<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
-------------------------------------------
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 0-14333
ALL AMERICAN COMMUNICATIONS, INC.
- - - - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 95-3803222
---------------------------------- -------------------
(State of or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2114 Pico Boulevard, Santa Monica, California 90405
- - - - ----------------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (310) 450-3193
----------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ______
----------
Number of shares of common stock, $.0001 par value outstanding as of May 9,
1995: 5,425,971
-------------------------------
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
--------- ------------
(unaudited) (Note)
<S> <C> <C>
Cash and cash equivalents $ 3,920 $ 1,662
Restricted cash 4,568 10,246
Trade receivables, less allowances of $2,446 and $3,855
at March 31, 1995 and December 31, 1994, respectively 57,209 62,338
Inventory of recorded music product, net 1,490 1,423
Advances to recording artists, net 2,286 1,801
Television program costs, less accumulated amortization of $119,779
and $114,269 at March 31, 1995 and December 31, 1994, 75,993 68,437
respectively
Property and equipment, less accumulated depreciation and amortization 3,732 3,772
Goodwill, less accumulated amortization of $1,782 and $1,242 at
March 31, 1995 and December 31, 1994, respectively 51,005 51,545
Deferred income tax benefits 883 235
Other 5,587 6,548
-------- --------
Total assets $206,673 $208,007
======== ========
</TABLE>
Note: The balance sheet at December 31, 1994 has been derived from the
audited financial statements at that date but does not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
See accompanying notes to unaudited condensed consolidated financial
statements.
1
<PAGE> 3
ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
--------- ------------
(unaudited) (Note)
<S> <C> <C>
Liabilities:
Accounts payable $ 4,526 $ 6,826
Accrued expenses 12,497 10,652
Royalties payable 2,650 2,477
Deferred revenues 1,799 257
Due to producers 28,536 27,278
Participations payable 17,261 17,091
Notes payable 111,749 115,343
-------- --------
Total liabilities 179,018 179,924
-------- --------
Commitments and contingencies
Stockholders' equity
Preferred stock, authorized 5,000,000 shares -- --
Common stock, voting, $.0001 par value, authorized
20,000,000 shares, issued 5,455,971 in 1995 and
1994 (including treasury shares) 1 1
Common stock, Class B non-voting, $.0001 par value, authorized
20,000,000 shares, issued 2,520,000 in 1995 and 1994 -- --
Additional paid-in capital 28,751 28,751
Common stock in treasury, at cost,
30,000 shares in 1995 and 1994 (135) (135)
Stock subscriptions receivable (125) (153)
Accumulated deficit (1,204) (309)
Currency translation adjustment 367 (72)
-------- --------
Total stockholders' equity 27,655 28,083
-------- --------
Total liabilities and stockholders' equity $206,673 $208,007
======== ========
</TABLE>
Note: The balance sheet at December 31, 1994 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
2
<PAGE> 4
ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-------------------------------
1995 1994
-------- --------
(unaudited)
<S> <C> <C>
Revenues:
Television $33,944 $16,098
Recorded music 3,018 3,904
------- -------
36,962 20,002
------- -------
Expenses:
Television 28,049 11,982
Recorded music 1,864 2,461
Selling, general and administrative 5,768 4,429
Goodwill amortization 540 23
------- -------
36,221 18,895
------- -------
Operating income 741 1,107
Other income (expense):
Interest income 21 40
Interest expense, net of amounts capitalized (2,365) (1,101)
Other 60 2
------- -------
(2,284) (1,059)
Income (loss) before provision (benefit) for income taxes (1,543) 48
Provision (benefit) for income taxes (648) 17
------- -------
Net income (loss) $ (895) $ 31
======= =======
Net income (loss) per share $ (.11) $ .01
======= =======
Weighted average number of common shares and common share
equivalents outstanding 8,006,000 5,002,000
========= =========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
3
<PAGE> 5
ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1995 1994
-------- -------
(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (895) $ 31
Adjustments to reconcile net income (loss) to net cash (used)
provided by operating activities:
Depreciation and amortization of property, equipment and goodwill 661 1,117
Amortization of television program costs 5,510 9,076
Decrease in allowance for doubtful accounts (116) (220)
Decrease in allowance for sales returns (403) (73)
Decrease in makegoods reserve (890) (558)
Changes in operating assets and liabilities:
Restricted cash 164 (112)
Trade receivables, inventory and advances to recording artists 5,986 3,969
Additions to television program costs (13,066) (5,847)
Deferred income tax benefit (648) --
Accounts payable, accrued expenses and royalties payable (282) (206)
Due to producers and participations payable 1,428 (1,179)
Deferred revenues 1,542 (748)
Other assets 961 (87)
-------- -------
Net cash (used) provided by operating activities (48) 5,163
-------- -------
INVESTING ACTIVITY
Purchase of property and equipment net of book value of assets retired (81) (169)
-------- -------
Net cash used in investing activity (81) (169)
-------- -------
FINANCING ACTIVITIES
Repurchase of redeemable warrants -- (250)
Payments on stock subscriptions receivable 28 30
Proceeds from borrowings 21,580 --
Repayments of borrowings (25,174) (424)
Restricted cash held for repayment of borrowings 5,514 --
-------- -------
Net cash provided (used) by financing activities 1,948 (644)
-------- -------
Effect of exchange rate changes on cash 439 --
-------- -------
Increase in cash 2,258 4,350
Cash and cash equivalents at beginning of period 1,662 3,264
-------- -------
Cash and cash equivalents at end of period $ 3,920 $ 7,614
======== =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 1,355 $ 195
======== =======
Income taxes $ 120 $ 66
======== =======
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
4
<PAGE> 6
ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
Description of Business:
All American Communications, Inc. ("AAC") and its wholly-owned
subsidiaries, All American Television, Inc. ("AATV"), All American Productions,
Inc., ("AAP"), Scotti Brothers Entertainment Industries, Inc. ("SBEI") and All
American Fremantle International, Inc. ("AAFII") (and together with their
respective wholly-owned subsidiaries collectively, the "Company" or "All
American"), produce and/or distribute, market and promote television programs
and recorded music product both domestically and internationally.
Acquisitions:
On August 3, 1994, the Company acquired (the "Fremantle Acquisition")
certain assets and securities and assumed certain liabilities of Fremantle
International, Inc. ("Fremantle") through the Company's newly formed
wholly-owned subsidiary, AAFII. The consideration for the Fremantle
Acquisition consisted of 630,000 shares of the Company's Common Stock,
2,520,000 shares of nonvoting Class B Common Stock and $31,500,000 in cash
funded by a term loan from Chemical Bank (See Note 2). The Company has
accounted for the Fremantle Acquisition as a purchase and has allocated the
purchase price based on the estimated fair value of assets and liabilities
acquired. The total consideration of $52,527,000 (including expenses related
to the acquisition of $1,027,000) exceeded the estimated fair value of net
assets acquired by $50,267,000 (goodwill); such goodwill is being amortized
over 25 years. Results of operations of AAFII have been included in the
Company's results from August 3, 1994.
The pro forma unaudited results from operations for the three months
ended March 31, 1994 assuming consummation of the Fremantle Acquisition at
January 1, 1994 follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1994
--------------------
(in thousands except
per share amounts)
<S> <C>
Revenues $ 39,931
Operating income $ 3,237
Net income $ 1,621
Earnings per share $ .20
</TABLE>
The pro forma information presented above is prepared for comparative
purposes only and does not purport to be indicative of what would have occurred
had the acquisition been made at January 1, 1994, or of the results which may
occur in the future.
5
<PAGE> 7
ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1995
Basis of Presentation:
The accompanying unaudited condensed consolidated financial statements
include the accounts of AAC and its subsidiaries. The accounts of Fremantle
acquired by the Company on August 3, 1994 are included only from the date of
purchase. All significant intercompany transactions have been eliminated.
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
the applicable rules of the Securities and Exchange Commission. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments consisting of normal recurring accruals
considered necessary for a fair presentation have been included. Operating
results for the three months ended March 31, 1995 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1995. These financial statements should be read in conjunction with the
consolidated financial statements and related footnotes included in the
Company's latest Annual Report on Form 10-K.
Restricted Cash:
Pursuant to the Company's lending agreements, substantially all cash
collected is required to be paid into accounts maintained by Chemical Bank and
applied to the repayment of the outstanding borrowings as specified in the
lending agreements - See Note 2. The cash held for repayment is included as
restricted cash. Additionally, amounts held in an interest bearing reserve
account with respect to a dispute have been included as restricted cash - See
Note 5.
Foreign Currency:
The operations of all foreign entities are measured in local
currencies. Assets and liabilities are translated into United States ("U.S.")
dollars using exchange rates in effect at the end of each reporting period.
Revenues and expenses are translated at the average exchange rates prevailing
during the period. Adjustments resulting from translating the financial
statements of foreign entities into U.S. dollars are recorded as a separate
component of stockholders' equity.
Share Information - Earnings/(Loss) Per Share:
The per share income or loss was computed based on the weighted
average common shares outstanding and common share equivalents, when dilutive,
as of the dates presented. Fully diluted earnings per share have not been
presented as the effect would be antidilutive for the three months ended March
31, 1995 and 1994.
Income Taxes:
Income tax expense (benefit) is determined using the expected annual
effective tax rates of 42% and 35% for 1995 and 1994, respectively. Tax
benefits recognized during the three months ended March 31, 1995 are expected
to be realized within the year.
6
<PAGE> 8
ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1995
2. NOTES PAYABLE AND AMOUNTS DUE TO BANKS
Notes payable and amounts due to banks are comprised of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
--------- ------------
(in thousands)
<S> <C> <C>
Convertible subordinated notes, 6-1/2% $ 60,000 $ 60,000
Notes payable to banks 51,749 55,343
-------- --------
$111,749 $115,343
======== ========
</TABLE>
In April 1995, the Company secured a new senior credit facility (the
"Senior Credit Facility Agreement"), with a syndicate of lenders led by
Chemical Bank consisting of the following four tranches: (A) a term loan, the
total commitment of which is $30,000,000 (the "Term Loan" or "Tranche A") and
which was utilized to refinance existing bank debt incurred in connection with
the Fremantle Acquisition; (B) a revolving credit facility of up to $20,000,000
in the aggregate to be utilized for production and distribution of Baywatch and
$14,000,000 of which was initially utilized to refinance existing bank debt
related to production of Baywatch for the 1994/1995 and 1995/1996 broadcast
seasons (the "Baywatch Production Line" or "Tranche B"); (C) a revolving credit
facility, of up to $20,000,000 in the aggregate for production and distribution
of Baywatch Nights (the "Baywatch Nights Production Line" or "Tranche C"); and
(D) a revolving credit facility of up to $40,000,000 to be utilized to finance
certain working capital needs of the Company and $10,000,000 of which was
initially primarily used to refinance existing bank debt related to the
Company's working capital needs and to pay certain fees in connection with the
Senior Credit Facility Agreement (the "Working Capital Line" or "Tranche D").
The Working Capital Line together with the Baywatch Production Line and the
Baywatch Nights Production Line are referred to collectively as the "Chemical
Bank Facilities". The obligations of the Company under the Chemical Bank
Facilities and the Term Loan are cross-collateralized with one another. The
Term Loan matures on December 31, 1998. The Chemical Bank Facilities mature on
April 13, 1999. Under the terms of the Senior Credit Facility Agreement, the
amount the Company may borrow under Tranche B, C and D will be based upon the
value of the collateral in the borrowing base which consists principally of
accounts receivable of the Company. Borrowings under the Chemical Bank
Facilities bear interest, at the Company's option, either (i) at LIBOR plus
2-3/4%, or (ii) at the Alternate Base Rate (which is the greater of Chemical
Bank's Prime Rate, its Base CD Rate plus 1%, or the Federal Funds Effective
Rate plus 1/2%) plus 1-3/4% (10.75% as of April 26, 1995), subject to reduction
if certain financial ratios are satisfied. The Senior Credit Facility
Agreement imposes a number of financial and other conditions upon the Company,
including limitations on indebtedness, restrictions on the disposition of
assets, restrictions on making certain payments (including dividends) and
certain financial tests. Additionally, the Baywatch Production Line and the
Baywatch Nights Production Line provide that certain conditions must be
satisfied before funding of each season of the respective series.
Except to the extent set forth below, under the terms of the Senior
Credit Facility Agreement substantially all of the Company's cash collections
are required to be paid into accounts maintained by Chemical Bank and applied
to the repayment of the Company's obligations under the Chemical Bank
Facilities. All of AAFII's cash collections are required to be paid into
accounts maintained by Chemical Bank and applied, subject to certain exceptions
for working capital, to interest and principal amounts outstanding under the
Term Loan until such time as the Term Loan is repaid in full. The Term Loan is
repayable in thirteen quarterly principal installments ranging from $500,000 to
$4,000,000 commencing September 1995 (each payment being subject to reduction
from certain prepayments). The amount the Company is able to reborrow under
the Chemical Bank Facilities is subject to the ability of the Company to pledge
certain collateral to the lenders with sufficient borrowing base value to
collateralize such borrowings. Substantially all of the Company's assets are
pledged under the Senior Credit Facility Agreement except the real property
owned by the Company.
7
<PAGE> 9
ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1995
3. TELEVISION PROGRAM COSTS
Costs for television programs are comprised of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
--------- ------------
(in thousands)
<S> <C> <C>
Released, less accumulated amortization $69,241 $64,780
In process and development 6,752 3,657
------- -------
$75,993 $68,437
======= =======
</TABLE>
4. RELATED PARTY TRANSACTIONS
Certain officers/stockholders of the Company have issued to the
Company promissory notes in consideration for the shares of the Company's
Common Stock. Principal and interest under such notes are payable in five
equal annual installments. The principal balance outstanding on such notes as
of March 31, 1995 was approximately $125,000.
During 1994 the Company loaned $250,000 to an officer of the Company,
which loan is secured by a pledge of shares of Common Stock of the Company
owned by such officer. The loan bears interest at a rate of 8.0% per annum
(equal to the rate then in effect under the Company's working capital loan) and
will mature upon expiration of the officer's employment agreement which is
currently February 1996. The loan has been included with other assets in the
accompanying condensed consolidated balance sheet at March 31, 1995.
5. COMMITMENTS AND CONTINGENCIES
Minimum commitments for advances to recording artists at March 31,
1995 amounted to approximately $800,000.
The Company currently anticipates that in June 1995 it will
re-commence principal photography for the sixth season of the Company's weekly
drama series Baywatch, consisting of 22 new one hour episodes for the 1995/1996
television broadcast season. The total production budget of approximately
$22,000,000 for the 1995/1996 season is expected to be funded through a
combination of (i) borrowings under the Baywatch Production Line and (ii) cash
payments by The Fremantle Corporation (a company unrelated to AAFII and
Fremantle) pursuant to its foreign distribution agreement with the Company.
Through March 31, 1995, the Company has spent approximately $2,400,000 towards
the production of Baywatch for the 1995/1996 broadcast season.
The Company has begun production of a spin-off of Baywatch, Baywatch
Nights, which commenced principal photography in April 1995 for initial airing
in first-run syndication in the 1995/1996 broadcast season. The Company will
self-distribute Baywatch Nights both domestically and internationally. The
total production budget for the 22 planned new one-hour episodes for the
1995/1996 broadcast season of approximately $22,000,000 is expected to be
funded through borrowings under the Baywatch Nights Production Line or by
obtaining funding from other outside sources. Through March 31, 1995 the
Company has spent approximately $2,200,000 towards the pre-production of
Baywatch Nights.
8
<PAGE> 10
ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1995
In June 1993, the Company entered into an agreement with Richard and
Esther Shapiro (the creators of Dynasty and The Colbys) pursuant to which the
Company was granted a six-month period to arrange for the development,
production and exploitation of a television series presently entitled The
Colony (formerly The Malibu Branch). In February 1995, the ABC Television
Network (the "ABC Network") agreed to pay a license fee of $2,850,000 for the
production of a two-hour pilot and retained a previously acquired option to
order production and licensing of a minimum of 13 episodes of the series for
the 1995/1996 broadcast season (or as a mid-season replacement). The estimated
production budget of the two-hour pilot is $3,200,000 which the Company expects
to substantially finance through the ABC Network license fee and distribution
in certain international markets. The Company has entered into a license
agreement with Taurus Film GmbH ("Taurus") for distribution of the pilot in
certain international markets and which grants to Taurus an exclusive option to
distribute the series in these markets. Production of the pilot commenced in
March 1995 and the Company anticipates delivery of the completed pilot to the
ABC Network in May 1995. There can be no assurance that the ABC Network will
exercise its series option.
The Company is distributing the series The New Family Feud for the
1994/1995 broadcast season. The Company guaranteed the producers $7,500,000
payable in 15 monthly installments of $500,000 each, which commenced on July
15, 1994. Through April 26, 1995, $5,000,000 of the guarantee has been
satisfied by the Company. Remaining payments due under the guarantee are
expected to be satisfied through collections from the sale of program
advertising time. The Company has determined it will not distribute the series
for the 1995/1996 broadcast season.
In November 1993, the Company entered into an agreement to distribute
the series Sirens throughout the world (excluding Canada) for the 1994/1995
broadcast season. The Company has guaranteed the producers approximately
$434,000 per episode for the 22 episodes to be produced for the 1994/1995
broadcast season (for an aggregate of $9,548,000). As of April 26, 1995, the
Company has made guarantee payments to the producers totaling $8,578,000. It
is currently anticipated that the remainder of the guarantee payments will be
satisfied through collections from the sale of program advertising time.
Pursuant to the Company's agreement with the producers, the Company has
determined it will not distribute the series for the 1995/1996 broadcast
season.
In September 1994, the Company filed a complaint as amended against
the producers of the series Acapulco H.E.A.T. in the Superior Court of the
State of California alleging, among other things, breach of contract and fraud.
The Company had entered into an agreement, dated as of October 7, 1992, with
the producers for the Company to distribute the series Acapulco H.E.A.T. in the
domestic television market. Subject to the fulfillment of certain terms by the
producer, the Company agreed to pay a distribution advance of $6,600,000 (plus
an additional amount per episode under certain circumstances) payable over ten
months commencing November 30, 1993. The Company has discontinued making such
advance payments. As of September 1994, the Company had made payments totaling
approximately $4,698,000 at which time a dispute with the producers with regard
to the non-fulfillment of certain terms by the producers was raised by the
Company. The unpaid portion of the advance payments, totaling approximately
$2,452,000, has been placed in an interest-bearing restricted cash account
pending resolution of the dispute. The producers have filed an answer and
cross-complaint alleging, among other things, breach of contract and fraud in
connection with the agreement to distribute Acapulco H.E.A.T. and breach of
contract and fraud in connection with the Company's barter distribution of
certain theatrical films unrelated to Acapulco H.E.A.T. The Company intends to
vigorously pursue its claim and defend against the cross-complaint. The
litigation is currently in the discovery phase and depositions continue to be
scheduled. Management does not believe the ultimate outcome of this matter will
result in a materially adverse effect on the Company's financial condition.
However, there can be no assurance that the Company will be successful on
the merits of the lawsuit.
9
<PAGE> 11
ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1995
On December 12, 1994, Credit Lyonnais Bank Nederland N.V. ("CLBN")
made demand upon SBEI under a Guarantee dated July 29, 1986 (the "SBEI
Guarantee"), for payment of approximately $3,742,000 plus interest accrued or
costs booked since November 11, 1994 under a Loan and Security Assignment dated
July 29, 1986 between CLBN and various former subsidiaries of SBEI relating to
the discontinued motion picture operations of the Company. In a letter dated
December 22, 1994, SBEI rejected the foregoing demand based upon, among other
reasons, the following: (a) that in a January 1993 agreement CLBN agreed to
release all liens and any interests in any property or assets of SBEI, which in
effect released SBEI from any obligations under the SBEI Guarantee; (b) that
the loan purportedly guaranteed has been repaid; and (c) that SBEI is not a
party to and was not bound by a material amendment to the above-referenced Loan
and Security Assignment.
In addition, since approximately November 1993, CLBN and its
representatives have been reviewing certain books and records relating to the
distribution and production of certain motion pictures by Minority Pictures,
Inc. (formerly Scotti Brothers Pictures, Inc.) or its subsidiaries for which
CLBN provided financing. In October 1994, CLBN requested that Minority
Pictures, Inc. and various of its current and former affiliates (including All
American Communications, Inc. and certain of its subsidiaries) execute a
tolling agreement which would have tolled any claims which CLBN may have
against such persons, including but not limited to causes of action based on
such financing. In December 1994, the Company responded that based upon the
information provided by CLBN, or the lack thereof, it was extremely unclear
whether there were any tenable claims against the Company and its subsidiaries
and that the Company was therefore unwilling to enter into any tolling
agreement. While the Company believes that SBEI has good and meritorious
defenses with respect to the SBEI Guarantee and any related claims which CLBN
may assert, and that the ultimate outcome of this matter will not result in a
materially adverse effect on the Company's financial condition, there can
be no assurance that the Company ultimately will prevail.
The Company is party to certain other legal proceedings which are
routine and incidental to the business. The Company believes that the results
of such litigation will not have a material adverse effect on the Company's
financial condition.
10
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is a diversified entertainment company which produces and
distributes, markets and promotes television programs and recorded music both
domestically and internationally.
On August 3, 1994, AAC acquired (the "Fremantle Acquisition") certain
assets, including international programming rights, 297 shares of nonvoting
equity securities (representing a 99% financial interest) and assumed certain
liabilities of Fremantle International, Inc. ("Fremantle") through its newly
formed wholly-owned subsidiary All American Fremantle International, Inc.
("AAFII"). The Company has accounted for the Acquisition as a purchase and has
allocated the purchase price based on the estimated fair value of assets and
liabilities acquired. The assets acquired and liabilities assumed and the
related results of operations have been consolidated beginning August 3, 1994.
A small number of programs and musical recordings historically have
accounted for a significant portion of the Company's revenues in any given
fiscal period. In addition, the Company's television distribution revenues
have historically been higher in the first and fourth quarter as a result of
the commencement of the television season in the fall of each year. Thus, a
change in programs from period to period or the discontinuation of certain
projects may materially affect a given period's results of operations.
Therefore, year-to-year results may not be comparable and results in any
quarter may not be indicative of results for an entire year.
During the third quarter of 1995, the independent broadcast stations,
which have licensed the Company's domestic rerun ("strip") syndication package
of 111 previously aired Baywatch episodes, will commence telecast of such
episodes. Through May 8, 1995, the Baywatch strip package has been licensed to
television stations covering approximately 90% of the United States television
market on a cash and barter basis and the Company continues to actively market
the package. As of May 8, 1995, the Company has generated approximately
$19,000,000 of cash sales (i.e., excluding barter) related to the
domestic strip licensing of Baywatch and, in addition, will generally retain
three minutes of advertising time per telecast. The cash sales will be
collected ratably over the term of the strip license period. As a result of
sales to date, the telecast of the Baywatch reruns is expected to have a
favorable impact on revenues and cash flows recognized in future quarters.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1995 AND 1994
The following unaudited table sets forth the percentage relationship
to total revenues of certain items included in the Company's unaudited
condensed consolidated statements of operations for the three months ended
March 31, 1995 and 1994.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1995 1994
----- ------
<S> <C> <C>
Revenues:
Television 91.8 % 80.5%
Recording 8.2 19.5
----- -----
Total 100.0 100.0
Operating expenses:
Television 75.9 59.9
Recording 5.0 12.3
Selling, general and administrative 15.6 22.2
Goodwill amortization 1.5 0.1
----- -----
Total 98.0 94.5
Other expense 6.2 5.3
----- -----
Income (loss) before income taxes (4.2)% 0.2%
===== =====
</TABLE>
11
<PAGE> 13
THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO THREE MONTHS ENDED MARCH 31, 1994
Revenues. The Company's total revenues increased by $16,960,000 or
85%, to $36,962,000 for the three months ended March 31, 1995 as compared to
$20,002,000 for the three months ended March 31, 1994. Revenues from
television operations increased by $17,846,000 or 111%, to $33,944,000 for the
three months ended March 31, 1995 as compared to $16,098,000 for the three
months ended March 31, 1994. This increase was due primarily to the inclusion
of the AAFII revenues of $23,110,000, offset by a reduction in revenues in
connection with Baywatch attributable to the delivery of no episodes in the
first quarter of 1995 as compared with the delivery of 6 episodes in the first
quarter of 1994.
AAFII revenues from the production and distribution of television
programming in Germany and Greece contributed $16,455,000 (71% of total AAFII
revenues) and $1,342,000 (6% of total AAFII revenues), respectively. Of the
$16,455,000 in revenues derived from Germany, the local versions of Let's
Make a Deal contributed approximately $7,700,000 and The Price is Right
contributed approximately $4,200,000. AAFII revenues, on a pro forma basis,
increased by $3,181,000, or 16%, to 423,110,000 for the three months ended
March 31, 1995.
The Company's television distribution revenues have historically been
higher in the first and fourth quarters as a result of the commencement of the
television season in the fall of each year. The strip licensing of Baywatch is
expected to favorably impact revenues principally commencing in September 1995.
Recorded music division revenues decreased by $886,000, or 23%, to
$3,018,000 during the three months ended March 31, 1995 from $3,904,000 during
the three months ended March 31, 1994 This decrease was primarily attributable
to lower sales of new releases in the first quarter of 1995 as compared with
sales of new releases in the first quarter of 1994 partially offset by improved
catalog sales.
Operating Expenses. Total operating expenses increased by
$17,326,000, to $36,221,000 for the three months ended March 31, 1995 from
$18,895,000 for the three months ended March 31, 1994 due primarily to the
inclusion of AAFII operating expenses of $20,483,000 (including AAFII overhead)
and offset by decreased amortization due to a decrease in Baywatch deliveries
discussed above. Selling, general and administrative expenses, including
corporate overhead, increased by $1,339,000 to $5,768,000 for the three months
ended March 31, 1995 from $4,429,000 for the three months ended March 31, 1994
due principally to the inclusion of AAFII overhead.
The Company's television division expenses increased by $16,067,000 to
$28,049,000 (83% of total television revenues) for the three months ended March
31, 1995 from $11,982,000 (74% of total television revenues) for the three
months ended March 31, 1994. The increase was primarily due to the inclusion
of AAFII expenses of $18,729,000 (81% of AAFII revenues) offset by decreased
amortization of television program costs. The increase in television expenses
as a percent of total television revenues is attributable to revenues
recognized from certain programming which has lower gross profit percentages
than the overall mix of the Company's other distributed programming and lower
than expected gross profits on Sirens and Family Feud. Television selling,
general and administrative expenses during the first quarter of 1995 of
$3,163,000 increased by $954,000 from $2,209,000 for the first quarter of 1994
due primarily to the inclusion of AAFII charges of $1,246,000.
The Company's recorded music division expenses decreased $597,000 to
$1,864,000 (62% of total recording revenues) for the three months ended March
31, 1995 from $2,461,000 (63% of total recording revenues) for the three months
ended March 31, 1994. This decrease was primarily due to a decrease in artist
cost amortization and other variable costs attributable to decreased revenues.
12
<PAGE> 14
Operating Income. Total operating income for the Company decreased
$366,000 to $741,000 for the three months ended March 31, 1995 from operating
income of $1,107,000 for the three months ended March 31, 1994 due principally
to a decrease in recorded music operating income, partially offset by an
increase in television operating income. Operating income from television
operations increased $825,000 to $2,732,000 for the three months ended March
31, 1995 from operating income of $1,907,000 for the three months ended March
31, 1994. This increase in television operating income was primarily
attributable to the inclusion of AAFII operating income of $3,135,000 (before
amortization of goodwill), offset by Baywatch revenue recognition discussed
above. Goodwill amortization for the quarter ended March 31, 1995 increased by
$517,000 to $540,000 from $23,000 for the quarter ended March 31, 1994 due to
the inclusion of AAFII amortization of $508,000.
The Company's recorded music division recognized an operating loss of
($289,000) for the three months ended March 31, 1995 as compared to operating
income of $133,000 for the three months ended March 31, 1994. Such decrease
was primarily attributable to decreased revenues as discussed above.
Foreign Currency Exchange Gain. The Company recognized a foreign
currency exchange gain of $60,000 as of March 31, 1995 which was attributable
to the inclusion of AAFII and results from the settlement and valuation of
certain licensing agreements, denominated in foreign currencies, into
U.S. dollars as of March 31, 1995. No comparable amounts existed at
March 31, 1994. The Company has experienced in the past, and may experience
in the future, gains and losses as a result of fluctuations in exchange rates.
The Company does not typically purchase financial instruments designed to
hedge or minimize such foreign currency exposure, and has no present
intention of purchasing such financial instruments in any material amount.
To the extent the Company does not enter into foreign currency swap
agreements, the Company can expect to record foreign exchange losses
and gains in the future.
Interest Expense. Interest expense, net of interest capitalized
($68,000) and interest income ($21,000), increased $1,283,000, to $2,344,000
for the three months ended March 31, 1995 from $1,061,000 for the three months
ended March 31, 1994, due to increased borrowings in connection with the
Fremantle Acquisition. The Company expects that the trend of increased
interest costs will continue.
Income Taxes. Income tax benefit of $648,000 for the three months
ended March 31, 1995 primarily represents the tax benefit from loss at an
expected financial tax rate of 42%. The benefit is expected to be realized
later in 1995. During the three months ended March 31, 1994, the Company
recorded income taxes of $17,000 based on an expected financial tax rate for
1994 of 35%.
Net Income (Loss). Net loss of $895,000 for the three months ended
March 31, 1995 compares with net income of $31,000 for the three months ended
March 31, 1994. The variance is attributable to matters discussed above.
LIQUIDITY AND CAPITAL RESOURCES
This discussion should be read in conjunction with the notes to the
condensed consolidated financial statements and the corresponding information
more fully described in the Company's Form 10-K for the year ended December 31,
1994.
Historically, the Company has financed its cash flow requirements
through cash flows generated from operations, the issuance of shares of capital
stock and third party financings.
In April 1995, the Company secured a new senior credit facility (the
"Senior Credit Facility Agreement"), with a syndicate of lenders led by
Chemical Bank consisting of the following four tranches: (A) a term loan, the
total commitment of which is $30,000,000 (the "Term Loan" or "Tranche A") and
which was utilized to refinance existing bank debt incurred in connection with
the Fremantle Acquisition; (B) a revolving credit facility of up to $20,000,000
in the aggregate to be utilized for production and distribution of Baywatch and
$14,000,000 of which was initially utilized to refinance existing bank debt
related to production of Baywatch for the 1994/1995 and 1995/1996 broadcast
seasons (the "Baywatch Production Line" or "Tranche B"); (C) a
13
<PAGE> 15
revolving credit facility, of up to $20,000,000 in the aggregate for production
and distribution of Baywatch Nights (the "Baywatch Nights Production Line" or
"Tranche C"); and (D) a revolving credit facility of up to $40,000,000 to be
utilized to finance certain working capital needs of the Company and
$10,000,000 of which was initially used to primarily refinance existing bank
debt related to the Company's working capital needs and to pay certain fees in
connection with the Senior Credit Facility Agreement (the "Working Capital
Line" or "Tranche D"). The Working Capital Line together with the Baywatch
Production Line and the Baywatch Nights Production Line are referred to
collectively as the "Chemical Bank Facilities". The obligations of the Company
under the Chemical Bank Facilities and the Term Loan are cross-collateralized
with one another. The Term Loan matures on December 31, 1998. The Chemical
Bank Facilities mature on April 13, 1999. Under the terms of the Senior Credit
Facility Agreement, the amount the Company may borrow under Tranche B, C and D
will be based upon the value of the collateral in the borrowing base which
consists principally of accounts receivable of the Company. Borrowings under
the Chemical Bank Facilities bear interest, at the Company's option, either (i)
at LIBOR plus 2-3/4%, or (ii) at the Alternate Base Rate (which is the greater
of Chemical Bank's Prime Rate, its Base CD Rate plus 1%, or the Federal Funds
Effective Rate plus 1/2%) plus 1-3/4% (10.75% as of May 9, 1995), subject to
reduction if certain financial ratios are satisfied. The Senior Credit
Facility Agreement imposes a number of financial and other conditions upon the
Company, including limitations on indebtedness, restrictions on the disposition
of assets, restrictions on making certain payments (including dividends) and
certain financial tests. Additionally, the Baywatch Production Line and the
Baywatch Nights Production Line provide that certain conditions must be
satisfied before funding of each season of the respective series and such
conditions have been met for the 1995/1996 broadcast season of Baywatch Nights.
Except to the extent set forth below, under the terms of the Senior
Credit Facility Agreement substantially all of the Company's cash collections
are required to be paid into accounts maintained by Chemical Bank and applied
to the repayment of the Company's obligations under the Chemical Bank
Facilities. All of AAFII's cash collections are required to be paid into
accounts maintained by Chemical Bank and applied, subject to certain exceptions
for working capital, to interest and principal amounts outstanding under the
Term Loan until such time as the Term Loan is repaid in full. The Term Loan is
repayable in thirteen quarterly principal installments ranging from $500,000 to
$4,000,000 commencing September 1995 (each payment being subject to reduction
from certain prepayments). The amount the Company is able to reborrow under
the Chemical Bank Facilities is subject to the ability of the Company to
pledge certain collateral to the lenders with sufficient borrowing base value
to collateralize such borrowings. Substantially all of the Company's assets
are pledged under the Senior Credit Facility Agreement except the real
property owned by the Company. As of May 9, 1995, the Company has borrowed
an aggregate of approximately $56,500,000 under the Term Loan and the
Chemical Bank Facilities and approximately $26,000,000 was available for
borrowing under the Chemical Bank Facilities.
During the three months ended March 31, 1995, the Company used cash of
$48,000 in its operations which was a decrease of $5,211,000 from $5,163,000
of net cash provided by its operations for the three months ended March 31,
1994. This decrease in cash provided was due primarily to an increase in
additions to television program costs offset by decreased amortization of
television program costs and a decrease in accounts receivable. The Company
experienced positive cash flows from financing activities of $1,948,000 during
the first three months of 1995, primarily due to a net increase in borrowings
and restricted cash in excess of repayments under the Company's then existing
production and working capital loans. The Company expects to experience
significant negative cash flow from operations as a result of its increased
production and distribution activities. Any such negative cash flows are
expected to be funded, pending receipt of anticipated licensing revenues, out
of its Working Capital Line or by obtaining funding from outside sources.
14
<PAGE> 16
As described more fully below, the Company will have substantial
capital requirements during the next 12 months principally arising from the
Fremantle Acquisition, increased production and distribution of television
programming and the continued release of record albums requiring related
marketing, promotion and recording expenses. See Note 5 of Notes to Condensed
Consolidated Financial Statements (unaudited) as of March 31, 1995. The
commencement of production of television programming for the 1995/1996
broadcast season will require the Company to incur substantial production costs
in advance of generating revenues and cash receipts. Similarly, the Company
plans to incur significant costs associated with its television distribution
operations. The Company believes that its existing working capital together
with anticipated cash flow from operations and other available funding sources
will be sufficient to meet its working capital needs for the next twelve
months.
The Company from time to time considers the acquisition of program
rights and the expansion of its business through the acquisition of businesses
complementary to the current operations of the Company. Consummation of any
such acquisition or other expansion of the business conducted by the Company,
if beyond the Company's capital resources, would be subject to the Company
securing additional financing to the extent required. To the extent available,
such financing, if in the form of additional debt, may significantly increase
the Company's interest expense and, if in the form of equity financing would
subject existing stockholders to potential dilution in their overall percentage
ownership of the Company.
Television Production and Distribution
In order to obtain television programming for distribution, the
Company may be required to make advance cash payments to the producers of such
programming. However, the Company generally attempts to avoid advance payment
requirements by making minimum guarantees to producers or owners in connection
with the acquisition of television programming. In addition, the Company has
obtained letters of credit and other sources of bank financing to facilitate
certain programming acquisitions. The Company may acquire domestic or foreign
distribution rights to a particular television program in exchange for a
minimum guarantee against a specified percentage of future licensing and/or
advertising sales revenue less certain costs of distribution. These guarantees
are typically subject to delivery of the completed programs. While the Company
generally anticipates that it will recoup payments made under its guarantees
from licensing fees and the sale of advertising time, the Company often is
required to make payments under such guarantees in advance of generating
revenues and cash receipts. Any expansion of the Company's business could
require the Company to make substantially increased advance payments or provide
guarantees to third parties. Further, there can be no assurance that existing
advances and guarantees or those from expansion will be recouped by the Company
and, if not recouped, that such payments will not have a material adverse
affect on the Company.
The Company currently anticipates that in June 1995 it will
re-commence principal photography for the sixth season of the Company's weekly
drama series Baywatch, consisting of 22 new one hour episodes for the 1995/1996
television broadcast season. The total production budget of approximately
$22,000,000 for the 1995/1996 season is expected to be funded through a
combination of (i) borrowings under the Baywatch Production Line and (ii) cash
payments by The Fremantle Corporation (a company unrelated to AAFII and
Fremantle) pursuant to its foreign distribution agreement with the Company.
Through March 31, 1995, the Company has spent approximately $2,400,000 towards
the production of Baywatch for the 1995/1996 broadcast season.
The Company has begun production of a spin-off of Baywatch, Baywatch
Nights, which commenced principal photography in April 1995 for initial airing
in first-run syndication in the 1995/1996 broadcast season. The Company will
self-distribute Baywatch Nights both domestically and internationally. The
total production budget for the 22 planned new one-hour episodes for the
1995/1996 broadcast season of approximately $22,000,000 is expected to be
funded through borrowings under the Baywatch Nights Production Line or by
obtaining funding from other outside sources. Through March 31, 1995 the
Company has spent approximately $2,200,000 towards the pre-production of
Baywatch Nights.
15
<PAGE> 17
In June 1993, the Company entered into an agreement with Richard and
Esther Shapiro (the creators of Dynasty and The Colbys) pursuant to which the
Company was granted a six-month period to arrange for the development,
production and exploitation of a television series presently entitled The
Colony (formerly The Malibu Branch). In February 1995, the ABC Television
Network (the "ABC Network") agreed to pay a license fee of $2,850,000 for the
production of a two-hour pilot and retained a previously acquired option to
order production and licensing of a minimum of 13 episodes of the series for
the 1995/1996 broadcast season (or as a mid-season replacement). The estimated
production budget of the two-hour pilot is $3,200,000 which the Company expects
to substantially finance through the ABC Network license fee and distribution
in certain international markets. The Company has entered into a license
agreement with Taurus Film GmbH ("Taurus") for distribution of the pilot in
certain international markets and which grants to Taurus an exclusive option to
distribute the series in these markets. Production of the pilot commenced in
March 1995 and the Company anticipates delivery of the completed pilot to the
ABC Network in May 1995. If the ABC Network exercises its series option, the
Company expects to finance production of the series through a combination of
license fees to be negotiated with the ABC Network, foreign pre sales, working
capital or from other outside sources. There can be no assurance that the
ABC Network will exercise its series option and, if the ABC Network exercises
its option, that the Company will be able to secure financing necessary
to produce the series.
The Company is distributing the series The New Family Feud for the
1994/1995 broadcast season. The Company guaranteed the producers $7,500,000
payable in 15 monthly installments of $500,000 each, which commenced on July
15, 1994. Through April 26, 1995, $5,000,000 of the guarantee has been
satisfied by the Company. Remaining payments due under the guarantee are
expected to be satisfied through collections from the sale of program
advertising time. The Company has determined it will not distribute the series
for the 1995/1996 broadcast season.
In November 1993, the Company entered into an agreement to distribute
the series Sirens throughout the world (excluding Canada) for the 1994/1995
broadcast season. The Company has guaranteed the producers approximately
$434,000 per episode for the 22 episodes to be produced for the 1994/1995
broadcast season (for an aggregate of $9,548,000). As of April 26, 1995, the
Company has made guarantee payments to the producers totaling $8,578,000. It
is currently anticipated that the remainder of the guarantee payments will be
satisfied through collections from the sale of program advertising time.
Pursuant to the Company's agreement with the producers, the Company has
determined it will not distribute the series for the 1995/1996 broadcast
season.
Although the Company has several projects in various stages of
development (including the projects set forth above), as is typical in the
entertainment industry, only a small number of such projects may ultimately be
produced. There is no assurance that the Company will have adequate access to
sources of programs or that its efforts in developing or acquiring new
programs, including any of the above described projects, will lead to
production commitments or that any project ultimately produced will be
successful. The Company intends to continue to consider potential acquisitions
of production and/or distribution rights, for new television programming assets
and/or businesses in the ordinary course of business. Any acquisition could
require substantial administrative operating and capital commitments on the
part of the Company and there can be no assurance that the Company would have
(or be able to obtain) adequate capital to take advantage of any such
opportunity or that any recent or future acquisition will be profitable.
Recorded Music Operations
The Company is responsible for funding all distribution activities,
including producing, marketing, promoting and manufacturing recorded music for
domestic distribution. In order to perform this responsibility, the Company
has significant personnel and other overhead and marketing expenses, which
requires substantial capital.
As of May 9, 1995 the Company had a roster of 28 recording artists.
Additionally, the Company contracts from time to time with other artists or
entities for the production of recorded music for its special projects
division. Maintenance of a current artist roster requires the Company to fund
artist advances and recording costs. Artist advances, recording costs,
recording studio costs and other overhead and marketing expenses were funded
with cash flows from operations.
16
<PAGE> 18
Minimum contractual commitments to existing artists totaled
approximately $800,000 at March 31, 1995, and the Company will be required to
spend additional sums for recording and marketing expenses for several artists
in its current roster.
The Company has agreed to extend, effective July 1, 1995, its existing
foreign record distribution agreement with PolyGram solely with respect to
current catalog product for five years, expiring June 30, 2000. PolyGram
provides the Company with distribution and collection of record sales for which
the Company earns a royalty based on records sold throughout the world,
excluding the United States, Canada and Japan, which are applied against
advances previously received. PolyGram is responsible for all costs and
expenses in connection with manufacturing, marketing, promotion and
distribution in its territories.
The Company has entered into arrangements with other companies for
distribution of the Company's recorded music products in Canada (Attic) and
Japan (Pony/Canyon, Inc.). These arrangements provide for advances to the
Company against royalties to be earned by the Company on records sold. The
Company is in discussion with other companies concerning the distribution of
new product in the PolyGram territories.
Inflation
The Company believes that the impact of inflation has not been
significant to its financial condition or results of operations.
17
<PAGE> 19
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.8 Credit, Security, Guarantee and Pledge Agreement,
dated as of April 13, 1995 among All American
Communications, Inc., All American Fremantle
International, Inc., The Baywatch Production Company,
The Baywatch Nights Production Company, the
guarantors named therein, and Chemical Bank, as Agent
and Fronting Bank for the lenders named therein.
10.8.1 Amendment No. 1 dated as of April 13, 1995 to Credit,
Security, Guarantee and Pledge Agreement, among All
American Communications, Inc., All American Fremantle
International, Inc., The Baywatch Production Company,
The Baywatch Nights Production Company, the
guarantors named therein, and Chemical Bank, as Agent
and Fronting Bank for the lenders named therein.
10.26 Exclusive License Agreement dated as of March 15,
1995 between All American Television, Inc. and Taurus
Film GmbH & Co. (confidential treatment requested).
11 Statement re: Computation of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
18
<PAGE> 20
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.
ALL AMERICAN COMMUNICATIONS, INC.
Date: May 15, 1995 By: /s/ Anthony J. Scotti
------------------------------
Anthony J. Scotti
Chief Executive Officer
Date: May 15, 1995 By: /s/ Thomas Bradshaw
------------------------------
Thomas Bradshaw,
Chief Financial Officer and
Treasurer (Principal financial
officer and principal accounting
officer)
<PAGE> 21
ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page
Exhibit Number
------- ------
<S> <C> <C>
10.8 Credit, Security, Guarantee and Pledge Agreement, dated as of April 13, 1995 among All American
Communications, Inc., All American Fremantle International, Inc., The Baywatch Production Company,
The Baywatch Nights Production Company, the guarantors named therein, and Chemical Bank, as Agent and
Fronting Bank for the lenders named therein.
10.8.1 Amendment No. 1 dated as of April 13, 1995 to Credit, Security, Guarantee and Pledge Agreement, among
All American Communications, Inc., All American Fremantle International, Inc., The Baywatch Production
Company, The Baywatch Nights Production Company, the guarantors named therein, and Chemical Bank, as
Agent and Fronting Bank for the lenders named therein.
10.26 Exclusive license agreement dated as of March 15, 1995 between All American Television, Inc. and Taurus
Film GmbH & Co. (confidential treatment requested).
11 Statement re: Computation of Per Share Earnings
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.8
_________________________________________________________________
CREDIT, SECURITY, GUARANTY AND PLEDGE AGREEMENT
DATED AS OF APRIL 13, 1995
AMONG
ALL AMERICAN COMMUNICATIONS, INC.
AS A BORROWER AND A GUARANTOR,
THE OTHER BORROWERS NAMED HEREIN,
THE OTHER GUARANTORS NAMED HEREIN
AND
THE LENDERS NAMED HEREIN
WITH
CHEMICAL BANK, AS AGENT
AND
CHEMICAL BANK, AS FRONTING BANK
_________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INTRODUCTORY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. THE LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.2. Baywatch Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.3. B.N. Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.4. Working Capital Loans. . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.5. Making of Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.6. Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 2.7. Interest on Notes. . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 2.8. Commitment Fees and Other Fees. . . . . . . . . . . . . . . . . . . . 40
SECTION 2.9. Optional and Mandatory Termination or Reduction of Commitments. . . . 40
SECTION 2.10. Default Interest; Alternate Rate of Interest. . . . . . . . . . . . . 41
SECTION 2.11. Continuation and Conversion of Loans. . . . . . . . . . . . . . . . . 42
SECTION 2.12. Prepayment of Loans; Reimbursement of Lenders. . . . . . . . . . . . 43
SECTION 2.13. Change in Circumstances. . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 2.14. Change in Legality. . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 2.15. Manner of Payments. . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 2.16. United States Withholding. . . . . . . . . . . . . . . . . . . . . . 52
SECTION 2.17. Interest Adjustments. . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 2.18. Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . 55
3. REPRESENTATIONS AND WARRANTIES OF DEBTORS . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 3.1. Corporate Existence and Power. . . . . . . . . . . . . . . . . . . . 61
SECTION 3.2. Corporate Authority and No Violation. . . . . . . . . . . . . . . . . 61
SECTION 3.3. Governmental Approval. . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 3.4. Binding Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 3.5. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 3.6. No Material Adverse Change. . . . . . . . . . . . . . . . . . . . . . 63
SECTION 3.7. Subsidiaries; Ownership of Stock. . . . . . . . . . . . . . . . . . . 64
SECTION 3.8. Copyrights, Patents and Other Rights. . . . . . . . . . . . . . . . . 64
SECTION 3.9. Fictitious Names. . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 3.10. Title to Properties. . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 3.11. Places of Business. . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 3.12. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 3.13. Federal Reserve Regulations. . . . . . . . . . . . . . . . . . . . . 66
SECTION 3.14. Investment Company Act. . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 3.15. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 3.16. Compliance with ERISA. . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 3.17. Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 3.18. Security Interest; Other Security. . . . . . . . . . . . . . . . . . 68
SECTION 3.19. Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 3.20. Distribution Rights. . . . . . . . . . . . . . . . . . . . . . . . . 69
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SECTION 3.21. Environmental Liabilities. . . . . . . . . . . . . . . . . . . . . . 69
SECTION 3.22. Pledged Securities. . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 3.23. Real Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . 70
4. CONDITIONS OF LENDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 4.1. Conditions Precedent to Initial Loans or Letter of Credit. . . . . . 71
SECTION 4.2. Conditions Precedent to the Initial Baywatch Loan for Each Season of
the Baywatch Series or the Initial B.N. Loan for each Season of
the Baywatch Nights Series. . . . . . . . . . . . . . . . . . . . . 75
SECTION 4.3. Conditions Precedent to Each Loan and Letter of Credit. . . . . . . . 76
5. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 5.1. Financial Statements and Reports. . . . . . . . . . . . . . . . . . . 78
SECTION 5.2. Corporate Existence. . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 5.3. Maintenance of Properties. . . . . . . . . . . . . . . . . . . . . . 80
SECTION 5.4. Notice of Material Events. . . . . . . . . . . . . . . . . . . . . . 81
SECTION 5.5. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 5.6. Fremantle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 5.7. Production. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 5.8. Music. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 5.9. Copyright. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 5.10. Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 5.11. Observance of Agreements. . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 5.12. Film Properties and Rights; Debtors to Act as Pledgeholder. . . . . . 85
SECTION 5.13. Laboratories; No Removal. . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 5.14. Taxes and Charges; Indebtedness in Ordinary Course of Business. . . . 86
SECTION 5.15. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 5.16. Cash Receipts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 5.17. Further Assurances; Security Interests. . . . . . . . . . . . . . . . 87
SECTION 5.18. Recorded Product. . . . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 5.19. Receivables Audit. . . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 5.20. ERISA Compliance and Reports. . . . . . . . . . . . . . . . . . . . . 88
SECTION 5.21. Environmental Laws. . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 5.22. Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
6. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 6.1. Limitations on Indebtedness. . . . . . . . . . . . . . . . . . . . . 90
SECTION 6.2. Limitations on Liens. . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 6.3. Guaranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
SECTION 6.4. Limitations on Investments. . . . . . . . . . . . . . . . . . . . . . 92
SECTION 6.5. Restricted Payments. . . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 6.6. Limitations on Leases. . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 6.7. Limitations on Sale of Assets. . . . . . . . . . . . . . . . . . . . 94
SECTION 6.8. Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
SECTION 6.9. Sale and Leaseback. . . . . . . . . . . . . . . . . . . . . . . . . . 95
SECTION 6.10. Places of Business; Change of Name. . . . . . . . . . . . . . . . . . 95
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SECTION 6.11. Limitations on Capital Expenditures. . . . . . . . . . . . . . . . . 95
SECTION 6.12. Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . 95
SECTION 6.13. Prohibition of Amendments or Waivers. . . . . . . . . . . . . . . . . 96
SECTION 6.14. Net Worth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 6.15. Refund Percentage. . . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 6.16. General and Administrative Expense. . . . . . . . . . . . . . . . . . 96
SECTION 6.17. Leverage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 6.18. Interest Coverage Ratio. . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 6.19. Program Spending Ratio. . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 6.20. No Negative Pledge. . . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 6.21. Acquisitions or Mergers. . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 6.22. Limitations on Transactions With Completion Guarantors. . . . . . . . 97
SECTION 6.23. Change in Business. . . . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 6.24. ERISA Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 6.25. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
SECTION 6.26. Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
SECTION 6.27. Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . . . . 99
SECTION 6.28. Production/Acquisition Commitments. . . . . . . . . . . . . . . . . . 99
SECTION 6.29. Advertiser Guaranties. . . . . . . . . . . . . . . . . . . . . . . . 101
SECTION 6.30. Unrecouped Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 101
SECTION 6.31. AAF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
SECTION 6.32. Distribution Fees and Expenses. . . . . . . . . . . . . . . . . . . . 102
SECTION 6.33. Use of Proceeds of Loans. . . . . . . . . . . . . . . . . . . . . . . 102
7. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
8. GRANT OF SECURITY INTEREST; REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . 105
SECTION 8.1. Security Interests. . . . . . . . . . . . . . . . . . . . . . . . . . 105
SECTION 8.2. Use of Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . 106
SECTION 8.3. Collection Accounts. . . . . . . . . . . . . . . . . . . . . . . . . 106
SECTION 8.4. Debtors to Hold in Trust. . . . . . . . . . . . . . . . . . . . . . . 107
SECTION 8.5. Collections, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 107
SECTION 8.6. Possession, Sale of Collateral, etc. . . . . . . . . . . . . . . . . 107
SECTION 8.7. Application of Proceeds on Default. . . . . . . . . . . . . . . . . . 109
SECTION 8.8. Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . . . . 109
SECTION 8.9. Financing Statements, Direct Payments. . . . . . . . . . . . . . . . 110
SECTION 8.10. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . 110
SECTION 8.11. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
SECTION 8.12. Remedies Not Exclusive. . . . . . . . . . . . . . . . . . . . . . . . 111
SECTION 8.13. Quiet Enjoyment. . . . . . . . . . . . . . . . . . . . . . . . . . . 111
SECTION 8.14. Continuation and Reinstatement. . . . . . . . . . . . . . . . . . . . 111
9. GUARANTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
SECTION 9.1. Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
SECTION 9.2. No Impairment of Guaranty, etc. . . . . . . . . . . . . . . . . . . . 113
SECTION 9.3. Continuation and Reinstatement, etc. . . . . . . . . . . . . . . . . 113
SECTION 9.4. Limitation on Guaranteed Amount etc. . . . . . . . . . . . . . . . . 114
10. PLEDGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
SECTION 10.1. Pledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
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SECTION 10.2. Registration in Nominee Name; Denominations. . . . . . . . . . . . . 114
SECTION 10.3. Voting Rights; Dividends; etc. . . . . . . . . . . . . . . . . . . . 114
SECTION 10.4. Remedies Upon Default. . . . . . . . . . . . . . . . . . . . . . . . 115
SECTION 10.5. Application of Proceeds of Sale and Cash. . . . . . . . . . . . . . 117
SECTION 10.6. Securities Act, etc. . . . . . . . . . . . . . . . . . . . . . . . . 117
SECTION 10.7. Continuation and Reinstatement. . . . . . . . . . . . . . . . . . . 118
SECTION 10.8. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
11. CASH COLLATERAL AND ROYALTY ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . 119
SECTION 11.1. Cash Collateral Accounts. . . . . . . . . . . . . . . . . . . . . . 119
SECTION 11.2. Royalty Account. . . . . . . . . . . . . . . . . . . . . . . . . . . 119
SECTION 11.3. Investment of Funds. . . . . . . . . . . . . . . . . . . . . . . . . 119
SECTION 11.4. Grant of Security Interest. . . . . . . . . . . . . . . . . . . . . 120
SECTION 11.5. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
SECTION 11.6. Release of Royalty Funds. . . . . . . . . . . . . . . . . . . . . . 121
SECTION 11.7. Release of Project Funds. . . . . . . . . . . . . . . . . . . . . . 121
SECTION 11.8. Release of Funds for Corporate Overhead. . . . . . . . . . . . . . . 121
SECTION 11.9. Principal Payments. . . . . . . . . . . . . . . . . . . . . . . . . 122
12. THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
SECTION 12.1. Administration by Agent. . . . . . . . . . . . . . . . . . . . . . . 122
SECTION 12.2. Advances and Payments. . . . . . . . . . . . . . . . . . . . . . . . 123
SECTION 12.3. Sharing of Setoffs and Cash Collateral. . . . . . . . . . . . . . . 123
SECTION 12.4. Notice to the Lenders. . . . . . . . . . . . . . . . . . . . . . . . 124
SECTION 12.5. Liability of Agent. . . . . . . . . . . . . . . . . . . . . . . . . 124
SECTION 12.6. Reimbursement and Indemnification. . . . . . . . . . . . . . . . . . 125
SECTION 12.7. Rights of Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . 125
SECTION 12.8. Independent Investigation by Lenders. . . . . . . . . . . . . . . . 126
SECTION 12.9. Execution by Agent of Security Documentation on behalf of the
Lenders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
SECTION 12.10. Agreement of Majority Lenders or Super Majority Lenders. . . . . . . 126
SECTION 12.11. Notice of Transfer. . . . . . . . . . . . . . . . . . . . . . . . . 126
SECTION 12.12. Successor Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . 126
13. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
SECTION 13.1. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
SECTION 13.2. Survival of Agreement, Representations and Warranties, etc. . . . . 128
SECTION 13.3. Successors and Assigns; Syndications; Loan Sales; Participations. . 128
SECTION 13.4. Expenses; Documentary Taxes. . . . . . . . . . . . . . . . . . . . . 132
SECTION 13.5. Indemnification of Lenders. . . . . . . . . . . . . . . . . . . . . 132
SECTION 13.6. CHOICE OF LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
SECTION 13.7. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . . 134
SECTION 13.8. No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
SECTION 13.9. Extension of Maturity. . . . . . . . . . . . . . . . . . . . . . . . 134
SECTION 13.10. Amendments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 134
SECTION 13.11. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
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SECTION 13.12. SERVICE OF PROCESS. . . . . . . . . . . . . . . . . . . . . . . . . 135
SECTION 13.13. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
SECTION 13.14. Execution in Counterparts. . . . . . . . . . . . . . . . . . . . . . 136
SECTION 13.15. Subordination of Intercompany Advances. . . . . . . . . . . . . . . 136
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<PAGE> 7
Schedules
1 Schedule of Commitments
2 Approved Obligors and Approved Producers
3 Employment Agreements
3.7 Subsidiaries/Pledged Securities
3.8(a) Product, Recorded Product and Film Assets
3.8(b) Trademarks
3.9 Fictitious Names
3.11 Principal Executive Office/Location of Collateral
3.12 Litigation
3.17 Existing Indebtedness/Material Agreements
3.21 Environmental Liabilities
3.22 Outstanding Rights re Pledged Securities
3.23 Real Properties
5.22 Bank Accounts
6.2 Existing Liens
Exhibits
A-1 Form of Term Note
A-2 Form of Baywatch Note
A-3 Form of Baywatch Nights Note
A-4 Form of Working Capital Note
B-1 Form of Copyright Security Agreement
B-2 Form of Copyright Security Agreement Supplement
C Form of Laboratory Access Letter
D Matters to be covered in Opinion of Debtors' Counsel
E Form of Borrowing Base Certificate
F-1 Form of Contribution Agreement (Working Capital Loan)
F-2 Form of Contribution Agreement (Other Loans)
G Form of Pledgeholder Agreement
H Form of Borrowing Certificate
I Form of Assignment and Acceptance
J Form of Fremantle Security Agreement
K Form of Interpublic Agreement
L Form of Trademark Security Agreement
<PAGE> 8
CREDIT, SECURITY, GUARANTY AND PLEDGE AGREEMENT,
dated as of April 13, 1995, among ALL AMERICAN
COMMUNICATIONS, INC., a Delaware corporation ("Parent"),
ALL AMERICAN FREMANTLE INTERNATIONAL, INC., a Delaware
corporation ("AAF"), THE BAYWATCH PRODUCTION COMPANY, a
California corporation ("Baywatch") and THE BAYWATCH
NIGHTS PRODUCTION COMPANY, a California corporation
("Baywatch Nights"), the other Guarantors named herein,
the Lenders referred to herein, CHEMICAL BANK, a New
York banking corporation, as Agent (the "Agent") for the
Lenders and CHEMICAL BANK as Fronting Bank (the
"Fronting Bank").
INTRODUCTORY STATEMENT
All terms not otherwise defined above or in this Introductory
Statement are as defined in Article 1 hereof, or as defined elsewhere herein.
The Borrowers have requested that the Lenders make a term loan to
AAF in an amount up to $30,000,000 and also make available revolving credit
facility in the total amount of $80,000,000, which shall consist of (i) a
$20,000,000 facility in connection with the production and distribution of the
television series "Baywatch" (the "Baywatch Commitment"), (ii) a $20,000,000
facility in connection with the production and distribution of the television
series "Baywatch Nights" (the "B.N. Commitment") and (iii) a $40,000,000 working
capital facility (the "Working Capital Commitment").
The Borrowers have represented to the Lenders that the proceeds of
Loans made pursuant to (i) the Baywatch Commitment shall be used by Baywatch to
finance the production and distribution of the Baywatch Series, and to refinance
existing bank debt as of the Closing Date under the Production Loan Agreement
and to repay any intercompany production advances; (ii) the B.N. Commitment
shall be used by Baywatch Nights to finance the production and distribution of
the Baywatch Nights Series and to repay any intercompany production advances;
and (iii) the Working Capital Commitment, as well as Letters of Credit issued
thereunder, shall be used by the Parent to finance certain working capital needs
of the Parent and the subsidiaries of the Parent and to refinance existing bank
debt as of the Closing Date under the Existing Agreement. In addition, the
proceeds of the Term Loan shall be used to refinance existing bank debt as of
the Closing Date under the Fremantle Agreement incurred in connection
<PAGE> 9
with the purchase of the non-voting stock of Fremantle and certain assets of
Fremantle and its subsidiaries.
To provide assurance for the repayment of the Loans and all other
Obligations of the Borrowers hereunder, the Borrowers and the Guarantors, as the
case may be, will provide to the Agent, for the benefit of the Lenders (as more
fully described herein) (i) a security interest in the Collateral pursuant to
Article 8 hereof, (ii) a Guaranty of the Obligations pursuant to Article 9
hereof and (iii) a pledge of the Pledged Securities pursuant to Article 10
hereof.
Subject to the terms and conditions set forth herein, the Agent is
willing to act as agent for the Lenders and each Lender is willing to make a
Term Loan to AAF and to make Revolving Credit Loans to the other Borrowers in
amounts not in excess of the Total Commitment of that Lender, all as set forth
on the Schedule of Commitments.
Accordingly, the parties hereto hereby agree as follows:
1. DEFINITIONS
For the purposes hereof unless the context otherwise requires, the
following terms shall have the meanings indicated, all accounting terms not
otherwise defined herein shall have the respective meanings accorded to them
under GAAP and all terms defined in the UCC and not otherwise defined herein
shall have the respective meanings accorded to them therein. Unless the content
otherwise requires, any of the following terms may be used in the singular or
the plural, depending on the reference:
"AAF" shall be as defined in the initial paragraph of this Credit
Agreement.
"AATI" shall mean All American Television, Inc., a Delaware
corporation.
"Acceptable L/C" shall mean an irrevocable letter of credit in form
and on terms acceptable to the Agent, payable in Dollars at an office of the
issuing or confirming bank in New York City (or another city acceptable to
the Agent) and issued or confirmed by (a) any commercial bank that has (or which
is the principal operating subsidiary of a holding company which has) as of the
time such letter of credit is issued, public debt outstanding with a rating of
at least "A" (or the equivalent of an "A") from one of the nationally recognized
debt rating agencies, or (b) by any other bank which the Majority Lenders may in
their sole discretion determine to be of acceptable credit quality, which letter
of credit is payable to the Agent or
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<PAGE> 10
assigned to the Agent pursuant to documentation in form and substance acceptable
to the Agent.
"Affiliate" shall mean, with respect to any entity, any Person which
directly or indirectly holds a controlling interest in, or is under common
control with, such entity and any natural Person who is a director or officer of
such entity. For purposes of this definition, a Person shall be deemed to be
"controlled by" another Person if such latter Person possesses, directly or
indirectly, power either to direct or cause the direction of the management and
policies of such controlled Person whether by contract or otherwise or if such
latter Person owns either directly or indirectly at least 20% of the voting
securities or general partnership interest of such controlled Person. For
purposes hereof, "Affiliate" shall exclude Fremantle and Interpublic and shall
include Malibu.
"Agent" shall mean Chemical Bank, in its capacity as agent for the
Lenders hereunder or such successor Agent as may be appointed pursuant to
Section 12.12 of this Credit Agreement.
"Agency Contracts" shall mean those agreements (e.g. "New Family
Feud") where no ownership interest in Product is transferred to a Debtor, but
rather a Debtor is entitled to solicit contracts on behalf of the producer or
other Person with a proprietary interest in such Product. "Agency Contracts"
shall not include agreements entered into by Fremantle.
"Allowable Amount" shall mean, with respect to any Approved Obligor,
such amount as may be specified as the maximum aggregate exposure for such
Approved Obligor on Schedule 2 hereto, provided however, that from time
to time by written notice to the Parent (which notice shall, with respect to any
decrease in such amount, be effective 15 days subsequent to the Parent's receipt
of such notice) the Agent (x) shall if so instructed by the Majority Lenders,
increase such amount as the Majority Lenders may in their sole discretion deem
appropriate; (y) may decrease such amount as the Agent may in its sole
discretion deem appropriate as a result of a change in circumstances of such
Approved Obligor; or (z) shall if so instructed by the Majority Lenders,
decrease such amount as the Majority Lenders in their sole discretion deem
appropriate as a result of a change in circumstances of such Approved Obligor.
"Alternate Base Rate" shall mean, for any day, a rate per
annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the
greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in
effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect
for such day plus 1/2 of 1%. For purposes hereof, "Prime Rate" shall
mean the rate of interest per annum publicly announced from time to time by the
Agent as its prime rate in effect at its principal office in New
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<PAGE> 11
York City; each change in the Prime Rate shall be effective on the date such
change is publicly announced as effective. "Base CD Rate" shall mean the
sum of (a) the product of (i) the Three-Month Secondary CD Rate and (ii)
Statutory Reserves and (b) the Assessment Rate. "Three-Month Secondary CD
Rate" shall mean, for any day, the secondary market rate for three-month
certificates of deposit reported as being in effect on such day (or, if such day
is not a Business Day, the next preceding Business Day) by the Board of
Governors of the Federal Reserve System of the United States through the public
information telephone line of the Federal Reserve Bank of New York (which rate
will, under current practices of the Board of Governors of the Federal Reserve
System of the United States, be published in Federal Reserve Statistical Release
H.15(519) during the week following such day), or, if such rate shall not be so
reported on such day or such next preceding Business Day, the average of the
secondary market quotations for three-month certificates of deposit of major
money center banks in New York City received at approximately 10:00 a.m., New
York City time, on such day (or, if such day shall not be a Business Day, on the
next preceding Business Day) by the Agent from three New York City negotiable
certificate of deposit dealers of recognized standing selected by it. "Statutory
Reserves" shall mean a fraction (expressed as a decimal), the numerator of which
is the number one and the denominator of which is the number one minus the
aggregate of the maximum reserve percentages (including any marginal, special,
emergency or supplemental reserves) expressed as a decimal established by the
Board of Governors of the Federal Reserve System of the United States and any
other banking authority to which the Agent is subject for new negotiable
nonpersonal time deposits in dollars of over $100,000 with maturities
approximately equal to three months. Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage. "Federal Funds Effective Rate" shall mean, for any
day, the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for the day of such transactions received by the
Agent from three Federal funds brokers of recognized standing selected by it. If
for any reason the Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Base CD
Rate or the Federal Funds Effective Rate or both for any reason, including the
inability or failure of the Agent to obtain sufficient quotations in accordance
with the terms hereof, the Alternate Base Rate shall be determined without
regard to clause (b) or (c), or both, of the first sentence of this definition,
as appropriate, until the circumstances giving rise to such inability no longer
exist. Any change in the Alternate Base Rate due to a change in the Prime Rate,
the Three-Month
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<PAGE> 12
Secondary CD Rate or the Federal Funds Effective Rate shall be effective on the
effective date of such change in the Prime Rate, the Three-Month Secondary CD
Rate or the Federal Funds Effective Rate, respectively.
"Alternate Base Rate Loan" shall mean a Loan based on the
Alternate Base Rate in accordance with the provisions of Article 2 hereof.
"Applicable Law" shall mean all provisions of statutes,
rules, regulations and orders of governmental bodies or regulatory agencies
applicable to a Person, and all orders and decrees of all courts and arbitrators
in proceedings or actions in which the Person in question is a party.
"Applicable Margin" shall mean in the case of Alternate Base
Rate Loans, 1 3/4% per annum and in the case of Eurodollar Loans 2 3/4% per
annum, provided, however, that at such time, if any, and for so
long as the Program Spending Ratio at the end of a Rolling Period is in excess
of 1:1, such margins will be reduced by 1/2 of 1% per annum (i.e. to 1-1/4% per
annum for Alternate Base Rate Loans and to 2-1/4% per annum for Eurodollar
Loans) and provided further that so long as the Program Spending
Ratio at the end of a Rolling Period is in excess of 1:1 for two consecutive
quarters, such margins will be reduced by an additional 1/4% per annum (i.e. to
1% per annum for Alternate Base Rate Loans and to 2% per annum for Eurodollar
Loans). Any such reduction in the Applicable Margin shall become effective
immediately upon receipt by the Agent of the financial statements (delivered
pursuant to Section 5.1(a) or (b) herein) for the quarter at which end the
Program Spending Ratio for the Rolling Period then ended first exceeds 1:1 and
any such reduction shall cease to be effective immediately upon receipt by the
Agent of the financial statements (delivered pursuant to Section 5.1(a) (or (b)
herein) for the quarter at which end the Program Spending Ratio for the Rolling
Period then ended falls below 1:1. At such time, the margin for Alternate Base
Rate Loans shall be increased to 1 3/4% per annum and the margin for Eurodollar
Loans shall be increased to 2 3/4% per annum until and unless the Program
Spending Ratio at the end of a Rolling Period is in excess of 1:1, at which time
such margin shall be reduced as provided above.
"Approved Obligor" shall mean any Person identified as such
on Schedule 2 hereto, any Investment Grade Account Debtor or any Non-Investment
Grade Account Debtor, in each case, subject to the limitations set forth on
Schedule 2. The Agent from time to time by written notice to the Parent (which
notice shall, with respect to any deletion, be effective 15 days subsequent to
the Parent's receipt of such notice) (x) shall if so instructed by the Majority
Lenders, add such Persons as Approved Obligors as the Majority Lenders may in
their sole discretion deem
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<PAGE> 13
appropriate; (y) may delete such Persons as Approved Obligors as the Agent may
in its sole discretion deem appropriate as a result of a change in circumstances
of such Approved Obligor; or (z) shall if so instructed by the Majority Lenders,
delete such Persons as Approved Obligors as the Majority Lenders in their sole
discretion deem appropriate as a result of a change in circumstances of such
Approved Obligor.
"Approved Producer" shall mean any Person identified as such
on Schedule 2 hereto. The Agent from time to time by written notice to the
Parent (which notice shall, with respect to any deletion, be effective 15 days
subsequent to the Parent's receipt of such notice) (x) shall, if so instructed
by the Majority Lenders, add such Persons as Approved Producers as the Majority
Lenders in their sole discretion deem appropriate; (y) may delete such Persons
as Approved Producers as the Agent may in its sole discretion deem appropriate
as a result of a change in circumstances of such Approved Producer, or (z) shall
if so instructed by the Majority Lenders, delete such Persons as Approved
Producers as the Majority Lenders in their sole discretion deem appropriate as a
result of a change in circumstances of such Approved Producer.
"Assessment Rate" shall mean, for any day, the net annual
assessment rate (rounded upwards, if necessary, to the next higher 1/100 of 1%)
as most recently estimated by the Agent for determining the then current annual
assessment payable by the Agent to the Federal Deposit Insurance Corporation (or
any successor) for insurance by such Corporation (or such successor) of time
deposits made in dollars at the Agent's domestic offices.
"Assignment and Acceptance" shall mean an agreement in the
form of Exhibit I hereto, executed by the assignor, assignee and other parties
as contemplated thereby.
"Authorized Officer" shall mean, with respect to any Person,
its chief financial officer or chief accounting officer.
"B.N. Commitment" shall mean with respect to each Lender,
the commitment of such Lender to make B.N. Loans to Baywatch Nights in an amount
not in excess of the amount set forth opposite its name in the Schedule of
Commitments under the column "B.N. Loan Commitment", as such amount may be
reduced from time to time in accordance with this Credit Agreement.
"B.N. Loans" shall be as defined in Section 2.3.
"B.N. Notes" shall be as defined in Section 2.6(c).
"Bankruptcy Code" shall mean the Bankruptcy Reform Act of
1978, as heretofore and hereafter amended, as codified at 11 U.S.C. Section 101
et seq.
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<PAGE> 14
"Barter Receivables" shall mean Type A Barter Receivables, Type B
Barter Receivables and Type C Barter Receivables.
"Baywatch" shall be as defined in the initial paragraph of this
Credit Agreement.
"Baywatch Commitment" shall mean with respect to each Lender, the
commitment of such Lender to make Baywatch Loans to Baywatch in an amount not in
excess of the amount set forth opposite its name in the Schedule of Commitments
under the column "Baywatch Loan Commitment", as such amount may be reduced from
time to time in accordance with this Credit Agreement.
"Baywatch Distribution Agreement" shall mean the Restated and Amended
Distribution Services Agreement dated April 13, 1995 between AATI and Baywatch.
"Baywatch Loans" shall be as defined in Section 2.2.
"Baywatch Nights" shall be as defined in the initial paragraph of
this Credit Agreement.
"Baywatch Nights Distribution Agreement" shall mean the Distribution
Services Agreement between AATI and Baywatch Nights, substantially in the form
of the Baywatch Distribution Agreement.
"Baywatch Nights Series" shall mean the first-run syndicated
television series entitled "Baywatch Nights" which is currently being produced
by Baywatch Nights.
"Baywatch Notes" shall be as defined in Section 2.6(b).
"Baywatch Series" shall mean the first-run and strip syndicated
television series entitled "Baywatch" which is currently being produced by
Baywatch.
"Billed Barter Receivables" shall mean the amount of "net receipts"
(adjusted for actual Make Goods) which are contractually owing to one of the
Debtors in connection with a program which has been aired and which is payable
to one of the Debtors by Approved Obligors as a result of sales to advertisers
of National Spots. Such receivables shall otherwise satisfy all applicable
criteria for inclusion as Eligible Receivables.
"Borrower" shall mean the Parent, AAF, Baywatch or Baywatch Nights,
as the case may be.
"Borrowing" means a borrowing of Loans by any one or more of the
Borrowers of the same interest rate type and having the same Interest Period
made by the Lenders hereunder on any given day.
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<PAGE> 15
"Borrowing Base" shall mean, at any date for which the amount thereof
is to be determined, an amount equal to:
(a) 90% of the Debtors' aggregate Domestic Receivables; plus,
(b) 90% of the Debtors' aggregate Foreign Receivables; plus,
(c) 90% of the Debtors' aggregate Billed Barter Receivables; plus,
(d) the amount, if any, by which 85% of the Debtors' aggregate
Record Receivables exceeds the portion of any advance made to
any Debtor by BMG Music, Inc. or any of its Affiliates which
they are entitled to recoup from such Record Receivables;
plus,
(e) 85% of the Debtors' Type A Barter Receivables; plus
(f) 50% of the Debtors' Type B Barter Receivables; plus
(g) 85% of the Debtors' Type C Barter Receivables; plus
(h) the aggregate amount of cash and Cash Equivalents on deposit
in the Cash Collateral Account;
provided, however, that if an Eligible Receivable is supported by an Acceptable
L/C, the advance rate for such Eligible Receivable shall be increased to 100%.
"Borrowing Base Certificate" shall be as defined in Section 5.1(d).
"Borrowing Certificate" shall mean a borrowing certificate,
substantially in the form of Exhibit H hereto, to be delivered by a Borrower to
the Agent in connection with each Borrowing.
"Budgeted Negative Cost" shall mean for any item of Product the
aggregate amount of the preproduction expenses with regard to such item of
Product plus the cost of all production elements usually and customarily
included as part of the negative cost of a television program or other item of
Product of like cost and quality plus the usual and customary post production
costs of such television program or other item of Product, and shall
specifically include charges for (x) general overhead costs, (y) any completion
guaranty fee which is to be paid and
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<PAGE> 16
(z) any interest whether capitalized or not. Preproduction expenses with respect
to a Picture or other item of Product shall mean the following costs:
(i) the cost of acquisition of the basic literary property;
(ii) the cost of the screenplays prepared for that item of
Product and any polishing work done thereon; and
(iii) the cost of all other production elements properly
includable in the production or preproduction expenses for that item
of Product (subject to the limitations set forth above), which are
payable or incurred before the commencement of principal photography
of that item of Product.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which banks are required or permitted to close in the State of
New York, State of California or The Netherlands; provided, however, that when
used in connection with a Eurodollar Loan, the term "Business Day" shall also
exclude any day on which banks are not open for dealings in Dollar deposits on
the London Interbank Market.
"Capital Expenditures" shall mean, with respect to any Person for
any period, the sum of (i) the aggregate of all expenditures (whether paid in
cash or accrued as a liability) by such Person during that period which, in
accordance with GAAP, are or should be included in "additions to property, plant
or equipment" or similar items reflected in the statement of cash flows of such
Person and (ii) to the extent not covered by clause (i) hereof, the aggregate of
all expenditures by such Person to acquire by purchase or otherwise the
business, property or fixed assets of, or stock or other evidence of beneficial
ownership of, any other Person (other than the portion of such expenditures
allocable in accordance with GAAP to net current assets), except for such
expenditures made in connection with Product or Recorded Product.
"Capital Lease", as applied to any Person, shall mean any lease of
any property (whether real, personal or mixed) by that Person as lessee which,
in accordance with GAAP, is or should be accounted for as a capital lease on the
balance sheet of that Person.
"Cash Collateral Accounts" shall be as defined in Section 11.1
hereof.
"Cash Equivalents" shall mean (i) marketable securities issued or
directly and fully guaranteed or insured by the United
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<PAGE> 17
States of America or any agency or instrumentality thereof (provided that the
full faith and credit of the United States of America is pledged in support
thereof) having maturities of not more than six months from the date of
acquisition, (ii) time deposits and certificates of deposit with maturities of
not more than six months from the date of acquisition, issued by any Lender, or
by any other domestic commercial bank of recognized standing having capital and
surplus in excess of U.S.$250,000,000 and (iii) commercial paper rated at least
A-2 or the equivalent thereof by Standard & Poor's Rating Group or at least P-2
or the equivalent thereof by Moody's Investors Service, Inc. and in each case
maturing within six months after the date of acquisition.
"Change in Control" shall mean (i) Anthony Scotti and Benjamin
Scotti as a group shall cease to beneficially own, directly or indirectly, at
least 20% (on a fully diluted basis) of the total Voting Stock then outstanding
of the Parent; (ii) Anthony Scotti and Benjamin Scotti as a group shall cease to
"beneficially" own, directly or indirectly, at least 80% of the total shares of
the Voting Stock of the Parent which they own of record as of the date hereof;
(iii) any "person" (such term being used in this clause (iii) as used in Section
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) is or becomes the "beneficial owner" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time; provided, however, that shares subject to a proxy or voting arrangement
in favor of Anthony Scotti and Benjamin Scotti shall not be included in
determining "beneficial ownership" by any other Person), directly or indirectly,
of more shares of the total Voting Stock then outstanding of the Parent than are
owned or controlled, directly or indirectly by Anthony Scotti and Benjamin
Scotti collectively or (iv) if at any time, individuals who at the date hereof
constituted the Board of Directors of the Parent (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the shareholders of the Parent, as the case may be, was approved by
a vote of the majority of the directors then still in office who were either
directors at the date hereof or whose election or a nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Parent then in office.
"Change in Management" shall mean either (x) Anthony Scotti or (y)
two out of three of the following individuals: Tom Bradshaw, Myron Roth and
Lawrence Lamattina shall cease for any reason, including, without limitation,
termination of employment, death or disability (the term "disability" or
"disabled" as used herein meaning an inability continuing for one hundred and
eighty (180) consecutive days (the "Disability Period") to perform the
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<PAGE> 18
functions and services described in the Employment Agreement to which such
individual is a party), to perform the functions and services described in his
respective Employment Agreement and the Parent shall fail, for a period of
ninety (90) consecutive days following the last day of the Disability Period in
which Anthony Scotti or the second such individual referred to in clause (y),
may be considered disabled or shall have otherwise ceased to perform his
executive functions with the Parent as aforesaid, to propose a replacement for
Anthony Scotti or one of such individuals, as the case may be, acceptable to the
Super Majority Lenders in their sole discretion provided that any such
replacement shall be deemed acceptable to the Super Majority Lenders unless the
Agent notifies the Parent in writing that the Super Majority Lenders object to
such replacement within 30 days after receiving a written notice from the Parent
containing the name of the proposed replacement.
"Chemical Account" shall mean an account of the Parent (under the
dominion and control of the Parent) maintained at the office of the Agent.
"Closing Date" shall mean the date on which all conditions precedent
to the making of the initial Loans as set forth in Section 4.1 have been
satisfied or waived, which shall in no event be later than April 21, 1995.
"Code" shall mean the Internal Revenue Code of 1986 and the rules
and regulations issued thereunder, as now and hereafter in effect, or any
successor provision thereto.
"Collateral" shall mean all the Debtors' right, title and interest
in personal property, tangible and intangible, wherever located or situated and
whether now owned or hereafter acquired or created, including but not limited to
all of the Debtors' right, title and interest in and to all related goods,
accounts, intercompany obligations, contract rights, documents, chattel paper,
general intangibles, goodwill, equipment, inventory, copyrights, trademarks,
tradenames, insurance proceeds, cash and bank accounts and any proceeds thereon,
products thereof or income therefrom to the extent of the Debtors' interest
therein, further including but not limited to all of the Debtors' right, title
and interest in and to each and every item of Product and Recorded Product to
the extent of the Debtors' interest therein and without limiting the foregoing
language, each and all of the following particular rights and properties to the
extent of the Debtors' interest therein:
(i) all scenarios, screenplays and/or scripts at every
stage thereof;
(ii) all common law and/or statutory copyright and other
rights in all literary and other properties
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<PAGE> 19
(hereinafter called "said literary properties") which form the basis
of the item of Product and/or Recorded Product and/or which are or
will be incorporated into the item of Product and/or Recorded
Product, all component parts of the item of Product (and/or Recorded
Product consisting of said literary and other properties, all motion
picture rights in and to the story, all treatments of said story and
other literary material, together with all preliminary and final
screenplays used and to be used in connection with the item of
Product and/or Recorded Product, and all other literary material
upon which the item of Product and/or Recorded Product is based or
from which it is adapted;
(iii) all rights in and to all music and musical compositions
used and to be used in the item of Product and/or Recorded Product,
including, but without being limited to, all rights to record,
rerecord, produce, reproduce or synchronize all of said music and
musical compositions in and in connection with motion pictures;
(iv) all exposed and developed negative film, tapes, sound
tracks, positive prints, cutouts and trims connected with the item
of Product, whether or not in completed form or in some state of
completion;
(v) all collateral, allied, subsidiary and merchandising
rights appurtenant or related to the item of Product and/or Recorded
Product including, without limitation, the following rights: all
rights to produce remakes or sequels or prequels to the item of
Product based upon the item of Product, said literary properties or
the theme of the item of Product and/or the text or any part of said
literary properties; all rights throughout the world to broadcast,
transmit and/or reproduce by means of television (including
commercially sponsored, sustaining and subscription or "pay"
television) or by any process analogous thereto, now known or
hereafter devised, the item of Product or any remake or sequel or
prequel to the item of Product; all rights to produce primarily for
television or similar use a motion picture or series of motion
pictures, by use of film or any other mechanical recording device
now known or hereafter devised, based upon the item of Product, said
literary properties or any part thereof, including, without
limitation, based upon any script, scenario or the like used in the
item of Product; all merchandising rights including, without
limitation, all rights to use, exploit and license others to use and
exploit any and all commercial tieups of any kind arising out of or
connected with said literary properties, the item of Product and/or
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<PAGE> 20
Recorded Product, the title or titles of the item of Product and/or
Recorded Product, the characters of the item of Product or said
literary properties and/or the names or characteristics of said
characters and including further, without limitation, any and all
commercial exploitation in connection with or related to the item of
Product, any remake or sequel thereof and/or said literary
properties;
(vi) all statutory copyrights, domestic and foreign,
obtained or to be obtained on the item of Product and/or Recorded
Product, together with any and all copyrights obtained or to be
obtained in connection with the item of Product and/or Recorded
Product or any underlying or component elements of the item of
Product and/or Recorded Product, including, but without being
limited to, all copyrights on the property described in
subparagraphs (i) through (v) inclusive, of this paragraph, together
with the right to copyright and all rights to renew or extend such
copyrights and the right to sue in the name of any of the Debtors or
in the Agent's name (for the benefit of the Lenders) for past,
present and future infringements of copyright;
(vii) all insurance policies and completion bonds connected
with the item of Product and/or Recorded Product and all proceeds
which may be derived therefrom;
(viii) all rights to distribute, sell, rent, license the
exhibition of and otherwise exploit and turn to account the item of
Product and/or Recorded Product, the negatives, sound tracks, prints
and motion picture rights in and to said story, other literary
material upon which the item of Product is based or from which it is
adapted, and said music and musical compositions used or to be used
in the item of Product and/or Recorded Product;
(ix) any and all sums, proceeds, money, products, profits or
increases, including money profits or increases (as those terms are
used in the UCC or otherwise) or other property obtained or to be
obtained from the distribution, exhibition, sale or other uses or
dispositions of the item of Product and/or Recorded Product or any
part of the item of Product and/or Recorded Product, including,
without limitation, all proceeds, profits, products and increases,
whether in money or otherwise, from the sale, rental or licensing of
the item of Product and/or Recorded Product and/or any of the
elements of the item of Product and/or
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<PAGE> 21
Recorded Product including from collateral, allied, subsidiary and
merchandising rights;
(x) the dramatic, nondramatic, stage, television, radio and
publishing rights, title and interest in and to the item of Product
and/or Recorded Product, and the right to obtain copyrights and
renewals of copyrights therein;
(xi) the title of the item of Product and/or Recorded
Product and all rights of the Debtors to the use thereof, including,
without limitation, rights protected pursuant to trademark, service
mark, unfair competition and/or the rules and principles of law and
of any other applicable statutory, common law, or other applicable
statutes, common law, or other rule or principle of law;
(xii) any and all contract rights and/or chattel paper which
may arise in connection with the item of Product and/or Recorded
Product;
(xiii) all accounts and/or other rights to payment which any
Debtor presently owns or which may arise in favor of any Debtor in
the future, including, without limitation, any refund under a
completion guaranty, all accounts and/or rights to payment due from
exhibitors in connection with the distribution of the item of
Product and/or Recorded Product, and from exploitation of any and
all of the collateral, allied, subsidiary, merchandising and other
rights in connection with the item of Product and/or Recorded
Product;
(xiv) any and all "general intangibles" (as that term is
defined in the UCC) not elsewhere included in this definition,
including, without limitation, any and all general intangibles
consisting of any right to payment which may arise in the
distribution or exploitation of any of the rights set out herein,
and any and all general intangible rights in favor of any Debtor or
the Lenders for services or other performances by any third parties,
including actors, writers, directors, individual producers and/or
any and all other performing or nonperforming artists in any way
connected with the item of Product and/or Recorded Product, any and
all general intangible rights in favor of any Debtor or the Lenders
relating to licenses of sound or other equipment, licenses for any
photograph or photographic process, and all general intangibles
related to the distribution or exploitation of the item of Product
and/or Recorded Product including general
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<PAGE> 22
intangibles related to or which grow out of the exhibition of the
item of Product and/or Recorded Product and the exploitation of any
and all other rights in the item of Product and/or Recorded Product
set out in this definition;
(xv) any and all goods including inventory (as that term is
defined in the UCC) which may arise in connection with the creation,
production or delivery of the item of Product and/or Recorded
Product and which goods pursuant to any production or distribution
agreement or otherwise are owned by any Debtor;
(xvi) all and each of the rights, regardless of denomination,
which arise in connection with the creation, production, completion
of production, delivery, distribution, or other exploitation of the
item of Product and/or Recorded Product, including, without
limitation, any and all rights in favor of any Debtor and/or the
Agent (for the benefit of the Lenders), the ownership or control of
which are or may become necessary or desirable, in the opinion of
the Agent, in order to complete production of the item of Product
and/or Recorded Product in the event that the Agent exercises any
rights it may have to take over and complete production of the item
of Product and/or Recorded Product;
(xvii) any and all documents issued by any pledgeholder or
bailee with respect to the item of Product and/or Recorded Product,
the negatives, sound tracks or prints with respect thereto;
(xviii) any and all rights of any Debtor under contracts
relating to the production of the Product and/or Recorded Product;
(xix) any and all rights of any of the Debtors under the
Distribution Agreements, Agency Contracts, the Baywatch Distribution
Agreement, the Baywatch Nights Distribution Agreement and/or
Licensing Agreements relating to any item of Product and/or Recorded
Product; and
(xx) the right of AAF and/or the Parent to indemnification
from Interpublic pursuant to Article VIII of the Fremantle Purchase
Agreement;
provided, however, Collateral shall not include any real property or any of the
Debtors' physical inventory which constitutes "Owner's Records" as defined in
the Distribution Agreement dated
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<PAGE> 23
as of September 1, 1990 between BMG Music and SBR, as amended through the date
hereof.
"Collection Accounts" shall mean the accounts referred to in
Section 8.3.
"Commitment" shall mean with respect to each Lender, its Baywatch
Commitment, its B.N. Commitment or its Working Capital Commitment, as
applicable.
"Commitment Fees" shall have the meaning given such term in
Section 2.8 hereof.
"Commitment Termination Date" shall mean the earliest to occur of
(i) April 12, 1999 or (ii) such earlier date on which the Commitments shall
terminate in accordance with Article 7.
"Complete" or "Completed" or "Completion" shall mean with respect to
any item of Product, that (A) either (i) sufficient elements have been delivered
to, and accepted by, a Person (other than Fremantle, any Debtor or an Affiliate
thereof) to permit such Person either to distribute or exhibit the item of
Product on television or (ii) the Borrowers have certified to the Agent that an
independent laboratory has in its possession a complete final one-inch tape or
35mm composite positive print of the item of Product as finally cut, main and
end titled, edited, scored and assembled, with sound track printed thereon in
perfect synchronization with the photographic action and fit and ready for
television exhibition and distribution, provided that if such certification
shall not have been verified to the Agent by such independent laboratory within
20 Business Days thereafter, such item of Product shall revert to being
un-Completed until the Agent receives such verification and (B) if such item of
Product was acquired from a third party, the entire acquisition price or minimum
advance due and payable at such time shall have been paid in full.
"Completion Bond" shall mean a completion bond, in form and
substance satisfactory to the Agent, issued by a financially sound and reputable
completion guarantor approved by the Majority Lenders which bond is in favor of
the Agent and guarantees Completion and delivery of an item of Product. The
Majority Lenders hereby pre-approve as a completion guarantor (i) Motion
Pictures Guarantors Ltd. (to the extent such completion bond is accompanied by a
Wellington Insurance Company "cut-through") and (ii) International Film
Guarantors provided that such pre-approval may be revoked at any time upon 15
days prior written notice to the Borrowers prior to the issuance of a Completion
Bond by Motion Pictures Guarantors Ltd.
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<PAGE> 24
"Contribution Agreement" shall mean a Contribution Agreement
executed by the Guarantors substantially in the form of Exhibit F.
"Convertible Subordinated Notes" shall mean the Parent's 6
1/2% Convertible Subordinated Notes due 2003.
"Copyright Security Agreement" shall mean the Copyright
Security Agreement, substantially in the form of Exhibit B-1 hereto as the same
may be amended or supplemented from time to time by delivery of a Copyright
Security Agreement Supplement or otherwise.
"Copyright Security Agreement Supplement" shall mean a
Supplement to the Copyright Security Agreement substantially in the form of
Exhibit B-2 hereto.
"Currency Agreement" shall mean any foreign exchange
contract, currency swap agreement, futures contract, option contract, synthetic
cap or other similar agreement designed to protect a Debtor against fluctuations
in currency values.
"Debtors" shall mean the Borrowers and the Guarantors.
"Default" shall mean any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.
"Distribution Agreements" shall mean (i) any and all
agreements entered into by a Debtor pursuant to which such Debtor has acquired
distribution rights to any item of Product and (ii) any agreement hereafter
entered into by a Debtor pursuant to which such Debtor acquires distribution
rights to an item of Product.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"Domestic Receivables" shall mean with respect to any
Person, those Eligible Receivables which (A) are due to such Person from
Approved Obligors which are (i) major domestic pay or cable television networks,
(ii) domestic television networks (including Fox, UPN and Warner) and their
affiliates, (iii) domestic television superstations, or (iv) domestic
independent television stations or (B) which are due to such Person under Agency
Contracts from Approved Producers based upon Domestic Receivables payable to
such Approved Producer.
"EBITDA" shall mean, for any period, for any Person, the sum
for such period of (i) Net Income, (ii) depreciation and amortization expense
(including amortization of film costs), (iii) interest expense and (iv)
provision for income taxes during
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<PAGE> 25
such period, all as determined for such period in conformity with GAAP.
"Eligible Assignee" shall mean (i) a commercial bank
organized under the laws of the United States, or any State thereof, and having
total assets in excess of $1,000,000,000; (ii) a savings and loan association or
savings bank organized under the laws of the United States, or any State
thereof, and having a net worth of at least $100,000,000, calculated in
accordance with generally accepted accounting principles; (iii) a commercial
bank organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development ("OECD"), or a political
subdivision of any such country, and having total assets in excess of
$1,000,000,000, provided that such bank is acting through a branch, subsidiary
or agency located in the country in which it is organized or another country
which is also a member of the OECD; or (iv) the central bank of any country
which is a member of the OECD.
"Eligible Receivables" shall mean, at any date at which the
amount thereof is to be determined, an amount equal to (a) the sum of the
minimum specified amounts which relate to Product, or Record Product which are
contractually obligated to be paid to a Debtor by an Approved Obligor on payment
dates certain or mutually agreed-upon estimated dates of payment, minus
(b) the sum of the following items (based on the Parent's then best estimates):
reserves for bad debts, payments due to third parties, taxes, participations
(payable, in each case, out of or reasonably contemporaneously with the payment
of such receivable), residuals, royalties (except royalties on Record
Receivables), unpaid collection/distribution expenses, commissions, and
releasing costs, and any other projected expenses of the Borrowers arising in
connection with such accounts receivable; all such amounts included in clause
(a) or (b) above discounted in the case of amounts which are not by their terms
due and payable within 12 months following the date of determination on a
quarterly basis by a rate of interest equal to the greater of (i) interest rate
currently for Alternate Base Rate Loans in effect at the date of such
determination and (ii) 7% per annum. Eligible Receivables shall not include:
(i) accounts receivable which remain unpaid more than 90
days after the end of the month in which invoiced, in the case of
cash syndication receivables; or more than 120 days after the end of
the month in which invoiced, in the case of barter syndication
receivables; or more than 30 days after they become due and payable,
in the case of all other receivables;
(ii) any receivable amount from any obligor which has 10%
or more of the total receivable amount
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<PAGE> 26
from such obligor that are excluded by reason of the preceding
paragraph;
(iii) any portion of any receivable which is payable later
than October 13, 1999;
(iv) accounts receivable for which there is a bona fide
request (which has not been approved by a Debtor within ten days of
receipt) for a material credit, adjustment, compromise, offset,
counterclaim or dispute, provided, however, that only the amount in
question shall be excluded from such receivable;
(v) accounts receivable which the Parent or a Debtor cannot
warrant title to sufficient underlying rights to justify such
receivable;
(vi) accounts receivable which the Agent (for the benefit of
the Lenders) does not have a first perfected security interest;
(vii) except in the case of (A) Type B and Type C Barter
Receivables to the extent outlined in the relevant definition and
(B) Record Receivables, accounts receivable which are not related to
Completed Product or covered by a Completion Bond;
(viii) accounts receivable which have been included in any
Debtors' estimated bad debts; but only to the extent such amount has
not been deducted pursuant to clause (ii) of this definition of
"Eligible Receivables";
(ix) accounts receivable which are subject (in the
discretion of the Agent, acting in good faith) to material
conditions precedent to payment (including a material performance
obligation on the part of a Debtor or any other party or obligations
contingent upon future events) not within a Debtor's control within
the ordinary course of business, except for Type A, Type B and Type
C Barter Receivables to the extent specified in the relevant
definition;
(x) accounts receivable in excess of $1,000,000 in the
aggregate which are not payable in Dollars unless the amount (in
excess of $1,000,000) sought to be included in the Borrowing Base is
covered by a Currency Agreement which provides for Dollar payments
to be made directly to the Agent and which is otherwise acceptable
to the Agent. For purposes of determining the amount to be included
in the Borrowing Base for any accounts receivable payable in a
currency
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<PAGE> 27
other than Dollars, such amount shall be calculated at a rate equal
to the lowest exchange rate of such currency into Dollars (as stated
in the form of Dollars per foreign currency unit) available for the
preceding twelve months as published in the Wall Street Journal for
current currency transactions or as quoted by Chemical Bank;
(xi) except for Record Receivables, accounts receivable
which are in excess in the aggregate of the Allowable Amount with
respect to such Approved Obligor, or with regard to Agency
Contracts, do not arise from circumstances where the obligor on the
underlying receivable is an Approved Obligor in aggregate amounts
not in excess of the Allowable Amount with respect to such Approved
Obligor and the producer is an Approved Producer;
(xii) accounts receivable which, during the six months prior
to the expiration of the existing distribution agreement with BMG
Music, Inc., as extended from time to time, are Record Receivables
in excess of $2,000,000 in the aggregate;
(xiii) accounts receivable which are related to an item of
Product which is not covered by a Pledgeholder Agreement or
Laboratory Access Letter to the extent required by Section 5.13
hereof; or
(xiv) accounts receivable relating to AAF (except those
receivables arising from AAF's role as a foreign sales agent for a
Debtor) or arising in connection with the distribution of assets,
rights or programming acquired from Fremantle.
"Employment Agreements" shall mean the agreements with
Anthony Scotti, Ben Scotti, Tom Bradshaw, Myron Roth and Lawrence Lamattina
listed on Schedule 3 hereto.
"Environmental Laws" shall mean any and all federal, state,
local or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees or requirements of any Governmental Authority regulating,
relating to or imposing liability or standards of conduct concerning any
Hazardous Material or environmental protection or health and safety, as now or
may at any time hereafter be in effect, including without limitation, the Clean
Water Act also known as the Federal Water Pollution Control Act ("FWPCA"), 33
U.S.C. Section 1251 et seq., the Clean Air Act ("CAA"), 42
U.S.C. Section Section 7401 et seq., the Federal Insecticide,
Fungicide and Rodenticide Act ("FIFRA"), 7 U.S.C. Section Section 136 et
seq., the Surface Mining Control and Reclamation Act ("SMCRA"), 30
U.S.C. Section Section 1201 et seq., the Comprehensive
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<PAGE> 28
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
Section 9601 et seq., the Superfund Amendment and Reauthorization Act of 1986
("SARA"), Public Law 99-499, 100 Stat. 1613, the Emergency Planning and
Community Right to Know Act ("ECPCRKA"), 42 U.S.C. Section 11001 et seq., the
Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6901 et seq.,
the Occupational Safety and Health Act as amended ("OSHA"), 29 U.S.C. Section
655 and Section 657, together, in each case, with any amendment thereto, and the
regulations adopted and the official publications promulgated thereunder and all
substitutions thereof.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as heretofore and hereafter amended, as codified at 29 U.S.C. Section 1001
et seq. and the regulations promulgated thereunder.
"Eurodollar Loan" shall mean a Loan based on the LIBO Rate
in accordance with the provisions of Article 2 hereof.
"Event of Default" shall have the meaning given such term in
Article 7 hereof.
"Existing Agreement" shall mean the Credit, Security,
Guaranty and Pledge Agreement dated as of February 5, 1993, among Parent as
Guarantor, AATI, LBS, SBEI, SBR as Borrowers, the other Guarantors named
therein, the Lenders referred to therein, Chemical Bank, as Agent for the
Lenders and Chemical Bank as Fronting Bank, as amended.
"Film Assets" shall mean screenplays, novels, treatments,
outlines and other literary properties upon which an item of Product is to be
based, and copyrights in each case acquired in the ordinary course of business
by any of the Borrowers.
"Foreign Receivables" shall mean with respect to any Person,
those Eligible Receivables which are:
(i) payable to such Person by foreign obligors which are
Approved Obligors; or
(ii) payable to such Person by foreign obligors which are not
Approved Obligors, but only to the extent such Eligible Receivables
are secured by an Acceptable L/C; or
(iii) payable to such Person under Agency Contracts from
Approved Producers based upon Foreign Receivables payable to such
Approved Producer.
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<PAGE> 29
"Fremantle" shall mean Fremantle International, Inc., a New York
corporation.
"Fremantle Agreement" shall mean the Credit, Security, Guaranty and
Pledge Agreement dated as of August 3, 1994 among Parent as Guarantor, AAF as
Borrower, the other Guarantors referred to therein, the Lenders referred to
therein and Chemical Bank as Agent for the Lenders.
"Fremantle Collateral" shall be as described in the Fremantle
Security Agreement.
"Fremantle Purchase Agreement" shall mean the Amended and Restated
Fremantle Acquisition Agreement dated as of June 30, 1994 as amended and
restated through August 3, 1994 between the Parent and Interpublic, as amended
from time to time.
"Fremantle Security Agreement" shall mean a Security Agreement
substantially in the form of Exhibit J hereto.
"Fronting Bank" shall mean as defined in the initial paragraph
hereof.
"Fundamental Documents" shall mean this Credit Agreement, the Notes,
the Pledgeholder Agreements, the Laboratory Access Letters, the Copyright
Security Agreement, the Fremantle Security Agreement, the Trademark Security
Agreement, UCC financing statements and any other ancillary documentation which
is required to be or is otherwise executed by any of the Debtors and delivered
to the Agent in connection with this Credit Agreement.
"GAAP" shall mean generally accepted accounting principles
consistently applied (except for accounting changes in response to FASB
releases, or other authoritative pronouncements).
"Governmental Authority" shall mean any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, or any court, in each case whether of the United States or
foreign.
"Guaranty" shall mean, as to any Person, any direct or indirect
obligation of such Person guarantying or intended to guaranty any Indebtedness,
Capital Lease, dividend or other monetary obligation ("primary obligation") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
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<PAGE> 30
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, or (c)
to purchase property, securities or services, in each case, primarily for the
purpose of assuring the owner of any such primary obligation. The amount of any
Guaranty shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Guaranty is made or,
if not stated or determinable, the maximum reasonably anticipated liability in
respect thereof (assuming such Person is required to perform thereunder).
"Guarantors" shall mean (i) with respect to the Term Loan,
the Parent, Baywatch, Baywatch Nights, Malibu, AATI, LBS, SBEI, SBR, Santa
Monica Sound Recorders, Inc., a California corporation ("SMR"), All American
Productions, Inc., a California corporation ("AAP"), All American Television
Production, Inc., a California corporation ("AATP"), All American FDF Holdings,
Inc., a Delaware corporation ("FDF") and Talbot Television Limited, a
corporation organized under the laws of the United Kingdom ("Talbot"); (ii) with
respect to the Baywatch Loans, the Parent, Baywatch Nights, Malibu, AATI, LBS,
SBEI, SBR, SMR, AAP, AATP, FDF, AAF and Talbot; (iii) with respect to the B.N.
Loans, the Parent, Baywatch, Malibu, AATI, LBS, SBEI, SBR, SMR, AAP, AATP, FDF,
AAF and Talbot; and (iv) with respect to the Working Capital Loans, Baywatch,
Baywatch Nights, Malibu, AATI, LBS, SBEI, SBR, SMR, AATP, FDF, AAF and Talbot.
"Hazardous Materials" shall mean any flammable materials,
explosives, radioactive materials, hazardous materials, hazardous wastes,
hazardous or toxic substances, or similar materials defined in any Environmental
Law.
"Indebtedness" shall mean (without double counting), at any
time and with respect to any Person, (i) indebtedness of such Person for
borrowed money (whether by loan or the issuance and sale of debt securities) or
for the deferred purchase price of property or services purchased (other than
amounts constituting trade payables and Program Acquisition Guarantees to the
extent permitted by Section 6.28 arising in the ordinary course and payable in
accordance with customary trading terms in the ordinary course of business);
(ii) indebtedness of others which such Person has directly or indirectly assumed
or guaranteed or for which such Person has otherwise provided credit support;
(iii) indebtedness of others secured by a Lien on assets of such Person, whether
or not such Person shall have assumed such indebtedness; (iv) obligations of
such Person in respect of letters of credit, acceptance facilities, or drafts or
similar instruments issued or accepted by banks and other financial institutions
for the account of such Person (other than trade payables arising in the
ordinary course and payable in accordance with customary trading terms in the
ordinary course of business); and (v) obligations of such Person under Capital
Leases.
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<PAGE> 31
"Interest Coverage Ratio" for any period shall mean the
ratio of (x) Operating Income for such period plus the amount of good will
amortized during such period which is directly associated with the acquisition
of the Fremantle non-voting stock and assets to (y) Net Interest Expense for
such period.
"Interest Payment Date" shall mean (i) as to any Eurodollar
Loan having an Interest Period of one, two or three months, the last day of such
Interest Period, (ii) as to any Eurodollar Loan having an Interest Period of six
months, the last day of such Interest Period and, in addition, the date during
such Interest Period that would be the last day of an Interest Period commencing
on the same day as the first day of such Interest Period but having a duration
of three months and (iii) with respect to Alternate Base Rate Loans, the last
Business Day of each March, June, September and December (commencing the last
Business Day of June 1995).
"Interest Period" shall mean as to any Eurodollar Loan, the
period commencing on the date of such Loan or the last day of the preceding
Interest Period and ending on the numerically corresponding day (or if there is
no corresponding day, the last day) in the calendar month that is one, two,
three or six months thereafter as the Borrower may elect; provided,
however, that (i) if any Interest Period would end on a day which shall
not be a Business Day, such Interest Period shall be extended to the next
succeeding Business Day, unless such next succeeding Business Day would fall in
the next calendar month, in which case, such Interest Period shall end on the
next preceding Business Day, (ii) no Interest Period may be selected which would
result in the aggregate dollar amount of Eurodollar Loans with respect to the
Term Loan having Interest Periods ending after any date on which an installment
of principal of the Term Notes is scheduled to be paid pursuant to Section
2.6(g) herein being in excess of the aggregate principal installments of the
Term Notes scheduled to mature after such date, (iii) no Interest Period may be
selected which would end later than April 13, 1999 and (iv) with respect to the
Term Loans, no Interest Period may be selected which would end later than the
Maturity Date.
"Interest Rate Protection Agreements" shall mean any
interest rate swap agreement, interest rate cap agreement or other financial
agreement or arrangement designed to protect any Borrower against fluctuations
in interest rates.
"Interpublic" shall mean The Interpublic Group of Companies,
Inc., a Delaware corporation.
"Interpublic Agreement" shall mean an agreement entered into
between Interpublic and the Agent substantially in the form of Exhibit K hereto.
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<PAGE> 32
"Investment" shall mean any stock, evidence of indebtedness
or other securities of any Person, any loan, advance, contribution of capital,
extension of credit or commitment therefor, including without limitation the
guarantee of loans made to others (except for current trade and customer
accounts receivable for services rendered in the ordinary course of business and
payable in accordance with customary trading terms in the ordinary course of
business), and any purchase of (i) any securities of another Person or (ii) any
business or undertaking of any Person or any commitment or option to make any
such purchase, or any other investment exclusive of Program Acquisition
Guarantees and commitments to the extent permitted by Section 6.28.
"Investment Grade Account Debtor" shall mean any Person not
specifically identified by name on Schedule 2 hereto (as amended from time to
time) which has a credit rating of at least BBB or the equivalent thereof by
Standard & Poor's Rating Group or Moody's Investors Services, Inc.
"Keyman Life Insurance" shall mean the Lamattina Life
Insurance and the Scotti Life Insurance.
"Keyman Life Insurance Assignment" shall mean the Assignment
to the Agent of the Keyman Life Insurance as Collateral, in form and substance
satisfactory to the Agent.
"LBS" shall mean LBS Communications, a New York corporation.
"L/C Exposure" shall mean, at any time, the amount expressed
in Dollars of the aggregate face amount of all drafts which may then or
thereafter be presented by beneficiaries under all Letters of Credit then
outstanding plus the face amount of all drafts which have been presented under
all Letters of Credit but have not yet been paid or have been paid but not
reimbursed.
"Laboratory Access Letter" shall mean a letter agreement
among (i) a laboratory holding any elements of any Product or Recorded Product
to which a Debtor has the right of access, (ii) such Debtor and (iii) the Agent,
substantially in the form of Exhibit C hereto or a form otherwise acceptable to
the Agent.
"Lamattina Life Insurance" shall mean the life insurance
policy on the life of Lawrence Lamattina issued by Metropolitan Life Insurance
Company or such other insurance company acceptable to the Agent in a face amount
as specified in Section 5.5(i) herein, and any supplemental or replacement
policies relating thereto.
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<PAGE> 33
"Lender" and "Lenders" shall mean the financial institutions whose
names appear at the foot hereof and any assignee of a Lender pursuant to Section
13.3(b).
"Lending Office" shall mean, with respect to any of the Lenders, the
branch or branches (or affiliate or affiliates) from which any such Lender's
Eurodollar Loans or Alternate Base Rate Loans, as the case may be, are made or
maintained and for the account of which all payments of principal of, and
interest on, such Lender's Eurodollar Loans or Alternate Base Rate Loans are
made, as notified to the Agent from time to time.
"Letter of Credit" shall mean a letter of credit issued by the
Fronting Bank pursuant to Section 2.18.
"Leverage Ratio" shall mean the ratio of Total Liabilities to Net
Worth.
"LIBO Rate" shall mean, with respect to the Interest Period for a
Eurodollar Loan, an interest rate per annum equal to the quotient (rounded
upwards to the next 1/100 of 1%) of (A) the average of the rates at which Dollar
deposits approximately equal in principal amount to the Agent's portion of such
Eurodollar Loan and for a maturity equal to the applicable Interest Period are
offered to the Lending Office of the Agent in immediately available funds in the
London Interbank Market for Eurodollars at approximately 11:00 a.m., London
time, two Business Days prior to the commencement of such Interest Period
divided by (B) one minus the applicable statutory reserve requirements of the
Agent, expressed as a decimal (including without duplication or limitation,
basic, supplemental, marginal and emergency reserves), from time to time in
effect under Regulation D or similar regulations of the Board of Governors of
the Federal Reserve System. It is agreed that for purposes of this definition,
Eurodollar Loans made hereunder shall be deemed to constitute Eurocurrency
Liabilities as defined in Regulation D and to be subject to the reserve
requirements of Regulation D.
"Licensing Agreements" shall mean agreements between a Debtor and
other Persons (who are not Affiliates of a Debtor) pursuant to which such Debtor
grants licenses to such other Persons to distribute, broadcast or exhibit an
item of Product.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind whatsoever (including any conditional
sale or other title retention agreement, any lease in the nature thereof, and
the filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction or the agreement to grant a security
interest at a future date).
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<PAGE> 34
"Loan" shall mean the Term Loan, a Baywatch Loan, a B.N. Loan or a
Working Capital Loan, as applicable.
"Loans" shall mean collectively the Term Loan, the Baywatch Loans,
the B.N. Loans and the Working Capital Loans.
"Majority Lenders" shall mean (i) the Lenders holding at least 51%
of the aggregate unpaid principal amount of the Loans then outstanding or (ii)
if no Loans are then outstanding, the Lenders holding at least 51% of the Total
Commitments.
"Make Goods" shall mean an obligation to offer an advertiser
additional advertising time on a particular television program or on other
programs as compensation for any shortfall in the actual rating or demographic
make-up of the viewing audience (as determined by A.C. Nielsen or similar rating
services) of a particular program on which such advertiser has purchased
advertising time.
"Malibu" shall mean The Malibu Branch Production Company, a
California corporation.
"Margin Stock" shall be as defined in Regulation U of the Board of
Governors of the Federal Reserve System.
"Maturity Date" shall mean April 13, 1999 or such earlier date, if
any, on which the Term Loan shall become due and payable in accordance with
Article 7.
"Multiemployer Plan" shall mean a plan described in Section 3(37) of
ERISA.
"National Spots" shall mean units of a specified duration of
national commercial advertisements to be integrated into an item of Product for
its telecast in a specified territory, in accordance with customary industry
practice of barter.
"Net Cash Proceeds" shall mean cash payments received (including any
cash payments received by way of deferred payment of principal pursuant to a
note or installment receivable or otherwise, but only as and when received) from
any issuance of debt securities of a Debtor or any sale, lease, transfer or
other disposition of property or other assets of a Debtor, in each case net of
all legal, title and recording tax expenses, commissions and other fees and
expenses incurred, and any taxes payable and reasonably estimated income taxes,
as a consequence of such sale, lease, transfer or other disposition, but only to
the extent reserved for, whether or not such reserve is required by GAAP.
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<PAGE> 35
"Net Income" shall mean for any period for which such amount is
being determined the net income (loss) of such Person for such period in
accordance with GAAP.
"Net Interest Expense" shall mean for any period for which such
amount is being determined, total interest expense (including amounts properly
attributable to Capital Leases in accordance with GAAP, capitalized interest and
amortization of debt discount and debt issuance costs, but net of interest
income to the extent received in cash) of the Parent and its Subsidiaries on a
consolidated basis.
"Net Worth" shall mean, at any date, the amount of stockholders'
equity as would be reported on the consolidated balance sheet of the Parent and
its Subsidiaries prepared in accordance with GAAP as of the date of
determination.
"Non-Investment Grade Account Debtor" shall mean any Person which is
neither specifically identified by name on Schedule 2 hereto (as amended from
time to time) nor an Investment Grade Account Debtor.
"Notes" shall mean collectively the Term Notes, the Baywatch Notes,
the B.N. Notes and the Working Capital Notes.
"Obligations" shall mean the obligation of the relevant Borrowers to
make due and punctual payment of principal of and interest on the Loans, the
Commitment Fees and all other monetary obligations of the Borrowers to the Agent
or any Lender under this Credit Agreement, the Notes or any other Fundamental
Documents and all amounts payable by any Borrower to any Lender under any
Interest Rate Protection Agreement.
"Operating Income" shall mean for any period for which such amount
is being determined, total revenues less total expenses of the Parent and its
Subsidiaries as determined on a consolidated basis in accordance with GAAP.
"Parent" shall be as defined in the initial paragraph of this Credit
Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"Percentage" shall mean each Lender's percentage share of the Total
Commitment which shall be equal to each Lender's percentage share of the Term
Loan.
"Permitted Encumbrances" shall mean Liens permitted under Section
6.2 hereof.
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<PAGE> 36
"Person" shall mean any natural person, corporation, division of a
corporation, partnership, trust, joint venture, association, company, estate,
unincorporated organization or government or any agency or political subdivision
thereof.
"Plan" shall mean an employee benefit plan within the meaning of
Section 3(3) of ERISA.
"Pledged Securities" shall mean (i) all of the issued and
outstanding capital stock of each of the Subsidiaries of the Parent other than
as noted on Schedule 3.7 hereto and (ii) all of the issued and outstanding
non-voting capital stock of Fremantle owned by AAF.
"Pledgeholder Agreement" shall mean a Laboratory Pledgeholder
Agreement among a Debtor, the Agent, a third party completion guarantor (if
there is one), and one or more laboratories located within the continental
United States, substantially in the form of Exhibit G hereto, or in such other
form as shall be acceptable to the Agent.
"Pledgors" shall mean those Debtors identified as such on Schedule
3.7.
"Prepayment Date" shall be as defined in Section 2.12(j).
"Product" shall mean any movie-of-the-week, television series,
motion picture, film, videotape or other program produced for television release
or for release in any other medium, or exhibited in any theatre, or shown on
network, free and cable, pay and/or other television medium (including without
limitation first run syndication) in each case whether recorded on film,
videotape, cassette, cartridge, disc or on or by any other means, method,
process or device whether now known or hereafter developed, with respect to
which a Debtor (i) is the initial copyright owner or (ii) acquires an equity
interest or distribution rights. The term "item of Product" shall include,
without limitation, the scenario, screenplay or script upon which such item of
Product is based, all of the properties thereof, tangible and intangible, and
whether now in existence or hereafter to be made or produced, whether or not in
possession of a Debtor, and all rights therein and thereto, of every kind and
character to the extent of the Debtor's interest therein.
"Production Company" shall mean Baywatch or Baywatch Nights, as
applicable.
"Production Loan Agreement" shall mean the Credit, Security,
Guaranty and Pledge Agreement dated as of February 5, 1993 (as heretofore
amended) among Baywatch, as Borrower; the
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<PAGE> 37
Parent, AATI and LBS as Guarantors; the Lenders named therein and Chemical Bank,
as Agent.
"Program Acquisition Guarantees" shall mean any commitment of a
Debtor to a producer or owner of Product in conjunction with the acquisition of
Product or distribution rights in Product by such Debtor to the effect that the
gross revenues to be generated in the future from the exploitation of such
Product or the net revenues to be received by such producer or owner from the
exploitation of such Product will equal or exceed an amount specified in the
acquisition agreement related to such Product or otherwise requiring payment by
the Debtor of a minimum amount specified in the acquisition agreement related to
such Product regardless of actual performance of such Product.
"Program Spending Ratio" shall mean the ratio of (x) EBITDA plus the
amount of net cash proceeds received by the Parent during the Rolling Period
most recently ended as a result of any new issuance of equity securities during
such Rolling Period, minus interest and scheduled amortization on the Term Loan
during such Rolling Period to (y) Program Spending during such Rolling Period.
For purposes hereof, "Program Spending" shall mean the cash component of
"additions to television programming costs" as such term is used on the Parent's
consolidated statement of cash flow.
"Quiet Enjoyment" shall be as defined in Section 8.13.
"Recorded Product" shall mean any audio embodiment of musical,
spoken or other sounds regardless of the nature of the material object, such as
discs, tapes or other phonorecords, in which such sounds are embodied.
"Record Receivables" shall mean receivables from BMG Music, Inc. in
connection with Recorded Product.
"Refund Percentage" shall mean at the date of determination the
actual amount of cash refunds made by all Debtors during the period most
recently ended in connection with all barter receivables divided by the total
amount of actual barter revenue received by the Debtors during such period.
"Reportable Event" shall mean any reportable event as defined in
Section 4043(b) of ERISA, other than a reportable event as to which provision
for 30-day notice to the PBGC would be waived under applicable regulations had
the regulations in effect on the Closing Date been in effect on the date of
occurrence of such reportable event.
"Restricted Payment" shall mean (i) any distribution, dividend or
other direct or indirect payment on account of shares of any class of stock of
the Parent or any of its Subsidiaries
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<PAGE> 38
now or hereafter outstanding; (ii) any redemption or other acquisition or
re-acquisition by the Parent or any of its Subsidiaries of any class of its own
stock or other equity interest of Fremantle, the Parent, any of its Subsidiaries
or any Affiliate now or hereafter outstanding; (iii) any payment of principal
of, premium, if any, or interest on, or any redemption, purchase, retirement,
defeasance, sinking fund or similar payment with respect to, any Subordinated
Debt and (iv) any payment made to retire, or obtain the surrender of any
outstanding warrants, puts or options or other rights to purchase or acquire
shares of any class of stock of the Parent or any of its Subsidiaries now or
hereafter outstanding.
"Revolving Credit Loan" shall mean a Baywatch Loan, a B.N. Loan or a
Working Capital Loan.
"Revolving Credit Loans" shall mean, collectively, all Baywatch
Loans, all B.N. Loans and all Working Capital Loans.
"Rolling Period" shall mean, with respect to the fiscal quarter then
ended, such fiscal quarter and the three immediately preceding fiscal quarters
considered as a single accounting period.
"Royalty Account" shall be as defined in Section 11.2 hereof.
"SBEI" shall mean Scotti Brothers Entertainment Industries, Inc., a
Delaware corporation.
"SBR" shall mean Scotti Brothers Records, Inc., a California
corporation.
"Schedule of Commitments" shall mean the schedule of the commitments
of the Lenders set forth in Schedule 1 hereto.
"Scotti Life Insurance" shall mean the life insurance policy on the
life of Anthony Scotti issued by Transamerica Occidental Life Insurance Company
or such other insurance company acceptable to the Agent in a face amount of not
less than $10,000,000, and any supplemental or replacement policies relating
thereto.
"Series" shall mean the Baywatch Series or the Baywatch Nights
Series, as applicable.
"Subordinated Debt" shall mean all other Indebtedness of any of the
Debtors subordinated to the Obligations pursuant to written agreements,
containing interest rates, payment terms, maturities, amortization schedules,
covenants, defaults, remedies, subordination provisions and other material terms
in form and substance satisfactory to the Super Majority Lenders.
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"Subsidiary" shall mean with respect to any Person, any corporation,
association, joint venture, partnership or other business entity (whether now
existing or hereafter organized) of which at least a majority of the Voting
Stock or other ownership interests having ordinary voting power for the election
of directors (or the equivalent) is, at the time as of which any determination
is being made, owned or controlled by such Person or one or more subsidiaries of
such Person or by such Person and one or more subsidiaries of such Person. The
parties hereby agree that until such time (if ever) as any of the Debtors
becomes the owner of the Voting Stock of Fremantle, Fremantle shall not be
deemed a Subsidiary of any Debtor.
"Super Majority Lenders" shall mean (i) the Lenders holding at least
60% of the aggregate unpaid principal amount of the Loans then outstanding or
(ii) if no Loans are then outstanding, the Lenders holding at least 60% of the
Total Commitments.
"Term Collection Account" shall be as defined in Section 8.3.
"Term Loan" shall be as defined in Section 2.1.
"Term Notes" shall be as defined in Section 2.6(a).
"Total Commitments" shall mean (i) with respect to all Lenders, the
sum of all Lenders' Baywatch Commitments, B.N. Commitments and Working Capital
Commitments and (ii) with respect to a Lender, the sum of such Lender's Baywatch
Commitment, such Lender's B.N.
Commitment and such Lender's Working Capital Commitment.
"Total Liabilities" shall mean, on a consolidated basis, all
Indebtedness of the Parent and its Subsidiaries, including Program Acquisition
Guaranties but excluding the Convertible Subordinated Notes.
"Trademark Security Agreement" shall mean a Trademark Security
Agreement executed by the Debtors substantially in the form of Exhibit L.
"Transfer Date" shall be as defined in Section 2.12(h).
"Type A Barter Receivables" shall mean with respect to any
Debtor, the amount of all receivables (adjusted for actual Make Goods) which are
contractually owing to such Person from Approved Obligors in connection with the
Baywatch Series which receivables are due within twelve (12) months from the
date of inclusion in the Borrowing Base even though the corresponding program to
which such receivables relate has not yet aired, provided that Baywatch has a
broadcast order or firm contracts to
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clear markets in 70% of the country for such program and such Person has no
completion or delivery risk for such program, i.e., a Completion Bond is in
place naming Baywatch or the Agent as beneficiary on the Completion Bond (the
maximum amount included shall then be the lesser of such Person's investment and
amount covered by the Completion Bond). The underlying contract for a Type A
Barter Receivable may include a provision for a cash reduction as opposed, or in
addition, to a Make Good provision. Such receivables shall otherwise satisfy all
applicable criteria for inclusion as Eligible Receivables.
"Type B Barter Receivables" shall mean with respect to any Debtor,
the amount of all receivables (adjusted for actual Make Goods) which are due to
such Debtor from Approved Obligors in connection with any other program (other
than the Baywatch Series) for which all conditions for Type A Barter Receivables
have been met; provided, however, that if a Completion Bond is not in place for
such program, receivables to be included as Type B Barter Receivables shall be
limited to the amount equal to the percentage of the total receivable owing
which is the same percentage as the number of episodes actually delivered at the
time of inclusion of such receivable in the Borrowing Base is of the total
number of episodes of the relevant Series planned for the entire season (relates
to season contract sales only). No credit for Type B Barter Receivables may be
included in the Borrowing Base until episodes of the corresponding program to
which such receivables relate have been aired for four weeks; then receivables
for such series may be included in the Borrowing Base. The net receivables for
such program which may be included as Type B Barter Receivables are to be
calculated using the lowest rating received during the previous four weeks for
such program. The underlying contract for a Type B Barter Receivable may include
a provision for a cash reduction as opposed, or in addition, to a Make Good
provision. Such receivables shall otherwise satisfy all applicable criteria for
inclusion as Eligible Receivables.
"Type C Barter Receivables" shall mean with respect to any Debtor,
the amount of all receivables (adjusted for actual Make Goods) which are due to
such Debtor from Approved Obligors for which all conditions for Type B Barter
Receivables have been met plus the corresponding program to which such
receivables relate shall be in its second or successive season; provided,
however, that if a Completion Bond is not in place for such program, receivables
to be included as Type C Barter Receivables shall be limited to the amount equal
to the percentage of the total receivable owing which is the same percentage as
the number of episodes actually delivered at the time of inclusion of such
receivable in the Borrowing Base is of the total number of episodes of the
relevant Series planned for the entire season (relates to season contract sales
only). The net amount of such receivables for such program which may be included
as Type C
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Barter Receivables are to be calculated (before the series airs in the current
season) using a rating which is equal to 80% of the previous season's cumulative
rating for such series until a rating is received for the current season;
thereafter the amount of such receivables which may be included as Type C Barter
Receivables is to be calculated, after four weeks, using the lowest rating
received for the program during the previous four weeks. The underlying contract
for a Type C Barter Receivable may include a provision for a cash reduction as
opposed to, or in addition to a Make Good provision. Such receivables shall
otherwise satisfy all applicable criteria for inclusion as Eligible Receivables.
"UCC" shall mean the Uniform Commercial Code as in effect in the
State of New York on the date of execution of this Credit Agreement.
"Voting Stock" shall mean the capital stock of an entity having
ordinary voting power under ordinary circumstances to vote in the election of
directors of such entity.
"Working Capital Commitment" shall mean the commitment of each
Lender to make Working Capital Loans to the Parent in an amount not in excess of
the amount set forth opposite its name in the Schedule of Commitments under the
column "Working Capital Loan Commitment", as such amount may be reduced from
time to time in accordance with this Credit Agreement.
"Working Capital Loan" shall be as defined in Section 2.4.
"Working Capital Notes" shall be as defined in Section 2.6(d).
2. THE LOANS
SECTION 2.1. Term Loan.
Each Lender, severally and not jointly, agrees, upon the terms and
subject to the conditions hereof, to make a loan (all such Loans being referred
to as the "Term Loan") to AAF on the Closing Date in an aggregate amount
for such Lender which shall be equal to the amount set forth opposite such
Lender's name under the column "Term Loan" in the Schedule of Commitments;
provided, however, that the aggregate amount of the Term Loan
shall be $30,000,000. The Agent shall apply the proceeds of the Term Loan to the
Indebtedness of AAF to Chemical Bank under the Fremantle Agreement.
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SECTION 2.2. Baywatch Loans.
Each Lender, severally and not jointly, agrees upon the terms and
subject to the conditions hereof, to make loans (each a "Baywatch Loan")
to Baywatch from time to time on or after the Closing Date and prior to the
Commitment Termination Date, in an aggregate amount at any one time outstanding
for such Lender which shall not exceed the amount of such Lender's Baywatch
Commitment. No Baywatch Loan shall be made which would result in the aggregate
amount of (a) all outstanding Revolving Credit Loans plus L/C Exposure exceeding
the lesser of (i) the then current amount of the Borrowing Base or (ii) the
aggregate of the Total Commitments of all Lenders then in effect or (b) all
outstanding Baywatch Loans exceeding the aggregate of the Baywatch Commitments
of all Lenders then in effect. Subject to the terms hereof, Baywatch may borrow,
repay and reborrow amounts constituting the Baywatch Commitments. Subject to
Section 2.5 hereof, the Baywatch Loans shall be made at such times as Baywatch
shall request, but the Lenders shall not be required to make Baywatch Loans
hereunder more often than once each calendar week. The Agent shall apply a
sufficient amount of the proceeds of the initial Baywatch Loans hereunder to the
payment in full of all outstanding Indebtedness of Baywatch to the lenders under
the Production Loan Agreement.
SECTION 2.3. B.N. Loans.
Each Lender, severally and not jointly, agrees upon the terms and
subject to the conditions hereof, to make loans (each a "B.N. Loan") to
Baywatch Nights from time to time on or after the Closing Date and prior to the
Commitment Termination Date, in an aggregate amount at any one time outstanding
for such Lender which shall not exceed the amount of such Lender's B.N.
Commitment. No B.N. Loan shall be made which would result in the aggregate
amount of (a) all outstanding Revolving Credit Loans plus L/C Exposure exceeding
the lesser of (i) the then current amount of the Borrowing Base or (ii) the
aggregate of the Total Commitments of all Lenders then in effect or (b) all
outstanding B.N. Loans exceeding the aggregate of the B.N. Commitments of all
Lenders then in effect. Subject to the terms hereof, Baywatch Nights may borrow,
repay and reborrow amounts constituting the B.N. Commitments. Subject to Section
2.5 hereof, the B.N. Loans shall be made at such times as Baywatch Nights shall
request, but the Lenders shall not be required to make B.N. Loans hereunder more
often than once each calendar week.
SECTION 2.4. Working Capital Loans.
Each Lender, severally and not jointly, agrees upon the terms and
subject to the conditions hereof, to make working capital loans (each a
"Working Capital Loan") to the Parent from time to time on or after the
Closing Date and prior to the
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Commitment Termination Date, in an aggregate amount at any one time outstanding
for such Lender which shall not exceed the amount of such Lender's Working
Capital Commitment. No Working Capital Loan shall be made which would result in
the aggregate amount of (a) all outstanding Revolving Credit Loans plus L/C
Exposure exceeding the lesser of (i) the then current amount of the Borrowing
Base or (ii) the aggregate of the Total Commitments of all Lenders then in
effect or (b) all outstanding Working Capital Loans plus the L/C Exposure
exceeding the aggregate of the Working Capital Commitments of all Lenders then
in effect. Subject to the terms hereof, the Parent may borrow, repay and
reborrow amounts constituting the Working Capital Commitments. Subject to
Section 2.5 hereof, the Working Capital Loans shall be made at such times as the
Parent shall request, but the Lenders shall not be required to make Working
Capital Loans hereunder more often than once each calendar week. The Agent shall
apply a sufficient amount of the proceeds of the initial Working Capital Loans
hereunder to the payment in full of all outstanding Indebtedness of the Parent
under the Existing Agreement.
SECTION 2.5. Making of Loans.
(a) Each Loan shall be an Alternate Base Rate Loan or a Eurodollar
Loan as any of the Borrowers may request subject to and in accordance with this
Section. The appropriate Borrower shall give the Agent at least three Business
Days' prior written, telegraphic or telephonic (promptly confirmed in writing)
notice of each Borrowing which is to consist of Eurodollar Loans, and at least
one Business Day's prior written, telegraphic or telephonic (promptly confirmed
in writing) notice of each Borrowing which is to consist of Alternate Base Rate
Loans. Each such notice in order to be effective must be received by the Agent
not later than 3:00 p.m., New York City time on the day required and shall
specify the date (which shall be a Business Day) on which such Loan is to be
made and the aggregate principal amount of the requested Loan. Each such notice
shall be irrevocable and shall specify whether the Borrowing then being
requested is to consist of Alternate Base Rate Loans or Eurodollar Loans and in
the case of Eurodollar Loans, the Interest Period or Interest Periods with
respect thereto. If no election of an Interest Period is specified in such
notice in the case of a Borrowing consisting of Eurodollar Loans, such notice
shall be deemed to be a request for an Interest Period of one month. If no
election is made as to the type of Loan, such notice shall be deemed a request
for a Borrowing consisting of Alternate Base Rate Loans. No Borrowing shall
consist of Eurodollar Loans if after giving effect thereto an aggregate of more
than six separate Eurodollar Loans would be outstanding hereunder with respect
to each Lender (determined in accordance with Section 2.11(c) hereof).
(b) The Agent shall promptly notify each Lender of its proportionate
share of each Borrowing under this Section, the
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date of such Borrowing, the type of Loans being requested and the Interest
Period or Interest Periods applicable thereto. On the borrowing date specified
in such notice, each Lender shall make its share of the Borrowing available at
the offices of the Agent's Agent Bank Services Department, 140 East 45th St.,
29th Floor, New York, NY 10017, Attention: Doris Mesa for credit to All American
Communications Clearing Acct., Account No. 144-8-16084 (Reference: "All American
Communications, Inc. - Credit Agreement dated as of April 13, 1995") no later
than 1:00 P.M. New York City time in Federal or other immediately available
funds. Upon receipt of the funds to be made available by the Lenders to fund any
Borrowing hereunder, the Agent shall disburse such funds by depositing the
requested amounts into an account maintained with the Agent by such of the
Borrowers as have requested such Loans.
(c) Each Lender may at its option fulfill its obligation to make
Eurodollar Loans by causing a foreign branch or affiliate to fund such
Eurodollar Loans, provided that any exercise of such option shall not affect the
obligation of the appropriate Borrowers to repay Loans in accordance with the
terms hereof. Subject to the other provisions of this Section, Loans of more
than one interest rate type may be outstanding at the same time.
(d) The amount of any Borrowing of new funds shall be in an
aggregate principal amount of $500,000 (or such lesser amount as shall equal the
available but unused portion of the appropriate Commitments) or such greater
amount which is an integral multiple of $100,000; provided, however that the
amount of any Borrowing of new funds which shall be a Eurodollar Loan shall be
in an aggregate principal amount of $1,500,000 or such greater amount which is
an integral multiple of $100,000.
(e) Notwithstanding the provisions of clause (a) above and/or the
absence of a request from one of the Borrowers that the Lenders make a Loan, the
Lenders may make Loans and apply the proceeds thereof as follows:
(x) if the completion guarantor for any Product being produced by
a Debtor shall take over production of such Product pursuant
to the Completion Bond with respect to such Product, the
Lenders may make Loans with respect to the production of such
Product and pay the proceeds thereof directly to the
completion guarantor to be used to finance the production and
delivery of such Product pursuant to the terms of the
Completion Bond; and
(y) if an Event of Default shall have occurred and be continuing,
the Lenders may make Loans with respect to any Product being
produced by a Debtor
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and pay the proceeds thereof directly to Persons providing services
in connection with the production, delivery and distribution of such
Product so as to ensure Completion of such Product and/or the
collection of Eligible Receivables.
If such Loans are made in connection with Baywatch, such Loans shall be Baywatch
Loans (to the extent available); if such Loans are made in connection with
Baywatch Nights, such Loans shall be B.N. Loans (to the extent available) and
otherwise, such Loans shall be Working Capital Loans.
SECTION 2.6. Notes.
(a) The Term Loan made by each Lender hereunder shall be evidenced
by a promissory note substantially in the form of Exhibit A-1 (each a "Term
Note" and collectively the "Term Notes") in the face amount of each
such Lender's Percentage of the Term Loan, payable to the order of each such
Lender, duly executed by AAF and dated the Closing Date.
(b) The Baywatch Loans made by each Lender hereunder shall be
evidenced by a promissory note substantially in the form of Exhibit A-2 (each a
"Baywatch Note" and collectively the "Baywatch Notes") in the
face amount of each such Lender's Baywatch Commitment, payable to the order of
each such Lender, duly executed by Baywatch and dated the Closing Date.
(c) The B.N. Loans made by each Lender hereunder shall be evidenced
by a promissory note substantially in the form of Exhibit A-3 (each a "B.N.
Note" and collectively the "B.N. Notes") in the face amount of each
such Lender's B.N. Commitment, payable to the order of each such Lender, duly
executed by Baywatch Nights and dated the Closing Date.
(d) The Working Capital Loans made by each Lender hereunder shall be
evidenced by a promissory note substantially in the form of Exhibit A-4 (each a
"Working Capital Note" and collectively the "Working Capital
Notes") in the face amount of each such Lender's Working Capital Commitment,
payable to the order of each such Lender, duly executed by the Parent and dated
the Closing Date.
(e) Each of the Notes shall bear interest on the outstanding
principal balance thereof as set forth in Section 2.7 hereof. Each Lender and
the Agent on its behalf is hereby authorized by the appropriate Borrower, but
not obligated, to enter the amount of each Loan and the amount of each payment
or prepayment of principal or interest thereon in the appropriate spaces on the
reverse of or on an attachment to the Notes; provided, however, that the failure
of any Lender or the Agent to set forth such Loans, principal payments or other
information
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shall not in any manner affect the obligations of the appropriate Borrower to
repay such Loans.
(f) The Baywatch Notes, the B.N. Notes and the Working Capital Notes
shall be payable in full on the Commitment Termination Date, subject to
mandatory prepayment as provided in Section 2.12 hereof.
(g) The outstanding principal amount of the Term Loan shall be
payable in (i) thirteen quarterly installments due on the last Business Day of
each March, June, September and December (commencing September 30, 1995) in
accordance with the following schedule:
Quarterly Amount of
Payment Date Quarterly Payment
------------ -----------------
September 1995 $2,500,000
December 1995 2,500,000
March 1996 500,000
June 1996 500,000
September 1996 3,000,000
December 1996 3,000,000
March 1997 1,000,000
June 1997 1,000,000
September 1997 3,000,000
December 1997 3,000,000
March 1998 1,000,000
June 1998 1,000,000
September 1998 4,000,000
and (ii) a final installment due on the last Business Day of December 1998 in
an amount equal to the aggregate unpaid principal amount of the Term Loan.
SECTION 2.7. Interest on Notes.
(a) In the case of a Eurodollar Loan, interest shall be payable at a
rate per annum (computed on the basis of the actual number of days elapsed over
a year of 360 days) equal to the LIBO Rate plus the Applicable Margin. Interest
shall be payable on each Eurodollar Loan on each applicable Interest Payment
Date, at maturity and on the date of a conversion of such Eurodollar Loan to an
Alternate Base Rate Loan. The Agent shall determine the applicable LIBO Rate for
each Interest Period as soon as practicable on the date when such determination
is to be made in respect of such Interest Period and shall notify the Borrowers
(as applicable) and the Lenders of the applicable interest rate so determined.
Such determination shall be conclusive absent manifest error.
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(b) In the case of an Alternate Base Rate Loan, interest shall be
payable at a rate per annum (computed on the basis of the actual number of days
elapsed over a year of 365/366 days, as the case may be, during such times as
the Alternate Base Rate is based upon the Prime Rate, and over a year of 360
days at all other times) equal to the Alternate Base Rate plus the Applicable
Margin. Interest shall be payable on each Alternate Base Rate Loan on each
applicable Interest Payment Date, at maturity and on the date of a conversion of
such Alternate Base Rate Loan to a Eurodollar Loan.
(c) Anything in this Credit Agreement or the Notes to the contrary
notwithstanding, the interest rate on the Loans shall in no event be in excess
of the maximum permitted by Applicable Law.
SECTION 2.8. Commitment Fees and Other Fees.
(a) The Borrowers jointly and severally agree to pay to the Agent
for the account of each Lender on the last Business Day of each March, June,
September and December in each year (commencing on the last Business Day of June
1995) prior to the Commitment Termination Date and on the Commitment Termination
Date, an aggregate fee (the "Commitment Fees") of 1/2 of 1% per annum, computed
on the basis of the actual number of days elapsed over a year of 360 days, on
the average daily amount by which such Lender's Total Commitment, as such Total
Commitment may be reduced in accordance with the provisions of this Credit
Agreement, exceeds the sum of such Lender's outstanding Revolving Credit Loans
plus its Percentage of L/C Exposure during the preceding period or quarter.
(b) Such Commitment Fees shall commence to accrue from the Closing
Date.
(c) In addition, the Borrowers jointly and severally agree to pay to
the Agent on the Closing Date any and all fees that are then due and payable
pursuant to the Fee Letter dated January 30, 1995 between the Parent and the
Agent.
SECTION 2.9. Optional and Mandatory Termination or Reduction of
Commitments.
(a) Upon written or telephonic (promptly confirmed in writing)
notice to the Agent, which notice must be received by the Agent not later than
11:00 a.m. New York City time on the same Business Day, the relevant Borrower
may at any time permanently terminate the appropriate Commitment in its
entirety, or from time to time permanently reduce the appropriate Commitment in
part. Each such reduction shall be in a minimum aggregate principal amount of
$500,000 or an integral multiple thereof.
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(b) Following the repayment of the Term Loan, the Total Commitments
shall be permanently reduced by an amount equal to 100% of the Net Cash Proceeds
of (i) all issuances by any Debtor of any debt securities issued after the
Closing Date (other than to another Debtor) and (ii) any asset sale made by any
Debtor which sale is not in the ordinary course of business and the Net Cash
Proceeds of which sale exceed $1,000,000; provided, however that
Net Cash Proceeds of any sale by the Parent of its existing Santa Monica
corporate headquarters facility shall not permanently reduce the Total
Commitments as aforesaid to the extent that substantially contemporaneously such
Net Cash Proceeds are invested in a new corporate headquarters facility. Such
reduction in the Total Commitments shall occur simultaneously with the receipt
by any Debtor of such Net Cash Proceeds.
(c) Any reduction of the Total Commitments pursuant to this Section
shall be pro rata in accordance with each Lender's Percentage and applied to
reduce the Total Commitment of each Lender.
SECTION 2.10. Default Interest; Alternate Rate of Interest.
(a) If any of the Borrowers shall default in the payment of the
principal of or interest on any Loan becoming due hereunder, whether at stated
maturity, by acceleration or otherwise, or the payment of any other amount
becoming due hereunder after notification from the Agent to the appropriate
Borrower of such amount, such Borrower shall on demand from time to time pay
interest, to the extent permitted by law, on all Loans and overdue amounts
outstanding up to the date of actual payment of such defaulted amount (after as
well as before judgment) (i) for the remainder of the then current Interest
Period for each Eurodollar Loan, at 2% in excess of the rate then in effect for
Eurodollar Loans and (ii) for all periods subsequent to the then current
Interest Period for each Eurodollar Loan, for all Alternate Base Rate Loans and
for all other overdue amounts hereunder, at 2% in excess of the rate then in
effect for Alternate Base Rate Loans.
(b) In the event, and on each occasion, that on the day two Business
Days prior to the commencement of any Interest Period for a Eurodollar Loan, (i)
the Agent shall have received notice from any Lender of such Lender's
determination (which determination, absent manifest error, shall be conclusive)
that Dollar deposits in the amount of the principal amount of such Eurodollar
Loan are not generally available in the London Interbank Market or that the rate
at which such Dollar deposits are being offered will not adequately and fairly
reflect the cost to such Lender of making or maintaining the principal amount of
such Eurodollar Loan during such Interest Period or (ii) the
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Agent shall have determined that reasonable means do not exist for ascertaining
the applicable LIBO Rate, the Agent shall, as soon as practicable thereafter,
give written or telegraphic notice of such determination to the Borrowers and
the Lenders, and any request by any of the Borrowers for a Eurodollar Loan (or
conversion to or continuation as a Eurodollar Loan pursuant to Section 2.11),
made after receipt of such notice, shall be deemed a request for an Alternate
Base Rate Loan; provided, however, that in the circumstances described in clause
(i) above such deemed request shall only apply to the affected Lender's portion
thereof. After such notice shall have been given and until the circumstances
giving rise to such notice no longer exist, each request (or portion thereof, as
the case may be) for a Eurodollar Loan shall be deemed to be a request for an
Alternate Base Rate Loan.
SECTION 2.11. Continuation and Conversion of Loans.
The appropriate Borrower shall have the right, at any time, (i) to
convert any Eurodollar Loan or portion thereof to an Alternate Base Rate Loan or
to continue such Eurodollar Loan or a portion thereof for a successive Interest
Period, or (ii) to convert any Alternate Base Rate Loan or a portion thereof to
a Eurodollar Loan, subject to the following:
(a) a Borrower shall give the Agent prior notice of each
continuation or conversion hereunder of at least three Business Days for
continuation as or conversion to a Eurodollar Loan and one Business Days for
continuation as or conversion to an Alternate Base Rate Loan; such notice shall
be irrevocable and to be effective, must be received by the Agent on the day
required not later than 11:00 a.m., New York City time;
(b) no Event of Default or Default shall have occurred and be
continuing at the time of any conversion to a Eurodollar Loan or continuation of
any such Eurodollar Loan into a subsequent Interest Period;
(c) no Alternate Base Rate Loan may be converted to a Eurodollar
Loan and no Eurodollar Loan may be continued as a Eurodollar Loan if, after such
conversion, and after giving effect to any concurrent prepayment of Loans, an
aggregate of more than six separate Eurodollar Loans would be outstanding
hereunder with respect to each Lender (for purposes of determining the number of
such Loans outstanding, Loans with different Interest Periods shall be counted
as different Loans even if made on the same date);
(d) if fewer than all Eurodollar Loans and Alternate Base Rate Loans
at the time outstanding shall be continued or converted, such continuation or
conversion shall be made pro rata among the Lenders in accordance with the
respective principal
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amounts of the Loans held by the Lenders immediately prior to such continuation
or conversion;
(e) the aggregate principal amount of Loans continued as or
converted to Eurodollar Loans as part of the same borrowing, shall be $1,500,000
or such greater amount which is an integral multiple of $100,000;
(f) accrued interest on the Loans (or portion thereof) being
continued or converted shall be paid by the Borrowers at the time of
continuation or conversion;
(g) the Interest Period with respect to a new Eurodollar Loan
effected by a continuation or conversion shall commence on the date of a
continuation or conversion;
(h) if a Eurodollar Loan is converted to another type of Loan other
than on the last day of the Interest Period with respect thereto, the amounts
required by Section 2.12(b) shall be paid upon such conversion; and
(i) each request for a continuation as or conversion to a Eurodollar
Loan which fails to state an applicable Interest Period shall be deemed to be a
request for an Interest Period of one month.
In the event that the appropriate Borrower shall not give notice to continue or
convert any Eurodollar Loan as provided above, such Loan (unless repaid) shall
automatically be converted to an Alternate Base Rate Loan at the expiration of
the then current Interest Period. The Agent shall, after it receives notice from
any of the Borrowers, promptly give the Lenders notice of any continuation or
conversion.
SECTION 2.12. Prepayment of Loans; Reimbursement of Lenders.
(a) Subject to the terms of paragraph (b) of this Section 2.12, the
appropriate Borrower shall have the right at its option at any time and from
time to time to prepay (i) any Alternate Base Rate Loan, in whole or in part,
upon at least one Business Day's written, telephonic (promptly confirmed in
writing) or telegraphic notice, in the principal amount of $500,000 or such
greater amount which is an integral multiple of $100,000 or the remaining
balance of such Loan if less than $500,000 and (ii) any Eurodollar Loan, in
whole or in part, upon at least three Business Days' written, telephonic
(promptly confirmed in writing) or telegraphic notice, in the principal amount
of $1,500,000 or such greater amount which is an integral multiple of $100,000.
Each notice of prepayment shall specify the prepayment date, each Loan to be
prepaid and the principal amount thereof, shall be irrevocable and shall commit
the
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Borrowers to prepay such Loan in the amount and on the date stated therein.
Such notice shall also specify the expected principal amount of Loans to be
outstanding after giving effect to such prepayment.
(b) The appropriate Borrower shall reimburse each Lender on demand
for any loss incurred or to be incurred by any such Lender in the reemployment
of the funds released (i) by any prepayment (for any reason) of any Eurodollar
Loan if such Loan is repaid other than on its last day of the Interest Period
for such Loan or (ii) in the event that after such Borrower delivers a notice
of borrowing under Section 2.5(a) or Section 2.11(a) in respect of Eurodollar
Loans, such Loan is not made on the first day of the Interest Period specified
in such notice of borrowing for any reason other than (I) a suspension or
limitation under Section 2.10(b) of the right of the Borrowers to select a
Eurodollar Loan or (II) a breach by the Lenders of their obligation hereunder.
Such loss shall be the amount as reasonably determined by such Lender as the
excess, if any of (A) the amount of interest which would have accrued to such
Lender on the amount so paid or not borrowed, continued or converted at a rate
of interest equal to the interest rate applicable to such Loan pursuant to
Section 2.7 hereof, for the period from the date of such payment or failure to
borrow, continue or convert to the last day (x) in the case of a payment other
than on the last day of the Interest Period for such Loan, of the then current
Interest Period for such Loan or (y) in the case of such failure to borrow,
continue or convert, of the Interest Period for such Loan which would have
commenced on the date of such failure to borrow, continue or convert, over (B)
the amount realized by such Lender in reemploying the funds not advanced or the
funds received in prepayment or realized from the Loan not so continued or
converted during the period referred to above. Each Lender shall deliver to
the Borrowers from time to time one or more certificates setting forth the
amount of such loss (and in reasonable detail the manner of computation
thereof) as determined by such Lender, which certificates shall be conclusive
absent manifest error. Such Borrower shall pay such Lender the amounts shown
on such certificate within ten days of the Borrower's receipt of such
certificate.
(c) In the event any of the Borrowers fails to prepay any Loan on
the date specified in any prepayment notice delivered pursuant to Section
2.12(a), the Borrowers shall pay to the Agent for the account of the applicable
Lender any amounts required to compensate such Lender for any actual loss
incurred by such Lender as a result of such failure to prepay, including,
without limitation, any loss, cost or expenses incurred by reason of the
acquisition of deposits or other funds by such Lender to fulfill deposit
obligations incurred in anticipation of such prepayment. Each Lender shall
deliver to the Borrowers and the Agent from time to time one or more
certificates setting forth the amount of
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such loss (and in reasonable detail the manner of computation thereof) as
determined by such Lender, which certificates shall be conclusive absent
manifest error. Such Borrower shall pay such Lender the amounts shown on such
certificate within ten days of the Borrower's receipt of such certificate.
(d) Within five (5) days following the delivery to the Agent of
each Borrowing Base Certificate, the appropriate Borrower will prepay the
Revolving Credit Loans to the extent, if any, that the total of all Revolving
Credit Loans outstanding plus the L/C Exposure exceeds the Borrowing Base as
set forth on such Borrowing Base Certificate.
(e) The outstanding principal amount of the Working Capital Loans
shall be repaid immediately to the extent that the aggregate amount thereof
exceeds the aggregate Working Capital Commitments of all Lenders then in
effect; the outstanding principal amount of the Baywatch Loans shall be repaid
immediately to the extent that the aggregate amount thereof exceeds the
aggregate Baywatch Commitments of all Lenders then in effect and the
outstanding principal amount of the B.N. Loans shall be repaid immediately to
the extent that the aggregate amount thereof exceeds the aggregate B.N.
Commitments of all Lenders then in effect.
(f) Simultaneously with each termination and/or mandatory or
optional reduction of the Commitments pursuant to Section 2.9, the Borrowers
shall pay to the Agent for the benefit of the Lenders the excess of the
aggregate outstanding principal amount of the appropriate Revolving Credit
Loans over the applicable reduced Commitments, all accrued and unpaid interest
thereon and the Commitment Fees on the amount of the Commitments so terminated
or reduced through the date thereof. For purposes hereof, in connection with
prepayments as a result of a reduction in the Commitments pursuant to Section
2.9(b), unless the Parent shall have determined that Net Cash Proceeds are the
result of sale of an asset which relates solely to a Production Company (and
the Agent has approved such determination, in which case such prepayment shall
be used to reduce the Commitment of the appropriate Production Company and the
Loans related thereto), all such prepayments shall first be utilized to reduce
the Term Loan and following repayment of the Term Loan, shall reduce such
Commitment and Loans related thereto as the Parent may elect. In addition,
prior to repayment of the Term Loan 100% of all Net Cash Proceeds (other than
pursuant to the preceding sentence) shall be applied as mandatory prepayments
of the Term Loan.
(g) Subject to the provisions of Section 2.12(j), on the last
Business Day of each week (or more frequently if determined by the Agent in its
sole discretion) in which the balance of cash receipts which have been
transferred into any Collection Account at the office of the Agent from the
lockboxes
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maintained by the Borrowers at the office of the Agent is in excess of
$250,000, the outstanding principal amount of the relevant Loans shall be
prepaid in an amount equal to the sum of items on deposit in each such
Collection Account which equals $250,000 or such greater amount which is an
integral multiple of $50,000. This Section 2.12(g) shall apply to each
Collection Account; provided, however, that in the event receipts have been
incorrectly transferred (e.g. Baywatch receipts have been transferred to the
Term Collection Account), the Borrower shall so advise the Agent and the
appropriate Loans shall be prepaid.
(h) On the last Business Day of each week (each a "Transfer
Date"), the outstanding principal amount of the Term Notes shall be subject to
mandatory prepayment; the amount of such prepayment to be determined pursuant
to the following sentence. Fifty percent (50%) of the amount of the cash
receipts which have been transferred into the Term Collection Account from the
lockbox/collection account maintained by AAF at the office of the Agent and are
on deposit in the Term Collection Account on such Transfer Date shall be
transferred into the Royalty Account and the remaining 50% of such amount shall
be transferred into the AAF Cash Collateral Account and applied by the Agent as
follows:
(i) to pay accrued but unpaid interest on the Term Loans
then due and then,
(ii) to pay interest on the Term Loan on the next two
Interest Payment Dates. The amount to be held in the Cash
Collateral Account pursuant to this clause (ii) shall be calculated
by applying the interest rate in effect on Eurodollar Loans on such
date to the principal balance of the Term Loan as of the date of
such transfer and then,
(iii) so long as no Default or Event of Default has occurred
and is continuing, to be used by AAF to pay corporate overhead in
the event AAF has delivered to the Agent a written request for the
release of funds for such purpose; provided, however, that the
amount so released to AAF by the Agent during any calendar quarter
pursuant to this clause (iii) shall not exceed (A) $1,500,000
during each quarter of 1995 and (B) for each calendar year
thereafter, the amount permitted hereunder for the corresponding
quarter of the prior calendar year plus 10%, subject however, to
the provisions of Section 6.31(a) and provided further that AAF may
not request the release of funds for such purpose more often than
once each calendar week. The Agent hereby agrees to transfer such
funds into the Chemical Account and AAF agrees to use such funds
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solely to pay expenses constituting corporate overhead and then,
(iv) so long as no Default or Event of Default has occurred
and is continuing, to be used by AAF in connection with projects
relating to Product, in the event AAF has delivered to the Agent a
written request for the release of funds for such purposes;
provided, however, that the amount so requested by AAF during any
calendar year pursuant to this clause (iv) shall not exceed (A)
$500,000 during 1995 and (B) for each calendar year thereafter, the
amount permitted hereunder for the prior calendar year plus 10%.
The Agent hereby agrees to transfer such funds into the Chemical
Account and AAF agrees to use such funds solely in connection with
projects relating to Product. Then,
(v) to the outstanding principal amount of the Term Loan.
(i) Each prepayment of the Term Loan made pursuant to clause (h)
of this Section 2.12 shall be applied as follows:
(i) to the quarterly payment due at the end of the current
calendar quarter pursuant to Section 2.6(g) hereof and then,
(ii) to the quarterly payment due at the end of the next
succeeding calendar quarter pursuant to Section 2.6(g) hereof, and
then
(iii) to installments of principal in inverse order of their
maturity until such time as a total of $1,500,000 has been so
applied during such quarter pursuant to this clause (iii) at which
time the next repayment made pursuant to Section 2.12(h)(v) and
applied pursuant to this clause (iii) shall be applied to the
quarterly payment due at the end of the second succeeding next
calendar quarter pursuant to Section 2.6(g) hereof and thereafter
applied to installments of principal in inverse order of their
maturity.
(j) If on any day on which the Loans would otherwise be required
to be prepaid but for the operation of this Section 2.12(j) (each a "Prepayment
Date"), the amount of such required prepayment exceeds the then outstanding
aggregate principal amount of the Loans which consist of Alternate Base Rate
Loans, and no Default or Event of Default is then continuing, then on such
Prepayment Date the Agent at the request of the relevant Borrower shall
transfer funds, if any, from a Collection Account referenced in Section 2.12(g)
above into the appropriate Cash
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Collateral Account identified by such Borrower in an amount equal to such
excess. If any of the Borrowers makes such deposit (i) only the outstanding
Alternate Base Rate Loans shall be required to be prepaid on such Prepayment
Date, and (ii) on the last day of each Interest Period in effect after such
Prepayment Date, the Agent is irrevocably authorized and directed to apply
funds from the appropriate Cash Collateral Account (and liquidate investments
held in such Cash Collateral Account as necessary) to prepay Eurodollar Loans
for which the Interest Period is then ending until the aggregate of such
prepayments equals the prepayment which would have been required on such
Prepayment Date but for the operation of this Section 2.12(j).
(k) Unless otherwise designated in writing by the appropriate
Borrower, all prepayments shall be applied to the applicable principal payment
set forth in this Section 2.12, first to that amount of such applicable
principal payment then maintained as Alternate Base Rate Loans by such
Borrower, and then, subject to the provisions of Section 2.12(j), to that
amount of such applicable principal payment maintained as Eurodollar Loans by
such Borrower in order of the scheduled expiry of Interest Periods with respect
thereto.
(l) All prepayments (other than those made pursuant to clauses
(e), (g) and (h) above) shall be accompanied by accrued but unpaid interest on
the principal amount being prepaid to the date of prepayment.
SECTION 2.13. Change in Circumstances.
(a) In the event that after the date hereof any change in
Applicable Law or in the official interpretation or administration thereof
(including, without limitation, any request, guideline or policy not having the
force of law) by any authority charged with the administration or
interpretation thereof or, with respect to clause (ii), (iii) or (iv) below any
change in conditions, shall occur which shall:
(i) subject any Lender to, or increase the net amount of,
any tax, levy, impost, duty, charge, fee, deduction or withholding
with respect to any Eurodollar Loan (other than withholding tax
imposed by the United States of America or any political
subdivision or taxing authority thereof or any other tax, levy,
impost, duty, charge, fee, deduction or withholding (x) that is
measured with respect to the overall net income of such Lender or
of a Lending Office of such Lender, and that is imposed by the
United States of America, or by the jurisdiction in which such
Lender or Lending Office is incorporated, in which such Lending
Office is located, managed or controlled or in which such Lender
has its principal office (or any political subdivision
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or taxing authority thereof or therein), or (y) that is imposed
solely by reason of any Lender failing to make a declaration of, or
otherwise to establish, non-residence, or to make any other claim
for exemption, or otherwise to comply with any certification,
identification, information, documentation or reporting
requirements prescribed under the laws of the relevant
jurisdiction, in those cases where a Lender may properly make such
declaration or claim or so establish non-residence or otherwise
comply); or
(ii) change the basis of taxation of any payment to any
Lender of principal or any interest on any Eurodollar Loan (except
as limited in clause (i) above); or
(iii) impose, modify or deem applicable any reserve, deposit
or similar requirement against any assets held by, deposits with or
for the account of or loans or commitments by an office of such
Lender with respect to any Eurodollar Loan; or
(iv) impose upon such Lender or the London Interbank Market
any other condition with respect to the Eurodollar Loans or this
Credit Agreement;
and the result of any of the foregoing shall be to increase the actual cost to
such Lender of making or maintaining any Eurodollar Loan hereunder or to reduce
the amount of any payment (whether of principal, interest or otherwise)
received or receivable by such Lender in connection with any Eurodollar Loan
hereunder, or to require such Lender to make any payment in connection with any
Eurodollar Loan hereunder, in each case by or in an amount which such Lender in
its sole judgment shall deem material, then and in each case the appropriate
Borrower shall pay to the Agent for the account of such Lender, as provided in
paragraph (c) below, such amounts as shall be necessary to compensate such
Lender for such cost, reduction or payment.
(b) If any Lender shall have determined that the adoption after
the date hereof of any law, rule, regulation or guideline regarding capital
adequacy, or any change in any of the foregoing or in the interpretation or
administration of any of the foregoing by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender (or any Lending Office of such Lender) or
any Lender's holding company with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on such Lender's capital or on the
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capital of such Lender's holding company, if any, as a consequence of this
Credit Agreement or the Revolving Credit Loans made by such Lender pursuant
hereto to a level below that which such Lender or such Lender's holding company
could have achieved but for such adoption, change or compliance (taking into
consideration such Lender's policies on capital adequacy) by an amount deemed
by such Lender to be material, then from time to time the Borrowers shall pay
to such Lender such additional amount or amounts as will compensate such Lender
or such Lender's holding company for any such reduction suffered with respect
to Loans made by such Lender hereunder.
(c) Each Lender shall deliver to the Borrowers and the Agent from
time to time, one or more certificates setting forth the amounts due to such
Lender under paragraphs (a) and (b) above, the changes as a result of which
such amounts are due, the manner of computing such amounts and the manner of
computing the amounts allocable to Loans hereunder pursuant to paragraphs (a)
and (b) above. Each such certificate shall be conclusive in the absence of
manifest error. The appropriate Borrower shall pay to the Agent for the
account of each such Lender the amounts shown as due on any such certificate
within ten Business Days after its receipt of the same. No failure on the part
of any Lender to demand compensation under paragraph (a) or (b) above on any
one occasion shall constitute a waiver of its rights to demand compensation on
any other occasion. The protection of this Section shall be available to each
Lender regardless of any possible contention of the invalidity or
inapplicability of any law, regulation or other condition which shall give rise
to any demand by such Lender for compensation thereunder.
(d) Each Lender agrees that, as promptly as practicable after it
becomes aware of the occurrence of an event or the existence of a condition
that (i) would cause it to incur any increased cost under Section 2.12(b) or
this Section 2.13 or (ii) would require the Borrowers to pay an increased
amount under Section 2.10(b) or this Section 2.13, it will use reasonable
efforts to notify the Borrowers of such event or condition and, to the extent
not inconsistent with such Lender's internal policies, will use its reasonable
efforts to make, fund or maintain the affected Loans of such Lender through
another Lending Office of such Lender if as a result thereof the additional
monies which would otherwise be required to be paid or the reduction of amounts
receivable by such Lender thereunder in respect of such Loans would be
materially reduced, or such inability to perform would cease to exist, or the
increased costs which would otherwise be required to be paid in respect of such
Loans pursuant to Section 2.12(b) or this Section 2.13 would be materially
reduced or the taxes or other amounts otherwise payable under Section 2.12(b)
or this Section 2.13 would be materially reduced, and if, as determined by such
Lender, in its sole discretion, the making, funding or maintaining of such
Loans
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through such other Lending Office would not otherwise materially adversely
affect such Loans or such Lender.
(e) In the event any Lender shall have delivered to the Borrowers
a notice that amounts are due to such Lender pursuant to this Section 2.13 or
Section 2.16 or that any of the events designated in paragraph (d) hereof have
occurred, the Parent may (but subject in any such case to the payments required
by Section 2.12(b) and (c) and Section 2.16(e)), provided that there shall
exist no Default or Event of Default, upon at least five Business Days' prior
written or telecopier notice to such Lender and the Agent, but not more than 30
days after receipt of notice from such Lender, identify to the Agent an
Eligible Assignee reasonably acceptable to the Agent which will purchase the
Commitments of such Lender, the amount of outstanding Loans and any
participations in Letters of Credit from such Lender providing such notice and
such Lender shall thereupon assign its Commitments, any Loans owing to such
Lender and any participations in Letters of Credit and the Notes held by such
Lender to such replacement Eligible Assignee pursuant to Section 13.3. Such
notice shall specify an effective date for such assignment and at the time
thereof, the appropriate Borrower(s) shall pay all accrued interest, Commitment
Fees and all other amounts (including without limitation all amounts payable
under this Section 2.13) owing hereunder to such Lender as at such effective
date for such assignment.
SECTION 2.14. Change in Legality.
(a) Notwithstanding anything to the contrary contained elsewhere
in this Credit Agreement, if any change after the date hereof in Applicable
Law, guideline or order, or in the interpretation thereof by any Governmental
Authority charged with the administration thereof, shall make it unlawful for
any Lender to make or maintain any Eurodollar Loan or to give effect to its
obligations as contemplated hereby with respect to a Eurodollar Loan, then, by
written notice to the appropriate Borrower and the Agent, such Lender may (i)
declare that Eurodollar Loans will not thereafter be made by such Lender
hereunder and/or (ii) require that, subject to Section 2.12(b), all outstanding
Eurodollar Loans made by it be converted to Alternate Base Rate Loans,
whereupon all of such Eurodollar Loans shall automatically be converted to
Alternate Base Rate Loans, as of the effective date of such notice as provided
in paragraph (b) below. Such Lender's pro rata portion of any subsequent
Eurodollar Loan shall, instead, be an Alternate Base Rate Loan unless such
declaration is subsequently withdrawn.
(b) A notice to the appropriate Borrower by any Lender pursuant to
paragraph (a) above shall be effective for purposes of clause (ii) thereof, if
lawful, on the last day of the current Interest Period for each outstanding
Eurodollar Loan; and in all
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other cases, on the date of receipt of such notice by the appropriate Borrower.
SECTION 2.15. Manner of Payments.
All payments of principal and interest by any Borrower in respect
of any Loans to it shall be pro rata among the Lenders holding such Loans in
accordance with the then outstanding principal amounts of such Loans held by
them and all Borrowings of any Loans by any Borrower hereunder shall be made
pro rata among the Lenders in accordance with their Commitments. Subject to
Section 2.12(h), all payments by a Borrower hereunder and under the Notes shall
be made in Dollars in Federal or other immediately available funds at the
office of the Agent's Agent Bank Services Department, 140 East 45th St., 29th
Floor, New York, NY 10017, Attention: Doris Mesa for credit to All American
Communication Clearing Acct., Account No. 144-8-16084 (Reference: All American
Communications, Inc. - Credit Agreement dated as of April 13, 1995") no later
than 12:00 noon, New York City time, on the date on which such payment shall be
due. Interest in respect of any Loan hereunder shall accrue from and including
the date of such Loan to but excluding the date on which such Loan is paid or
converted to a Loan of a different type.
SECTION 2.16. United States Withholding.
(a) Prior to the date of the initial Loans hereunder, and from
time to time thereafter if requested by the appropriate Borrower or the Agent
or required because, as a result of a change in law or a change in
circumstances or otherwise, a previously delivered form or statement becomes
incomplete or incorrect in any material respect, each Lender organized under
the laws of a jurisdiction outside the United States shall provide, if
applicable, the Agent and the appropriate Borrower with complete, accurate and
duly executed forms or other statements prescribed by the Internal Revenue
Service of the United States certifying such Lender's exemption from, or
entitlement to a reduced rate of, United States withholding taxes (including
backup withholding taxes) with respect to all payments to be made to such
Lender hereunder and under the Notes.
(b) The Borrowers and the Agent shall be entitled to deduct and
withhold any and all present or future taxes or withholdings, and all
liabilities with respect thereto, from payments hereunder or under the Notes,
if and to the extent that the Borrowers or the Agent in good faith determines
that such deduction or withholding is required by the law of the United States,
including, without limitation, any applicable treaty of the United States. In
the event that any of the Borrowers or the Agent shall so determine that
deduction or withholding of taxes is required, it shall advise the affected
Lender as to the basis of such determination prior to actually deducting and
withholding
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such taxes. In the event a Borrower or the Agent shall so deduct or withhold
taxes from amounts payable hereunder, it (i) shall pay to or deposit with the
appropriate taxing authority in a timely manner the full amount of taxes it has
deducted or withheld; (ii) shall provide evidence of payment of such taxes to,
or the deposit thereof with, the appropriate taxing authority and a statement
setting forth the amount of taxes deducted or withheld, the applicable rate,
and any other information or documentation reasonably requested by the Lenders
from whom the taxes were deducted or withheld; and (iii) shall forward to such
Lenders any payment or deposit of the deducted or withheld taxes as may be
issued from time to time by the appropriate taxing authority. Unless the
Borrowers and the Agent have received forms or other documents satisfactory to
them indicating that payments hereunder or under the Notes are not subject to
United States withholding tax or are subject to such tax at a rate reduced by
an applicable tax treaty, the Borrowers or the Agent may withhold taxes from
such payments at the applicable statutory rate in the case of payments to or
for any Lender organized under the laws of a jurisdiction outside the United
States.
(c) Each Lender agrees (i) that as between it and the Borrowers or
the Agent, such Lender shall be the Person to deduct and withhold taxes, and to
the extent required by law it shall deduct and withhold taxes, on amounts that
such Lender may remit to any other Person(s) by reason of any undisclosed
transfer or assignment of an interest in this Credit Agreement to such other
Person(s) pursuant to paragraph (g) of Section 13.3 and (ii) to indemnify the
Borrowers and the Agent and any officers, directors, agents, or employees of
the Borrowers or the Agent against and to hold them harmless from any tax,
interest, additions to tax, penalties, reasonable counsel and accountants'
fees, disbursements or payments arising from the assertion by any appropriate
taxing authority of any claim against them relating to a failure to withhold
taxes as required by law with respect to amounts described in clause (i) of
this paragraph (c) or arising from the reliance by the Borrowers or the Agent
on any form or other document furnished by such Lender and purporting to
establish a basis for not withholding, or for withholding at a reduced rate,
taxes with respect to payments hereunder.
(d) Each assignee of a Lender's interest in this Credit Agreement
in conformity with Section 13.3 shall be bound by this Section 2.16, so that
such assignee will have all of the obligations and provide all of the forms and
statements and all indemnities, representations and warranties required to be
given under this Section 2.16.
(e) Notwithstanding the foregoing, in the event that any
additional withholding taxes shall become payable solely as a result of any
change in any statute, treaty, ruling, determination or regulation occurring
after the Initial Date in
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respect of any sum payable hereunder or under any other Fundamental Document to
any Lender or the Agent (i) the sum payable by the appropriate Borrower shall
be increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
2.16) such Lender or the Agent (as the case may be) receives an amount equal to
the sum it would have received had no such withholding deductions been made,
(ii) the appropriate Borrower shall make such deductions and (iii) the
appropriate Borrower shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with Applicable Law. For
purposes of this Section 2.16, the term "Initial Date" shall mean (i) in the
case of the Agent, the date hereof, (ii) in the case of each Lender as of the
date hereof, the date hereof and (iii) in the case of any other Lender, the
date of the Assignment and Acceptance or the date of the Assumption Agreement,
as the case may be, pursuant to which it became a Lender.
(f) In the event that a Lender receives a refund of or credit for
taxes withheld pursuant to clause (e) of this Section 2.16, which credit or
refund is identifiable by such Lender as being a result of taxes withheld in
connection with sums payable hereunder or under any other Fundamental Document,
such Lender shall promptly notify the Agent and the appropriate Borrower and
shall remit to the appropriate Borrower the amount of such refund or credit
allocable to payments made hereunder or under the other Fundamental Documents.
(g) Each Lender agrees that, as promptly as practicable after it
becomes aware of the occurrence of an event that would cause any Borrower to
pay any amount pursuant to clause (e) of this Section 2.16, it will use
reasonable efforts to notify the Borrowers of such event and, to the extent not
inconsistent with such Lender's internal policies, will use its reasonable
efforts to make, fund or maintain the affected Loans of such Lender through
another Lending Office of such Lender if as a result thereof the additional
monies which would otherwise be required to be paid by reason of Section
2.16(e) in respect of such Loans would be materially reduced, and if, as
determined by such Lender, in its sole discretion, the making, funding or
maintaining of such Loans through such other Lending Office would not otherwise
materially adversely affect such Loans or such Lender.
SECTION 2.17. Interest Adjustments.
If the provisions of this Credit Agreement or any Note would at any
time require payment by any of the Borrowers to a Lender of any amount of
interest in excess of the maximum amount then permitted by the law applicable
to any Loan, the interest payments to that Lender shall be reduced to the
extent necessary
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so that such Lender shall not receive interest in excess of such maximum
amount. If, as a result of the foregoing, a Lender shall receive interest
payments hereunder or under a Note in an amount less than the amount otherwise
provided hereunder, such deficit (hereinafter called the "Interest Deficit")
will, to the fullest extent permitted by Applicable Law, cumulate and will be
carried forward (without interest) until the termination of this Credit
Agreement. Interest otherwise payable to a Lender hereunder and under a Note
for any subsequent period shall be increased by the maximum amount of the
Interest Deficit that may be so added without causing such Lender to receive
interest in excess of the maximum amount then permitted by the law applicable
to the Loans.
The amount of any Interest Deficit relating to a particular Loan
and Note shall be treated as a prepayment penalty and shall, to the fullest
extent permitted by Applicable Law, be paid in full at the time of any optional
prepayment by the appropriate Borrower to the Lenders of all the Loans at that
time outstanding pursuant to Section 2.9(a) hereof. The amount of any Interest
Deficit relating to a particular Loan and Note at the time of any complete
payment of the Loans at that time outstanding (other than an optional
prepayment thereof pursuant to Section 2.12(a) hereof) shall be cancelled and
not paid.
SECTION 2.18. Letters of Credit.
(a) (i) Subject to the terms and conditions hereof and of
Applicable Law, the Fronting Bank agrees to issue Letters of Credit payable in
Dollars from time to time after the Closing Date and prior to the Commitment
Termination Date upon the request of the Parent, provided, however, that (A)
the Parent shall not request that any Letter of Credit be issued if, after
giving effect thereto, (1) the sum of the then current L/C Exposure plus the
aggregate Working Capital Loans then outstanding would exceed the aggregate
Working Capital Commitments of all the Lenders or (2) all outstanding Revolving
Credit Loans plus L/C Exposure would exceed the lesser of (I) the then current
amount of the Borrowing Base or (II) the aggregate of the Total Commitments of
all Lenders then in effect and (B) in no event shall the Fronting Bank issue
any Letter of Credit having an expiration or earliest revocation date after the
Commitment Termination Date.
(ii) Immediately upon the issuance of each Letter of Credit, each
Lender shall be deemed to, and hereby agrees to, have irrevocably purchased
from the Fronting Bank a participation in such Letter of Credit in accordance
with such Lender's Percentage.
(iii) Each Letter of Credit may, at the option of the Fronting
Bank, provide that the Fronting Bank may (but shall not be required to) pay all
or any part of the maximum amount which
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may at any time be available for drawing thereunder to the beneficiary thereof
upon the occurrence and continuation of an Event of Default and the
acceleration of the maturity of the Loans, provided that, if payment is not
then due to the beneficiary, the Fronting Bank shall deposit the funds in
question in a segregated account with the Fronting Bank to secure payment to
the beneficiary and any funds so deposited shall be paid to the beneficiary of
the Letter of Credit if conditions to such payment are satisfied or returned to
the Fronting Bank for distribution to the Lenders (or, if all Obligations shall
have been paid in full in cash, to the appropriate Borrower) if no payment to
the beneficiary has been made and the final date available for drawings under
the Letter of Credit has passed. Each payment or deposit of funds by the
Fronting Bank as provided in this paragraph shall be treated for all purposes
of this Credit Agreement as a drawing duly honored by the Fronting Bank under
the related Letter of Credit.
(b) Whenever the Parent desires the issuance of a Letter of
Credit, it shall deliver to the Fronting Bank a written notice no later than
1:00 p.m. (New York time) at least five Business Days prior to the proposed
date of issuance. Such notice shall specify (i) the proposed date of issuance
(which shall be a Business Day), (ii) the face amount of the Letter of Credit,
(iii) the expiration date of the Letter of Credit and (iv) the name and address
of the beneficiary. Such notice shall be accompanied by a brief description of
the underlying transaction and upon request of the Fronting Bank, the Parent
shall provide additional details regarding the underlying transaction.
Concurrently with the giving of written notice of a request for the issuance of
a Letter of Credit, the Parent shall specify a precise description of the
documents and the verbatim text of any certificate to be presented by the
beneficiary of such Letter of Credit which, if presented by such beneficiary
prior to the expiration date of the Letter of Credit, would require the
Fronting Bank to make payment under the Letter of Credit; provided, however,
that the Fronting Bank, in its reasonable discretion, may require customary
changes in any such documents and certificates. Promptly after receipt of such
notice, the Agent shall notify each Lender of the issuance and the amount of
each such Lender's respective participation therein.
(c) The payment of drafts under any Letter of Credit shall be made
in accordance with the terms of such Letter of Credit and the Uniform Customs
and Practice for documentary Credits of the International Chamber of Commerce.
The Fronting Bank shall be entitled to honor any drafts and accept any
documents presented to it by the beneficiary of such Letter of Credit in
accordance with the terms of such Letter of Credit and believed by the Fronting
Bank in good faith to be genuine. The Fronting Bank shall not have any duty to
inquire as to the
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accuracy or authenticity of any draft or other drawing documents which may be
presented to it, but shall be responsible only to determine in accordance with
customary commercial practices that the documents which are required to be
presented before payment or acceptance of a draft under any Letter of Credit
have been delivered and that they comply on their face with the requirements to
that Letter of Credit.
(d) If the Fronting Bank shall make payment on any draft presented
under a Letter of Credit (regardless of whether a Default or Event of Default
or acceleration has occurred), the Fronting Bank shall give notice of such
payment to the Lenders and each Lender hereby authorizes and requests the
Fronting Bank to advance for its account pursuant to the terms thereof its
share of such payment based upon its participation in the Letter of Credit and
agrees promptly to reimburse the Fronting Bank in immediately available funds
for the Dollar equivalent of the amount so advanced on its behalf. If such
reimbursement is not made by any Lender in immediately available funds on the
same day on which the Fronting Bank shall have made payment on any such draft,
such Lender shall pay interest thereof to the Fronting Bank at a rate per annum
equal to the Fronting Bank's cost of obtaining overnight funds in the New York
Federal Funds Market. In the case of any draft presented under a Letter of
Credit which is required to be paid at any time on or before the Commitment
Termination Date, such payment of the unreimbursed draft shall constitute an
Alternate Base Rate Loan (under the Working Capital Commitment, if available)
hereunder and interest shall accrue from the date the Fronting Bank makes
payment of a draft under the Letter of Credit.
(e) If any draft is presented under a Letter of Credit, payment of
which is required to be made after the termination of the Commitments (it being
understood that no Letter of Credit shall be issued which would expire after
April 13, 1999), then the Parent will, upon demand by the Fronting Bank, pay to
the Fronting Agent, in immediately available funds, the full amount of such
draft. If such payment is not made by the Parent and the Fronting Bank shall
make payment on any draft presented under a Letter of Credit, the Fronting Bank
shall give notice of such payment to the Lenders and each Lender hereby
authorizes and requests the Fronting Bank to advance for its account pursuant
to the terms thereof its share of such payment based upon its participation in
the Letter of Credit and agrees promptly to reimburse the Fronting Bank in
immediately available funds for the Dollar equivalent of the amount so advanced
on its behalf. If such reimbursement is not made by any Lender in immediately
available funds on the same day on which the Fronting Bank shall have made
payment on any such draft, such Lender shall pay interest thereon to the
Fronting Bank at a rate per annum equal to the Fronting Bank's cost of
obtaining overnight funds in the New York Federal Funds Market.
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Such payment shall constitute an Alternate Base Rate Loan hereunder and
interest shall accrue from the date the Fronting Bank makes payment of a draft
under the Letter of Credit at the rate specified in Section 2.10.
(f) (i) The Parent agrees to pay the following amount to the
Fronting Bank with respect to Letters of Credit issued by it hereunder:
(A) with respect to drawings made under any Letter of
Credit, interest, payable on demand, on the amount paid by the
Fronting Bank in respect of each such drawing from the date of the
drawing to but excluding the date such amount is reimbursed by the
Parent at a rate which is at all times equal to 2% per annum in
excess of the rate in effect for Alternate Base Rate Loans;
provided, however, that no such default interest shall be payable
if such reimbursement is made from the proceeds of Loans pursuant
to Section 2.18(d);
(B) with respect to the issuance, amendment, transfer or any
other transaction related to each Letter of Credit and each drawing
made thereunder, documentary and processing charges in accordance
with the Fronting Bank's standard schedule for such charges in
effect at the time of such issuance, amendment, transfer or
drawing, as the case may be; and
(C) a fronting fee for the period from and including the
Closing Date to but excluding the Commitment Termination Date,
computed at a rate equal to 1/4 of 1% per annum (computed on the
basis of the actual number of days elapsed over a year of 360 days)
of the daily average L/C Exposure, such fee to be due and payable
in arrears on and through the last day of each fiscal quarter of
the Parent, on the Commitment Termination Date and on the
expiration of the last outstanding Letter of Credit.
(ii) The Parent agrees to pay to the Agent for distribution to
each Lender in respect of all L/C Exposure, such Lender's pro rata share of a
commission on the amount thereof calculated at a rate per annum of 2% (computed
on the basis of the actual number of days elapsed over a year of 360 days) of
the daily average L/C Exposure. Such commission shall be payable in arrears on
and through the last day of each fiscal quarter and on the later of the
Commitment Termination Date and the expiration of the last outstanding Letter
of Credit.
(iii) Promptly upon receipt by the Fronting Bank of any amount
described in clause (i)(A) or (ii) of this Section
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2.18(f), or any amount described in Section 2.18(e) previously reimbursed to
the Fronting Bank by the Lenders, the Fronting Bank shall distribute to each
Lender its pro rata share of such amount. Amounts payable under clauses (i)(B)
and (i)(C) of this Section 2.18(f) shall be paid directly to the Fronting Bank
and shall be for its exclusive use.
(g) If by reason of (i) any change after the date hereof in
Applicable Law, or in the interpretation or administration thereof (including,
without limitation, any request, guideline or policy not having the force of
law) by any Governmental Authority charged with the administration or
interpretation thereof, or (ii) compliance by the Fronting Bank or any Lender
with any direction, request or requirement (whether or not having the force of
law) issued after the date hereof by any Governmental Authority or monetary
authority (including any change whether or not proposed or published prior to
the date hereof), including, without limitation, Regulation D:
(A) the Fronting Bank or any Lender shall be subject to any
tax, levy, duty, fee, charge, deduction or withholding with respect
to any Letter of Credit (other than withholding tax imposed by the
United States of America or any other tax, levy, impost, duty,
charge, fee, deduction or withholding (i) that is measured with
respect to the overall net income of the Fronting Bank or such
Lender or of a Lending Office of the Fronting Bank or such Lender,
and that is imposed by the United States of America, or by the
jurisdiction in which the Fronting Bank or such Lender is
incorporated, or in which such Lending Office is located, managed
or controlled or in which the Fronting Bank or such Lender has its
principal office (or any political subdivision or taxing authority
thereof or therein) or (ii) that is imposed solely by reason of any
Lender failing to make a declaration of, or otherwise to establish,
non-residence or to make any other claim for exemption, or
otherwise to comply with any certification, identification,
information, documentation or reporting requirements prescribed
under the laws of the relevant jurisdiction, in those cases where a
Lender may properly make such declaration or claim or so establish
non-residence or otherwise comply);
(B) the basis of taxation of any fee or amount payable
hereunder with respect to any Letter of Credit shall be changed
(except as limited in clause (A) above);
(C) any reserve, deposit or similar requirement is or shall
be applicable, imposed or modified in
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respect of any Letter of Credit issued by the Fronting Bank or
participations therein purchased by any Lender; or
(D) there shall be imposed on the Fronting Bank or any
Lender any other condition regarding this Section 2.18, any Letter
of Credit or any participation therein;
and the result of the foregoing is to increase the actual cost to the Fronting
Bank or any Lender of issuing, making or maintaining any Letter of Credit or of
purchasing or maintaining any participation therein, or to reduce the amount
receivable in respect thereof by the Fronting Bank or any Lender, in each case
by or in an amount which the Fronting Bank or any Lender shall reasonably deem
material, then and in any such case the Fronting Bank or such Lender may, at
any time, notify the Parent, and the Parent shall pay on demand such amounts as
the Fronting Bank or such Lender may specify to be necessary to compensate the
Fronting Bank or such Lender for such additional cost or reduced receipt.
Section 2.13(b), (c), (d) and Section 2.14 shall in all instances apply to the
Fronting Bank and any Lender with respect to Letters of Credit issued
hereunder.
(h) If at any time when an Event of Default shall have occurred
and be continuing, any Letters of Credit shall remain outstanding, then the
Majority Lenders or the Fronting Bank may, at their option, require the Parent
to deliver to the Fronting Bank Cash Equivalents in an amount equal to the full
amount of the L/C Exposure or to furnish other security acceptable to the
Fronting Bank. Any amounts so delivered pursuant to the preceding sentence
shall be applied to reimburse the Fronting Bank for the amount of any drawings
honored under Letters of Credit; provided, however, that if prior to the
Commitment Termination Date, no Event of Default is then continuing, the
Fronting Bank shall return all of such collateral relating to such deposit to
the Parent if requested by it.
(i) If at any time, the L/C Exposure plus Revolving Credit Loans
outstanding exceeds the Borrowing Base, then the Majority Lenders or the
Fronting Bank may, at their option, require the Parent to deliver Cash
Equivalents to the Fronting Bank in an amount sufficient to eliminate such
excess or to furnish other security for such excess acceptable to the Fronting
Bank. Any amounts so delivered pursuant to the preceding sentence shall be
applied to reimburse the Fronting Bank for the amount of any drawings honored
under Letters of Credit; provided, however, that if subsequent to any such
deposit such excess is reduced to an amount less than the amount of such
deposited amounts and no Default or Event of Default is then continuing, the
Parent shall be entitled to receive such excess collateral if requested by it.
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(j) If at any time, a prepayment would be required under Section
2.12 in an amount in excess of Working Capital Loans then outstanding, such
excess (but not more than an amount equal to the L/C Exposure) shall be
deposited in the Cash Collateral Account as security for outstanding Letters of
Credit.
(k) Notwithstanding the termination of the Commitments and the
payment of the Loans, the obligations of the Parent under this Section 2.18
shall remain in full force and effect until the Fronting Bank and the Lenders
shall have been irrevocably released from their obligations with regard to any
and all Letters of Credit.
3. REPRESENTATIONS AND WARRANTIES OF DEBTORS
In order to induce the Lenders to enter into this Credit Agreement
and to make the Loans and issue the Letters of Credit provided for herein, each
Debtor, jointly and severally, makes the following representations and
warranties to, and agreements with, the Lenders, all of which shall survive the
execution and delivery of this Credit Agreement, the issuance of the Notes, the
making of the Loans and the issuance of the Letters of Credit:
SECTION 3.1. Corporate Existence and Power.
Each of the Debtors is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and is in good standing as a foreign corporation in all
jurisdictions where the nature of its properties or business so requires and
where the failure to be in good standing as a foreign corporation would render
an Eligible Receivable unenforceable or would give rise to a material liability
of any Borrower or the Parent and its Subsidiaries taken as a whole. Each of
the Debtors has the corporate power and authority to own its respective
properties and carry on its respective businesses as now being conducted, to
execute, deliver and perform, as applicable, its obligations under this Credit
Agreement, the Notes and the other Fundamental Documents and other documents
contemplated hereby to which it is or will be a party as provided herein and to
grant to the Agent, for the benefit of the Lenders, a security interest in the
Collateral as contemplated by Article 8 hereof and in the Pledged Securities as
contemplated by Article 10 hereof.
SECTION 3.2. Corporate Authority and No Violation.
The execution, delivery and performance of this Credit Agreement
and the other Fundamental Documents to which it is a party, by each Debtor and,
in the case of the Borrowers, the borrowings hereunder and the execution and
delivery of the
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relevant Notes and, in the case of each Debtor, the grant to the Agent for the
benefit of the Lenders of the security interest in the Collateral and the
Pledged Securities as contemplated herein and in the other Fundamental
Documents (a) have been duly authorized by all necessary corporate action on
the part of each such Debtor, (b) will not constitute a violation by any Debtor
of any provision of Applicable Law, any order of any court or other agency of
the United States or any state thereof applicable to any of the Debtors or any
of their respective properties or assets, (c) will not violate any provision of
the Certificate of Incorporation or By-Laws of any of the Debtors, or any
material provision of any Distribution Agreement, Licensing Agreement,
indenture, agreement, bond, note or other similar instrument to which any of
the Debtors is a party or by which any of the Debtors or their respective
properties or assets are bound, (d) will not be in conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under or create any right to terminate any such Distribution Agreement,
indenture, agreement, bond, note or other instrument, and (e) will not result
in the creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of any of the Debtors other
than pursuant to this Credit Agreement or the other Fundamental Documents to
which it is a party.
SECTION 3.3. Governmental Approval.
All authorizations, approvals, registrations or filings from or
with any governmental or public regulatory body or authority of the United
States or any state thereof or any foreign jurisdiction required on the part of
any Debtor for the execution, delivery and performance by any Debtor of this
Credit Agreement and the other Fundamental Documents to which it is a party,
and the execution and delivery by the Borrowers of the relevant Notes, have
been duly obtained or made, and are in full force and effect.
SECTION 3.4. Binding Agreements.
This Credit Agreement and the other Fundamental Documents when
executed will constitute the legal, valid and binding obligations of the
respective Debtors, enforceable in accordance with their respective terms,
subject, as to the enforcement of remedies, to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and to
general principles of equity.
SECTION 3.5. Financial Statements.
The audited consolidated balance sheet of the Parent and its
Subsidiaries at December 31, 1994, together with the related consolidated or
consolidating statements of income and
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cash flow and the related notes and supplemental information, has been prepared
in accordance with GAAP, except as otherwise indicated in the notes to such
financial statements. All of such financial statements fairly present the
consolidated financial condition or the results of operations of the Parent and
its Subsidiaries, at the dates or for the periods indicated, subject in the
case of unaudited statements to changes resulting from normal year-end and
audit adjustments, and (in the case of balance sheets) reflect (including the
notes thereto) all known liabilities, contingent or otherwise, as of such dates
required in accordance with GAAP to be shown or reserved against, or disclosed
in the notes to the financial statements.
SECTION 3.6. No Material Adverse Change.
(a) At (and for the period ending on) the Closing Date, there has
been no material adverse change from the business plan previously provided by
the Parent to the Agent and included in the February 1995 Confidential
Information Memorandum.
(b) No Debtor has entered or is entering into the arrangements
contemplated hereby and by the other Fundamental Documents, or intends to make
any transfer or incur any obligations hereunder or thereunder, with actual
intent to hinder, delay or defraud either present or future creditors. On and
as of the date hereof, on a pro forma basis after giving effect to all
Indebtedness (including the Loans) (w) each Debtor expects the cash available
to such Debtor, after taking into account all other anticipated uses of the
cash of such Debtor (including the payments on or in respect of debt referred
to in clause (y) of this Section 3.6(b)), will be sufficient to satisfy all
final judgments for money damages which have been docketed against such Debtor
or which may be rendered against such Debtor in any action in which such Debtor
is a defendant (taking into account the reasonably anticipated maximum amount
of any such judgment and the earliest time at which such judgment might be
entered); (x) the sum of the present fair saleable value of the assets of each
Debtor will exceed the probable liability of such Debtor on its debts
(including its Guaranties); (y) no Debtor will have incurred or intends to, or
believes that it will, incur debts beyond its ability to pay such debts as such
debts mature (taking into account the timing and amounts of cash to be received
by such Debtor from any source, and of amounts to be payable on or in respect
of debts of such Debtor and the amounts referred to in clause (w)); and (z)
each Debtor believes it will have sufficient capital with which to conduct its
present and proposed business and the property of such Debtor does not
constitute unreasonably small capital with which to conduct its present or
proposed business. For purposes of this Section 3.6, "debt" means any
liability on a claim, and "claim" means (i) right to payment whether or not
such right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured,
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unmatured, disputed (other than those being disputed in good faith),
undisputed, legal, equitable, secured or unsecured, or (ii) right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured.
SECTION 3.7. Subsidiaries; Ownership of Stock.
(a) Annexed hereto as Schedule 3.7 is a correct and complete list
as of the date hereof, of all the Subsidiaries of the Parent showing, as to
each, its name, the jurisdiction of incorporation, its authorized
capitalization and the ownership of the capital stock of such Subsidiary;
(b) Except as noted on Schedule 3.7, neither the Parent nor any
Subsidiary owns any Voting Stock or beneficial interest, directly or
indirectly, in any entity other than in the Subsidiaries of the Parent and in
Fremantle; and
(c) All of the outstanding shares of capital stock of each
Subsidiary of the Parent have been validly issued and are fully paid and
non-assessable; such shares are owned by the Person set forth in Schedule 3.7
free and clear of all liens, charges or encumbrances except as contemplated
herein.
SECTION 3.8. Copyrights, Patents and Other Rights.
(a) On the date hereof, the Product, Recorded Product and Film
Assets listed on Schedule 3.8(a) hereof comprise all of the Product, Recorded
Product and Film Assets in which any Debtor has any right, title or interest
(either directly or through a joint venture or partnership) and the value to
the Debtor of which in the Debtors' reasonably commercial judgment is in excess
of $250,000 and the description of the interests held by each Debtor are set
forth on such Schedule. Each Debtor has duly recorded its interest in each
such Product, Recorded Product or Film Asset in the United States Copyright
Office and delivered copies of all such recordations to the Agent (other than
such Product, Recorded Product or Film Assets which in the aggregate do not
represent more than 1% of the overall value of the Collateral). No Product,
Recorded Product or Film Asset or any component part thereof violates or
infringes upon any copyright, right of privacy, trademark, patent, trade name,
performing right or any literary, dramatic, musical, artistic, personal,
private, contract or copyright right or any other right of any Person if such
infringement would materially adversely affect the business or financial
condition of any Debtor or expose any Debtor to material damages or costs or
contains any libelous or slanderous material. There is no claim, suit, action
or proceeding pending or threatened against any Debtor that involves a claim of
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infringement of any copyright and no Debtor has knowledge of any existing
infringement by any other Person of any copyright held by any Debtor.
(b) Schedule 3.8(b) hereto (i) lists all the trademarks registered
by any Debtor on the date hereof and identifies the Debtor which registered
each such trademark and (ii) specifies as to each, the jurisdictions in which
such trademark has been issued or registered (or, if applicable, in which an
application for such issuance or registration has been filed), including the
respective registration or application numbers and applicable dates of
registration or application and (iii) specifies as to each, as applicable,
material licenses, sublicenses and other material agreements as of the date
hereof (other than any agreements which relate to the exploitation of a item of
Product), to which any Debtor is a party and pursuant to which any Person is
authorized to use such trademark. Each trademark set forth on Schedule 3.8(b)
shall be included on Schedule A to the Trademark Security Agreement delivered
to the Agent pursuant to Section 4.01.
SECTION 3.9. Fictitious Names.
Except as disclosed on Schedule 3.9, none of the Debtors are doing
business or intend to do business other than under its full corporate name,
including, without limitation, under any trade name or other doing business
name.
SECTION 3.10. Title to Properties.
The Debtors have good title to each of the properties and assets
reflected on the latest balance sheets referred to in Section 3.5 (other than
such properties or assets disposed of in the ordinary course of business since
the date of such balance sheets) and all such properties and assets are free
and clear of Liens, except Permitted Encumbrances.
SECTION 3.11. Places of Business.
The chief executive office of each Debtor is, on the date hereof,
as set forth on Schedule 3.11 hereto, which offices in the United States are
the places where each Debtor is "located" for the purpose of the UCC and the
Uniform Commercial Code in effect in any State in which any Debtor is so
located. All of the places where each Debtor keeps the records concerning the
Collateral on the date hereof or regularly keeps any goods included in the
Collateral on the date hereof are also listed on Schedule 3.11 hereto.
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SECTION 3.12. Litigation.
Except as set forth on Schedule 3.12 hereto, there are no actions,
suits or other proceedings at law or in equity by or before any arbitrator or
arbitration panel, or any Governmental Authority (including, but not limited
to, matters relating to environmental liability) or any investigation by any
Governmental Authority of the affairs of or threatened litigation action or
other proceedings against or affecting any Debtor or of any of their respective
properties or rights which, if adversely determined, would reasonably be
expected to materially and adversely affect (i) the ability of any Debtor to
perform its obligations under the Fundamental Documents to which it is a party,
(ii) the ability of any Debtor to carry on its business, (iii) the security
interests granted to the Agent for the benefit of the Lenders under the
Fundamental Documents, (iv) the financial condition or business of the Parent
and its Subsidiaries taken as a whole or, (v) the Collateral. No Debtor is in
default with respect to any order, writ, injunction, decree, rule or regulation
of any Governmental Authority binding upon such Person, which default would
have a material adverse effect upon the financial condition or the business of
the Parent and its Subsidiaries taken as a whole.
SECTION 3.13. Federal Reserve Regulations.
No Debtor is engaged principally or as one of its important
activities, in the business of extending credit for the purpose of purchasing
or carrying any Margin Stock. No part of the proceeds of the Working Capital
Loans will be used, directly or indirectly, whether immediately, incidentally
or ultimately (i) to purchase or carry any Margin Stock or to extend credit to
others for the purpose of purchasing or carrying any Margin Stock, or (ii) for
any other purpose violative of or inconsistent with any of the provisions of
any regulation of the Board of Governors of the Federal Reserve System,
including, without limitation, Regulations G, T, U and X thereto.
SECTION 3.14. Investment Company Act.
No Debtor is, or will during the term of this Credit Agreement be,
(x) an "investment company", within the meaning of the Investment Company Act
of 1940, as amended or (y) subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act or any foreign, federal or
local statute or any other Applicable Law of the United States of America, any
other jurisdiction, in each case limiting its ability to incur indebtedness for
money borrowed as contemplated hereby or by any other Fundamental Document.
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SECTION 3.15. Taxes.
Each Debtor has filed or caused to be filed all federal, state,
local and foreign tax returns which are required to be filed with any
Governmental Authority after giving effect to applicable extensions, and has
paid or have caused to be paid all taxes as shown on said returns or on any
assessment received by them in writing, to the extent that such taxes have
become due, except as permitted by Section 5.14 hereof. No Debtor knows of any
material additional assessments or any basis therefor. The Debtors reasonably
believe that the charges, accrual and reserves on the books of the Parent and
its Subsidiaries in respect of taxes or other governmental charges are
adequate.
SECTION 3.16. Compliance with ERISA.
Each Debtor is in compliance in all material respects with the
provisions of ERISA and the Code applicable to Plans, and the regulations and
published interpretations thereunder, if any, which are applicable to it. As
of the date hereof, no Debtor has, with respect to any Plan established or
maintained by it, engaged in a prohibited transaction which would subject it to
a material tax or penalty on prohibited transactions imposed by ERISA or
Section 4975 of the Code. No liability to the PBGC has been or is expected to
be incurred with respect to the Plans and there has been no Reportable Event
and no other event or condition that presents a material risk of termination of
a Plan by the PBGC. No Debtor has engaged in a transaction which would result
in the incurrence by such Debtor of any liability under Section 4069 of ERISA.
No Debtor has taken any action and no event has occurred with respect to any
Multiemployer Plan which would subject any Debtor to liability under either
Section 4201 or 4204 of ERISA.
SECTION 3.17. Agreements.
(a) No Debtor is in default in the performance, observance or
fulfillment of any of the material obligations, covenants or conditions
contained in any agreement or instrument (including the Distribution Agreements
or any Licensing Agreements) to which it is a party which would reasonably be
expected to result in any material adverse change in the business, properties,
assets, operations, condition (financial or otherwise) or prospects of any
Borrower or the Parent and its Subsidiaries taken as a whole.
(b) Schedule 3.17 is a true and complete listing (in form
satisfactory to the Agent) as of the date hereof of (i) all credit agreements,
indentures, and other agreements related to any Indebtedness for borrowed money
of the Debtors, (ii) all joint venture agreements to which the Debtors are a
party (iii) all material Distribution Agreements and/or Licensing
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Agreements to which the Debtors are party, including, but not limited to those
agreements relating to receivables, Product or licenses acquired as a result of
the acquisition of the Fremantle stocks and assets, and (iv) all other
contracts and agreements which are material to any Debtor. The Debtors have
delivered or made available to the Agent a true and complete copy of each
agreement listed on Schedule 3.17, including all exhibits and schedules. For
purposes of this Section 3.17, a Distribution Agreement or other contract or
agreement shall be deemed "material" if the Debtors reasonably expect that
prior to the Commitment Termination Date any Debtor would, pursuant to the
terms thereof, (x) recognize net revenues after the payment of third party
shares in excess of $250,000 or (y) incur liabilities or obligations (not
covered by corresponding revenues) in excess of $100,000.
SECTION 3.18. Security Interest; Other Security.
(a) This Credit Agreement and the other Fundamental Documents,
when executed and delivered and, upon the making of the initial Loan hereunder,
will create and grant to the Agent for the benefit of the Lenders (upon (i) the
filing of the appropriate UCC-1 financing statements, (ii) the filing of the
Copyright Security Agreements with the U.S. Copyright Office, (iii) the filing
of the Trademark Security Agreement with the U.S. Patent and Trademark Office
and (iv) delivery of the Pledged Securities to the Agent) valid and first
priority perfected security interests in the Collateral and the Pledged
Securities subject only to Permitted Encumbrances (other than any Collateral
consisting of a Debtor's interest in a copyright as to which a security
interest may only be perfected by a filing in the U.S. Copyright Office and as
to which no filing has been made in the U.S. Copyright Office to perfect the
transfer of such interest to such Debtor and which in the aggregate do not
represent more than 1% of the overall value of the Collateral).
(b) The Keyman Life Insurance is in full force and effect and the
Debtors know of no defense or offset to the full and timely payment thereon
which could be asserted by the insurer issuing such policy if a bona fide claim
were to be made.
(c) The Keyman Life Insurance Assignment constitutes a valid and
effective transfer to the Agent for the benefit of the Lenders for security
purposes of all right, title and interest of the Debtors in and to the Keyman
Life Insurance.
SECTION 3.19. Disclosure.
Neither this Credit Agreement nor any other Fundamental Document
nor any agreement, document, certificate or statement furnished to the Agent
for the benefit of the Lenders by any Debtor in connection with the
transactions contemplated hereby,
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at the time it was furnished or delivered contained any untrue statement of a
material fact regarding any Debtor or, when taken together with such other
agreements, documents, certificates and statements omitted to state a material
fact necessary under the circumstances under which it was made in order to make
the statements contained herein or therein not misleading. There is no fact
known to any Debtor not constituting general industry conditions or not
disclosed in such agreements, documents, certificates and statements which
materially and adversely affects, or could reasonably be expected in the future
to materially and adversely affect, the business, assets or condition,
financial or otherwise of the Parent and its Subsidiaries taken as a whole.
SECTION 3.20. Distribution Rights.
Each Debtor has sufficient right, title and interest in Product
and/or Recorded Product to enable it (i) to enter into and perform all of the
Distribution Agreements and/or Licensing Agreements to which it is a party and
other agreements generating Eligible Receivables and accounts receivable
reflected on the most recent balance sheet delivered to the Lenders pursuant
hereto, and (ii) to charge, earn, realize and retain all fees and profits to
which such Debtor is entitled thereunder, and is not in breach of any of its
obligations under such agreements, nor does any Debtor have any knowledge of
any breach or anticipated breach by any other parties thereto, which breach in
either case either individually or when aggregated with all other such breaches
would have a material adverse effect on the Borrowers taken as a whole or on
the Parent and its Subsidiaries taken as a whole.
SECTION 3.21. Environmental Liabilities.
(a) Except as set forth on Schedule 3.21 hereto, no Debtor has
used, stored, treated, transported, manufactured, refined, handled, produced or
disposed of any Hazardous Materials on, under, at, from, or in any way
affecting, any of their properties or assets, or otherwise, in any manner which
at the time of the action in question violated any Environmental Law governing
the use, storage, treatment, transportation, manufacture, refinement, handling,
production or disposal of Hazardous Materials and to the best of the Debtors'
knowledge, no prior owner of such property or asset or any tenant, subtenant,
prior tenant or prior subtenant thereof has used Hazardous Materials on or
affecting such property or asset, or otherwise, in any manner which at the time
of the action in question violated any Environmental Law governing the use,
storage, treatment, transportation, manufacture, refinement, handling,
production or disposal of Hazardous Materials.
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(b) To the best of each Debtor's knowledge (i) no Debtor has any
obligations or liabilities, known or unknown, matured or not matured, absolute
or contingent, assessed or unassessed, where such would reasonably be expected
to have a materially adverse effect on the business or condition (financial or
otherwise) of any of the Debtors and (ii) no claims have been made against any
of the Debtors during the past five years and no presently outstanding
citations or notices have been issued against any of the Debtors, where such
could reasonably be expected to have a materially adverse effect on the
business or condition (financial or otherwise) of any of the Debtors, which in
either case have been or are imposed by reason of or based upon any provision
of any Environmental Law, including, without limitation, any such obligations
or liabilities relating to or arising out of or attributable, in whole or in
part, to the manufacture, processing, distribution, use, treatment, storage,
disposal, transportation or handling of any Hazardous Materials by any Debtor,
or any of their employees, agents, representatives or predecessors in interest
in connection with or in any way arising from or relating to any of the Debtors
or any of their respective properties, or relating to or arising from or
attributable, in whole or in part, to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation or handling of
any such substance, by any other Person at or on or under any of the real
properties owned or used by any of the Debtors or any other location where such
could have a materially adverse effect on the business or condition (financial
or otherwise) of the Borrowers taken as a whole or the Parent and its
Subsidiaries taken as a whole.
SECTION 3.22. Pledged Securities.
All of the Pledged Securities are duly authorized, validly issued
and fully paid, and are owned and held by the Pledgors, free and clear of any
liens, encumbrances, or security interests whatsoever other than those created
pursuant to this Credit Agreement or Permitted Encumbrances and there are no
restrictions on the transfer of the Pledged Securities other than as a result
of this Credit Agreement or applicable securities laws. Except as set forth on
Schedule 3.22, there are no outstanding rights, warrants, options, or
agreements to purchase or otherwise acquire any shares of the stock or
securities or obligations of any kind convertible into any shares of capital
stock, of any shares, of the issuers of the Pledged Securities. The Pledged
Securities are owned by the Persons specified on Schedule 3.7.
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SECTION 3.23. Real Properties.
Listed on Schedule 3.23 are all material real properties currently
owned or occupied by a Debtor and a designation of each such property as being
owned or leased by such Person and relevant terms of material leases.
4. CONDITIONS OF LENDING
SECTION 4.1. Conditions Precedent to Initial Loans or Letter of
Credit.
The obligation of each Lender to make its initial Loan or issue and
participate in the initial Letter of Credit is subject to the following
conditions precedent:
(a) Corporate Documents. At the time of the making of the initial
Loan, the Agent shall have received, with copies for each of the Lenders:
(i) a copy of each Debtor's certificate of incorporation,
certified as of a recent date by the Secretary of State of such
Debtor's jurisdiction of incorporation;
(ii) a certificate of such Secretary of State, dated as of
a recent date as to the good standing of and payment of taxes by
each Debtor which lists the charter documents on file in the office
of such Secretary of State;
(iii) a certificate dated as of a recent date as to the good
standing of each Debtor issued by the Secretary of State of each
jurisdiction in which each Debtor is qualified as a foreign
corporation; and
(iv) a certificate of the Secretary of each Debtor dated
the date of the initial Loans and certifying (A) that attached
thereto is a true and complete copy of the by-laws of such Debtor
as in effect on the date of such certification, (B) that attached
thereto is a true and complete copy of resolutions adopted by the
Board of Directors of such Debtor authorizing (to the extent
applicable) the Borrowings hereunder, the execution, delivery and
performance in accordance with their respective terms of this
Credit Agreement, the Notes to be executed by it, and any other
documents required or contemplated hereunder or thereunder, (C)
that the certificate of incorporation of such Debtor has not been
amended since the date of the last amendment thereto indicated on
the
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certificate of the Secretary of State furnished pursuant to clause
(i) above except to the extent specified in such Secretary's
certificate and (D) as to the incumbency and specimen signature of
each officer of such Debtor executing (as applicable) this Credit
Agreement, the Notes or any other document delivered by it in
connection herewith or therewith (such certificate to contain a
certification by another officer of such Debtor as to the
incumbency and signature of the officer signing the certificate
referred to in this clause (iv)).
(b) Notes. On or before the date of the making of the initial
appropriate Loans, the Agent shall have received the Notes executed by the
Borrowers.
(c) Opinions of Counsel. The Agent shall have received the
favorable written opinions, dated the Closing Date and addressed to the Agent
and the Lenders, of (i) Kaye, Scholer, Fierman, Hays & Handler, counsel to the
Borrowers and the other Debtors, covering the matters set forth in Exhibit D-1
hereto, (ii) the general counsel to the Borrowers and the other Debtors,
covering the matters set forth in Exhibit D-2 hereto, (iii) special copyright
counsel to the Borrowers and the other Debtors acceptable to the Majority
Lenders, covering the matters set forth on Exhibit D-3 hereto and (iv) such
local counsel as the Majority Lenders may reasonably request regarding
perfection of security interests and such other matters as the Majority Lenders
shall reasonably request.
(d) Projected Financial Information. The Debtors shall have
delivered to the Agent forecasted financial statements consisting of balance
sheets, cash flow statements and income statements together with appropriate
supporting details and a statement of the underlying assumptions. Such
projected statements shall cover a period commencing on the Closing Date and
ending at year end 1996, and shall have been prepared on a basis consistent
with the Parent's past practices. All of the foregoing shall have been
prepared in good faith and shall represent the reasonable, good faith opinion
of the senior management of the Parent of the most probable course of its
business as of the date of delivery of such projections to the Agent.
(e) No Material Adverse Change. No material adverse change shall
have occurred with respect to the business, operations, performance, assets,
properties, condition (financial or otherwise) or prospects of the Parent and
its Subsidiaries taken as a whole from December 31, 1994 except for changes due
to seasonality that are consistent with the corresponding periods in prior
years.
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(f) Insurance. The Debtors shall have furnished the Agent with a
summary of all existing insurance coverage and evidence acceptable to the Agent
that the insurance policies required by Section 5.5 hereof have been obtained
and are in full force and effect.
(g) Borrowing Base Certificate. The Agent shall have received an
initial Borrowing Base Certificate.
(h) Security and Other Documentation. On or prior to the Closing
Date, the Agent shall have received fully executed copies of (i) a Pledgeholder
Agreement for each item of Product, Recorded Product or Film Asset for which a
Debtor has control over any physical elements thereof as listed on Schedule
3.8(a) hereto; (ii) a Copyright Security Agreement for each item of Product,
Recorded Product or Film Asset in which a Debtor has a copyrightable interest
(as listed on Schedule 3.8(a) hereto) executed by such Debtor; (iii) a
Trademark Security Agreement for each trademark in which a Debtor has any
interest (as listed on Schedule 3.8(b) hereto) executed by such Debtor; (iv) a
Laboratory Access Letter addressed to each laboratory where a Debtor has access
rights to any physical elements of Product or Recorded Product; (v) appropriate
UCC-1 financing statements relating to the Collateral; and (vi) the Pledged
Securities with appropriate undated stock powers executed in blank.
(i) Security Interests in Copyrights and other Collateral. On or
prior to the Closing Date, the Agent shall have received evidence satisfactory
to it that each Debtor has sufficient right, title and interest in and to the
Collateral and other assets which it purports to own (including appropriate
licenses under copyright), as set forth in its financial statements and in the
other documents presented to the Lenders to enable each such Debtor to perform
the Distribution Agreements and Licensing Agreements to which each such Debtor
is a party and as to Baywatch, perform the Baywatch Distribution Agreement and
as to Baywatch Nights, perform the Baywatch Nights Distribution Agreement and
as to each Debtor to grant to the Agent for the benefit of the Lenders the
security interests contemplated by the Fundamental Documents, and that all
financing statements, copyright filings and other filings under Applicable Law
necessary to provide the Agent for the benefit of the Lenders with a first
priority perfected security interest in the Pledged Securities, Keyman Life
Insurance and Collateral (subject, as to the Collateral, to Permitted
Encumbrances and other than any Collateral consisting of a Debtor's interest in
a copyright as to which a security interest may only be perfected by filing in
the U.S. Copyright Office and as to which no filing has been made in the U.S.
Copyright Office to perfect the transfer of such interest to such Debtor and
which in the aggregate do not represent more than 1% of the overall value of
the Collateral)
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have been filed or delivered to the Agent in satisfactory form for filing.
(j) Employment Agreements. Each of the Lenders shall have
received true, correct and complete copies of the Employment Agreements and any
amendments thereto in effect on the Closing Date, which shall be in form and
substance satisfactory to the Agent.
(k) Payment of Fees. All fees and expenses then due and payable
by any Debtor in connection with the transactions contemplated hereby shall
have been paid including, but not limited to, fees and expenses due and payable
by the Borrowers to the Agent and the Lenders.
(l) Certificate from the Borrowers. The Agent shall have received
a certificate, signed by an Authorized Officer on behalf of each of the
Borrowers, confirming that such Borrower has determined that the projected
availability of the Revolving Credit Loans as determined by the Borrowing Base,
together with funds from internally generated sources, is sufficient to finance
such Borrower in a manner compatible with the forecasted financial statements
previously delivered to the Lenders.
(m) Litigation. No litigation shall be pending or threatened
which involves this Credit Agreement or which in the Agent's good faith
judgment would be likely to materially and adversely affect the assets,
operations, business, condition (financial or otherwise), or prospects of the
Borrowers or the Parent and its Subsidiaries taken as a whole, or could
reasonably be expected to materially adversely affect the ability of any
Borrower or the Parent and its Subsidiaries (taken as a whole) to fulfill their
respective Obligations hereunder.
(n) Existing Debt. All unused commitments of the Debtors for
financing (other than in connection with Indebtedness specified on Schedule
3.17) shall have been terminated and the Debtors shall have no Indebtedness
other than as specified on Schedule 3.17. All Indebtedness under the Existing
Agreement, Production Loan Agreement and Fremantle Agreement shall have been
paid or shall be paid simultaneously with the making of the initial Loans
hereunder.
(o) UCC Searches. The Agent shall have received UCC searches
satisfactory to it indicating that no other filings (other than in connection
with Permitted Encumbrances) with regard to the Collateral are of record in any
jurisdiction in which it shall be necessary or desirable for the Agent to make
a UCC filing in order to provide the Agent with a perfected security interest
in the Collateral.
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(p) ERISA. The Agent shall have received copies of all Plans of
the Debtors that are in existence on the Closing Date, and descriptions of
those that are committed to on the Closing Date.
(q) Distribution Agreements. The Agent shall have received a
fully executed copy of each of the Restated and Amended Baywatch Distribution
Agreement and the Baywatch Nights Distribution Agreement, each certified as
true and complete by an executive officer of AATI.
(r) Contribution Agreement. The Agent shall have received a fully
executed Contribution Agreement.
(s) Keyman Life Insurance Assignment. The Keyman Life Insurance
and the Keyman Life Insurance Assignment shall have been delivered to the
Agent.
(t) Fremantle Documents. The Agent shall have received the fully
executed Interpublic Agreement, the fully executed Fremantle Security Agreement
and the appropriate UCC-1 financing statements relating to the Fremantle
Collateral.
(u) Other Matters. All legal matters incident to this Credit
Agreement and the transactions contemplated hereby shall be satisfactory to
Morgan, Lewis & Bockius, counsel to the Agent.
SECTION 4.2. Conditions Precedent to the Initial Baywatch Loan for
Each Season of the Baywatch Series or the Initial B.N. Loan for each Season of
the Baywatch Nights Series.
The obligation of the Lenders to make the initial Baywatch Loan for
each season of the Baywatch Series or the initial B.N. Loan for each season of
the Baywatch Nights Series is subject to the following conditions precedent:
(a) Completion Bond. The Agent on behalf of the Lenders shall
have received a Completion Bond in form and substance satisfactory to the Agent
covering all production costs, marketing and distribution expenses plus
interest and fees on the relevant Commitment for all episodes of such Series
naming the Agent on behalf of the Lenders as a beneficiary in an amount equal
to the relevant Commitment plus interest and fees for the entire season's
planned production.
(b) Clearance. The appropriate Borrower shall have licensed such
season's episodes to stations in television markets representing at least (i)
with respect to Baywatch, 80% and (ii) with respect to Baywatch Nights, 70% of
U.S. television
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households as determined based on the most recent Nielsen Rankings.
(c) Other Matters. In addition:
(i) the Super Majority Lenders shall be satisfied in their
sole discretion that such Series will generate receivables for such
season sufficient to repay the relevant Loans for such Series or
that sufficient alternative sources of financing are available to
repay such Loans. Within 30 days after the receipt of the cash
flow projections (pursuant to clause (ii) below) by the Agent, the
Agent shall give notice to the Parent as to whether the Super
Majority Lenders are satisfied that the condition specified in this
Section 4.2(c)(i) has been met;
(ii) the Agent shall have received cash flow projections
for the relevant Production Company covering the relevant season;
and
(iii) no advertiser shall have been guaranteed by or on
behalf of the applicable Production Company a minimum rating of
higher than (A) 1.5 points above the average rating received for
Baywatch during the prior broadcast season in connection with
Baywatch or (B) 6.0 in connection with Baywatch Nights during its
first season and thereafter, 1.5 points above the average rating
received for Baywatch Nights during the prior broadcast season.
(d) 1995/1996 Season. Prior to making the initial Baywatch Loan
for the 1995/1996 season, the Agent shall have received assignment agreements,
or such other financial arrangements satisfactory in form and substance to the
Agent, in connection with such material licensing agreements as it deems
appropriate.
SECTION 4.3. Conditions Precedent to Each Loan and Letter of Credit.
The obligation of the Lenders to make each Loan and to issue and
participate in each Letter of Credit (including the initial Loans and Letter of
Credit) is subject to the following conditions precedent:
(a) Notice. The Agent shall have received a notice with respect
to such Borrowing as required by Article 2 hereof.
(b) Borrowing Certificate. The Agent shall have received a
Borrowing Certificate with respect to such Borrowing,
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duly executed by an Authorized Officer of the Parent and the appropriate
Borrower.
(c) Representations and Warranties. The representations and
warranties set forth in Article 3 hereof and in the other Fundamental Documents
shall be true and correct in all material respects on and as of the date of
each Borrowing and issuance of a Letter of Credit hereunder (except to the
extent that such representations and warranties expressly relate to an earlier
date and except to the extent that such changes have occurred without breach or
default under any of the terms or conditions hereof including without
limitation Articles 5 and 6 hereof) with the same effect as if made on and as
of such date.
(d) No Event of Default. On the date of each Borrowing hereunder,
each Debtor shall be in compliance with all of the terms and provisions set
forth herein to be observed or performed and no Event of Default or Default
shall have occurred and be continuing.
(e) No Material Adverse Change. No material adverse change shall
have occurred with respect to the business, operations, performance, assets,
properties, condition (financial or otherwise) or prospects of the Parent and
its Subsidiaries taken as a whole from December 31, 1994, except for changes
due to seasonality that are consistent with the corresponding periods in prior
years.
(f) Additional Documents. The Lenders shall have received from
the Borrowers on the date of each Borrowing and issuance of a Letter of Credit
such documents and information as they may reasonably request relating to the
satisfaction of the conditions in this Section 4.3.
Each request for a Borrowing or for issuance of a Letter of Credit shall be
deemed to be a representation and warranty by the Borrowers on the date of such
Borrowing or the issuance of such Letter of Credit as to the matters specified
in paragraphs (c), (d) and (e) of this Section.
5. AFFIRMATIVE COVENANTS
From the date hereof and for so long as the Commitments shall be in
effect or any amount remains outstanding under the Notes or any Letter of
Credit shall remain outstanding or any Obligations remain unpaid or
unsatisfied, each Debtor agrees that, unless the Majority Lenders shall
otherwise consent in writing, it will and will cause each of the Subsidiaries
to:
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SECTION 5.1. Financial Statements and Reports.
Furnish or cause to be furnished to the Agent in sufficient numbers
for distribution to the Lenders:
(a) Within 95 days after the end of each fiscal year (or 110 days
in the event the Parent has applied for an extension for such filing pursuant
to Rule 12b-25 of the Securities Exchange Act of 1934, as amended) (i) the
audited consolidated balance sheet of the Parent and its Subsidiaries as at the
end of, and the related statements of income, shareholders' equity and cash
flow for, such year, and the corresponding figures as at the end of, and for,
the preceding fiscal year, accompanied by an opinion of Ernst & Young or such
other independent public accountants of recognized standing as shall be
retained by the Parent and be satisfactory to the Agent, which report and
opinion shall be prepared in accordance with generally accepted auditing
standards relating to reporting and which report and opinion shall contain no
material exceptions or qualifications except for qualifications relating to
accounting changes (with which such independent public accountants concur) in
response to FASB releases or other authoritative pronouncements and (ii) the
unaudited consolidating balance sheet of the Parent and its Subsidiaries as at
the end of, and the related unaudited consolidating statements of income and
cash flow for, such fiscal year certified by the chief financial officer of the
Parent, on behalf of the Parent;
(b) Within 50 days after the end of each of the first three fiscal
quarters of each of its fiscal years (or 65 days in the event the Parent has
applied for an extension for such filing pursuant to Rule 12b-25 of the
Securities Exchange Act of 1934, as amended), the unaudited consolidated and
consolidating balance sheets of the Parent and its Subsidiaries as at the end
of, and the related unaudited consolidated and consolidating statements of
income and cash flow for, such quarter, and the corresponding figures as at the
end of, and for, the corresponding period in the preceding fiscal year,
together with a certificate signed by an Authorized Officer of the Parent, on
behalf of the Parent, to the effect that such financial statements, while not
examined by independent public accountants, reflect, in the opinion of the
Parent, all adjustments necessary to present fairly the financial position of
the Parent and its Subsidiaries as at the end of the fiscal quarter and the
results of its operations for the quarter then ended in conformity with GAAP;
(c) Simultaneously with the delivery of the statements referred to
in paragraphs (a) and (b) of this Section 5.1, a certificate of an Authorized
Officer of the Parent, on behalf of the Parent, in form and substance
satisfactory to the Agent (i) stating whether or not such Authorized Officer
has knowledge of any condition or event which would constitute an Event of
Default
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or Default has occurred and, if so, specifying each such condition or event and
the nature thereof, (ii) demonstrating in reasonable detail compliance with the
provisions of Sections 6.14, 6.17, 6.18, 6.19, 6.30, 6.32 and 6.33 hereof,
(iii) stating the actual amount of cash refunds made during such past quarter
by the Parent or the Subsidiaries in connection with Barter Receivables and
indicating the Refund Percentage as of such date and (iv) certifying that all
filings required under Section 5.9 hereof have been made and listing each such
filing that has been made since the date of the last certificate delivered in
accordance with this Section 5.1(c);
(d) On or prior to the twentieth day of each month, a certificate
("Borrowing Base Certificate") in the form of Exhibit E hereto, setting forth
the amount of each component included in the Borrowing Base as of the last
Business Day of the preceding month, attached to which shall be detailed
information including the calculation of each such component (the Borrowers, at
their option, may furnish additional Borrowing Base Certificates setting forth
such information as of such other dates as they may deem appropriate);
(e) Promptly upon their becoming available, copies of (i) all
management projections, studies or evaluations prepared by consultants for or
presented to any Debtor's Board of Directors and (ii) all audits, studies,
reports or evaluations prepared for or submitted to any of the Debtors by any
outside professional firm or service, including, without limitation, the
comment letter submitted by the Debtors' accountants to management in
connection with their annual audit;
(f) Within 30 days after filing with the Internal Revenue Service,
copies of the actual corporate income tax return(s) of the Parent and its
consolidated Subsidiaries;
(g) Promptly upon their becoming available, copies of (i) all
registration statements, proxy statements, and all reports which the Parent or
any other Debtor shall file with any securities exchange or with the Securities
and Exchange Commission or any successor agency and (ii) all reports, financial
statements, press releases and other information which the Parent or any other
Debtor shall release, send or make available to its common stockholders
generally;
(h) Notice of (i) any substantive action taken by any Debtor in
connection with the proposed issuance of any additional debt or equity
securities and (ii) the date on which such Debtor expects to receive the net
cash proceeds from the issuance of such additional debt or equity securities;
(i) By June 30th of each year (commencing June 30, 1996),
forecasted financial statements consisting of balance
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sheets of the Parent and its Subsidiaries, cash flow statements and income
statements together with appropriate supporting details and a statement of
underlying assumptions comparable to the projections delivered to the Lenders
pursuant to Section 4.1(d) hereof which cover the succeeding two fiscal years,
and which shall have been prepared in accordance with GAAP;
(j) If requested by the Agent, then within 90 days after the end
of each fiscal year commencing with the fiscal year ended December 31, 1994 a
report from Ernst & Young LLP or other independent public accountants of
recognized standing as shall be retained by the Borrowers and reasonably
satisfactory to the Majority Lenders, stating that, in accordance with
generally accepted auditing standards, they have examined the Borrowing Base
Certificate submitted to the Lenders by the Borrowers for the month ended
December 31 and expressing their opinion that such statement fairly presents
such elements of the Borrowing Base in accordance with the definitions
contained in this Credit Agreement; and
(k) From time to time such additional information regarding the
financial condition or business of the Debtors or otherwise regarding the
Collateral, as any Lender may reasonably request for the purpose of assuring
itself as to compliance by the Debtors with the terms hereof.
SECTION 5.2. Corporate Existence.
Do or cause to be done all things reasonably necessary to preserve,
renew and keep in full force and effect its corporate existence, rights,
licenses, permits and franchises, and comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, any
Governmental Authority.
SECTION 5.3. Maintenance of Properties.
Keep its tangible properties which are material to its business in
good repair, working order and condition and, from time to time (i) make all
necessary and proper repairs, renewals, replacements, additions and
improvements thereto and (ii) comply at all times with the provisions of all
material leases and other material agreements to which it is a party so as to
prevent any loss or forfeiture thereof or thereunder unless compliance
therewith is being currently contested in good faith by appropriate
proceedings.
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SECTION 5.4. Notice of Material Events.
(a) Promptly upon any executive officer of any Debtor obtaining
knowledge of (i) any Default or Event of Default, or becoming aware that any
Lender has given notice or taken any other action with respect to a claimed
Event of Default, (ii) any material adverse change in the condition or
operations of any Borrower or the Parent and its Subsidiaries taken as a whole,
financial or otherwise, (other than changes due to seasonality that are
consistent with the corresponding periods in prior years) (iii) any action or
event which might materially and adversely affect the performance of the
Debtors' obligations under this Credit Agreement, the repayment of the Notes,
or the security interests granted to the Agent for the benefit of the Lenders
under this Credit Agreement or any other Fundamental Document, (iv) the opening
of any office of any Debtor or the change of the executive office or the
principal place of business of any Debtor or of the location of any Debtor's
books and records, (v) any change in the name of any Debtor, (vi) any other
event which may materially and adversely impact upon the amount or
collectibility of accounts receivable of the Debtors or otherwise materially
decrease the value of the Collateral or (vii) any Person giving any notice to
any Debtor or taking any other action to enforce remedies with respect to a
claimed default or event or condition of the type referred to in paragraph (d)
of Article 7, such Debtor shall promptly give written notice thereof to the
Agent specifying the nature and period of existence of any such condition or
event, or specifying the notice given or action taken and the nature of such
claimed Event of Default or condition and what action such Debtor has taken, is
taking and proposes to take with respect thereto.
(b) Promptly upon any executive officer of any Debtor obtaining
knowledge of (i) the institution of, or threat of, any action, suit,
proceeding, investigation or arbitration by any Governmental Authority or other
Person against or affecting any Debtor or any of its assets, or (ii) any
material development in any such action, suit, proceeding, investigation or
arbitration (whether or not previously disclosed to the Lenders), which, in the
case of (i) or (ii) might, if adversely determined, reasonably be expected to
have a materially adverse effect on the Borrowers taken as a whole or the
Parent and its Subsidiaries taken as a whole, such Debtor shall promptly give
notice thereof to the Agent and provide such other information as may be
available to it to enable the Lenders to evaluate such matters; and, in
addition to the requirements set forth in clauses (i) and (ii) of this
subsection (b), such Debtor upon request shall promptly give notice of the
status of any action, suit, proceeding, investigation or arbitration covered by
a report delivered to the Lenders pursuant to clause (i) and (ii) above to the
Lenders and provide such other information as may be reasonably available to it
to enable the Lenders to evaluate such
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matters. For the purposes of this Section 5.4, the submittal or filing by a
Debtor of a notice or report or an application for the issuance, modification
or renewal of any permit or the acknowledgment by a Governmental Authority of
receipt of such notice, report or application shall not constitute an "action",
"suit", "proceeding", "investigation" or "arbitration".
SECTION 5.5. Insurance.
(a) Keep its assets which are of an insurable character insured
(to the extent and for the time periods consistent with normal industry
practices) by financially sound and reputable insurers against loss or damage
by fire, explosion, theft or other hazards which are included under extended
coverage in amounts not less than the insurable value of the property insured
or such lesser amounts, and with such self-insured retention or deductible
levels, as are consistent with normal industry practices.
(b) Maintain with financially sound and reputable insurers,
insurance against other hazards and risks and liability to persons and property
to the extent and in the manner customary for companies in similar businesses.
(c) Maintain, or cause to be maintained, in effect during the
period from the commencement of principal photography of each item of Product
produced by any Debtor, through the third anniversary of the date on which such
item of Product is Completed and/or as otherwise required by applicable
contracts, a so-called "Errors and Omissions" policy with respect to all items
of Product for which principal photography has commenced, and cause such Errors
and Omissions policy to provide coverage to the extent and in such manner as is
customary for items of Product of like type but, at minimum, to the extent and
in such manner as is required under all applicable contracts relating thereto.
(d) Maintain, or cause to be maintained, in effect during the
period from the commencement of principal photography of each item of Product
produced by any Debtor, or from the date of acquisition of each item of Product
acquired by any Debtor (1) until such time as the Agent shall have been
provided with satisfactory evidence of the existence of one negative or master
tape in one location and an interpositive or internegative or duplicate master
tape in another location of the final version of the Completed Product,
insurance on the negatives and sound tracks or master tapes of such item of
Product in an amount not less than the cost of re-shooting the principal
photography of the item of Product, and (2) until principal photography of such
item of Product has been concluded, a cast insurance policy with respect to
such item of Product, which provides coverage to the extent and in such manner
as is customary for a like type of
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Product, but at minimum, to the extent required under all applicable contracts
relating thereto.
(e) Maintain, or cause to be maintained, in effect distributor's
"Errors and Omissions" insurance to the extent and in amounts customary for
companies in similar businesses.
(f) Cause all such above-described insurance (excluding worker's
compensation insurance) to (1) provide for the benefit of the Lenders that 30
days' prior written notice of suspension, cancellation, termination,
modification, non-renewal or lapse or material change of coverage shall be
given to the Agent; (2) name the Agent for the benefit of the Lenders as the
loss payee (except for errors and omissions insurance and other third party
liability insurance), provided, however, that production insurance recoveries
received prior to Completion or abandonment of an item of Product may be
utilized to finance the production of such item of Product and property
insurance proceeds may be used to repair damage in respect of which such
proceeds were received; and (3) to the extent that neither the Agent nor the
Lenders shall be liable for premiums or calls, name the Agent for the benefit
of the Lenders as an additional assured.
(g) Upon the request of the Agent, the Parent will render to the
Agent a statement in such detail as the Agent may request as to all such
insurance coverage.
(h) So long as Anthony Scotti is employed by the Parent, maintain
or cause to be maintained the Scotti Life Insurance.
(i) So long as Lawrence Lamattina is employed by the Parent or AAF
maintain or cause to be maintained the Lamattina Life Insurance in face amounts
as follows:
Term Loan Amount Face Amount
$30,000,000 - 25,000,001 $10,000,000
25,000,000 - 15,000,001 5,000,000
15,000,000 or less -0-
SECTION 5.6. Fremantle.
Cooperate with Fremantle, to the extent practicable, to assure that
such actions are taken as are necessary to comply with the provisions of the
Fremantle Security Agreement and to preserve the Agent's security interest in
the Fremantle Collateral.
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SECTION 5.7. Production.
Use its best efforts to cause any item of Product being produced by
any Debtor to be produced in accordance with the standards set forth in, and
within the time period established in, all agreements with respect to such item
of Product to which such Debtor is a party, subject to the terms and conditions
of such agreements.
SECTION 5.8. Music.
When an item of Product has been scored, if requested by the Agent,
deliver to the Agent, (a) written evidence of the music synchronization rights
obtained from the composer or the licensor of the music and (b) copies of all
music cue sheets with respect to such item of Product.
SECTION 5.9. Copyright.
(a) When an item of Product, Film Asset or Recorded Product can be
copyrighted and, with respect to the Series, in no event later than within ten
Business Days after the end of the relevant broadcast season, and to the extent
any Debtor is or becomes the copyright proprietor thereof or to the extent such
interest is obtained by any Debtor, or any Debtor otherwise acquires a
copyrightable interest, take any and all actions necessary to register the
copyright for such item in the name of such Debtor (subject to a lien in favor
of the Agent for the benefit of the Lenders pursuant to the Copyright Security
Agreement) in conformity with the laws of the United States and such other
jurisdictions as the Majority Lenders may reasonably specify, and immediately
deliver to the Agent (i) written evidence of the registration of any and all
such copyrights for inclusion in the Collateral under this Credit Agreement and
(ii) a Copyright Security Agreement Supplement relating to such item executed
by such Debtor.
(b) Use its reasonable best efforts to obtain instruments of
transfer or other documents evidencing the interest of any Debtor with respect
to the copyright relating to items of Product, Recorded Product or Film Assets
in which such Debtor is not entitled to be the initial copyright proprietor,
and promptly record such instruments of transfer on the United States Copyright
Register and such other jurisdictions as the Agent may specify.
SECTION 5.10. Books and Records.
Maintain or cause to be maintained at all times true and complete
books and records of its financial operations and provide the Agent and its
representatives access to such books and records upon reasonable notice and
during regular business
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hours in order that the Agent may make such audits and examinations and make
abstracts from such books, accounts, records and other papers pertaining to the
Collateral (including, but not limited to, Eligible Receivables included in the
Borrowing Base) and may discuss the affairs, finances and accounts with, and be
advised as to the same by, officers and independent accountants, all as the
Agent may deem appropriate for the purpose of verifying the accuracy of the
Borrowing Base Certificate and the various other reports delivered by the
Borrowers to the Agent and/or the Lenders pursuant to this Credit Agreement or
for otherwise ascertaining compliance with this Credit Agreement.
SECTION 5.11. Observance of Agreements.
Duly observe and perform all material terms and conditions of all
material agreements with respect to the exploitation of items of Product and/or
Recorded Product and diligently protect and enforce the rights of the Debtors
under all such agreements in a manner consistent with prudent business judgment
and subject to the terms and conditions of such agreements.
SECTION 5.12. Film Properties and Rights; Debtors to Act as
Pledgeholder.
Act as pledgeholder for the Agent for the benefit of the Lenders
with the same effect as if the Agent for the benefit of the Lenders were a
pledgee in possession of all Film Assets relating to items of Product which are
now or hereafter in the (actual or constructive) possession of any Debtor,
subject to such access as shall be necessary to distribute such items of
Product.
SECTION 5.13. Laboratories; No Removal.
(a) To the extent any Debtor has control over or rights to receive
any of the physical elements of any item of Product, deliver or cause to be
delivered to a laboratory or laboratories located within the United States all
negative and preprint material, master tapes and all sound track materials with
respect to each such item of Product and deliver to the Agent a fully executed
Pledgeholder Agreement with respect to such materials. To the extent that any
Debtor has only rights of access to preprint material or master tapes then the
Debtors will deliver to the Agent a fully executed Laboratory Access Letter
covering such materials. Prior to requesting any such laboratory to deliver
such negative or other preprint or sound track material or master tapes to
another laboratory, any such Debtor shall provide the Agent with a Pledgeholder
Agreement or Laboratory Access Letter, as appropriate, executed by such other
laboratory.
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(b) During production of any item of Product produced by any
Debtor, such Debtor shall promptly deliver the daily rushes for such item of
Product to the appropriate laboratory.
(c) With respect to each Series and any other items of Product
completed after the date hereof, as soon as practicable after completion,
deliver to the Agent and the laboratories which are signatories to Pledgeholder
Agreements a revised schedule of Product on deposit with such laboratories.
SECTION 5.14. Taxes and Charges; Indebtedness in Ordinary Course
of Business.
Duly pay and discharge, or cause to be paid and discharged, before
the same shall become in arrears (after giving effect to applicable
extensions), all taxes, assessments, levies and other governmental charges,
imposed upon any Debtor or its properties, sales and activities, or any part
thereof, or upon the income or profits therefrom, as well as all claims for
labor, materials, or supplies which if unpaid might by law become a Lien upon
any property of any Debtor; provided, however, that any such tax, assessment,
charge, levy or claim need not be paid if the validity or amount thereof shall
currently be contested in good faith by appropriate proceedings and if such
Debtor shall have set aside on its books reserves (the presentation of which is
segregated to the extent required by GAAP) adequate with respect thereto if
reserves shall be deemed necessary; and provided, further, that such Debtor
will pay all such taxes, assessments, levies or other governmental charges
forthwith upon the commencement of proceedings to foreclose any Lien which may
have attached as security therefor. The Debtors will pay when due, or in
conformance with customary trade terms, all other indebtedness incident to its
operations in a manner consistent with the Parent's past business practices.
SECTION 5.15. Liens.
Defend the Collateral against any and all Liens howsoever arising,
other than Permitted Encumbrances.
SECTION 5.16. Cash Receipts.
In the event any Debtor receives (i) payment from any account
debtor or obligor, which payment should have been remitted to the Agent or (ii)
the proceeds of any sale of Product or Recorded Product, whether in the form of
cash or otherwise, such Debtor shall immediately remit such payment or proceeds
to the Agent for deposit in the appropriate Collection Account for application
in accordance with Section 2.12(g).
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SECTION 5.17. Further Assurances; Security Interests.
(a) Upon the request of the Agent, duly execute and deliver, or
cause to be duly executed and delivered, at the cost and expense of the
Debtors, such further instruments as may be appropriate in the reasonable
judgment of the Agent, to provide the Agent (for the benefit of the Lenders) a
perfected Lien in the Collateral and to carry out the provisions and purposes
of this Credit Agreement and the other Fundamental Documents.
(b) Upon the request of the Agent, promptly execute or cause to be
executed any and all documents (including, without limitation, the execution,
amendment or supplementation of any financing statement and continuation
statement or other statement) for filing under the provisions of the UCC and
the rules and regulations thereunder, or any other statute, rule or regulation
of any applicable foreign, federal, state or local jurisdiction, and perform or
cause to be performed such other ministerial acts which are necessary or
advisable, from time to time, in order to grant and maintain in favor of the
Agent for the ratable benefit of the Lenders as beneficiaries thereof the
security interest in the Collateral contemplated hereunder and under the other
Fundamental Documents, subject only to Permitted Encumbrances.
(c) Promptly undertake to deliver or cause to be delivered to the
Lenders from time to time such other documentation, consents, authorizations
and approvals in form and substance satisfactory to the Agent, as the Agent
shall deem reasonably necessary or advisable to perfect or maintain the Liens
of the Agent for the benefit of the Lenders.
SECTION 5.18. Recorded Product.
Provide the Agent with:
(a) copies of requests for audit by performers promptly after
receipt by any Debtor; and
(b) if requested by the Agent, copies of reports on the Debtors'
recorded music business, including reports from BMG Music or PolyGram N.V.
SECTION 5.19. Receivables Audit.
In connection with the annual audit by Ernst & Young (or any
successor auditor) if so requested by the Agent arrange for account debtors to
confirm accounts receivables (both on and off balance sheet) directly to the
Agent.
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SECTION 5.20. ERISA Compliance and Reports.
Furnish to the Agent (a) as soon as possible, and in any event
within 30 days after any Debtor knows that (A) any Reportable Event with
respect to any Plan has occurred, a statement of an Authorized Officer of the
Parent, setting forth on behalf of such Debtor details as to such Reportable
Event and the action which it proposes to take with respect thereto, together
with a copy of the notice, if any, required to be filed by the applicable
Debtor of such Reportable Event given to the PBGC or (B) an accumulated funding
deficiency has been incurred or an application has been made to the Secretary
of the Treasury for a waiver or modification of the minimum funding standard or
an extension of any amortization period under Section 412 of the Code with
respect to a Plan, a Plan has been or is proposed to be terminated,
unorganized, partitioned or declared insolvent under Title IV of ERISA,
proceedings have been instituted to terminate a Plan, a proceeding has been
instituted pursuant to Section 515 of ERISA to collect a delinquent
contribution to a Plan, or the Borrowers or such Debtor will incur any
liability (including any contingent or secondary liability) to or on account of
the termination of or withdrawal from a Plan under Sections 4062, 4063, 4201 or
4204 of ERISA, if the occurrence of any of the foregoing events would result in
a liability which is materially adverse to the financial condition of the
Parent and its Subsidiaries taken as a whole or would materially and adversely
affect the ability of any Borrower to perform its obligations under this Credit
Agreement or the Notes, a statement of an Authorized Officer of the Parent,
setting forth details as to such event and the action the applicable Debtor
proposes to take with respect thereto, (b) promptly upon reasonable request of
the Agent, copies of each annual and other report with respect to each Plan and
(c) promptly after receipt thereof, a copy of any notice any Debtor may receive
from the PBGC relating to the PBGC's intention to terminate any Plan or to
appoint a trustee to administer any Plan.
SECTION 5.21. Environmental Laws.
(a) Promptly notify the Agent upon any Debtor becoming aware of
any violation or potential violation or non-compliance with, or liability or
potential liability under any Environmental Laws which, when taken together
with all other pending violations would reasonably be expected to be materially
adverse to the Parent and its Subsidiaries or any Debtor, and promptly furnish
to the Agent all notices of any nature which any Debtor may receive from any
Governmental Authority or other Person with respect to any violation, or
potential violation or non-compliance with, or liability or potential liability
under any Environmental Laws which, in any case or when taken together with all
such other notices, could reasonably be expected to have a
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material adverse effect on the Parent and its Subsidiaries or any Debtor.
(b) Comply with and use reasonable efforts to ensure compliance
by all tenants and subtenants with all Environmental Laws, and obtain and
comply in all material respects with and maintain and use best efforts to
ensure that all tenants and subtenants obtain and comply in all material
respects with and maintain any and all licenses, approvals, registrations or
permits required by Environmental Laws.
(c) Conduct and complete all investigations, studies, sampling
and testing, and all remedial, removal and other actions required under all
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities. Any order or directive
whose lawfulness is being contested in good faith by appropriate proceedings
shall be considered a lawful order or directive when such proceedings,
including any judicial review of such proceedings, have been finally concluded
by the issuance of a final non-appealable order; provided, however, that the
appropriate Debtor shall have set aside on its books reserves (the presentation
of which is segregated to the extent required by GAAP) adequate with respect
thereto if reserves shall be deemed necessary.
(d) Defend, indemnify and hold harmless the Agent and the
Lenders, and their respective employees, agents, officers and directors, from
and against any claims, demands, penalties, fines, liabilities, settlements,
damages, costs and expenses of whatever kind or nature, known or unknown,
contingent or otherwise, arising out of, or in any way related to the violation
of or non-compliance by any Debtor with any Environmental Laws, or any orders,
requirements or demands of Governmental Authorities related thereto, including,
without limitation, reasonable attorney and consultant fees, investigation and
laboratory fees, court costs and litigation expenses, but excluding therefrom
all claims, demands, penalties, fines, liabilities, settlements, damages, costs
and expenses arising out of or resulting from (i) the gross negligence or
willful misconduct of any indemnified party or (ii) any acts or omissions of
any indemnified party occurring after any indemnified party is in possession
of, or controls the operation of, any property or asset.
SECTION 5.22. Bank Accounts.
Provide the Agent with notice of the opening of any bank accounts
by any Debtor other than those listed on Schedule 5.22 hereof and execute such
forms of notice to the banks holding such accounts as reasonably requested by
the Agent.
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6. NEGATIVE COVENANTS
From the date hereof and for so long as the Commitments shall be in
effect or any amount remains outstanding under the Notes or any Letter of
Credit shall remain outstanding or any Obligations remain unpaid or
unsatisfied, each Debtor agrees that, unless as to Sections 6.1, 6.2, 6.3, 6.5,
6.11, 6.14, 6.15, 6.16, 6.17, 6.18, 6.19, 6.23, 6.28, 6.30 and 6.31, the Super
Majority Lenders shall otherwise consent in writing or as to any other Section
in this Article 6, the Majority Lenders shall otherwise consent in writing, it
will not and will not allow any of its Subsidiaries to:
SECTION 6.1. Limitations on Indebtedness.
Incur, create, assume or suffer to exist any Indebtedness other
than:
(i) the Indebtedness represented by the Notes and the
other Obligations;
(ii) Indebtedness in respect of secured purchase money
financing to the extent permitted by Section 6.2(ii);
(iii) Indebtedness in respect of Capital Leases to the
extent permitted under Section 6.11 hereof;
(iv) normal business liabilities which are not yet due and
payable and are not the result of a transaction which is the
equivalent of borrowing of money;
(v) liabilities relating to net or gross profit
participations, deferments and guild residuals with respect to
items of Product and/or Film Assets;
(vi) the Convertible Subordinated Notes in a maximum
principal amount of $60,000,000 and
(vii) existing Indebtedness listed on Schedule 3.17 hereto
but no increases, extensions or renewals thereof unless otherwise
noted on Schedule 3.17.
SECTION 6.2. Limitations on Liens.
Incur, create, assume or suffer to exist any Lien on its income,
property or assets, whether now owned or hereafter acquired, except:
(i) Liens pursuant to written security agreements (in form
and substance acceptable to the
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Agent) in favor of guilds required pursuant to terms of collective
bargaining agreements, which Liens are subordinated or junior to
the claims of the Lenders hereunder pursuant to documentation that
is satisfactory in form and substance to the Agent;
(ii) Liens (including in the form of Capital Leases)
granted to the Person financing the acquisition of property, plant
or equipment if (A) limited to the particular assets acquired; (B)
the debt secured by the Lien does not exceed the amount financed
for the acquisition cost of a particular asset for which the Lien
is granted; (C) such transaction does not otherwise violate this
Credit Agreement and (D) the aggregate amount of all indebtedness
secured by Liens permitted under this paragraph does not exceed
$2,000,000 at any one time outstanding;
(iii) deposits under worker's compensation, unemployment
insurance and Social Security laws or to secure statutory
obligations or surety or appeal bonds or performance or other
similar bonds in the ordinary course of business (other than
completion bonds);
(iv) Liens for taxes, assessments or other governmental
charges or levies due and payable, the validity or amount of which
is currently being contested in good faith by appropriate
proceedings pursuant to the terms of Section 5.14 hereof;
(v) Liens on receivables in situations where a Debtor is
acting solely as a collection agent for such receivables in return
for a fee;
(vi) Liens customarily granted or incurred in the ordinary
course of business with regard to services rendered by laboratories
and production houses, record warehouses and suppliers of materials
and equipment but in any instance not securing obligations in
excess of $500,000 in the aggregate;
(vii) possessory Liens (other than of laboratories and
production houses) which (a) occur in the ordinary course of
business, (b) secure normal trade debt which is not yet due and
payable, (c) do not secure Indebtedness for borrowed money and (d)
do not defer payment terms beyond 180 days;
(viii) Liens arising out of attachments, judgments or awards
as to which an appeal or other appropriate proceedings for contest
or review are promptly commenced (and as to which foreclosure and
other
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enforcement proceedings shall not have been commenced (unless fully
bonded or otherwise effectively stayed));
(ix) the Liens of the Agent and the Lenders under this
Credit Agreement, the other Fundamental Documents and other
documents contemplated hereby;
(x) existing Liens set forth on Schedule 6.2 hereto;
(xi) Liens in connection with the lease of computer
equipment and office furniture;
(xii) a Lien to Richard and Esther Shapiro Entertainment
Inc. ("RSE") on assets which relate solely to the series "Malibu
Branch" provided that the security agreement in connection
therewith shall be in form and substance satisfactory to the Agent
and that if the Agent deems it appropriate, the Agent, Malibu and
RSE shall enter into an intercreditor agreement in form and
substance satisfactory to the Agent; and
(xiii) Liens of completion guarantors in connection with
Completion Bonds which comply with Section 6.22 hereof.
SECTION 6.3. Guaranties.
Incur, create, assume or suffer to exist any Guaranty, either
directly or indirectly, or otherwise in any way become responsible for any
Indebtedness (including working capital maintenance, pay-or-play contracts or
other similar obligations) of any other Person, contingently or otherwise,
except (i) for the endorsement of negotiable instruments by any Debtor in the
ordinary course of business, (ii) for Program Acquisition Guaranties and other
commitments to the extent permitted by Section 6.28, (iii) for existing
Guaranties listed on Schedule 3.17 hereto and (iv) for Guaranties to the Agent
and the Lenders in accordance with the terms of this Credit Agreement.
SECTION 6.4. Limitations on Investments.
Make or permit to exist any Investment (including any loans to
Fremantle, any officer, shareholder or other Affiliate of any Debtor) other
than (i) loans to Thomas Bradshaw ("Bradshaw") in the aggregate principal
amount of not more than $286,000 at any one time outstanding, provided,
however, that such loans shall be secured on terms satisfactory to the Agent
and shall be payable with accrued interest not later than February 25, 1996, or
such earlier or later date as Bradshaw shall no longer be employed as Chief
Financial Officer of the Parent, (ii) in Cash Equivalents, (iii) intercompany
advances
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between Borrowers and from a Borrower and/or any Guarantor to a Borrower or a
Guarantor (other than to (A) any Subsidiary (including any Guarantor)
incorporated in a jurisdiction outside the United States (a "Foreign Debtor")
to which all Debtors may not make total advances to all such Foreign Debtors in
excess of $750,000 at any one time outstanding in the aggregate unless the
Agent (for the benefit of the Lenders) shall have a perfected security interest
in the assets of such Foreign Debtor on terms and conditions satisfactory to
the Agent which shall include, but not be limited to, (x) a valid and
enforceable first position lien (subject to Permitted Encumbrances) in such
Foreign Debtor's assets and (y) a favorable written opinion of such local
counsel as is acceptable to the Agent with respect thereto or (B) Malibu, to
which all Debtors may not make advances in excess of $7,500,000 at any time
outstanding in the aggregate, (iv) intercompany advances from a Foreign Debtor
to a Borrower or Guarantor, and (v) by any consolidated Subsidiary to the
Parent in connection with a tax-sharing agreement between the Parent and such
consolidated Subsidiary; provided, however, that all intercompany loans and
advances contemplated by clauses (ii) and (iii) of this Section 6.4 shall be on
open account and not evidenced by any note or other instrument and shall be
subordinated to the Loans hereunder on terms specified in Section 13.15.
SECTION 6.5. Restricted Payments.
Declare, make or incur any liability to make any Restricted
Payments other than:
(a) Restricted Payments constituting dividends to any of the
Borrowers or to a Subsidiary of any of the Borrowers (other than to Malibu
Branch);
(b) Restricted Payments to pay the Parent's reasonable legal,
accounting, operational and other similar expenses;
(c) Restricted Payments to allow the Parent to pay income taxes
actually paid by the Parent or intercompany advances otherwise permitted by
Section 6.4;
(d) Restricted Payments constituting dividends to the Parent to
enable the Parent to pay salaries pursuant to the Employment Agreements or
otherwise;
(e) Restricted Payments by the Debtors constituting fees and
expenses (incurred in the ordinary course) relating to the Convertible
Subordinated Notes, interest payments due and payable to the holders of the
Convertible Subordinated Notes, Additional Amounts (as defined in the
Convertible Subordinated Notes), mandatory redemptions of the Convertible
Subordinated Notes, and optional redemptions of the Convertible Subordinated
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Notes (with the consent of the Super Majority Lenders), but only if at the time
of each payment contemplated by this Section 6.5(e) (and after giving effect
thereto), no Event of Default (other than an Event of Default under clause (d)
of Article 7 hereof) has occurred and is continuing;
(f) The payment by Parent to The Bank of New York of the
redemption price required to be paid upon exercise of the put rights for each
of the Class B-1 Warrant and Class B-2 Warrant in accordance with their
respective terms provided the amount of such payments shall not exceed $250,000
and $1,250,000, respectively; and
(g) Restricted Payments constituting a conversion or exchange of
the Parent's Class A Common Stock to Class B Common Stock.
SECTION 6.6. Limitations on Leases.
Incur, create or assume any commitment to make any direct or
indirect payment, whether as rent or otherwise, under any lease, rental or
other arrangement hereafter entered into (other than Capital Leases and Program
Acquisition Guarantees to the extent permitted by Section 6.28) for the use of
real or personal property or both but excluding Product and/or Recorded
Product, if immediately thereafter the aggregate of all such payments that
shall be payable by all of the Debtors during any period of twelve consecutive
months thereafter shall exceed $400,000 in excess of the prior year's total
measured on a pro-forma basis; provided, however, if during 1995 the Parent
relocates its principal office, the Debtors may incur a one-time additional
increase in total lease payments payable by all of the Debtors during any
period of twelve consecutive months up to a maximum of $1,000,000 in excess of
the prior year's total.
SECTION 6.7. Limitations on Sale of Assets.
Sell, lease, license, transfer, liquidate or otherwise dispose of
any item of Product, Recorded Product or any other asset except:
(a) licenses for exploitation of Product on television or in
other media pursuant to License Agreements in the ordinary course of business
consistent with past practices;
(b) outright sales of Product and Recorded Product not in excess
of $2,000,000 in the aggregate prior to the Commitment Termination Date; and
(c) the sale by the Parent of its existing Santa Monica corporate
headquarters facility.
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SECTION 6.8. Receivables.
Sell, discount or otherwise dispose of notes, accounts receivable
or other obligations owing to any Debtor except for the purpose of collection
in the ordinary course of business.
SECTION 6.9. Sale and Leaseback.
Enter into any arrangement with any Person or Persons, whereby in
contemporaneous transactions any Debtor sells essentially all of its right,
title and interest in an item of Product or Recorded Product and acquires or
licenses the right to distribute or exploit such item of Product or Recorded
Product in media and markets accounting for substantially all the value of such
item of Product or Recorded Product.
SECTION 6.10. Places of Business; Change of Name.
Change the location of its chief executive office or principal
place of business or any of the locations where it keeps any material portion
of the Collateral or its books and records with respect to the Collateral or
change its name without (i) giving the Agent 30 days prior written notice of
such change and (ii) filing any additional Uniform Commercial Code financing
statements, and such other documents requested by the Agent or which are
otherwise necessary or desirable to maintain perfection of the security
interest of the Agent for the benefit of the Lenders in the Collateral.
SECTION 6.11. Limitations on Capital Expenditures.
Make or incur any obligation to make Capital Expenditures (other
than in connection with items of Product or Recorded Product), in the aggregate
in excess of $1,000,000 from the Closing Date until the Commitment Termination
Date; provided, however, that in addition thereto the Parent may incur
additional capital expenditures during 1995 in connection with the relocation
of its principal offices up to a maximum of $1,500,000.
SECTION 6.12. Transactions with Affiliates.
Effect any transaction (other than the Malibu Branch Distribution
Agreement) with Fremantle or an Affiliate of any Debtor (other than
transactions among the Parent and/or its wholly-owned Subsidiaries) on a basis
less favorable to any Debtor than would have been the case if such transaction
had been effected at arms-length with a Person other than Fremantle or such
Affiliate.
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SECTION 6.13. Prohibition of Amendments or Waivers.
Amend, alter, modify, or waive, or consent to any amendment,
alteration, modification or waiver of:
(a) any material agreement to which any Debtor is a party, or the
terms thereof in any manner which would change, alter or waive any material
term thereof and which might (i) materially and adversely affect the
collectibility of accounts receivable that form part of the Borrowing Base,
(ii) materially and adversely affect the financial condition of any Debtor,
(iii) materially and adversely affect the rights of the Lenders under this
Credit Agreement, the other Fundamental Documents and any other agreements
contemplated hereby, (iv) materially decrease the value of the Collateral, or
(v) decrease the amount of the Borrowing Base to less than the then outstanding
principal amount of the Loans;
(b) the articles of incorporation or bylaws of any Debtor except
(i) such amendments or modifications as are deemed ministerial by the Agent in
its sole discretion or (ii) with the Agent's prior consent, which consent shall
not be unreasonably withheld or delayed; or
(c) the Employment Agreements (except extensions of a given
Employment Agreement that would otherwise expire prior to the Commitment
Termination Date).
SECTION 6.14. Net Worth.
Permit Net Worth at any time after March 31, 1995 to be less than
$18,500,000 plus 50% of the cumulative consolidated Net Income of the Parent
and its Subsidiaries for the period from March 31, 1995 through the last day of
the fiscal quarter immediately preceding the date of determination plus 100% of
the net proceeds of any equity issued by the Parent or Indebtedness converted
into equity after the Closing Date.
SECTION 6.15. Refund Percentage.
Permit the Refund Percentage at the end of any Rolling Period to
exceed 5%.
SECTION 6.16. General and Administrative Expense.
Incur selling, general and administrative expenses (excluding
direct syndication, promotion and advertising and distribution costs and other
items included in Budgeted Negative Cost) in excess of $30,000,000 in the
fiscal year ending December 31, 1995 and in any subsequent fiscal year, in
excess of the amount permitted hereunder for the prior fiscal year plus 10%.
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SECTION 6.17. Leverage.
Permit the Leverage Ratio to exceed 2.0:1.0 at any time.
SECTION 6.18. Interest Coverage Ratio.
Permit the Interest Coverage Ratio to be less than 1.75:1.00 for
the quarters ending September 30, 1995 and December 31, 1995 or less than
2.0:1.0 for any quarter thereafter.
SECTION 6.19. Program Spending Ratio.
Permit the Program Spending Ratio at the end of any Rolling Period
to be less than .5:1.0 up to and including September 30, 1995 and .75:1.0
thereafter.
SECTION 6.20. No Negative Pledge.
Enter into any agreement after the date hereof (other than the
Fundamental Documents) which prohibits the creation or assumption of any Lien
upon the properties or assets of any Debtor, whether now owned or hereafter
acquired or requiring an obligation to be secured if some other obligation is
secured.
SECTION 6.21. Acquisitions or Mergers.
(a) Merge into or consolidate with a Person or (b) acquire
substantially all the assets of another Person; provided, however that a
Borrower may acquire substantially all of the assets of another Person provided
that the actual cost of such transaction to the Borrower is not more than
$2,000,000.
SECTION 6.22. Limitations on Transactions With Completion
Guarantors.
Enter into an arrangement with a completion guarantor unless the
arrangement would qualify as a Completion Bond and the Agent for the benefit of
the Lenders is the named beneficiary of such arrangement; but in no event shall
any Debtor enter into an arrangement with a completion guarantor which provides
for the completion guarantor to:
(i) receive a fee in excess of 6% of the Budgeted Negative
Cost of the item of Product involved;
(ii) receive any profit participation;
(iii) recoup any of its contribution to the cost of the item
of Product before such Debtor recoups (either from Proceeds of
exploitation of such item of
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Product or from payments by such completion guarantor) its share of
Budgeted Negative Cost; or
(iv) receive interest at a rate per annum in excess of the
Alternate Base Rate plus 2%.
SECTION 6.23. Change in Business.
(a) Engage in any business substantially different from, or not
related to, the business that the Parent and its Subsidiaries are presently
engaged in, including without limitation, the general field of television
entertainment and recorded music production and distribution. The permitted
conduct of the businesses of the Parent and Subsidiaries as described herein
shall include the production of Product directly by the Parent or a Subsidiary,
the purchase and sale of Product, the purchase and sale of distribution rights
(subject to the limitations set forth in this Credit Agreement), the license of
exhibition rights to television stations, networks and others, the license and
sale of ancillary rights (as such term is understood in the television
industry), the promotion and marketing of Product and the production,
distribution, marketing and promotion of recorded music which includes
development of new recording artists and entering into contracts with
established recording artists.
(b) Engage in theatrical film production or distribution.
(c) FDF shall not engage in any business other than such
activities which are incident to its holding the shares of Fremantle
(Deutschland) Fernsehproduktions GmbH and any other direct or indirect
Subsidiary of the Parent incorporated in a jurisdiction outside the United
States.
SECTION 6.24. ERISA Compliance.
Engage in a "prohibited transaction", as defined in Section 406 of
ERISA or Section 4975 of the Code, with respect to any Plan or Multiemployer
Plan or knowingly consent to any other "party in interest" or any "disqualified
person", as such terms are defined in Section 3(14) or ERISA and Section
4975(e)(2) of the Code, respectively, engaging in any "prohibited transaction",
with respect to any Plan or Multiemployer Plan maintained by any Debtor; or
permit any Plan maintained by any Debtor to incur any "accumulated funding
deficiency", as defined in Section 302 of ERISA or Section 412 of the Code,
unless such incurrence shall have been waived in advance by the Internal
Revenue Services; or terminate any Plan in a manner which could result in the
imposition of a Lien on any property of any Debtor pursuant to Section 4068 of
ERISA; or breach or knowingly permit any employee or officer or any trustee or
administrator of any Plan maintained
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by any Debtor to breach any fiduciary responsibility imposed under Title I of
ERISA with respect to any Plan; engage in any transaction which would result in
the incurrence of a liability under Section 4069 of ERISA; or fail to make
contributions to a Plan or Multiemployer Plan which results in the imposition
of a Lien on any property of any Debtor pursuant to Section 302(f) of ERISA or
Section 412(n) of the Code.
SECTION 6.25. Subsidiaries.
Acquire or create any new direct or indirect Subsidiary provided
however that the Parent may incorporate additional Subsidiaries if (i) each
such Subsidiary executes an instrument of joinder satisfactory to the Agent
whereby such Subsidiary becomes a Debtor and Guarantor hereunder and the
capital stock of such Subsidiary becomes part of the Pledged Securities
hereunder or (ii) the Parent takes such other action in connection with the
stock of such Subsidiary as is deemed appropriate by the Agent to protect the
Lenders' security interest therein.
SECTION 6.26. Bank Accounts.
After the date hereof, open or maintain any bank account other than
(a) at the office of the Agent as contemplated by Section 8.3 hereof, (b) those
accounts listed on Schedule 5.22 or (c) a production account for a specific
item of Product which is in production, as to which the Agent shall have
received notice and as to which the Agent shall have been granted a perfected
first priority security interest in such account.
SECTION 6.27. Hazardous Materials.
Except as set forth on Schedule 3.21, cause or permit any of its
properties or assets to be used to generate, manufacture, refine, transport,
treat, store, handle, dispose, transfer, produce or process Hazardous
Materials, except in compliance in all material respects with all applicable
Environmental Laws, nor release, discharge, dispose or of permit or suffer any
release or disposal as a result of any intentional act or omission on its part
of Hazardous Materials onto any such property or asset in material violation of
any Environmental Law.
SECTION 6.28. Production/Acquisition Commitments.
(a) Except as contemplated by paragraph (c) below, commence
active preproduction for any item of Product in respect of which a Debtor has
direct production funding responsibility unless the following three conditions
are satisfied: (i) Budgeted Negative Cost is no more than $175,000 per week of
episodes (i.e. one episode in the case of a weekly series or five episodes in
the case of daily strip) in the case of any television series or $250,000 in
the case of any other Product, (ii) Budgeted Negative
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Cost does not exceed the sum of good faith projected cash receipts (based on
reasonable assumptions) anticipated to be received during the initial license
period including minimum payments under executed pre-sale or co-production
arrangements with Approved Obligors due either upon Completion of the Item of
Product or within 15 months after Completion and (iii) either (y) a written
presale agreement has been executed with a U.S. broadcast or cable television
network which provides for minimum payments of at least 75% of Budgeted
Negative Cost or (z) pre-sale or co-production arrangements have been executed
with Approved Obligors pursuant to which foreign rights to such Item of Product
are granted in return for minimum payments of at least 50% of the Budgeted
Negative Cost.
(b) Except as contemplated by paragraph (c) below, incur any
obligation to pay any Program Acquisition Guarantee in excess of $50,000 unless
the following three conditions are satisfied: (i) the Program Acquisition
Guarantee is no more than $175,000 per week of episodes in the case of any
television series or $250,000 in the case of any other Product, (ii) the
Debtors have licensed such Product to stations in television markets
representing at least 70% of U.S. television households as determined based on
the most recent Nielsen Rankings (or the payment of such Program Acquisition
Guarantee is expressly conditioned upon such licensing) or to a network and
(iii) no Debtor is obligated to make a payment under any such Program
Acquisition Guarantee for an item of Product, or episode thereof in the case of
any television series, prior to delivery thereof to such Debtor in accordance
with broadcast obligations undertaken by the Debtors and in conformity with
technical broadcast and other customary industry standards.
(c) In addition to the obligations and actions described in
Section 6.28(a), (b) and (d), the Debtors may incur the obligations and take
the actions described in this Section 6.28(c):
(i) Active preproduction of the relevant Series for the
next broadcast season may be commenced if the condition precedent
set forth in Section 4.2(c) as to such Series has been satisfied
for such season;
(ii) Program Acquisition Guarantees in respect of "Family
Feud" not exceeding $7,500,000 in the aggregate for the 1994-1995
broadcast season;
(iii) Program Acquisition Guarantees in respect of
"Sirens" for the (A) 1994-1995 broadcast season not exceeding
$434,000 per episode for a maximum of 22 episodes and (B) 1995-1996
broadcast season not exceeding $450,000 per episode for a maximum
of 22 episodes; and
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(iv) Commitments of up to $7,000,000 to purchase local
advertising time throughout the domestic television market at
prevailing rates in respect of "Superhuman Samurai Syber Squad" for
the 1994-1995 broadcast season and 1995-1996 season.
(d) In addition to the obligations described in Section 6.28(a),
(b) and (c), the Debtors may incur the obligation to make Program Acquisition
Guarantees or commence active preproduction for any item of Product in respect
of which a Debtor has direct production funding responsibility, in either case
relating to Product licensed to a U.S. broadcast network (i.e. CBS, ABC, NBC,
Fox, UPN or Warner) provided (x) the total of (1) the license fee payable by
such network and (2) the fees payable in connection with foreign pre-sales for
such item of Product (the terms of which are acceptable to the Majority
Lenders, in each case payable no later than delivery of such item of Product,
is an amount equal to 100% of the Program Acquisition Guarantee, or Budgeted
Negative Cost, as applicable and (y) a written agreement has been executed with
the network which provides for payment of such license fee.
SECTION 6.29. Advertiser Guaranties.
Guaranty any advertiser a minimum rating (i) of higher than 6.0 for
the first broadcast season of Baywatch Nights, (ii) of higher than 5.0 for the
first broadcast season of any other new show (unless the Majority Lenders have
consented to a higher minimum rating for such show) or (iii) for any show, in
excess of 1.5 points above the average rating received for such show for the
prior broadcast season.
SECTION 6.30. Unrecouped Expenses.
Permit unrecouped expenses on Recorded Product to exceed $5,500,000.
SECTION 6.31. AAF.
(a) Permit AAF to incur selling, general and administrative
expenses in excess of $7,000,000 in any fiscal year.
(b) Permit AAF's EBITDA Ratio to be less then 1.0:1.0 at the end
of any Rolling Period. "EBITDA Ratio" shall mean the ratio of AAF's EBITDA for
such period to the sum of the accrued interest plus scheduled amortization
payments on the Term Loan for such period.
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SECTION 6.32. Distribution Fees and Expenses.
(a) Pay any distribution fees or expenses to Fremantle or any
Affiliate.
(b) Neither Baywatch nor Baywatch Nights shall pay any
distribution fees or expenses to any Person (including without limitation, any
other Debtor) except that (i) Baywatch may make such payments as are required
under the Baywatch Distribution Agreement and (ii) Baywatch Nights may make
such payments as are required under the Baywatch Nights Distribution Agreement,
in each case, if at the time of each such payment (and after giving effect
thereto) no Default or Event of Default is continuing.
SECTION 6.33. Use of Proceeds of Loans.
(a) In connection with the Term Loan, use the proceeds thereof for
any purpose other than to refinance existing bank debt as of the Closing Date
under the Fremantle Agreement.
(b) In connection with Baywatch Loans, use the proceeds thereof
for any purpose other than to finance the production and distribution of the
Baywatch Series, to pay any distribution fee or distribution, promotional and
advertising expenses or any other amounts due to AATI required under the
Baywatch Distribution Agreement, to the extent the payment of such fee is
permitted under Section 6.32 hereof or to refinance existing bank debt as of
the Closing Date under the Production Loan Agreement.
(c) In connection with Baywatch Nights Loans, use the proceeds
thereof for any purpose other than to finance the production and distribution
of the Baywatch Nights Series and to pay any distribution fee or distribution,
promotional and advertising expenses or any other amounts due to AATI required
under the Baywatch Nights Distribution Agreement, to the extent the payment of
such fee is permitted under Section 6.32 hereof.
(d) In connection with Working Capital Loans, use the proceeds
thereof for any purpose other than to finance certain working capital needs of
the Parent and the Subsidiaries of the Parent or to refinance Indebtedness as
of the Closing Date under the Existing Agreement.
7. EVENTS OF DEFAULT
In the case of the happening and during the continuance of any of
the following events (herein called "Events of Default"):
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(a) any representation or warranty made by any Debtor in this
Credit Agreement or any other Fundamental Document or in connection with this
Credit Agreement or with the execution and delivery of the Notes or the
Borrowings hereunder, or any statement or representation made in any report,
financial statement, certificate or other document furnished by or on behalf of
any Debtor to the Agent or any Lender under or in connection with this Credit
Agreement and not corrected prior to the Closing Date, shall prove to have been
false or misleading in any material respect when made or delivered;
(b) default shall be made in the payment of any principal of or
interest on the Notes or of any fees or other amounts payable by the Borrowers
hereunder, when and as the same shall become due and payable, whether at the
due date thereof or at a date fixed for prepayment thereof or by acceleration
thereof or otherwise and in the case of payments of any amounts other than
principal, such default shall continue unremedied for five (5) days after
receipt by the Borrowers of an invoice therefor;
(c) default shall be made by any Debtor in the due observance or
performance of any covenant, condition or agreement contained in Section 5.4 or
Article 6 of this Credit Agreement;
(d) default shall be made with respect to any payment of any
Indebtedness of any Debtor in excess of $500,000 when due or the performance of
any other obligation incurred in connection with any such Indebtedness, if the
effect of such default is to accelerate the maturity of such Indebtedness or to
permit the holder thereof to cause such Indebtedness to become due prior to its
stated maturity and such default shall not be remedied, cured, waived or
consented to within the period of grace with respect thereto, or any other
circumstance which arises (other than the mere passage of time) by reason of
which the Parent is required to redeem or repurchase or offer to holders of the
Convertible Subordinated Notes, the opportunity to have redeemed or
repurchased, any such indebtedness;
(e) any Debtor or Fremantle shall generally not pay its debts as
they become due or shall admit in writing its inability to pay its debts, or
shall make a general assignment for the benefit of creditors; or any Debtor or
Fremantle shall commence any case, proceeding or other action seeking to have
an order for relief entered on its behalf as debtor or to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief of debtors or
seeking appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its property or shall file an
answer or other pleading in any such case, proceeding or other action admitting
the material
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allegations of any petition, complaint or similar pleading filed against it or
consenting to the relief sought therein; or any Debtor or Fremantle shall take
any action to authorize any of the foregoing;
(f) any involuntary case, proceeding or other action against any
Debtor or Fremantle shall be commenced seeking to have an order for relief
entered against it as debtor or to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, liquidation, dissolution or
composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its property, and such case, proceeding or other action (i)
results in the entry of any order for relief against it or (ii) shall remain
undismissed for a period of thirty (30) days;
(g) final judgment(s) for the payment of money in excess of
$250,000 shall be rendered against any Debtor which within thirty (30) days
from the entry of such judgment shall not have been discharged or stayed
pending appeal or which shall not have been discharged or bonded in full within
thirty (30) days from the entry of a final order of affirmance on appeal;
(h) any Person shall have a right in the Collateral prior or equal
to that of the Lenders (except Permitted Encumbrances) or any Person or any
Debtor shall assert that any Person has such right and such Person or such
Debtor (as applicable) shall not renounce such right within 10 days after the
Agent has requested such renunciation;
(i) failure to deliver a Borrowing Base Certificate to the Agent
within 10 Business Days of the date such Certificate was due pursuant to
Section 5.1(d) hereof, provided, however, that any failure to deliver a
Borrowing Base Certificate shall not give rise to an Event of Default under
this clause (i) in the event there are no outstanding Revolving Credit Loans;
(j) a Change in Control shall occur;
(k) a Change in Management shall occur;
(l) as long as Anthony Scotti is an employee of the Parent, the
Scotti Life Insurance shall be cancelled or terminated; as long as Lawrence
Lamattina is an employee of the Parent or AAF, the Lamattina Life Insurance (in
the amounts provided for in Section 5.5(i)) shall be cancelled or terminated;
(m) default shall be made by any Debtor in the due observance or
performance of any other covenant, condition or agreement to be observed or
performed pursuant to the terms of
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this Credit Agreement, or any other Fundamental Document and such default shall
continue unremedied for thirty (30) consecutive days after any Debtor obtains
knowledge of such occurrence; or
(n) (i) the Parent or a Subsidiary shall cease to be the legal and
beneficial owner of 100% of the non-voting issued and outstanding shares of
capital stock of Fremantle or (ii) Interpublic shall cease to be the legal and
beneficial owner of 100% of the issued and outstanding shares of the Fremantle
Voting Stock; provided, however, that in the event Mark Goodson Productions
shall have waived the change in control termination provision in its relevant
agreements with Fremantle or otherwise consented to the transfer of the
Fremantle Voting Stock to the Parent or a Subsidiary of the Parent, an Event of
Default shall not be deemed to have occurred in the event the Parent or a
Subsidiary of the Parent (rather than Interpublic) becomes the owner of a
minimum of 79.9% of the Fremantle Voting Stock;
then, in every such event and at any time thereafter during the continuance of
such event, the Agent may, or if directed by the Majority Lenders shall, take
either or both of the following actions, at the same or different times:
terminate forthwith the Commitments and/or declare the principal of and the
interest on the Loans and the Notes and all other amounts payable hereunder or
thereunder to be forthwith due and payable, whereupon the same shall become and
be forthwith due and payable, without presentment, demand, protest, or other
notice of any kind, all of which are hereby expressly waived, anything in this
Credit Agreement or in the Notes to the contrary notwithstanding. If an Event
of Default specified in paragraphs (e) or (f) above shall have occurred, the
Commitments shall automatically terminate and the Notes shall automatically
become due and payable, both as to interest and principal, without presentment,
demand, protest, or other notice of any kind, all of which are hereby expressly
waived, anything in this Credit Agreement or the Notes to the contrary
notwithstanding. Such remedies shall be in addition to any other remedy
available to the Lenders pursuant to Applicable Law or otherwise.
8. GRANT OF SECURITY INTEREST; REMEDIES
SECTION 8.1. Security Interests.
The Borrowers, as security for the due and punctual payment of the
Obligations and the Guarantors, as security for their obligations under Article
9 hereof, hereby mortgage, pledge, assign, transfer, set over, convey and
deliver to the Agent (for the benefit of the Lenders) and grant to the Agent
(for the benefit of the Lenders) a security interest in the Collateral.
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SECTION 8.2. Use of Collateral.
So long as no Event of Default shall have occurred and be
continuing, and subject to the various provisions of this Credit Agreement and
the other Fundamental Documents, a Debtor may use the Collateral in any lawful
manner permitted hereunder.
SECTION 8.3. Collection Accounts.
(a) The Debtors will establish a lockbox arrangement and related
collection bank accounts (each, a "Collection Account") with the Agent and will
direct all Persons who become licensees, buyers or account debtors under
receivables with respect to any item included in the Collateral to make
payments under or in connection with the license agreements, sales agreements
or receivables directly to the appropriate lockbox or Collection Account. To
the extent practicable, the Debtors, will amend existing agreements to direct
all Persons who are licensees, buyers or account debtors under receivables with
respect to any item included in the Collateral, to make payments under or in
connection with the license agreements, sales agreements or receivables
directly to the appropriate lockbox or Collection Account. The Debtors shall
establish four separate collection accounts for payments to be made to AAF,
Baywatch, Baywatch Nights and all other Debtors.
(b) In connection with productions relating to Product in
countries other than the United States and Canada, the broadcasters to which
such Product is to be licensed shall pay into a collection account established
by AAF or the Agent in such country the amount due to AAF in connection with
such production (including production costs (to the extent such broadcaster is
responsible for providing production funds for such Product) and the license
fee payable to AAF). In the event AAF has previously submitted to the Agent
the budget for such production, within two (2) Business Days after such funds
are deposited into the local collection account, the Agent shall release an
amount to AAF from such account in the amount of the budget. The net balance
in each such account shall be transferred to the Collection Account established
in connection with the Term Loan (the "Term Collection Account") on a weekly
basis to be applied pursuant to the terms of Section 2.12(h) hereof.
(c) The Debtors will execute such documentation as may be required
by the Agent in order to provide for the deposit into the Collection Accounts
of all items received in the lockbox and to otherwise effectuate the provisions
of this Section 8.3.
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SECTION 8.4. Debtors to Hold in Trust.
Upon the occurrence and during the continuance of an Event of
Default, the Debtors will, upon receipt by them of any revenue, income, profits
or other sums in which a security interest is granted by this Article 8,
payable pursuant to any agreement or otherwise, or of any check, draft, note,
trade acceptance or other instrument evidencing an obligation to pay any such
sum, hold the sum in trust for the Lenders, and forthwith, without any notice
or demand whatsoever (all notices, demands, or other actions on the part of the
Lenders being expressly waived), endorse, transfer and deliver any such sums or
instruments or both, to the Agent to be applied to the repayment of the
Obligations in accordance with the provisions of Section 8.7 hereof.
SECTION 8.5. Collections, etc.
Upon the occurrence and during the continuance of an Event of
Default, the Agent may, in its sole discretion, in its name or in the name of
any Debtor or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for, or
make any compromise or settlement deemed desirable with respect to, any of the
Collateral, but shall be under no obligation so to do, or the Agent may extend
the time of payment, arrange for payment in installments, or otherwise modify
the terms of, or release, any of the Collateral, without thereby incurring
responsibility to, or discharging or otherwise affecting any liability of, any
Debtor. The Agent will not be required to take any steps to preserve any
rights against prior parties to the Collateral. If any Debtor fails to make
any payment or take any action required hereunder, the Agent may, after notice
to the Borrowers, make such payments and take all such actions as the Agent
reasonably deems necessary to protect the Agent's security interests in the
Collateral and/or the value thereof, and the Agent is hereby authorized
(without limiting the general nature of the authority herein above conferred)
to pay, purchase, contest or compromise any Liens that in the judgment of the
Agent appear to be equal to, prior to or superior to the security interests of
the Lenders in the Collateral and any Liens not expressly permitted by this
Credit Agreement.
SECTION 8.6. Possession, Sale of Collateral, etc.
Upon the occurrence and during the continuance of an Event of
Default, the Agent may enter upon the premises of any Debtor or wherever the
Collateral may be, and take possession of the Collateral, and may demand and
receive such possession from any Person who has possession thereof, and the
Agent may take such measures as it may deem necessary or proper for the care or
protection thereof, including the right to remove all or any
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portion of the Collateral, and with or without taking such possession may sell
or cause to be sold, whenever the Agent shall decide, in one or more sales or
parcels, at such prices as the Agent may deem best, and for cash or on credit or
for future delivery, without assumption of any credit risk, all or any portion
of the Collateral, at any broker's board or at public or private sale, without
demand of performance or notice of intention to sell or of time or place of sale
(except 7 days' written notice to the Borrowers of the time and place of any
such public sale or sales and such other notices as may be required by
Applicable Law and cannot be waived), and any Person may be the purchaser of all
or any portion of the Collateral so sold and thereafter hold the same
absolutely, free (to the fullest extent permitted by Applicable Law) from any
claim or right of whatever kind, including any equity of redemption, of any
Debtor, any such demand, notice, claim, right or equity being hereby expressly
waived and released. At any sale or sales made pursuant to this Article 8, the
Agent may bid for or purchase, free (to the fullest extent permitted by
Applicable Law) from any claim or right of whatever kind, including any equity
of redemption, of any Debtor, any such demand, notice, claim, right or equity
being hereby expressly waived and released, any part of or all of the Collateral
offered for sale, and may make any payment on account thereof by using any claim
for moneys then due and payable to the Agent and the Lenders by any Debtor
hereunder as a credit against the purchase price. The Agent shall in any such
sale make no representations or warranties with respect to the Collateral or any
part thereof, and the Agent shall not be chargeable with any of the obligations
or liabilities of any Debtor. Each Debtor hereby agrees (i) that it will
indemnify and hold the Agent and the Lenders harmless from and against any and
all claims with respect to the Collateral asserted before the taking of actual
possession or control of the relevant Collateral by the Agent pursuant to this
Article 8, or arising out of any act of, or omission to act on the part of, any
party other than the Agent prior to such taking of actual possession or control
by the Agent (whether asserted before or after such taking of possession or
control), or arising out of any act on the part of any Debtor, or its agents
before or after the commencement of such actual possession or control by the
Agent; and (ii) the Agent shall have no liability or obligation to any Debtor
arising out of any such claim except for acts of willful misconduct or gross
negligence or not taken in good faith. Subject only to the lawful rights of
third parties, any laboratory which has possession of any of the Collateral is
hereby constituted and appointed by the Debtors as pledgeholder for the Agent
and, upon the occurrence of an Event of Default, each such pledgeholder is
hereby authorized (to the fullest extent permitted by Applicable Law) to sell
all or any portion of the Collateral upon the order and direction of the Agent,
and each Debtor hereby waives any and all claims, for damages or otherwise, for
any action taken by such pledgeholder in accordance with the terms of the UCC
not otherwise waived
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hereunder. In any action hereunder, the Agent shall be entitled if permitted
by Applicable Law to the appointment of a receiver without notice, to take
possession of all or any portion of the Collateral and to exercise such powers
as the court shall confer upon the receiver. Notwithstanding the foregoing,
upon the occurrence of an Event of Default, and during the continuation of such
Event of Default, the Agent shall be entitled to apply, without prior notice to
the Debtors, any cash or cash items constituting Collateral in the possession
of the Agent to payment of the Obligations.
SECTION 8.7. Application of Proceeds on Default.
During the continuance of an Event of Default, the balances in the
Chemical Account, Collection Account(s), Cash Collateral Account(s), the
Royalty Account, or in any account of any Debtor with the Agent, all other
income on the Collateral, and all proceeds from any sale of the Collateral
pursuant hereto shall be applied (in such order as the Agent shall in its sole
discretion determine, but subject to instructions received, if any, from the
Super Majority Lenders and to the rights of the Lenders) to the payment in full
of the Obligations, provided, however, that, the Majority Lenders may in their
discretion apply funds comprising the Collateral to pay the cost (i) of
completing any Product owned in whole or in part by any Debtor in any stage of
production and (ii) of making delivery to the licensees of such Product. Any
amounts remaining after such indefeasible payment in full shall be remitted to
an account maintained by the Debtors with the Agent or as a court of competent
jurisdiction may otherwise direct.
SECTION 8.8. Power of Attorney.
Upon the occurrence of an Event of Default, (a) each Debtor does
hereby irrevocably make, constitute and appoint the Agent or any of its
officers or designees its true and lawful attorney-in-fact with full power in
the name of the Agent or such other Person to receive, open and dispose of all
mail addressed to any Debtor, and to endorse any notes, checks, drafts, money
orders or other evidences of payment relating to the Collateral that may come
into the possession of the Agent with full power and right to cause the mail of
such Persons to be transferred to the Agent's own offices or otherwise, and to
do any and all other acts necessary or proper to carry out the intent of this
Credit Agreement and the grant of the security interests hereunder, and each
Debtor hereby ratifies and confirms all that the Agent or its substitutes shall
properly do by virtue hereof; (b) each Debtor does hereby further irrevocably
make, constitute and appoint the Agent or any of its officers or designees its
true and lawful attorney-in-fact in the name of the Agent or any Debtor (i) to
enforce all of each Debtor's rights under and pursuant to all agreements with
respect to the Collateral, all
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for the sole benefit of the Agent on behalf of the Lenders, (ii) to enter into
and perform such agreements as may be necessary in order to carry out the
terms, covenants and conditions of the Fundamental Documents that are required
to be observed or performed by any Debtor, (iii) to execute such other and
further mortgages, pledges and assignments of the Collateral, and related
instruments or agreements, as the Agent may reasonably require for the purpose
of perfecting, protecting, maintaining or enforcing the security interests
granted to the Agent on behalf of the Lenders hereunder, and (iv) to do any and
all other things necessary or proper to carry out the intention of this Credit
Agreement and the grant of the security interests hereunder.
SECTION 8.9. Financing Statements, Direct Payments.
Each Debtor hereby authorizes the Agent to file UCC financing
statements and any amendments thereto or continuations thereof, any Copyright
Security Agreement, any Copyright Security Agreement Supplement and any other
appropriate security documents or instruments and to give any notices necessary
or desirable to perfect the Lien of the Agent on behalf of the Lenders on the
Collateral, in all cases without the signatures of any Debtor or to execute
such items as attorney-in-fact for any Debtor. Each Debtor further authorizes
the Agent upon the occurrence of an Event of Default, and during the
continuation of such Event of Default, to notify any account debtors that all
sums payable to any Debtor relating to the Collateral shall be paid directly to
the Agent.
SECTION 8.10. Further Assurances.
Upon the request of the Agent, each Debtor hereby agrees to duly
execute and deliver, or cause to be duly executed and delivered, at the cost
and expense of the Debtors, such further instruments as may be necessary or
proper, in the judgment of the Agent, to carry out the provisions and purposes
of this Article 8, necessary, in the judgment of the Agent, to perfect and
preserve the Liens of the Agent on behalf of the Lenders hereunder and under
the Fundamental Documents, and in the Collateral or any portion thereof.
SECTION 8.11. Termination.
The security interests granted under this Article shall terminate
when all the Obligations have been indefeasibly fully paid and performed and
the Commitment shall have terminated. Upon request by any Debtor (and at the
sole expense of the Debtors) after such termination, the Agent will take all
reasonable action and do all things reasonably necessary, including executing
UCC terminations, Pledgeholder Agreement terminations, termination letters to
account debtors and
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copyright reassignments, to release the security interest granted to it
hereunder.
SECTION 8.12. Remedies Not Exclusive.
The remedies conferred upon or reserved to the Agent in this
Article are intended to be in addition to, and not in limitation of, any other
remedy or remedies available to the Agent. Without limiting the generality of
the foregoing, the Agent and the Lenders shall have all rights and remedies of
a secured creditor under Article 9 of the UCC.
SECTION 8.13. Quiet Enjoyment.
The Lenders acknowledge that their security interest hereunder is
subject to the rights of Quiet Enjoyment of parties to Distribution Agreements,
Licensing Agreements and other similar agreements, whether existing on the date
hereof or hereafter executed. For the purpose hereof, "Quiet Enjoyment" shall
mean in connection with the rights of licensees under Licensing Agreements, the
Lenders' agreement that their rights under this Credit Agreement and the
Fundamental Documents and in the Collateral are subject to the rights of such
parties to distribute, exhibit and/or to exploit the Product licensed to them,
and to receive prints or tapes or have access to preprint material or master
tapes in connection therewith and that even if the Lenders shall become the
owner of the Collateral in case of an Event of Default, the Lenders' ownership
rights shall be subject to the rights of said parties under such agreements,
provided, however, that the Lenders shall not be responsible for any liability
or obligation of any Debtor under any license agreement.
SECTION 8.14. Continuation and Reinstatement.
Each Debtor further agrees that the security interest granted
hereunder shall continue to be effective or be reinstated, as the case may be,
if at any time payment or any part thereof, of principal or interest on any
Obligation is rescinded or must otherwise be restored by the Agent or the
Lenders upon the bankruptcy or reorganization of any Debtor or otherwise.
9. GUARANTY
SECTION 9.1. Guaranty.
(a) Each Guarantor unconditionally and irrevocably guarantees the
due and punctual payment by, and performance of, the Obligations (including
interest accruing on and after the filing of any petition in bankruptcy or of
reorganization of the obligor whether or not post filing interest is allowed in
such
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proceeding). Each Guarantor further agrees that the Obligations may be
extended or renewed, in whole or in part, without notice or further assent from
it (except as may be otherwise required herein), and it will remain bound upon
this guaranty notwithstanding any extension or renewal of any Obligation.
(b) Each Guarantor waives presentation to, demand for payment from
and protest to, as the case may be, the Borrowers or any other Guarantor, and
also waives notice of protest for nonpayment. The obligations of each
Guarantor hereunder shall not be affected by (i) the failure of the Agent or
the Lenders to assert any claim or demand or to enforce any right or remedy
against the Borrowers or any other guarantor under the provisions of this
Credit Agreement or any other agreement or otherwise; (ii) any extension or
renewal of any provision hereof or thereof; (iii) the failure of the Agent or
the Lenders to obtain the consent of the Guarantor with respect to any
rescission, waiver, compromise, acceleration, amendment or modification of any
of the terms or provisions of this Credit Agreement, the Notes or of any other
agreement; (iv) the release, exchange, waiver or foreclosure of any security
held by the Agent for the Obligations or any of them; (v) the failure of the
Agent or the Lenders to exercise any right or remedy against any other
guarantor of the Obligations; or (vi) the release or substitution of any
guarantor.
(c) Each Guarantor further agrees that this guaranty constitutes a
guaranty of performance and of payment when due and not just of collection, and
waives any right to require that any resort be had by the Agent or the Lenders
to any security held for payment of the Obligations or to any balance of any
deposit, account or credit on the books of the Agent or the Lenders in favor of
the Borrowers, any other guarantor or to any other Person.
(d) Each Guarantor hereby expressly assumes all responsibilities
to remain informed of the financial condition of the Borrowers and any
circumstances affecting the ability of the Borrowers to perform under this
Credit Agreement.
(e) Each Guarantor's guaranty shall not be affected by the
genuineness, validity, regularity or enforceability of the Obligations, the
Notes or any other instrument evidencing any Obligations, or by the existence,
validity, enforceability, perfection, or extent of any collateral therefor or
by any other circumstance relating to the Obligations which might otherwise
constitute a defense to this Guaranty. The Agent and the Lenders make no
representation or warranty with respect to any such circumstances and have no
duty or responsibility whatsoever to each Guarantor in respect to the
management and maintenance of the Obligations or any collateral security for
the Obligations.
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SECTION 9.2. No Impairment of Guaranty, etc.
The obligations of each Guarantor hereunder shall not be subject to
any reduction, limitation, impairment or termination for any reason, including,
without limitation, any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to any defense or set-off, counterclaim,
recoupment or termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations. Without limiting the generality of the
foregoing, the obligations of each Guarantor hereunder shall not be discharged
or impaired or otherwise affected by the failure of the Agent or the Lenders to
assert any claim or demand or to enforce any remedy under this Credit Agreement
or any other agreement, by any waiver or modification of any provision thereof,
by any default, failure or delay, willful or otherwise, in the performance of
the Obligations, or by any other act or thing or omission or delay to do any
other act or thing which may or might in any manner or to any extent vary the
risk of such Guarantor or would otherwise operate as a discharge of such
Guarantor as a matter of law, unless and until the Obligations are paid in
full.
SECTION 9.3. Continuation and Reinstatement, etc.
(a) Each Guarantor further agrees that its guaranty hereunder
shall continue to be effective or be reinstated, as the case may be, if at any
time payment, or any part thereof, of principal of or interest on any
Obligation is rescinded or must otherwise be restored by the Agent or the
Lenders upon the bankruptcy or reorganization of any of the Borrowers or a
Guarantor, or otherwise. In furtherance of the provisions of this Article 9,
and not in limitation of any other right which the Agent or the Lenders may
have at law or in equity against any of the Borrowers or a Guarantor by virtue
hereof, upon failure of any of the Borrowers to pay any Obligation when and as
the same shall become due, whether at maturity, by acceleration, after notice
or otherwise, each Guarantor hereby promises to and will, upon receipt of
written demand by the Agent on behalf of the Lenders, forthwith pay or cause to
be paid to the Agent on behalf of the Lenders in cash an amount equal to the
unpaid amount of all the Obligations with interest thereon at a rate of
interest equal to the rate specified in Section 2.10(a) hereof.
(b) All rights of the Guarantors against any of the Borrowers,
arising as a result of the payment by any Guarantor of any sums to the Agent
for the benefit of the Lenders or directly to the Lenders hereunder by way of
right of subrogation or otherwise shall in all respects be subordinated and
junior in right of payment to the prior final and indefeasible payment in full
of all the Obligations. If any amount shall be paid to such Guarantor for the
account of the Borrowers, such amount shall be held in trust for the benefit of
the Agent and shall forthwith be
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paid to the Agent on behalf of the Lenders to be credited and applied to the
Obligations, whether matured or unmatured.
SECTION 9.4. Limitation on Guaranteed Amount etc.
Notwithstanding any other provision of this Article 9, the amount
guaranteed by the Guarantor hereunder shall be limited to the extent, if any,
required so that its obligations under this Article 9 shall not be subject to
avoidance under Section 548 of the Bankruptcy Code or to being set aside or
annulled under any applicable state law relating to fraud on creditors. In
determining the limitations, if any, on the amount of any Guarantor's
obligations hereunder pursuant to the preceding sentence, it is the intention
of the parties thereto that any rights of subrogation or contribution which
such Guarantor may have under this Article 9 (or as a result of the operation
of Article 8 with regard to assets of other Debtors) or any other Agreement or
under Applicable Law shall be taken into account.
10. PLEDGE
SECTION 10.1. Pledge.
As security for the Obligations, each Pledgor hereby pledges,
hypothecates, assigns, transfers, sets over and delivers unto the Agent for the
benefit of the Lenders, a security interest in all Pledged Securities now owned
or hereafter acquired by it. On the Closing Date, the Pledgors shall deliver
to the Agent the definitive instruments representing all Pledged Securities,
accompanied by executed undated stock powers, duly endorsed or executed in
blank by the appropriate Pledgor, and such other instruments or documents as
the Agent on behalf of the Lenders or its counsel shall reasonably request.
SECTION 10.2. Registration in Nominee Name; Denominations.
The Agent shall have the right (in its sole and absolute
discretion) to hold the certificates representing any Pledged Securities (a) in
its own name or in the name of its nominee or (b) in the name of the
appropriate Pledgor, endorsed or assigned in blank or in favor of the Agent.
The Agent shall have the right to exchange the certificates representing
Pledged Securities for certificates of smaller or larger denominations for any
purpose consistent with this Credit Agreement.
SECTION 10.3. Voting Rights; Dividends; etc.
(a) The appropriate Pledgor shall be entitled to exercise any and
all voting and/or consensual rights and powers accruing to owners of the
Pledged Securities or any part thereof
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for any purpose not inconsistent with the terms hereof, at all times, except as
expressly provided in (c) below.
(b) Any dividends or distributions of any kind whatsoever (other,
so long as an Event of Default is not continuing, than cash) received by a
Pledgor, whether resulting from a subdivision, combination, or reclassification
of the outstanding capital stock of the issuer or received in exchange for
Pledged Securities or any part thereof or as a result of any merger,
consolidation, acquisition, or other exchange of assets to which the issuer may
be a party, or otherwise, shall be and become part of the Pledged Securities
pledged hereunder and shall immediately be delivered to the Agent to be held
subject to the terms hereof.
(c) Upon the occurrence and during the continuance of an Event of
Default and notice from the Agent of the transfer of such rights to the Agent,
all rights of the Pledgors to exercise the voting and/or consensual rights and
powers which it is entitled to exercise pursuant to this Section shall cease,
and all such rights shall thereupon become vested in the Agent, which shall
have the sole and exclusive right and authority to exercise such voting and/or
consensual rights.
SECTION 10.4. Remedies Upon Default.
If an Event of Default shall have occurred and be continuing, the
Agent on behalf of the Lenders may sell the Pledged Securities, or any part
thereof, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery as the Agent
shall deem appropriate subject to the terms hereof or as otherwise provided in
the New York Uniform Commercial Code. The Agent shall be authorized at any
such sale (if it deems it advisable to do so) to restrict to the full extent
permitted by Applicable Law the prospective bidders or purchasers to persons
who will represent and agree that they are purchasing the Pledged Securities
for their own account for investment and not with a view to the distribution or
sale thereof, and upon consummation of any such sale the Agent shall have the
right to assign, transfer, and deliver to the purchaser or purchasers thereof
the Pledged Securities so sold. Each such purchaser at any such sale shall
hold the property sold absolutely, free from any claim or right on the part of
the Pledgors; provided, however, that prior to the consummation of such sale
the Pledgors shall be entitled to redeem the Pledged Securities by paying (i)
all the Obligations and (ii) any additional costs or expenses incurred by the
Agent in connection with the proposed sale of the Pledged Securities. The
Agent shall give ten days' written notice of its intention to make any such
public or private sale, or sale at any broker's board or on any such securities
exchange, or of any other disposition of the Pledged Securities. Such notice,
in the case
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of public sale, shall state the time and place for such sale and, in the case of
sale at a broker's board or on a securities exchange, shall state the board or
exchange at which such sale is to be made and the day on which the Pledged
Securities, or portion thereof, will first be offered for sale at such board or
exchange. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Agent may fix and
shall state in the notice of such sale. At any such sale, the Pledged
Securities, or portion thereof, to be sold may be sold in one lot as an entirety
or in separate parcels, as the Agent may (in its sole and absolute discretion)
determine. The Agent shall not be obligated to make any sale of the Pledged
Securities if it shall determine not to do so, regardless of the fact that
notice of sale of the Pledged Securities may have been given. The Agent may,
without notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case the sale of all or any
part of the Pledged Securities is made on credit or for future delivery, the
Pledged Securities so sold shall be retained by the Agent until the sale price
is paid by the purchaser or purchasers thereof, but the Agent shall not incur
any liability in case any such purchaser or purchasers shall fail to take up and
pay for the Pledged Securities so sold and, in case of any such failure, such
Pledged Securities may be sold again upon like notice. At any sale or sales
made pursuant to this Section 10.4, the Agent may bid for or purchase, free from
any claim or right of whatever kind, including any equity of redemption, of the
Pledgors, any such demand, notice, claim, right or equity being hereby expressly
waived and released, any or all of the Pledged Securities offered for sale, and
may make any payment on the account thereof by using any claim for moneys then
due and payable to the Agent or any consenting Lender by any Debtor as a credit
against the purchase price; and the Agent, upon compliance with the terms of
sale, may hold, retain and dispose of the Pledged Securities without further
accountability therefor to the Pledgors or any third party (other than the
Lenders). The Agent shall in any such sale make no representations or
warranties with respect to the Pledged Securities or any part thereof, and shall
not be chargeable with any of the obligations or liabilities of the Pledgors
with respect thereto. Each Pledgor hereby agrees (i) it will indemnify and hold
the Agent and the Lenders harmless from and against any and all claims with
respect to the Pledged Securities asserted before the taking of actual
possession or control of the Pledged Securities by the Agent pursuant to this
Credit Agreement or arising out of any act of, or omission to act on the part
of, any party prior to such taking of actual possession or control by the Agent
(whether asserted before or after such taking of possession or control), or
arising out of any act on the part of any Pledgor, their agents or Affiliates
before or after the
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commencement of such actual possession or control by the Agent and (ii) the
Agent and the Lenders shall have no liability or obligation arising out of any
such claim. As an alternative to exercising the power of sale herein conferred
upon it, the Agent may proceed by a suit or suits at law or in equity to
foreclose upon the Collateral and Pledged Securities under this Credit
Agreement and to sell the Pledged Securities, or any portion thereof, pursuant
to a judgment or decree of a court or courts having competent jurisdiction.
SECTION 10.5. Application of Proceeds of Sale and Cash.
The proceeds of sale of the Pledged Securities sold pursuant to
Section 10.4 hereof shall be applied by the Agent on behalf of the Lenders as
follows:
(i) to the payment of all reasonable out-of-pocket costs and
expenses incurred by the Agent in connection with such sale,
including, but not limited to, all court costs and the reasonable
fees and expenses of counsel for the Agent in connection therewith,
and the payment of all other costs and expenses paid or incurred by
the Agent in connection with this Credit Agreement, or the exercise
of any right or remedy hereunder or otherwise in connection with
the Obligations; and
(ii) to the payment in full of the Obligations in such order
as determined by the Majority Lenders.
Any amounts remaining after such applications shall be remitted to the
appropriate Pledgor, or as a court of competent jurisdiction may otherwise
direct.
SECTION 10.6. Securities Act, etc.
In view of the position of each Pledgor in relation to the Pledged
Securities pledged by it, or because of other present or future circumstances,
a question may arise under the Securities Act of 1933, as amended, as now or
hereafter in effect, or any similar statute hereafter enacted analogous in
purpose or effect (such Act and any such similar statute as from time to time
in effect being hereinafter called the "Federal Securities Laws"), with respect
to any disposition of the Pledged Securities permitted hereunder, each Pledgor
understands that compliance with the Federal Securities Laws may very strictly
limit the course of conduct of the Agent if the Agent were to attempt to
dispose of all or any part of the Pledged Securities, and may also limit the
extent to which or the manner in which any subsequent transferee of any Pledged
Securities may dispose of the same. Similarly, there may be other legal
restrictions or
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limitations affecting the Agent in any attempt to dispose of all or any part of
the Pledged Securities under applicable Blue Sky or other state securities
laws, or similar laws analogous in purpose or effect. Under applicable law, in
the absence of an agreement to the contrary, the Agent may perhaps be held to
have certain general duties and obligations to the Pledgors to make some effort
towards obtaining a fair price even though the Obligations may be discharged or
reduced by the proceeds of a sale at a lesser price. Each Pledgor waives to
the fullest extent permitted by Applicable Law any such general duty or
obligation to it, and the Pledgors and/or the Debtors will not attempt to hold
the Agent responsible for selling all or any part of the Pledged Securities at
an inadequate price, even if the Agent shall accept the first offer received or
does not approach more than one possible purchaser. Without limiting the
generality of the foregoing, the provisions of this Section 10.6 would apply
if, for example, the Agent were to place all or any part of the Pledged
Securities for private placement by an investment banking firm, or if such
investment banking firm purchased all or any part of the Pledged Securities for
its own account, or if the Agent placed all or any part of the Pledged
Securities privately with a purchaser or purchasers.
SECTION 10.7. Continuation and Reinstatement.
Each Pledgor further agrees that its pledge hereunder shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of principal of or interest on any Obligation is
rescinded or must otherwise be restored by Agent or the Lenders upon the
bankruptcy or reorganization of any Pledgor or otherwise.
SECTION 10.8. Termination.
The pledge referenced herein shall terminate when all of the
Obligations shall have been indefeasibly fully paid and the Commitments shall
have terminated, at which time the Agent shall assign and deliver to the
appropriate Pledgor, or to such Person or Persons as such Pledgor shall
designate, against receipt, such of the Pledged Securities (if any) as shall
not have been sold or otherwise applied by the Agent pursuant to the terms
hereof and shall still be held by it hereunder, together with appropriate
instruments of reassignment and release. Any such reassignment shall be free
and clear of all Liens, arising by, under or through any Lender but shall
otherwise be without recourse upon or warranty by the Agent and at the expense
of the Pledgors.
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11. CASH COLLATERAL AND ROYALTY ACCOUNT
SECTION 11.1. Cash Collateral Accounts.
On or prior to the Closing Date, there shall be established with
the Agent two collateral accounts in the name of the Agent (one for AAF, the
"AAF Cash Collateral Account" and one for all other Debtors, the "All American
Cash Collateral Account"; collectively, the "Cash Collateral Accounts"), into
which the appropriate Debtors shall from time to time deposit Dollars pursuant
to the express provisions of this Credit Agreement requiring or permitting such
deposits. Except to the extent otherwise provided in this Article 11, the Cash
Collateral Accounts shall be under the sole dominion and control of the Agent.
SECTION 11.2. Royalty Account.
On or prior to the Closing Date, there shall be established with
the Agent a collateral account in the name of the Agent (the "Royalty
Account"), into which the Agent shall from time to time transfer Dollars
pursuant to the express provisions of this Credit Agreement requiring or
permitting such transfer. Except to the extent otherwise provided in this
Article 11 and Section 2.12(h), the Royalty Account shall be under the sole
dominion and control of the Agent.
SECTION 11.3. Investment of Funds.
(a) The Agent is hereby authorized and directed to invest and
reinvest the funds from time to time deposited in the Cash Collateral Accounts
and the Royalty Account on the instructions of the Parent (provided that such
notice may be given verbally to be confirmed promptly in writing) or, if the
Parent shall fail to give such instruction upon delivery of any such funds, in
the sole discretion of the Agent, provided that in no event may the Parent give
instructions to the Agent to, or may the Agent in its discretion, invest or
reinvest funds in the Cash Collateral Accounts or the Royalty Account in other
than Cash Equivalents described in clause (i) of the definition of Cash
Equivalents, or described in clauses (ii) and (iii) of the definition of Cash
Equivalents to the extent issued by Chemical Bank.
(b) Any net income or gain on the investment of funds from time to
time held in the Cash Collateral Accounts or the Royalty Account, as the case
may be, shall be promptly reinvested by the Agent as a part of the Cash
Collateral Accounts or the Royalty Account, as the case may be; and any net
loss on any such investment shall be charged against the Cash Collateral
Accounts or the Royalty Account, as the case may be.
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(c) Neither the Agent nor the Lenders shall be a trustee for the
Debtors, or shall have any obligations or responsibilities, or shall be liable
for anything done or not done, in connection with the Cash Collateral Accounts
or the Royalty Account, as the case may be, except as expressly provided herein
and except that the Agent shall have the obligations of a secured party under
the UCC. The Agent and the Lenders shall not have any obligation or
responsibilities and shall not be liable in any way for any investment decision
made pursuant to this Section 11.3 or for any decrease in the value of the
investments held in the Cash Collateral Accounts or the Royalty Account, as the
case may be.
SECTION 11.4. Grant of Security Interest.
For value received and to induce the Lenders to make Loans from
time to time to the Borrowers as provided for in this Credit Agreement, as
security for the payment of all of the Obligations, the Debtors hereby assign
to the Agent (for the benefit of the Lenders), and grant to the Agent (for the
benefit of the Lenders), a first and prior Lien upon all the Debtors' rights in
and to the Cash Collateral Accounts and the Royalty Account, all cash,
documents, instruments and securities from time to time held therein, and all
rights pertaining to investments of funds in the Cash Collateral Accounts and
the Royalty Account and all products and proceeds of any of the foregoing. All
cash, documents, instruments and securities from time to time on deposit in the
Cash Collateral Accounts and the Royalty Account, and all rights pertaining to
investments of funds in the Cash Collateral Accounts and the Royalty Account,
shall immediately and without any need for any further action on the part of
any of the Debtors, any Lender or the Agent, become subject to the Lien set
forth in this Section 11.4, be deemed Collateral for all purposes hereof and be
subject to the provisions of this Credit Agreement.
SECTION 11.5. Remedies.
At any time during the continuation of an Event of Default, the
Agent may sell any documents, instruments and securities held in the Cash
Collateral Accounts or the Royalty Account and may immediately apply the
proceeds thereof and any other cash held in the Cash Collateral Accounts or the
Royalty Account to the satisfaction of the Obligations in such order as the
Agent may determine, but subject to the rights of the Lenders. Any amounts
remaining after such application shall be paid or delivered to the Parent or as
a court of competent jurisdiction may direct.
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SECTION 11.6. Release of Royalty Funds.
So long as no Default or Event of Default has occurred and is then
continuing, AAF may request the release of funds from the Royalty Account to
pay royalties; provided, however, that AAF may not request the release of funds
for such purpose more often than once each calendar week. At the time of such
request, AAF shall deliver to the Agent a certificate indicating therein the
amount of royalty payments payable at such time by AAF in such detail as may be
required by the Agent and the Agent shall transfer such funds from the Royalty
Account into the Chemical Account. AAF hereby agrees to use such funds solely
for the payment of royalties.
SECTION 11.7. Release of Project Funds.
So long as no Default or Event of Default has occurred and is then
continuing, AAF may request the release of funds from the AAF Cash Collateral
Account in connection with projects relating to Product; provided, however,
that AAF may not request the release of funds for such purposes in an amount to
exceed (i) $500,000 during 1995 and (ii) for each calendar year thereafter, the
amount permitted hereunder for the prior calendar year plus 10%. At the time
of such request, AAF shall deliver to the Agent a written request indicating
therein the amount of funds required in connection with such project and the
Agent shall transfer such funds from the AAF Cash Collateral Account into the
Chemical Account. AAF hereby acknowledges that such transfer shall only be
made by the Agent to the extent there are sufficient funds in the AAF Cash
Collateral Account to pay the next two succeeding quarters' interest on the
Term Loan and that no principal installment pursuant to Section 2.6(g) which is
then due has not been prepaid.
SECTION 11.8. Release of Funds for Corporate Overhead.
So long as no Default or Event of Default has occurred and is then
continuing, AAF may request the release of funds from the AAF Cash Collateral
Account to pay corporate overhead; provided, however, that AAF may not request
the release of funds for such purpose more often than once each calendar week
at, provided, further, that AAF may not request the release of such funds for
such purposes in an amount to exceed (i) $1,500,000 during each quarter of 1995
and (ii) for each calendar year thereafter, the amount permitted hereunder for
the corresponding quarter of the prior calendar year plus 10%, subject however,
to the provisions of Section 6.31. At the time of such request, AAF shall
deliver to the Agent a written notice containing such request and the Agent
shall transfer such funds from the AAF Cash Collateral Account into the Chemical
Account. AAF hereby agrees to use such funds solely for the payment of items
constituting corporate overhead. AAF hereby acknowledges that such transfer
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shall only be made by the Agent to the extent there are sufficient funds in the
AAF Cash Collateral Account to pay the next two succeeding quarters' interest
on the Term Loan and that no principal installment pursuant to Section 2.6(g)
which is then due has not been prepaid.
SECTION 11.9. Principal Payments.
AAF hereby acknowledges that in the event a principal installment
due pursuant to Section 2.6(g) has not been prepaid in accordance with the
provisions of Section 2.12(i) of this Credit Agreement, the Agent shall apply
(on the date such payment is due) sufficient funds from the AAF Cash Collateral
Account to make such payment notwithstanding the fact that such funds had been
held in the AAF Cash Collateral Account pursuant to Section 2.12(h)(iii) or
(iv).
12. THE AGENT
SECTION 12.1. Administration by Agent.
(a) The general administration of the Fundamental Documents and
any other documents contemplated by this Credit Agreement shall be by the Agent
or its designees. Each of the Lenders hereby irrevocably authorizes the Agent,
at its discretion, to take or refrain from taking such actions as agent on its
behalf and to exercise or refrain from exercising such powers under the
Fundamental Documents, the Notes and any other documents contemplated by this
Credit Agreement as are expressly delegated by the terms hereof or thereof, as
appropriate, together with all powers reasonably incidental thereto. The Agent
shall have no duties or responsibilities except as set forth in the Fundamental
Documents.
(b) The Lenders hereby authorize the Agent (in its sole
discretion):
(i) in connection with the sale or other disposition of
any asset included in the Collateral, in accordance with the terms
of this Credit Agreement, to release a Lien granted to it (for the
benefit of the Lenders) on such asset;
(ii) to determine that the cost to a Borrower or another
Debtor is disproportionate to the benefit to be realized by the
Lenders by perfecting a Lien in a given asset or group of assets
included in the Collateral (other than any item which is to be
included in the Borrowing Base) and that such Borrower or other
Debtor should not be required to perfect such Lien in favor of the
Agent (for the benefit of the Lenders);
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(iii) to appoint subagents or Lenders to be the holder of
record of a Lien to be granted to the Agent (for the benefit of the
Lenders) or to hold on behalf of the Agent such collateral or
instruments relating thereto; and
(iv) to grant the right of Quiet Enjoyment to licensees
pursuant to the terms of Section 8.13.
SECTION 12.2. Advances and Payments.
(a) On the date requested by any Borrower for the funding of each
Loan, the Agent shall be authorized (but not obligated) to advance, for the
account of each of the Lenders, the amount of the Loan to be made by it in
accordance with its Commitment hereunder. Each of the Lenders hereby
authorizes and requests the Agent to advance for its account, pursuant to the
terms hereof, the amount of the Loan to be made by it, and each of the Lenders
agrees forthwith to reimburse the Agent in immediately available funds for the
amount so advanced on its behalf by the Agent. If any such reimbursement is
not made in immediately available funds on the same day on which the Agent
shall have made any such amount available on behalf of any Lender, such Lender
shall pay interest to the Agent at a rate per annum equal to the Agent's cost
of obtaining overnight funds in the New York Federal Funds Market.
(b) Any amounts received by the Agent in connection with this
Credit Agreement or the Notes the application of which is not otherwise
provided for shall be applied, in accordance with each of the Lenders'
Percentages, first, to pay accrued but unpaid Commitment Fees, second, to pay
accrued but unpaid interest on the Notes, third, the principal balance
outstanding on the Notes and fourth, to pay other amounts payable to the Agent.
All amounts to be paid to any of the Lenders by the Agent shall be credited to
the Lenders, after collection by the Agent, in immediately available funds
either by wire transfer or deposit in such Lender's correspondent account with
the Agent, or as such Lender and the Agent shall from time to time agree.
SECTION 12.3. Sharing of Setoffs and Cash Collateral.
Each of the Lenders agrees that if it shall, through the exercise
of a right of bank's lien, setoff or counterclaim against any Debtor,
including, but not limited to, a secured claim under Section 506 of Title 11 of
the United States Code or other security or interest arising from, or in lieu
of, such secured claim and received by such Lender under any applicable
bankruptcy, insolvency or other similar law, or otherwise, obtain payment in
respect of its Loans as a result of which the unpaid portion of its Loans is
proportionately less than the unpaid portion of any of the other Lenders (a) it
shall promptly
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purchase at par (and shall be deemed to have thereupon purchased) from such
other Lenders a participation in the Loans of such other Lenders, so that the
aggregate unpaid principal amount of each of the Lenders' Loans and its
participation in Loans of the other Lenders shall be in the same proportion to
the aggregate unpaid principal amount of all Loans then outstanding as the
principal amount of its Loans prior to the obtaining of such payment was to the
principal amount of all Loans outstanding prior to the obtaining of such
payment and (b) such other adjustments shall be made from time to time as shall
be equitable to ensure that the Lenders share such payment pro rata. The
Debtors expressly consent to the foregoing arrangements and agree that any
Lender or Lenders holding (or deemed to be holding) a participation in a Note
may exercise any and all rights of banker's lien, setoff or counterclaim with
respect to any and all moneys owing by any of the Borrowers to such Lender or
Lenders as fully as if such Lender or Lenders held a Note and was the original
obligee thereon, in the amount of such participation.
SECTION 12.4. Notice to the Lenders.
Upon receipt by the Agent from any of the Debtors of any
communication calling for an action on the part of the Lenders, or upon notice
to the Agent of any Event of Default, the Agent will in turn immediately inform
the other Lenders in writing (which shall include telegraphic communications)
of the nature of such communication or of the Event of Default, as the case may
be.
SECTION 12.5. Liability of Agent.
(a) The Agent, when acting on behalf of the Lenders, may execute
any of its duties under this Credit Agreement by or through its officers,
agents, or employees and neither the Agent nor such officers, agents or
employees shall be liable to the Lenders or any of them for any action taken or
omitted to be taken in good faith, nor be responsible to the Lenders or to any
of them for the consequences of any oversight or error of judgment, or for any
loss, unless the same shall happen through its gross negligence or willful
misconduct. The Agent and its directors, officers, agents, and employees shall
in no event be liable to the Lenders or to any of them for any action taken or
omitted to be taken by it pursuant to instructions received by it from the
Majority Lenders or in reliance upon the advice of counsel selected by it with
reasonable care. Without limiting the foregoing, neither the Agent nor any of
its directors, officers, employees, or agents shall be responsible to any of
the Lenders for the due execution, validity, genuineness, effectiveness,
sufficiency, or enforceability of, or for any statement, warranty, or
representation in, or for the perfection of any security interest contemplated
by, this Credit Agreement or any related agreement, document or order, or shall
be required
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to ascertain or to make any inquiry concerning the performance or observance by
any of the Borrowers of any of the terms, conditions, covenants, or agreements
of this Credit Agreement or any related agreement or document.
(b) Neither the Agent, as Agent hereunder, nor any of its
directors, officers, employees, or agents shall have any responsibility to the
Borrowers or any other Debtor on account of the failure or delay in performance
or breach by any of the Lenders or the Borrowers of any of their respective
obligations under this Credit Agreement or the Notes or any related agreement
or document or in connection herewith or therewith.
(c) The Agent, as Agent hereunder, shall be entitled to rely on
any communication, instrument, or document reasonably believed by it to be
genuine or correct and to have been signed or sent by a person or persons
believed by it to be the proper person or persons, and it shall be entitled to
rely on advice of legal counsel, independent public accountants, and other
professional advisers and experts selected by it.
SECTION 12.6. Reimbursement and Indemnification.
Each of the Lenders agrees (i) to reimburse the Agent in accordance
with each Lender's Percentage, for any expenses and fees incurred for the
benefit of the Lenders under the Fundamental Documents, including, without
limitation, counsel fees and compensation of agents and employees paid for
services rendered on behalf of the Lenders, and any other expense incurred in
connection with the operations or enforcement thereof not reimbursed by the
Borrowers, and (ii) to indemnify and hold harmless the Agent and any of its
directors, officers, employees, or agents, on demand, in accordance with each
Lender's Percentage, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses, or
disbursements of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against it or any of them in any way relating to or
arising out of the Fundamental Documents or any action taken or omitted by it
or any of them under the Fundamental Documents to the extent not reimbursed by
the Borrowers or any other Debtor (except such as shall result from their gross
negligence or willful misconduct).
SECTION 12.7. Rights of Agent.
It is understood and agreed that Chemical Bank shall have the same
rights and powers as a Lender hereunder (including the right to give such
instructions) as the other Lenders and may exercise such rights and powers, as
well as its rights and powers under other agreements and instruments to which
it is or may be party, and engage in other transactions with the Borrowers or
any Subsidiary thereof, as though it were not the Agent of the
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Lenders under this Credit Agreement. The fact that Chemical Bank may at any
time engage in any such other transaction with a Borrower or any Subsidiary or
Affiliate or Fremantle shall not however in any way diminish the obligations
and responsibilities of Chemical Bank as Agent hereunder.
SECTION 12.8. Independent Investigation by Lenders.
Each of the Lenders acknowledges that it has decided to enter into
this Credit Agreement and to make the Loans hereunder based on its own analysis
of the transactions contemplated hereby and of the creditworthiness of the
Borrowers and agrees that the Agent shall bear no responsibility therefor.
SECTION 12.9. Execution by Agent of Security Documentation on
behalf of the Lenders.
The Agent hereby agrees to expressly indicate in all the security
documentation (including the UCC-1 Financing Statements, Copyright Security
Agreement, Trademark Security Agreement, Pledgeholder Agreements and any
payment instructions) that it obtains or executes that it is doing such on
behalf of the Lenders.
SECTION 12.10. Agreement of Majority Lenders or Super Majority
Lenders.
Upon any occasion requiring or permitting an approval, consent,
waiver, election or other action on the part of the Majority Lenders or Super
Majority Lenders, action shall be taken by the Agent for and on behalf or for
the benefit of all Lenders upon the direction of the Majority Lenders or the
Super Majority Lenders, as the case may be, and any such action shall be
binding on all Lenders. No amendment, modification, consent or waiver shall be
effective except in accordance with the provisions of Section 13.10 hereof.
SECTION 12.11. Notice of Transfer.
The Agent may deem and treat any Lender which is a party to this
Credit Agreement as the owner of such Lender's respective portions of the Loans
for all purposes, unless and until a written notice of the assignment or
transfer thereof executed by any such Lender shall have been received by the
Agent and become effective in accordance with Section 13.3 hereof.
SECTION 12.12. Successor Agent.
The Agent may resign at any time by giving written notice thereof
to the Lenders and the Borrowers, but such resignation shall not become
effective until acceptance by a successor Agent of its appointment pursuant
hereto. Upon any
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such resignation, the retiring Agent shall promptly appoint a successor Agent
from among the Lenders which is experienced and sophisticated in entertainment
industry lending, provided that such replacement is reasonably acceptable (as
evidenced in writing) to the Parent and the Majority Lenders. If no successor
Agent shall have been so appointed by the retiring Agent and shall have
accepted such appointment, within 30 days after the retiring Agent's giving of
notice of resignation, the Borrowers may appoint a successor Agent (which
successor may be replaced by the Majority Lenders; provided that such
replacement is experienced and is sophisticated in entertainment industry
lending and reasonably acceptable to the Parent), which shall be either a
Lender or a commercial bank organized under the laws of the United States of
America or of any State thereof and having a combined capital and surplus of at
least $250,000,000 and which is experienced and sophisticated in entertainment
industry lending. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations under the credit documentation. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Article 12 shall inure
to its benefit as to any actions taken or omitted to be taken by it while it
was Agent under this Credit Agreement.
13. MISCELLANEOUS
SECTION 13.1. Notices.
Notices and other communications provided for herein shall be in
writing and shall be delivered or mailed (or in the case of telegraphic
communication, if by telegram, delivered to the telegraph company and, if by
telex, graphic scanning or other telegraphic or facsimile communications
equipment of the sending party hereto, delivered by such equipment) addressed,
if to the Agent or Chemical Bank, to it at 270 Park Avenue, New York, New York
10017, Attn: John Huber, facsimile no.: (212) 270-2056, with a copy to CBC-USA,
Inc., 1800 Century Park East, Suite 400, Los Angeles, California 90067, Attn:
Christa Thomas or if to any Debtor at 1325 Avenue of the Americas, New York,
New York 10019, Attn: Chief Financial Officer, facsimile no. (212) 541-2810, or
if to a Lender, to it at its address set forth on the signature page, or such
other address as such party may from time to time designate by giving written
notice to the other parties hereunder. Any failure of the Agent or a Lender
giving notice pursuant to this Section 13.1, to provide a courtesy copy to a
party as provided herein, shall not affect the validity of such notice. All
notices and other communications given to any party hereto in accordance with
the provisions of this Credit Agreement
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shall be deemed to have been given on the fifth Business Day after the date
when sent by registered or certified mail, postage prepaid, return receipt
requested, if by mail, or when delivered to the telegraph company, charges
prepaid, if by telegram, or upon receipt by such party, if by any telegraphic
or facsimile communications equipment, in each case addressed to such party as
provided in this Section 13.1 or in accordance with the latest unrevoked
written direction from such party.
SECTION 13.2. Survival of Agreement, Representations and
Warranties, etc.
All warranties, representations and covenants made by the Debtors
herein or in any certificate or other instrument delivered by it or on its
behalf in connection with this Credit Agreement shall be considered to have
been relied upon by the Agent and the Lenders and shall survive the making of
the Loans herein contemplated and the issuance and delivery to the Agent of the
Notes regardless of any investigation made by the Agent or the Lenders or on
their behalf and shall continue in full force and effect so long as any amount
due or to become due hereunder is outstanding and unpaid and so long as the
Commitments have not been terminated. All statements in any such certificate
or other instrument shall constitute representations and warranties by the
Debtors hereunder.
SECTION 13.3. Successors and Assigns; Syndications; Loan Sales;
Participations.
(a) Whenever in this Credit Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
assigns of such party (provided, however, that the Borrowers may not assign
their rights hereunder without the prior written consent of all the Lenders),
and all covenants, promises and agreements by or on behalf of any of the
Debtors which are contained in this Credit Agreement shall inure to the benefit
of the successors and assigns of the Lenders.
(b) Each of the Lenders may (but only with the prior written
consent of the Agent, which consent shall not be unreasonably withheld) assign
to an Eligible Assignee all or a portion of its interests, rights and
obligations under this Credit Agreement (including, without limitation, all or
a portion of its Total Commitment and the same portion of all Loans at the time
owing to it and the Notes held by it); provided, however, that (i) each
assignment shall be of a constant, and not a varying, percentage of the
assigning Lender's rights and obligations under this Credit Agreement, (ii) the
amount of the (A) portion of the Term Loan made by such Lender plus (B)
original Total Commitment of the assigning Lender subject to each such
assignment (determined as of the date the Assignment and Acceptance with
respect to such assignment is delivered to
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the Lender) shall be in a minimum principal amount of $5,000,000, (iii) the
parties to each such assignment shall execute and deliver to the Agent, for its
acceptance and recording in the Register (as defined below), an Assignment and
Acceptance, together with any Note or Notes subject to such assignment and a
processing and recordation fee of $2,000 to be paid to the Agent by the
assigning Lender and (iv) Chemical Bank as Lender shall not assign its entire
interest under this Credit Agreement without the prior written consent of the
Debtors which may be granted or withheld in their sole discretion. Upon such
execution, delivery, acceptance and recording, from and after the effective
date specified in each Assignment and Acceptance, which effective date shall be
not earlier than five Business Days after the date of acceptance and recording
by the Agent, (x) the assignee thereunder shall be a party hereto and, to the
extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder and (y) the assigning Lender thereunder
shall, to the extent provided in such Assignment and Acceptance, be released
from its obligations under this Credit Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of the
assigning Lender's rights and obligations under this Credit Agreement, such
assigning Lender shall cease to be a party hereto).
(c) Notwithstanding the other provisions of this Section 13.3,
each Lender may at any time make an assignment of its interests, rights and
obligations under this Credit Agreement to (i) any Affiliate of such Lender or
(ii) any other Lender hereunder, provided that after giving effect to such
assignment, the assignee's Percentage shall not exceed 50%. Any such
assignment to any Affiliate of the assigning Lender or any other Lender
hereunder shall not be subject to the requirement of Section 13.3(b) that the
amount of the total of the Term Loan made by such Lender plus the Commitment of
the assigning Lender subject to each assignment be in a minimum principal
amount of $5,000,000 and shall not release the assigning Lender of its
remaining obligations hereunder, if any.
(d) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than the
representation and warranty that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse claim, the
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Fundamental
Documents or any other instrument or document furnished pursuant hereto or
thereto; (ii) such Lender assignor makes no representation or warranty and
assumes no responsibility
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with respect to the financial condition of the Debtors or the performance or
observance by the Debtors of any of their obligations under the Fundamental
Documents; (iii) such assignee confirms that it has received a copy of this
Credit Agreement, together with copies of the most recent financial statements
delivered pursuant to Sections 5.1(a) and 5.1(b) (or if none of such financial
statements shall have then been delivered, then copies of the financial
statements referred to in Section 3.5 hereof) and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the assigning Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this Credit
Agreement; (v) such assignee appoints and authorizes the Agent to take such
action as the Agent on its behalf and to exercise such powers under this Credit
Agreement as are delegated to the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto; and (vi) such assignee agrees that
it will perform in accordance with their terms all of the obligations which by
the terms of this Credit Agreement are required to be performed by it as a
Lender.
(e) The Agent shall maintain at its address at which notices are
to be given to it pursuant to Section 13.1 a copy of each Assignment and
Acceptance and a register for the recordation of the names and addresses of the
Lenders and the Commitments of, and principal amount of the Loans owing to,
each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive, in the absence of manifest error, and the Debtors, the
Agent and the Lenders may treat each person whose name is recorded in the
Register as a Lender hereunder for all purposes of the Fundamental Documents.
The Register shall be available for inspection by the Borrowers or any Lender
at any reasonable time and from time to time upon reasonable prior notice.
(f) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender and an assignee together with any Notes subject to such
assignment, the Agent shall, if such Assignment and Acceptance has been
completed and is in the form of Exhibit I hereto, (i) accept such Assignment
and Acceptance, (ii) record the information contained therein in the Register
and (iii) give prompt written notice thereof to the Borrowers. Within five
Business Days after receipt of the notice, the Borrowers, at their own expense,
shall execute and deliver to the Lender, in exchange for the surrendered Notes,
new Notes to the order of such assignee in an amount equal to the Commitments
assumed by it and in the case of the Term Note, the amount of the Term Loan
being assigned to such Lender) pursuant to such Assignment and Acceptance and
new Notes to the order of the assigning Lender in an amount equal to the
Commitments retained
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by it hereunder. Such new Notes shall be in an aggregate principal amount
equal to the aggregate principal amount of such retained Commitment (and in the
case of the Term Note, the amount of the Term Loan being retained by such
Lender), shall be dated the date of the surrendered Notes and shall otherwise
be in substantially the form of the appropriate Exhibit hereto. In addition
the Debtors will promptly, at their own expense, execute such amendments to the
Fundamental Documents to which it is a party and such additional documents, and
take such other actions as the Agent or the assignee Lender may reasonably
request in order to give such assignee Lender the full benefit of the Liens
contemplated by the Fundamental Documents.
(g) Each of the Lenders may without the consent of the Debtors
sell participations to one or more banks or other entities in all or a portion
of its rights and obligations under this Credit Agreement (including, without
limitation, all or a portion of its Commitment and the Loans (including the
Term Loan) owing to it and the Note or Notes held by it); provided, however,
that (i) any such Lender's obligations under this Credit Agreement shall remain
unchanged, (ii) such participant shall not be granted any voting rights under
this Credit Agreement, except with respect to proposed changes to interest
rates, amount of Commitment, final maturity of Loans, releases of all or
substantially all the Collateral and fees (as applicable to such participant),
(iii) any such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iv) the participating banks or
other entities shall be entitled to the cost protection provisions contained in
Sections 2.12, 2.13 and 2.16(e) hereof but a participant shall not be entitled
to receive pursuant to such provisions an amount larger than its share of the
amount to which the Lender granting such participation would have been entitled
and (v) the Debtors, the Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights
and obligations under this Credit Agreement.
(h) The Lenders may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
13.3, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Debtors furnished to the Agent by
or on behalf of the Debtors; provided that prior to any such disclosure, each
such assignee or participant or proposed assignee or participant shall agree,
by executing a confidentiality letter in form and substance equivalent to the
confidentiality letter executed by the Lenders in connection with information
received by such Lenders relating to this transaction to preserve the
confidentiality of any confidential information relating to the Borrowers
received from such Lender.
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(i) Any assignment pursuant to paragraph (a) or (b) of this
Section 13.3 shall constitute an amendment of the Schedule of Commitments as of
the effective date of such assignment.
(j) The Borrowers consent that any Lender may at any time and from
time to time pledge or otherwise grant a security interest in any Loan or in
any of the Notes evidencing such Loans (or any part thereof) to any Federal
Reserve Bank.
SECTION 13.4. Expenses; Documentary Taxes.
Whether or not the transactions hereby contemplated shall be
consummated, the Borrowers agree to pay all reasonable out-of-pocket expenses
incurred by the Agent in connection with performance of due diligence by the
Agent in connection with the transactions hereby contemplated and the
syndication, preparation, execution, delivery, waiver or modification and
administration of this Credit Agreement and any other documentation
contemplated hereby, the Notes and the making of the Loans, including but not
limited to any internally allocated audit costs, the fees and disbursements of
Morgan, Lewis & Bockius, counsel for the Agent, and any other counsel that the
Agent shall retain, fees and expenses of technical or other consultants engaged
by the Agent to the extent previously approved by a Borrower, as well as all
reasonable out-of-pocket expenses incurred by the Lenders in the enforcement or
protection of the rights of the Lenders in connection with this Credit
Agreement or the Notes, and with respect to any action which may be instituted
by any Person other than the Debtors against any Lender in respect of the
foregoing, or as a result of any transaction, action or non-action arising from
the foregoing, including but not limited to the fees and disbursements of any
counsel for the Lenders. Such payments shall be made on the date of execution
of this Credit Agreement and thereafter on demand. The Borrowers agree that
they shall indemnify the Agent and the Lenders from and hold them harmless
against any documentary taxes, assessments or charges made by any Governmental
Authority by reason of the execution and delivery of this Credit Agreement or
the Notes. The obligations of the Borrowers under this Section shall survive
the termination of this Credit Agreement and/or the payment of the Loans.
SECTION 13.5. Indemnification of Lenders.
The Borrowers agree (a) to indemnify and hold harmless the Lenders
(to the full extent permitted by law) from and against any and all claims,
demands, losses, judgments and liabilities (including liabilities for
penalties) of whatsoever nature, and (b) to pay to the Agent an amount equal to
the amount of all costs and expenses, including reasonable legal fees and
disbursements, and with regard to both (a) and (b) growing out of or resulting
from any Collateral, this Credit Agreement
- 132 -
<PAGE> 140
(including the preparation of this Credit Agreement and all related documents
whether or not the transactions contemplated hereby are consummated), the
Copyright Security Agreements and the Pledgeholder Agreements, the making of
the Loans, or the administration and enforcement or exercise of any right or
remedy granted to the Lenders hereunder or thereunder but excluding therefrom
all costs arising out of or resulting from (i) the gross negligence or willful
misconduct of the Lender claiming indemnification hereunder and (ii) litigation
between the Borrowers and the Agent or the Lenders in connection with the
Fundamental Documents or in any way relating to the transactions contemplated
hereby if, after final non-appealable judgment, the Agent or the Lenders are
not the prevailing party or parties in such litigation. The foregoing
indemnity agreement includes any reasonable costs incurred by the Lenders in
connection with any action or proceeding which may be instituted in respect of
the foregoing by the Agent, or by any other Person either against the Lenders
or in connection with which any officer or employee of the Lenders is called as
a witness or deponent, including, but not limited to, the reasonable fees and
disbursements of Morgan, Lewis & Bockius, counsel to the Agent, and any
out-of-pocket costs incurred by the Lenders in appearing as a witness or in
otherwise complying with legal process served upon them. In no event shall the
Lenders be liable to the Borrowers for any matter or thing in connection with
this Credit Agreement other than to make Loans and account for moneys actually
received by them in accordance with the terms hereof.
Whenever the provisions of this Credit Agreement or any other
Fundamental Document provide that, if any Debtor shall fail to do any act or
thing which it has covenanted to do hereunder or any representation or warranty
of any of the Debtors shall be breached, the Agent may (but shall not be
obligated to) do the same or cause it to be done or remedy any such breach and
the Agent does the same or causes it to be done, there shall be added to the
Obligations hereunder the cost or expense incurred by the Agent in so doing,
and any and all amounts expended by the Agent in taking any such action shall
be repayable to it upon its demand therefor and shall bear interest at 4% in
excess of the Alternate Base Rate from time to time in effect from the date
advanced to the date of repayment.
All indemnities contained in this Section shall survive the
expiration or earlier termination of this Credit Agreement.
SECTION 13.6. CHOICE OF LAW.
THIS CREDIT AGREEMENT AND THE NOTES HAVE BEEN EXECUTED AND
DELIVERED IN THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SUCH STATE APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
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<PAGE> 141
SECTION 13.7. WAIVER OF JURY TRIAL.
TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE
WAIVED, EACH DEBTOR HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT
(WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN
ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION
ARISING OUT OF OR BASED UPON THIS CREDIT AGREEMENT OR THE SUBJECT MATTER HEREOF
OR ANY FUNDAMENTAL DOCUMENT, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING OR WHETHER IN CONTRACT OR TORT OR OTHERWISE. EACH DEBTOR ACKNOWLEDGES
THAT IT HAS BEEN INFORMED BY THE LENDERS THAT THE PROVISIONS OF THIS SECTION
CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH THE LENDERS HAVE RELIED, ARE
RELYING AND WILL RELY IN ENTERING INTO THIS CREDIT AGREEMENT AND ANY OTHER
FUNDAMENTAL DOCUMENT. THE AGENT OR ANY LENDER MAY FILE AN ORIGINAL COUNTERPART
OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE BORROWER TO THE WAIVER OF ITS RIGHTS TO TRIAL BY JURY.
SECTION 13.8. No Waiver.
No failure on the part of the Agent or any Lender to exercise, and
no delay in exercising, any right, power or remedy hereunder or under the Notes
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. All remedies hereunder
are cumulative and are not exclusive of any other remedies provided by law.
SECTION 13.9. Extension of Maturity.
Except as otherwise specifically provided in Article 13 hereof,
should any payment of principal of or interest on the Notes or any other amount
due hereunder become due and payable on a day other than a Business Day, the
maturity thereof shall be extended to the next succeeding Business Day and, in
the case of principal, interest shall be payable thereon at the rate herein
specified during such extension.
SECTION 13.10. Amendments, etc.
No modification, amendment or waiver of any provision of this
Credit Agreement, and no consent to any departure by the Debtors herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Majority Lenders or the Super Majority Lenders if so required, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given; provided, however, that no such modification or
amendment shall without the written consent of all of the Lenders (i) change
the Commitment of any Lender, (ii) amend or modify any provision of this Credit
Agreement which
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<PAGE> 142
provides for the unanimous consent or approval of the Lenders, (iii) release
any Collateral or any of the Pledged Securities (except as contemplated herein)
or release any Guarantor from its obligations hereunder, (iv) alter the fixed
scheduled maturity or principal amount of any Loan, or the rate of interest
payable thereon, or the rate at which the Commitment Fees accrue or the fixed
scheduled maturity or amount of any other payment required to be made under
this Credit Agreement, (v) amend the definition of "Majority Lenders" or "Super
Majority Lenders" or (vi) amend this Section 13.10. No such amendment or
modification may adversely affect the rights and obligations of the Agent
hereunder without its prior written consent. No notice to or demand on any of
the Borrowers shall entitle the Debtors to any other or further notice or
demand in the same, similar or other circumstances. Each holder of a Note
shall be bound by any amendment, modification, waiver or consent authorized as
provided herein, whether or not a Note shall have been marked to indicate such
amendment, modification, waiver or consent and any consent by any holder of a
Note shall bind any Person subsequently acquiring a Note, whether or not a Note
is so marked.
SECTION 13.11. Severability.
Any provision of this Credit Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 13.12. SERVICE OF PROCESS.
EACH DEBTOR (EACH A "SUBMITTING PARTY") HEREBY IRREVOCABLY SUBMITS
TO THE JURISDICTION OF THE STATE COURTS OF THE STATE OF NEW YORK AND TO THE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT
OF OR BASED UPON THIS CREDIT AGREEMENT OR THE SUBJECT MATTER HEREOF BROUGHT BY
THE AGENT OR A LENDER. THE SUBMITTING PARTY TO THE EXTENT PERMITTED BY
APPLICABLE LAW (A) HEREBY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION,
AS A DEFENSE, OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
SUCH COURTS, ANY CLAIM THAT IT IS NOT SUBJECT PERSONALLY TO THE JURISDICTION OF
THE ABOVE-NAMED COURTS, THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT
OR EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT
FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT
THIS CREDIT AGREEMENT OR THE SUBJECT MATTER HEREOF MAY NOT BE ENFORCED IN OR BY
SUCH COURT, AND (B) HEREBY WAIVES THE RIGHT TO ASSERT IN ANY SUCH ACTION, SUIT
OR PROCEEDING ANY OFFSETS OR COUNTERCLAIMS EXCEPT COUNTERCLAIMS THAT ARE
COMPULSORY OR
- 135 -
<PAGE> 143
OTHERWISE ARISE FROM THE SAME SUBJECT MATTER. THE SUBMITTING PARTY HEREBY
CONSENTS TO SERVICE OF PROCESS BY MAIL AT ITS ADDRESS TO WHICH NOTICES ARE TO
BE GIVEN PURSUANT TO SECTION 13.1 HEREOF. THE SUBMITTING PARTY AGREES THAT ITS
SUBMISSION TO JURISDICTION AND CONSENT TO SERVICE OF PROCESS BY MAIL IS MADE
FOR THE EXPRESS BENEFIT OF THE AGENT AND THE LENDERS. FINAL JUDGMENT AGAINST
THE SUBMITTING PARTY IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE
CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER JURISDICTION (A) BY SUIT, ACTION
OR PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE
CONCLUSIVE EVIDENCE OF THE FACT AND THE AMOUNT OF INDEBTEDNESS OR LIABILITY OF
THE SUBMITTING PARTY THEREIN DESCRIBED OR (B) IN ANY OTHER MANNER PROVIDED BY
OR PURSUANT TO THE LAWS OF SUCH OTHER JURISDICTION, PROVIDED, HOWEVER, THAT THE
AGENT OR A LENDER MAY AT ITS OPTION BRING SUIT, OR INSTITUTE OTHER JUDICIAL
PROCEEDINGS AGAINST THE SUBMITTING PARTY OR ANY OF ITS ASSETS IN ANY STATE OR
FEDERAL COURT OF THE UNITED STATES OR OF ANY COUNTRY OR PLACE WHERE THE
SUBMITTING PARTY OR SUCH ASSETS MAY BE FOUND.
SECTION 13.13. Headings.
Section headings used herein are for convenience only and are not
to affect the construction of or be taken into consideration in interpreting
this Credit Agreement.
SECTION 13.14. Execution in Counterparts.
This Credit Agreement may be executed in any number of
counterparts, each of which shall constitute an original, but all of which
taken together shall constitute one and the same instrument.
SECTION 13.15. Subordination of Intercompany Advances.
(a) Each Debtor hereby agrees that any Indebtedness or other
intercompany receivables or advances of any other Debtor, directly or
indirectly, in favor of such Debtor of whatever nature at any time outstanding
shall be completely subordinate in right of payment to the prior payment in
full of the Obligations, and that no payment on any such Indebtedness shall be
made (i) except intercompany receivables and advances permitted pursuant to the
terms hereof may be repaid in the ordinary course of business so long as no
Default or Event of Default, shall have occurred and be continuing and (ii)
except as specifically consented to by all the Lenders in writing, until the
prior payment in full all Obligations and termination of the Commitments.
(b) In the event that any payment on any such indebtedness shall
be received by such Debtor other than as permitted by Section 13.15(a) before
payment in full of all Obligations and termination of the Commitments, such
Debtor shall
- 136 -
<PAGE> 144
receive such payments and hold the same in trust for, and shall immediately pay
over to, the Agent on behalf of the Lenders all such sums to the extent
necessary so that the Lenders shall have been paid all Obligations owed or
which may become owing.
- 137 -
<PAGE> 145
IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be duly executed as of the day and the year first written.
BORROWERS AND GUARANTORS:
ALL AMERICAN COMMUNICATIONS, INC.
By /s/ Thomas Bradshaw
________________________________
Name: Thomas Bradshaw
Title: Chief Financial Officer
THE BAYWATCH PRODUCTION COMPANY
By /s/ Thomas Bradshaw
________________________________
Name: Thomas Bradshaw
Title: Chief Financial Officer
THE BAYWATCH NIGHTS PRODUCTION
COMPANY
By /s/ Thomas Bradshaw
________________________________
Name: Thomas Bradshaw
Title: Chief Financial Officer
138
<PAGE> 146
ALL AMERICAN FREMANTLE
INTERNATIONAL, INC.
By /s/ Thomas Bradshaw
________________________________
Name: Thomas Bradshaw
Title: Chief Financial Officer
GUARANTORS:
ALL AMERICAN PRODUCTIONS, INC.
ALL AMERICAN TELEVISION, INC.
ALL AMERICAN TELEVISION
PRODUCTION, INC.
ALL AMERICAN FDF HOLDINGS, INC.
LBS COMMUNICATIONS, INC.
THE MALIBU BRANCH PRODUCTION
COMPANY
SANTA MONICA SOUND RECORDERS, INC.
SCOTTI BROTHERS ENTERTAINMENT
INDUSTRIES, INC.
SCOTTI BROTHERS RECORDS, INC.
TALBOT TELEVISION LIMITED
By /s/ Thomas Bradshaw
________________________________
Name: Thomas Bradshaw
Title: Authorized Signatory
139
<PAGE> 147
LENDERS:
CHEMICAL BANK, individually and
as Agent
By /s/ John J. Huber
________________________________
Name: John J. Huber
Title: Managing Director
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Mary Etta Schneider
________________________________
Name: Mary Etta Schneider
Title: Managing Director
Address: 100 Federal Street
01-08-08
Boston, MA 02110
Attn: Mary Etta Schneider,
Managing Director
Telephone No.: (617) 434-7045
Telecopy No.: (617) 434-3401
COUTTS & CO.
By /s/ R.E. Skinner, Esq.
________________________________
Name: R.E. Skinner, Esq.
Title: Deputy Head of Media
Banking
Address: 440 Strand
London WC2R OQS
England
Telephone No.: (011) 4471-753-1658
Telecopy No.: (011) 4471-753-1069
with a copy to:
NATIONAL WESTMINSTER BANK plc
350 South Grand Avenue
39th floor
Los Angeles, CA 90071
Attn.: Hal Sadoff
Vice President
Telephone No.: (213) 624-8555
Telecopy No.: (213) 623-6540
140
<PAGE> 148
DE NATIONALE INVESTERINGSBANK N.V.
By /s/ J.P. van der Zwan
_________________________________
Name: J.P. van der Zwan
Title: Director of Company
Financing
By /s/ L. van't Hoenderdaal
_________________________________
Name: L. van't Hoenderdaal
Title: Senior Account Manager
Address: Carnegieplein #4
2501 BH The Hague
Box 380
The Netherlands
Attn: Lars van't Hoenderdaal,
Account Manager
Telephone No.: 011-31-70-342-5449
Telecopy No.: 011-31-70-365-1071
UNION BANK
By /s/ Gabe Renga
_________________________________
Name: Gabe Renga
Title: Senior Vice President
Address: 445 S. Figueroa Street
15th floor
Los Angeles, CA 90071
Attn: Christine Ball,
Vice President
Telephone No.: (213) 236-6176
Telecopy No.: (213) 236-5747
WELLS FARGO BANK
By /s/ Patricia A. Dorsey
_________________________________
Name: Patricia A. Dorsey
Title: Vice President
Address: 333 South Grand Avenue
3rd floor
Los Angeles, CA 90071
Attn: Patricia Dorsey,
Vice President
Telephone No.: (213) 253-6188
Telecopy No.: (213) 617-7622
141
<PAGE> 149
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By /s/ Daniel Touffu
____________________________________
Name: DANIEL TOUFFU
Title: FIRST VP AND REGIONAL MANAGER
By /s/ Paul Lane
____________________________________
Name: Paul Lane
Title: Vice President
Address: 660 S. Figueroa Street
Suite 1400
Los Angeles, CA 90017
Attn: Daniel Touffu,
First Vice President
Telephone No.: (213) 627-2870
Telecopy No.: (213) 627-2761
THE FUJI BANK LTD., LOS ANGELES
AGENCY
By /s/ Takao Endo
___________________________________
Name: Takao Endo
Title: Joint General Manager
Address: 333 South Grand Avenue
25th floor
Los Angeles, CA 90071
Attn: Elly Whalen,
Vice President and
Manager
Telephone No: (213) 253-4186
Telecopy No.: (213) 626-0475
THE SUMITOMO TRUST & BANKING CO.
LTD., NEW YORK BRANCH
By /s/ Suraj P. Bhatia
___________________________________
Name: Suraj P. Bhatia
Title: Senior Vice President
Address: 527 Madison Avenue
6th floor
New York, NY 10022
Attn: Mitchell J. Gervis,
Vice President
Telephone No.: (212) 326-0716
Telecopy No.: (212) 418-4848
142
<PAGE> 150
BANQUE NATIONALE DE PARIS
By /s/ Clive Bettles
_________________________________
Name: Clive Bettles
Title: Vice President
By /s/ Janice S. H. Ho
_________________________________
Name: Janice S. H. Ho
Title: Vice President
Address: 725 S. Figueroa Street
Suite 2090
Los Angeles, CA 90017
Attn: Janice Ho,
Vice President
Telephone No.: (213) 488-9120
Telecopy No.: (213) 488-9602
CALIFORNIA UNITED BANK N.A.
By /s/ Joanne Lucchesi
_________________________________
Name: Joanne Lucchesi
Title: Senior Vice President
Address: 10880 Wilshire Boulevard
Suite 1200
Los Angeles, CA 90024
Attn: Joanna M. Lucchesi,
Senior Vice President
Telephone No.: (310) 475-1592
Telecopy No.: (310) 271-4921
143
<PAGE> 151
Below is a listing and brief description of all Schedules to that
certain Credit, Security, Guaranty and Pledge Agreement dated as of April 13,
1995 among All American Communications, Inc. as a Borrower and a Guarantor, the
other Borrowers named therein, the other Guarantors named therein, the Lenders
named therein with Chemical Bank as Agent for the Lenders and Chemical Bank as
Fronting Bank which are not filed herewith. The Company will furnish a copy of
any such schedule to the Commission upon request.
Schedules
1 Schedule of Commitments
2 Approved Obligors and Approved Producers
3 Employment Agreements
3.7 Subsidiaries/Pledged Securities
3.8(a) Product, Recorded Product and Film Assets
3.8(b) Trademarks
3.9 Fictitious Names
3.11 Principal Executive Office/Location of Collateral
3.12 Litigation
3.17 Existing Indebtedness/Material Agreements
3.21 Environmental Liabilities
3.22 Outstanding Rights re Pledged Securities
3.23 Real Properties
5.22 Bank Accounts
6.2 Existing Liens
144
<PAGE> 152
EXHIBIT A-1
FORM OF TERM NOTE
$__________ New York, New York
as of April 13, 1995
FOR VALUE RECEIVED, ALL AMERICAN FREMANTLE INTERNATIONAL, INC.,
a Delaware corporation (the "Obligor"), DOES HEREBY PROMISE TO PAY to the order
of [INSERT NAME OF LENDER] (the "Lender") at the office of Chemical Bank at 270
Park Avenue, New York, New York 10017-2070, in lawful money of the United States
of America in immediately available funds, the principal amount of
___________________ DOLLARS ($__________), or such lesser amount as shall then
constitute the Lender's percentage of the Term Loan (as defined in the Credit
Agreement referred to below) made by the Lender to the maker hereof pursuant to
said Credit Agreement, on such date or dates as is required by said Credit
Agreement, and to pay interest on the unpaid principal amount from time to time
outstanding hereunder, in like money, at such office, as set forth in Section
2.15 of said Credit Agreement.
The Obligor and any and all sureties, guarantors and endorsers
of this Note and all other parties now or hereafter liable hereon severally
waive grace, demand, presentment for payment, protest, notice of any kind
(including, but not limited to, notice of dishonor, notice of protest, notice of
intention to accelerate or notice of acceleration) and diligence in collecting
and bringing suit against any party hereto and agree to the extent permitted by
applicable law (i) to all extensions and partial payments, with or without
notice, before or after maturity, (ii) to any substitution, exchange or release
of any security now or hereafter given for this Note, (iii) to the release of
any party primarily or secondarily liable hereon, and (iv) that it will not be
necessary for any holder of this Note, in order to enforce payment of this Note,
to first institute or exhaust such holder's remedies against the Obligor or any
other party liable therefor or against any security for this Note. The
nonexercise by the holder of any of its rights hereunder in any particular
instance shall not constitute a waiver thereof in that or any subsequent
instance.
This Note is one of the Term Notes referred to in that certain
Credit, Security, Guaranty and Pledge Agreement dated as of April 13, 1995, as
the same may be amended from time to time, (the "Credit Agreement"), among the
Obligor as one of the Borrowers thereunder, the other Borrowers referred to
therein, the Guarantors referred to therein, the Lenders referred to therein,
and Chemical Bank as Agent and as Fronting Bank, and is entitled to the benefits
of and is secured by the security interests granted in the Credit Agreement and
the other security documents referred to and described therein, which among
other things contains provisions for optional and mandatory prepayment, and for
acceleration of the maturity hereof upon the occurrence of certain events, all
as provided in the Credit Agreement.
<PAGE> 153
THIS NOTE SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
ALL AMERICAN FREMANTLE
INTERNATIONAL, INC.
By____________________________
Name:
Title:
-2-
<PAGE> 154
[LAST PAGE OF NOTE]
Unpaid Name of
Principal Person
Payments Balance Making
Date Amount of Loan Principal Interest of Note Notation
- - - - ---- -------------- --------- -------- ------- ----------
<PAGE> 155
EXHIBIT A-2
FORM OF BAYWATCH NOTE
$__________ New York, New York
as of April 13, 1995
FOR VALUE RECEIVED, THE BAYWATCH PRODUCTION COMPANY, a
California corporation (the "Obligor"), DOES HEREBY PROMISE TO PAY to the order
of [INSERT NAME OF LENDER] (the "Lender") at the office of Chemical Bank at 270
Park Avenue, New York, New York 10017-2070, in lawful money of the United
States of America in immediately available funds, the principal amount of
___________ DOLLARS ($__________), or the aggregate unpaid principal amount of
all Baywatch Loans (as defined in the Credit Agreement referred to below) made
by the Lender to the maker hereof pursuant to said Credit Agreement, whichever
is less, on such date or dates as is required by said Credit Agreement, and to
pay interest on the unpaid principal amount from time to time outstanding
hereunder, in like money, at such office, as set forth in Section 2.15 of said
Credit Agreement.
The Obligor and any and all sureties, guarantors and endorsers
of this Note and all other parties now or hereafter liable hereon severally
waive grace, demand, presentment for payment, protest, notice of any kind
(including, but not limited to, notice of dishonor, notice of protest, notice
of intention to accelerate or notice of acceleration) and diligence in
collecting and bringing suit against any party hereto and agree to the extent
permitted by applicable law (i) to all extensions and partial payments, with or
without notice, before or after maturity, (ii) to any substitution, exchange or
release of any security now or hereafter given for this Note, (iii) to the
release of any party primarily or secondarily liable hereon, and (iv) that it
will not be necessary for any holder of this Note, in order to enforce payment
of this Note, to first institute or exhaust such holder's remedies against the
Obligor or any other party liable therefor or against any security for this
Note. The nonexercise by the holder of any of its rights hereunder in any
particular instance shall not constitute a waiver thereof in that or any
subsequent instance.
This Note is one of the Baywatch Notes referred to in that
certain Credit, Security, Guaranty and Pledge Agreement dated as of April 13,
1995, as the same may be amended from time to time, (the "Credit Agreement"),
among the Obligor and All American Communications, Inc. as Borrowers and
Guarantors thereunder, the other Borrowers named therein, the other Guarantors
named therein, the Lenders named therein, and Chemical Bank as Agent and as
Fronting Bank, and is entitled to the benefits of and is secured by the
security interests granted in the Credit Agreement and the other security
documents referred to and described therein, which among other things contains
provisions for optional and mandatory prepayment, and for acceleration of the
maturity hereof upon the occurrence of certain events, all as provided in the
Credit Agreement.
<PAGE> 156
THIS NOTE SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
THE BAYWATCH PRODUCTION COMPANY
By_____________________________
Name:
Title:
-2-
<PAGE> 157
[LAST PAGE OF NOTE]
Unpaid Name of
Principal Person
Payments Balance Making
Date Amount of Loan Principal Interest of Note Notation
- - - - ---- -------------- --------- -------- --------- --------
<PAGE> 158
EXHIBIT A-3
FORM OF B.N. NOTE
$__________ New York, New York
as of April 13, 1995
FOR VALUE RECEIVED, THE BAYWATCH NIGHTS PRODUCTION COMPANY, a
California corporation (the "Obligor"), DOES HEREBY PROMISE TO PAY to the order
of [INSERT NAME OF LENDER] (the "Lender") at the office of Chemical Bank at 270
Park Avenue, New York, New York 10017-2070, in lawful money of the United
States of America in immediately available funds, the principal amount of
___________ DOLLARS ($__________), or the aggregate unpaid principal amount of
all B.N. Loans (as defined in the Credit Agreement referred to below) made by
the Lender to the maker hereof pursuant to said Credit Agreement, whichever is
less, on such date or dates as is required by said Credit Agreement, and to pay
interest on the unpaid principal amount from time to time outstanding
hereunder, in like money, at such office, as set forth in Section 2.15 of said
Credit Agreement.
The Obligor and any and all sureties, guarantors and endorsers
of this Note and all other parties now or hereafter liable hereon severally
waive grace, demand, presentment for payment, protest, notice of any kind
(including, but not limited to, notice of dishonor, notice of protest, notice
of intention to accelerate or notice of acceleration) and diligence in
collecting and bringing suit against any party hereto and agree to the extent
permitted by applicable law (i) to all extensions and partial payments, with or
without notice, before or after maturity, (ii) to any substitution, exchange or
release of any security now or hereafter given for this Note, (iii) to the
release of any party primarily or secondarily liable hereon, and (iv) that it
will not be necessary for any holder of this Note, in order to enforce payment
of this Note, to first institute or exhaust such holder's remedies against the
Obligor or any other party liable therefor or against any security for this
Note. The nonexercise by the holder of any of its rights hereunder in any
particular instance shall not constitute a waiver thereof in that or any
subsequent instance.
This Note is one of the B.N. Notes referred to in that certain
Credit, Security, Guaranty and Pledge Agreement dated as of April 13, 1995, as
the same may be amended from time to time, (the "Credit Agreement"), among
Obligor and All American Communications, Inc. as the Borrowers and Guarantors
thereunder, the other Borrowers named therein, the other Guarantors named
therein, the Lenders named therein, and Chemical Bank as Agent and as Fronting
Bank, and is entitled to the benefits of and is secured by the security
interests granted in the Credit Agreement and the other security documents
referred to and described therein, which among other things contains provisions
for optional and mandatory prepayment, and for acceleration of the maturity
hereof upon the occurrence of certain events, all as provided in the Credit
Agreement.
<PAGE> 159
THIS NOTE SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
THE BAYWATCH NIGHTS PRODUCTION
COMPANY
By____________________________
Name:
Title:
-2-
<PAGE> 160
[LAST PAGE OF NOTE]
Unpaid Name of
Principal Person
Payments Balance Making
Date Amount of Loan Principal Interest of Note Notation
- - - - ---- -------------- --------- -------- --------- --------
<PAGE> 161
EXHIBIT A-4
FORM OF WORKING CAPITAL NOTE
$__________ New York, New York
as of April 13, 1995
FOR VALUE RECEIVED, ALL AMERICAN COMMUNICATIONS, INC., a
Delaware corporation (the "Obligor"), DOES HEREBY PROMISE TO PAY to the order
of [INSERT NAME OF LENDER] (the "Lender") at the office of Chemical Bank at 270
Park Avenue, New York, New York 10017-2070, in lawful money of the United
States of America in immediately available funds, the lesser of (a) the
principal amount of ___________ DOLLARS ($__________), or (b) the total amount
of (i) the aggregate unpaid principal amount of all Working Capital Loans (as
defined in the Credit Agreement referred to below) made by the Lender to the
maker hereof pursuant to said Credit Agreement and (ii) aggregate amount of
unreimbursed drawings under Letters of Credit (as defined in said Credit
Agreement) issued pursuant to said Credit Agreement, on such date or dates as
is required by said Credit Agreement, and to pay interest on the unpaid
principal amount from time to time outstanding hereunder, in like money, at
such office, as set forth in Section 2.15 of said Credit Agreement.
The Obligor and any and all sureties, guarantors and endorsers
of this Note and all other parties now or hereafter liable hereon severally
waive grace, demand, presentment for payment, protest, notice of any kind
(including, but not limited to, notice of dishonor, notice of protest, notice
of intention to accelerate or notice of acceleration) and diligence in
collecting and bringing suit against any party hereto and agree to the extent
permitted by applicable law (i) to all extensions and partial payments, with or
without notice, before or after maturity, (ii) to any substitution, exchange or
release of any security now or hereafter given for this Note, (iii) to the
release of any party primarily or secondarily liable hereon, and (iv) that it
will not be necessary for any holder of this Note, in order to enforce payment
of this Note, to first institute or exhaust such holder's remedies against the
Obligor or any other party liable therefor or against any security for this
Note. The nonexercise by the holder of any of its rights hereunder in any
particular instance shall not constitute a waiver thereof in that or any
subsequent instance.
This Note is one of the Working Capital Notes referred to in
that certain Credit, Security, Guaranty and Pledge Agreement dated as of April
13, 1995, as the same may be amended from time to time, (the "Credit
Agreement"), among the Obligor as one of the Borrowers and Guarantors
thereunder, the other Borrowers named therein, the other Guarantors named
therein, the Lenders named therein, and Chemical Bank as Agent and as Fronting
Bank, and is entitled to the benefits of and is secured by the security
interests granted in the Credit Agreement and the other security documents
referred to and described therein, which among other things contains provisions
for optional and mandatory prepayment, and for acceleration of the maturity
hereof upon the occurrence of certain events, all as provided in the Credit
Agreement.
<PAGE> 162
THIS NOTE SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
ALL AMERICAN COMMUNICATIONS, INC.
By_______________________________
Name:
Title:
-2-
<PAGE> 163
[LAST PAGE OF NOTE]
Unpaid Name of
Principal Person
Payments Balance Making
Date Amount of Loan Principal Interest of Note Notation
- - - - ---- -------------- --------- -------- --------- --------
<PAGE> 164
EXHIBIT B-1
COPYRIGHT SECURITY AGREEMENT
WHEREAS, All American Communications, Inc., a Delaware
corporation ("Parent") and each Subsidiary of Parent whose name appears at the
foot hereof (collectively the "Grantors") hold certain copyrights and rights
under copyright with respect to certain movies-of-the-week, television series,
motion pictures, films, videotapes or other programs produced for television
release or for release in any other medium, shown on network, free and cable,
pay and/or other television medium (including, without limitation, first-run
syndication) in each case whether recorded on film, videotape, cassette,
cartridge, disc or on or by any other means, method, process or device whether
now owned or hereafter developed, including, without limitation, those United
States copyright registrations listed on Schedule 1 hereto (the "Product") and
certain copyrights and rights under copyright with respect to certain audio
embodiments of musical, spoken or other sounds whether embodied on disc, tape
or other phonorecords or on or by any other meaning, method, process or device
whether now owned or hereafter developed, including without limitation, those
United States copyright registrations listed on Schedule 1A hereto ("Recorded
Product");
WHEREAS, the Grantors are parties to a Credit, Security,
Guaranty and Pledge Agreement dated as of April 13, 1995, as the same may from
time to time be amended (the "Credit Agreement"), among the Grantors, the
Lenders named therein (the "Lenders"), and Chemical Bank as Agent and as
Fronting Bank;
WHEREAS, pursuant to the terms of the Credit Agreement, the
Grantors granted to the Agent (for the benefit of the Lenders) a security
interest in all of the personal property of the Grantors including all right,
title and interest of the Grantors in, to and under any copyright or copyright
license whether now existing or hereafter arising or acquired, and all proceeds
thereof to secure the payment of the Grantors' respective obligations
thereunder (hereinafter collectively referred to as the "Obligations");
NOW THEREFORE, for good and valuable consideration the receipt
and sufficiency of which is hereby acknowledged, Grantors do, as security for
the Obligations, hereby grant to the Agent (for the benefit of the Lenders) a
continuing security interest in all the Grantors' right, title and interest in
and to each and every item of Product and Recorded Product, to the extent of
Grantor's interest therein, whether presently existing or hereafter acquired or
created including the scenario, screenplay or script upon which such item of
Product and Recorded Product is
<PAGE> 165
based, all of the properties thereof, tangible and intangible, whether now in
existence or hereafter to be made or produced, whether or not in possession of
such Grantors, and all copyrights and all other rights therein and thereto of
every kind and character, including with respect to each and every item of
Product and Recorded Product and without limiting the foregoing language, each
and all of the following particular rights and properties:
(i) all scenarios, screenplays and/or scripts at
every stage thereof;
(ii) all common law and/or statutory copyright and
other rights in all literary and other properties (hereinafter
called "said literary properties") which form the basis of the
item of Product and/or Recorded Product and/or which are or
will be incorporated into the item of Product and/or Recorded
Product, all component parts of the item of Product and/or
Recorded Product consisting of said literary and other
properties, all motion picture rights in and to the story, all
treatments of said story and other literary material, together
with all preliminary and final screenplays used and to be used
in connection with the item of Product and/or Recorded
Product, and all other literary material upon which the item
of Product and/or Recorded Product is based or from which it
is adapted;
(iii) all rights in and to all music and musical
compositions used and to be used in the item of Product and/or
Recorded Product, including, but without being limited to, all
rights to record, rerecord, produce, reproduce or synchronize
all of said music and musical compositions in and in
connection with motion pictures;
(iv) all exposed and developed negative film,
tapes, sound tracks, positive prints, cutouts and trims
connected with the item of Product, whether or not in
completed form or in some state of completion;
(v) all collateral, allied, subsidiary and
merchandising rights appurtenant or related to the item of
Product and/or Recorded Product now or hereafter owned or
controlled by any Grantor including, without limitation, the
following rights: all rights to produce remakes or sequels or
prequels to the item of Product based upon the item of
Product, said literary properties or the theme of the item of
Product and/or the text or any part of said literary
properties; all rights throughout the world to broadcast,
transmit and/or reproduce by means of television (including
commercially sponsored, sustaining and subscription or
- 2 -
<PAGE> 166
"pay" television) or by any process analogous thereto, now
known or hereafter devised, the item of Product or any remake
or sequel or prequel to the item of Product; all rights to
produce primarily for television or similar use a motion
picture or series of motion pictures, by use of film or any
other mechanical recording device now known or hereafter
devised, based upon the item of Product, said literary
properties or any part thereof, including, without limitation,
based upon any script, scenario or the like used in the item
of Product; all merchandising rights including, without
limitation, all rights to use, exploit and license others to
use and exploit any and all commercial tieups of any kind
arising out of or connected with said literary properties, the
item of Product and/or Recorded Product, the title or titles
of the item of Product and/or Recorded Product, the characters
of the item of Product or said literary properties and/or the
names or characteristics of said characters and including
further, without limitation, any and all commercial
exploitation in connection with or related to the item of
Product, any remake or sequel thereof and/or said literary
properties;
(vi) all statutory copyrights, domestic and
foreign, obtained or to be obtained on the item of Product
and/or Recorded Product, together with any and all copyrights
obtained or to be obtained in connection with the item of
Product and/or Recorded Product or any underlying or component
elements of the item of Product and/or Recorded Product,
including, but without being limited to, all copyrights on the
property described in subparagraphs (i) through (v) inclusive,
of this paragraph, including, without limitation, those
copyright registrations identified on Schedule 1 hereto,
together with the right to copyright and all rights to renew
or extend such copyrights and the right to sue in the name of
such Grantor or in the name of the Agent (for the benefit of
the Lenders) for past, present and future infringements of
copyright;
(vii) all insurance policies and completion bonds
connected with an item of Product and/or Recorded Product and
all proceeds which may be derived therefrom;
(viii) all rights to distribute, sell, rent, license
the exhibition of and otherwise exploit and turn to account
the item of Product and/or Recorded Product, the negatives,
sound tracks, prints and motion picture rights in and to said
story, other literary material upon which the item of Product
is based or
- 3 -
<PAGE> 167
from which it is adapted, and said music and musical
compositions used or to be used in the item of Product and/or
Recorded Product;
(ix) any and all sums, proceeds, money, products,
profits or increases, including money profits or increases (as
those terms are used in the New York Uniform Commercial Code
(the "UCC") or otherwise) or other property obtained or to be
obtained from the distribution, exhibition, sale or other uses
or dispositions of the item of Product and/or Recorded Product
or any part of the item of Product and/or Recorded Product,
including, without limitation, all proceeds, profits, products
and increases, whether in money or otherwise, from the sale,
rental or licensing of the item of Product and/or Recorded
Product and/or any of the elements of the item of Product
and/or Recorded Product including from collateral, allied,
subsidiary and merchandising rights;
(x) the dramatic, nondramatic, stage, television,
radio and publishing rights, title and interest in and to the
item of Product and/or Recorded Product, and the right to
obtain copyrights and renewals of copyrights therein;
(xi) the title of the item of Product and/or
Recorded Product and all rights of such Grantor to the use
thereof, including, without limitation, rights protected
pursuant to trademark, service mark, unfair competition and/or
the rules and principles of law and of any other applicable
statutory, common law, or other applicable statutes, common
law or other rule or principle of law;
(xii) any and all contract rights and/or chattel
paper which may arise in connection with the item of Product
and/or Recorded Product;
(xiii) all accounts and/or other rights to payment
which such Grantor presently owns or which may arise in favor
of such Grantor in the future, including, without limitation,
any refund under a completion guaranty, all accounts and/or
rights to payment due from exhibitors in connection with the
distribution of the item of Product and/or Recorded Product,
and from exploitation of any and all of the collateral,
allied, subsidiary, merchandising and other rights in
connection with the item of Product and/or Recorded Product;
- 4 -
<PAGE> 168
(xiv) any and all "general intangibles" (as that
term is defined in the UCC) not elsewhere included in this
definition, including, without limitation, any and all general
intangibles consisting of any right to payment which may arise
in the distribution or exploitation of any of the rights set
out herein, and any and all general intangible rights in favor
of such Grantor or the Lenders for services or other
performances by any third parties, including actors, writers,
directors, individual producers and/or any and all other
performing or nonperforming artists in any way connected with
the item of Product and/or Recorded Product, any and all
general intangible rights in favor of any Grantor or the
Lenders relating to licenses of sound or other equipment,
licenses for any photograph or photographic process, and all
general intangibles related to the distribution or
exploitation of the item of Product and/or Recorded Product
including general intangibles related to or which grow out of
the exhibition of the item of Product and/or Recorded Product
and the exploitation of any and all other rights in the item
of Product and/or Recorded Product set out in this definition;
(xv) any and all goods including inventory (as
that term is defined in the UCC) which may arise in connection
with the creation, production or delivery of the item of
Product and/or Recorded Product and which goods pursuant to
any production or distribution agreement or otherwise are
owned by such Grantor;
(xvi) all and each of the rights, regardless of
denomination, which arise in connection with the creation,
production, completion of production, delivery, distribution,
or other exploitation of any item of Product and/or Recorded
Product, including, without limitation, any and all rights in
favor of such Grantor and/or the Agent (for the benefit of the
Lenders), the ownership or control of which are or may become
necessary or desirable, in the opinion of the Agent, in order
to complete production of the item of Product and/or Recorded
Product in the event that the Agent exercises any rights it
may have to take over and complete production of the item of
Product and/or Recorded Product;
(xvii) any and all documents issued by any
pledgeholder or bailee with respect to the item of Product
and/or Recorded Product, the negatives, sound tracks or prints
with respect thereto;
- 5 -
<PAGE> 169
(xviii) any and all rights of any Grantor under
contracts relating to the production of the Product and/or
Recorded Product; and
(xix) any and all rights of any Grantor under any
agreement now existing or hereafter entered into by such
Grantor respecting distribution or other exploitation rights
to the item of Product and/or Recorded Product.
Each of the Grantors agrees that if any person, firm or
corporation shall do or perform any acts which the Agent believes constitute a
copyright infringement of the photoplay or of any of the literary, dramatic or
musical material contained in the Product and/or Recorded Product, or
constitute a plagiarism, or violate or infringe any right of any Grantor or the
Lenders therein or if any person, firm or corporation shall do or perform any
acts which the Agent believes constitute an unauthorized or unlawful
distribution, exhibition, or use thereof, then and in any such event, upon 30
days' prior written notice to such Grantor, while an Event of Default is
continuing, the Agent may and shall have the right to take such steps and
institute such suits or proceedings as the Agent may deem advisable or
necessary to prevent such acts and conduct and to secure damages and other
relief by reason thereof, and to generally take such steps as may be advisable
or necessary or proper for the full protection of the rights of the parties.
The Agent may take such steps or institute such suits or proceedings in its own
name or in the name of such Grantor or in the names of the parties jointly.
This Agreement is made for collateral purposes only. This
security interest is granted in conjunction with the security interests granted
to the Agent (for the benefit of the Lenders) pursuant to the Credit Agreement.
The parties do hereby further acknowledge and affirm that the rights and
remedies of the Agent (for the benefit of the Lenders) with respect to the
security interest made and granted hereby are more fully set forth in the
Credit Agreement, and are subject to the limitations (including certain rights
of quiet enjoyment in favor of licensees) set forth in the Credit Agreement,
the terms and provisions of which are incorporated by reference herein as if
fully set forth herein.
THIS COPYRIGHT SECURITY AGREEMENT SHALL IN ALL RESPECTS BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
- 6 -
<PAGE> 170
IN WITNESS WHEREOF, the Grantors have caused this Copyright
Security Agreement to be duly executed by its officer thereunto duly authorized
as of , 1995.
ALL AMERICAN COMMUNICATIONS, INC.
By_______________________________
Name:
Title:
THE BAYWATCH PRODUCTION COMPANY
By_______________________________
Name:
Title:
THE BAYWATCH NIGHTS PRODUCTION
COMPANY
By_______________________________
Name:
Title:
ALL AMERICAN FREMANTLE
INTERNATIONAL, INC.
By_______________________________
Name:
Title:
-7-
<PAGE> 171
ALL AMERICAN PRODUCTIONS, INC.
ALL AMERICAN TELEVISION, INC.
ALL AMERICAN TELEVISION
PRODUCTION, INC.
ALL AMERICAN FDF HOLDINGS, INC.
LBS COMMUNICATIONS, INC.
THE MALIBU BRANCH PRODUCTION
COMPANY
SANTA MONICA SOUND RECORDERS, INC.
SCOTTI BROTHERS ENTERTAINMENT
INDUSTRIES, INC.
SCOTTI BROTHERS RECORDS, INC.
TALBOT TELEVISION LIMITED
By______________________________
Name:
Title: Authorized Signatory
Accepted:
CHEMICAL BANK, individually
and as Agent
By:_______________________
Name:
Title:
-8-
<PAGE> 172
STATE OF )
: ss.:
COUNTY OF )
On the ____ day of __________, in the year 1995, before me
personally came _____________________, to me known, who, being by me sworn, did
say that he resides at ________________________; that he is an Authorized
Signatory of each of the corporations listed on the signature page to which
this is attached, which corporations are described in, and which corporations
executed the above instrument, and that he signed his name by order of the
Board of Directors of each of said corporations.
___________________________________
Notary Public
-9-
<PAGE> 173
SCHEDULE 1 to Copyright
Security Agreement
Title Registration No. Date of Registration
_____ ________________ ____________________
<PAGE> 174
SCHEDULE 1A to Copyright
Security Agreement
Title Registration No. Date of Registration
_____ ________________ ____________________
<PAGE> 175
EXHIBIT B-2
SUPPLEMENT NO. __ TO COPYRIGHT SECURITY
AGREEMENT DATED AS OF ______________, 199_
WHEREAS, ______________ (the "Grantor") is a party to a
Credit, Security, Guaranty and Pledge Agreement dated as of March __, 1995, as
the same may from time to time be amended (the "Credit Agreement") among All
American Fremantle International, Inc., All American Communications, Inc., The
Baywatch Production Company, and The Baywatch Nights Production Company as
Borrowers and Guarantors, the other Guarantors named therein, the Lenders named
therein (the "Lenders"), Chemical Bank as Agent and as Fronting Bank;
WHEREAS, the Grantor has also entered into a Copyright
Security Agreement, dated as of April 13, 1995 (as the same may be amended or
supplemented from time to time, the "Copyright Security Agreement"), pursuant
to which it has granted to the Agent (for the benefit of the Lenders), as
security for its obligations under the Credit Agreement, a continuing security
interest in all the Grantor's right, title and interest in and to Product
and/or Recorded Product (such terms being used herein as defined in the
Copyright Security Agreement), whether presently existing or hereafter acquired
or created, and all copyrights and other rights in and to all such Product
and/or Recorded Product;
WHEREAS, the Grantor has acquired or created certain Product
and/or Recorded Product since the date of execution of the Copyright Security
Agreement and holds certain copyrights and rights under copyright with respect
to this Product and/or Recorded Product;
WHEREAS, Schedule 1 and/or Schedule 1A to the Copyright
Security Agreement does not reflect (i) the Product and/or Recorded Product
acquired or created by the Grantor since the date of execution of the Copyright
Security Agreement or (ii) the copyrights and other rights in and to such
Product and/or Recorded Product;
THEREFORE, Schedule 1 and/or Schedule 1A (as applicable) to
the Copyright Security Agreement is hereby supplemented, effective as of the
date hereof, so as to reflect all of the Product and/or Recorded Product in and
to which the Grantor has granted a continuing security interest to the Agent
(for the benefit of the Lenders) pursuant to the terms of the Copyright
Security Agreement. The following Product and/or Recorded Product and
copyright information are hereby added to Schedule 1 and/or Schedule 1A (as
applicable) to the Copyright Security Agreement:
<PAGE> 176
Title Registration No. Date of Registration
----- ---------------- --------------------
Except as expressly supplemented hereby, the Copyright
Security Agreement shall continue in full force and effect in accordance with
the provisions thereof on the date hereof. As used in the Copyright Security
Agreement, the terms "Agreement", "this Agreement", "this Copyright Security
Agreement", "herein", "hereafter", "hereto", "hereof" and words of similar
import, shall, unless the context otherwise requires, mean the Copyright
Security Agreement as supplemented by this Supplement.
IN WITNESS WHEREOF, the Grantor has caused this Supplement No.
___ to the Copyright Security Agreement to be duly executed by its officer
thereunder duly authorized as of _____________, 199_.
[NAME OF GRANTOR]
By:_____________________
Name:
Title:
Accepted:
CHEMICAL BANK, as Agent
By:____________________
Name:
Title:
-2-
<PAGE> 177
STATE OF )
: ss.:
COUNTY OF )
On the _____ day of ___________________, in the year 199_,
before me personally came _________________, to me known, who, being by me
sworn, did say that (s)he resides at ___________________; that (s)he is the
________________ of _____________________, the corporation described in and
which executed the above instrument; and that (s)he signed his/her name by
order of the Board of Directors of said corporation.
______________________________
-3-
<PAGE> 178
EXHIBIT C
FORM OF LABORATORY ACCESS LETTER
This letter will confirm the terms of an agreement among you
(the "Laboratory"), [INSERT NAME OF DEBTOR WITH ACCESS RIGHTS TO ANY PHYSICAL
ELEMENTS OF AN ITEM OF PRODUCT] ("Debtor") and Chemical Bank (as agent under
the Credit Agreement hereinafter defined) (the "Agent") relating to the items
(the "Properties") described on Schedule 1 hereto.
Reference is hereby made to that certain Credit, Security,
Guaranty and Pledge Agreement dated as of April 13, 1995 among All American
Communications, Inc., All American Fremantle International, Inc., The Baywatch
Production Company, and The Baywatch Nights Production Company as Borrowers and
Guarantors, the other Guarantors named therein, the Lenders named therein (the
"Lenders"), Chemical Bank as Agent and as Fronting Bank, as the same may be
amended from time to time (the "Credit Agreement").
The Laboratory now has or may have in its possession or under
its control certain of the negatives, dupe negatives, fine grain prints,
soundtracks, positive prints, video tape masters or other physical properties
in connection with the Properties, whether or not in completed form (all of the
foregoing physical properties now or hereafter in the Laboratory's possession
or control are herein collectively referred to as the "Physical Materials").
Debtor now possesses certain rights in connection with the Properties and the
Physical Materials, including, without limitation, rights of access with
respect to the Physical Materials (the "Access Rights").
For good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. The Laboratory hereby agrees and confirms to the Agent
that Debtor is entitled to exercise the Access Rights with respect to the
Physical Materials. Debtor and the Agent hereby confirm to the Laboratory, and
the Laboratory hereby acknowledges, that in order to secure certain obligations
under the Credit Agreement, Debtor has pursuant to the Credit Agreement, inter
alia, granted to the Agent, for the benefit of the Lenders, a security interest
in and to the Debtor's right, title and interest in and to the Access Rights.
2. The parties hereby agree that, upon written notice from
the Agent to the Laboratory that the Agent has exercised its security interest
with respect to Access Rights, the Laboratory
<PAGE> 179
shall accord to the Agent (or the Agent's successors or assigns) instead of the
Debtor, the non-exclusive right to exercise the Access Rights including,
without limitation, the right to have access to the Physical Materials and to
order and receive from the Laboratory on the Laboratory's normal and customary
terms all materials and services customarily rendered or furnished by the
Laboratory in connection with the Physical Materials.
3. The Laboratory and the other parties hereto hereby agree
that the rights of any party hereunder (including, without limitation, the
Agent's non-exclusive right to exercise the Access Rights) shall not be
affected, diminished, impeded or interfered with by reason of any failure of
any other person or entity to pay for any charges which have heretofore been
incurred or which may hereinafter be incurred in connection with the Properties
or the Physical Materials, that the Laboratory will not look to any party
hereunder for payment of any charges incurred by any other person or entity
with respect to the Properties or the Physical Materials (it being understood
and agreed that all services or materials ordered by any party shall be at the
sole cost and expense of the party ordering the same) and that any claim or
lien which the Laboratory may assert against any party hereto with respect to
services or materials furnished or rendered by the Laboratory at the request of
such party with respect to the Properties or the Physical Materials will not
interfere with any other party's rights of access with respect to the Physical
Materials or other rights referred to hereunder.
4. The parties hereto hereby agree that the Access Rights may
not be altered, amended, supplemented, terminated or replaced without the prior
written consent of the Agent, and that the Physical Materials may not be
released to any other entity (including another laboratory) without the Agent's
prior written consent.
Kindly confirm your agreement to and acceptance of the
foregoing by signing in the space provided below.
Very truly yours,
[INSERT NAME OF DEBTOR(S)
WITH ACCESS RIGHTS]
By:___________________________
Name:
Title:
- 2 -
<PAGE> 180
CHEMICAL BANK, as
Agent
By:___________________________
Name:
Title:
AGREED AND ACCEPTED BY:
[LABORATORY]
By:_______________________
Name:
Title:
- 3 -
<PAGE> 181
Schedule 1
THE PROPERTIES
<PAGE> 182
EXHIBIT D
OPINIONS OF LEGAL COUNSEL
<PAGE> 183
EXHIBIT D-1
KAYE, SCHOLER, FIERMAN, HAYS & HANDLER
425 PARK AVENUE
NEW YORK, NEW YORK 10022-3598
April 13, 1995
(212) 836-8000
Chemical Bank, as Agent
270 Park Avenue
New York, New York 10017
The lenders initially party to
the below-mentioned Credit Agreement
Ladies and Gentlemen:
We have acted as special counsel to All American
Communications, Inc., a Delaware corporation (the "Parent"), All American
Fremantle International, Inc., a Delaware corporation ("AAF"), The Baywatch
Production Company, a California corporation ("Baywatch"), The Baywatch Nights
Production Company, a California corporation ("Baywatch Nights"), The Malibu
Branch Production Company, a California corporation ("Malibu"), All American
Productions, Inc., a California corporation ("AAP"), All American Television
Production, Inc., a California corporation ("AATP"), Santa Monica Sound
Recorders, Inc., a California corporation ("Santa Monica"), LBS Communications,
Inc., a New York corporation ("LBS"), All American Television, Inc., a Delaware
corporation ("AATI"), All American FDF Holdings, Inc., a Delaware corporation
("FDF"), Scotti Brothers Records, Inc., a California corporation ("Scotti
Brothers"), and Scotti Brothers Entertainment Industries, Inc., a Delaware
corporation ("Scotti Brothers Entertainment" and, together with the Parent,
AAF, Baywatch, Baywatch Nights, Malibu, AAP, AATP, Santa Monica, LBS, AATI, FDF
and Scotti Brothers, each a "Company" and, collectively, the "Companies"), in
connection with the execution and delivery of (i) the Credit, Security,
Guaranty and Pledge Agreement, dated as of the date hereof (the "Credit
Agreement"), among the Companies, the financial institutions initially party
thereto as lenders (the "Lenders") and Chemical Bank, as agent for the Lenders
and as Fronting Bank, and (ii) the other documents listed on Schedule I
attached hereto (together with the Credit Agreement, the "Transaction
Documents"). This opinion is given pursuant to Section 4.1(c)(i) of the Credit
Agreement. Capitalized terms not otherwise defined herein are defined as set
forth in the Credit Agreement.
In rendering our opinions expressed below, we have examined
executed copies of the Transaction Documents. We have also examined, and, with
your consent, are relying upon the
<PAGE> 184
Chemical Bank, as Agent 2 April 13, 1995
accuracy of: (i) certificates of public officials (including, without
limitation, certificates of status, certified copies of the Certificate or
Articles of Incorporation and other certificates relating to the Companies from
the Delaware, California and New York Secretaries of State, as the case may
be), (ii) the officer's certificate of each Company dated the date hereof
attached hereto as Exhibit 1 (each, a "Certificate"), and (iii) various
corporate documents (including, without limitation, the Bylaws of each Company
and the resolutions of the Board of Directors of each Company, certified as
accurate and complete by the Secretary or other appropriate officer of the
respective Company). We have also examined such other documents, certificates
and records, and have reviewed such questions of law, as we have deemed
necessary or appropriate in connection with the opinions hereinafter set forth.
In rendering our opinions, with your consent, we have assumed,
without any investigation that:
(i) all signatures on the Transaction Documents or
other documents are genuine, all documents submitted to us as
originals are authentic and complete, all documents submitted to us as
copies conform to the complete originals thereof and all certificates,
reports, documents and other papers obtained from officers, partners,
employees, representatives or public officials are accurate and
complete;
(ii) each of the Transaction Documents has been duly
executed and delivered on, as of or prior to the date hereof by each
of the parties thereto other than the Companies, and that each of such
parties has the full right, power and authority to enter into and
perform its obligations thereunder;
(iii) the Transaction Documents constitute the
legal, valid and binding obligations of each of the parties thereto
other than the Companies, enforceable in accordance with their
respective terms;
(iv) the Companies have received, or will receive,
the consideration provided for in, or contemplated by, the Credit
Agreement;
(v) except for the Transaction Documents, there are
and will be no other understandings, agreements or documents between
or among any of the Lenders, the Agent and the Companies, or others,
which would expand or otherwise modify the obligations of the
respective parties with respect to the Transaction Documents or which
would otherwise have an effect on our opinion rendered herein;
<PAGE> 185
Chemical Bank, as Agent 3 April 13, 1995
(vi) the representations, warranties and
certificates as to factual matters contained in the Transaction
Documents (and certificates delivered in connection herewith or
therewith) are each true and correct; and
(vii) the Transaction Documents have not been
amended, modified, terminated or revoked in any respect, and remain
in full force and effect as of the date hereof.
As to various questions of fact material to our opinion, we
have relied, without any investigation, with your consent, upon the
representations and warranties of the parties made in the Transaction Documents
and upon certificates of representatives of the Companies.
Based upon the foregoing, and subject to the exceptions,
qualifications, and limitations set forth herein, it is our opinion that:
1. Each of the Companies is a corporation duly
incorporated and validly existing in good standing under the laws of its
jurisdiction of incorporation, has all requisite corporate power and authority
to own its properties and assets and to carry on its business substantially as
now conducted, and is duly qualified to do business and is in good standing as
a foreign corporation in the states listed on Schedule II.
2. Each Company has the corporate power and authority to
execute, deliver and perform its obligations under each of the Transaction
Documents to which it is a party (including, without limitation, with respect
to the Borrowers, to borrow under the Credit Agreement as contemplated
thereby). The execution and delivery by each Company of each of the
Transaction Documents to which it is a party and the performance by each such
Company of its obligations thereunder (including, without limitation, with
respect to the Borrowers, the borrowing under the Credit Agreement as
contemplated thereby), have been duly authorized by all requisite corporate
action on the part of each Company and each of the Transaction Documents to
which a Company is a party have been duly executed and delivered by such
Company.
3. Each of the Transaction Documents constitutes the
legal, valid and binding obligation of each Company which is a party thereto,
enforceable against such Company in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors' rights generally and
to general principles of equity (whether considered in a proceeding in equity
or at law).
<PAGE> 186
Chemical Bank, as Agent 4 April 13, 1995
4. The execution and delivery by each Company of each of
the Transaction Documents to which it is a party and the performance by such
Company of its obligations thereunder do not conflict with or result in a
violation of any law or regulation to which such Company is subject or the
Certificate or Articles of Incorporation or By-Laws of such Company or any
order, writ, judgment or decree set forth in Section 2 of each Company's
Certificate.
5. The execution and delivery by each Company of each of
the Transaction Documents to which it is a party and the performance by such
Company of its obligations thereunder (x) do not conflict with, or result in
the breach of, or constitute (alone or with notice or lapse of time or both) a
default under, any indenture, mortgage, deed of trust, agreement or other
instrument set forth in Section 1 of such Company's Certificate (other than the
credit agreements being discharged out of the proceeds of the initial
borrowings thereunder) and (y) do not, pursuant to any such indentures,
mortgages, deeds of trust, agreements or other instruments, result in the
creation or imposition of any Lien (other than as contemplated by the
Transaction Documents) upon any property or assets of such Company.
6. No approval, authorization, consent or other action
by, or filing or registration with, any governmental authority, is required on
the part of any Company in connection with the execution and delivery by such
Company of any of the Transaction Documents to which it is a party or the
performance of their respective obligations in each such Transaction Document
except such as have been made or obtained and are in full force and effect and
other than approvals, authorizations, consents, other actions, filings and
registrations to record and/or perfect the security interests or liens created
by the Transaction Documents.
7. None of the Companies is (i) an "investment company"
as defined in, or subject to regulation under, the Investment Company Act of
1940, as amended or (ii) a "holding company" as defined in, or subject to
regulation under, the Public Utility Holding Company Act of 1935 or the Federal
Power Act. The making of the Loans and the application of the proceeds thereof
as contemplated by the Transaction Documents do not violate any applicable
provisions of Regulations U or X of the Board of Governors of the Federal
Reserve System, as amended.
8. The Trademark Security Agreement creates in favor of
the Agent a security interest in the registered trademarks listed on the
schedules thereto (the "Trademarks") owned by the Companies, and upon the
proper filing of the Trademark Security Agreement with the United States Patent
and Trademark Office and
<PAGE> 187
Chemical Bank, as Agent 5 April 13, 1995
of the UCC financing statements set forth on Schedule I hereto (the "Financing
Statements") in the office of the Secretary of State of the States of New York
and California and the New York City's Registers Office-New York County, New
York (the "Filing Offices"), such security interest will be a perfected
security interest in the Trademarks to the extent of the Companies' interest
therein.
9. The Credit Agreement creates in favor of the Agent a
security interest in the Companies' right, title and interest in and to the
Collateral (as defined in the Credit Agreement) described therein to which
Article 9 of the New York Uniform Commercial Code (the "NYUCC") or Division 9
of the California Uniform Commercial Code (the "CAUCC") is applicable (the
"Article 9 Collateral"). The Agent upon the filing of the Financing Statements
with the Filing Offices will have a perfected security interest in that portion
of the Article 9 Collateral in which a security interest is perfected by filing
a financing statement under the NYUCC or the CAUCC (the "Filing Collateral").
10. The Credit Agreement, together with and upon delivery
to the Agent in the State of California or New York of the certificates
representing the shares of stock of the Companies listed on Schedule III
attached hereto in which the Parent, Scotti Brothers Entertainment, AAF, AATI
or AAP (each a "Pledgor") has an interest identified opposite each Pledgor's
name on Schedule 3.7 to the Credit Agreement (the "Pledged Securities") and
stock powers with respect thereto duly endorsed in blank, creates in favor of
the Agent a perfected security interest under the CAUCC or the NYUCC in the
Pledged Securities. Assuming each of the Agent and the Lenders acquires its
interest in the Pledged Securities in good faith and without notice of any
adverse claims, the Agent will acquire a security interest in the Pledged
Securities which is prior to any other security interest therein under the
CAUCC or the NYUCC.
The opinions expressed above are subject to the following additional
assumptions and qualifications (as used herein, "Collateral" shall mean,
collectively, the Pledged Securities, the Trademarks and the Article 9
Collateral):
A. Our opinions in paragraphs 8 and 9 above are limited
to Article 9 of the NYUCC and Division 9 of the CAUCC and additionally the
Federal Laws of the United States with respect to the perfection of a security
interest in trademarks (the "Federal Trademark IP Laws"), and our opinion in
paragraph 10 above is limited to Article 8 of the NYUCC and Division 8 of the
CAUCC, and therefore those opinion paragraphs do not address laws of
jurisdictions other than the Federal Trademark IP Laws, laws of New York except
for Articles 8 and 9, as the case may be, of
<PAGE> 188
Chemical Bank, as Agent 6 April 13, 1995
the NYUCC, and laws of California except for Divisions 8 or 9, as the case may
be, of the CAUCC.
B. Except to the extent Article 9 of the NYUCC or
Division 9 of the CAUCC is applicable or the Federal Trademark IP Laws are
applicable, this opinion does not address the security interest of the Agent or
any Lender in any copyrights, patents, trademarks, service marks or other
intellectual property, the proceeds thereof or any rights (including accounts
or general intangibles) with respect to the lease, license or use thereof.
C. We express no opinion with respect to any Article 9
Collateral of a type described in Section 9-401(1)(a) or (b) of the NYUCC or of
the type described in 9401(1)(b) of the CAUCC or represented by a certificate
of title.
D. We express no opinion as to the priority of any
security interest in Collateral other than as expressly provided in paragraph
10 above.
E. Our opinions in paragraphs 8, 9 and 10 above are
subject to the following additional qualifications:
(i) The security interest of the Agent in
proceeds of Collateral is limited to the extent set forth in Section
9-306 of the NYUCC and Section 9306 of the CAUCC, as the case may be;
(ii) In the case of Collateral consisting of
chattel paper, accounts and general intangibles, the security interest
of the Agent may be subject to the rights of account debtors, claims
and defenses of account debtors and the terms of agreements with
account debtors;
(iii) To the extent that any Company acquires
rights in Collateral subsequent to the date hereof, the Agent's
security interest therein will not attach until such Company acquires
such rights;
(iv) Such opinions do not address the effect of
agreements or laws (other than the NYUCC and the CAUCC) prohibiting,
restricting or conditioning the assignment of Collateral subject to
Article 8 or 9 of the NYUCC or Collateral subject to Division 8 or 9
of the CAUCC;
(v) Except to the extent Article 9 of the NYUCC
or Division 9 of the CAUCC is applicable or the Federal Trademark IP
Laws are applicable, no opinion is expressed concerning any items of
Collateral that are subject to a statute, regulation or treaty of the
United States of America that provides for a national or international
<PAGE> 189
Chemical Bank, as Agent 7 April 13, 1995
registration or a national or international certificate of title for
the creation or perfection of a security interest therein or that
specifies a place of filing different from the place specified in the
NYUCC, the CAUCC and the Federal Trademark IP Laws for filing to
perfect security interests;
(vi) We have assumed each Company has rights in
the Collateral as to which it has granted a security interest;
(vii) We have assumed that each item of Collateral
consisting of instruments, chattel paper or documents is represented
by only one original document;
(viii) We have assumed that any and all recording
taxes and fees with respect to the perfection of security interests in
Collateral have been or will be paid to the appropriate governmental
authorities;
(ix) We have relied, with your permission, without
independent investigation, upon the representations of the Companies
in the Credit Agreement as to each Company's chief executive office,
other places of business, the place where records concerning the
Collateral are kept and the location of Collateral and as to the other
factual matters stated therein;
(x) We express no opinion as to the validity of
any security interest in property that constitutes (A) crops, timber,
minerals or the like (including oil and gas) or certain accounts
relating to minerals or the like, (B) letters of credit,
uncertificated securities or book-entry securities, (C) consumer goods
or (D) goods (other than mobile goods of the type described in Section
9-103(3) of the NYUCC or Section 9103(3) of the CAUCC) which were not
located in the State of California or New York as of the date hereof;
(xi) We call to your attention that a perfected
security interest in the Filing Collateral may become unperfected (a)
if a Company changes its location to another jurisdiction and
appropriate steps are not taken in that other jurisdiction to maintain
perfection or (b) as to any Filing Collateral acquired by a Company
more than four months after it changes its name, identity or corporate
structure so as to make a financing statement filed in connection
therewith misleading, unless new appropriate financing statements
indicating the new name, identity or corporate structure of such
Company are properly filed before the expiration of such four month
period; and
<PAGE> 190
Chemical Bank, as Agent 8 April 13, 1995
additional filings may be required upon or incident to satisfaction of
the obligations secured by the Collateral;
(xii) We call to your attention that the NYUCC and
the CAUCC requires the filing of continuation statements within the
period of six months prior to the expiration of five years from the
date of the original filings of UCC financing statements, in order to
maintain the effectiveness of such filings; and
(xiii) Such opinions are subject to bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other
similar laws affecting the enforcement of creditors' rights generally
and to general principles of equity (whether considered in a
proceeding in equity or at law).
F. You should note that buyers and purchasers of the
Collateral may, in certain circumstances, acquire such property free of the
secured party's security interest.
G. In rendering our opinions in paragraph 10 above,
(i) We have assumed that the Pledged Securities are
maintained in the continuous possession of the Agent in the States of
California or New York and continue either to be issued or indorsed in
the name of the Agent or indorsed in blank;
(ii) We express no opinion as to the priority of any
security interest with respect to a lien creditor to the extent
Section 9301(4) of the CAUCC or Section 9-301(4) of the NYUCC limits
the priority accorded any future advances by the Lenders or the Agent
under the Credit Agreement or any other Transaction Documents; and
(iii) Such opinions do not address the priority of any
lien, claim or encumbrance arising under any treaty, statute, rule or
regulation other than the CAUCC or the NYUCC.
H. In the case of the issuance of distributions with
respect to the Pledged Securities, the security interest of the Agent will be
entitled to the same validity, perfection and priority as are the Pledged
Securities only if possession thereof is obtained or other appropriate action
is taken in accordance with the provisions of applicable law.
I. The opinions expressed in this letter are subject to
and may be limited or affected by the requirements of applicable law relating
to the exercise of remedies of a secured
<PAGE> 191
Chemical Bank, as Agent 9 April 13, 1995
lender regarding a creditor's rights with respect to personal property
collateral upon the occurrence of a default in satisfying the secured
obligation.
J. With respect to the Pledged Securities representing
shares of stock in AAF, AATI, FDF and Scotti Brothers Entertainment, we express
no opinion with respect to any attachment of such Pledged Securities under
Section 324 of the Delaware General Corporation Law if such Pledged Securities
are only indorsed in blank and not registered in the name of the Agent.
K. Notwithstanding anything to the contrary herein, we
are expressing no opinion as to the state of title to any property.
L. The opinions rendered herein are as of the date
hereof and are based upon (i) our interpretation of, and are limited to,
existing laws, which laws are subject to change at any time by legislative,
administrative or judicial decisions and (ii) facts existing on this date, and
are therefore limited to such laws and facts and we disclaim any undertaking to
advise you of any changes which may hereafter be brought to our attention.
M. We note that the provisions of the Transaction
Documents that permit the Agent, the Fronting Bank and/or one or more Lenders
to take actions or make determinations may be subject to a requirement that
such action be taken or such determinations be made on a reasonable basis and
in good faith.
N. Certain rights and remedies provided in the
Transaction Documents may be unenforceable in whole or in part under the laws
of New York or California and/or the Federal Laws of the United States;
however, taken as a whole, the Transaction Documents provide sufficient
enforceable rights and remedies for the practical realization of the benefits
provided thereby.
O. The enforceability of the indemnity and exculpation
provisions of the Transaction Documents may be limited by general principles of
public policy.
P. While the Transaction Documents purport to be
governed by New York law, we note that some of the Companies conduct
significant portions of their business in the State of California. We
therefore advise you of certain California statutory provisions and case law to
the effect that, in certain circumstances, a guarantor may be exonerated if the
creditor materially alters the original obligation of the principal without the
consent of the guarantor, elects remedies for default that impair the
subrogation rights of the guarantor against the principal, or otherwise takes
any action or fails to take action
<PAGE> 192
Chemical Bank, as Agent 10 April 13, 1995
without notifying the guarantor that materially prejudices the guarantor. See,
e.g., Cal. Civ. Code Section 2810; Union Bank v. Gradsky, 265 Cal. App. 2d 40,
71 Cal. Rptr. 64 (1968); Sumitomo Bank v. Iwasaki, 70 Cal. 2d 81, 447 P.2d
956, 73 Cal. Rptr. 564 (1968). However, there is also authority to the effect
that a guarantor may validly waive such rights if the waivers are expressly set
forth in the guarantee. E.g., Krueger v. Bank of America, 145 Cal. App. 3d
204, 193 Cal. Rptr. 322 (1983). There are also similar concepts under New York
law.
Q. We have assumed, with your permission, that the
Obligations constitute indebtedness incurred in the ordinary course of business
of the Parent and consistent with the Parent's past practices or with practices
within the entertainment industry for purposes of Section 16 of the Fiscal
Agency Agreement dated September 29, 1993 referred to in Section 1 of such
Company's Certificate.
This opinion letter is rendered solely for the benefit of the
Agent and the Lenders in connection with the subject transaction and may not be
relied upon by such parties for any other purpose, or be furnished to, used,
circulated, quoted or relied upon by any other person for any purpose
whatsoever, without our prior written consent.
Our opinions expressed above are limited to the internal laws,
without reference to the conflict of law provisions thereof, of the States of
New York and California, the General Corporation Law of the State of Delaware
and the Federal Laws of the United States of America (other than (i) Federal
securities laws and regulations (except for the Investment Company Act of 1940,
as amended, and the Public Utility Holding Company Act of 1935) and (ii) laws
and regulations relating to commodity (and other) futures and indices and other
similar instruments, pension and employee benefit laws and regulations, Federal
antitrust and unfair competition laws and regulations, Federal environmental
laws and regulations, Federal land use and subdivision laws and regulations,
Federal tax laws and regulations, federal racketeering laws and regulations,
Federal health and safety laws and regulations, Federal labor laws and
regulations, federal laws, regulations and policies concerning (A) national and
local emergency, (B) possible judicial deference to acts of sovereign states
and (C) criminal and civil forfeiture laws and other Federal statutes of
general application to the extent they provide for criminal prosecution).
Very truly yours,
/s/ KAYE, SCHOLER, FIERMAN, HAYS
& HANDLER
<PAGE> 193
ALL AMERICAN COMMUNICATIONS, INC.
OFFICER'S CERTIFICATE
This certificate is given to Kaye, Scholer, Fierman, Hays &
Handler with the understanding that it will be relied upon by them in rendering
their opinion ("KS Opinion") given to the lenders (the "Lenders") party to the
Credit Agreement (as hereinafter defined) and Chemical Bank, as agent
thereunder (the "Agent"), in connection with the execution and delivery of the
Credit, Security, Guaranty and Pledge Agreement (the "Credit Agreement"), dated
as of the date hereof, among All American Communications, Inc. (the
"Corporation"), the other borrowers and guarantors defined therein, the Lenders
and the Agent. Capitalized terms not otherwise defined herein are defined as
set forth in the Credit Agreement.
The undersigned, the duly elected and acting Senior Executive
Vice President of the Corporation hereby certifies that:
1. Schedule I attached hereto sets forth material
indentures, mortgages, deeds of trust, agreements and
other instruments (other than the Transaction
Documents as that term is defined in the KS Opinion)
to which the Corporation is a party or by which the
Corporation or any of its property is or may be
bound; such agreements are in full force and effect
and have not been amended or modified in any respect;
2. the Corporation is not subject to any order, writ,
judgment or decree;
3. except as set forth on Schedule 3.12 to the Credit
Agreement, there are no actions, suits or proceedings
at law or in equity or by or before any adjudicative
tribunal (including an arbitration panel) now pending
or threatened by a written communication against or
affecting the Corporation or any business, property
or rights of the Corporation and any of its
subsidiaries (A) that seek to enjoin or otherwise
interfere with any Transaction Documents or any
transactions contemplated thereby or (B) that seek
monetary relief in an amount exceeding $25,000;
4. the Corporation has no subsidiaries except as set
forth on Schedule 3.7 to the Credit Agreement;
5. none of the Corporation and any of its subsidiaries
is engaged principally, or as one of its important
activities, in the business of extending credit for
the purpose of purchasing or carrying margin stock.
Exhibit 1
<PAGE> 194
Dated: April 13, 1995 ALL AMERICAN COMMUNICATIONS, INC.
By: /s/ Thomas Bradshaw
------------------------------
Name: Thomas Bradshaw
Title: Senior Executive Vice
President and Chief
Financial Officer
2
<PAGE> 195
SCHEDULE I
1. Shareholders Voting Agreement dated August 3, 1994 between The
Interpublic Group of Companies, the Company and certain of the
Corporation's shareholders.
2. Shareholders Agreement dated as of February 25, 1991 between the
Corporation, Anthony J. Scotti, Benjamin J. Scotti, Thomas Bradshaw,
Myron Roth, Sydney D. Vinnedge, George Back and Joseph E. Kovacs.
3. Employment Agreement dated as of February 25, 1991 between the
Corporation and Anthony J. Scotti as amended.
4. Employment Agreement dated as of August 3, 1994 between the
Corporation and Lawrence Lamattina.
5. Shared Facilities and Services Agreement dated as of August 2, 1994 by
and between the Corporation and Fremantle International, Inc.
6. Registration Rights Agreement dated as of August 3, 1994 by and
between the Corporation and The Interpublic Group of Companies, Inc.
7. Option Letter, dated August 3, 1994, from The Interpublic Group of
Companies, Inc. and Fremantle International, Inc. to the Corporation.
8. Standard Industrial Lease Agreement dated October 31, 1994 between the
Corporation and Wilshire Lincoln Properties.
9. Fiscal Agency Agreement dated September 29, 1993, between the
Corporation and BankAmerica National Trust Company, as Fiscal Agent
and Form of Note attached thereto as Exhibit A.
<PAGE> 196
OFFICER'S CERTIFICATE
The undersigned, the duly elected and acting Senior Vice
President of the following corporations hereby certifies that each of the
following corporations join in the statements made in the foregoing All
American Communications, Inc. Officer's Certificate and that each of the
statements made therein are true and correct as to each of the following
corporations:
All American Fremantle International, Inc.
The Baywatch Production Company
The Baywatch Nights Production Company
The Malibu Branch Production Company
All American Productions, Inc.
All American Television Production, Inc.
Santa Monica Sound Recorders, Inc.
LBS Communications, Inc.
All American FDF Holdings, Inc.
Scotti Brothers Records, Inc.
Scotti Brothers Entertainment Industries, Inc.
Dated: April 13, 1995
/s/ Thomas Bradshaw
-------------------
Thomas Bradshaw
<PAGE> 197
SCHEDULE I
TRANSACTION DOCUMENTS
Capitalized terms not defined herein shall have the respective meanings
assigned to them in the Credit Agreement. Unless otherwise noted, all
transaction documents are dated April 13, 1995.
1. Term Note in favor of the following lenders in the amounts set
forth:
Name $
---- -
Chemical Bank 4090909.09
The First National
Bank of Boston 3000000.00
Coutts & Co. 3000000.00
De Nationale
Investeringsbank 3000000.00
Union Bank 3000000.00
Wells Fargo Bank 3000000.00
Banque Francaise du
Commerce Exterieur 2727272.73
The Fuji Bank Ltd.,
Los Angeles Agency 2727272.73
The Sumitomo Trust &
Banking Co. Ltd.,
New York Branch 2727272.73
Banque Nationale
de Paris 1363636.36
California United
Bank N.A. 1363636.36
2. Baywatch Note in favor of the following lenders in the amounts
set forth:
Name $
---- -
Chemical Bank 2727272.73
The First National
Bank of Boston 2000000.00
Coutts & Co. 2000000.00
De Nationale
Investeringsbank 2000000.00
Union Bank 2000000.00
Wells Fargo Bank 2000000.00
Banque Francaise du
Commerce Exterieur 1818181.82
The Fuji Bank Ltd.,
Los Angeles Agency 1818181.82
The Sumitomo Trust &
Banking Co. Ltd.,
New York Branch 1818181.82
Banque Nationale
1
<PAGE> 198
de Paris 909090.91
California United
Bank N.A. 909090.91
3. B.N. Note in favor of the following lenders in the amounts set
forth:
Name $
---- -
Chemical Bank 2727272.73
The First National
Bank of Boston 2000000.00
Coutts & Co. 2000000.00
De Nationale
Investeringsbank 2000000.00
Union Bank 2000000.00
Wells Fargo Bank 2000000.00
Banque Francaise du
Commerce Exterieur 1818181.82
The Fuji Bank Ltd.,
Los Angeles Agency 1818181.82
The Sumitomo Trust &
Banking Co. Ltd.,
New York Branch 1818181.82
Banque Nationale
de Paris 909090.91
California United
Bank N.A. 909090.91
4. Working Capital Note in favor of the following lenders in the
amounts set forth:
Name $
---- -
Chemical Bank 5454545.45
The First National
Bank of Boston 4000000.00
Coutts & Co. 4000000.00
De Nationale
Investeringsbank 4000000.00
Union Bank 4000000.00
Wells Fargo Bank 4000000.00
Banque Francaise du
Commerce Exterieur 3636363.64
The Fuji Bank Ltd.,
Los Angeles Agency 3636363.64
The Sumitomo Trust &
Banking Co. Ltd.,
New York Branch 3636363.64
Banque Nationale
de Paris 1818181.82
California United
Bank N.A. 1818181.82
5. Copyright Security Agreement by and among Borrowers and
Guarantors.
2
<PAGE> 199
6. Laboratory Access Letter from AATI and Dubs, Inc. to Chemical
Bank.
7. Contribution Agreement (Working Capital) by and among
Borrowers and Guarantors.
8. Contribution Agreement (Other Loans) by and among Borrowers
and Guarantors.
9. Laboratory Pledgeholders Agreement by and among Chemical Bank
and the following:
a. Baywatch and
1. Digital Magic / Four Media
2. Fotokem
3. Modern Video
b. Baywatch, Stars Production Services and
Percenterprises Completion Bond, Inc.
c. AATI and
1. Bonded Archives
2. Bonded Services
3. Stars
4. Dubs, Inc.
d. AATI, Dubs, Inc. and Cineguarantie Ltd..
10. Trademark Security Agreement by and among Borrowers and
Guarantors.
11. Form UCC-1 Financing Statements for the states of New York and
California.
3
<PAGE> 200
SCHEDULE II
GOOD STANDING CERTIFICATES
ALL AMERICAN COMMUNICATIONS, INC., a Delaware corporation
Good Standing Certificate in: Delaware
Good Standing Certificates in the Following Foreign Jurisdictions: California
and New York
THE BAYWATCH PRODUCTION COMPANY, a California corporation
Good Standing Certificate in: California
Good Standing Certificates in the Following Foreign Jurisdictions: None
THE BAYWATCH NIGHTS PRODUCTION COMPANY, a California corporation
Good Standing Certificate in: California
Good Standing Certificates in the Following Foreign Jurisdictions: None
ALL AMERICAN FREMANTLE INTERNATIONAL, INC., a Delaware corporation
Good Standing Certificate in: Delaware
Good Standing Certificates in the Following Foreign Jurisdictions: None
ALL AMERICAN TELEVISION, INC., a Delaware corporation
Good Standing Certificate in: Delaware
Good Standing Certificates in the Following Foreign Jurisdictions: California
and New York
SCOTTI BROTHERS RECORDS, INC., a California corporation
Good Standing Certificate in: California
Good Standing Certificates in the Following Foreign Jurisdictions: None
1
<PAGE> 201
SCOTTI BROTHERS ENTERTAINMENT INDUSTRIES, INC., a Delaware corporation
Good Standing Certificate in: Delaware
Good Standing Certificates in the Following Foreign Jurisdictions: California
and New York
LBS COMMUNICATIONS, INC., a New York corporation
Good Standing Certificate in: New York
Good Standing Certificates in the Following Foreign Jurisdictions: California
SANTA MONICA SOUND RECORDERS, INC., a California corporation
Good Standing Certificate in: California
Good Standing Certificates in the Following Foreign Jurisdictions: None
All AMERICAN TELEVISION PRODUCTION, INC., a California corporation
Good Standing Certificate in: California
Good Standing Certificates in the Following Foreign Jurisdictions: None
ALL AMERICAN PRODUCTIONS, INC., a California corporation
Good Standing Certificate in: California
Good Standing Certificates in the Following Foreign Jurisdictions: None
THE MALIBU BRANCH PRODUCTION COMPANY, a California corporation
Good Standing Certificate in: California
Good Standing Certificate in the Following Foreign
Jurisdictions: None
ALL AMERICAN FDF HOLDINGS, INC. a Delaware corporation
Good Standing Certificate in: Delaware
Good Standing Certificate in the Following Foreign
Jurisdictions: None
2
<PAGE> 202
SCHEDULE III
STOCK CERTIFICATES
Pledged Securities Pledgor
- - - - --------------------------------------------------
AATI Parent
Scotti Brothers Entertainment Parent
AAF Parent
Scotti Brothers Scotti Brothers Entertainment
Santa Monica Scotti Brothers Entertainment
AATP Scotti Brothers Entertainment
Baywatch AATI
Baywatch Nights AATI
Malibu AAP
AAP Parent
LBS AATI
FDF Parent
Fremantle International, Inc. Parent
(non-voting Stock)
<PAGE> 203
EXHIBIT D-2
ALL AMERICAN COMMUNICATIONS, INC.
2114 PICO BOULEVARD
SANTA MONICA, CALIFONRIA 90405
April 13, 1995
Chemical Bank, as Agent
270 Park Avenue
New York, New York 10017
[BThe lenders initially party to
the below-mentioned Credit Agreement
Ladies and Gentlemen:
I am general counsel of All American Communications, Inc., a
Delaware corporation (the "Parent"), All American Fremantle International,
Inc., a Delaware corporation ("AAF"), The Baywatch Production Company, a
California corporation ("Baywatch"), The Baywatch Nights Production Company, a
California corporation ("Baywatch Nights"), The Malibu Branch Production
Company, a California corporation ("Malibu"), All American Productions, Inc., a
California corporation ("AAP"), All American Television Productions, Inc., a
California corporation ("AATP"), Santa Monica Sound Recorders, Inc., a
California corporation ("Santa Monica"), LBS Communications, Inc., a New York
corporation ("LBS"), All American Television, Inc., a Delaware corporation
("AATI"), All American FDF Holdings, Inc., a Delaware corporation ("FDF"),
Scotti Brothers Records, Inc., a California corporation ("Scotti Brothers"),
and Scotti Brothers Entertainment Industries, Inc., a Delaware corporation
("Scotti Brothers Entertainment" and, together with the Parent, AAF, Baywatch,
Baywatch Nights, Malibu, AAP, AATP, Santa Monica, LBS, AATI, FDF and Scotti
Brothers, each a "Company" and, collectively, the "Companies"), in connection
with the execution and delivery of (i) the Credit, Security, Guaranty and
Pledge Agreement, dated as of the date hereof (the "Credit Agreement"), among
the Companies, the financial institutions initially party thereto as lenders
(the "Lenders") and Chemical Bank, as agent for the Lenders (the "Agent") and
as Fronting Bank, and (ii) the other documents listed on Schedule I attached
hereto (together with the Credit Agreement, the "Transaction Documents"). This
opinion is given pursuant to Section 4.1(c) of the Credit Agreement.
Capitalized terms not otherwise defined herein are defined as set forth in the
Credit Agreement.
In rendering my opinions expressed below, I have examined such
documents, certificates and records, and have reviewed such questions of law,
as I have deemed necessary or appropriate in connection with the opinions
hereinafter set forth.
<PAGE> 204
Chemical Bank, as Agent 2 April 13, 1995
Based on and subject to the foregoing, it is my opinion that:
1. The execution and delivery by each Company of each of
the Transaction Documents to which it is a party and the performance by such
Company of its of its obligations thereunder (x) do not conflict with, or
result in the breach of, or constitute (alone or with notice or lapse of time
or both) a default under, any indenture, mortgage, deed of trust, or, to my
actual knowledge without independent investigation, any agreement set forth on
Schedule 3.17 of the Credit Agreement (other than the credit agreement being
discharged out of the proceeds of the initial borrowings thereunder) and (y) do
not, pursuant to any such indentures, mortgages, deeds of trust, or, to my
actual knowledge without independent investigation, any agreements set forth on
Schedule 3.17 of the Credit Agreement, result in the creation or imposition of
any Lien (other than as contemplated by the Transaction Documents) upon any
property or assets of such Company.
2. Except as set forth on Schedule 3.12 of the Credit
Agreement, there are no actions, suits or proceedings at law or in equity or by
or before any adjudicative tribunal (including an arbitration panel) pending or
threatened by a written communication against or affecting any Company or any
business, property or rights of any Company that seek to enjoin or otherwise
interfere with any Transaction Document or any transactions contemplated
thereby.
3. The principal and interest payable under the Credit
Agreement will constitute "Senior Indebtedness" for purposes of the Convertible
Subordinated Notes of the Parent and are entitled to the benefits of the
subordination provisions thereof.
This Opinion Letter may be relied upon by you and your
respective assigns only in connection with the transactions contemplated by the
Transaction Documents and may not be used or relied upon by you or any other
person for any purpose whatsoever, without in each instance our prior written
consent.
My opinions expressed above are limited to the laws of the
State of California, the General Corporation Law of the State of Delaware and
the Federal Laws of the United States of America.
Very truly yours,
/s/ Leonard Breijo
<PAGE> 205
SCHEDULE I
TRANSACTION DOCUMENTS
Capitalized terms not defined herein shall have the respective meanings
assigned to them in the Credit Agreement. Unless otherwise noted, all
transaction documents are dated April 13, 1995.
1. Term Note in favor of the following lenders in the amounts set
forth:
Name $
---- -
Chemical Bank 4090909.09
The First National
Bank of Boston 3000000.00
Coutts & Co. 3000000.00
De Nationale
Investeringsbank 3000000.00
Union Bank 3000000.00
Wells Fargo Bank 3000000.00
Banque Francaise du
Commerce Exterieur 2727272.73
The Fuji Bank Ltd.,
Los Angeles Agency 2727272.73
The Sumitomo Trust &
Banking Co. Ltd.,
New York Branch 2727272.73
Banque Nationale
de Paris 1363636.36
California United
Bank N.A. 1363636.36
2. Baywatch Note in favor of the following lenders in the amounts
set forth:
Name $
---- -
Chemical Bank 2727272.73
The First National
Bank of Boston 2000000.00
Coutts & Co. 2000000.00
De Nationale
Investeringsbank 2000000.00
Union Bank 2000000.00
Wells Fargo Bank 2000000.00
Banque Francaise du
Commerce Exterieur 1818181.82
The Fuji Bank Ltd.,
Los Angeles Agency 1818181.82
The Sumitomo Trust &
Banking Co. Ltd.,
<PAGE> 206
New York Branch 1818181.82
Banque Nationale
de Paris 909090.91
California United
Bank N.A. 909090.91
3. B.N. Note in favor of the following lenders in the amounts set
forth:
Name $
---- -
Chemical Bank 2727272.73
The First National
Bank of Boston 2000000.00
Coutts & Co. 2000000.00
De Nationale
Investeringsbank 2000000.00
Union Bank 2000000.00
Wells Fargo Bank 2000000.00
Banque Francaise du
Commerce Exterieur 1818181.82
The Fuji Bank Ltd.,
Los Angeles Agency 1818181.82
The Sumitomo Trust &
Banking Co. Ltd.,
New York Branch 1818181.82
Banque Nationale
de Paris 909090.91
California United
Bank N.A. 909090.91
4. Working Capital Note in favor of the following lenders in the
amounts set forth:
Name $
---- -
Chemical Bank 5454545.45
The First National
Bank of Boston 4000000.00
Coutts & Co. 4000000.00
De Nationale
Investeringsbank 4000000.00
Union Bank 4000000.00
Wells Fargo Bank 4000000.00
Banque Francaise du
Commerce Exterieur 3636363.64
The Fuji Bank Ltd.,
Los Angeles Agency 3636363.64
The Sumitomo Trust &
Banking Co. Ltd.,
New York Branch 3636363.64
Banque Nationale
2
<PAGE> 207
de Paris 1818181.82
California United
Bank N.A. 1818181.82
5. Copyright Security Agreement by and among Borrowers and
Guarantors.
6. Laboratory Access Letter from AATI and Dubs, Inc. to Chemical
Bank.
7. Contribution Agreement (Working Capital) by and among
Borrowers and Guarantors.
8. Contribution Agreement (Other Loans) by and among Borrowers
and Guarantors.
9. Laboratory Pledgeholders Agreement by and among Chemical Bank
and the following:
a. Baywatch and
1. Digital Magic / Four Media
2. Fotokem
3. Modern Video
b. Baywatch, Stars Production Services and
Percenterprises Completion Bond, Inc.
c. AATI and
1. Bonded Archives
2. Bonded Services
3. Stars
4. Dubs, Inc.
d. AATI, Dubs, Inc. and Cineguarantie Ltd..
10. Trademark Security Agreement by and among Borrowers and
Guarantors.
11. Form UCC-1 Financing Statements for the states of New York and
California.
3
<PAGE> 208
EXHIBIT D-3
KAYE, SCHOLER, FIERMAN, HAYS & HANDLER
425 PARK AVENUE
NEW YORK, NEW YORK 10022-3598
April 13, 1995
(212) 836-8000
Chemical Bank, as Agent
270 Park Avenue
New York, New York 10017
The lenders initially party to
the below-mentioned Credit Agreement
Ladies and Gentlemen:
We have acted as special counsel to All American
Communications, Inc., a Delaware corporation (the "Parent"), All American
Fremantle International, Inc., a Delaware corporation ("AAF"), The Baywatch
Production Company, a California corporation ("Baywatch"), The Baywatch Nights
Production Company, a California corporation ("Baywatch Nights"), The Malibu
Branch Production Company, a California corporation ("Malibu"), All American
Productions, Inc., a California corporation ("AAP"), All American Television
Production, Inc., a California corporation ("AATP"), Santa Monica Sound
Recorders, Inc., a California corporation ("Santa Monica"), LBS Communications,
Inc., a New York corporation ("LBS"), All American Television, Inc., a Delaware
corporation ("AATI"), All American FDF Holdings, Inc., a Delaware corporation
("FDF"), Scotti Brothers Records, Inc., a California corporation ("Scotti
Brothers"), and Scotti Brothers Entertainment Industries, Inc., a Delaware
corporation ("Scotti Brothers Entertainment" and, together with the Parent,
AAF, Baywatch, Baywatch Nights, Malibu, AAP, AATP, Santa Monica, LBS, AATI, FDF
and Scotti Brothers, each a "Company" and, collectively, the "Companies"), in
connection with the execution and delivery of (i) the Credit, Security,
Guaranty and Pledge Agreement, dated as of the date hereof (the "Credit
Agreement"), among the Companies, the financial institutions initially party
thereto as lenders (the "Lenders") and Chemical Bank, as agent for the Lenders
(the "Agent") and as Fronting Bank, and (ii) the Copyright Security Agreement,
dated as of the date hereof by the Companies and the Agent (the "Copyright
Security Agreement"). This opinion is given pursuant to Section 4.1(c)(iii) of
the Credit Agreement. Capitalized terms not otherwise defined herein are
defined as set forth in the Credit Agreement.
In rendering our opinions expressed below, we have examined
executed copies of the Credit Agreement and the Copyright Security Agreement.
We have also examined unfiled copies of financing statements (the "Financing
Statements")
<PAGE> 209
Chemical Bank, as Agent 2 April 13, 1995
naming each Company as debtor and the Agent as secured party, which we
understand will be filed in the office of the Secretary of State of the States
of New York and California and the New York City's Registers Office-New York
County, New York (the "Filing Offices"). We have also examined such other
documents, certificates and records, and have reviewed such questions of law,
as we have deemed necessary or appropriate in connection with the opinions
hereinafter set forth.
Based upon the foregoing, and subject to the exceptions,
qualifications, and limitations set forth herein, it is our opinion that the
Copyright Security Agreement creates in favor of the Agent a security interest
in the U.S. registered copyrights listed on Schedules 1 and 1A of the Copyright
Security Agreement as of the date hereof (the "Copyrights"). Upon the filing
of the Financing Statements with the Filing Offices and the recordation of the
Copyright Security Agreement, which is in form satisfactory for recordation, in
the United States Copyright Office (the "Copyright Office"), such security
interest will be perfected.
The opinion expressed above is subject to the following additional assumptions
and qualifications:
A. Our opinion is limited to Article 9 of the New York
Uniform Commercial Code (the "NYUCC"), Division 9 of the California Uniform
Commercial Code (the "CAUCC") and the Federal Copyright Act of 1976, as amended
(the "Copyright Act"). Except to the extent Article 9 of the NYUCC or Division
9 of the CAUCC is applicable or the Copyright Act is applicable, this opinion
does not address the security interest of the Agent or any Lender in any
copyrights, the proceeds thereof or any rights (including accounts or general
intangibles) with respect to the lease, license or use thereof.
B. In rendering our opinion above,
(i) We have assumed, with your permission, that each of
the Copyrights has been registered in the Copyright Office and that
the records of the Copyright Office show the applicable Company as the
owner thereof;
(ii) The security interest of the Agent in proceeds of
Copyrights is limited to the extent set forth in Section 9-306 of the
NYUCC and Section 9306 of the CAUCC, as the case may be, and
additional filings with respect to the proceeds of Copyrights may be
required to be made in the Copyright Office;
(iii) We express no opinion as to the effect of agreements
or laws (other than the Copyright Act and the
<PAGE> 210
Chemical Bank, as Agent 3 April 13, 1995
NYUCC and the CAUCC) prohibiting, restricting or conditioning the
assignment of the Copyrights;
(iv) We have assumed that each Company has rights in the
Copyrights as to which it has granted a security interest;
(v) We have assumed that the Copyright Security Agreement
will be duly recorded by the Copyright Office and that all recording
fees with respect thereto will be duly paid;
(vi) We call to your attention that a perfected security
interest in the Copyrights may become unperfected (a) if a Company
changes its location to another jurisdiction and appropriate steps are
not taken in that other jurisdiction to maintain perfection or (b) as
to any Copyrights acquired by a Company more than four months after it
changes its name, identity or corporate structure so as to make a
financing statement filed in connection therewith misleading, unless
new appropriate financing statements indicating the new name, identity
or corporate structure of such Company are properly filed before the
expiration of such four month period; additional filings should also
be made in the Copyright Office if any Company changes its name or
identity; additional filings should also be made in the Copyright
Office if any Company delivers a Supplement to the Copyright Security
Agreement with respect to U.S. registered copyrights acquired by such
Company after the date hereof;
(vii) We call to your attention that the NYUCC and the
CAUCC requires the filing of continuation statements within the period
of six months prior to the expiration of five years from the date of
the original filings of UCC financing statements, in order to maintain
the effectiveness of such filings;
(viii) We have assumed that the description of each
Copyright in Schedules 1 and 1A to the Copyright Security Agreement is
accurate and provides sufficiently specific identification of the work
to which it pertains in accordance with Section 205(c) of the
Copyright Act;
(ix) We express no opinion as to the nature or extent of
any Company's rights in, or title to, any Copyright or as to the
validity or enforceability of any Copyright;
(x) We express no opinion as to the effectiveness outside
of the territorial limits of the United States of any security
interest in any Copyright; and
<PAGE> 211
Chemical Bank, as Agent 4 April 13, 1995
(xi) We have relied, with your permission, without
independent investigation, upon the representations and warranties in
the Credit Agreement and the Copyright Security Agreement as to each
Company's chief executive office and the places where its records
concerning the Copyrights are kept and as to the other factual matters
stated therein.
This opinion letter is rendered solely for the benefit of the
Agent and the Lenders in connection with the subject transaction and may not be
relied upon by such parties for any other purpose, or be furnished to, used,
circulated, quoted or relied upon by any other person for any purpose
whatsoever, without our prior written consent.
Very truly yours,
/s/ KAYE, SCHOLER, FIERMAN, HAYS
& HANDLER
<PAGE> 212
EXHIBIT E
FORM OF BORROWING BASE CERTIFICATE
as of ________________
The undersigned (the "Borrowers") HEREBY CERTIFY the
following information as of __________, 199_ pursuant to the Credit, Security,
Guaranty and Pledge Agreement dated as of April 13, 1995, among All American
Communications, Inc., All American Fremantle International, Inc., The Baywatch
Production Company, and The Baywatch Nights Production Company as Borrowers and
Guarantors, the other Guarantors named therein, the Lenders named therein and
Chemical Bank as Agent and as Fronting Bank, as the same may be amended from
time to time (herein called the "Credit Agreement"), the defined terms therein
being herein used with the same meanings:
ITEM (from detailed Amount Advance Borrowing
schedules attached) $000's Rate Base
___________________ ______ _______ _________
a. Domestic and
Foreign
Receivables ______x 90% = _________
b. Billed Barter
Receivables ______x 90% = _________
c. Record
Receivables ______x 85% = _________
d. Type A Barter
Receivables ______x 85% = _________
e. Type B Barter
Receivables ______x 50% = _________
f. Type C Barter
Receivables ______x 85% = _________
g. Any of the Above
Backed by an
Acceptable L/C ______x 100% = _________
h. Cash and Cash
Equivalents in
Cash Collateral
Account ______x 100% = _________
TOTAL BORROWING BASE
=========
<PAGE> 213
The Borrowers have no reason to believe that the aggregate
principal amount of all Revolving Credit Loans to all Borrowers outstanding as
of the date of this certificate wouold exceed the Borrowing Base if such
Borrowing Base was computed as of the date of this certificate.
IN WITNESS WHEREOF, the undersigned have caused this
certificate to be executed this _____ day of ____________, 199_.
THE BAYWATCH PRODUCTION COMPANY
By____________________________
Name:
Title:
THE BAYWATCH NIGHTS PRODUCTION
COMPANY
By___________________________
Name:
Title:
ALL AMERICAN COMMUNICATIONS, INC.
By___________________________
Name:
Title:
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<PAGE> 214
EXHIBIT F-1
(W.C. Loans)
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT ("Agreement") is entered into as
of April 13, 1995 by and among All American Communications, Inc., a Delaware
corporation (the "Company" or the "Borrower"), and each Subsidiary of the
Company whose name appears at the foot hereof (the "Contributors", individually
the "Contributor"), for the purpose of establishing the respective rights and
obligations of contribution among the Contributors and the Borrower in
connection with the Credit Agreement (as hereinafter defined). Capitalized
terms used herein and not otherwise defined shall have the meanings set forth
in the Credit Agreement.
RECITALS
WHEREAS, the Borrower and the Contributors are parties to a
Credit, Security, Guaranty and Pledge Agreement dated as of April 13, 1995,
among the Borrower, the Contributors, the Lenders named therein (the
"Lenders"), and Chemical Bank as Agent and as Fronting Bank (said agreement, as
it may hereafter be amended or otherwise modified from time to time in
accordance with its terms being the "Credit Agreement"), pursuant to which the
Lenders have made certain commitments, subject to the terms and conditions set
forth therein, to extend Working Capital Loans to the Borrower (the Borrower's
obligations of every nature under the Credit Agreement and the other
Fundamental Documents are referred to herein as the "Obligations");
WHEREAS, pursuant to the Credit Agreement, the Contributors
have guaranteed the Obligations of the Borrower;
WHEREAS, pursuant to the Credit Agreement, the Contributors
have granted to the Agent for the benefit of the Lenders a security interest in
the Collateral as security for their respective obligations thereunder;
WHEREAS, as a result of the transactions contemplated by the
Credit Agreement, the Borrower and the Contributors will benefit, directly and
indirectly, from the Obligations and in consideration thereof desire to enter
into this Agreement to allocate such benefits among themselves and to provide a
fair and equitable arrangement to make contributions in the event any payments
are made by the Contributor under the Credit Agreement or the Agent, on behalf
of the Lenders, exercises recourse
<PAGE> 215
against any of the Collateral owned by the Contributors (such payment or
recourse being referred to herein as a "Contribution");
NOW, THEREFORE, in consideration of the foregoing premises and
for other good and valuable consideration, the receipt of which is hereby
acknowledged, the Contributors and the Brrower hereby agree as follows:
SECTION 1. Contribution. In order to provide for just and
equitable contribution among the Contributors and the Borrower in the event any
Contribution is made by a Contributor (a "Funding Contributor") under the
Credit Agreement, that Funding Contributor shall be entitled to a contribution
from certain other Contributors and from the Borrower for all payments, damages
and expenses incurred by that Funding Contributor in discharging any of the
Obligations, in the manner and to the extent set forth in this Agreement. The
amount of any Contribution under this Agreement shall be equal to the payment
made pursuant to the Credit Agreement, or the fair saleable value of the
Funding Contributor's portion of the Collateral against which recourse is
exercised, and shall be determined as of the date on which such payment is made
or recourse is exercised, as the case may be.
SECTION 2. Benefit Amount Defined. For purposes of this
Agreement, the "Benefit Amount" of any Contributor as of any date of
determination shall be the net value of the benefits to such Contributor from
extensions of credit made by the Lenders to the Borrower under the Credit
Agreement. Such benefits shall include benefits of funds constituting proceeds
of Loans which are deposited into the account of the Borrower by the Lenders
which are in turn advanced or contributed by the Borrower to such Contributor
(collectively, the "Benefits"). In the case of any proceeds of Loans or
Benefits advanced or contributed to a Person (an "Owned Entity") any of the
equity interests of which are owned directly or indirectly by a Contributor,
the Benefit Amount of a Contributor with respect thereto shall be that portion
of the net value of the benefits attributable to Loans or Benefits advanced or
contributed to the Owned Entity equal to the direct or indirect percentage
ownership of such Contributor in its Owned Entity.
SECTION 3. Contribution Obligation. Each Contributor and the
Borrower shall be liable to a Funding Contributor in an amount equal to the
greater of (A) the product of (i) a fraction the numerator of which is (x) the
Benefit Amount of such Contributor, and the denominator of which is (y) the
total amount of Obligations and (ii) the amount of Obligations paid by such
Funding Contributor and (B) 95% of the excess of the fair saleable value of the
property of such Contributor over the total liabilities of such Contributor
(including the maximum amount
- 2 -
<PAGE> 216
reasonably expected to become due in respect of contingent liabilities), as the
case may be, determined as of the date on which the payment made by a Funding
Contributor is deemed made for purposes of this Agreement or any recourse is
exercised against any Contributor's portion of the Collateral, as the case may
be (giving effect to all payments made by other Funding Contributors and to the
exercise of recourse against any other Funding Contributor's portion of the
Collateral as of such date in a manner to maximize the amount of such
contributions).
SECTION 4. Allocation. In the event that at any time there
exists more than one Funding Contributor with respect to any Contribution (in
any such case, the "Applicable Contribution"), then payment from other
Contributors and from the Borrower pursuant to this Agreement shall be
allocated among such Funding Contributors in proportion to the total amount of
the Contribution made for or on account of the Borrower by each such Funding
Contributor pursuant to the Applicable Contribution. In the event that at any
time any Contributor pays an amount under this Agreement in excess of the
amount calculated pursuant to clause (A) of Section 3, that Contributor shall
be deemed to be a Funding Contributor to the extent of such excess and shall be
entitled to contribution from the other Contributors and from the Borrower in
accordance with the provisions of this Agreement.
SECTION 5. Subrogation. Any payments made hereunder by the
Borrower shall be credited against amounts payable by the Borrower pursuant to
any subrogation rights of the Contributors which received the payments under
this Agreement.
SECTION 6. Preservation of Rights. This Agreement shall not
limit any right which any Contributor may have against any other Person which
is not a party hereto.
SECTION 7. Subsidiary Payment. The amount of contribution
payable under this Agreement by any Contributor shall be reduced by the amount
of any contribution paid hereunder by a Subsidiary of such Contributor.
SECTION 8. Equitable Allocation. If as a result of any
reorganization, recapitalization, or other corporate change in the Company or
any Affiliates or Subsidiaries thereof, or as a result of any amendment, waiver
or modification of the terms and conditions governing the Credit Agreement or
the Obligations, or for any other reason, the Contributions under this
Agreement become inequitable, the parties hereto shall promptly modify and
amend this Agreement to provide for an equitable allocation of the
Contributions. Any of the foregoing modifications and amendments to this
Agreement shall be in writing and signed by all parties hereto.
- 3 -
<PAGE> 217
SECTION 9. Asset of Party to Which Contribution is Owing.
The parties hereto acknowledge that the right to contribution hereunder shall
constitute an asset in favor of the party to which such contribution is owing.
SECTION 10. Subordination. No payments payable by a
Contributor or by the Borrower pursuant to the terms hereof shall be paid until
all amounts then due and payable by the Borrower to any Lender, pursuant to the
terms of the Fundamental Documents, are indefeasibly paid in full in cash.
Nothing contained in this Agreement shall affect the obligations of any party
hereto to any Lender under the Credit Agreement or any other Fundamental
Documents.
SECTION 11. Successors and Assigns; Amendments. This
Agreement shall be binding upon each party hereto and its respective successors
and assigns and shall inure to the benefit of the parties hereto and their
respective successors and assigns, and in the event of any transfer or
assignment of rights by a Contributor or by the Borrower, the rights and
privileges herein conferred upon that Contributor shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
condition hereof. Except as specifically required under Section 8, this
Agreement shall not be amended without the prior written consent of the
Required Lenders.
SECTION 12. Termination. This Agreement, as it may be
modified or amended from time to time, shall remain in effect, and shall not be
terminated until the Credit Agreement has been discharged or otherwise
satisfied in accordance with its respective terms.
SECTION 13. Choice of Law. This Agreement, and any
instrument or agreement required hereunder, shall be deemed to be made under,
shall be governed by, and shall be construed and enforced in accordance with,
the laws of the State of New York without regard to principles of conflict of
laws.
SECTION 14. Counterparts. This Agreement, and any
modifications or amendments hereto may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to
be an original for all purposes, but all such counterparts shall constitute but
one and the same instrument.
SECTION 15. Effectiveness. This Agreement shall become
effective on the date on which all of the parties hereto shall have executed
this Agreement. The Company shall deliver counterparts hereof bearing the
signatures of each of the parties hereto to the Agent.
- 4 -
<PAGE> 218
IN WITNESS WHEREOF, the undersigned parties have caused this
Agreement to be duly executed as of the day and year first written above.
ALL AMERICAN COMMUNICATIONS, INC.
By_______________________________
Name:
Title:
THE BAYWATCH PRODUCTION COMPANY
By_______________________________
Name:
Title:
THE BAYWATCH NIGHTS PRODUCTION
COMPANY
By_______________________________
Name:
Title:
- 5 -
<PAGE> 219
ALL AMERICAN FREMANTLE
INTERNATIONAL, INC.
By_______________________________
Name:
Title:
ALL AMERICAN PRODUCTIONS, INC.
ALL AMERICAN TELEVISION, INC.
ALL AMERICAN TELEVISION
PRODUCTION, INC.
ALL AMERICAN FDF HOLDINGS, INC.
LBS COMMUNICATIONS, INC.
THE MALIBU BRANCH PRODUCTION
COMPANY
SANTA MONICA SOUND RECORDERS, INC.
SCOTTI BROTHERS ENTERTAINMENT
INDUSTRIES, INC.
SCOTTI BROTHERS RECORDS, INC.
TALBOT TELEVISION LIMITED
By______________________________
Name:
Title: Authorized Signatory
- 6 -
<PAGE> 220
EXHIBIT F-2
(Baywatch Loans,
B.N. Loans and
the Term Loan)
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT ("Agreement") is entered into as
of April 13, 1995 by and among All American Communications, Inc., a Delaware
corporation (the "Parent"), All American Fremantle International, Inc. ("AAF"),
The Baywatch Production Company ("Baywatch"), and The Baywatch Nights
Production Company ("Baywatch Nights") (as referred to herein (i) with respect
to the Term Loan, "Borrower" shall mean AAF, "Companies" shall mean Baywatch
and Baywatch Nights; (ii) with respect to the Baywatch Loans, "Borrower" shall
mean Baywatch, "Companies" shall mean AAF and Baywatch Nights; (iii) with
respect to the B.N. Loans, "Borrower" shall mean Baywatch Nights, "Companies"
shall mean AAF and Baywatch), and each other Subsidiary of the Company whose
name appears at the foot hereof (collectively with the Parent and the
Companies, the "Contributors", individually the "Contributor"), for the purpose
of establishing the respective rights and obligations of contribution among the
Contributors and the Borrower in connection with the Credit Agreement (as
hereinafter defined). Capitalized terms used herein and not otherwise defined
shall have the meanings set forth in the Credit Agreement.
RECITALS
WHEREAS, the Borrower and the Contributors are parties to a
Credit, Security, Guaranty and Pledge Agreement dated as of April 13, 1995,
among the Borrower, the Contributors, the Lenders named therein (the
"Lenders"), and Chemical Bank as Agent and as Fronting Bank (said agreement, as
it may hereafter be amended or otherwise modified from time to time in
accordance with its terms being the "Credit Agreement"), pursuant to which the
Lenders have made certain commitments, subject to the terms and conditions set
forth therein, to extend certain credit facilities to the Borrower (the
Borrower's obligations of every nature under the Credit Agreement and the other
Fundamental Documents are referred to herein as the "Obligations");
WHEREAS, pursuant to the Credit Agreement, the Contributors
have guaranteed the Obligations of the Borrower;
WHEREAS, pursuant to the Credit Agreement, the Contributors
have granted to the Agent for the benefit of the
<PAGE> 221
Lenders a security interest in the Collateral as security for their respective
obligations thereunder;
WHEREAS, as a result of the transactions contemplated by the
Credit Agreement, the Borrower and the Contributors will benefit, directly and
indirectly, from the Obligations and in consideration thereof desire to enter
into this Agreement to allocate such benefits among themselves and to provide a
fair and equitable arrangement to make contributions in the event any payments
are made by the Contributor under the Credit Agreement or the Agent, on behalf
of the Lenders, exercises recourse against any of the Collateral owned by the
Contributors (such payment or recourse being referred to herein as a
"Contribution");
NOW, THEREFORE, in consideration of the foregoing premises and
for other good and valuable consideration, the receipt of which is hereby
acknowledged, the Contributors and the Borrower hereby agree as follows:
SECTION 1. Contribution. In order to provide for just and
equitable contribution among the Contributors and the Borrower in the event any
Contribution is made by a Contributor (a "Funding Contributor") under the
Credit Agreement, that Funding Contributor shall be entitled to a contribution
from certain other Contributors and from the Borrower for all payments, damages
and expenses incurred by that Funding Contributor in discharging any of the
Obligations, in the manner and to the extent set forth in this Agreement. The
amount of any Contribution under this Agreement shall be equal to the payment
made pursuant to the Credit Agreement, or the fair saleable value of the
Funding Contributor's portion of the Collateral against which recourse is
exercised, and shall be determined as of the date on which such payment is made
or recourse is exercised, as the case may be.
SECTION 2. Benefit Amount Defined. For purposes of this
Agreement, the "Benefit Amount" of any Contributor as of any date of
determination shall be the net value of the benefits to such Contributor from
extensions of credit made by the Lenders to the Borrower under the Credit
Agreement. Such benefits shall include benefits of funds constituting proceeds
of Loans which are deposited into the account of the Borrower by the Lenders
which are in turn advanced or contributed by the Borrower to such Contributor
(collectively, the "Benefits"). In the case of any proceeds of Loans or
Benefits advanced or contributed to a Person (an "Owned Entity") any of the
equity interests of which are owned directly or indirectly by a Contributor,
the Benefit Amount of a Contributor with respect thereto shall be that portion
of the net value of the benefits attributable to Loans or Benefits advanced or
contributed to the Owned Entity equal to the direct
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or indirect percentage ownership of such Contributor in its Owned Entity.
SECTION 3. Contribution Obligation. Each Contributor and the
Borrower shall be liable to a Funding Contributor in an amount equal to the
greater of (A) the product of (i) a fraction the numerator of which is (x) the
Benefit Amount of such Contributor, and the denominator of which is (y) the
total amount of Obligations and (ii) the amount of Obligations paid by such
Funding Contributor and (B) 95% of the excess of the fair saleable value of the
property of such Contributor over the total liabilities of such Contributor
(including the maximum amount reasonably expected to become due in respect of
contingent liabilities), as the case may be, determined as of the date on which
the payment made by a Funding Contributor is deemed made for purposes of this
Agreement or any recourse is exercised against any Contributor's portion of the
Collateral, as the case may be (giving effect to all payments made by other
Funding Contributors and to the exercise of recourse against any other Funding
Contributor's portion of the Collateral as of such date in a manner to maximize
the amount of such contributions).
SECTION 4. Allocation. In the event that at any time there
exists more than one Funding Contributor with respect to any Contribution (in
any such case, the "Applicable Contribution"), then payment from other
Contributors and from the Borrower pursuant to this Agreement shall be
allocated among such Funding Contributors in proportion to the total amount of
the Contribution made for or on account of the Borrower by each such Funding
Contributor pursuant to the Applicable Contribution. In the event that at any
time any Contributor pays an amount under this Agreement in excess of the
amount calculated pursuant to clause (A) of Section 3, that Contributor shall
be deemed to be a Funding Contributor to the extent of such excess and shall be
entitled to contribution from the other Contributors and from the Borrower in
accordance with the provisions of this Agreement.
SECTION 5. Subrogation. Any payments made hereunder by the
Borrower shall be credited against amounts payable by the Borrower pursuant to
any subrogation rights of the Contributors which received the payments under
this Agreement.
SECTION 6. Preservation of Rights. This Agreement shall not
limit any right which any Contributor may have against any other Person which
is not a party hereto.
SECTION 7. Subsidiary Payment. The amount of contribution
payable under this Agreement by any Contributor shall be reduced by the amount
of any contribution paid hereunder by a Subsidiary of such Contributor.
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<PAGE> 223
SECTION 8. Equitable Allocation. If as a result of any
reorganization, recapitalization, or other corporate change in the Company or
any Affiliates or Subsidiaries thereof, or as a result of any amendment, waiver
or modification of the terms and conditions governing the Credit Agreement or
the Obligations, or for any other reason, the Contributions under this
Agreement become inequitable, the parties hereto shall promptly modify and
amend this Agreement to provide for an equitable allocation of the
Contributions. Any of the foregoing modifications and amendments to this
Agreement shall be in writing and signed by all parties hereto.
SECTION 9. Asset of Party to Which Contribution is Owing.
The parties hereto acknowledge that the right to contribution hereunder shall
constitute an asset in favor of the party to which such contribution is owing.
SECTION 10. Subordination. No payments payable by a
Contributor or by the Borrower pursuant to the terms hereof shall be paid until
all amounts then due and payable by the Borrower to any Lender, pursuant to the
terms of the Fundamental Documents, are indefeasibly paid in full in cash.
Nothing contained in this Agreement shall affect the obligations of any party
hereto to any Lender under the Credit Agreement or any other Fundamental
Documents.
SECTION 11. Successors and Assigns; Amendments. This
Agreement shall be binding upon each party hereto and its respective successors
and assigns and shall inure to the benefit of the parties hereto and their
respective successors and assigns, and in the event of any transfer or
assignment of rights by a Contributor or by the Borrower, the rights and
privileges herein conferred upon that Contributor shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
condition hereof. Except as specifically required under Section 8, this
Agreement shall not be amended without the prior written consent of the
Required Lenders.
SECTION 12. Termination. This Agreement, as it may be
modified or amended from time to time, shall remain in effect, and shall not be
terminated until the Credit Agreement has been discharged or otherwise
satisfied in accordance with its respective terms.
SECTION 13. Choice of Law. This Agreement, and any
instrument or agreement required hereunder, shall be deemed to be made under,
shall be governed by, and shall be construed and enforced in accordance with,
the laws of the State of New York without regard to principles of conflict of
laws.
SECTION 14. Counterparts. This Agreement, and any
modifications or amendments hereto may be executed in any number
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<PAGE> 224
of counterparts, each of which when so executed and delivered shall be deemed
to be an original for all purposes, but all such counterparts shall constitute
but one and the same instrument.
SECTION 15. Effectiveness. This Agreement shall become
effective on the date on which all of the parties hereto shall have executed
this Agreement. The Company shall deliver counterparts hereof bearing the
signatures of each of the parties hereto to the Agent.
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<PAGE> 225
IN WITNESS WHEREOF, the undersigned parties have caused this
Agreement to be duly executed as of the day and year first written above.
ALL AMERICAN COMMUNICATIONS, INC.
By_______________________________
Name:
Title:
THE BAYWATCH PRODUCTION COMPANY
By_______________________________
Name:
Title:
THE BAYWATCH NIGHTS PRODUCTION
COMPANY
By_______________________________
Name:
Title:
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<PAGE> 226
ALL AMERICAN FREMANTLE
INTERNATIONAL, INC.
By_______________________________
Name:
Title:
ALL AMERICAN PRODUCTIONS, INC.
ALL AMERICAN TELEVISION, INC.
ALL AMERICAN TELEVISION
PRODUCTION, INC.
ALL AMERICAN FDF HOLDINGS, INC.
LBS COMMUNICATIONS, INC.
THE MALIBU BRANCH PRODUCTION
COMPANY
SANTA MONICA SOUND RECORDERS, INC.
SCOTTI BROTHERS ENTERTAINMENT
INDUSTRIES, INC.
SCOTTI BROTHERS RECORDS, INC.
TALBOT TELEVISION LIMITED
By______________________________
Name:
Title: Authorized Signatory
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<PAGE> 227
EXHIBIT G
FORM OF LABORATORY PLEDGEHOLDER AGREEMENT
AGREEMENT dated as of [INSERT DATE],
199_ among (i) [INSERT NAME OF LABORATORY]
(the "Laboratory"), (ii) [INSERT NAME OF
DEBTOR(S) WHO HAS CONTROL OVER THE PHYSICAL
ELEMENTS OF THE ITEM OF PRODUCT], a
__________ corporation (hereinafter referred
to as the "Debtor"), (iii) [_________________
(THE "COMPLETION GUARANTOR")], (iv) CHEMICAL
BANK, a New York banking corporation as agent
for the Lenders (the "Agent"), named in the
Credit Agreement (as defined below).
Pursuant to the Credit, Security, Guaranty and Pledge
Agreement dated as of April 13, 1995 among All American Communications, Inc.,
All American Fremantle International, Inc., Baywatch Production Company, and
Baywatch Nights Production Company as Borrowers and Guarantors, the other
Guarantors named therein, the Lenders named therein (the "Lenders"), Chemical
Bank as Agent and as Fronting Bank, as the same may be amended from time to
time (the "Credit Agreement") the Lenders have made loans to the Debtor and/or
its subsidiaries and/or affiliates and the Debtor has granted to the Agent for
the benefit of the Lenders a security interest in, among other things, the
[MOTION PICTURE AND/OR TELEVISION PRODUCT] tentatively entitled
"_______________" (hereinafter called the "Picture") as security for various
obligations of the Debtor and/or its subsidiaries and/or affiliates to the
Lenders. Such security interest covers, among other things, all negatives,
negative film, fine grain positive prints, lavendars, dupes, sound tracks,
positive prints, cut-outs and trims in connection with the Picture, whether in
completed form or in some state of completion (all of the foregoing items being
hereinafter collectively called the "Collateral"). From time to time the
Laboratory will have in its possession certain items of the Collateral referred
to in the preceding sentence.
Accordingly, the parties hereto hereby agree as follows:
1. The Debtor, [COMPLETION GUARANTOR] and the Agent hereby
appoint the Laboratory as the pledgeholder of all items of the Collateral that
may from time to time come into the possession or control of the Laboratory.
The Laboratory agrees to hold all such items of the Collateral as pledgeholder
for the Agent for the benefit of the Lenders, as security for the indebtedness
and obligations of the Debtor and/or its
<PAGE> 228
subsidiaries and/or affiliates to the Lenders, subject to the following terms
and conditions:
(a) The Laboratory will keep all such items of the
Collateral at the laboratories or storage facilities listed in
Schedule 1 hereto, and will not deliver such property to
anyone except as may be permitted hereunder.
(b) Unless the Laboratory shall have received
written notice from the Agent that an Event of Default has
occurred under the Credit Agreement, the Laboratory will
permit the Debtor [AND/OR COMPLETION GUARANTOR]:
(i) to have customary access to and to
receive delivery of in accordance with paragraph
(c)(iii) or (c)(iv) below any and all of the
Collateral for any purposes including inspecting,
cutting, editing, modifying, scoring or similar
purposes;
(ii) to the extent applicable, to make
preprint material masters and positive prints of the
Picture and trailers thereof and to deliver thereof
to the Debtor or to such other parties as the Debtor
may direct;
(iii) to remove elements of the Collateral
for processing by optical and/or sound houses and/or
video houses or other processing laboratories which
shall agree in writing to be bound by the terms
hereof and to return such materials when processed to
the Laboratory; and
(iv) to forward any of the above-mentioned
property to another laboratory which is located
within any state in the continental United States
where UCC-1 financing statements have been filed
against the Debtor; provided that the Agent has
notified the Laboratory that such other laboratory,
the Debtor [, THE COMPLETION GUARANTOR] and the Agent
have executed a laboratory pledgeholder agreement
relating to the Picture and all items of the
Collateral, in such form as shall be acceptable to
the Agent.
(c) If and when the Laboratory shall receive written
notice that an Event of Default shall have occurred under the
Credit Agreement, the Laboratory will hold all of the items of
the Collateral in its possession or under its control as
pledgeholder hereunder, subject only to the written
instructions of
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<PAGE> 229
the Agent, and to the rights of [INSERT NAME OF DISTRIBUTOR
WHICH IS NOT AFFILIATED TO THE DEBTOR] to have access to
and/or receive delivery of items referred to in Paragraph 4
below.
2. [SUBJECT TO THE RIGHTS OF THE COMPLETION GUARANTOR
HEREUNDER,] the Laboratory agrees that in its capacity as pledgeholder, it is
holding and has possession of the Collateral and the physical properties
thereof constructively for the Agent for the benefit of the Lenders, and upon
the written request of the Agent together with written notice from the Agent
that an Event of Default (as such term is defined in the Credit Agreement) has
occurred, will hold a sale or sales of the Collateral or any part thereof in
accordance with the direction and instruction of the Agent, at the expense of
the Agent, or in the alternative will cause to be delivered or made available
to the Agent or its nominee the Collateral and all physical properties thereof
in the possession of the Laboratory or under its control. Nothing herein
contained shall be construed to waive any rights of the Laboratory as specified
under Paragraph 5 hereof.
3. [EACH OF THE COMPLETION GUARANTOR AND] the Debtor hereby
waives any claim for damages or otherwise which it may have against the
Laboratory for any acts which the Laboratory may take as pledgeholder, pursuant
to the direction of the Agent.
4. The Laboratory agrees that, despite the existence of a
lien referred to in Paragraph 5 hereof or any other claim which the Laboratory
may have against the Debtor [AND/OR THE COMPLETION GUARANTOR], the Laboratory
shall accept and fulfill orders for laboratory work and any other material
which may be required by the Agent or any third-party distributor of the
Picture, subject to satisfactory credit arrangements being made with the
Laboratory with respect to any charges incurred on behalf of the Agent or any
such third-party distributor, and the Laboratory will not assert any claim or
lien, statutory or otherwise, against the Agent or any such third-party
distributor or against the Picture (except as set forth in Paragraph 5 hereof)
with respect to any charges for laboratory services or materials ordered by the
Debtor or the Debtor's designees [OR THE COMPLETION GUARANTOR].
5. The Laboratory shall hold and/or process the Collateral
under its standard terms of business as set forth in Schedule 2 hereto, except
that any liens arising in favor of the Laboratory shall be limited to an
aggregate amount of $50,000 at any one time outstanding for processing and/or
storing the Collateral and/or materials delivered therefrom for the Debtor
[AND/OR THE COMPLETION GUARANTOR]. Except as provided in the prior sentence,
the rights of the Laboratory in the Collateral
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<PAGE> 230
shall be subordinate and junior to the rights of the Agent in respect of the
Collateral.
6. The Agent shall promptly give written notice to the
Laboratory when the obligations of the Debtor and/or its subsidiaries and/or
affiliates to the Lenders have been satisfied and the Lenders' security
interests in the Collateral have terminated. Upon receipt of such written
notice, the Laboratory's obligations hereunder shall terminate and all items of
the Collateral in possession of the Laboratory shall then and thereafter be
held in the name and subject to the instructions of the Debtor and its
designees.
7. This Agreement shall be binding on and inure to the
benefit of the successors and assigns of each of the parties.
8. THIS AGREEMENT SHALL IN ALL RESPECTS BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
9. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which when
taken together, shall constitute but one instrument, and shall become effective
on the date on which all of the parties hereto shall have executed and
delivered this Agreement to the Agent. Promptly thereafter, the Debtor shall
deliver or mail counterparts hereof bearing the signatures of each of the
parties hereto to each party hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed as of the day and year first above written.
[LABORATORY]
By_____________________________
Name:
Title:
Address:
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<PAGE> 231
[INSERT NAME OF DEBTOR(S) WHO
HAS (HAVE) CONTROL OVER THE
PHYSICAL ELEMENTS OF THE ITEM OF
PRODUCT]
By_____________________________
Name:
Title:
Address:
[COMPLETION GUARANTOR]
By_____________________________
Name:
Title:
Address:
CHEMICAL BANK, as Agent
By_____________________________
Name:
Title:
Address: 270 Park Avenue
New York, NY
10017-2070
Attention:
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<PAGE> 232
Schedule 1
LIST OF LABORATORY AND STORAGE FACILITIES
<PAGE> 233
Schedule 2
LABORATORY'S STANDARD TERMS OF BUSINESS
<PAGE> 234
EXHIBIT H
FORM OF BORROWING CERTIFICATE
The undersigned HEREBY CERTIFIES with respect to the [INSERT
SPECIFIC TYPE OF LOAN, I.E. A BAYWATCH LOAN, A B.N. LOAN OR A WORKING CAPITAL
LOAN] to be made to [INSERT NAME OF APPROPRIATE BORROWER], a ___________
corporation, on the date indicated below pursuant to the Credit, Security,
Guaranty and Pledge Agreement dated as of April 13, 1995, among All American
Communications, Inc., All American Fremantle International, Inc., The Baywatch
Production Company, and The Baywatch Nights Production Company as Borrowers and
Guarantors, the other Guarantors named therein, the Lenders named therein (the
"Lenders") and Chemical Bank as Agent and as Fronting Bank, as the same may be
amended from time to time (the "Credit Agreement"), the defined terms therein
being herein used with the same meanings, that:
(a) the representations and warranties contained
in the Credit Agreement are true and correct on and as of
the date hereof as if such representations and warranties
had been made on and as of the date hereof except to the
extent that such representations and warranties expressly
relate to an earlier date;
(b) no Default or Event of Default has occurred or
is continuing, nor shall any such event occur by reason of
the making of the [INSERT SPECIFIC TYPE OF LOAN, I.E. A
BAYWATCH LOAN, A B.N. LOAN OR A WORKING CAPITAL LOAN]
requested herein;
(c) [INSERT NAME OF APPROPRIATE BORROWER] requests
a [INSERT SPECIFIC TYPE OF LOAN, I.E. A BAYWATCH LOAN, A
B.N. LOAN OR A WORKING CAPITAL LOAN] on the terms and
conditions as stated in the Credit Agreement and the related
Notes:
(i) the requested Business Day of the
[INSERT SPECIFIC TYPE OF LOAN, I.E. A BAYWATCH LOAN,
A B.N. LOAN OR A WORKING CAPITAL LOAN] is
__________, 199_; and
(ii) the type of [INSERT WHETHER AN
ALTERNATE BASE RATE OR EURODOLLAR LOAN] requested,
the
<PAGE> 235
amounts thereof and the Interest Period(s) [IF A EURODOLLAR
LOAN IS REQUESTED] are as follows:
Type Interest Period Amount
____ _______________ ______
(d) the Borrowing Base on ____________, 199_
was $__________ as indicated on the most recent Borrowing
Base Certificate delivered to the Lenders pursuant to the
Credit Agreement and the undersigned has no reason to
believe that the Borrowing Base if currently computed would
be less than the outstanding principal amount of all
Revolving Credit Loans in the aggregate to all Borrowers
under the Credit Agreement (after giving effect to the Loan
requested hereby).
IN WITNESS WHEREOF, the undersigned has caused this
certificate to be executed this day of 199 .
[INSERT NAME OF APPROPRIATE BORROWER]
By____________________________
Name:
Title:
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<PAGE> 236
EXHIBIT I
FORM OF ASSIGNMENT AND ACCEPTANCE
Dated _____________, 199_
Reference is made to the Credit, Security, Guaranty and Pledge
Agreement dated as of April 13, 1995 among All American Communications, Inc.,
All American Fremantle International, Inc., The Baywatch Production Company,
and The Baywatch Nights Production Company as Borrowers and Guarantors, the
other Guarantors named therein, the Lenders named therein (the "Lenders") and
Chemical Bank as Agent and as Fronting Bank (the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meaning.
____________________ (the "Assignor") and ____________ (the
"Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and
the Assignee hereby purchases and assumes from the Assignor, a ___% interest in
and to all the Assignor's rights and obligations under the Credit Agreement as
of the Effective Date (as defined below) (including, without limitation, such
Assignor's Percentage interest in the Total Commitment of the Assignor on the
Effective Date and such percentage interest in the Loans owing to the Assignor
outstanding on the Effective Date together with such percentage interest in all
unpaid interest and Commitment Fees accrued to the Effective Date, as defined
herein).
2. The Assignor (i) represents that as of the date hereof,
its Percentage of all Loans under the Credit Agreement is ___%, its Total
Commitment (without giving effect to assignments thereof which have not yet
become effective) is $__________, the outstanding balance of its Loans
(unreduced by any assignments thereof which have not yet become effective) is
$___________; (ii) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Fundamental
Documents or any other instrument or document furnished pursuant thereto, other
than that it is the legal and beneficial owner of the interest being assigned
by it hereunder and that such interest is free and clear of any adverse claim;
and (iii) makes no representation or warranty and assumes no responsibility
with respect to the financial condition of the Debtors or the performance or
observance by the Debtors of any of their
<PAGE> 237
respective obligations under the Fundamental Documents or any other instrument
or document furnished pursuant thereto.
3. The Assignee (i) represents and warrants that it is
legally authorized to enter into this Assignment and Acceptance; (ii) confirms
that it has received a copy of the Credit Agreement, together with copies of
the most recent financial statements delivered pursuant to Sections 5.1(a) and
5.1(b) thereof (or if no such statements have been delivered as of the date
hereof, pursuant to Section 3.5 thereof) and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (iii) agrees that it
will, independently and without reliance upon the Agent, the Assignor or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement; (iv) appoints and authorizes the
Agent to take such action as agent on its behalf and to exercise such powers
under the Credit Agreement as are delegated to the Agent by the terms thereof,
together with such powers as are reasonably incidental thereto; (v) agrees that
it will perform in accordance with their terms all the obligations which by the
terms of the Credit Agreement are required to be performed by it as a Lender;
(vi) agrees that it will keep all the information provided to it pursuant to
the Credit Agreement confidential prior to its becoming public (through
publication other than as a result of action by one of the Lenders in violation
of the provisions of the Credit Agreement) subject, however, to the provisions
of Section 13.3(h) of the Credit Agreement; and (vii) attaches the forms
prescribed by the Internal Revenue Service of the United States certifying as
to the Assignee's exemption from United States withholding taxes with respect
to all payments to be made to the Assignee under the Credit Agreement or such
other documents as are necessary to indicate that all such payments are subject
to such tax at a rate reduced by any applicable tax treaty.(1)
4. The effective date for this Assignment and Acceptance
shall be ________________ (the "Effective Date").(2)
____________________
(1) If the Assignee is organized under the laws of a
jurisdiction outside the United States.
(2) Such date shall be not earlier than five Business Days
after the date of acceptance and recording by the
Agent.
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<PAGE> 238
Following the execution of this Assignment and Acceptance, it will be delivered
to the Agent for acceptance and recording by the Agent.
5. Upon such acceptance and recording, from and after the
Effective Date, (i) the Assignee shall be a party to the Credit Agreement and,
to the extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording, from and after the
Effective Date, the Agent shall make all payments in respect of the interest
assigned hereby (including payments of principal, interest, supplemental
interest, fees and other amounts) to the Assignee. The Assignor and Assignee
shall make all appropriate adjustments in payments made by the Agent for
periods prior to the Effective Date or with respect to the making of this
assignment directly between themselves.
7. This Assignment and Acceptance shall in all respects be
construed in accordance with and governed by the laws of the State of New York
applicable to contracts made and to be performed wholly within such state.
[NAME OF ASSIGNOR]
By____________________________
Name:
Title:
[NAME OF ASSIGNEE]
By____________________________
Name:
Title:
CHEMICAL BANK, as Agent
Accepted this __ day By____________________________
of __________, 199_ Name:
Title:
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<PAGE> 239
EXHIBIT J
SECURITY AGREEMENT, dated as of April
13, 1995 between FREMANTLE INTERNATIONAL,
INC., a New York corporation (the "Company"
or "Debtor"), CHEMICAL BANK, a New York
banking corporation (the "Agent"), as agent
for the Lenders, named in the Credit
Agreement (as defined below).
INTRODUCTORY STATEMENT
Pursuant to the Credit, Security, Guaranty and Pledge
Agreement dated as of April 13, 1995, as the same may from time to time be
amended (the "Credit Agreement") among All American Fremantle International,
Inc. (the "Obligor"), All American Communications, Inc., Baywatch Production
Company, and Baywatch Nights Production Company as Borrowers and Guarantors,
the other Guarantors named therein (the "Guarantors"), the Lenders named
therein (the "Lenders"), Chemical Bank as Agent and as Fronting Bank, the
Lenders have agreed to make a term loan (the "Term Loan") to the Obligor, as
more particularly set forth, and subject to the terms and conditions of, the
Credit Agreement.
As an inducement to the Lenders to make the Term Loan to the
Obligor, the Debtor has agreed to grant to the Agent for the benefit of the
Lenders a security interest in the Fremantle Collateral (as hereinafter
defined).
Therefore, for good and valuable consideration, receipt of
which is hereby acknowledged by the Debtor, the parties hereto agree as
follows:
1. DEFINITIONS
The following terms as used herein shall have the following
meanings:
"Affiliate" shall mean, with respect to any entity, any Person
which directly or indirectly holds a controlling interest in, or is under
common control with, such entity and any natural Person who is a director or
officer of such entity. For purposes of this definition, a Person shall be
deemed to be "controlled by" another Person if such latter Person possesses,
directly or indirectly, power either to direct or cause the direction of the
management and policies of such controlled Person whether by contract or
otherwise or if such latter Person owns either directly or indirectly at least
20% of the voting securities or general partnership interest of such controlled
Person.
<PAGE> 240
"Applicable Law" shall mean all provisions of statutes, rules,
regulations and orders of governmental bodies or regulatory agencies applicable
to a Person, and all orders and decrees of all courts and arbitrators in
proceedings or actions in which the Person in question is a party.
"Event of Default" shall have the meaning given such term in
Article 4 hereof.
"Fremantle Collateral" shall mean all the Debtor's right,
title and interest in personal property, tangible and intangible, wherever
located or situated and whether now owned or hereafter acquired or created,
including but not limited to all related goods, accounts, intercompany
obligations, contract rights, documents, chattel paper, general intangibles,
goodwill, equipment, inventory, copyrights, insurance proceeds, cash and bank
accounts and any proceeds thereon, products thereof or income therefrom,
further including but not limited to all of the Debtor's right, title and
interest in and to each and every item of Product to the extent of the Debtor's
interest therein and without limiting the foregoing language, each and all of
the following particular rights and properties to the extent of the Debtor's
interest therein:
(i) all scenarios, screenplays and/or scripts at
every stage thereof;
(ii) all common law and/or statutory copyright and
other rights in all literary and other properties (hereinafter
called "said literary properties") which form the basis of the
item of Product and/or which are or will be incorporated into
the item of Product, all component parts of the item of
Product (consisting of said literary and other properties, all
motion picture rights in and to the story, all treatments of
said story and other literary material, together with all
preliminary and final screenplays used and to be used in
connection with the item of Product, and all other literary
material upon which the item of Product is based or from which
it is adapted;
(iii) all rights in and to all music and musical
compositions used and to be used in the item of Product,
including, but without being limited to, all rights to record,
rerecord, produce, reproduce or synchronize all of said music
and musical compositions in and in connection with motion
pictures;
(iv) all exposed and developed negative film,
tapes, sound tracks, positive prints, cutouts and trims
connected with the item of Product, whether or not in
completed form or in some state of completion;
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(v) all collateral, allied, subsidiary and
merchandising rights appurtenant or related to the item of
Product including, without limitation, the following rights:
all rights to produce remakes or sequels or prequels to the
item of Product based upon the item of Product, said literary
properties or the theme of the item of Product and/or the text
or any part of said literary properties; all rights throughout
the world to broadcast, transmit and/or reproduce by means of
television (including commercially sponsored, sustaining and
subscription or "pay" television) or by any process analogous
thereto, now known or hereafter devised, the item of Product
or any remake or sequel or prequel to the item of Product; all
rights to produce primarily for television or similar use a
motion picture or series of motion pictures, by use of film or
any other mechanical recording device now known or hereafter
devised, based upon the item of Product, said literary
properties or any part thereof, including, without limitation,
based upon any script, scenario or the like used in the item
of Product; all merchandising rights including, without
limitation, all rights to use, exploit and license others to
use and exploit any and all commercial tieups of any kind
arising out of or connected with said literary properties, the
item of Product, the title or titles of the item of Product,
the characters of the item of Product or said literary
properties and/or the names or characteristics of said
characters and including further, without limitation, any and
all commercial exploitation in connection with or related to
the item of Product, any remake or sequel thereof and/or said
literary properties;
(vi) all statutory copyrights, domestic and
foreign, obtained or to be obtained on the item of Product,
together with any and all copyrights obtained or to be
obtained in connection with the item of Product or any
underlying or component elements of the item of Product,
including, but without being limited to, all copyrights on the
property described in subparagraphs (i) through (v) inclusive,
of this paragraph, together with the right to copyright and
all rights to renew or extend such copyrights and the right to
sue in the name of the Debtor or in the Agent's name (for the
benefit of the Lenders) for past, present and future
infringements of copyright;
(vii) all insurance policies and completion bonds
connected with the item of Product and all proceeds which may
be derived therefrom;
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(viii) all rights to distribute, sell, rent, license
the exhibition of and otherwise exploit and turn to account
the item of Product, the negatives, sound tracks, prints and
motion picture rights in and to said story, other literary
material upon which the item of Product is based or from which
it is adapted, and said music and musical compositions used or
to be used in the item of Product;
(ix) any and all sums, proceeds, money, products,
profits or increases, including money profits or increases (as
those terms are used in the UCC or otherwise) or other
property obtained or to be obtained from the distribution,
exhibition, sale or other uses or dispositions of the item of
Product or any part of the item of Product, including, without
limitation, all proceeds, profits, products and increases,
whether in money or otherwise, from the sale, rental or
licensing of the item of Product and/or any of the elements of
the item of Product including from collateral, allied,
subsidiary and merchandising rights;
(x) the dramatic, nondramatic, stage, television,
radio and publishing rights, title and interest in and to the
item of Product, and the right to obtain copyrights and
renewals of copyrights therein;
(xi) the title of the item of Product and all
rights of the Debtor to the use thereof, including, without
limitation, rights protected pursuant to trademark, service
mark, unfair competition and/or the rules and principles of
law and of any other applicable statutory, common law, or
other applicable statutes, common law, or other rule or
principle of law;
(xii) any and all contract rights and/or chattel
paper which may arise in connection with the item of Product;
(xiii) all accounts and/or other rights to payment
which the Debtor presently owns or which may arise in favor of
the Debtor in the future, including, without limitation, any
refund under a completion guaranty, all accounts and/or rights
to payment due from exhibitors in connection with the
distribution of the item of Product, and from exploitation of
any and all of the collateral, allied, subsidiary,
merchandising and other rights in connection with the item of
Product;
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(xiv) any and all "general intangibles" (as that
term is defined in the UCC) not elsewhere included in this
definition, including, without limitation, any and all general
intangibles consisting of any right to payment which may arise
in the distribution or exploitation of any of the rights set
out herein, and any and all general intangible rights in favor
of the Debtor or the Lenders for services or other
performances by any third parties, including actors, writers,
directors, individual producers and/or any and all other
performing or nonperforming artists in any way connected with
the item of Product, any and all general intangible rights in
favor of the Debtor or the Lenders relating to licenses of
sound or other equipment, licenses for any photograph or
photographic process, and all general intangibles related to
the distribution or exploitation of the item of Product
including general intangibles related to or which grow out of
the exhibition of the item of Product and the exploitation of
any and all other rights in the item of Product set out in
this definition;
(xv) any and all goods including inventory (as that
term is defined in the UCC) which may arise in connection with
the creation, production or delivery of the item of Product
and which goods pursuant to any production or distribution
agreement or otherwise are owned by the Debtor;
(xvi) all and each of the rights, regardless of
denomination, which arise in connection with the creation,
production, completion of production, delivery, distribution,
or other exploitation of the item of Product, including,
without limitation, any and all rights in favor of the Debtor
and/or the Agent (for the benefit of the Lenders), the
ownership or control of which are or may become necessary or
desirable, in the opinion of the Agent, in order to complete
production of the item of Product in the event that the Agent
exercises any rights it may have to take over and complete
production of the item of Product;
(xvii) any and all documents issued by any
pledgeholder or bailee with respect to the item of Product,
the negatives, sound tracks or prints with respect thereto;
(xviii) any and all rights of the Debtor under
contracts relating to the production of the Product; and
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(xix) any and all rights of the Debtor under
distribution agreements and/or licensing agreements relating
to the item of Product.
"Fundamental Documents" shall mean the Credit Agreement and
all ancillary documentation which is required to be or is otherwise executed by
any of the Guarantors or the Obligor and delivered to the Agent in connection
with the Credit Agreement.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind whatsoever (including any conditional
sale or other title retention agreement, any lease in the nature thereof, and
the filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction or the agreement to grant a security
interest at a future date).
"Obligations" shall mean the obligation of the Obligor to
make due and punctual payment of principal of and interest on the Term Loan and
all other monetary obligations of the Obligor to the Agent or any Lender under
the Credit Agreement or any other Fundamental Documents.
"Person" shall mean any natural person, corporation,
division of a corporation, partnership, trust, joint venture, association,
company, estate, unincorporated organization or government or any agency or
political subdivision thereof.
"Product" shall mean any movie-of-the-week, television
series, motion picture, film, videotape or other program produced for
television release or for release in any other medium, or exhibited in any
theatre, or shown on network, free and cable, pay and/or other television
medium (including without limitation first run syndication) in each case
whether recorded on film, videotape, cassette, cartridge, disc or on or by any
other means, method, process or device whether now known or hereafter
developed, with respect to which the Debtor (i) is the initial copyright owner
or (ii) acquires an equity interest or distribution rights. The term "item of
Product" shall include, without limitation, the scenario, screenplay or script
upon which such item of Product is based, all of the properties thereof,
tangible and intangible, and whether now in existence or hereafter to be made
or produced, whether or not in possession of the Debtor, and all rights therein
and thereto, of every kind and character to the extent of the Debtor's interest
therein.
"UCC" shall mean the Uniform Commercial Code as in effect in
the State of New York on the date of execution of this Security Agreement.
2. GRANT OF SECURITY INTEREST
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SECTION 2.1. Security Interests. As security for the due
and punctual payment of the Obligations, the Debtor hereby mortgages, pledges,
assigns, transfers, sets over, conveys and delivers to the Agent for the
benefit of the Lenders and grants to the Agent for the benefit of the Lenders a
security interest in all of its right, title and interest in and to the
Fremantle Collateral.
SECTION 2.2. Use of Fremantle Collateral. So long as no
Event of Default shall have occurred and be continuing, and subject always to
the various provisions of this Security Agreement, the Debtor may use the
Fremantle Collateral in any lawful manner permitted hereunder.
SECTION 2.3. Debtor To Hold in Trust. Upon the occurrence
and during the continuance of an Event of Default, the Debtor will, upon
receipt by it of any revenue, income, profits or other sums in which a security
interest is granted by this Security Agreement, payable pursuant to any
agreement or otherwise, or of any check, draft, note, trade acceptance or other
instrument evidencing an obligation to pay any such sum, hold the sum or
instrument in trust for the Lenders, and forthwith, without any notice, demand
or other action on the part of the Lenders whatsoever (all notices, demands, or
other actions on the part of the Lenders being expressly waived), endorse,
transfer and deliver any such sums or instruments or both, to the Agent to be
applied to the repayment of the Obligations in accordance with the provisions
of the Credit Agreement.
SECTION 2.4. Collections, etc. Upon the occurrence of an
Event of Default, and during the continuation of such Event of Default, the
Agent may, in its sole discretion, in its name or in the name of the Debtor or
otherwise, demand, sue for, collect or receive any money or property at any
time payable or receivable on account of or in exchange for, or make any
compromise or settlement deemed desirable with respect to, any of the Fremantle
Collateral, but shall be under no obligation so to do, or the Agent may extend
the time of payment, arrange for payment in installments, or otherwise modify
the terms of, or release, any of the Fremantle Collateral, without thereby
incurring responsibility to, or discharging or otherwise affecting any
liability of, the Debtor. The Agent will not be required to take any steps to
preserve any rights against prior parties to the Fremantle Collateral. If the
Debtor fails to take any action required hereunder, the Agent may take all such
actions as the Agent reasonably deems necessary to protect the Lenders'
security interests in the Fremantle Collateral and/or the value thereof, and
the Agent is hereby authorized (without limiting the general nature of the
authority herein above conferred) to pay, purchase, contest, or compromise any
Liens which in the judgment of the Agent appear to be equal to, prior to or
superior to the security
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interests of the Lenders in the Fremantle Collateral and any Liens not
expressly permitted by this Security Agreement.
SECTION 2.5. Possession, Sale of Collateral, etc. Upon the
occurrence of an Event of Default, and during the continuation of such Event of
Default, the Agent may enter upon the premises of the Debtor or wherever the
Fremantle Collateral may be, and take possession of the Fremantle Collateral,
and may demand and receive such possession from any Person who has possession
thereof, and the Agent may take such measures as it may deem necessary or
proper for the care or protection thereof, including the rights to remove all
or any portion of the Fremantle Collateral, and with or without taking such
possession may sell or cause to be sold, whenever the Agent shall decide, in
one or more sales or parcels, at such prices as the Agent may deem best, and
for cash or on credit or for future delivery, without assumption of any credit
risk, all or any portion of the Fremantle Collateral, at any broker's board or
at a public or private sale, without any demand of performance or notice of
intention to sell or of the time or place of sale (except 7 days' written
notice to the Debtor of the time and place of any such sale or sales and such
other notices as may be required by Applicable Law and cannot be waived), and
any Person may be the purchaser of all or any portion of the Fremantle
Collateral so sold and thereafter hold the same absolutely free (to the fullest
extent permitted by Applicable Law) from any claim or right of whatever kind,
including any equity of redemption, of the Debtor, any such demand, notice,
claim, right or equity being hereby expressly waived and released to the
fullest extent permitted by Applicable Law. At any sale or sales made pursuant
to this Security Agreement, the Agent may bid for or purchase, free (to the
fullest extent permitted by Applicable Law) from any claim or right of whatever
kind, including any equity of redemption, of the Debtor, any such demand,
notice, claim, right or equity being hereby expressly waived and released, any
part of or all of the Fremantle Collateral offered for sale, and may make any
payment on account thereof by using any claim for moneys then due and payable
to the Agent and the Lenders (subject to the provisions of the Credit
Agreement) by the Debtor hereunder as a credit against the purchase price. The
Agent shall in any such sale make no representations or warranties with respect
to the Fremantle Collateral or any part thereof, and neither the Agent nor any
Lender shall be chargeable with any of the obligations or liabilities of the
Debtor. The Debtor hereby agrees (i) that it will indemnify and hold the Agent
and the Lenders harmless from and against any and all claims with respect to
the Fremantle Collateral asserted before the taking of actual possession or
control of the relevant Fremantle Collateral by the Agent pursuant to this
Security Agreement, or arising out of any act of, or omission to act on the
part of, any party other than the Agent prior to such taking of actual
possession or control by the Agent, or arising out of any act on the part of
the Debtor, or its agents before or after the commencement of such actual
possession or
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control by the Agent; and (ii) neither the Agent nor any Lender shall have
liability or obligation to the Debtor arising out of any such claim except for
acts of willful misconduct or gross negligence or not taken in good faith.
Subject only to the lawful rights of third parties, any laboratory which has
possession of any of the Fremantle Collateral is hereby constituted and
appointed by such Debtor to act as pledgeholder for the Agent and, upon the
occurrence of an Event of Default, each such pledgeholder is hereby authorized
to sell all or any portion of the Fremantle Collateral upon the order and
direction of the Agent, and the Debtor hereby waives any and all claims, for
damages or otherwise, for any action taken by such pledgeholder in accordance
with the terms of the UCC not otherwise waived hereunder. In any action
hereunder, the Agent shall be entitled to the appointment of a receiver,
without notice, to take possession of all or any portion of the Fremantle
Collateral and to exercise such powers as the court shall confer upon the
receiver. Notwithstanding the foregoing, upon the occurrence of an Event of
Default, and during the continuation of such Event of Default, the Agent shall
be entitled to apply, without prior notice to the Debtor, any cash or cash
items constituting Fremantle Collateral in the possession of the Agent to
payment of that portion of the Obligations secured hereby.
SECTION 2.6. Application of Proceeds on Default. After the
occurrence of an Event of Default and during the continuance of an Event of
Default, the balances in any account of the Debtor with any Lender, all other
income on the Fremantle Collateral, and all proceeds from any sale of the
Fremantle Collateral pursuant hereto shall be applied (in such order as the
Agent shall in its sole discretion determine, but subject to the rights of the
Lenders) to the payment in full of that portion of the Obligations secured
hereby. Any amounts remaining after such payment in full shall be remitted to
any account maintained by the Debtor with the Agent or as a court of competent
jurisdiction may otherwise direct.
SECTION 2.7. Power of Attorney. Upon the occurrence of an
Event of Default and during the continuation of such Event of Default, (a) the
Debtor does hereby irrevocably make, constitute and appoint the Agent or any of
its officers or designees its true and lawful attorney-in-fact with full power
in the name of the Agent or such other Person to receive, open and dispose of
all mail addressed to the Debtor, and to endorse any notes, checks, drafts,
money orders or other evidences of payment relating to the Fremantle Collateral
that may come into the possession of the Agent, with full power and right to
cause the mail of such Persons to be transferred to the Agent's own offices or
otherwise, and to do any and all other acts necessary or proper to carry out
the intent of this Security Agreement and the grant of the security interests
hereunder, and the Debtor hereby ratifies and confirms all that the Agent or
its substitutes shall properly do by virtue
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hereof; (b) the Debtor does hereby further irrevocably make, constitute and
appoint the Agent or any of its officers or designees its true and lawful
attorney-in-fact in the name of the Agent or the Debtor (i) to enforce all of
such Debtor's rights under and pursuant to all agreements with respect to the
Fremantle Collateral, all for the sole benefit of the Agent on behalf of the
Lenders, (ii) to enter into and perform such agreements as may be necessary in
order to carry out the terms, covenants and conditions of this Security
Agreement that are required to be observed or performed by the Debtor, (iii) to
execute such other and further mortgages, pledges and assignments of the
Fremantle Collateral, and related instruments or agreements, as the Agent may
reasonably require for the purpose of perfecting, protecting, maintaining or
enforcing the security interests granted to the Agent for the benefit of the
Lenders hereunder, and (iv) to do any and all other things necessary or proper
to carry out the intention of this Security Agreement and the grant of the
security interests hereunder and the Debtor hereby ratifies and confirms in
advance all that the Agent as such attorney-in-fact or its substitutes shall
properly do by virtue of this power of attorney.
SECTION 2.8. Financing Statements, Direct Payments,
Confirmation of Receivables and Audit Rights. So long as the Obligations are
outstanding, the Debtor hereby authorizes the Agent to file UCC financing
statements and any amendments thereto or continuations thereof and any other
appropriate security documents or instruments and to give any notices necessary
or desirable to perfect the Lien of the Agent for the benefit of the Lenders on
the Fremantle Collateral, in all cases without the signature of the Debtor or
to execute such items as attorney-in-fact for the Debtor. The Debtor further
authorizes the Agent, (i) upon the occurrence of an Event of Default, and
during the continuation of such Event of Default, to notify any account debtor
that all sums payable to the Debtor relating to the Fremantle Collateral shall
be paid directly to the Agent; (ii) to confirm directly with any account debtor
the amounts payable by them to the Debtor with regard to the Fremantle
Collateral; and (iii) to participate with the Debtor in the audits of its
account debtor or to request that the Debtor's auditors confirm with account
debtor the amounts and terms of all accounts receivable.
SECTION 2.9. Further Assurances.
(a) Upon the request of the Agent, the Debtor hereby agrees
to duly execute and deliver, or cause to be duly executed and delivered, at the
cost and expense of the Debtor, such further instruments as may be necessary or
proper, in the judgment of the Agent, to carry out the provisions and purposes
of this Article, and to do all things necessary or proper, in the judgment of
the Agent, to perfect and preserve the security interests of the Agent for the
benefit of the Lenders hereunder in the Fremantle Collateral or any portion
thereof.
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(b) Upon the request of the Agent, the Debtor hereby agrees
to promptly perform or cause to be performed any and all acts and execute or
cause to be executed any and all documents (including, without limitation, the
execution, amendment or supplementation of any financing statement and
continuation statement or other statement) for filing under the provisions of
the UCC and the rules and regulations thereunder, or any other statute, rule or
regulation of any applicable foreign, federal, state or local jurisdiction,
which are necessary or advisable, from time to time, in order to grant and
maintain in favor of the Agent for the benefit of the Lenders the security
interests in the Fremantle Collateral contemplated hereunder, subject only to
Permitted Encumbrances.
(c) The Debtor hereby agrees to promptly undertake to
deliver or cause to be delivered to the Lenders from time to time such other
documentation, consents, authorizations and approvals in form and substance
satisfactory to the Agent, as the Agent shall deem reasonably necessary or
advisable to perfect or maintain the Liens of the Agent for the benefit of the
Lenders.
SECTION 2.10. Termination. The security interests granted
under this Article 2 shall terminate when all the Obligations have been
indefeasibly fully paid and performed.
SECTION 2.11. Remedies Not Exclusive. The remedies
conferred upon or reserved to the Agent in this Article 2 are intended to be in
addition to, and not in limitation of, any other remedy or remedies available
to the Agent. Without limiting the generality of the foregoing, the Agent and
the Lenders shall have all rights and remedies of a secured creditor under
Article 9 of the UCC and any other Applicable Law.
SECTION 2.12. Quiet Enjoyment. The Agent acknowledges that
the security interest granted hereunder is subject to the rights of Quiet
Enjoyment of various licensees (which are not Affiliates of the Debtor) under
license agreements, whether existing on the date hereof or hereafter executed.
For the purpose hereof, "Quiet Enjoyment" shall mean in connection with the
rights of licensees (which are not Affiliates of the Debtor) under license
agreements, the Agent's agreement that its rights under this Security Agreement
and the Fundamental Documents and in the Fremantle Collateral are subject to
the rights of such licensees to distribute, exhibit and/or to exploit the item
of Product licensed to them, and to receive prints or have access to preprint
material in connection therewith and that even if the Agent for the benefit of
the Lenders shall become the owner of the Fremantle Collateral in case of an
Event of Default, the Agent's ownership rights shall be subject to the rights
of said licensees under such license agreements, provided, however, that the
Lenders shall not be responsible for any liability or obligation of the Debtor
under any license agreement.
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3. REPRESENTATIONS AND WARRANTIES OF THE DEBTOR
The Debtor makes the following representations and
warranties to the Agent, all of which shall survive the execution and delivery
of this Security Agreement:
(i) The Debtor is a corporation duly organized,
validly existing and in good standing under the laws of its
jurisdiction of incorporation and is in good standing as a
foreign corporation in all jurisdictions where the nature of
its properties or business so requires. The Debtor has the
corporate power and authority to own its properties and
carry on its business as now being conducted, to execute,
deliver and perform its obligations under this Security
Agreement and to grant to the Agent, for the benefit of the
Lenders, a security interest in the Fremantle Collateral.
(ii) The execution, delivery and performance of
this Security Agreement and the grant to the Agent for the
benefit of the Lenders of a security interest in the
Fremantle Collateral (a) have been duly authorized by all
necessary corporate action on the part of the Debtor, (b)
will not violate, or involve any of the Lenders in a
violation of, any provision of Applicable Law, any order of
any court or other agency of the United States or any state
thereof, applicable to the Debtor or any of its properties
or assets, (c) will not violate any provision of the
Certificate of Incorporation or By-Laws of the Debtor, or
any provision of any indenture, material agreement, bond,
note or other similar material instrument to which the
Debtor is a party or by which the Debtor or any of its
properties or assets are bound, (d) will not be in conflict
with, result in a breach of or constitute (with due notice
or lapse of time or both) a default under any such
indenture, agreement, bond, note or other instrument and (e)
will not result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any
properties or assets of the Debtor other than pursuant to
this Security Agreement.
(iii) This Security Agreement when executed will
constitute the legal, valid and binding obligation of the
Debtor, enforceable in accordance with its terms, subject
(a) as to the enforcement of remedies, to applicable
bankruptcy, insolvency and similar laws affecting creditors'
rights generally and (b) to general principles of equity.
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(iv) The Debtor will realize a direct economic
benefit as a result of the Term Loans being made to the
Obligor under the Credit Agreement.
4. EVENTS OF DEFAULT
For purposes of this Security Agreement, the following
events shall constitute "Events of Default":
(a) an Event of Default (as defined therein) shall have
occurred under the Credit Agreement;
(b) any representation or warranty made by the Debtor
in the Security Agreement or in connection herewith shall prove to have been
false or misleading in any material respect when made;
(c) default shall be made by the Debtor in the due
observance or performance of any covenant or agreement contained in this
Security Agreement; or
(d) any Person shall have a right in the Fremantle
Collateral prior to or equal to that of the Agent for the benefit of the
Lenders (other than permitted encumbrances approved by the Majority Lenders
(such term used herein as defined in the Credit Agreement)) or any Person or
the Debtor shall assert that any Person has such right and such Person or such
Debtor shall not renounce such right within ten days after the Agent has
requested renunciation.
5. MISCELLANEOUS
SECTION 5.1. Notices. Any notice shall be conclusively
deemed to have been received by the Debtor and be effective on the day on which
delivered in writing (which shall include telegraphic communications) to the
Company at its address set forth on the signature page hereof or, if sent by
certified or registered mail, on the fifth day after the day on which mailed.
SECTION 5.2. Successors. Each reference herein to a party
hereto shall be deemed to include their respective successors and assigns
including but not by way of limitation, any party in whose favor the provisions
of the Credit Agreement shall inure. Each reference herein to the Debtor shall
be deemed to include the successors thereto and assigns thereof, all of whom
shall be bound by the provisions of this Security Agreement.
SECTION 5.3. SERVICE OF PROCESS. THE DEBTOR (I) HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATE COURTS OF THE STATE OF NEW
YORK AND TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK, FOR THE
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PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING HEREOF BROUGHT BY THE AGENT OR
THE LENDERS OR THEIR RESPECTIVE SUCCESSORS OR ASSIGNS AND (II) HEREBY WAIVES,
AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY
SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT SUBJECT PERSONALLY TO
THE JURISDICTION OF THE ABOVE-NAME COURTS, THAT ITS PROPERTY IS EXEMPT OR
IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS
BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR
PROCEEDING IS IMPROPER, OR THAT THIS SECURITY AGREEMENT OR THE SUBJECT MATTER
HEREOF OR THEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURT, AND (III) HEREBY
AGREES NOT TO ASSERT ANY OFFSETS OR COUNTERCLAIMS (OTHER THAN COMPULSORY
COUNTERCLAIMS) IN ANY SUCH ACTION, SUIT OR PROCEEDING. THE DEBTOR HEREBY
CONSENTS TO SERVICE OF PROCESS BY CERTIFIED MAIL AT ITS ADDRESS SET FORTH ON
THE SIGNATURE PAGES OF THIS SECURITY AGREEMENT AND AGREES THAT THE SUBMISSION
TO JURISDICTION AND THE CONSENT TO SERVICE OR PROCESS BY MAIL IS MADE FOR THE
EXPRESS BENEFIT OF THE AGENT AND THE LENDERS. FINAL JUDGMENT AGAINST THE
DEBTOR IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE, AND MAY BE
ENFORCED IN OTHER JURISDICTIONS (X) BY SUIT, ACTION OR PROCEEDING ON THE
JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE
FACT AND OF THE AMOUNT OF ANY LIABILITY OF THE DEBTOR THEREIN DESCRIBED OR (Y)
IN ANY OTHER MANNER PROVIDED BY OR PURSUANT TO THE LAWS OF SUCH OTHER
JURISDICTION; PROVIDED, HOWEVER, THAT EITHER THE AGENT OR THE LENDERS MAY AT
ITS OPTION BRING SUIT, OR INSTITUTE OTHER JUDICIAL PROCEEDINGS AGAINST THE
DEBTOR OR ANY OF ITS ASSETS IN ANY STATE OR FEDERAL COURT OF THE UNITED STATES
OR OF ANY COUNTRY OR PLACE WHERE SUCH DEBTOR OR SUCH ASSETS MAY BE FOUND.
SECTION 5.4. GOVERNING LAW. THIS SECURITY AGREEMENT SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK.
SECTION 5.5. No Waiver, etc. Neither a failure nor a delay
on the part of either the Agent or the Lenders in exercising any right, power
or privilege under this Security Agreement shall operate as a waiver thereof,
nor shall a single or partial exercise thereof preclude any other or further
exercise of any right, power or privilege. The rights, remedies and benefits
of the Agent and the Lenders herein expressly specified are cumulative and not
exclusive of any other rights, remedies or benefits which the Agent and the
Lenders may have under this Security Agreement, at law, in equity, by statute,
or otherwise.
SECTION 5.6. Modification, etc. No modification, amendment
or waiver of any provision of this Security Agreement, nor the consent to any
departure by the Debtor therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Agent, and then such waiver or
consent shall be effective only in the specific instance and for the purpose
for which given. No notice to or demand on the Debtor in any case
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shall entitle the Debtor to any other or further notice or demand in the same,
similar or other circumstances.
SECTION 5.7. Severability. If any one or more of the
provisions contained in this Security Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall in no way be affected or impaired
thereby.
SECTION 5.8. Headings. Section headings used herein are
for convenience of reference only and are not to affect the construction of, or
be taken into consideration in interpreting, this Security Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Security Agreement to be executed by its duly authorized officer as of the
date first written above.
FREMANTLE INTERNATIONAL, INC.
By____________________________
Name:
Title:
Address:
CHEMICAL BANK, as Agent
By____________________________
Name:
Title:
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EXHIBIT K
AGREEMENT dated as of April 13, 1995
between THE INTERPUBLIC GROUP OF COMPANIES,
INC., a Delaware corporation ("Interpublic"
or "Pledgor"), CHEMICAL BANK, a New York
banking corpration (the "Agent"), as agent
for the Lenders, named in the Credit
Agreement (as defined below) or any credit
agreement which replaces the Credit Agreement
or constitutes a refinancing of the loans
under the Credit Agreement.
INTRODUCTORY STATEMENT
Pursuant to the Credit, Security, Guaranty and Pledge
Agreement dated as of April 13, 1995, as the same may from time to time be
amended (the "Credit Agreement") among All American Fremantle International,
Inc., All American Communications, Inc., Baywatch Production Company, and
Baywatch Nights Production Company as Borrowers and Guarantors, the other
Guarantors named therein, the Lenders named therein (the "Lenders"), Chemical
Bank as Agent and as Fronting Bank, the Lenders have agreed to make a term loan
(the "Term Loan") to All American Fremantle International, Inc. (the
"Obligor"), as more particularly set forth, and subject to the terms and
conditions of, the Credit Agreement.
As an inducement to the Lenders to make the Term Loan to the
Obligor, the Pledgor has agreed to grant to the Agent for the benefit of the
Lenders a security interest in the Pledged Securities (as hereinafter defined)
and to enter into this Agreement with the Agent.
Therefore, for good and valuable consideration, receipt of
which is hereby acknowledged by the Pledgor, the parties hereto agree as
follows:
1. DEFINITIONS:
The following terms used herein shall have the following
meanings:
"Affiliate" shall mean, with respect to any entity, any Person
which directly or indirectly holds a controlling interest in, or is under
common control with, such entity and any natural Person who is a director or
officer of such entity. For purposes of this definition, a Person shall be
deemed to be "controlled
<PAGE> 255
by" another Person if such latter Person possesses, directly or indirectly,
power either to direct or cause the direction of the management and policies of
such controlled Person whether by contract or otherwise or if such latter
Person owns either directly or indirectly at least 20% of the voting securities
or general partnership interest of such controlled Person.
"Applicable Law" shall mean all provisions of statutes, rules,
regulations and orders of governmental bodies or regulatory agencies applicable
to a Person, and all orders and decrees of all courts and arbitrators in
proceedings or actions in which the Person in question is a party.
"Buyer's Option" shall mean the option granted by Interpublic
to the Parent to purchase all or a portion of the shares of the voting stock of
Fremantle not purchased by the Parent at the closing of the Fremantle Purchase
Agreement which option has been granted pursuant to a Letter Agreement dated
August 3, 1994 between Interpublic and the Parent.
"Event of Default" shall have the meaning given such term in
Article 5 hereof.
"Fremantle" shall mean Fremantle International Inc., a New
York corporation.
"Fremantle Purchase Agreement" shall mean the Amended and
Restated Acquisition Agreement between the Parent and Interpublic dated as of
August 3, 1994 and such amendments, modifications and restatements thereof as
may be acceptable to the Agent.
"Fremantle Security Agreement" shall mean the Security and
Pledge Agreement dated as of April 13, 1995 between Fremantle and Chemical Bank
as Agent.
"Goodson" shall have the meaning given thereto in the
Fremantle Purchase Agreement.
"Goodson Agreements" shall have the meaning given thereto in
the Fremantle Purchase Agreement.
"Goodson Rights" shall have the meaning given thereto in the
Fremantle Purchase Agreement.
"Goodson Sublicenses" shall have the meaning given thereto in
the Fremantle Purchase Agreement.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind whatsoever (including any conditional
sale or other title retention agreement, any lease in the nature thereof, and
the filing of or
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agreement to give any financing statement under the Uniform Commercial Code of
any jurisdiction or the agreement to grant a security interest at a future
date).
"Obligations" shall mean the Obligor's Obligations and the
obligations of Interpublic hereunder.
"Obligor" shall have the meaning given such term in the
Introductory Statement.
"Obligor's Obligations" shall mean the obligation of the
Obligor to make due and punctual payment of principal of and interest on the
Term Loan and all other monetary obligations of the Obligor to the Agent or any
Lender under the Credit Agreement, the notes issued pursuant thereto or any
other fundamental documents executed in connection therewith and shall include
the Obligor's obligation under any credit agreement which replaces the Credit
Agreement or constitutes a refinancing of the loans under the Credit Agreement.
"Pledged Securities" shall mean all of the issued and
outstanding shares of voting stock of Fremantle, as more fully described on
Schedule 1 hereto.
2. PLEDGE
SECTION 2.1. Pledge. As security for the Obligations, the
Pledgor hereby pledges, hypothecates, assigns, transfers, sets over and
delivers unto the Agent for the benefit of the Lenders, a security interest in
all Pledged Securities now owned or hereafter acquired by it. Upon execution
of this Agreement, the Pledgor shall deliver to the Agent the definitive
instruments representing all Pledged Securities, accompanied by executed
undated stock powers, duly endorsed or executed in blank by the appropriate
Pledgor, and such other instruments or documents as the Agent on behalf of the
Lenders or its counsel shall request.
SECTION 2.2. Registration in Nominee Name; Denominations.
The Agent shall have the right (in its sole and absolute discretion) to hold
the certificates representing any Pledged Securities (a) in its own name or in
the name of its nominee or (b) in the name of the appropriate Pledgor, endorsed
or assigned in blank or in favor of the Agent. The Agent shall have the right
to exchange the certificates representing Pledged Securities for certificates
of smaller or larger denominations for any purpose consistent with this
Agreement.
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<PAGE> 257
SECTION 2.3. Voting Rights; Dividends; etc.
(a) The Pledgor shall be entitled to exercise any and all
voting and/or consensual rights and powers accruing to owners of the Pledged
Securities or any part thereof for any purpose not inconsistent with the terms
hereof, at all times, except as expressly provided in (c) below.
(b) Any dividends or distributions of any kind whatsoever
(other, so long as an Event of Default is not continuing, than cash) received
by a Pledgor, whether resulting from a subdivision, combination, or
reclassification of the outstanding capital stock of the issuer or received in
exchange for Pledged Securities or any part thereof or as a result of any
merger, consolidation, acquisition, or other exchange of assets to which the
issuer may be a party, or otherwise, shall be and become part of the Pledged
Securities pledged hereunder and shall immediately be delivered to the Agent to
be held subject to the terms hereof.
(c) Upon the occurrence and during the continuance of an
Event of Default and notice from the Agent of the transfer of such rights to
the Agent, all rights of the Pledgor to exercise the voting and/or consensual
rights and powers which it is entitled to exercise pursuant to this Section
shall cease, and all such rights shall thereupon become vested in the Agent,
which shall have the sole and exclusive right and authority to exercise such
voting and/or consensual rights.
SECTION 2.4. Remedies Upon Default. If an Event of Default
shall have occurred and be continuing, the Agent on behalf of the Lenders may
sell the Pledged Securities, or any part thereof, at public or private sale or
at any broker's board or on any securities exchange, for cash, upon credit or
for future delivery as the Agent shall deem appropriate subject to the terms
hereof or as otherwise provided in the New York Uniform Commercial Code. The
Agent shall be authorized at any such sale (if it deems it advisable to do so)
to restrict to the full extent permitted by Applicable Law the prospective
bidders or purchasers to persons who will represent and agree that they are
purchasing the Pledged Securities for their own account for investment and not
with a view to the distribution or sale thereof, and upon consummation of any
such sale the Agent shall have the right to assign, transfer, and deliver to
the purchaser or purchasers thereof the Pledged Securities so sold. Each such
purchaser at any such sale shall hold the property sold absolutely, free from
any claim or right on the part of the Pledgor; provided, however, that prior to
the consummation of such sale the Pledgor shall be entitled to redeem the
Pledged Securities by paying (i) all the Obligations and (ii) any additional
costs or expenses incurred by the Agent in connection with the proposed sale of
the Pledged Securities. The Agent
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shall give ten days' written notice of its intention to make any such public or
private sale, or sale at any broker's board or on any such securities exchange,
or of any other disposition of the Pledged Securities. Such notice, in the
case of public sale, shall state the time and place for such sale and, in the
case of sale at a broker's board or on a securities exchange, shall state the
board or exchange at which such sale is to be made and the day on which the
Pledged Securities, or portion thereof, will first be offered for sale at such
board or exchange. Any such public sale shall be held at such time or times
within ordinary business hours and at such place or places as the Agent may fix
and shall state in the notice of such sale. At any such sale, the Pledged
Securities, or portion thereof, to be sold may be sold in one lot as an
entirety or in separate parcels, as the Agent may (in its sole and absolute
discretion) determine. The Agent shall not be obligated to make any sale of
the Pledged Securities if it shall determine not to do so, regardless of the
fact that notice of sale of the Pledged Securities may have been given. The
Agent may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the time
and place fixed for sale, and such sale may, without further notice, be made at
the time and place to which the same was so adjourned. In case the sale of all
or any part of the Pledged Securities is made on credit or for future delivery,
the Pledged Securities so sold shall be retained by the Agent until the sale
price is paid by the purchaser or purchasers thereof, but the Agent shall not
incur any liability in case any such purchaser or purchasers shall fail to take
up and pay for the Pledged Securities so sold and, in case of any such failure,
such Pledged Securities may be sold again upon like notice. At any sale or
sales made pursuant to this Section 2.4, the Agent may bid for or purchase,
free from any claim or right of whatever kind, including any equity of
redemption, of the Pledgor, any such demand, notice, claim, right or equity
being hereby expressly waived and released, any or all of the Pledged
Securities offered for sale, and may make any payment on the account thereof by
using any claim for moneys then due and payable to the Agent or any consenting
Lender by any Pledgor as a credit against the purchase price; and the Agent,
upon compliance with the terms of sale, may hold, retain and dispose of the
Pledged Securities without further accountability therefor to the Pledgor or
any third party (other than the Lenders). The Agent shall in any such sale
make no representations or warranties with respect to the Pledged Securities or
any part thereof, and shall not be chargeable with any of the obligations or
liabilities of the Pledgor with respect thereto. Each Pledgor hereby agrees
(i) it will indemnify and hold the Agent and the Lenders (each an "Indemnified
Party") harmless from and against any and all claims with respect to the
Pledged Securities asserted before the taking of actual possession or control
of the Pledged Securities by the Agent pursuant to this Agreement or arising
out of any act of, or
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<PAGE> 259
omission to act on the part of, any party prior to such taking of actual
possession or control by the Agent (whether asserted before or after such
taking of possession or control), or arising out of any act on the part of any
Pledgor, their agents or Affiliates before or after the commencement of such
actual possession by the Agent, but excluding therefrom all claims arising out
of or resulting from the gross negligence or willful misconduct of such
Indemnified Party and (ii) the Agent and the Lenders shall have no liability or
obligation arising out of any such claim but excluding therefrom all claims
arising out of or resulting from the gross negligence or willful misconduct of
such Indemnified Party. As an alternative to exercising the power of sale
herein conferred upon it, the Agent may proceed by a suit or suits at law or in
equity to foreclose upon the Pledged Securities under this Agreement and to
sell the Pledged Securities, or any portion thereof, pursuant to a judgment or
decree of a court or courts having competent jurisdiction.
SECTION 2.5. Application of Proceeds of Sale and Cash. The
proceeds of sale of the Pledged Securities sold pursuant to Section 2.4 hereof
shall be applied by the Agent on behalf of the Lenders as follows:
(i) to the payment of all costs and expenses
incurred by the Agent in connection with such sale, including,
but not limited to, all court costs and the reasonable fees
and expenses of counsel for the Agent in connection therewith,
and the payment of all other costs and expenses paid or
incurred by the Agent in connection with this Agreement, or
the exercise of any right or remedy hereunder or otherwise in
connection with the Obligations; and
(ii) to the payment in full of the Obligations.
Any amounts remaining after such applications shall be remitted to the
appropriate Pledgor, or as a court of competent jurisdiction may otherwise
direct.
SECTION 2.6. Securities Act, etc. In view of the position of
each Pledgor in relation to the Pledged Securities pledged by it, or because of
other present or future circumstances, a question may arise under the
Securities Act of 1933, as amended, as now or hereafter in effect, or any
similar statute hereafter enacted analogous in purpose or effect (such Act and
any such similar statute as from time to time in effect being hereinafter
called the "Federal Securities Laws"), with respect to any disposition of the
Pledged Securities permitted hereunder, each Pledgor understands that
compliance with the Federal Securities Laws may very strictly limit the course
of conduct of the Agent if the Agent were to attempt to dispose of all or any
part of the Pledged Securities, and may also limit the
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extent to which or the manner in which any subsequent transferee of any Pledged
Securities may dispose of the same. Similarly, there may be other legal
restrictions or limitations affecting the Agent in any attempt to dispose of
all or any part of the Pledged Securities under applicable Blue Sky or other
state securities laws, or similar laws analogous in purpose or effect. Under
applicable law, in the absence of an agreement to the contrary, the Agent may
perhaps be held to have certain general duties and obligations to the Pledgor
to make some effort towards obtaining a fair price even though the Obligations
may be discharged or reduced by the proceeds of a sale at a lesser price. Each
Pledgor waives to the fullest extent permitted by Applicable Law any such
general duty or obligation to it, and the Pledgor and/or the Pledgors will not
attempt to hold the Agent responsible for selling all or any part of the
Pledged Securities at an inadequate price, even if the Agent shall accept the
first offer received or does not approach more than one possible purchaser.
Without limiting the generality of the foregoing, the provisions of this
Section 2.6 would apply if, for example, the Agent were to place all or any
part of the Pledged Securities for private placement by an investment banking
firm, or if such investment banking firm purchased all or any part of the
Pledged Securities for its own account, or if the Agent placed all or any part
of the Pledged Securities privately with a purchaser or purchasers.
SECTION 2.7. Continuation and Reinstatement. Each Pledgor
further agrees that its pledge hereunder shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
principal of or interest on any Obligation is rescinded or must otherwise be
restored by Agent or the Lenders upon the bankruptcy or reorganization of any
Pledgor or otherwise.
SECTION 2.8. Termination of Pledge. The pledge referenced
herein shall terminate when all of the Obligations shall have been indefeasibly
fully paid, at which time the Agent shall assign and deliver to the appropriate
Pledgor, or to such Person or Persons as such Pledgor shall designate, against
receipt, such of the Pledged Securities (if any) as shall not have been sold or
otherwise applied by the Agent pursuant to the terms hereof and shall still be
held by it hereunder, together with appropriate instruments of reassignment and
release. Any such reassignment shall be free and clear of all Liens, arising
by, under or through any Lender but shall otherwise be without recourse upon or
warranty by the Agent and at the expense of the Pledgor.
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3. AGREEMENTS AND ACKNOWLEDGMENTS
SECTION 3.1. Agreements of Interpublic.
Interpublic hereby agrees with the Agent that:
(i) until such time which is the earliest of (a)
August 3, 1997, (b) such time as the Goodson Rights shall no
longer be held by Fremantle or a subsidiary thereof and (c)
such time as Interpublic no longer owns a majority of the
voting stock of Fremantle, Interpublic shall directly or
indirectly own a minimum of 10% of the common stock of All
American Communications Inc., a Delaware corporation on a
fully-diluted basis;
(ii) unless Goodson shall have waived the change in
control termination provisions in its relevant agreements with
Fremantle or Goodson shall otherwise consent to the transfer
of a majority of the voting stock of Fremantle held by
Interpublic, subject to the Buyer's Option, Interpublic shall
directly or indirectly own all the voting stock of Fremantle;
(iii) as sole shareholder of the voting stock of
Fremantle, Interpublic (a) shall not vote its stock, cause the
directors of Fremantle to, or take any other action as a
shareholder which would cause Fremantle to (1) take any action
(or refrain from taking any action) which would directly or
indirectly materially decrease the value of the Fremantle
Collateral or materially and adversely affect the rights of
the Agent under the Fremantle Security Agreement; (2) incur
indebtedness, grant liens or guaranty debt of a third party
(other than to the extent necessary to service the Goodson
Rights) or materially modify any contract in connection with
the Goodson Rights, or (3) take any action which would violate
the following clauses contained in Section 6.1 of the
Fremantle Purchase Agreement: (a), (b), (c), (d), (f), (g),
(h), (i), (l), (n), (t) or (u) and (b) shall vote its stock,
cause the directors of Fremantle to take such other actions as
a shareholder to cause Fremantle to take such actions as shall
be reasonably necessary to maintain the Goodson Rights;
(iv) Interpublic will have the ability to meet all
of its obligations, whether now existing or arising hereafter,
under the Fremantle Purchase Agreement;
(v) Interpublic shall not sell, assign,
hypothecate, pledge, encumber or otherwise dispose, whether by
operation of law or otherwise any of the
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Pledged Securities other than pursuant to this Agreement or
the Buyer's Option;
(vi) Interpublic shall not cancel, terminate or
modify its indemnification obligations except to the extent
expressly contemplated herein under the Fremantle Purchase
Agreement (the "Indemnification Obligations");
(vii) to the extent Interpublic makes any payment to
the Parent or the Obligor in connection with its
Indemnification Obligations, Interpublic shall remit such
funds directly to the Agent at the address set forth on the
signature page hereof. The Parent and the Obligor hereby
instruct Interpublic to make such payment directly to the
Agent.
SECTION 3.2. (a) Notwithstanding any provision to the
contrary contained in the Fremantle Purchase Agreement (including, but not
limited to, Section 10.4 thereof), the Pledgor hereby acknowledges (i) notice
of, and consents to, the grant of a security interest by the Obligor to the
Agent for the benefit of the Lenders in the Parent's or the Obligor's rights
under the Fremantle Purchase Agreement, including but not limited to the
Indemnification Obligations provided for by Article VIII of the Fremantle
Purchase Agreement and (ii) that the Agent shall be entitled to exercise any
and all rights of the Parent or the Obligor to indemnification under Article
VIII of the Purchase Agreement in accordance with the terms thereof and each of
the Pledgor and the Agent hereby agrees to comply in all respects with such
exercise.
(b) Each of the Parent, the Obligor and the Agent hereby
agrees that neither Interpublic nor any of its Affiliates shall have any
liability to the Parent, the Obligor, the Agent or any Lender under the Credit
Agreement pursuant to Section 8.1(b) of the Fremantle Purchase Agreement, this
Agreement or otherwise to the extent (and only to the extent) such liability
arises from or is attributable to (i) the Agent's sale of the Pledged
Securities, (ii) a foreclosure by Agent of the security interest granted
hereunder by Interpublic in the Pledged Securities or (iii) Agent's actual
exercise of control over the Pledged Securities, including, without limitation
(if arising from or attributable to such foreclosure, sale or exercise of
control), a default, termination or breach of the Goodson Contracts and upon
such foreclosure, sale or exercise of control, any indemnity by Interpublic or
any of its Affiliates contained in Section 8.1 of the Fremantle Purchase
Agreement in respect of any such foreclosure, sale or exercise of control shall
terminate and be of no further effect to the extent (and only to the extent)
such claim arises from or is attributable to such foreclosure, sale or exercise
of control. Nothing herein shall limit any other
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representation, warranty or agreement by Interpublic in the Fremantle Purchase
Agreement or in this Agreement.
4. REPRESENTATIONS AND WARRANTIES
The Pledgor makes the following representations and warranties
to the Lenders, all of which shall survive the execution and delivery of this
Agreement:
(i) The Pledgor is a corporation duly organized,
validly existing and in good standing under the laws of its
jurisdiction of incorporation and is in good standing as a
foreign corporation in all jurisdictions where the nature of
its properties or business so requires. The Pledgor has the
corporate power and authority to own its properties and carry
on its businesses as now being conducted, to execute, deliver
and perform its obligations under this Agreement and to grant
to the Agent, for the benefit of the Lenders, a security
interest in the Pledged Securities;
(ii) the execution, delivery and performance of
this Agreement and the grant to the Agent for the benefit of
the Lenders of a security interest in the Pledged Securities
(a) have been duly authorized by all necessary corporate
action on the part of the Pledgor, (b) will not violate, or
involve any of the Lenders in a violation of, any provision of
Applicable Law, any order of any court or other agency of the
United States or any state thereof, applicable to the Pledgor
or any of its properties or assets, (c) will not violate any
provision of the Certificate of Incorporation or By-Laws of
the Pledgor, or any provision of any indenture, material
agreement, bond, note or other similar material instrument to
which the Pledgor is a party, (d) will not be in conflict
with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture,
agreement, bond, note or other instrument referred to in
clause (c) above and (e) will not result in the creation or
imposition of any lien, charge or encumbrance of any nature
whatsoever upon any properties or assets of any of the
Pledgors other than pursuant to this Agreement;
(iii) this Agreement when executed will constitute
the legal, valid and binding obligation of the Pledgor,
enforceable in accordance with its terms, subject (a) as to
the enforcement of remedies, to applicable bankruptcy,
insolvency and similar laws
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affecting creditors' rights generally and (b) to general
principles of equity.
(iv) the Pledgor has the ability to meet all of its
obligations under the Fremantle Purchase Agreement;
(v) the Pledged Securities are duly authorized,
validly issued, fully paid and non-assessable and are subject
to no options to purchase or similar rights of any Person
other than the Buyer's Option and the pledge hereunder;
(vi) there are no restrictions on the transfer of
the Pledged Securities other than the Buyer's Option, as a
result of this Agreement or applicable securities laws and the
regulations promulgated thereunder;
(vii) the Pledgor has good and marketable title to
the Pledged Securities owned by it;
(viii) the Pledged Securities are not subject to any
prior liens or encumbrances other than those in favor of the
Parent and/or the Obligor, including the Buyer's Option;
(ix) the Pledgor has the right to pledge the
Pledged Securities free of any encumbrances, without the
consent of any other Person or any governmental agency
whatsoever other than of the Parent and/or the Obligor, whose
consent is hereby given; and
(x) upon the delivery of the certificates
representing the Pledged Securities to the Agent in accordance
with this Article 4, the Agent will have valid and perfected
security interests in the Pledged Securities subject to no
prior lien or encumbrance. Upon such delivery, no
registration, recordation or filing with any governmental
body, agency or official is required in connection with the
execution or delivery of this Agreement or necessary for the
validity or enforceability hereof or for the perfection of the
security interest in the Pledged Securities created hereby.
The Pledgor has not performed and will not perform any acts
which might prevent the Agent from enforcing any of the terms
and conditions of this Agreement or which would limit the
Agent in any such enforcement.
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5. EVENTS OF DEFAULT
For purposes of this Agreement the following events shall
constitute "Events of Default":
(a) any representation or warranty made by the Pledgor in
this Agreement shall provide to have been materially false or misleading in any
material respect when made;
(b) default shall be made by the Pledgor in the due
observance or performance of any covenant or agreement contained in this
Agreement and such default shall continue unremedied for twenty days after
Pledgor receives written notice from the Agent of such default or after Pledgor
has actual knowledge thereof;
(c) Interpublic shall generally not pay its debts as they
become due or shall admit in writing its inability to pay its debts, or shall
make a general assignment for the benefit of creditors; or shall commence any
case, proceeding or other action seeking to have an order for relief entered on
its behalf as debtor or to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, liquidation, dissolution or
composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors or seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its property or shall file an answer or other pleading in
any such case, proceeding or other action admitting the material allegations of
any petition, complaint or similar pleading filed against it or consenting to
the relief sought therein; or Interpublic shall take any action to authorize
any of the foregoing;
(d) any involuntary case, proceeding or other action
against Interpublic shall be commenced seeking to have an order for relief
entered against it as debtor or to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, liquidation, dissolution or
composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its property, and such case, proceeding or other action (i)
results in the entry of any order for relief against it or (ii) shall remain
undismissed for a period of thirty (30) days;
(e) an Event of Default (as defined therein) shall have
occurred under the Fremantle Security Agreement; or
(f) an Event of Default (as defined therein) shall have
occurred under the Credit Agreement.
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6. MISCELLANEOUS
SECTION 6.1. Notices. Any notice shall be conclusively
deemed to have been received by the Pledgor and be effective on the day on
which delivered in writing (which shall include telegraphic communications) to
the Pledgor at its address set forth on the signature page hereof or, if sent
by certified or registered mail, on the fifth day after the day on which
mailed.
SECTION 6.2. Successors. Each reference herein to a party
hereto shall be deemed to include their respective successors and assigns
including but not by way of limitation, any party in whose favor the provisions
of the Credit Agreement shall inure. Each reference herein to a Pledgor shall
be deemed to include the successors thereto and assigns thereof, all of whom
shall be bound by the provisions of this Agreement.
SECTION 6.3. SERVICE OF PROCESS. THE PLEDGOR (I) HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATE COURTS OF THE STATE OF NEW
YORK AND TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER
PROCEEDING HEREOF BROUGHT BY THE AGENT OR THE LENDERS OR THEIR RESPECTIVE
SUCCESSORS OR ASSIGNS AND (II) HEREBY WAIVES, AND AGREES NOT TO ASSERT, BY WAY
OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING,
ANY CLAIM THAT IT IS NOT SUBJECT PERSONALLY TO THE JURISDICTION OF THE
ABOVE-NAME COURTS, THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR
EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT
FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT
THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR THEREOF MAY NOT BE ENFORCED IN
OR BY SUCH COURT, AND (III) HEREBY AGREES NOT TO ASSERT ANY OFFSETS OR
COUNTERCLAIMS (OTHER THAN COMPULSORY COUNTERCLAIMS) IN ANY SUCH ACTION, SUIT OR
PROCEEDING. THE PLEDGOR HEREBY CONSENTS TO SERVICE OF PROCESS BY CERTIFIED
MAIL AT ITS ADDRESS SET FORTH ON THE SIGNATURE PAGES OF THIS AGREEMENT AND
AGREES THAT THE SUBMISSION TO JURISDICTION AND THE CONSENT TO SERVICE OR
PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF THE AGENT AND THE LENDERS.
FINAL JUDGMENT AGAINST ANY PLEDGOR IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL
BE CONCLUSIVE, AND MAY BE ENFORCED IN OTHER JURISDICTIONS (X) BY SUIT, ACTION
OR PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE
CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF ANY INDEBTEDNESS OR
LIABILITY OF THE PLEDGOR THEREIN DESCRIBED OR (Y) IN ANY OTHER MANNER PROVIDED
BY OR PURSUANT TO THE LAWS OF SUCH OTHER JURISDICTION; PROVIDED, HOWEVER, THAT
EITHER THE AGENT OR THE LENDERS MAY AT ITS OPTION BRING SUIT, OR INSTITUTE
OTHER JUDICIAL PROCEEDINGS AGAINST A PLEDGOR OR ANY OF ITS ASSETS IN ANY STATE
OR FEDERAL COURT OF THE UNITED STATES OR OF ANY COUNTRY OR PLACE WHERE SUCH
PLEDGOR OR SUCH ASSETS MAY BE FOUND.
- 13 -
<PAGE> 267
SECTION 6.4. GOVERNING LAW. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 6.5. No Waiver, etc. Neither a failure nor a delay
on the part of either the Agent or the Lenders in exercising any right, power
or privilege under this Agreement shall operate as a waiver thereof, nor shall
a single or partial exercise thereof preclude any other or further exercise of
any right, power or privilege. The rights, remedies and benefits of the Agent
and the Lenders herein expressly specified are cumulative and not exclusive of
any other rights, remedies or benefits which the Agent and the Lenders may have
under this Agreement, at law, in equity, by statute, or otherwise.
SECTION 6.6. Remedies. In addition to legal remedies, in
recognition of the fact that remedies at law may not be sufficient, Interpublic
hereby acknowledges that the Agent (and its permitted successors and assigns)
shall be entitled to equitable remedies for breaches or defaults hereunder
including without limitation, specific performance and/or injunctive relief.
SECTION 6.7. Termination. The obligations of Interpublic
pursuant to Section 3.1 hereunder shall terminate on the earlier of (i) such
date as Interpublic no longer owns a majority of the voting stock of Fremantle
and (ii) August 3, 2000; provided, however, that the pledge of the Pledged
Securities hereunder shall continue notwithstanding such termination of such
covenants and shall terminate pursuant to the provisions of Section 2.8.
SECTION 6.8. Modification, etc. No modification, amendment
or waiver of any provision of this Agreement, nor the consent to any departure
by any Pledgor therefrom, shall in any event be effective unless the same shall
be in writing and signed by the Agent and Pledgor, and then such waiver or
consent shall be effective only in the specific instance and for the purpose
for which given. No notice to or demand on any Pledgor in any case shall
entitle the Pledgor to any other or further notice or demand in the same,
similar or other circumstances.
SECTION 6.9. LIMITATION ON REMEDIES. THE AGENT HEREBY
ACKNOWLEDGES THAT THIS AGREEMENT DOES NOT CONSTITUTE A GUARANTY BY INTERPUBLIC
OF THE OBLIGOR'S OBLIGATIONS AND THAT IN THE EVENT OF A FORECLOSURE BY THE
AGENT OF THE SECURITY INTEREST GRANTED HEREIN IN THE PLEDGED SECURITIES AND/OR
COMMENCEMENT OF LEGAL ACTION AGAINST THE OBLIGOR AS A RESULT OF THE OCCURRENCE
OF AN EVENT OF DEFAULT UNDER THE CREDIT AGREEMENT, INTERPUBLIC SHALL HAVE NO
OBLIGATION TO THE AGENT FOR ANY DEFICIENCY JUDGMENT OBTAINED BY THE AGENT IN
CONNECTION THEREWITH; PROVIDED, HOWEVER, THAT THIS ACKNOWLEDGMENT SHALL IN NO
WAY BE CONSTRUED AS A
- 14 -
<PAGE> 268
RELINQUISHMENT OF THE AGENT'S RIGHT TO A CLAIM AGAINST INTERPUBLIC IN THE EVENT
OF A BREACH OF THE REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE 4 HEREOF
OR ITS OBLIGATIONS CONTAINED IN SECTION 3.1 HEREOF. WITHOUT LIMITING THE
FOREGOING AND NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS
AGREEMENT, THE AGENT HEREBY AGREES THAT ITS AND THE LENDERS' SOLE RECOURSE
AGAINST INTERPUBLIC WITH RESPECT TO THE OBLIGOR'S OBLIGATIONS SHALL BE TO
REALIZE ON THE PLEDGED SECURITIES. AGENT HEREBY AGREES NOT TO ASSERT ANY CLAIM
AGAINST INTERPUBLIC WITH RESPECT TO THE OBLIGOR'S OBLIGATIONS.
SECTION 6.10. Headings. Section headings used herein are for
convenience of reference only and are not to affect the construction of, or be
taken into consideration in interpreting, this Agreement.
- 15 -
<PAGE> 269
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officers as of the date first
written above.
THE INTERPUBLIC GROUP
OF COMPANIES, INC.
By:___________________________
Name:
Title:
Address:
CHEMICAL BANK
By:___________________________
Name:
Title:
Address: 270 Park Avenue
New York, N.Y.
10017-2070
Attention:
CONSENTED TO:
ALL AMERICAN COMMUNICATIONS,
INC.
By:__________________________
Name:
Title:
ALL AMERICAN FREMANTLE
INTERNATIONAL, INC.
By:__________________________
Name:
Title:
<PAGE> 270
SCHEDULE 1
Pledged Securities
Certificate Number Number of Shares
__________________ _________________
01 3
<PAGE> 271
EXHIBIT L
FORM OF TRADEMARK SECURITY AGREEMENT
WHEREAS, All American Communications, Inc., a Delaware
corporation ("Parent") and each Subsidiary of Parent whose name appears at the
foot hereof (collectively the "Pledgors") owns certain trademarks, trade names,
business names, trade dress, service marks, logos and other source or business
identifiers, all registrations and recordings thereof or similar property
rights, and all applications in connection therewith, including the United
States registered trademarks listed on Schedule A annexed hereto (hereinafter
collectively referred to as "Trademarks");
WHEREAS, the Pledgors are parties to a Credit, Security,
Guaranty and Pledge Agreement dated as of April 13, 1995, as the same may from
time to time be amended (the "Credit Agreement"), among the Pledgors, the
Lenders named therein (the "Lenders", and Chemical Bank as Agent and as
Fronting Bank (the "Agent;
WHEREAS, pursuant to the terms of the Credit Agreement, the
Pledgors granted to the Agent, for the benefit of the Lenders, a security
interest in all of the personal property of the Pledgors including all right,
title and interest of the Pledgors in, to and under all of the Pledgors'
Trademarks, whether presently existing or hereafter arising or acquired,
together with the goodwill of the business connected with and symbolized by the
Trademarks, and all proceeds thereof, including, without limitation, any and
all causes of action which may exist now or in the future by reason of
infringement or dilution thereof or injury to the associated goodwill, to
secure the payment of the Obligations (as defined in the Credit Agreement);
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each Pledgor does, as
security for the Obligations, hereby grant to the Agent, for the benefit of the
Lenders, a continuing security interest in all of the Pledgors' right, title
and interest in, to and under the following (all of the following items or
types of property being herein collectively referred to as the "Trademark
Collateral"), whether presently existing or hereafter arising or acquired:
(i) each Trademark together with any reissues,
extensions or renewals thereof and all of the goodwill of the
business connected with the use of, and symbolized by, each
Trademark;
<PAGE> 272
(ii) each Trademark license to the extent such
Trademark license does not prohibit the licensee from
assigning or granting a security interest in its rights
thereunder; and
(iii) all proceeds of the foregoing, including,
without limitation, any claim by any Pledgor against third
parties for past, present or future infringement or dilution
of any Trademark or for injury to the goodwill associated with
any Trademark.
This security interest is granted in conjunction with the
security interests granted to the Agent, for the benefit of the Lenders,
pursuant to the Credit Agreement. The parties do hereby further acknowledge
and affirm that the rights and remedies of the Agent, for the benefit of the
Lenders, with respect to the security interest in the Trademark Collateral made
and granted hereby are more fully set forth in the Credit Agreement, the terms
and provisions of which are incorporated by reference herein as if fully set
forth herein.
This Agreement is made for collateral purposes only. Upon
request of the Pledgors following termination of the Credit Agreement and
payment in full of all obligations thereunder, the Agent, for the benefit of
the Lenders, shall promptly execute and deliver to the Pledgors at the
Pledgors' expense, without representation, warranty or recourse, all releases
and reassignments, termination statements and other instruments as may be
necessary or proper to terminate the security interest of the Agent, for the
benefit of the Lenders, in the Trademark Collateral, subject to any disposition
thereof which may have been made by the Agent, for the benefit of the Lenders,
pursuant to the terms of the Credit Agreement.
The Agent, for the benefit of the Lenders, agrees that there
will be no assignment of the Trademark Collateral, other than the security
interest described herein, unless and until there shall occur an Event of
Default as defined in the Credit Agreement and the Agent, for the benefit of
the Lenders, gives written notice to the Pledgors of its intention to enforce
its rights against any of the Trademark Collateral.
So long as no Event of Default shall have occurred and be
continuing, and subject to the various provisions of the Credit Agreement and
the other Fundamental Documents to which it is a party, the Pledgors may use
the Trademark Collateral in any lawful manner.
This Trademark Security Agreement shall in all respects be
construed in accordance with and governed by the laws of the State of New York
applicable to contracts made and to be performed wholly within such state.
- 2 -
<PAGE> 273
Capitalized terms used herein and not otherwise defined shall
have the meaning ascribed thereto in the Credit Agreement.
- 3 -
<PAGE> 274
IN WITNESS WHEREOF, the Pledgors have caused this Trademark
Security Agreement to be duly executed by their officers thereunto duly
authorized as of , 1995.
ALL AMERICAN COMMUNICATIONS, INC.
By_______________________________
Name:
Title:
THE BAYWATCH PRODUCTION COMPANY
By_______________________________
Name:
Title:
THE BAYWATCH NIGHTS PRODUCTION
COMPANY
By_______________________________
Name:
Title:
<PAGE> 275
ALL AMERICAN FREMANTLE
INTERNATIONAL, INC.
By______________________________
Name:
Title:
ALL AMERICAN PRODUCTIONS, INC.
ALL AMERICAN TELEVISION, INC.
ALL AMERICAN TELEVISION
PRODUCTION, INC.
ALL AMERICAN FDF HOLDINGS, INC.
LBS COMMUNICATIONS, INC.
THE MALIBU BRANCH PRODUCTION
COMPANY
SANTA MONICA SOUND RECORDERS, INC.
SCOTTI BROTHERS ENTERTAINMENT
INDUSTRIES, INC.
SCOTTI BROTHERS RECORDS, INC.
TALBOT TELEVISION LIMITED
By______________________________
Name:
Title: Authorized Signatory
<PAGE> 276
STATE OF )
: ss.:
COUNTY OF )
On the ____ day of __________, in the year 1995, before me
personally came _____________________, to me known, who, being by me sworn, did
say that he resides at ________________________; that he is an Authorized
Signatory of each of the corporations listed on the signature page to which
this is attached, which corporations are described in, and which corporations
executed the above instrument, and that he signed his name by order of the
Board of Directors of each of said corporations.
___________________________________
Notary Public
<PAGE> 277
Schedule A to Trademark
Security Agreement
Registered Trademarks
REGISTERED TRADEMARKS
United States Trademark Registrations
Registration Registration
Mark Number Date
____ _____________ ____________
Rock 'N' Roll Records
and Design 1,622,146 November 13, 1990
Scotti Bros. 1,480,538 March 15, 1988
BAYWATCH 1,696,583 June 23, 1992
BAYWATCH 1,737,788 December 1, 1992
(and design)
(tower design
only) 1,735,811 November 24, 1992
[continued on next page]
<PAGE> 278
Schedule A to Trademark
Security Agreement
Filed Trademarks
FILED TRADEMARKS
United States Trademark Filings
Filing Filing
Mark Number Date
____ ____________ ____________
BAYWATCH LIFEGUARD 74/198939 August 28, 1991
(and design)
BAYWATCH 74/233261 December 23, 1991
(and design)
BAYWATCH 74/229686 December 12, 1991
(and design)
BAYWATCH 74/573428 September 14, 1994
BAYWATCH 74/573429 September 14, 1994
(and design)
(tower design
only) 74/573810 September 15, 1994
BAYWATCH 74/573426 September 14, 1994
BAYWATCH 74/573427 September 14, 1994
(and design)
BAYWATCH 74/604688 December 16, 1994
(writstwatches
only)
<PAGE> 1
EXHIBIT 10.8.1
AMENDMENT NO. 1 dated as of April 13, 1995 to the
Credit, Security, Guaranty and Pledge Agreement dated as of
April 13, 1995, among ALL AMERICAN COMMUNICATIONS, INC. as a
Borrower and a Guarantor, the other Borrowers named therein, the
other Guarantors named therein, the Lenders referred to therein
and CHEMICAL BANK, as Agent (the "Agent") and as Fronting Bank
(the "Fronting Bank") for the Lenders (the "Credit Agreement").
INTRODUCTORY STATEMENT
The parties hereto hereby agree as follows:
Section 1. Defined Terms. Capitalized terms used herein and not
otherwise defined herein shall have the meaning given them in the Credit
Agreement.
Section 2. Amendments to the Credit Agreement. Subject to the
satisfaction of the conditions precedent set forth in Section 3 hereof, the
Credit Agreement is hereby amended as of the Effective Date as follows:
(A) The definition of "Leverage Ratio" appearing in Article 1 of the
Credit Agreement is hereby amended in its entirety to read as follows:
" 'Leverage Ratio' shall mean the ratio of (x) Total
Liabilities to (y) the sum of Net Worth plus the outstanding
amount of the Convertible Subordinated Notes as would be
reported as "Notes payable" on the consolidated balance sheet
of the Parent and its Subsidiaries prepared in accordance with
GAAP as of the date of determination.
Section 3. Conditions to Effectiveness. The effectiveness of this
Amendment is subject to the satisfaction in full of each of the conditions
precedent set forth in this Section 3 (the first date on which all such
conditions have been satisfied being herein called the "Effective Date");
(A) the Agent shall have received counterparts of this Amendment
which, when taken together, bear the signatures of each Borrower, each
Guarantor, the Agent and such of the Lenders as are required by the Credit
Agreement; and
<PAGE> 2
(B) all legal matters incident to this Amendment shall be satisfactory
to Morgan, Lewis & Bockius, counsel for the Agent.
Section 4. Representations and Warranties. The Borrowers and the
Guarantors represent and warrant that:
(A) after giving effect to this Amendment, the representations and
warranties contained in the Credit Agreement are true and correct in all
material respects on and as of the date hereof as if such representations and
warranties had been made on and as of the date hereof (except to the extent
that any such representations and warranties specifically relate to an earlier
date); and
(B) after giving effect to this Amendment, no Event of Default or
Default will have occurred and be continuing on and as of the date hereof.
Section 5. Fundamental Documents. This Amendment is designated a
Fundamental Document by the Agent.
Section 6. Full Force and Effect. Except as expressly amended hereby,
the Credit Agreement shall continue in full force and effect in accordance with
the provisions thereof on the date hereof. As used in the Credit Agreement, the
terms "Agreement", "this Agreement" "herein", "hereafter", "hereto", "hereof",
and words of similar import, shall, unless the context otherwise requires, mean
the Credit Agreement as amended by this Amendment.
Section 7. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 8. Counterparts. This Amendment may be executed in two or
more counterparts, each of which shall constitute an original, but all of which
when taken together shall constitute but one instrument.
Section 9. Expenses. The Parent agrees to pay all out-of-pocket
expenses incurred by the Agent in connection with the preparation, execution
and delivery of this Amendment, including, but not limited to, the reasonable
fees and disbursements of counsel for the Agent.
Section 10. Headings. The headings of this Amendment are for the
purposes of reference only and shall not affect the construction of or be taken
into consideration in interpreting this Amendment.
- 2 -
<PAGE> 3
IN WITNESS WHEREOF, the parties hereby have caused this Amendment to be
duly executed as of the date first written above.
BORROWERS AND GUARANTORS:
ALL AMERICAN COMMUNICATIONS, INC.
By /s/ Thomas Bradshaw
_______________________________
Name: Thomas Bradshaw
Title: Chief Financial Officer
THE BAYWATCH PRODUCTION COMPANY
By /s/ Thomas Bradshaw
_______________________________
Name: Thomas Bradshaw
Title: Chief Financial Officer
THE BAYWATCH NIGHTS PRODUCTION
COMPANY
By /s/ Thomas Bradshaw
_______________________________
Name: Thomas Bradshaw
Title: Chief Financial Officer
ALL AMERICAN FREMANTLE
INTERNATIONAL, INC.
By /s/ Thomas Bradshaw
_______________________________
Name: Thomas Bradshaw
Title: Chief Financial Officer
- 3 -
<PAGE> 4
GUARANTORS:
ALL AMERICAN PRODUCTIONS, INC.
ALL AMERICAN TELEVISION, INC.
ALL AMERICAN TELEVISION
PRODUCTION, INC.
ALL AMERICAN FDF HOLDINGS, INC.
LBS COMMUNICATIONS, INC.
THE MALIBU BRANCH PRODUCTION
COMPANY
SANTA MONICA SOUND RECORDERS, INC.
SCOTTI BROTHERS ENTERTAINMENT
INDUSTRIES, INC.
SCOTTI BROTHERS RECORDS, INC.
TALBOT TELEVISION LIMITED
By /s/ Thomas Bradshaw
_________________________________
Name: Thomas Bradshaw
Title: Authorized Signatory
LENDERS:
Executed in CHEMICAL BANK, individually and
New York, New York as Agent
On __________, 1995
By /s/ John J. Huber
_________________________________
Name: John J. Huber
Title: Managing Director
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Mary Etta Schneider
_________________________________
Name: Mary Etta Schneider
Title: Bank of Boston
COUTTS & CO.
By /s/ Judith V. Chan
_________________________________
Name: Judith V. Chan
Title: Manager
- 4 -
<PAGE> 5
DE NATIONALE INVESTERINGSBANK N.V.
By /s/ Erik H. Snaterse
_______________________________
Name: Erik H. Snaterse
Title: General Manager
By /s/ Lars van't Hoenderdaal
_______________________________
Name: Lars van't Hoenderdaal
Title: Senior Account Manager
UNION BANK
By /s/ Gabe Renga
_______________________________
Name: Gabe Renga
Title: Senior Vice President
WELLS FARGO BANK
By /s/ Michael Ho
_______________________________
Name: Michael Ho
Title: Vice President
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By /s/ Paul Lane
_______________________________
Name: Paul Lane
Title: Vice President
By /s/ Daniel Touffu
_______________________________
Name: Daniel Touffu
Title: First VP and Regional
Manager
THE FUJI BANK LTD., LOS ANGELES
AGENCY
By /s/ N. Umamura
_______________________________
Name: Nobuhiro Umamura
Title: Joint General Manager
- 5 -
<PAGE> 6
THE SUMITOMO TRUST & BANKING CO.
LTD., NEW YORK BRANCH
By /s/ Suraj P. Bhatia
_______________________________
Name: Suraj P. Bhatia
Title: Senior Vice President
BANQUE NATIONALE DE PARIS
By /s/ C. Morio
_______________________________
Name: C. Morio
Title: Senior Vice President
and Manager
By /s/ Janice Ho
_______________________________
Name: Janice Ho
Title: Vice President
CALIFORNIA UNITED BANK N.A.
By /s/ Carole Bakshi
_______________________________
Name: Carole Bakshi
Title: Vice President
- 6 -
<PAGE> 1
EXHIBIT 10.26
MALIBU BRANCH
-------------
EXCLUSIVE LICENSE AGREEMENT
---------------------------
AGREEMENT made as of 15th day of March, 1995
Between: ALL AMERICAN TELEVISION, INC.
2114 PICO BOULEVARD
SANTA MONICA, CA 90405
(Hereinafter called "Grantor")
and: TAURUS FILM GMBH & CO.
BETA STRASSE 1
85774 UNTERFOHRING, MUNICH
GERMANY
(Hereinafter called "TAURUS")
with respect to the Series entitled "MALIBU BRANCH" (referred to as "Program")
listed and described in Exhibit A" attached hereto and by this reference made a
part hereof, as follows:
1. RIGHTS: Grantor hereby licenses to TAURUS, on the terms and
conditions set forth in this Agreement and in Exhibit "B" attached hereto and
by this reference made a part hereof, the "Pay TV, Free TV, Home Video and
Merchandising rights as defined in paragraph 4 below, for the period ("Term")
and the territory ("Territory") set forth below.
2. TERM: The Term shall be the period of time set forth on
Exhibit "A" hereto, commencing on the date of the Agreement.
-1-
<PAGE> 2
3. TERRITORY: Continental Europe (Excluding U.K. and Ireland)
including Finland, Iceland, Norway, Sweden, Denmark, Holland, Belgium,
Luxembourg, France, (including French speaking Switzerland, DOM/TOM,
Departements et Territories d'Outre-Mer which are in fact part of France, not
possessions: French Polynesia, New Caledonia, Reunion, Comores Island,
Martinique, Guadeloupe, French Guyana, St. Pierre and Miquelon Islands) Spain,
Andorra, Portugal, Italy, Republics of San Marino and Vatican City, Italian
speaking parts of Switzerland, Monaco, Malta and the former Yugoslavia (Capo
d'Istria); Germany, Austria, German speaking Switzerland, Czech Republic,
Slovak Republic, Hungary, the former Yugoslavia, Romania, Bulgaria, Albania,
Greece and Turkey, (including the island of Cyprus), Poland and the
territories of the former USSR (Estonia, Latvia, Lithuania, Russia, Armenia,
Georgia, Moldava, Ukraine, Belarus, Azerbaijan) and the Territories marine
installations (including oil-rigs) of companies wherever situated throughout
the universe, army, navy, marine and airforce and other military armed services
installations. It is understood and agreed that transmissions into the
Territory of the Territory language versions of the Program via a means
intended primarily for reception in the Territory for either direct reception
or for retransmission within the Territory, may be made from anywhere inside or
outside the Territory by TAURUS or its Licensees.
4. GRANT OF RIGHTS: The rights granted TAURUS hereunder shall mean
the sole and exclusive right and authority, under copyright or otherwise, to
license and to license others to license, sublicense, exhibit, distribute,
publicize, promote and exploit the Program and all cut, recut, edited,
re-edited, dubbed, redubbed and other versions thereof, in any and all forms
now known or hereafter devised including, but not limited to, film, tape,
disc, wire and cassette, throughout the Territory, during the Term and for the
number of "Runs" (as defined in Exhibit "B") as indicated on Exhibit "A" hereto
in the media of:
4.1 "Home Video Exploitation" which shall mean the right to
manufacture video recordings ("copies") of the Program and market copies in the
Territory under any Trademarks, trade names or labels owned or controlled by
TAURUS. The term copies shall include videocassettes, videodiscs and any other
audio visual contrivances, whether now or hereafter known or developed,
intended primarily for home use for viewing of visual images, with or without
sound, by means of an electronic, optical, mechanical or other device located
at the place of exhibition; and not by means of broadcast to a place of
exhibition where a fee is charged for admission to view the Program. Grantor
and TAURUS shall share the revenue derived from such home video exploitation
on a 50:50 basis and TAURUS shall provide Grantor with statements on a
quarterly basis accompanied by wire transfer if monies are due.
-2-
<PAGE> 3
4.2 "Pay Television Exhibition:" shall mean the exhibition of the
Program by means of over-the-air, cable, closed circuit, satellite, microwave,
or laser transmission using any form of Program copy for reception on a
television receiver or a comparable device now known or hereafter
devised located in a living accommodation, where a "supplemental charge" is
made to the viewer for the privilege of viewing such exhibition in his home or
in a hotel, motel or hospital or other living accommodation, whether such
exhibition is a particular program selected by the viewer which would not be
available for viewing by the viewer but for the payment of such supplemental
charge, or is a program being exhibited over one or more assigned channels
which would not be available for viewing by the viewer but for the payment of
such supplemental charge, or where a charge is made to the operator of a hotel,
motel, hospital or other living accommodation for the obtaining of such
exhibition for viewing at such location. Pay TV runs shall be determined by
industry practice in the Territory.
4.3 "Free Television", which shall mean the remote transmission of
video and audio signals comprising a schedule of programming intended for and
capable of reception on one or more channels of television receivers utilized
by the ultimate consumer for viewing such video and audio signals; which
transmissions originate from outside the place (or distant from the location of
portable television receivers) where such television receivers are located and
which video and audio signals are transmitted by means of over-the-air VHF or
UHF transmissions, satellite, cable or any other transmission means now known
or hereafter devised, created or invented without a charge being made to the
viewer by the telecaster for the right to receive and view such transmission
other than:
(i) Fees or taxes imposed or fixed by any government
(including state or local), or agency thereof, for ownership of a television
receiver, or for general reception of and access to all video and audio
transmissions;
(ii) Fees (either one-time or periodic) only for the
physical equipment necessary to receive such transmission (e.g., cable system
"hook-up" fees, antenna fees, decoder fees, etc.) with respect to any channels
of programming;
-3-
<PAGE> 4
4.4 "Merchandising Rights" which shall mean the
exploitation of the ancillary rights of the Program in the field of
merchandising, Publishing and the like. Subject to TAURUS exercising its option
to acquire the series under Para. 6.2. for the exploitation of such rights
Grantor shall enter into a separate Agency/Representation Agreement with
Merchandising Munich (hereinafter called "MM"). Not included in such rights,
however, is Music Publishing and so-called "character merchandising" (i.e.
personal endorsements any artist in the Program) which is subject to separate
agreements by MM with the respective artists subject to existing artists
agreements with producers. TAURUS and Grantor shall share MM's revenue from the
exploitation of such rights pursuant to a separate Agency Agreement with
Merchandising Munich.
4.5 "Music Publishing Rights" are expressly excluded from
this Agreement and all music provided by producers and included in the M & E
tracks will be used in the preparation of all foreign language versions and no
substitutions for this music may be made.
4.6 Retransmission Fees and Video Levies: TAURUS shall be
entitled to all Retransmission Fees and blank Video Levies in the Territory
during the Term of this Agreement.
5. EXHIBITION RIGHTS FEE: As full consideration for all of the
rights granted to TAURUS and Grantor's obligations hereunder, TAURUS shall pay
Grantor the following fee ("Exhibition Rights Fee") U.S. [ Confidential
Treatment Requested ] -- ([ Confidential Treatment Requested ] U.S. Dollars),
Payable as follows:
1/3 = $ [ Confidential Treatment Requested ]--upon commencement of
principal photography.
1/3 = $ [ Confidential Treatment Requested ]--upon completion of
principal photography.
1/3 = $ [ Confidential Treatment Requested ]--upon delivery and
acceptance of material.
The payments outlined above will be wire transferred by TAURUS into Grantor's
account as due as follows to:
All American Television
c/o Chemical Bank
55 Water Street
New York, New York 10041
Account #: 323-045 189
ABA #: 021000128
-4-
<PAGE> 5
TAURUS will advise Grantor by fax or telex each time such a wire transfer has
been initiated.
The payments outlined in this paragraph cover the payments due for the
Television Exhibition rights granted hereunder and any royalty payments due for
Home Video rights (4.1) are separate and additional, and will be made at the
end of each calendar quarter along with the appropriate reports of sales.
5.1 PROGRAM
MALIBU BRANCH
A two-hour MOW/PILOT to be produced in a "closed" as
well as an "open-ended" version
6. ADDITIONAL PROVISIONS:
6.1 TAURUS shall be entitled to a credit as
co-producer in the Territory and may
pass on this co-producer's credit to its
customers.
6.2 Options:
a) In the event the MOW will become a series
TAURUS is herewith granted the exclusive option to acquire such series at a
license fee of $[ Confidential Treatment Requested ]-- per one-hour episodes
for the first broadcast season (BS). The MOW will then be considered the
PILOT episode. Such option to be exercised not later than 14 business days
after TAURUS has been advised in writing of Grantor's intent to go forward
with the series.
b) If TAURUS does not exercise its option under
6.2 a) above then, at GRANTOR's option, TAURUS may sell the PILOT as a MOW in
its "closed" version in the Territory or Grantor may buy back the PILOT/MOW
from TAURUS at the amount set forth under Para. 5 above.
c) In the event TAURUS exercises its option to
acquire the series and Grantor produces more than one BS of a minimum of 22
hours, TAURUS is herewith granted the option, exercisable in writing by TAURUS
not later than 30 days after TAURUS has been notified in writing by Grantor of
Grantor's intent to produce subsequent seasons, to acquire same at a license
fee increase of 5% per season.
d) TAURUS is herewith granted the exclusive option
to renew the term granted hereunder by an additional ten (10) years upon
payment of $[ Confidential Treatment Requested ] -- ([ Confidential Treatment
Requested ] U.S. dollars) per episode, which option must be exercised with
respect to all episodes accepted hereunder. The option may be exercised at
any time during the term.
-5-
<PAGE> 6
6.3 Additional Episodes (BS I and BS II)
Should more, or less, than 22 hours of Program be
produced for the first or second broadcast season this Agreement will be
adjusted according to the number of episodes produced with the per episode
license fee remaining the same.
6.4 Credits
Further to Exhibit B, Para. E.1 and 2, TAURUS and/or
its sublicensees may add a produced by ..."in Association with ..." to the
producers credit.
IN WITNESS WHEREOF, the parties have executed this AGREEMENT as of the
date first written above.
TAURUS FILM GMBH & CO. (TAURUS)
BY /s/ Klaus Hallig
-----------------------------------
Klaus Hallig
ITS AUTHORIZED REPRESENTATIVE
ALL AMERICAN TELEVISION, INC.
(GRANTOR)
BY /s/ John Storrier
-----------------------------------
John Storrier
Executive Vice President,
Operations
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<PAGE> 7
EXHIBIT 'A'
Part of Agreement dated 15th day of March, 1995 between TAURUS FILM GMBH & CO.
and ALL AMERICAN TELEVISION, INC.
PROGRAM TERM RUNS
- - - - -----------------------------------------------------------------------
MALIBU BRANCH
- - - - ------------- commencing with the date unlimited
of this agreement, until
15 years from the delivery
a 2-hour MOW date of the MOW or in the
event TAURUS elects to
exercise its option under
Para. 6.2 the last episode
of the last season.
<PAGE> 8
EXHIBIT "B"
-----------
EXCLUSIVE LICENSE STANDARD TERMS AND CONDITIONS
-----------------------------------------------
These standard terms and conditions shall be deemed part of and
incorporated into the Agreement, dated as of 15th day of March, 1995 between
TAURUS FILM GMBH ("TAURUS") and ALL AMERICAN TELEVISION, INC. ("Grantor").
A. Additional Rights
1. In connection with the exercise of the Rights
granted to TAURUS herein, TAURUS shall have and may grant to others the
following rights:
(a) Use of Performers' Name and Likeness: Subject
to the rights of such third parties, if any, of which Grantor shall duly advise
TAURUS, to disseminate, reproduce, print and publish the name, likeness, voice,
and biography of Grantor, the performers, director(s), producer(s), author(s),
writer(s), actual persons portrayed in the Program, if any, and others who
rendered services in or granted rights in connection with the production of the
Program for the purpose of advertising, publicity, and for purposes of trade.
Grantor shall, upon the request of TAURUS use reasonable best efforts to
furnish TAURUS with the appropriate written consents of all such persons. In no
event shall any such name or likeness be used as a direct endorsement of a
commercial product or service;
(b) Editing Rights: To make such cuts,
alterations, modifications, translations and variations of and in the title,
subtitles and any part of the negative or positive copies of the Program
(including, but not limited to, dubbing or subtitling solely as may be required
to obtain censorship approval as provided in paragraph D.7 hereinbelow or as
TAURUS may in its absolute discretion think necessary or desirable for the
effective licensing of the Program for use in the Territory solely to conform
the length of the Program to customary television station time segment
requirements or to any self-imposed station censorship requirements, and to
insert or authorize the insertion of commercial announcement material during
breaks in the broadcast of the Program; provided, however, that no such editing
shall materially adversely affect the artistic integrity or pictorial quality
of the Program, or materially interfere with its continuity. Without limiting
the foregoing, TAURUS may shorten, segment, and/or change the title of the
Program. TAURUS shall not delete Grantor's copyright notice, trademarks, or any
credit or other required notice on the Program;
-1-
<PAGE> 9
(c) Advertising Rights: To publicize, advertise,
and promote the Program by all means customary at any time during the Term in
the Territory, and to use excerpts, stills, and trailers of the Program in
connection therewith, including, but not limited to, all promotional material
delivered to TAURUS pursuant to paragraph D.7 below;
(d) Excerpt Rights: To use, and authorize others
to use, excerpts, not exceeding three (3) minutes in length, from the Program
for promotional purposes, news, etc. inclusion in review or preview
compilations by the broadcasters, or similar programs for exhibition on
Television in the Territory during the term.
(e) Print Publication Rights: To publish and
copyright or cause to be published and copyrighted in the name of TAURUS or its
nominee, synopses, serializations, abridgements and selections from the
"Underlying Material" of any of the Program, not exceeding 1500 words each, for
advertising and publicity purposes and the right to use excerpts from the
"Underlying Material" and the Program in heralds, programs, booklets, posters,
displays, prospects and all other media of advertising and publicity.
"Underlying Material" shall mean all literary, dramatic and musical material
written or composed for use in the Program or otherwise acquired by, or
supplied or assigned to, Grantor or anyone else associated with the production
of the Program, for use in the Program and included in the Program.
2. The rights herein granted to TAURUS shall be exercisable by
TAURUS directly or by its subsidiaries, affiliates, sponsors, agents,
subdistributors and licensees.
B. Run. "Run" shall mean a single exhibition of the Program
capable of reception in all or any portion of the Territory; provided, however,
that in calculating whether the full number of permitted Runs have been taken,
TAURUS shall be entitled to the permitted number of Runs in each separate
geographic portion of the Territory (including primary broadcast areas of any
region or state of a country within the Territory). Thus, each exhibition of
the Program received in any particular portion of the Territory, whether such
exhibition is by over-the-air transmission, cable or other closed circuit
transmission, and whether such exhibition is capable of reception only in that
portion of the Territory; and provided, however, that if the transmission is
not intended primarily for reception in any such separate geographic portion
and there is a "spill-over" to less than a substantial part of such geographic
portion it shall not count as a Run for such latter geographic portion. A Run
is to be deemed to include two telecasts by the same broadcaster within a
twenty-four hour period if and when TAURUS' licensees are customarily making a
prime-time and a non prime-time telecast of the Program within a twenty-four
hour period.
-2-
<PAGE> 10
C. Spillover. Grantor acknowledges that the Program when transmitted
for the Territory may be received by persons outside of the geographical
boundaries thereof, and Grantor agrees that such reception shall not constitute
a breach of this Agreement on TAURUS' part and Grantor shall have no claim
against TAURUS by reason thereof. TAURUS likewise acknowledges that the Program
transmitted in a language other than a language of the Territory outside of the
Territory may be received by persons within the Territory, and TAURUS agrees
that such reception shall not constitute a breach of this Agreement on the part
of Grantor and that TAURUS shall have no claim against Grantor by reason
thereof. Subject only to the immediately preceding sentence, Grantor shall not
authorize or permit during the Term any broadcast or transmission, of any kind
or nature, whether now known or hereafter devised, of the English language
version of the Program within the Territory, or made outside the Territory but
intended specifically for the Territory (or any specific geographic portion
thereof) or made as part of a pan-European exhibition or transmission. Grantor
shall do no act or thing which will cause the Program to be broadcast into or
in the licensed Territory.
D. Delivery and Acceptance.
1. Delivery of the Program ("Delivery") shall be deemed
complete on the date ("Delivery Date") on which TAURUS has possession of the
elements ("Delivery Elements") listed in Exhibit I attached hereto and by this
reference made a part hereof.
2. All Delivery Elements not maintained at a laboratory
shall be delivered to TAURUS at such address as TAURUS shall specify. Delivery
as to the Delivery Elements set forth in paragraphs 1 through 4 of Exhibit I,
to the extent they are maintained in a laboratory in Europe (or if not held in
a laboratory in Europe, in the United States) shall be deemed made upon receipt
by TAURUS of an executed laboratory access letter in a form approved by TAURUS).
3. Delivery is of the essence of this Agreement. If
Grantor fails to make timely delivery of any Delivery Element hereunder,
subject to Para. I.7 (a), TAURUS shall have the rights of termination set forth
at paragraph I.7 (b) below. TAURUS may also at its election accept late
Delivery of the Program or one or more Delivery Elements.
-3-
<PAGE> 11
Taurus shall have the right, but not the obligation, to make, at Grantor's
expense, any element which Grantor fails to deliver on time. Any such
termination or acceptance of late Delivery shall be without prejudice to any
rights TAURUS may have at law, at equity, under this Agreement, or otherwise by
reason of such failure by Grantor to deliver.
4. TAURUS shall have four (4) weeks after the Delivery Date within
which to inspect and accept the Delivery Elements.
5. All materials to be delivered hereunder shall meet German
television network standards for technical quality. If such materials are not
of such quality as determined by TAURUS, TAURUS shall have the right to either:
(i) require Grantor to make Delivery of new substitute materials of quality
acceptable to TAURUS and the costs of such new substitute materials shall be
borne solely by Grantor; or (ii) deem Grantor to have failed to make timely
Delivery in which event TAURUS shall have the rights set forth at paragraph
D.3. hereinabove.
6. (a) TAURUS shall, at its own cost, be responsible and make all
necessary arrangements of (1) the importation into and use in the Territory of
the Program and of all pre-print, print advertising and other materials thereof
with respect thereto in accordance with the laws of the Territory; provided,
however, Grantor shall provide to TAURUS, free of charge, one set of print
advertising and publicity materials if and when available to Grantor and used
in connection with the Program, and (2) subject to paragraph D.6 (b) below,
obtaining approval of the Program by the duly constituted and competent Boards
of Censorship and other authorities in the Territory having jurisdiction
thereof. Grantor shall sign such papers which are customary in the dealings
between the Grantor's country and countries of the Territory which are required
by government agencies in the Territory.
(b) If the Program is prohibited by any governmental authority
from being exhibited in Germany, Italy, Spain or France, then TAURUS shall
provide Grantor with the official certificate from the applicable Board of
Censors evidencing such prohibition and TAURUS shall be entitled to a pro-rated
reimbursement of the license fee relating to the prohibited episode as follows:
Germany: 35%
Italy: 25%
France: 25%
Spain: 15%
-4-
<PAGE> 12
7. Delivery Elements listed in paragraphs 1 through 4 of Exhibit I
shall be struck in accordance with the specifications set forth in "Exhibit I"
attached hereto, and by this reference made a part hereof.
8. Grantor shall charge to TAURUS only Grantor's actual
out-of-pocket costs payable to third parties for the manufacture of the
Delivery Elements.
9. Legal title in and to all Delivery Elements, and all materials
ordered or manufactured by TAURUS hereunder, including, but not limited to, all
prints, print materials, and dubbed soundtracks in the language versions of the
Territory licensed hereunder and dubbing materials, for the Program, shall
vest, and remain, in TAURUS during the entire Term with respect to the Program,
and after the expiration of such Term TAURUS shall destroy all such materials;
provided, however, that if a television station accomplishes the dubbing of the
Program, such station may retain beyond such station's period of license of the
Program a copy of the soundtrack, for archival uses only and TAURUS will notify
broadcaster of such restrictions.
E. Credits.
1. Grantor shall deliver to TAURUS a complete statement of paid
advertising credits, if any, which are required under the contracts relating to
the Program, to be given to directors, actors and others. In all advertisements
TAURUS will, except as hereinafter provided, abide by the credits shown on the
statement of credits so delivered to TAURUS by Grantor. No casual or
inadvertent failure by TAURUS, and no third party failure, to abide by the
credits shown on such statement of credits shall constitute a breach of this
Agreement.
2. TAURUS may include its trademark or insignia on the main and
end title of the Program and all advertising relating to the Program and may
announce on all duplicate prints of the Program that the Program is co-produced
and distributed by TAURUS, and/or its sublicensees, in the Territory. Such
credits will be prepared at Taurus' expense.
-5-
<PAGE> 13
F. Grantor's Representations and Warranties. To induce TAURUS to
enter into this Agreement, and in consideration thereof, the person signing
this Agreement on Grantor's behalf represents and warrants, separate and apart
from Grantor's representations and warranties, that he has the authority to
execute this Agreement for and on behalf of Grantor and Grantor represents and
warrants to TAURUS that:
1. Grantor has the full right and power and authority to enter
into and perform this Agreement and has not entered into any agreement of any
kind which may interfere with the performance of this Agreement;
2. Grantor owns and controls the exclusive television rights,
under copyright and otherwise, in and to the Program within the Territory for
the full Term and has the sole and exclusive right to grant the rights herein
granted;
3. The Program will be registered in the United States Copyright
Office and no part of the Program (other than music) is in the public domain in
the Territory;
4. Grantor has acquired all rights in the Underlying material
required for TAURUS' exercise and enjoyment of all rights granted to TAURUS
hereunder;
5. Except for financing purposes, the rights granted to TAURUS
under this Agreement, in the Program, are as of the date hereof free and clear
of any liens, and have not been mortgaged or pledged as security or similarly
encumbered;
6. Grantor shall be solely liable for the payment of and shall pay
all reuse, residual and other fees payable on account of the production,
exhibition, distribution and use of the Program, and for payment to persons
granting rights or furnishing services or material (including, but not limited
to, the Underlying Material) for the Program, as well as all US. guild required
payments, royalties, license fees, deferred compensation, percentages or parts
of profits or gross receipts, or other compensation of any kind however
denominated;
-6-
<PAGE> 14
7. All recordings and synchronization rights to music in the
Program have been or will by the Delivery Date of the Program be obtained for
the exhibition, distribution and exploitation of the Program in the Territory
for the Term in accordance herewith, and, if video cassette and disc rights are
included in Free TV Exhibition Rights hereunder, including, but not limited to,
all rights to music, and otherwise, necessary for video cassette and disc
manufacture, distribution, sale and exhibition of the Program. All license fees
and royalties required to be paid in connection with the foregoing have been
paid in full, or will be so paid by Grantor prior to Delivery;
8. To the best of Grantor's knowledge, no claim or litigation is
pending or threatened with respect to the Program or any right therein;
9. No part of the Program nor the exercise by TAURUS of any of the
rights herein granted to TAURUS will violate or infringe the copyright,
trademark, tradename, patent, literary, intellectual, artistic or dramatic
right, the right of privacy, publicity, or civil or property right.
10. Each performer, producer, director, composer, author, artist,
and other person who rendered or shall render services, or who furnished or
shall furnish material or rights, in connection with the Program, or whose
name, voice, likeness, work, composition, or material appear in or were used in
connection with the Program, has granted, released and authorized the use of
the results and proceeds of such services and all such items in connection with
the production of the Program, and advertising, publicity and promotion
thereof. Grantor has also obtained the right to use biographies of such persons
for such advertising, publicity and promotion;
11. The performing rights to all musical compositions contained in
the Program are either:
(a) Controlled by: The American Society of Composers,
Authors and Publishers; Broadcast Music, Inc., SESAC, Inc.; or a performing
rights society operating within the Territory;
(b) are in the public domain throughout the universe; or
-7-
<PAGE> 15
(c) are controlled by Grantor and granted to TAURUS hereby.
Grantor's indemnity under paragraph G below shall apply to the performance of
any musical compositions in the Programs, the performing rights to which do not
fall within category (a) above;
12. The Program does not contain any defamatory; scandalous or
obscene matter or any matter contrary to law;
13. The Program is an original hour-long talking motion picture
photoplay, fully synchronized with dialogue, music and sound, main and end
titled, complete and ready for exhibition as described herein, and Grantor has
duplicate pre-print material of the English language version of the Program
from which may be made (directly or indirectly) television exhibition tapes
thereof commercially acceptable in the Territory.
14. The Program, and all applicable Delivery Elements, shall
contain all required screen credits in conformity with all contractual
specifications;
15. Grantor has not heretofore authorized exhibition of the Program
by any form of home video or television, including but not limited to free or
pay television services, in the Territory and Grantor has not done, nor
permitted to be done, any act or thing, or committed any omission, by which any
of the rights herein granted have been or may be in any way impaired; and
Grantor will not henceforth do or permit any such act or thing or commit any
such omission;
16. The Program will not be broadcast or exhibited anywhere in the
Territory except as may be expressly permitted elsewhere in this Agreement.
-8-
<PAGE> 16
G. Indemnification.
1. Grantor shall at all times defend, indemnify, and hold
harmless TAURUS, its parent, subsidiary and affiliated companies, assignees,
licensees and successors, and its and their officers, directors, shareholders,
employees, and agents from and against any and all claims, actions, liability,
loss, damages, costs and expenses, including, but not limited to, attorneys'
fees and costs, arising out of or relating to any breach or alleged breach of
any warranty, representation or agreement of Grantor or the exercise by TAURUS
and Grantor of their rights pursuant to this Agreement. TAURUS shall have the
right, but not the obligation, to be represented by its own counsel at TAURUS'
own expense with respect to any matter subject to this paragraph G.1, and
shall have the right to approve the settlement, if any, of any matter subject
to this paragraph G.1.
2. TAURUS shall at all times defend, indemnify, and hold
harmless Grantor, its parent, subsidiary and affiliated companies, assignees,
licensees and successor, and its and their officers, directors, shareholders,
employees, and agents from and against any and all claims, actions, liability,
loss, damages, costs and expenses, including, but not limited to attorneys'
fees and breach of any warranty, representations or agreement of rights
pursuant to this Agreement. Grantor shall have the right, but not the
obligation, to be represented by its own counsel at Grantor's own expense with
respect to any matter subject to this paragraph G.2., and shall have the right
to approve the settlement, if any, of any matter subject to this paragraph G.2.
H. TAURUS'S Representations Warranties, Indemnities
TAURUS represents and warrants to Licensor as follows:
1. TAURUS has full right and power and authority to enter
into and perform this Agreement.
2. TAURUS will not exhibit or exploit nor authorize others
to exhibit or exploit the Program outside of the Territory or during a period
after the end of the Term.
3. At the end of the Term, TAURUS shall either furnish a
certificate of destruction or return the Delivery Elements to Grantor.
-9-
<PAGE> 17
I. Miscellaneous.
1. Force Majeure. Neither party to this Agreement shall incur
any liability for delay in the performance by it of any of its obligations
under this Agreement due to any cause not within the control of the party so
delayed.
2. Waivers. No waiver by either party hereto of any breach of
this Agreement by the other shall be deemed a waiver of any preceding or
succeeding breach hereof, and no waiver shall be operative unless the same is
in writing signed by both parties.
3. Relationship of the Parties. Nothing herein contained shall
constitute a partnership or joint venture between the parties hereto or
constitute either party the agent of the other. Neither party shall hold itself
out contrary to the terms of this Agreement and neither party shall become
liable by reason of any representation, act or omission of the other contrary
to the provisions hereof. This Agreement is not for the benefit of any third
party and shall not be deemed to give any right or remedy to any such party
whether referred to herein or not, including, but not limited to, any right to
enforce the terms hereof.
6. Copyright. Subject only to TAURUS' rights under paragraph 8
below, Grantor shall protect the copyright in the Program and all rights
therein throughout the Territory. TAURUS shall be under no liability of any
kind in the event there shall be a defect in any copyright in the Program.
4. Effective Date. Neither this Agreement nor any provision or
content hereof shall be binding on either of the parties hereto until this
Agreement has been signed by both parties hereto.
5. Assignment.
a) TAURUS may assign this Agreement or the rights
hereunder to a bank, banks, or other financial institutions, for financing
purposes provided, however, no such assignment shall relieve TAURUS of its
obligations hereunder.
b) Grantor may assign this Agreement or the rights
hereunder to a bank, banks, or other financial institutions for financing
purposes provided, however, no such assignment shall relieve Grantor of its
obligations hereunder.
-10-
<PAGE> 18
7. Default.
(a) Either party shall be deemd in default ("Default")
if it breaches or defaults in the performance of any material provision hereof
on its part to be performed or breaches any material representation or warranty
made by it, and fails to remedy the same within a period of thirty (30) days
after receipt of written notice from the other party specifying such default.
(b) In the event of any Default by Grantor, TAURUS
shall have the right, but not the obligation, to withhold any payments
thereafter due and owing by TAURUS to Grantor pursuant to this Agreement, and
TAURUS shall in addition have all of its rights and remedies hereunder and/or
in equity and at law. However, if more than one episode is subject to this
Agreement, and Grantor is in default hereunder with respect to any one episode,
such default may only be as to said one episode in which event TAURUS shall
have all rights and remedies provided hereunder with respect to said one
episode and all of the terms and conditions of this Agreement shall remain in
full force and effect with respect to the balance of the episodes subject
hereto.
8. Actions Against Third Persons. If anyone shall do anything
which TAURUS believes constitutes a copyright infringement of the Program or of
any material contained in the Program, or violates any right of TAURUS or
Grantor therein, or if anyone shall do anything which TAURUS believes
constitutes an unauthorized or unlawful distribution, exhibition or use of a
Program or any material thereof, TAURUS is hereby authorized (but not
obligated) to take such steps and institute such proceedings as TAURUS may deem
advisable to prevent such actions, to secure damages or other relief, and
protect its rights hereunder. TAURUS is granted the right to take such steps or
institute such proceedings in its own name or in the name of Grantor or in both
names, and TAURUS is appointed the irrevocable attorney-in-fact of Grantor for
such purposes, such appointment being coupled with an interest. Nothing
contained in this paragraph 8, nor any action taken by TAURUS pursuant to this
paragraph 8 shall be deemed a waiver, limitation or other restriction of the
indemnity provisions of this Agreement.
-11-
<PAGE> 19
9. Conflicts. Nothing herein contained shall be construed
to require the performance by either party of any act contrary to applicable
law or governmental regulation. In the event of any conflict between any
provision hereof and any applicable law or governmental regulation, the latter
shall prevail; but in such event the affected provisions of this Agreement
shall be curtailed only to the extent necessary to bring them within the
requirements of such law or regulation.
10. Agreement Complete. This Agreement contains the entire
understanding of the parties and supersedes all prior agreements of the
parties, oral or written, with respect to the Program. Neither party has made
any representation, warranty, covenant or undertaking of any nature
whatsoever; express or implied, in connection with or relating to this
Agreement other than as expressly set forth herein. This Agreement may not be
changed or modified, nor may any provision hereof be waived, except in writing
signed by the party to be charged therewith.
11. Remedies. Subject to TAURUS having made all payments
due under this agreement in no event shall the rights herein acquired by
TAURUS be subject to revocation or termination, and Grantor's sole remedy in
the event of any claimed breach by TAURUS of any provision of this Agreement
shall be an action at law for damages. All rights and remedies granted to
TAURUS and/or Grantor hereunder are cumulative and are in addition to any other
rights or remedies that either such party may have at law or in equity.
12. Attorney's Fees. In the event any action is instituted
by either party to enforce any of the terms and provisions contained herein,
the prevailing party in such action shall be entitled to such reasonable
attorney's fees, costs and expenses as may be fixed by the Court.
13. Further Documents. Grantor shall execute and deliver to
TAURUS short form assignments ("Short Form Assignment") for the Program for
filing in the United States Copyright Office, in the form attached hereto and
incorporated herein as Exhibit "II", and shall execute, acknowledge and deliver
to TAURUS, or procure the execution, acknowledgment and delivery, of any and
all further assignments, agreements and instruments that TAURUS may from time
to time deem necessary or expedient to effectuate the purposes of this
Agreement and to evidence TAURUS' rights hereunder in the Program.
-12-
<PAGE> 20
Grantor hereby irrevocably appoints TAURUS its attorney-in-fact, in Grantor's
name or otherwise, (such appointment being coupled with an interest) to execute
any document or instrument Grantor fails to execute and deliver to TAURUS
hereunder within a reasonable period after written request from TAURUS.
14. Notices. All demands and notices ("Notice") which either
Grantor or TAURUS shall desire or be required to give, make or serve hereunder
shall be in writing and shall be served by telegraph or cable or by personal
delivery as provided herein. Service of any Notice upon either party shall be
deemed complete if and when the same is personally delivered to such party, or
upon the sending of a telegram or cable, toll prepaid, and addressed to the
party who or which is the recipient at its or his address above, with a copy of
all Notices to TAURUS also to: International Television Trading Corp., P.O. Box
367, Main Street, South Egremont, Massachusetts 01258, Attention: Dr. Klaus
Hallig, and a courtesy copy to Atty. Milton Rudin, 2121 Avenue of the Stars,
18th Floor, Los Angeles, California 90067, such copies to be sent in the same
manner as the Notice itself. Any party hereto may change its address for the
purpose of receiving Notices, demands and other communications as herein
provided by a Notice given in the manner aforesaid to the other party or
parties hereto. If the last date on which a Notice required under this
Agreement shall fall on a Saturday, Sunday, or a day (a "closed day" herein) on
which the department of the sending party that is responsible for sending such
Notice shall not be open for business, then (notwithstanding any other
provision hereof) such last date shall be deemed postponed until the first day
that shall not be a Saturday, Sunday, or closed day.
14. Construction. The clause headings in this Agreement are for
reference purposes only and shall not be deemed to affect, quality, or amplify
the scope of the clauses.
15. Applicable Law. This Agreement shall be construed in
accordance with, and all questions with respect hereto shall be determined by,
the laws of the State of New York, U.S.A. applicable to contracts entered
into, and to be fully performed within, said State.
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<PAGE> 21
16. Additional Payments. Nothing in this Exclusive License
Agreement shall be deemed to require TAURUS to account (except for Home Video
or Merchandising) to Grantor with respect to any receipts, proceeds, or income
of any nature whatsoever derived or received by TAURUS with respect to TAURUS'
exploitation of the rights granted to TAURUS hereunder and no fees, monies, or
consideration of any kind or nature whatsoever shall be payable by TAURUS to
Grantor with respect thereto especially with regard to retransmission fees and
blank video levies.
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<PAGE> 22
EXHIBIT "II"
ASSIGNMENT OF EXCLUSIVE FREE TV EXHIBITION RIGHTS
For $1.00 and other good and valuable consideration, receipt
of which is hereby acknowledged by the undersigned, the undersigned hereby
grants, transfers and assigns to TAURUS Film GmBH ("TAURUS") with respect to
the Program entitled:
MALIBU BRANCH
United States Copyright Registration No:
and all cut, re-cut, edited, re-edited, original and language dubbed, redubbed
or subtitled, versions thereof: (1) the right to transfer, copy, duplicate and
dub or subtitle in the language of the Territory, the Program and, (2) the sole
and exclusive right license, sub-license, distribute, exhibit, publicize,
promote and otherwise exploit the Program in the Territory for the Term (as
Territory and Term are defined below) in the Medium described below and
(3) certain allied and incidental rights, including advertising and limited
publication rights set forth in the Agreement described hereinbelow.
The Territory is:
Continental Europe (Excluding U.K and Ireland) including
Finland, Iceland, Norway, Sweden, Denmark, Holland, Belgium, Luxembourg,
France, (including French speaking Switzerland, DOM/TOM, Departements et
Territories d'Outre-Mer which are in fact part of France, not possessions:
French Polynesia, New Caledonia, Reunion, Comores Island, Martinique,
Guadeloupe, French Guyana, St. Pierre and Miquelon Islands) Spain, Andorra,
Portugal, Italy, Republics of San Marino and Vatican City, Italian speaking
parts of Switzerland, Monaco, Malta and the former Yugoslavia (Capo d'Istria);
Germany, Austria, German speaking Switzerland, Czech Republic, Slovak Republic,
Hungary, the former Yugoslavia, Romaina, Bulgaria, Albania, Greece and Turkey,
(including the island of Cyprus), Poland and the territories of the former USSR
(Estonia, Latvia, Lithuania, Russia, Armenia, Georgia, Moldava, Ukraine,
Belarus, Azerbaijan) and the Territories marine installations (including
oil-rigs) of companies wherever situated throughout the universe, army, navy,
marine and airforce and other military armed services installations. It is
understood and agreed that transmissions into the Territory of the Territory
language versions of the Program via a means intended primarily for reception
in the Territory for either direct reception or for retransmission within the
Territory, may be made from anywhere inside or outside the Territory by TAURUS
or its Licensees.
The term is: Commencing with the date of this agreement until
15 years from the delivery date of the last episode of the last season.
Exhibit "II" page 1
<PAGE> 23
The Medium is;
"Home Video Exploitation" which shall mean the right to
manufacture video recordings ("copies") of the Program and market copies in the
Territory under any Trademarks, trade names or labels owned or controlled by
TAURUS. The term copies shall include videocassettes, videodiscs and any other
audio visual contrivances, whether now or hereafter known or developed,
intended primarily for home use for viewing of visual images, with or without
sound, by means of an electronic, optical, mechanical or other device located
at the place of exhibition; and not by means of broadcast to a place of
exhibition where a fee is charged for admission to view the Program.
"Pay Television Exhibition:" which shall mean the exhibition of
the Program by means of over-the-air, cable, closed circuit, satellite,
microwave, or laser transmission using any form of Program copy for reception
on a television receiver or a comparable device now known or hereafter devised
located in a living accommodation, where a "supplemental charge" is made to the
viewer for the privilege of viewing such exhibition in his home or in a hotel,
motel or hospital or other living accommodation, whether such exhibition is a
particular program selected by the viewer which would not be available for
viewing by the viewer but for the payment of such supplemental charge, or is a
program being exhibited over one or more assigned channels which would not be
available for viewing by the viewer but for the payment of such supplemental
charge, or where a charge is made to the operator of a hotel, motel, hospital
or other living accommodation for the obtaining of such exhibition for viewing
at such location.
"Free Television", which shall mean the remote transmission of
video and audio signals comprising a schedule of programming intended for and
capable of reception on one or more channels of television receivers utilized
by the ultimate consumer for viewing such video and audio signals; which
transmissions originate from outside the place (or distant from the location of
portable television receivers) where such television receivers are located and
which video and audio signals are transmitted by means of over-the-air VHF or
UHF transmissions, satellite, cable or any other transmission means now known
or hereafter devised, created or
Exhibit "II" page 2
<PAGE> 24
invented without a charge being made to the viewer by the telecaster for the
right to receive and view such transmission other than:
(i) Fees or taxes imposed or fixed by any government
(including state or local), or agency thereof, for ownership of a television
receiver, or for general reception of and access to all video and audio
transmissions;
(ii) Fees (either one-time or periodic) only for the
physical equipment necessary to receive such transmission (e.g., cable system
"hook-up" fees, antenna fees, decoder fees, etc.) with respect to any channels
of programming;
TAURUS is hereby in power to bring, prosecute, defend and appear in
suits, actions and proceedings of any nature, under or concerning said
copyright, or concerning any infringement of or interference with any of the
rights in the Program granted herein under said Copyright, in the Territory
during the Term.
This Assignment is made in accordance with, and is subject to, that
certain Agreement dated March 15, 1995, with exhibits annexed, between TAURUS
and the undersigned.
Exhibit "II" Page 3
<PAGE> 25
IN WITNESS WHEREOF this document was executed on March 29, 1995
ALL AMERICAN TELEVISION, INC. (Grantor)
By /s/ JOHN STORRIER
---------------------------------
John Storrier
State of New York )
)
County of New York )
On this 29th day of March, in the year 1995, before me, the
undersigned, a Notary Public in and for said State, personally appeared
John Storrier, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person who executed the within instrument on
behalf of the corporation therein named and acknowledged to me that such
corporation executed it.
WITNESS my hand and official seal:
/s/ JAMES F. SLATTERY
-----------------------------------
NOTARY PUBLIC IN AND FOR SAID STATE
[SEAL]
Notary Public, State of New York
No. 028LA911192
Qualified in Westchester County
Commission Expires October 13, 1995
Exhibit "II" Page 4
<PAGE> 1
EXHIBIT 11
ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1995 1994
--------- ---------
<S> <C> <C> <C>
Weighted average number of common shares outstanding 5,456 4,826
Weighted average number of restricted stock awards granted 30 --
Weighted average number of Class B common shares outstanding 2,520 --
Assumed exercise of dilutive options and warrants based on the treasury stock
method using average market price -- 176
--------- ---------
Weighted average number of common shares and common share equivalents -
primary (B) 8,006 5,002
Assumed conversion of 6-1/2% Convertible Subordinated Notes due 2003 5,217 5,217
--------- ---------
Weighted average number of common shares, common share equivalents and
other dilutive securities - fully diluted (D) 13,223 10,219
========= =========
Computation of net income (loss) for per share purposes:
Net income (loss) $ (895) $ 31
--------- ---------
Add: After tax reduction of interest expense for the assumed reduction of
borrowings from aggregate proceeds on options and warrants assumed to
have been exercised in excess of 20% of the outstanding shares under the
treasury stock method -- 38
--------- ---------
Net income (loss) for primary per share computation (A) (895) 69
Add: After tax reduction of interest expense for assumed conversion of 6-1/2%
Convertible Subordinated Notes due 2003 606 715
--------- ---------
Net income (loss) for fully diluted per share computation (C) $ (289) $ 784
========= =========
Primary earnings (loss) per share (A) / (B) $ (.11) $ .01
========= =========
Fully diluted earnings (loss) per share (C) / (D) $ (.02)(1) $ .08(1)
========= =========
</TABLE>
(1) Calculation for 1995 and 1994 is antidilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 1995 AND
THE THREE MONTHS THEN ENDED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 8,488
<SECURITIES> 0
<RECEIVABLES> 59,655
<ALLOWANCES> 2,446
<INVENTORY> 77,483
<CURRENT-ASSETS> 0
<PP&E> 6,758
<DEPRECIATION> 3,026
<TOTAL-ASSETS> 206,673
<CURRENT-LIABILITIES> 0
<BONDS> 111,749
<COMMON> 1
0
0
<OTHER-SE> 27,654
<TOTAL-LIABILITY-AND-EQUITY> 206,673
<SALES> 3,018
<TOTAL-REVENUES> 36,962
<CGS> 1,864
<TOTAL-COSTS> 28,049
<OTHER-EXPENSES> 540
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,365
<INCOME-PRETAX> (1,543)
<INCOME-TAX> 648
<INCOME-CONTINUING> (895)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (895)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
