respective successors and assigns. The terms
"successors" and "assigns" shall not include any purchaser of any of the
Bonds merely because of such purchase. Except asexpressly set forth
herein, neither the Bank's Agent nor any Owner or other third party shall
have any rights or privileges hereunder.
(c) All of the representations and warranties of the Trustee and the
Remarketing Agent in this Agreement shall remain operative and in full
force and effect, regardless of (i) any investigation made by or on behalf
of the Remarketing Agent or the Trustee, (ii) the offering and sale of and
any payment for any Bonds hereunder or (iii) termination or cancellation
of this Agreement.
(d) This Agreement and each provision hereof may be amended, changed,
waived, discharged or terminated only by an instrument in writing signed
by the parties hereto.
(e) Nothing herein shall be construed to make any party an employee of the
other or to establish any fiduciary relationship between the parties
except as expressly provided herein.
(f) If any provision of this Agreement shall be held or deemed to be or
shall, in fact, be invalid, inoperative or unenforceable for any reason,
such circumstances shall not have the effect of rendering any other
provision or provisions of this Agreement invalid, inoperative or
unenforceable to any extent whatsoever.
(g) This Agreement may be executed in several counterparts, each of which
shall be regarded as an original and all of which shall constitute one and
the same document.
[INTENTIONALLY LEFT BLANK]
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
ALLEGHENY COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
By: /s/ Gregory D. Bernaciak
-----------------------------------
RRZ PUBLIC MARKETS, INC.
By: /s/ Nicholas F. Falgione, III
-----------------------------------
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Richard Ranii
-----------------------------------
UNITEL VIDEO, INC.
By: /s/ George Horowitz
-----------------------------------
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated November 4, 1997, accompanying the consolidated
financial statements and schedule included in the Annual Report of Unitel Video,
Inc. on Form 10-K for the year ended August 31, 1997. We hereby consent to the
incorporation by reference of said report in the Registration Statement of
Unitel Video, Inc. on Form S-8, filed on July 15, 1986 (File No. 33-7306), the
Registrant's Registration Statement on Form S-8 filed on April 20, 1987 (File
No. 33-13660), the Registrant's Registration Statement on Form S-8 filed on May
28, 1987 (File No. 33-14654) the Registrant's Registration Statement on Form S-8
filed on February 1, 1996 (File No. 333-00613) and the Registrant's Registration
Statement on Form S-3 (File No. 33-38839).
GRANT THORNTON LLP
/s/ Grant Thornton LLP
New York, New York
November 4, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
UNITEL VIDEO, INC., FORM 10-K FOR THE YEAR ENDED AUGUST 31, 1996
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> AUG-31-1997
<CASH> 137
<SECURITIES> 0
<RECEIVABLES> 5,551
<ALLOWANCES> 412
<INVENTORY> 0
<CURRENT-ASSETS> 6,778
<PP&E> 111,135
<DEPRECIATION> 59,228
<TOTAL-ASSETS> 63,083
<CURRENT-LIABILITIES> 16,433
<BONDS> 38,604
0
0
<COMMON> 27
<OTHER-SE> 13,365
<TOTAL-LIABILITY-AND-EQUITY> 63,083
<SALES> 58,767
<TOTAL-REVENUES> 58,767
<CGS> 49,708
<TOTAL-COSTS> 49,708
<OTHER-EXPENSES> 13,783
<LOSS-PROVISION> (10)
<INTEREST-EXPENSE> 3,430
<INCOME-PRETAX> (4,398)
<INCOME-TAX> 38
<INCOME-CONTINUING> (4,436)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,436)
<EPS-PRIMARY> (1.66)
<EPS-DILUTED> (1.66)
</TABLE>
