SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended February 28, 1998
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ____________________
Commission file number 1-8654
------
Unitel Video, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 23-1713238
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
555 West 57th Street - New York, New York 10019
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(212) 265-3600
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 twelve months and (2) has been subject to such requirements
for the past 90 days.
Yes |X| No |_|
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
2,674,665 Common shares outstanding as of April 20, 1998.
(Number of shares) (Date)
<PAGE>
UNITEL VIDEO, INC.
FORM 10-Q
QUARTER ENDED FEBRUARY 28, 1998
Page
INDEX Number
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
February 28, 1998 (Unaudited) and
August 31, 1997 3-4
Consolidated Statements of Operations
February 28, 1998 (Unaudited) and
February 28, 1997 (Unaudited) 5
Consolidated Statements of Cash Flows
February 28, 1998 (Unaudited)
and February 28, 1997 (Unaudited) 6-7
Notes to Consolidated Financial
Statements (Unaudited) 8-10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 11-14
Item 3. Quantitive and Qualitative Disclosure
About Market Risk 15
Part II. OTHER INFORMATION
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
2
<PAGE>
UNITEL VIDEO, INC.
FORM 10-Q
QUARTER ENDED FEBRUARY 28, 1998
Part 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
February 28, 1998 August 31, 1997
----------------- ---------------
(Unaudited) (Note)
ASSETS
- ------
Current Assets:
Cash $ 89,000 $ 137,000
Accounts receivable,
less allowance for
doubtful accounts of $575,000
and $412,000 5,949,000 5,139,000
Other receivables 207,000 19,000
Prepaid income taxes 107,000 75,000
Prepaid expenses 708,000 564,000
Deferred tax asset 495,000 495,000
------------ ------------
Total current assets 7,555,000 6,429,000
Property and equipment - at cost
Land, buildings
and improvements 21,260,000 20,799,000
Video equipment 81,338,000 87,745,000
Furniture and fixtures 2,065,000 2,591,000
------------ ------------
104,663,000 111,135,000
Less accumulated depreciation 52,391,000 59,228,000
------------ ------------
52,272,000 51,907,000
Deferred tax asset 1,974,000 1,974,000
Goodwill 1,652,000 1,721,000
Other assets 1,696,000 1,052,000
------------ ------------
$ 65,149,000 $ 63,083,000
============ ============
Note: The balance sheet at August 31, 1997 has been taken from the audited
consolidated financial statements at that date.
See notes to consolidated financial statements.
3
<PAGE>
UNITEL VIDEO, INC.
FORM 10-Q
CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
February 28, 1998 August 31, 1997
----------------- ---------------
(Unaudited) (Note)
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
<S> <C> <C>
Accounts payable $ 7,873,000 $ 6,754,000
Accrued expenses 1,099,000 998,000
Payroll, benefits and related taxes 1,069,000 2,038,000
Current maturities of long-term debt 4,300,000 3,530,000
Current maturities of subordinated debt 1,057,000 1,167,000
Current maturities of capital lease obligations 1,820,000 1,946,000
------------ ------------
Total current liabilities 17,218,000 16,433,000
Deferred rent 123,000 121,000
Long-term debt, less current maturities 30,550,000 26,525,000
Subordinated debt, less current maturities 1,682,000 1,770,000
Long-term leases, less current maturities 2,837,000 3,666,000
Accrued retirement 1,111,000 1,176,000
Stockholders' equity:
Common stock, par value
$.01 per share
Authorized 5,000,000 shares
Issued 3,540,954 and 3,540,954 shares
respectively, and outstanding 2,674,665
and 2,674,665 shares respectively 27,000 27,000
Additional paid-in capital 27,367,000 27,367,000
Accumulated deficit (7,792,000) (6,028,000)
Common stock held in treasury,
at cost (866,289 shares) (7,974,000) (7,974,000)
------------ ------------
Total stockholders' equity 11,628,000 13,392,000
------------ ------------
$ 65,149,000 $ 63,083,000
============ ============
</TABLE>
Note: The balance sheet at August 31, 1997 has been taken from the audited
consolidated financial statements at that date.
See notes to consolidated financial statements.
4
<PAGE>
UNITEL VIDEO, INC.
FORM 10-Q
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
February 28, February 28, February 28, February 28,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $ 12,429,000 $ 15,000,000 $ 26,197,000 $ 31,370,000
Cost of sales:
Production costs 8,784,000 10,228,000 18,063,000 20,944,000
Depreciation 2,190,000 2,258,000 4,341,000 4,309,000
------------ ------------ ------------ ------------
10,974,000 12,486,000 22,404,000 25,253,000
------------ ------------ ------------ ------------
Gross profit 1,455,000 2,514,000 3,793,000 6,117,000
Operating expenses:
Selling 406,000 509,000 769,000 994,000
General and administrative 1,484,000 1,751,000 3,104,000 3,121,000
Interest 946,000 933,000 1,845,000 1,774,000
------------ ------------ ------------ ------------
2,836,000 3,193,000 5,718,000 5,889,000
------------ ------------ ------------ ------------
Earnings (loss) from operations (1,381,000) (679,000) (1,925,000) 228,000
Other income 73,000 76,000 163,000 154,000
------------ ------------ ------------ ------------
Earnings (loss) before
income taxes (1,308,000) (603,000) (1,762,000) 382,000
Income taxes -- (31,000) 2,000 19,000
------------ ------------ ------------ ------------
Net earnings (loss) available to
common stockholders $ (1,308,000) $ (572,000) $ (1,764,000) $ 363,000
============ ============ ============ ============
Earnings (loss) Per Common
Share - Basic and Diluted $ (.49) $ (.21) $ (.66) $ .13
============ ============ ============ ============
Weighted average of common and
common equivalent shares
outstanding 2,675,000 2,695,000 2,675,000 2,694,000
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
UNITEL VIDEO, INC.
FORM 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
----------------
February 28, 1998 February 28, 1997
----------------- -----------------
Cash Flows From Operating Activities:
Net income (loss) $(1,764,000) $ 363,000
Adjustments to reconcile
net income (loss) to net cash
provided by operating
activities:
Depreciation and amortization 4,374,000 4,505,000
Net gain on disposal of equipment (33,000) (196,000)
Deferred financing costs (395,000) --
Amortization of deferred financing costs 137,000 74,000
Deferred rent 2,000 (215,000)
Accrued retirement expense (65,000) (64,000)
Deferred advisory and legal costs (326,000) --
Decrease (Increase) in:
Accounts receivable (973,000) 2,020,000
Allowance for doubtful accounts 163,000 (277,000)
Other receivables (188,000) 147,000
Prepaid expenses (144,000) (5,000)
Prepaid taxes (32,000) 2,000
Other assets (60,000) (88,000)
Increase (Decrease) in
Accounts payable 1,119,000 (683,000)
Accrued expenses 101,000 (483,000)
Payroll and related taxes (969,000) (1,228,000)
----------- -----------
Total adjustments 2,711,000 3,509,000
----------- -----------
Net cash provided by operating
activities 947,000 3,872,000
Cash Flows From Investing
Activities:
Capital expenditures (4,670,000) (3,422,000)
Proceeds from disposal of equipment 33,000 2,204,000
----------- -----------
Net cash used in
investing activities (4,637,000) (1,218,000)
(Continued)
6
<PAGE>
UNITEL VIDEO, INC.
FORM 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
Six Months Ended
----------------
February 28, 1998 February 28, 1997
----------------- -----------------
Cash Flows From Financing Activities:
Proceeds from long-term financing 11,257,000 2,091,000
Proceeds from issuance of common stock -- 39,000
Repayment of loan to ESOP -- (91,000)
Principal repayments (7,615,000) (4,931,000)
Release of ESOP quarterly shares -- 78,000
------------ ------------
Net cash (used) provided by
financing activities 3,642,000 (2,814,000)
------------ ------------
Net (Decrease)/Increase in Cash (48,000) (160,000)
Cash Beginning of Year 137,000 192,000
------------ ------------
Cash End of Six Months $ 89,000 $ 32,000
============ ============
Schedule of income taxes and interest
paid:
Income Taxes Paid $ -0- $ 17,000
Interest Paid 1,639,000 1,757,000
------------ ------------
$ 1,639,000 $ 1,774,000
============ ============
See notes to consolidated financial statements.
7
<PAGE>
UNITEL VIDEO, INC.
FORM 10-Q
SIX MONTHS ENDED FEBRUARY 28, 1998
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Consolidated Financial Statements
The condensed consolidated balance sheet as of February 28, 1998, the
consolidated statements of operations for the six months and quarters ended
February 28, 1998 and February 28, 1997, and the consolidated statements of cash
flows for the six months then ended have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations, and cash flows at February 28, 1998 and for all periods
presented have been made.
Certain information and footnote disclosure normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the financial
statements and notes thereto in the Company's August 31, 1997 Form 10-K filed
with the Securities and Exchange Commission. The results of operations for the
six months ended February 28, 1998 are not necessarily indicative of the
operating results for the full year.
2. Stockholders' Equity
During the six months ended February 28, 1998, stockholders' equity decreased
due to a net loss of ($1,764,000).
3. Per Share Data
Per share data for the quarter and six months ended February 28, 1998 and
February 28, 1997 is based on the weighted average number of common shares
outstanding. In the quarter and six months ended February 28, 1997 unreleased
Employee Stock Ownership Plan shares are not considered outstanding for earnings
per share calculations. (See Note 4). There were no unreleased employee stock
ownership shares in the quarter and six months ended February 28, 1998.
4. 401(k) Employee Savings and Stock Ownership Plan
The Company sponsors a 401(k) savings and stock ownership plan (the "Plan")
which 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. Effective September 1, 1994, the Company has adopted the
provisions of Statement of Position 93-6, "Employer's Accounting for Employee
Stock Ownership Plans" ("SOP 93-6").
8
<PAGE>
The Company reports compensation expense based on the dollar value of the 401(k)
match expense. The Plan's compensation expense was $35,000 and $70,000 for the
quarter and six months ended February 28, 1998.
5. 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.
In fiscal 1995 the Company determined to focus its resources toward providing
services to the entertainment and corporate communications areas, which
represent the Company's strength, and decided to sell its three Editel divisions
which did not specialize in these areas. The Company recorded the carrying value
of the assets related to these divisions as net assets held for sale, and a
corresponding impairment charge, since these assets were no longer needed for
the current and future operations of the Company.
In fiscal 1996 the Company began marketing these divisions to potential buyers.
In the first six months of fiscal 1996 the Company recorded an impairment charge
of $1,739,000 relating to the assets at all three Editel divisions. The
impairment charge recorded represented 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 found to be reasonable and
appropriate.
In February 1996 the Company closed its Editel Chicago division, distributed the
majority of its assets to other divisions throughout the Company and sold the
remaining assets at an auction held in May 1996. Also in May 1996, after
reevaluating the potential of the Editel Los Angeles division and primarily due
to increasing sales and profitability at that division, the Company decided to
retain and expand the Editel Los Angeles division. In August 1996 the Company
closed its Editel New York division and distributed the majority of its
editorial and computer graphics assets throughout the Company. In November 1996
the Company sold the majority of this division's remaining net assets held for
sale of $1,587,000 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 these assets were used by the Company to
repay outstanding debt. In June 1997 the Company determined that a single
facility in California would significantly reduce its costs and adequately meet
the demand for its services in that location and, accordingly, the Company
merged its Unitel Hollywood and Editel Los Angeles divisions in the Company's
owned Editel Los Angeles facility. 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 outstanding debt.
The positive result of the decision to merge the Editel Los Angeles and Unitel
Hollywood divisions is reflected in the results of operations for the merged
operation in the six months ended February 28,
9
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1998. As a result of the merger and sale, the Company recorded a restructuring
charge of $1,055,000 in the third quarter of 1997. The restructuring charge
consisted primarily of the write off of assets sold and the costs of moving
equipment and personnel to Editel Los Angeles. Severance and related payroll
costs were expensed as incurred. There is no continuing liability in connection
with the closure of the Unitel Hollywood division. 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.
6. Stock Based Compensation
Statement of Financial Accounting Standards No. 123 ("SFAS No. 123"),
"Accounting for Stock Based Compensation," provides 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 was adopted by the Company during its fiscal year ending August 31,
1997. The Company intends 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.
10
<PAGE>
Item 2. 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 $4,670,000 during the six months ended
February 28, 1998, and primarily consisted of video equipment for the company's
two new digital mobile teleproduction units as well as the purchase of
production, post production and graphics equipment for use throughout the
Company.
Net cash provided by operating activities during the six months ended February
28, 1998 was $947,000 and during the six months ended February 28, 1997 was
$3,872,000. Net cash provided by operating activities for the six months ended
February 28, 1998 was offset by $4,637,000 of cash used in investing activities,
which consisted of capital expenditures (net of proceeds from asset dispositions
of $33,000), and was supplemented by net cash provided by financing activities
of $11,257,000 on new debt financing less $7,615,000 of debt repayments,
resulting in a net decrease in cash available of $48,000.
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 two
(52) equal monthly principal installments of $100,000 plus interest, with the
balance of $3,800,000 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. $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. In February 1998 Term Loan D was extended and is payable
in eighteen (18) monthly installments of $140,000 commencing May 1, 1998.
In July 1997 the credit facility was further amended by the issuance of a
$5,080,000 letter of credit (the "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 "Bonds"). The proceeds from the sale of the Bonds were loaned to the
Company and were used by the Company, together with other available funds, to
build a new digital mobile teleproduction 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.
In December 1997 the credit facility was further amended by increasing the
Letter of Credit to $8,636,000 to secure payment of principal and interest on an
additional $3,500,000 principal amount of Allegheny County (Pennsylvania)
Industrial Development Authority Variable Rate Demand Revenue Bonds ("the
Additional Bonds"). The proceeds from the sale of the Additional Bonds were
loaned to the Company and were used by the
11
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Company, together with other available funds, to build a second new digital
mobile teleproduction unit. The amended Letter of Credit requires additional
quarterly principal payments of $125,000 commencing February 1999 to be applied
to the redemption in equal principal amount of the Additional Bonds. The
Additional 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 Company is currently in negotiations to refinance
or sell certain of its owned real estate and anticipates using the proceeds of
the refinancing or sale to repay certain of its outstanding debt, including the
mortgages on the subject properties, with the balance used for working capital
purposes.
The terms of the overall credit facility 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. In addition, under certain
circumstances the Company is required to prepay the loans under the credit
facility from funds generated by the sale of assets and to prepay Term Loan D
from excess cash flow. The Company has at certain times not been in compliance
with the tangible net worth, fixed charge coverage, leverage ratio and interest
coverage ratio financial covenants (the "Financial Covenants") in the credit
facility and the lender has waived such non-compliance and is currently revising
the Financial Covenants to a level such that it is expected that the Company
will be in compliance with the Financial Covenants on a going forward basis. It
is not expected that in the future the Financial Covenants will be revised to
their initial levels on the date of execution of the credit facility. The
Company anticipates that funds generated from operations together with funds
available under its existing credit facility and proceeds from the refinancing
or sale of certain of its owned real estate currently being negotiated and noted
above in this item will be sufficient to meet the Company's anticipated working
capital and investing needs in fiscal 1998.
Results of Operations
Sales were $12,429,000 and $15,000,000 for the quarters ended February 28, 1998
and February 28, 1997, respectively. Sales were $26,197,000, and $31,370,000 for
the six months ended February 28, 1998 and February 28, 1997, respectively. The
decrease in sales in the six month period ending February 28, 1998 was due
primarily to the merger of the Company's Unitel Hollywood and Editel Los Angeles
divisions in fiscal 1997. The Company's Mobile division commenced operating its
two newest and most sophisticated mobile teleproduction units during the six
months ended February 1998. However, sales for the Mobile division were flat
during such period as compared to the same period of the prior year as a result
of delays in the completion of such mobile units. The completion of the units
was delayed in order to incorporate technical design changes made to maximize
the flexibility and capability of the units to take advantage of new Interstate
Commerce Commission regulations regarding length and weight. Uncertainly as to
the completion date made premarketing of the units difficult, since mobile units
are typically booked several months in advance. Sales for the Company's Studio
division were lower during the six months ended February 28, 1998 as compared
with the six months ended February 28, 1997 due to the non-renewal of the
"Gordon Elliott" and "Rolanda" shows. This loss was partially offset by revenues
from the addition of the "Chris Rock" show. Sales for the Company's New York
Post Production division were lower during the six months ended February 28,
1998 as compared with the six months ended February 28, 1997 as a result of a
continuing industry wide decline in revenues and profitability from analog
editing.
12
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The Company is currently reducing its New York post production assets and is
repurposing the related space for use in its New York Studio division. An
auction of excess analogue equipment will be held in April 1998.
The merger of the Editel Los Angeles and Unitel Hollywood divisions in fiscal
1997 resulted in a significant decrease in sales during the six months ended
February 28, 1998. However, the Editel Los Angeles division's merged operations
resulted in a profit during the six months ended February 28, 1998 as compared
to a substantial operating loss for the two divisions during the six months
ended February 28, 1997. The Company's net loss for the quarter ended February
28, 1998 was $(1,308,000), compared to the net loss of ($572,000) for the
comparable quarter of fiscal year 1997. The Company's net loss was $(1,764,000)
for the six months ended February 28, 1998, compared with net income of $363,000
for the same period of the prior fiscal year. The second quarter of the fiscal
year has historically been the slowest. The comparative increase in net loss of
approximately ($736,000) and ($2,127,000) for the quarter and six months ended
February 28, 1998 compared to the quarter and six months ended February 28, 1997
is principally due to a decrease in sales in the Company's New York Studio and
Post Production divisions and an increase in expenses in the Mobile division.
The increase in expenses in the Mobile division is primarily due to a new field
shop in Montreal, Canada, promotional expenses in connection with the new
digital mobile teleproduction units, as well as increased depreciation and
interest expense generated by the new units.
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 70.7% for the quarter ended
February 28, 1998, as compared to 68.2% for the quarter ended February 28, 1997.
Although production expenses decreased during the quarter ended February 28,
1998 as compared with the quarter ended February 28, 1997, the percentage to
sales was higher due to the substantial portion of fixed costs that do not
decrease when sales decrease.
Depreciation, as a percentage of sales, was 17.6% and 15.1% for the quarters
ended February 28, 1998 and 1997, respectively, and 16.6% and 13.7% for the six
months ended February 28, 1998 and February 28, 1997, respectively. The increase
in the quarter and six months ended February 28, 1998 compared to the same
periods in the prior year was a result of depreciation on the Mobile division's
newest digital mobile teleproduction units introduced in the six months ended
February 28, 1998 and increased depreciation resulting from additions to
property and equipment at other divisions during fiscal 1997. This increase was
offset by a reduction in depreciation on the Editel Los Angeles division
resulting from the merger of the Editel Los Angeles and Unitel Hollywood
divisions in fiscal 1997. Since sales were down and depreciation was
approximately the same in the quarter and six months ended February 28, 1998,
depreciation as a percentage of sales increased for such periods.
Selling expenses, as a percentage of sales, for the quarters ended February 28,
1998 and February 28, 1997 were 3.3% and 3.4%, respectively, and 2.9% and 3.2%
for the six months ended February 28, 1998 and February 28, 1997, respectively.
The percent of sales in the quarter and six months ended February 28, 1998 was
comparable to the prior year periods since selling expense as well as sales
decreased proportionately. The decrease in selling expenses in the quarter and
six months ended February 28, 1998 as
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compared to the same periods in the prior year is mainly due to a decrease in
sales staff resulting from the merger of the Unitel Hollywood and Editel Los
Angeles divisions in fiscal 1997.
General and administrative expenses, as a percentage of sales, for the quarters
ended February 28, 1998 and February 28, 1997 were 11.9% and 11.7%,
respectively, and 11.8% and 9.9% for the six months ended February 28, 1998 and
February 28, 1997, respectively. The decrease in general and administrative
expenses is primarily due to the merger of the Company's Editel Los Angeles and
Unitel Hollywood divisions. Also included in the decrease in general and
administrative expenses from the comparable period in the prior year is the
impact of the reduction of certain cost estimates related to the closure of the
Editel New York and Editel Chicago divisions. Since sales decreased in the
periods ended February 28, 1998, the percentage to sales remained constant in
the quarter and increased in the six months ended February 28, 1998,
respectively.
Interest expense, as a percentage of sales, for the quarters ended February 28,
1998 and February 28, 1997 was 7.6% and 6.2%, respectively, and 7.0% and 5.7%
for the six months ended February 28, 1998 and February 28, 1997. The level of
outstanding debt in the first six months of fiscal 1998 increased compared with
the same period of the prior year and sales decreased in the first six months of
fiscal 1998, resulting in an increase in interest expense as a percentage of
sales in fiscal 1998 when compared with the same periods of the prior year.
The Company's effective tax rate was 0% and 5% for the first six months of
fiscal years 1998 and 1997, respectively. The effective tax rate for the first
six months of fiscal 1998 and 1997 is less than the federal statutory rate of
34% due to the utilization of net operating loss carryforwards generated by the
losses incurred in fiscal 1995, 1996 and 1997.
As previously announced, the Company has received unsolicited expressions of
interest in acquiring the Company. The Company has incurred $326,000 of deferred
advisory and legal fees in connection with its evaluation of these expressions
of interest.
Year 2000
The Company has been actively reviewing all of its financial and operational
software for Year 2000 issues. In discussions with the vendors of such software
the Company has been assured that all Year 2000 issues will be addressed in a
timely manner without significant cost to the Company.
14
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Item 3. Quantitative and Qualitative Disclosure About Market Risk.
Not applicable.
PART II OTHER INFORMATION
Item 5. Other Information
This report contains certain 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 cautioned that these statements may be impacted by several factors,
and, accordingly, the Company's actual performance and results may vary from
those stated herein.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required to be filed by Item 601 of Regulation S-K.
1. Exhibit 4(A). Sixth Amendment to Amended and Restated Loan and
Security Agreement, dated as of November 13, 1997, among
Unitel Video, Inc., R Squared, Inc. and Heller Financial, Inc.
2. Exhibit 4(B). Letter Agreement amending Amended and Restated
Loan and Security Agreement, dated December 11, 1997, from
Heller Financial, Inc.
3. Exhibit 4(C). Seventh Amendment to Amended and Restated Loan
and Security Agreement, dated as of December 15, 1997, among
Unitel Video, Inc., R Squared, Inc. and Heller Financial, Inc.
4. Exhibit 4(D). Eighth Amendment to Amended and Restated Loan
and Security Agreement, dated as of February 12, 1998, among
Unitel Video, Inc., R Squared, Inc. and Heller Financial, Inc.
5. Exhibit 4(E). Loan Agreement, dated October 27, 1997, between
Unitel Video, Inc. and the Commonwealth of Pennsylvania.
6. Exhibit 4(F). First Supplemental Loan Agreement, dated as of
December 15, 1997, between the Allegheny County Industrial
Development Authority and Unitel Video, Inc.
7. Exhibit 4(G). First Amendment to Pledge Agreement, dated as of
December 15, 1997, among Unitel Video, Inc., Heller Financial,
Inc. and PNC National Bank, National Association.
8. Exhibit 4(H). First Amendment to Reimbursement Agreement,
dated as of December 15, 1997, between Unitel Video, Inc. and
Heller Financial, Inc.
9. Exhibit 10(A). Amendment to Lease, dated February 16, 1998
between Unitel Video Canada, Inc. and Olymbec Construction
Inc.
10. Exhibit 27. Financial Data Schedule.
(b) There were no reports filed on Form 8-K during the quarter ended
February 28, 1998.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITEL VIDEO, INC.
By: /s/ Barry Knepper
------------------------------------------
Barry Knepper
President and Chief Executive Officer
By: /s/ George Horowitz
------------------------------------------
George Horowitz
Chief Financial Officer
Dated: April 20, 1998
16
SIXTH AMENDMENT
TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This SIXTH AMENDMENT ("Amendment") is entered into as of November
13, 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 729 North Highland, Los Angeles, California 90038
("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 Lender amend the Loan Agreement and
Lender 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 of effectiveness 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:
"Canadian Subsidiary" means Unitel Video Canada, Inc., an
Ontario corporation and a wholly-owned Subsidiary of Borrower.
<PAGE>
"Department" means the Commonwealth of Pennsylvania, acting by
and through the Department of Community and Economic
Development.
"Department Documentation" means the Loan Agreement dated
October 27, 1997 by and between Borrower and the Department,
the Security Agreement dated October 27, 1997 by and between
Borrower and the Department, the promissory note dated October
27, 1997 in the original principal amount of $500,000 made by
Borrower in favor of the Department and all other documents,
instruments and agreements executed in connection therewith,
as each may be amended, modified and supplemented from time to
time.
"Intercreditor Agreement" means the Intercreditor Agreement
dated as of October 27, 1997 between Agent and the Department.
"Permitted Subordinated Debt Modifications" means those
modifications to the Subordinated Notes consented to in
writing by Agent on the Sixth Amendment Effective Date.
"Revolving Overadvance Amount" means $1,617,136.53.
"Sixth Amendment Effective Date" means November 13, 1997.
"Specified Department Collateral" means (a) one SMS 7000
Production Router (Textronix), Serial No. B23655, (b) one
4000-3 Dig Production Switcher (Textronix), Serial No. A89063,
(c) one Dveous Digital Equipment (Scitex Digital Video),
Serial No. 5100SY14390177 and (d) one Wolf Coach Motor
Vehicle, VIN No. 1R1C5323VK970517, Title No. 51076985201UN.
"Specified Sale Leaseback Transaction" means one or more sale
leaseback transactions entered into by Borrower, in accordance
with the terms and provisions of subsection 7.3(A)(iii), with
respect to the real property located at 515 West 57th Street,
New York, New York 10019, 433 West 53rd Street, New York, New
York 10019 and 729 North Highland, Hollywood, California
90038-7771, as applicable.
"Term Note" means each promissory note of Borrower in
substantially the form of Exhibits 2.1(A)(1), (A)(2), (A)(3)
and (A)(5) issued in connection with the Term Loans referenced
in Section 2.1(A).
(ii) amending the following defined terms in their entirety to provide as
follows:
"Permitted Subsidiaries" means Corporate Guarantor and
Canadian Subsidiary.
<PAGE>
"Required Canadian Documentation" means (a) all such
documentation as shall be required by Agent and its counsel to
perfect in favor of Agent a first priority security interest
in all now owned and hereafter created Accounts of the
Canadian Subsidiary (the "Canadian Receivables"), (b) a
guaranty agreement in favor of and in form and substance
satisfactory to Agent executed by the Canadian Subsidiary,
pursuant to which the Canadian Subsidiary guaranties to Agent
and Lenders the payment and performance of all of Borrower's
Obligations under the Loan Documents, (c) all such
documentation as shall be required by Agent to establish a
lockbox and blocked account in favor of Agent with respect to
the Canadian Receivables, (d) corporate resolutions of the
Canadian Subsidiary authorizing the transactions contemplated
by the Required Canadian Documentation, (e) an opinion of the
Canadian Subsidiary's counsel covering such matters as Agent
and its counsel shall reasonably request, (f) a certified
certificate of incorporation for the Canadian Subsidiary, (g)
bylaws of the Canadian Subsidiary and (h) good standing
certificates and authorizations to do business with respect to
the Canadian Subsidiary for its jurisdiction of incorporation
and for each jurisdiction where the conduct of its business
requires such authorization.
"Term Loan Commitment" means (a) as to any Lender, the
commitment of such Lender to make a portion of the Term Loans
in the amount set forth on the signature page of the Sixth
Amendment to this Agreement under such Lender's signature or
in the most recent Lender Addition Agreement, if any, executed
by such Lender and (b) as to all Lenders, the aggregate
commitment of all Lenders to make the Term Loans.
"Term Loan D" means advances made pursuant to subsection
2.1(A)(5).
"Term Loans" mean advances made pursuant to subsections
2.1(A)(1), (A)(2), (A)(3) and (A)(5).
(iii) amending the defined term "Permitted Encumbrances" by: (1)
deleting the word "and" immediately preceding clause "(h)" thereof; (2) deleting
the period at the end of clause "(h)" thereof and replacing the same with a
semi-colon; and (3) adding a new clause "(i)" thereto to provide as follows:
"(i) Liens on the Specified Department Collateral in favor of
the Department, the lien priorities with respect to which are
set forth in the Intercreditor Agreement."
(iv) deleting the defined term "Amended and Restated Term Note" or
"Amended and Restated Term Notes".
<PAGE>
(b) A new Section 2.1(A)(5) is hereby added to the Loan Agreement to
provide as follows:
"(A)(5) Term Loan D. Subject to the terms and conditions of
this Agreement and in reliance upon the representations and
warranties of Borrower herein set forth, each Lender,
severally, agrees to lend to Borrower, upon Borrower's request
therefor in accordance with the borrowing procedures for
Revolving Loan requests set forth in Section 2.1(D) hereof,
its Pro Rata Share of Term Loan D in an aggregate amount not
to exceed $2,500,000. Amounts borrowed under this subsection
2.1(A)(5) and repaid may not be reborrowed. Borrower shall
make a principal payment in the amount of the applicable
Scheduled Installment of Term Loan D (or such lesser principal
amount of Term Loan D as shall then be outstanding) on the
date and in the amount set forth below. Term Loan D 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 Section 2.2(A) applicable to Term Loan B. Borrower hereby
authorizes Agent, on the Sixth Amendment Effective Date, to
(a) debit Borrower's loan account as a Term Loan D advance in
an amount equal to the Revolving Overadvance Amount and (b)
apply the proceeds thereof to the Revolving Loan such that
after giving effect to such application the Revolving
Overadvance Amount shall equal zero ($0).
"Scheduled Installment of Term Loan D" means the
principal installment in an amount equal to $2,500,000,
payable, subject to the provisions of subsection 2.4(B), on or
before January 31, 1998, together with all accrued interest
thereon (it being understood that Borrower may prepay Term
Loan D, in whole or in part, from time to time), or the
earlier to occur of (i) the Termination Date or (ii)
acceleration of the Obligations in accordance with the
provisions of subsection 8.3 at which time the entire unpaid
principal amount of Term Loan D plus accrued interest thereon
shall be due and payable. In the event the Scheduled
Installment of Term Loan D is not paid in full in cash when
due, then Borrower shall pay to Agent (which amount Agent may
charge to Borrower's loan account as a Revolving Loan) a
premium in an amount equal to $100,000; provided, however,
Borrower's failure to pay the Scheduled Installment of Term
Loan D when due shall constitute an Event of Default hereunder
and shall entitle Agent to exercise all rights and remedies
available to Agent under this Agreement the Loan Documents and
applicable law, notwithstanding payment of the aforementioned
premium.
(c) Clause "(i)" of the first sentence of Section 2.1(E) of the Loan
Agreement is hereby amended to provide as follows:
"(i) the Term Notes to evidence such Lender's portion of the
Term Loans, such notes to be in the principal amount of the
respective Term
<PAGE>
Loan Commitments of such Lender and with other appropriate
insertions and"
(d) Section 2.4(B) of the Loan Agreement is hereby amended by:
(i) deleting subsection "(2)" thereof and replacing the same with
the following:
"(2) Proceeds of Asset Dispositions. (i) Subject to the
provisions of subsection 2.4(B)(4), immediately upon receipt
by Borrower or any of its Subsidiaries of the net proceeds of
any Asset Disposition, Borrower shall prepay the Obligations
in an amount equal to such net proceeds in accordance with the
provisions of this subsection 2.4(B)(2). So long as no Default
or Event of Default shall exist and Borrower reasonably
expects the net proceeds of any Asset Disposition to be
reinvested within 180 days to repair or replace such assets
with like assets, Borrower shall deliver the net proceeds to
Agent to be applied to the Revolving Loan, and Borrower may,
so long as no Default or Event of Default shall have occurred
and be continuing, reborrow such net proceeds only for such
repair or replacement. If Borrower fails to reinvest such net
proceeds within 180 days, such net proceeds shall be applied
as set forth below. Notwithstanding anything contained in this
subsection 2.4(B)(2) to the contrary, Borrower shall not be
eligible to utilize the foregoing reinvestment option (a) with
respect to any individual Asset Disposition in the event the
net proceeds generated therefrom are greater than $50,000, (b)
with respect to any individual Asset Disposition in the event
Borrower shall have previously utilized during the Fiscal Year
in which such Asset Disposition shall have occurred at least
$200,000 in net proceeds generated from all Asset Dispositions
during such Fiscal Year and (c) in the event the net proceeds
arise out of a Specified Sale Leaseback Transaction. Subject
to the provisions of subsection 2.4(B)(4), Borrower shall
remit, or cause its Subsidiaries to remit, all such net
proceeds to Agent's Account for application to the Obligations
in accordance with the provisions of this subsection
2.4(B)(2).
(ii) In the event any such net proceeds arise out of an Asset
Disposition (other than a Specified Sale Leaseback
Transaction), Agent shall apply such net proceeds first to
repay Term Loan D in the inverse order of maturity thereof,
second to repay Term Loan A in the inverse order of maturity
thereof and then to the remaining Obligations in such order as
Agent shall elect.
(iii) In the event any such net proceeds arise out of a
Specified Sale Leaseback Transaction, Agent shall apply such
net proceeds to the Obligations in accordance with the
provisions of subsection 2.4(B)(4).
<PAGE>
(iv) During the existence of a Default or an Event of Default,
all net proceeds of any Asset Disposition shall be applied by
Agent first to all fees, costs and expenses then owing to
Agent and Lender under subsection 10.1, second to repay Term
Loan D in the inverse order of maturity thereof, third to
repay Term Loan A in the inverse order of maturity thereof and
fourth to the remaining Obligations in such order as Agent
shall elect.
(ii) adding a new subsection "(4)" to provide as follows:
"(4) Prepayments of Term Loan D. Immediately upon consummation
of each Specified Sale Leaseback Transaction, Borrower shall
direct the purchaser/lessor with respect thereto to remit the
net proceeds generated therefrom to Agent in immediately
available funds, which such net proceeds shall be applied by
Agent first to repay Term Loan D in the inverse order of
maturity thereof and second to the Revolving Loan; provided,
however, in the event a Default or Event of Default shall be
in existence at the time of any such prepayment, Agent shall
apply such net proceeds to the Obligations in such order as
Agent shall elect."
(e) The first sentence of Section 2.4(C) of the Loan Agreement is
hereby amended by adding the following immediately preceding the reference to
"2.1(B)": "2.1(A)(5)".
(f) Section 5.1(F) of the Loan Agreement is hereby amended to
provide as follows:
"(F) Borrowing Base Certificates. On each Tuesday of each
week, Borrower shall deliver to Agent (i) a Borrowing Base
Certificate updated to reflect the most recent sales and
collections of Borrower for the immediately preceding week and
(ii) an assignment schedule of all Accounts created by
Borrower for the immediately preceding week."
(g) Section 5.6 of the Loan Agreement is hereby amended by:
(i) deleting the first two lines thereof and replacing the
same with the following: "Each Loan Party and Agent
shall establish lockboxes and".
(ii) deleting the eleventh line thereof and replacing the
same with the following: "Each Loan Party, and any of
its Affiliates,"
(h) Section 5.7 of the Loan Agreement is hereby amended by deleting
the first sentence thereof and replacing the same with the following:
"Each Loan Party hereby constitutes and appoints Agent and all
Persons designated by Agent for that purpose as such Loan
Party's true and lawful
<PAGE>
attorney-in-fact, with power to endorse such Loan Party's name
to any of the items of payment or proceeds described in
subsection 5.6 above and all proceeds of Collateral that come
into Agent's possession or under Agent's control."
(i) Section 7.1 of the Loan Agreement is hereby amended by adding
after clause "(b)(vi)" thereof a new clause "(b)(vii)" to provide as follows:
"and (vii) Indebtedness incurred under the Department
Documentation, which Indebtedness may be paid only in
accordance with the terms of such documentation as in effect
on the Sixth Amendment Effective Date or as subsequently
modified with the prior written consent of Agent."
(j) Section 7.3(A) of the Loan Agreement is hereby amended by:
(i) deleting the parenthetical in clause "(i)" thereof and
replacing the same with the following: "(other than
Specified Fixed Asset Dispositions and Specified Sale
Leaseback Transactions, as applicable);
(ii) deleting the word "and" immediately preceding clause
"(ii)" thereof; and
(iii) adding the word "and" at the end of clause "(ii)(2)"
thereof; and
(iv) adding a new clause "(iii) thereto to provide as
follows: "(iii) enter into Specified Sale Leaseback
Transactions if all of the following conditions are met:
(1) the purchaser/lessor in each such Specified Sale
Leaseback Transaction is directed to remit all net
proceeds generated therefrom to Agent for application to
the Obligations in accordance with the provisions of
subsection 2.4(B)(4); (2) the purchaser/lessor with
respect to each such Specified Sale Leaseback
Transaction shall have delivered to Agent a landlord
waiver covering the real property subject to such
Specified Sale Leaseback Transaction, which shall in
form and substance be satisfactory to Agent and its
counsel, (3) no Default or Event of Default shall then
be in existence or shall exist after giving effect to
each such Specified Sale Leaseback Transaction and (4)
Agent shall have received copies of all documentation to
be entered into by Borrower in connection with each such
Specified Sale Leaseback Transaction, the terms of which
shall be reasonably acceptable to Agent."
(k) Section 7.4 of the Loan Agreement is hereby amended by:
<PAGE>
(i) deleting the word "and" immediately preceding clause
"(c)" thereof and replacing the same with a comma; and
(ii) adding a new clause "(d)" thereto to provide as follows:
"(d) loans to and investments in the Canadian Subsidiary
not to exceed $1,000,000 in the aggregate at any time
outstanding."
(l) Section 7.5 of the Loan Agreement is hereby amended by deleting
clause "(b)" thereof and replacing the same with the following:
"(b)" Borrower (i) may make regularly scheduled payments of
principal and interest on the Subordinated Debt in accordance
with the terms of the Subordinated Notes; provided, however,
until such time as Term Loan D is paid in full in cash, the
aggregate amount of regularly scheduled principal and interest
payments which shall be permitted to be made on the
Subordinated Debt, during the period commencing on the Sixth
Amendment Effective Date and ending on the date Term Loan D is
paid in full in cash, shall not exceed $350,000, and (ii) may
prepay the Subordinated Notes (other than the Subordinated
Note referenced in subsection "(1)" of the defined term
"Subordinated Notes") in full provided that prior to any such
prepayment (1) Term Loan D shall have been paid in full in
cash, (2) at the time of and immediately after giving effect
to such prepayment, no Event of Default shall exist or would
have existed if such payment were, on a pro forma basis (x)
included in the calculation of the prior quarterly covenant
measuring period or (y) included in management's written best
good faith calculation for the next quarterly covenant
measuring period, and (3) immediately after giving effect to
such prepayment, Undrawn Availability shall equal or exceed
$3,000,000,"
(m) Section 7.7 of the Loan Agreement is hereby amended by deleting
the word "Change" on the first line thereof and replacing the same with the
following: "Other than the Permitted Subordinated Debt Modifications, change".
(n) New subsections 8.1(W), (X), (Y) and (Z) are hereby added to the
Loan Agreement to provide as follows:
"(W) Cross Default to Department Documentation. An event of
default shall occur and be continuing under any Department
Documentation which is not cured within any applicable grace
period."
"(X) Canadian Documentation. Failure of Borrower to cause the
Canadian Subsidiary to deliver to Agent the Required Canadian
Documentation on or prior to December 12, 1997."
<PAGE>
"(Y) Cash Dominion. Failure of Borrower to have entered into
all such documentation as shall be required by Agent to grant
to Agent full dominion and control over all proceeds of
Borrower's Accounts on or prior to December 12, 1997."
"(Z) Department Proceeds. Failure of Borrower to immediately
(but in no event later than two Business Days after Borrower's
receipt thereof) deliver to Agent the loan proceeds generated
from the transactions contemplated by the Department
Documentation, which such proceeds shall aggregate no less
than $500,000."
(o) Exhibit 2.1(A)(5) to this Amendment is hereby added to the Loan
Agreement as Exhibit 2.1(A)(5).
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) an amendment
fee for Agent's account in an amount equal to $75,000, which may be charged by
Agent to Borrower's account (the "Amendment Fee"), (c) fully executed copies of
all Department Documentation, (d) the Intercreditor Agreement executed by the
Department and Borrower and (e) 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 Lender 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 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, other than a Default or Event
of Default occurring solely by reason of Borrower's failure to make certain
payments on the Subordinated Debt (the "Subordinated Debt Defaults"); provided,
however, that Borrower shall use its best efforts to cause the Permitted
Subordinated Debt Modifications to be executed and delivered promptly after the
Sixth Amendment Effective Date and shall otherwise make payments under the
Subordinated Debt in accordance with the terms and provisions of Section 7.5 of
the Loan Agreement which actions shall cause the Subordinated Debt Defaults to
be no longer outstanding.
<PAGE>
(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.
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.
[SIGNATURE LINES ON FOLLOWING PAGE]
<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: Chief Executive Officer
--------------------------------------------
R SQUARED, INC., as
Corporate Guarantor
By: /s/ Barry Knepper
-----------------------------------------------
Name: Barry Knepper
---------------------------------------------
Title: President
--------------------------------------------
HELLER FINANCIAL, INC., as Agent
and Lender
By: /s/ Venkat Venkatesan
-----------------------------------------------
Name: Venkat Venkatesan
---------------------------------------------
Title: Vice President
--------------------------------------------
Term Loan A Commitment: $9,000,000
($8,400,000 of which is outstanding as of the
Sixth Amendment Effective Date)
Term Loan B Commitment: $0
Term Loan C Commitment: $0
Term Loan D Commitment: $2,500,000
<PAGE>
EXHIBIT 2.1(A)(5)
TERM NOTE D
$2,500,000 New York, New York
November __, 1997
This Term Note D is executed and delivered under and pursuant to the
terms of that certain Amended and Restated Loan and Security Agreement dated as
of December 12, 1995 (as amended, supplemented or modified from time to time,
the "Loan Agreement") 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 other financial institutions
named in or which hereafter become a party to the Loan Agreement (Heller and
such other 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 to 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, 18th 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 TWO MILLION FIVE HUNDRED THOUSAND AND
00/100 DOLLARS ($2,500,000.00) payable, subject to acceleration upon the
occurrence of an Event of Default under the Loan Agreement or earlier repayment
as required by the Loan Agreement; and
(ii) interest on the principal amount of this Note from time to time
outstanding, payable at the Interest Rate set forth in Section 2.1(A)(5) 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 Term Note D 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.
This Note is subject to mandatory prepayment and may be voluntarily
prepaid, in whole or in part, on the terms and conditions set forth in the Loan
Agreement.
<PAGE>
If an Event of Default under Sections 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 November, 1997, before me personally came Barry
Knepper, to me known, who being by me duly sworn, did depose and say that he is
the ___________________ of Unitel Video, Inc., the corporation described in and
which executed the foregoing instrument; and that he signed his name thereto by
order of the board of directors of said corporation.
-------------------------------
Notary Public
April 16, 1998
Unitel Video, Inc.
555 West 57th Street
New York, NY 10019
Attn: George Horowitz
Re: Financial Covenants
Dear Mr. Horowitz:
Reference is made to that certain Amended and Restated Loan and Security
Agreement dated as of December 12, 1995 (as amended, the "Agreement") among
Unitel Video, Inc., as Borrower, R Squared, Inc., as Corporate Guarantor, and
Heller Financial, Inc., as Agent and Lender ("Heller"). Capitalized terms used
herein and not otherwise defined, shall have the meanings ascribed to them in
the Agreement.
This letter will confirm that Borrower and Heller have agreed to amend the
financial covenants contained in Section 6 of the Agreement to the amounts set
forth below for the periods set forth below:
Quarter
Covenant Ended Amount
Tangible Net Worth 11/30/97 $12,500,000
(Section 6.1) 02/28/98 $12,500,000
05/31/98 $13,000,000
08/31/98 $13,000,000
Capital Expenditure Limits 11/30/97 $ 3,322,000
(Section 6.2) 02/28/98 $ 799,000
05/31/98 $ 658,000
08/31/98 $ 985,000
Fixed Charge Coverage* 11/30/97 <0.50 : 1.0>
(Section 6.3) 02/28/98 0.25 : 1.0
05/31/98 0.75 : 1.0
08/31/98 1.00 : 1.0
* calculated on a cumulative quarter basis until 8/31/98, then calculated on a
rolling four-quarter basis
Leverage Ratio 11/30/97 5.00 : 1.0
(Section 6.4) 02/28/98 5.00 : 1.0
05/31/98 3.75 : 1.0
08/31/98 3.75 : 1.0
Interest Coverage Ratio 11/30/97 <0.72 : 1.0>
(Section 6.5) 02/28/97 1.00 : 1.0
05/31/98 1.50 : 1.0
08/31/98 1.80 : 1.0
<PAGE>
The Agreement will be amended to reflect the foregoing covenant levels.
Very truly yours,
Heller Financial, Inc.
/s/ Shyam Amladi
- ---------------------------------
Shyam Amladi
Senior Vice President
SEVENTH AMENDMENT
TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS SEVENTH AMENDMENT ("Amendment") is entered into as of December
15, 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 729 North Highland Avenue, Hollywood, California 90038
("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.
At Borrower's request, Agent has caused the issuance of an
irrevocable letter of credit (the "Original Bond 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 $5,000,000 in aggregate
principal amount of its Variable Rate Demand Revenue Bonds, Series 1997 (Unitel
Mobile Video Project)(the "First Series Bonds") to finance Borrower's costs of
constructing up to two mobile video television production units to be based at
Borrower's Allegheny County office (the "Project").
Borrower has requested that Agent cause the Original Bond Letter of
Credit to be amended to provide credit and liquidity support for an additional
series of bonds in an aggregate principal amount of $3,500,000 to be designated
as the Allegheny County Industrial Development Authority Variable Rate Demand
Revenue Bonds, Series B of 1997 (Unitel Mobile Video Project) (the "Series B
Bonds")to further finance the Project. Agent is willing to do so provided that
the Loan Agreement is amended by 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 provided in this paragraph 2.
(a) Section 1.1 of the Loan Agreement is hereby amended by amending
the following defined terms in their entirety to provide as follows:
<PAGE>
"Bond Amortizing Availability Amount" means $8,636,931.51
less (1) $178,571 on August 5, 1998 and November 5, 1998 and (2)
$303,571 per quarter commencing on February 5, 1999 and on the fifth
day of each quarter thereafter.
"Bond Letter of Credit" means the Amended and Restated Irrevocable
Letter of Credit No. ____________, dated December 30, 1997, in the
original face amount of $8,636,931.51 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 Note" means the promissory note of Borrower
in substantially the form of Exhibit 2.1(A)(4) to this Amendment.
"Bond Loan Agreement" means the Loan Agreement dated as of July 1,
1997 by and between Borrower and the Issuer, as amended by First
Supplemental Loan Agreement dated as of December 15, 1997 and as it
may be further amended, modified or supplemented from time to time
with the prior written consent of Agent.
"Bonds" means, collectively, 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) and
the Issuer's Variable Rate Demand Revenue Bonds, Series B of 1997
(Unitel Mobile Video Project) in the original principal amount of
Three Million Five Hundred Thousand Dollars ($3,500,000).
"Bond Pledge Agreement" means the Pledge Agreement dated as of July
1, 1997 among Borrower, the Trustee, as escrow agent, and Agent, as
amended by the First Amendment to Pledge Agreement dated as of
December 15, 1997 and as it may be further amended, modified and
supplemented from time to time.
"Bond Trust Indenture" means the Trust Indenture dated as of July 1,
1997 between the Issuer and the Trustee, as amended by the First
Supplemental Indenture dated as of December 15, 1997, and as it may
be further amended, modified or supplemented from time to time with
the prior written consent of Agent.
"Purchase Contract" means, collectively, the Private Placement
Agreement dated July 23, 1997 relating to the First Series Bonds and
the Private Placement Agreement dated December 29, 1997 relating to
the Series B Bonds, in each case 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 July 1, 1997 between Borrower and Agent, as amended by the First
Amendment to Reimbursement Agreement dated as of December 15, 1997,
and as it may be further amended, modified and supplemented from
time to time.
2
<PAGE>
"Remarketing Agreement" means the Remarketing Agreement dated as of
July 1, 1997 among the Issuer, the Borrower, the Trustee and the
Remarketing Agent, as amended by the First Supplemental Remarketing
Agreement dated as of December 15, 1997, and as it may be further
amended, modified or supplemented from time to time with the prior
written consent of Agent.
(b) Exhibit 2.1(A)(4) to the Loan Agreement is hereby replaced with
Exhibit 2.1(A)(4) to this Amendment.
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 and one (1) copy of
the Private Placement Agreement dated December 29, 1997 relating to the Series B
Bonds; (b) a fully executed copy of the first amendment or supplement to each of
the following documents: (i) the Reimbursement Agreement, (ii) the Bond Pledge
Agreement, (iii) the Bond Trust Indenture, (iv) the Remarketing Agreement and
(iv) the Bond Loan Agreement, (c) an executed Bond Letter of Credit Note, (d)
all documents set forth in Section 3(b) of the first amendment to the
Reimbursement Agreement, (e) a fee in the amount of $60,000.00 and (f) 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 Loan 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 materials 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 under the Loan Agreement
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.
3
<PAGE>
(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.
(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.
SIGNATURE LINES ON FOLLOWING PAGE
4
<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: Chief Executive Officer
--------------------------------------
R SQUARED, INC., as Corporate Guarantor
By: /s/ Barry Knepper
-----------------------------------------
Name: Barry Knepper
---------------------------------------
Title: President
--------------------------------------
HELLER FINANCIAL, INC., as Agent and Lender
By: /s/ Venkat Venkatesan
-----------------------------------------
Name: Venkat Venkatesan
---------------------------------------
Title: Vice President
--------------------------------------
EIGHTH AMENDMENT
TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This EIGHTH AMENDMENT ("Amendment") is entered into as of February
12, 1998, 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 729 North Highland, Los Angeles, California 90038
("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 Lender amend the Loan Agreement and
Lender 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 of effectiveness 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
adding the following defined terms in their appropriate alphabetical order:
"Eighth Amendment Effective Date" means February 12, 1998.
"Excess Cash Flow" means, for a any period, the greater of (A)
zero (0); or (B) without duplication, the total of the
following for Borrower and its
<PAGE>
Subsidiaries on a consolidated basis, each calculated for such
period: (1) EBITDA; plus (2) tax refunds actually received;
less (3) Capital Expenditures (to the extent actually made in
cash and/or due to be made in cash within such period but in
no event more than the amount permitted by subsection 6.2
hereof); less (4) income and franchise taxes; less (5)
decreases in deferred income taxes resulting from payments of
deferred taxes accrued in prior periods; less (6) Interest
Expenses paid or accrued; less (7) scheduled amortization of
Indebtedness actually paid in cash and/or due to be paid in
cash within such period and permitted under subsections 7.1
and 7.5; less (8) voluntary prepayments and mandatory
prepayments made under subsection 2.4(B)(2), but only to the
extent that the transaction that precipitated the mandatory
prepayment increased EBITDA.
(b) The second paragraph of Section 2.1(A)(1) of the Loan Agreement
is hereby amended to provide as follows:
"Scheduled Installment of Term Loan A" means the principal
amount equal to $9,000,000, payable, subject to the provisions
of subsection 2.4(B), (a) in fifty-six (56)monthly principal
installments, the first fifty-five (55) of which shall be in
an amount equal to $100,000 and the last installment of which
shall be in an amount equal to the then outstanding principal
balance thereof, commencing on June 1, 1997 and on the first
day of each month thereafter with the final installment
thereof payable on December 12, 2001 (it being understood that
Borrower may prepay Term Loan A, in whole or in part, from
time to time) or (b) the earlier to occur of (i) the
Termination Date or (ii) acceleration of the Obligations in
accordance with the provisions of subsection 8.3 at which time
the entire unpaid principal amount of Term Loan A plus accrued
interest thereon shall be due and payable. Notwithstanding the
foregoing, no Scheduled Installment of Term Loan A shall be
due and payable on each of February 1, 1998, March 1, 1998 and
April 1, 1998 (the "Term Loan A Moratorium Period"); provided,
however, interest on the outstanding principal balance of Term
Loan A shall continue to be paid by Borrower during the Term
Loan A Moratorium Period in accordance with the provisions of
subsection 2.2(C).
(c) Section 2.1(A)(5) of the Loan Agreement is hereby amended as
follows:
(i) the third sentence of the first paragraph thereof is
hereby amended to provide as follows:
"Term Loan D 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 Section 2.2(A) applicable to
Term Loan B; provided, however, in the event the entire
outstanding balance of Term Loan D is not paid in full
- 2 -
<PAGE>
in cash on or prior to May 31, 1998, then commencing on June
1, 1998 Term Loan D shall bear interest at a rate per annum
equal to (a) with respect to Base Rate Loans, the Base Rate
plus one and one-half percent (1.50%) and (b) with respect to
LIBOR Rate Loans, the LIBOR Rate plus three and one-quarter
percent (3.25%)."
(ii) The second paragraph thereof is hereby amended to provide
as follows:
"Scheduled Installment of Term Loan D" means the
principal installment in an amount equal to $2,500,000,
payable, subject to the provisions of subsection 2.4(B), (a)
in eighteen (18) consecutive monthly principal installments,
the first seventeen (17) of which shall be in an amount equal
to $140,000 and the last installment of which shall be in an
amount equal to the then outstanding principal balance
thereof, commencing on May 1, 1998 and on the first day of
each month thereafter (it being understood that Borrower may
prepay Term Loan D, in whole or in part, from time to time) or
(b) the earlier to occur of (i) the Termination Date or (ii)
acceleration of the Obligations in accordance with the
provisions of subsection 8.3 at which time the entire unpaid
principal amount of Term Loan D plus accrued interest thereon
shall be due and payable.
(d) Section 2.3 of the Loan Agreement is hereby amended by adding
new subsections "(G)" and "(H)" to provide as follows:
"(G) Term Loan D Premium. Borrower hereby acknowledges that,
in accordance with Section 2.1(A)(5) of the Sixth Amendment to
this Agreement (the "Sixth Amendment"), Agent is permitted to
charge Borrower's loan account in an amount equal to $100,000
as a premium payable to Agent (the "Term Loan D Premium") for
Borrower's failure to pay the entire outstanding balance of
Term Loan D in full in cash on or prior to January 31, 1998.
Agent and Borrower hereby acknowledge that notwithstanding
anything contained in the Sixth Amendment to the contrary, the
Term Loan D Premium shall be payable in four (4) consecutive
weekly installments each in an amount equal to $25,000,
payable on each of February 3, 1998, February 10, 1998,
February 17, 1998 and February 24, 1998, which such amounts
may be charged by Agent to Borrower's loan account as a
Revolving Loan when due."
"(H) Eighth Amendment Restructuring Fee. In consideration of
Agent's agreement to enter into an Eighth Amendment to this
Agreement, Borrower hereby acknowledges that it shall pay to
Agent a restructuring fee in an amount equal to $80,000 (the
"Restructuring Fee"), which shall be payable in four (4)
consecutive monthly installments each in an amount equal to
$20,000, payable on each of February 28, 1998, March 31, 1998,
- 3 -
<PAGE>
April 30, 1998 and May 31, 1998, which such amounts may be
charged by Agent to Borrower's loan account as a Revolving
Loan when due; provided, however, in the event the entire
outstanding balance of Term Loan D is paid in full in cash
prior to May 31, 1998 (a "Payment Event") then that portion of
the Restructuring Fee payable to Agent solely for those months
occurring subsequent to the month in which the Payment Event
occurred, if any, shall be deemed waived."
(e) Section 2.4(B) of the Loan Agreement is hereby amended by adding a new
subsection "(5)" to provide as follows:
"(5) Prepayments from Excess Cash Flow. Within one hundred and
five (105) days after the end of each Fiscal Year, Borrower
shall prepay Term Loan D in an amount equal to twenty-five
percent (25%) of Excess Cash Flow for such prior Fiscal Year
calculated on the basis of the audited financial statements
for such Fiscal Year delivered to Agent pursuant to subsection
5.1(B). All such prepayments from Excess Cash Flow shall be
applied to the outstanding principal balance of Term Loan D in
inverse order of maturity thereof. Concurrently with the
making of any such payment, Borrower shall deliver to Agent a
certificate or Borrower's chief executive officer or chief
financial officer demonstrating its calculation of the amount
required to be paid."
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 and (b) 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 Lender 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 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.
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<PAGE>
(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.
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.
[SIGNATURE LINES ON FOLLOWING PAGE]
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<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: Chief Executive Officer
-----------------------------------
R SQUARED, INC., as
Corporate Guarantor
By: /s/ Barry Knepper
--------------------------------------
Name: Barry Knepper
------------------------------------
Title: President
-----------------------------------
HELLER FINANCIAL, INC., as Agent
and Lender
By: /s/ Venkat Venkatesan
--------------------------------------
Name: Venkat Venkatesan
------------------------------------
Title: Vice President
-----------------------------------
LOAN AGREEMENT
THIS LOAN AGREEMENT, MADE this 27th day of October, 1997, BY AND BETWEEN
UNITEL VIDEO, INC., a Delaware corporation, with its principal offices at 555
West 57th Street, New York, New York 10019 (the "Borrower") and the COMMONWEALTH
OF PENNSYLVANIA, acting by and through the DEPARTMENT OF COMMUNITY AND ECONOMIC
DEVELOPMENT, having its principal place of business at Room 433 Forum Building,
Harrisburg, Pennsylvania 17120 (the "Department").
WITNESSETH THAT:
WHEREAS, the Borrower has established a project consisting of the
constructing and equipping of two mobile video television production units to be
based at its Allegheny County, Pennsylvania facilities (the "Project"); and
WHEREAS, in concert with the establishment of the Project, the Borrower
has purchased or intends to purchase certain equipment for use in the Project as
more fully described on Exhibit A and which is incorporated herein by reference
and made a part hereof (the "Equipment"); and
WHEREAS, pursuant to the authority granted the Department by virtue of the
Machinery and Equipment Loan Fund ("MELF") Act, Act 120 of 1988, P.L. 1050 (the
"Act"), the Department has approved the Borrower's application for a loan not to
exceed the principal amount of $500,000 (the "Loan") to be used exclusively to
defray a part of the cost of purchasing the Equipment (the "Cost") or to
reimburse Borrower for a portion of the Cost; and
WHEREAS, the Department is willing to make the Loan upon the terms and
subject to the conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto, in consideration of the mutual
promises herein contained and intending to be legally bound hereby, covenant and
agree as follows:
Section 1. The Loan. Subject to the conditions set forth herein, the
Department agrees to make the Loan to the Borrower for the purpose of defraying
or reimbursing a portion the Cost of purchasing the Equipment described in
Exhibit A.
<PAGE>
Section 2. The Note. The Loan shall be evidenced by a note (the "Note") of
even date herewith given by the Borrower to the Department.
Section 3. Security.
a. The Equipment. Payment of the Note and satisfaction of all
obligations of the Borrower hereunder and under the Note shall be secured
by a security interest in the Equipment given by the Borrower to the
Department under a security agreement of even date herewith (the "Security
Agreement"). The Security Agreement shall be dated the date of the Note
and shall create a first lien upon the Equipment. HELLER FINANCIAL, INC.,
a Delaware corporation, as agent and lender under a certain Amended and
Restated Loan and Security Agreement dated as of December 12, 1995 (the
"Credit Agreement") agreed to lend Borrower funds which are secured, in
part, by the Equipment. Pursuant to an Intercreditor Agreement of even
date between the Department and HELLER FINANCIAL, INC. (the "Intercreditor
Agreement"), the lien of HELLER FINANCIAL, INC. in the Equipment shall be
subordinate to the Department's lien.
b. The Motor Vehicle Mobile Unit. Payment of the Note and
satisfaction of all obligations of the Borrower hereunder and under the
Note shall be secured by a subordinate lien in a certain motor vehicle
Pennsylvania VIN No. Vin No. 1 R1C25323VK970517, subject to the prior lien
of HELLER FINANCIAL, INC.
Section 4. Prepayments. Prepayments of the outstanding principal amount of
the Loan shall be as set forth in and governed by the terms of the Note.
Section 5. Representations and Warranties of the Borrower. To induce the
Department to enter into this Agreement and to make the Loan, the Borrower
represents and warrants that:
(a) the Borrower is a corporation, duly organized and validly
existing and in good standing under the laws of the State of Delaware;
(b) the Borrower has all necessary corporate power and authority to
purchase, own, encumber and sell Borrower's property and to carry on
Borrower's business as now being conducted, and to carry out the
transactions contemplated by this Agreement;
(c) the execution and delivery of this Agreement, consummation of
the transactions herein contemplated and compliance with the terms and
provisions hereof and of the Note and Security Agreement will not conflict
with, or result in a breach of, any of the terms, conditions or provisions
of the Articles of Incorporation or By-Laws of the Borrower or of any
agreement, indenture or other instrument to which the Borrower is a party
or by which Borrower is bound or to which Borrower or Borrower's property
is subject, or constitute a default thereunder, and will not result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever (except those contemplated by the Security Agreement) upon any
of the property of the Borrower pursuant to the terms of any such
agreement, indenture or other instrument;
(d) the execution, delivery and performance of this Agreement, the
performance of the transactions contemplated by the provisions hereof, and
the execution, issuance and delivery of the Note and the Security
Agreement in accordance with the provisions hereof have each been duly
authorized by all necessary corporate action on the part of the Borrower;
2
<PAGE>
(e) this Agreement has been duly and validly executed and delivered
by the Borrower and constitutes a valid and legally binding obligation of
the Borrower, enforceable in accordance with the terms of this Agreement
and the Note and Security Agreement, when executed and delivered in
accordance with the terms thereof, will be valid and legally binding
obligations of the Borrower, enforceable in accordance with the respective
terms of each;
(f) there is no material litigation or governmental proceeding
pending or, to the knowledge of the Borrower or Borrower's officers,
threatened against the Borrower other than that which has been previously
disclosed to the Department in writing. If such litigation or proceeding
exists, Borrower shall set forth in an exhibit information regarding the
amount of the claim, the forum in which the claim was filed, the date for
the same, all of which shall be attached hereto and made a part hereof;
(g) the Borrower has filed all required federal, state and local tax
returns and has paid all taxes shown on such returns as such taxes have
become due, except for those being contested in good faith and by
appropriate proceedings diligently pursued and for which such reserves or
other appropriate provisions as may be required by GAAP shall have been
made therefor; and
(h) no consent or approval to the execution and performance of this
Agreement and the transactions contemplated hereby not already obtained is
required to be obtained by the Borrower from any governmental body,
authority, agency, court or other person or entity, public or private,
other than the Department.
All of the representations and warranties of the Borrower set forth
herein shall survive and continue until the Loan is paid in full and all of the
Borrower's obligations hereunder have been satisfied.
Section 6. General Conditions of Lending. The obligation of the Department
to make the Loan hereunder is subject to the fulfillment of the following
conditions by the Borrower to the satisfaction of the Department:
(a) concurrently with, or prior to, the disbursement of the Loan and
dated the date of such disbursement, the Borrower shall have furnished to
the Department in form and substance satisfactory to the Department's
Counsel a favorable written opinion of Borrower's counsel;
(b) there shall have been delivered to the Department a certificate
executed by the Secretary of the Borrower, dated the date of the initial
disbursement under the Loan, setting forth the corporate action taken by
the Borrower in connection with the Loan and the authorization of the
Borrower, or authorized representatives of the Borrower to execute,
deliver and perform pursuant to the terms and conditions of this
Agreement, and the execution by the Borrower of the Note, the Security
Agreement and all related documentation; such certificates shall include
all excerpts from minutes of meetings of the Board of Directors of the
Borrower (and, where appropriate, from minutes of meetings of the
shareholders of the Borrower), their By-Laws and Articles of Incorporation
as the Department's counsel shall deem appropriate;
(c) all legal matters incident or related to the Loan shall be in
form and substance satisfactory to counsel for the Department;
(d) the Note and the Security Agreement and related financing
statements shall have been duly executed and delivered to the Department
or delivered for recording, as appropriate;
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(e) compliance with such other conditions as shall be required by
the Department.
Section 7. Covenants of the Borrower. Until the Loan has been entirely
repaid and all of Borrower's obligations to the Department in connection
therewith and herewith have been satisfied, the Borrower hereby covenants that:
(a) the Borrower shall use the proceeds of the Loan solely for the
purpose of defraying a portion of the Cost or reimbursing Borrower for a
portion of the Cost;
(b) the Borrower shall preserve Borrower's corporate existence,
rights, privileges and franchises, and maintain Borrower's authority to do
business under the laws of Pennsylvania;
(c) the Borrower shall comply with all laws, regulations and orders
of any court or governmental body having jurisdiction over the Project;
(d) the Borrower shall, upon request by the Department, provide
financial information and other information concerning Borrower in form
reasonably satisfactory to the Department, including at least the
following:
(i) a certificate of an authorized officer of the Borrower
setting forth the number of employees and their respective job
classifications (skilled, semi-skilled and unskilled) employed
during the previous year at the Borrower's facility in Allegheny
County, Pennsylvania; and (ii) financial statements of the Borrower
for its most recent fiscal year, including its balance sheet and
income statement;
(e) the Borrower shall comply with all of the terms and conditions
of this Agreement, the Note, and the Security Agreement;
(f) the Borrower shall not create any additional debt secured by the
Equipment except in favor of HELLER FINANCIAL, INC. as set forth in
Section 3;
(g) the Borrower shall not discriminate against any employee or
against any applicant for employment because of race, religion, color,
national origin, sex or age (including, but not limited to, employment
upgrading, demotion or transfer, recruitment or recruitment advertising,
layoff or termination, rates of pay or other forms of compensation, and
selection for training, including apprenticeship). The Borrower hereby
accepts and agrees to be bound by the nondiscrimination provisions as set
forth in Exhibit "B" attached hereto;
(h) the Borrower shall comply with the contractor integrity
provisions as set forth in Exhibit "C" attached hereto;
(i) the Borrower shall comply with the contractor responsibility
provisions as set forth in Exhibit "D" attached hereto;
(j) the Borrower shall pay all the costs of filing and any other
costs that may be incurred pursuant to the closing and administration of
the Loan;
(k) the Borrower shall provide proper facilities at all times for
inspection of the Equipment by the Department and its authorized
representatives, and shall afford full and free access to the Project to
such
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persons as may from time to time be designated by the Department, in each
case at reasonable times and with reasonable prior notice;
(l) without the prior written consent of the Department, the
Borrower shall not merge or consolidate with any other corporation or
dispose of all or any substantial portion of its assets, except in the
ordinary course of business, unless the Borrower or surviving corporation,
as the case may be, shall have a tangible net worth (after giving effect
to such merger, consolidation or sale of assets) not less than that shown
in the most recent audited financial statements for the Borrower delivered
to the Department prior to approval of the Loan, and, if a corporation
different from the Borrower, shall have expressly assumed the obligations
of the Borrower hereunder.
(m) The Borrower will not change its name without notice to the
Department; and
(n) the Borrower shall comply with the Americans With Disabilities
Act Provisions as set forth in Exhibit "E" attached hereto.
Section 8. Events of Default. The following shall each constitute an event
of default hereunder (an "Event of Default"):
(a) Failure to pay any installment of principal or interest under
the Note, when due, and such failure shall continue for a period of thirty
(30) days;
(b) any representation or warranty made herein, in the application
to the Department made by the Borrower in connection with the Loan, or in
any certificate or financial or other statement furnished pursuant to the
provisions hereof or as a part of such application, shall have been false
or misleading in any material respect as of the time made or furnished;
(c) the Borrower shall (i) become insolvent, (ii) admit Borrower's
inability to pay Borrower's debts as they come due, (iii) make an
assignment to the benefit of Borrower's creditors, (iv) be adjudicated
bankrupt or insolvent, (v) voluntarily initiate proceedings under any
bankruptcy or reorganization law either now or hereafter in effect, (vi)
become the subject of any involuntary proceedings under any bankruptcy or
reorganization law either now or hereafter in effect that shall not have
been discharged within sixty (60) days of the initiation thereof, or (vii)
seek to take advantage of any moratorium law either now or hereafter in
effect;
(d) a receiver, liquidator or trustee shall be appointed for the
Borrower and shall not have been discharged within sixty (60) days;
(e) an Event of Default under the Security Agreement or any other
instrument relating to the Loan shall occur and be continuing;
(f) a material failure to comply by the Borrower with any other
covenant, condition or provision of this Agreement, including, but not
limited to, the failure to provide job information, insurance information,
and annual financial statements required by the Department, shall occur
and be continuing after written notice of such failure has been given to
Borrower, for thirty (30) days or, if such failure shall not be capable of
being cured within thirty (30) days, and curative action shall have been
initiated within such thirty (30) day period and pursued diligently
thereafter, for such time period after notice of such failure has been
given to Borrower, as shall, in the good faith judgment of the Department,
which shall be conclusive, be required for such cure;
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(g) (i) the Borrower shall fail to pay when due insurance premiums,
and taxes (except if such taxes are being contested in good faith and by
appropriate proceeding diligently pursued and for which such reserves or
other appropriate provisions as may be required by GAAP shall have been
made therefor; and (ii) if the Collateral (as defined in the Security
Agreement) shall be seized or levied upon under any legal or governmental
process against the Borrower or against the Collateral; or
(h) Borrower shall fail to create the number of employment
opportunities or jobs specified in Borrower's application, the interest
rate of the Loan shall, at the sole discretion of the Secretary, be
increased to a fixed rate equal to two (2) percentage points greater than
the current prime interest rate as defined in Section 5.10 (relating to
"Penalty") of the MELF Statement of Policy, unless the penalty is waived
by the Secretary because the failure of such compliance is due to
circumstances beyond the control of the Borrower.]
Immediately and without further notice to the Borrower, upon the
occurrence and during the continuance of an Event of Default hereunder (except
for an Event of Default under (h) (relating to job creation), the Department, or
any subsequent holder of the Note, may declare the Note and interest accrued
thereon and all liabilities of the Borrower thereunder to be immediately due and
payable, and the same shall thereupon become and be due and payable, without
presentment, demand, protest or notice of any kind to the Borrower, all of which
are hereby expressly and knowingly waived, and any funds remaining in the Escrow
Account shall be returned to the Department and applied towards repayment of the
Loan. In addition, upon the occurrence of an Event of Default hereunder
(including under (h) relating to job creation) other than the non-payment of the
Loan, the Department shall have the right to raise the rate of interest on the
Loan up to twelve and one-half percent (12-1/2%) per annum, applied
retroactively to the date of the first occurrence of the Event of Default until
such time as the Event of Default is cured.
Section 9. Miscellaneous.
(a) No delay or failure on the part of the Department in exercising
any right, power or privilege hereunder shall affect such right, power or
privilege; nor shall any single or partial exercise thereof or any
abandonment, waiver, or discontinuance of steps to enforce such a right,
power or privilege preclude any other or further exercise thereof, or the
exercise of any other right, power or privilege. The rights and remedies
of the Department hereunder are cumulative and concurrent and not
exclusive of any rights or remedies which the Department might otherwise
have. The Department shall have the right at all times to enforce the
provisions of this Agreement, the Note, the Security Agreement, and all
related documentation in strict accordance with the terms hereof and
thereof, notwithstanding any conduct or custom on the part of the
Department in refraining from so doing at any time or times. The failure
of the Department at any time or times to enforce the Department's rights
under such provisions, strictly in accordance with the same, shall not be
construed as having created a custom in any way or manner contrary to
specific provisions of this Agreement or any such documentation or as
having in any way or manner modified or waived the same.
(b) Any permit, consent or approval of any kind or character on the
part of the Department under this Agreement, and any waiver of any
provision or condition of this Agreement, must be in writing and executed
by the Department and shall be effective only to the extent specifically
set forth in such writing.
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(c) All covenants and agreements of the Borrower contained herein or
made in writing in connection herewith shall survive and continue until
the Loan is entirely paid and all of the Borrower's obligations hereunder
have been entirely satisfied.
(d) This Agreement, the Commitment Letter accepted by Borrower on
May 21, 1997, the Note, and the Security Agreement and all other
agreements delivered pursuant hereto shall be deemed to be contracts made
under the laws of the Commonwealth of Pennsylvania and, for all purposes,
shall be construed in accordance with the laws of such Commonwealth.
(e) This Agreement may be executed in as many counterparts as may be
deemed necessary and convenient and each of which, when so executed, shall
be deemed an original, but all such counterparts shall constitute but one
and the same instrument.
(f) This Agreement, the Note, and the Security Agreement constitute
the entire agreement between the Department and the Borrower. Such
instruments may be modified only by a written instrument duly executed by
the Department and the Borrower.
(g) Any notices or consents required or permitted by this Agreement
shall be deemed sufficient if in writing and addressed to the Borrower or
the Department, as applicable, and shall be deemed to be delivered if
delivered in person or sent by certified or registered mail, postage
prepaid, return receipt requested, addressed to the Borrower or the
Department, as applicable, at the addresses set forth at the beginning of
this Agreement. Notice shall be effective on delivery if delivered in
person or on the fifth business day following mailing if mailed.
(h) The terms and provisions of this Agreement are severable. In the
event of the unenforceability or invalidity of any one or more of the
terms, covenants, conditions or provisions of this Agreement under
federal, state or other applicable law, such unenforceability or
invalidity shall not render any other term, covenant, condition or
provision hereof unenforceable or invalid.
(i) This Agreement shall take effect as an instrument under seal.
(j) The Borrower, from time to time, shall execute such further
instruments as the Department may reasonably request to further confirm
and assure the interests and rights created or intended to be created in
favor of the Department hereunder or under the Security Agreement or the
Note.
(k) This Agreement shall be binding upon and inure to the benefit of
the Borrower, the Department and their respective successors and assigns,
except that the Borrower may not assign or transfer its rights hereunder
without the prior written consent of the Department.
(l) The parties do not intend the benefits of this Agreement to
inure to any third party. No portion of the Department's commitment to
make the Loan will, at any time, be subject to attachment or levy by any
creditor of the Borrower or by any contractor, subcontractor, materialman
or supplier or any creditor of any such contractor, subcontractor,
materialman or supplier. Notwithstanding anything contained herein or in
the Note, the Security Agreement, or any other document executed in
connection with this transaction, or any conduct or course of conduct by
any of the parties hereto, before or after signing this Agreement or any
of the other aforesaid documents, this Agreement shall not be construed as
creating any rights, claims, or
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causes of action against the Department, in favor of any contractor,
subcontractor, supplier of labor or materials, or any of their respective
creditors, or any other person or entity other than the Borrower.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
WITNESS: COMMONWEALTH OF PENNSYLVANIA, acting
by and through the DEPARTMENT OF
COMMUNITY AND ECONOMIC
DEVELOPMENT
/s/ Mark Zearfaus By /s/ Emily J. White
- ------------------------ --------------------------------------------------
Secretary of Community and Economic Development
(OFFICIAL SEAL)
ATTEST: UNITEL VIDEO, INC., a Delaware corporation
/s/ Karen Ceil Lapidus By /s/ Barry Knepper
- ------------------------- -------------------------------------------------
Secretary President
(CORPORATE SEAL)
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EXHIBIT "A"
EQUIPMENT
One (1) SMS 7000 Production Router (Textronix) Serial No. B23655
One (1) 4000-3 Dig. Production Switcher (Textronix) Serial No. A89063
One (1) Dveous Digital Equipment (Scitex digital Video) Serial No.
5100SY14390177
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EXHIBIT "B"
NONDISCRIMINATION CLAUSE
During the term of this contract, the Borrower agrees as follows:
l. the Borrower shall not discriminate against any employe, applicant for
employment, independent contractor or any other person because of race, color,
religious creed, ancestry, national origin, age or sex. The Borrower shall take
affirmative action to insure that applicants are employed, and that employes or
agents are treated during employment, without regard to their race, color,
religious creed, ancestry, national origin, age or sex. Such affirmative action
shall include, but is not limited to: employment, upgrading, demotion or
transfer, recruitment or recruitment advertising; layoff or termination; rates
of pay or other forms of compensation; and selection for training. The Borrower
shall post in conspicuous places, available to employes, agents, applicants for
employment and other persons, a notice to be provided by the contracting agency
setting forth the provisions of this nondiscrimination clause.
2. the Borrower shall in advertisements or requests for employment placed
by it or on its behalf, state that all qualified applicants will receive
consideration for employment without regard to race, color, religious creed,
ancestry, national origin, age, or sex.
3. the Borrower shall send each labor union or workers' representative
with which they have a collective bargaining agreement or other contract or
understanding, a notice advising said labor union or workers' representative of
their commitment to this nondiscrimination clause. Similar notice shall be sent
to every other source of recruitment regularly utilized by the Borrower.
4. it shall be no defense to a finding of noncompliance with this
nondiscrimination clause that the Borrower had delegated some of its employment
practices to any union, training program or other source of recruitment which
prevents it from meeting its obligations. However, if the evidence indicates
that the Borrower was not on notice of the third-party discrimination or made a
good faith effort to correct it, such factor shall be considered in mitigation
in determining appropriate sanctions.
5. where the practices of a union or of any training program or other
source of recruitment will result in the exclusion of minority group persons, so
that the Borrower will be unable to meet its obligations under this
nondiscrimination clause, the Borrower shall then employ and fill vacancies
through other nondiscriminatory employment procedures.
6. the Borrower shall comply with all state and federal laws prohibiting
discrimination in hiring or employment opportunities. In the event of the
Borrower's noncompliance with the nondiscrimination clause of this contract or
with any such laws, this contract may be terminated or suspended, in whole or in
part, and the Borrower may be declared temporarily ineligible for further
Commonwealth contracts, and other sanctions may be imposed and remedies invoked.
7. upon request, the Borrower shall furnish all necessary employment
documents and records to, and permit access to its books, records and accounts
by, the contracting agency and the Office of Administration, Bureau of
Affirmative Action, for purposes of investigation to ascertain compliance with
the provisions of this clause. If the Borrower does not possess documents or
records reflecting the necessary information requested, it shall furnish such
information on reporting forms supplied by the contracting agency or the Bureau
of Affirmative Action.
8. the Borrower shall actively recruit minority subcontractors or
subcontractors with substantial minority representation among its employes.
9. the Borrower shall include the provisions of this nondiscrimination
clause in every subcontract, so that such provisions will be binding upon each
subcontractor.
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10. the Borrower obligations under this clause are limited to the
Borrower's facilities within Pennsylvania or, where the contract is for purchase
of goods manufactured outside of Pennsylvania, the facilities at which such
goods are actually produced.
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EXHIBIT "C"
CONTRACTOR INTEGRITY PROVISIONS
1. Definitions.
a. Confidential information means information that is not public
knowledge, or available to the public on request, disclosure of which would give
an unfair, unethical, or illegal advantage to another desiring to contract with
the Commonwealth.
b. Consent means written permission signed by a duly authorized officer or
employee of the Commonwealth, provided that where the material facts have been
disclosed, in writing, by prequalification, bid, proposal, or contractual terms,
the Commonwealth shall be deemed to have consented by virtue of execution of
this Agreement.
c. Commonwealth means the Commonwealth of Pennsylvania Acting by and
Through its Department of Community and Economic Development and any agencies
and instrumentalities of the Commonwealth of Pennsylvania for which the
Department of Community and Economic Development provides staff services
(including without limitation the Pennsylvania Industrial Development Authority,
Pennsylvania Economic Development Financing Authority, Pennsylvania Energy
Development Authority, and Pennsylvania Minority Business Development
Authority).
d. Contractor means the individual or entity that has entered into an
agreement with the Commonwealth, assumed the obligations of another to repay
moneys to the Commonwealth, or is the intended beneficiary of, and has knowingly
received benefits under, an agreement between the Commonwealth and a financial
intermediary or educational institution, including directors, officers,
partners, managers, key employees, and owners of more than a 5% interest.
e. Financial Interest means:
(1) ownership of more than a 5% interest in any business; or
(2) holding a position as an officer, director, trustee, partner,
employee, or the like, or holding any position of management.
f. Gratuity means any payment of more than nominal monetary value in the
form of cash, travel, entertainment, gifts, meals, lodging, loans,
subscriptions, advances, deposits of money, services, employment, or contracts
of any kind.
2. The Contractor shall take no action in violation of state or federal
laws, regulations, or other requirements that govern contracting with the
Commonwealth.
3. The Contractor shall not, in connection with this or any other
agreement with the Commonwealth, directly or indirectly offer, confer, or agree
to confer any pecuniary benefit on anyone as consideration for the decision,
opinion, recommendation, vote, other exercise of discretion, or violation of a
known legal duty by any officer or employee of the Commonwealth.
4. The Contractor shall not, in connection with this or any other
agreement with the Commonwealth, directly or indirectly offer, give, or agree or
promise to give to anyone any gratuity for the benefit of or at the direction or
request of any officer or employee of the Commonwealth.
5. Except with the consent of the Commonwealth, the Contractor shall not
have a financial interest in any other contractor, subcontractor, or supplier
providing services, labor, or material on this project.
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6. The Contractor, upon being informed that any violation of these
provisions has occurred or may occur, shall immediately notify the Commonwealth
in writing.
7. The Contractor, by execution of this Agreement and by the submission of
any bills or invoices for payment pursuant thereto, certifies and represents
that he has not violated any of these provisions.
8. The Contractor, upon the inquiry or request of the Inspector General of
the Commonwealth or any of that official's agents or representatives, shall
provide, or if appropriate, make promptly available for inspection or copying,
any information of any type or form relevant to the Contractor's compliance with
this Agreement (including without limitation these provisions relating to
Contractor integrity). Such information shall be retained by the Contractor for
a period of three years beyond the termination of the contract unless provided
by law.
9. For violation of any of the above provisions, the Commonwealth may
declare an event of default hereunder, subject to applicable notice and cure
provisions, and debar and suspend the Contractor from doing business with the
Commonwealth, including without limitation participation in its financial
assistance programs. These rights and remedies are cumulative, and the use or
nonuse of any one shall not preclude the use of all or any other. These rights
and remedies are in addition to those the Commonwealth may have under law,
statute, regulation, or otherwise.
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EXHIBIT "D"
CONTRACTOR RESPONSIBILITY PROVISIONS
1. The Contractor certifies that it is not currently under suspension or
debarment by the Commonwealth, any other state, or the federal government, and
if the Contractor cannot so certify, then it agrees to submit along with the
bid/proposal a written explanation of why such certification cannot be made.
2. If the Contractor enters into any subcontracts or employs under this
contract any subcontractors/individuals who are currently suspended or debarred
by the Commonwealth or the federal government or who become suspended or
debarred by the Commonwealth or federal government during the term of this
contract or any extensions or renewals thereof, the Commonwealth shall have the
right to require the Contractor to terminate such subcontracts or employment.
3. The Contractor agrees to reimburse the Commonwealth for the reasonable
costs of investigation incurred by the Office of Inspector General for
investigations of the Contractor's compliance with terms of this or any other
agreement between the Contractor and the Commonwealth which result in the
suspension or debarment of the Contractor. Such costs shall include, but not be
limited to, salaries of investigators, including overtime; travel and lodging
expenses; and expert witness and documentary fees. The Contractor shall not be
responsible for investigative costs for investigations which do not result in
the Contractor's suspension or debarment.
4. The Contractor may obtain the current list of suspended and debarred
contractors by contacting the:
Department of General Services
Office of Chief Counsel
603 North Office Building
Harrisburg, PA 17125
Telephone No. (717) 783-6472
Fax No. (717) 787-9138
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EXHIBIT "E"
AMERICANS WITH DISABILITIES ACT PROVISIONS
During the term of this contract, the Contractor agrees as follows:
1. Pursuant to federal regulations promulgated under the authority of The
Americans With Disabilities Act, 28 C.F.R. ss.35.101 et seq., the Contractor
understands and agrees that no individual with a disability shall, on the basis
of the disability, be excluded from participation in this contract or from
activities provided for under this contract. As a condition of accepting and
executing this contract, the Contractor agrees to comply with the "General
Prohibitions Against Discrimination," 28 C.F.R. ss.35.130, and all other
regulations promulgated under Title II of The Americans With Disabilities Act
which are applicable to the benefits, services, programs, and activities
provided by the Commonwealth of Pennsylvania through contracts with outside
contractors.
2. The Contractor shall be responsible for and agrees to indemnify and
hold harmless the Commonwealth of Pennsylvania from all losses, damages,
expenses, claims, demands, suits, and actions brought by any party against the
Commonwealth of Pennsylvania as a result of the Contractor's failure to comply
with the provisions of paragraph 1 above.
3. "Contractor" means the individual or entity that has entered into this
Agreement with the Commonwealth.
15
FIRST SUPPLEMENTAL LOAN AGREEMENT
THIS FIRST SUPPLEMENTAL LOAN AGREEMENT, dated as of December 15, 1997 (the
"Supplemental Agreement"), amending the Loan Agreement (the "Original
Agreement," and as supplemented by this Supplemental Agreement, the "Agreement")
dated as of July 1, 1997 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, in order to accomplish such purposes the Authority previously
issued its revenue bonds in an aggregate principal amount of $5,000,000, which
have been designated as the Allegheny County Industrial Development Authority
Variable Rate Demand Revenue Bonds, Series 1997 (Unitel Mobile Video Project)
(the "1997A Bonds"), under the Trust Indenture dated as of July 1, 1997 (the
"Original Indenture,") by and between the Authority and PNC Bank, National
Association, as trustee (the "Trustee"); and
WHEREAS, Section 201(b) of the Original Indenture authorizes the issuance
of a second tranche of Bonds in an aggregate principal amount not to exceed
$3,500,000 upon the satisfaction of certain conditions set forth in Section
201(b) of the Original Indenture; and
<PAGE>
WHEREAS, the Authority and the Corporation have on the date hereof
executed their Joint Written Request (as defined in the Original Indenture)
requesting the issuance of a second tranche of revenue bonds to be issued under
the Original Indenture, as supplemented by a First Supplemental Indenture, dated
as of December 15, 1997 (the "Supplemental Indenture," and together with the
Original Indenture, the "Indenture"), in an aggregate principal amount of
$3,500,000 and designated as the Allegheny County Industrial Development
Authority Variable Rate Demand Revenue Bonds, Series B of 1997 (Unitel Mobile
Video Project) (the "1997B Bonds," and together with the 1997A Bonds, the
"Bonds"); and
WHEREAS, the Authority and the Corporation desire to enter into this
Supplemental Agreement to clarify certain provisions regarding the 1997B Bonds;
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:
SECTION 1. PURPOSE. This Supplemental Agreement is being executed and
delivered for the purpose of supplementing the Original Agreement to provide for
the issuance of the 1997B Bonds in accordance with sections 201(b) and 1001(n)
of the Original Indenture.
SECTION 2. DEFINITIONS. All terms which are used and not otherwise defined
herein shall have the meanings set forth in the Indenture. All references to the
Bonds in the Original Agreement shall refer to both the 1997A Bonds and the
1997B Bonds, collectively, unless the context clearly requires otherwise.
SECTION 3. LOAN OF BOND PROCEEDS. The Authority will concurrently with the
issuance of the 1997B Bonds lend the proceeds from the sale of the 1997B Bonds
to the Corporation for the purpose of financing the Project. All proceeds
received from the sale of the 1997B 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 1997B Bonds, and such deposit, the Corporation shall
apply such finds to the costs of the Project and of the issuance of the 1997B
Bonds, as provided in the Indenture and the Agreement and shall make the
payments specified in Article IV of the Original Agreement and in Section 4
hereof.
SECTION 4. 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 set forth in Article IV of the Original Agreement,
in sums sufficient to pay the principal of, premium, if any, and interest
payable on both the 1997A Bonds and the 1997B Bonds, and to pay all other
amounts payable by the Corporation under the terms of the Agreement. All
references to the Bonds in Section 4.02 of the Original Agreement shall refer to
the 1997A Bonds and the 1997B Bonds, collectively.
2
<PAGE>
Section 4.02(g) of the Original Agreement is hereby amended and restated
as follows:
(h) Authority's Annual Administrative Fee.
(i) The Corporation shall pay an initial closing fee with
respect to the 1997A Bonds in the amount of $5,000 together with a legal fee in
the amount of $2,500 on the Closing Date applicable to the 1997A Bonds (July 24,
1997).
(ii) The Corporation shall pay an initial closing fee with
respect to the 1997B Bonds in the amount of $3,500 together with a first annual
administrative fee in the amount of $510 (representing seven months from the
Closing Date until July 24, 1998, the first anniversary of the closing date for
the 1997A Bonds) on the Closing Date (December 30, 1997). Commencing on August
1, 1998 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 $2,125, together with any other administrative
expenses (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.
SECTION 7. AMENDMENT TO ORIGINAL AGREEMENT. Section 5.01(g) of the
Original Agreement is hereby amended and restated as follows:
(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, with the exception of any such taxes the
payment of which is being contested in good faith and by proper
proceedings. No claims have been assessed and are unpaid with respect to
such taxes.
SECTION 6. COUNTERPARTS. This Supplemental Agreement may be simultaneously
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
SECTION 7. GOVERNING LAW. This Supplemental Agreement shall be governed
exclusively by and construed in accordance with the laws of the Commonwealth.
3
<PAGE>
SECTION 8. ORIGINAL AGREEMENT AND SUPPLEMENTAL AGREEMENT AS ONE DOCUMENT.
As supplemental by this Supplemental Agreement, the Original Agreement is in all
respects ratified and confirmed, and the Original Agreement and this
Supplemental Agreement shall be read, taken and construed as one and the same
instrument.
IN WITNESS WHEREOF, the ALLEGHENY COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
and UNITEL VIDEO, INC. have caused this First Supplemental Loan Agreement to be
duly executed as of the day and year first above written.
ATTEST: ALLEGHENY COUNTY INDUSTRIAL
DEVELOPMENT AUTHORITY
By: /s/ James M. Edwards By: /s/ James Marsh
----------------------------------- -----------------------------------
Authorized Designate (Vice) Chairman
ATTEST: UNITEL VIDEO, INC.
By: /s/ Karen C. Lapidus By: /s/ Barry Knepper
----------------------------------- -----------------------------------
Authorized Officer Authorized Officer
4
FIRST AMENDMENT
TO
PLEDGE AGREEMENT
This FIRST AMENDMENT TO PLEDGE AGREEMENT (this "Amendment") dated as of
December 15, 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").
W I T N E S S E T H :
WHEREAS, at the request of the Pledgor, the Allegheny County
Industrial Development Authority (the "Issuer") previously issued and sold
$5,000,000 aggregate principal amount of its Variable Rate Demand Revenue Bonds
Series 1997 (Unitel Mobile Video Project) (the "First Series of Bonds"), issued
pursuant to a Trust Indenture, dated as of July 1, 1997 (the "Original
Indenture") between the Issuer and PNC Bank, National Association, as trustee
(in its capacity as such, the "Trustee"), and loaned the principal amount of the
First Series of Bonds to the Pledgor to finance a portion of the costs of
constructing up to two mobile video television production units to be based at
the Pledgor's Allegheny County office (the "Project");
WHEREAS, in order to provide for payment when due of the principal
of, and interest on, the First Series of Bonds, and to provide for the payment
of the purchase price of the First Series of Bonds tendered or required to be
tendered pursuant to the Original Indenture, the Pledgor, pursuant to a
Reimbursement Agreement dated as of July 1, 1997 (the "Original Reimbursement
Agreement") between the Pledgor and Agent, requested Agent to cause Bank of
America National Trust and Savings Association (the "Letter of Credit Bank") to
issue a letter of credit (the "Original Letter of Credit"), in the initial
amount of $5,080,547.95 to support payments of principal of, and interest on,
the First Series Bonds and the purchase price of the First Series Bonds so
tendered or required to be tendered and Agent has caused the issuance of the
Original Letter of Credit under the Original Reimbursement Agreement;
WHEREAS, Pledgor has requested the Issuer to issue and sell an
additional $3,500,000 aggregate principal amount of its Variable Rate Demand
Revenue Bonds Series B of 1997 (Unitel Mobile Video Project) (the "Series B
Bonds" and, together with the First Series of Bonds, the "Bonds") issued
pursuant to a First Supplemental Indenture dated as of December 15, 1997 (as
amended the Original Indenture is hereinafter, the "Indenture"), to further
finance the Project;
WHEREAS, in order to provide for payment when due of the principal
of and interest on, the Series B Bonds, and to provide for the purchase of the
Series B Bonds tendered or required to be tendered pursuant to the Indenture,
the Pledgor, pursuant to a First Amendment to Reimbursement Agreement dated as
of December 15, 1997 (as amended the Original Reimbursement Agreement is
hereinafter, the "Reimbursement Agreement") has requested Agent to cause the
Letter of Credit Bank to issue an amended and restated Letter of Credit, (the
"Amended Letter of Credit") in place of the Original Letter of Credit, in an
aggregate stated amount of $8,636,931.51 to support payments of principal of,
<PAGE>
and interest on, all of the Bonds and the purchase price of Bonds tendered or
required to be tendered and not remarketed; and
WHEREAS, Agent is willing to cause the Letter of Credit Bank to
issue the Amended Letter of Credit pursuant to the Reimbursement Agreement
provided that the Pledge Agreement among Pledgor, the Escrow Agent and Agent is
amended on the terms and conditions hereafter set forth.
NOW THEREFORE, the Pledgor, the Escrow Agent and Agent hereby agree
as follows:
1. Amendment to Pledge Agreement. By this Amendment, the parties
intend to amend the Pledge Agreement solely to provide for the issuance of the
Series B Bonds and the Amended Letter of Credit. Accordingly, the Pledge
Agreement is hereby amended as follows:
(i) to include both the First Series of Bonds and the Series B
Bonds in the definition of "Bonds" for all purposes of the Pledge Agreement; and
(ii) to replace the recitals in the Original Pledge Agreement
with the recitals in this Amendment.
2. Effect on Pledge Agreement. Except as specifically amended
herein, the Pledge Agreement shall remain in full force and effect and is hereby
ratified and conformed.
3. Governing Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of New York.
4. 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.
SIGNATURE LINES ON FOLLOWING PAGE
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed, all as of the day and year first above written.
The Agent: HELLER FINANCIAL, INC. as Agent
By: /s/ Venkat Venkatesan
---------------------------------
Title: Vice President
------------------------------
500 West Monroe
Chicago, Illinois 60661
Attn: HBC Portfolio Manager
Telecopy: (312) 441-7026
The Pledgor: UNITEL VIDEO, INC.
By: /s/ Barry Knepper
---------------------------------
Title: Chief Executive 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/ Robert Ernst
---------------------------------
Title: Vice President
------------------------------
One Oliver Plaza, 27th Floor
Pittsburgh, Pennsylvania 15265
Attn: Corporate Trust Division
Telecopy: (412) 762-8226
3
FIRST AMENDMENT
TO
REIMBURSEMENT AGREEMENT
This FIRST AMENDMENT TO REIMBURSEMENT AGREEMENT is entered into as of
December 15, 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).
W I T N E S S E T H:
WHEREAS, the Company and Heller have entered into a Reimbursement
Agreement dated as of July 1, 1997 (the "Original Reimbursement Agreement); and
WHEREAS, the Company and Heller have agreed to amend the Original
Reimbursement Agreement on the terms set forth herein (the Original
Reimbursement, as amended by this Amendment, and as it may be further amended,
supplemental or otherwise modified from time to time, the "Reimbursement
Agreement").
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1. Definitions.
Capitalized terms used herein and undefined shall have therespective
meanings specified in the Reimbursement Agreement.
SECTION 2. Amendment to Reimbursement Agreement.
(a) Section 1(b) of the Reimbursement Agreement is hereby amended by
amending the following defined terms in their entirety to provide as follows:
"Bonds" means, collectively, the Issuer's Variable Rate Demand Revenue
Bonds, Series 1997 (Unitel Mobile Video Project) in the original principal
amount of $5,000,000 (the "First Series Bonds") and the Issuer's Variable Rate
Demand Revenue Bonds, Series B of 1997 (Unitel Mobile Video Project) in the
original principal amount of $3,500,000 (the "Series B Bonds").
"Company Agreement" means the Loan Agreement, dated as of July 1, 1997,
between the Company and the Issuer as amended by the First Supplement to Loan
Agreement dated as of December 15, 1997, and as the same may from time to time
be further amended, supplemented or modified.
"Indenture" means the Trust Indenture, dated as of July 1, 1997, between
the Issuer and PNC Bank, National Association, as trustee, as amended by the
First Supplemental Indenture dated as of December 15, 1997, and as the same may
from time to time be further amended, supplemented or modified.
"Letter of Credit" means the Amended and Restated Irrevocable Letter of
Credit No. ______ dated December 30, 1997 in the original face amount of
$8,636,931.51 issued by Bank of America National Trust and Savings Association
<PAGE>
in favor of PNC Bank, National Association, as trustee, as the same may from
time to time be amended, supplemented or modified.
"Letter of Credit Amount" means $8,636,931.51, as reduced and reinstated
as provided in the Letter of Credit.
"Letter of Credit Bank" means Bank of America National Trust and Savings
Association.
"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 amended by the First Amendment to Pledge Agreement, dated as of December 15,
1997, as the same may from time to time be further amended, supplemented or
modified.
"Preliminary Private Placement Memorandum" means, collectively, the
Preliminary Private Placement Memorandum dated July 18, 1997 relating to the
First Series Bonds and the Preliminary Private Placement Memorandum dated
December 23, 1997 relating to the Series B Bonds (including any documents
incorporated therein by reference and any amendments or supplements thereto).
"Private Placement Memorandum" means, collectively, the Private Placement
Memorandum dated July 23, 1997 relating to the First Series Bonds and the
Private Placement Memorandum dated December __, 1997 relating to the Series B
Bonds (including any documents incorporated therein by reference and any
amendments or supplements thereto).
"Purchase Contract" means, collectively, the Private Placement Agreement
dated July 23, 1997 relating to the First Series Bonds and the Private Placement
Agreement dated December 29, 1997 relating to the Series B Bonds, in each case
among the Issuer, the Company and RRZ Public Markets, Inc., as the same may from
time to time be amended, supplemented or modified.
"Remarketing Agreement" means the Remarketing Agreement, dated as of July
1, 1997, among the Issuer, the Company, the Trustee and the Remarketing Agent,
as amended by the Supplemental Remarketing Agreement dated as of December 15,
1997, and as the same may from time to time be further amended, supplemented or
modified.
(b) Section 1(b) of the Reimbursement Agreement is hereby further
amended by adding the following defined terms in their appropriate alphabetical
order:
"First Amendment Effective Date" means the date on which this Amendment is
executed and delivered by the Company and Heller.
"First Amendment Effective Date Related Documents" means those Related
Documents (or amendments or supplements thereto) executed and delivered on the
First Amendment Effective Date.
(c) Section 4(a) of the Reimbursement Agreement is hereby amended to
read in its entirety as follows:
"(b)(i) The initial term of the letter of credit (the "Initial
Letter of Credit") issued under the Reimbursement Agreement on July 24, 1997
commenced on July 24, 1997. The Initial Letter of Credit is being surrendered
and replaced by the Letter of Credit being issued contemporaneously with this
2
<PAGE>
Amendment. The initial term of the Letter of Credit shall commence on December
30, 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."
SECTION 3. Issuance of the Letter of Credit; Conditions Precedent to
Issuance. It is understood that the provisions of Section 3 of the Original
Reimbursement Agreement applied solely with respect to the issuance of the
Initial Letter of Credit delivered contemporaneously with the execution and
delivery of the Original Reimbursement Agreement. Accordingly, the terms of this
Section 3 shall apply with respect to the issuance of the Letter of Credit being
issued on the First Amendment Effective Date.
(a) Upon satisfaction of the conditions precedent set forth in
subsections (b) and (c)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, in form and substance satisfactory to Agent;
(ii) an 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 Amendment and each First Amendment Effective Date Related Document 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 Amendment and the First Amendment
Effective Date 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 Amendment and the other documents to be delivered by the
Company pursuant hereto;
(vi) executed copies (or duplicates thereof) of the First
Amendment Effective Date Related Documents, each of which shall be in form and
substance satisfactory to Agent; and
(vii) such other documents, instruments, approvals (and, if
requested by Agent, certified duplicates of executed copies thereof) or opinions
as Agent may reasonably request.
3
<PAGE>
(c) 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 Amendment and the First Amendment Effective Date 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 Series
B Bonds, this Amendment and of the First Amendment 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 first supplement to the Indenture and the Indenture shall be in
full force and effect;
(iv) all conditions precedent to the issuance of the Series B
Bonds (and to their purchase under the Purchase Contract relating to the Series
B Bonds as specified therein) shall have occurred; and
(v) the Issuer shall have duly executed, issued and delivered
the Series B Bonds.
SECTION 4. Representations and Warranties; No Default. The Company
represents and warrants to Agent and Lenders as follows:
(a) This Amendment and the Reimbursement Agreement, as amended hereby,
constitute legal, valid and binding obligations of the Company and are
enforceable against the Company in accordance with their respective terms.
(b) That all covenants, representations and warranties (excluding only
that set forth in paragraph (d) of Section 6 of the Reimbursement Agreement)
made in the Reimbursement Agreement, to the extent the same are not otherwise
notified to Agent in writing, are correct in all material respects and agrees
that after giving effect to the expanded definition of "Related Documents" in
this Amendment, all covenants, representations and warranties shall be deemed to
have been remade as of the First Amendment Effective Date.
(c) No Event of Default or Default has occurred and is continuing or would
exist after giving effect to this Amendment.
SECTION 5. Effect on the Reimbursement Agreement.
(a) Upon the execution on delivery of this Amendment, each reference
in the Reimbursement Agreement to "this Agreement," "hereunder," "hereof,"
"herein" or words of like import shall mean and be a reference to the
Reimbursement Agreement as amended hereby.
(b) Except as specifically amended herein, the Reimbursement
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.
4
<PAGE>
(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 Reimbursement Agreement, or any
other documents, instruments or agreements executed and/or delivered under or in
connection therewith.
SECTION 6. Governing Law. This Amendment shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New York.
SECTION 7. Counterparts. This Amendment 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.
SIGNATURE LINES ON FOLLOWING PAGE
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment 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: Chief Executive Officer
----------------------------
HELLER FINANCIAL, INC., as Agent
By: /s/ Venkat Venkatesan
-------------------------------
Title: Vice President
----------------------------
Exhibit 10(A)
AGREEMENT - AMENDMENT TO LEASE
February 16, 1998
BETWEEN: OLYMBEC CONSTRUCTION INC.
5584 Cote de Liesse, Suite 208
Town of Mount Royal, Quebec, H4P 1A9 (the "Lessor")
AND: UNITEL VIDEO CANADA INC.
3540 Griffith Street
City of Saint-Laurent, Quebec, H4T 1A7 (the "Lessee")
RE: Amendment to the Lease for the premises
measuring approximately 8,000 square feet and located at
3540 Griffith Street, Saint-Laurent, Quebec, H4T 1A7 (the
"Premises")
The present Agreement - Amendment to Lease shall form an integral part of the
Lease.
THE PARTIES HEREBY CONFIRM THE FOLLOWING:
WHEREAS in virtue of a lease signed in June 1997 (the "Lease"), the Lessor
leased to the Lessee the Premises for a term of five (5) years and one (1)
month, commencing June 1, 1997 and terminating June 30, 2002, the whole, at
terms and conditions more fully described in the Lease.
WHEREAS in virtue of Lessee's December 15, 1997 letter to the Lessor (the
"Letter"), the Lessee requested certain amendments to the Lease, the whole, as
more fully described in the Letter.
WHEREAS as a result of the Letter, the Lessor agrees to make certain amendments
to the Lease, the whole, as more fully described hereinafter.
IN WITNESS WHEREOF, THE PARTIES MUTUALLY AGREE TO THE FOLLOWING AMENDMENTS TO
THE LEASE:
1. Name of Lessee, Unitel Video Canada Inc.
The name of the Lessee, "Unitel", shall be amended as follows: "Unitel Video
Canada Inc."
2. Default, Article 18(c) of the Lease
The following section of Article 18(c) shall be deleted from the Lease:
"....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..."
<PAGE>
3. Lessor's Legal Hypothec, Article 36 of the Lease
Article 36 shall be deleted from the Lease.
4. Security Deposit, Article 41.1 of the Lease
Article 41,1 of the Lease reads as follows:
"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."
The following paragraph shall be added to Article 41.1 of the Lease:
"As a result of the amendments to the Lease contained herein, Lessee shall
provide Lessor with an additional sum of $9,585.42, including G.S.T. and P.S.T.,
which said sum shall be included in the Security Deposit. The sum of $9,585.42,
including G.S.T. and P.S.T., is payable immediately. The total amount of the
Security Deposit, namely $19,081.65, including G.S.T. and P.S.T., shall be
applied towards the minimum rental, surtax and taxes to become due for the first
and last three months of the Term."
The parties acknowledge having expressly required that this agreement and all
writings relating thereto be drawn up in English. Les parties declarent avoir
expressement requis que cette entente et tous les documents s'y rapportant
soient rediges en anglais.
IN WITNESS WHEREOF WE HAVE SIGNED THIS ___ DAY OF ________, 199____.
OLYMBEC CONSTRUCTION INC.
PER:
/s/Richard Stern
- --------------------------------- ---------------------------------------
Witness LESSOR: Richard Stern
UNITEL VIDEO CANADA INC.
PER:
/s/ Brian Harty
- --------------------------------- ---------------------------------------
Witness LESSEE: Brian Harty
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNITEL
VIDEO, INC. FORM 10-Q FOR THE QUARTER AND SIX MONTHS ENDED FEBRUARY 28, 1998.
</LEGEND>
<CIK> 0000740103
<NAME> Unitel Video, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1997
<PERIOD-END> FEB-28-1998
<CASH> 89
<SECURITIES> 0
<RECEIVABLES> 6,524
<ALLOWANCES> 575
<INVENTORY> 0
<CURRENT-ASSETS> 7,555
<PP&E> 104,663
<DEPRECIATION> 52,391
<TOTAL-ASSETS> 65,149
<CURRENT-LIABILITIES> 17,218
<BONDS> 42,246
0
0
<COMMON> 27
<OTHER-SE> 11,601
<TOTAL-LIABILITY-AND-EQUITY> 65,149
<SALES> 26,197
<TOTAL-REVENUES> 26,197
<CGS> 22,404
<TOTAL-COSTS> 22,404
<OTHER-EXPENSES> 5,718
<LOSS-PROVISION> 163
<INTEREST-EXPENSE> 1,845
<INCOME-PRETAX> (1,762)
<INCOME-TAX> 2
<INCOME-CONTINUING> (1,764)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,764)
<EPS-PRIMARY> (.66)
<EPS-DILUTED> (.66)
</TABLE>
