<PAGE>
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 JUNE 30, 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: 1-9724
SpectraVision, Inc.
-------------------
(Exact name of Registrant as specified in its charter)
Delaware 75-2182004
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1501 North Plano Road, Richardson, Texas 75081
---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
(214) 234-2721
--------------
(Registrant's telephone number,
including area code)
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
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed
all documents and reports required to be filed by Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court. Yes X No
--- ---
Number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:
Outstanding at
Title of each Class August 12, 1995
-------------------------------------- ---------------
Class A Common Stock, $0.001 Par Value 4,593,526
Class B Common Stock, $0.001 Par Value 19,390,379
<PAGE>
Index
Page
----
Part I Financial Information
Item 1 Financial Statements
Condensed Consolidated Statements of Financial Position
as of June 30, 1995 (unaudited) and December 31, 1994.............2
Condensed Consolidated Statements of Operations
for the three months ended June 30, 1995 and 1994 (unaudited).....4
Condensed Consolidated Statements of Operations
for the six months ended June 30, 1995 and 1994 (unaudited).......5
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 1995 and 1994 (unaudited).......6
Notes to the Condensed Consolidated Financial Statements..........7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations...............................12
Part II Other Information
Item 1 Legal Proceedings.................................................18
Item 6 Exhibits and Reports on Form 8-K..................................19
Signature..................................................................20
i
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
<PAGE>
SPECTRAVISION, INC.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 1,952 $ 1,317
Accounts Receivable (net) 21,030 20,417
Debt Issuance Costs (net) 6,022 6,797
Prepaids and Other Assets 8,028 8,933
Video Systems
Installations In-Process 41,338 38,144
Completed Systems 251,665 257,484
------------ ------------
293,003 295,628
Less accumulated depreciation and amortization (161,874) (149,045)
------------ ------------
Total Video Systems 131,129 146,583
Building and Equipment
Building 4,217 4,294
Furniture, fixtures and other equipment 7,067 6,887
------------ ------------
11,284 11,181
Less accumulated depreciation (5,749) (4,965)
------------ ------------
Total Building and Equipment 5,535 6,216
Land 2,559 2,559
Hotel Contracts (net) 48,701 50,000
------------ ------------
TOTAL ASSETS $ 224,956 $ 242,822
============ ============
</TABLE>
See Accompanying Notes to the Condensed Consolidated Financial Statements
2
<PAGE>
SPECTRAVISION, INC.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
------------ ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities
Accounts Payable $ 1,416 $ 48,807
Accrued Liabilities
Interest 292 3,413
Other 1,928 26,017
Income Taxes 263 290
Deferred Income Taxes 6,273 6,757
Debt
Revolving Credit Facility - 12,500
Canadian Bank Credit Facility - 7,350
Foothill Revolving Facility 15,408 -
11.5% Senior Discount Notes - 172,295
11.65% Senior Subordinated Reset Notes - 294,768
Capitalized Lease Obligations 414 23,492
Other Debt - 158
------------ ------------
Total Debt 15,822 510,563
Liabilities Subject to Settlement Under Reorganization 591,593 -
------------ ------------
Total Liabilities 617,587 595,847
Contingent Value Rights Subject to Settlement
Under Reorganization 20,000 20,000
Stockholders' Deficit
Class A Common Stock - $0.001 par value, authorized
6,000,000 shares, issued and outstanding 4,593,526
at June 30, 1995 and December 31, 1994, respectively. 5 5
Class B Common Stock - $0.001 par value, authorized
144,000,000 shares, issued and outstanding 19,390,379
at June 30, 1995 and December 31, 1994, respectively. 19 19
Paid in Capital 392,185 392,185
Retained Deficit (805,373) (765,729)
Foreign Currency Translation Adjustment 533 495
------------ ------------
Total Stockholders' Deficit (412,631) (373,025)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 224,956 $ 242,822
============ ============
</TABLE>
See Accompanying Notes to the Condensed Consolidated Financial Statements
3
<PAGE>
SPECTRAVISION, INC.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-------------------------------
1995 1994
------------ ------------
<S> <C> <C>
REVENUES:
Pay-Per-View $ 27,026 $ 31,067
Free-To-Guest 3,418 3,707
Other 1,629 1,763
---------- ----------
TOTAL REVENUES 32,073 36,537
DIRECT COSTS:
Pay-Per-View 9,528 10,607
Free-To-Guest 2,840 2,689
Other 520 752
---------- ----------
TOTAL DIRECT COSTS 12,888 14,048
DEPRECIATION AND AMORTIZATION 9,946 11,060
OPERATING EXPENSES 9,239 7,943
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 6,180 6,131
RESEARCH AND DEVELOPMENT (NET) 582 607
EXCHANGE LOSS 109 74
---------- ----------
TOTAL COSTS AND EXPENSES 38,944 39,863
---------- ----------
OPERATING LOSS (6,871) (3,326)
NON-OPERATING INCOME (139) (1,163)
INTEREST EXPENSE, NET (Contractual interest
expense of $15,969 for the three months
ended June 30, 1995) 12,089 13,713
---------- ----------
LOSS BEFORE REORGANIZATION ITEMS, INCOME
TAXES AND EXTRAORDINARY ITEM (18,821) (15,876)
REORGANIZATION ITEMS 177 -
---------- ----------
LOSS BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM (18,998) (15,876)
INCOME TAXES
State and Foreign Provision 19 370
Deferred Benefit (242) (2,152)
---------- ----------
TOTAL INCOME TAX BENEFIT (223) (1,782)
---------- ----------
LOSS BEFORE EXTRAORDINARY ITEM (18,775) (14,094)
EXTRAORDINARY ITEM
Loss from Debt Extinguishment (915) -
---------- ----------
NET LOSS $ (19,690) $ (14,094)
========== ==========
LOSS PER COMMON SHARE:
Before Extraordinary Item $ (0.78) $ (0.59)
Extraordinary Item (0.04) -
---------- ----------
Net Loss $ (0.82) $ (0.59)
========== ==========
AVERAGE COMMON SHARES OUTSTANDING 23,983,905 23,983,905
</TABLE>
See Accompanying Notes to the Condensed Consolidated Financial Statements
4
<PAGE>
SPECTRAVISION, INC.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------------
1995 1994
------------ ------------
<S> <C> <C>
REVENUES:
Pay-Per-View $ 55,110 $ 62,681
Free-To-Guest 6,876 7,575
Other 3,222 3,381
---------- -----------
TOTAL REVENUES 65,208 73,637
DIRECT COSTS:
Pay-Per-View 19,156 21,326
Free-To-Guest 5,673 5,819
Other 1,055 1,122
---------- -----------
TOTAL DIRECT COSTS 25,884 28,267
DEPRECIATION AND AMORTIZATION 18,920 22,529
OPERATING EXPENSES 19,421 16,384
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 11,782 11,812
RESEARCH AND DEVELOPMENT (NET) 1,183 1,227
EXCHANGE LOSS 254 136
---------- -----------
TOTAL COSTS AND EXPENSES 77,444 80,355
---------- -----------
OPERATING LOSS (12,236) (6,718)
NON-OPERATING INCOME (139) (1,163)
INTEREST EXPENSE, NET (Contractual interest
expense of $30,799 for the six months
ended June 30, 1995) 26,919 27,360
---------- -----------
LOSS BEFORE REORGANIZATION ITEMS, INCOME
TAXES AND EXTRAORDINARY ITEM (39,016) (32,915)
REORGANIZATION ITEMS 177 -
---------- -----------
LOSS BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM (39,193) (32,915)
INCOME TAXES
State and Foreign Provision 20 701
Deferred Benefit (484) (4,304)
---------- -----------
TOTAL INCOME TAX BENEFIT (464) (3,603)
---------- -----------
LOSS BEFORE EXTRAORDINARY ITEM (38,729) (29,312)
EXTRAORDINARY ITEM
Loss from Debt Extinguishment (915) -
---------- -----------
NET LOSS $ (39,644) $ (29,312)
========== ===========
LOSS PER COMMON SHARE:
Before Extraordinary Item $ (1.61) $ (1.22)
Extraordinary Item (0.04) -
---------- -----------
Net Loss $ (1.65) $ (1.22)
========== ===========
AVERAGE COMMON SHARES OUTSTANDING 23,983,905 23,983,905
</TABLE>
See Accompanying Notes to the Condensed Consolidated Financial Statements
5
<PAGE>
SPECTRAVISION, INC.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------
1995 1994
---------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(39,644) $(29,312)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 18,920 22,529
Other non-cash items:
Conversion of non-cash interest to secondary notes 18,494 16,469
Deferred income tax benefit (484) (4,304)
Extraordinary loss from debt extinguishment 915 -
Accretion of discount on senior notes 8,609 8,868
Amortization of debt issuance costs 553 643
Exchange loss 254 136
Other items (net) 42 (743)
Increase (decrease) in:
Accounts payable 13,639 4,808
Accrued interest (993) 381
Other accrued liabilities 1,239 6,501
Income taxes payable 10 342
Decrease (increase) in:
Accounts receivable (623) (4,242)
Debt issuance costs (693) -
Prepaids and other assets 335 (1,548)
------- -------
Net cash provided by operating activities 20,573 20,528
INVESTING ACTIVITIES:
Cost of in-process systems and capital expenditures (12,216) (33,983)
------- -------
Net cash used in investing activities (12,216) (33,983)
FINANCING ACTIVITIES:
Borrowing under Foothill revolving facility 25,052 -
Repayment of Foothill revolving facility (9,644) -
Repayment of revolving credit facility 19,896) -
Repayment of Canadian bank credit facility (7,350) -
Borrowing under revolving credit facility 7,396 3,000
Repayment of other debt and capitalized leases (3,225) (1,791)
------- -------
Net cash provided by (used in) financing activities (7,667) 1,209
Effect of exchange rate changes on cash (55) (12)
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 635 (12,258)
Cash and cash equivalents at beginning of period 1,317 14,285
------- -------
Cash and cash equivalents at end of period $ 1,952 $ 2,027
======= =======
</TABLE>
See Accompanying Notes to the Condensed Consolidated Financial Statements
6
<PAGE>
SpectraVision, Inc.
(Debtor-in-Possession)
Notes to the Condensed Consolidated Financial Statements
June 30, 1995
1. General
-------
These consolidated financial statements should be read in the context of
the financial statements and notes thereto filed with the Securities Exchange
Commission in the 1994 Annual Report on Form 10-K of SpectraVision, Inc.,
("SpectraVision," or the "Company"). The accompanying unaudited condensed
consolidated financial statements include SpectraVision and all of its
subsidiaries. Intercompany transactions have been eliminated. Certain prior
period amounts have been reclassified to conform with the current period
presentation. In the opinion of management, these financial statements include
all adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the Company's financial position and results of its operations
for the periods presented. The results of operations for such interim periods
are not necessarily indicative of results of operations for the entire year.
2. Organization and Basis of Presentation
--------------------------------------
The Company is the leading provider of in-room entertainment services to
the lodging industry. Founded in 1971, the Company originally developed and
patented a system, known as "Spectravision," which provides in-room television
viewing of recently released major and other motion pictures on a pay-per-view
("PPV") basis.
Unless the context otherwise requires, all references herein to the Company
are not intended to imply exact corporate relationships and include
SpectraVision, SPI Newco, Inc., ("Newco") its direct subsidiary, Spectradyne,
Inc., ("Spectradyne") the direct subsidiary of Newco, and the foreign
subsidiaries.
3. Bankruptcy Proceedings
----------------------
On June 8, 1995 (the "Petition Date"), SpectraVision, together with Newco,
Spectradyne, Spectradyne International, Inc., and Kalevision Systems, Inc. -USA,
filed voluntary petitions for reorganization under Chapter 11 of the United
States Bankruptcy Code ("Chapter 11") in the United States Bankruptcy Court for
the District of Delaware (the "Bankruptcy Court") and are currently operating
their respective businesses as debtors-in-possession pursuant to section 1107
and 1108 of the Bankruptcy Code. On June 23, 1995, a single unsecured creditors'
committee was appointed by the U.S. Trustee for the district of Delaware
pursuant to Section 1102 of the Bankruptcy Code (the "Creditors' Committee").
The Creditors' Committee has the right to review and object to certain business
transactions and is expected to participate in the negotiation of the Company's
plan of reorganization.
In early 1995, the Company determined that a financial restructuring would
be required to ensure the Company's long-term survival. The Company conducted
restructuring negotiations with representatives of its secured and unsecured
creditors during April and May 1995, working toward the development of an
overall restructuring plan. In June 1995, the Company concluded that the Chapter
11 filing should be made in order to preserve the value of its assets and to
ensure that the business had sufficient cash resources to continue operations
while it completed the financial restructuring process. Costs related to the
pre-petition restructuring negotiations in the amount of $369,000 deducted from
non-operating income are included in results of operations.
7
<PAGE>
SpectraVision, Inc.
(Debtor-in-Possession)
Notes to the Condensed Consolidated Financial Statements
June 30, 1995
As of the Petition Date, actions to collect pre-petition indebtedness have
been automatically stayed pursuant to Section 362 of the Bankruptcy Code
(subject to order of the Bankruptcy Court) and, in certain circumstances, other
pre-petition contractual obligations may not be enforced against the Company. In
addition, the Company may reject pre-petition executory contracts and lease
obligations, and parties affected by these rejections may file claims with the
Bankruptcy Court in accordance with the reorganization process. Substantially
all liabilities as of the Petition Date are subject to being paid or compromised
under a plan of reorganization to be voted upon by all impaired classes of
creditors and equity security holders and approved by the Bankruptcy Court.
The accompanying condensed consolidated financial statements have been
prepared on a going concern basis, which assumes continuity of operations,
realization of assets and liquidation of liabilities in the ordinary course of
business. However, as a result of the Chapter 11 filings and circumstances
relating to these events, including the Company's highly leveraged financial
structure and recurring losses from operations as reflected in the accompanying
condensed consolidated statements of operations, such realization of assets and
liquidation of liabilities is subject to significant uncertainty. In addition,
the Company's independent public accountants included in their report on the
Company's consolidated financial statements for the year ended December 31, 1994
an explanatory paragraph that describes the uncertainty about the Company's
ability to continue as a going concern.
As a Chapter 11 debtor, the Company may sell (subject, in certain
circumstances, to Bankruptcy Court approval) or otherwise dispose of assets, and
liquidate or settle liabilities, for amounts other than those reflected in the
condensed consolidated financial statements. The amounts reported in the
condensed consolidated financial statements do not give effect to any
adjustments to the carrying value of assets or amounts of liabilities that might
result as a consequence of actions taken pursuant to a plan of reorganization.
If the Company is unable to obtain confirmation of a plan of reorganization, its
creditors or equity security holders may seek a liquidation of the Company by
conversion to a Chapter 7 bankruptcy proceeding. In that event, it is likely
that additional liabilities and claims would be asserted which are not presently
reflected in the condensed consolidated financial statements. In the event of a
liquidation, the amounts reflected in the condensed consolidated financial
statements would be subject to adverse adjustments in amounts which, while not
presently determinable, could be material.
8
<PAGE>
SpectraVision, Inc.
(Debtor-in-Possession)
Notes to the Condensed Consolidated Financial Statements
June 30, 1995
Financial accounting and reporting during a Chapter 11 proceeding is
prescribed in Statement of Position No. 90-7, "Financial Reporting by Entities
in Reorganization Under the Bankruptcy Code" ("SOP 90-7"). Accordingly, certain
pre-petition obligations, which may be impaired, have been classified as
obligations subject to Chapter 11 reorganization proceedings and include the
following estimated amounts at June 30, 1995 (dollars in thousands):
<TABLE>
<S> <C>
Debt Instruments:
11.5% Senior Discount Notes due 2000 $180,904
11.65% Senior Subordinated Reset Notes due 2001 313,262
--------
Total debt instruments 494,166
Accrued interest on the debt instruments 2,120
Capital lease obligations 24,312
Accounts payable 54,616
Accrued taxes 37
Other unliquidated accrued liabilities 16,342
--------
Total liabilities subject to settlement under
reorganization $611,593
========
Contingent Value Rights subject to settlement under
reorganization $ 20,000
========
</TABLE>
Contractual interest expense for the six months ended June 30, 1995 was
$3.9 million ($2.6 million at stated interest rates and $1.3 million unrecorded
original issue discount) in excess of reported interest expense because pursuant
to SOP 90-7, the Company has discontinued, effective June 8, 1995, the accrual
of interest on prepetition debt that is unsecured or estimated to be
undersecured.
Reorganization costs of $177,000 for the three months ended June 30, 1995
include attorneys' fees in connection with the bankruptcy filing.
4. Debt
----
Foothill Revolving Facility: On June 9, 1995 Spectradyne entered into a
loan and security agreement with Foothill Capital Corporation ("Foothill") to
provide debtor-in-possession financing (the "Foothill Loan"). The Foothill Loan
allows for revolving advances up to a maximum amount of $40 million and bears
interest payable monthly at prime plus 1.75% with a floor of 8.5%. Proceeds from
initial advances under the Foothill Loan were used to repay outstanding balances
and accrued interest under the Company's revolving credit facility and the
Canadian bank credit facility (referred to herein as the "Old Credit
Facilities"). The Foothill Loan matures June 15, 1997.
The Foothill Loan is secured by all of the assets of Spectradyne and
certain subsidiaries, all the outstanding stock of the Company's subsidiaries
and the guarantees of SpectraVision and certain subsidiaries. The Foothill Loan
contains various and customary financial and operating covenants including
limitations on additional indebtedness and limitations on capital expenditures.
9
<PAGE>
SpectraVision, Inc.
(Debtor-in-Possession)
Notes to the Condensed Consolidated Financial Statements
June 30, 1995
Senior Subordinated Reset Notes: At June 1, 1995 the Company exercised its
option under the indenture for the Company's 11.65% Senior Subordinated Reset
Notes ("Reset Notes") to pay interest for the six months ended June 1, 1995 in
additional Reset Notes, (the "PIK Option"). The indenture requires interest to
accrue at 12.65% per annum during the PIK Option period. Accordingly,
$18,494,000 of additional Reset Notes were issued at June 1, 1995.
5. Extraordinary loss
------------------
The Company applied the proceeds from the initial advance under the
Foothill Loan to repay outstanding obligations under the Old Credit Facilities.
As a result of extinguishment of this debt, the Company wrote-off unamortized
debt issuance costs in the amount of $915,000.
6. Contingencies
-------------
On October 20, 1994, a purported class action complaint was filed in the
United States District Court alleging misrepresentations and omissions
concurrent with and following the Company's 1993 offerings of Class B Common
Stock and Senior Discount Notes. The plaintiff seeks unspecified damages,
prejudgment interest, and fees and costs of the plaintiff. The Company believes
that it has meritorious defenses to the claims, and it intends to vigorously
defend itself. Proceedings in this lawsuit with respect to the Company have been
stayed as a result of the Chapter 11 filings.
The Company and its subsidiaries and related companies are potential and
named defendants in several other lawsuits and claims arising in the ordinary
course of business. While the outcome of such claims, lawsuits or other
proceedings against the Company cannot be predicted with certainty, management
expects that such liability, to the extent not provided for through insurance or
otherwise, will not have a material adverse effect on the operating results or
financial condition of the Company. Proceedings in connection with any lawsuit
against the Company have been stayed as a result of the Chapter 11 filings.
10
<PAGE>
SpectraVision, Inc.
(Debtor-in-Possession)
Notes to Condensed Consolidated Financial Statements
June 30, 1995
7. Balance Sheet of Entities under Chapter 11
The condensed balance sheet of SpectraVision and all entities included in
the Chapter 11 filings is as follows (dollars in thousands):
<TABLE>
<S> <C>
ASSETS
Cash and Cash Equivalents $ 791
Accounts Receivable 17,604
Debt Issuance Costs 6,022
Prepaids and Other Assets 7,152
Video Systems
Installations In-Process 37,782
Completed Systems 218,553
-----------
256,335
Less accumulated depreciation and amortization (137,936)
-----------
Total Video Systems 118,399
Building and Equipment
Building 4,216
Furniture, fixtures and other equipment 5,861
-----------
10,078
Less accumulated depreciation (4,678)
-----------
Total Building and Equipment 5,400
Land 2,559
Hotel Contracts (net) 48,701
Investment in and advances to subsidiaries 31,170
-----------
TOTAL ASSETS $ 237,798
===========
LIABILITIES
Post-petition
Accounts Payable $ 1,190
Accrued Interest 316
Other Accrued Liabilities 1,514
Deferred Income Taxes 5,950
Foothill Revolving Facility 15,408
-----------
Total Post-Petition 24,378
Pre-petition
Accounts Payable and Accrued Liabilities 73,115
Debt Instruments 494,166
Capital Lease Obligations 24,312
-----------
Total Pre-Petition 591,593
Intercompany Payable 3,678
-----------
Total Liabilities 619,649
Contingent Value Rights (subject to settlement under reorganization) 20,000
Stockholders' Deficit
Common Stock 24
Paid in Capital 392,189
Retained Deficit (794,064)
-----------
Total Stockholders' Deficit (401,851)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 237,798
===========
</TABLE>
11
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
--------------------------------------------------------------------------------
OF OPERATIONS
-------------
Financial Condition, Liquidity and Capital Resources
On the Petition Date, SpectraVision, together with Newco, Spectradyne,
Spectradyne International, Inc., and Kalevision Systems, Inc. - USA filed
voluntary petitions for reorganization under Chapter 11 bankruptcy and are
currently operating their respective businesses as debtors-in-possession
pursuant to section 1107 and 1108 of the Bankruptcy Code. On June 23, 1995, the
Creditors' Committee was appointed by the U.S. Trustee for the District of
Delaware pursuant to Section 1102 of the Bankruptcy Code. The Creditors'
Committee has the right to review and object to certain business transactions
and is expected to participate in the negotiation of the Company's plan of
reorganization.
In early 1995, the Company determined that a financial restructuring would
be required to ensure the Company's long-term survival. The Company conducted
restructuring negotiations with representatives of its secured and unsecured
creditors during April and May 1995, working toward the development of an
overall restructuring plan. In June 1995, the Company concluded that the Chapter
11 filing should be made in order to preserve the value of its assets and to
ensure that the business had sufficient cash resources to continue operations
while it completed the financial restructuring process.
At June 30, 1995, the Company had total liabilities of approximately $617.6
million and total assets of $225.0 million. The Company's cash flow from
operations (earnings before interest, taxes, depreciation, amortization and
other non-cash items) for the six months ended June 30, 1995 was $6.9 million as
compared to $17.1 million cash flow from operations for the six months ended
June 30, 1994. Cash and Cash Equivalents were $1.3 million at December 31, 1994.
During the six months ended June 30, 1995, the Company used available cash of
$1.3 million, cash flow from operations and working capital of $20.6 million and
net borrowings under the Foothill Loan in the amount of $15.4 million for
capital expenditures of $12.2 million, payment of other debt and capital leases
in the amount of $3.2 million, and payment of the outstanding balance of the Old
Credit Facilities in the amount of $19.9 million. Changes in Video Systems since
December 31, 1994 include capital purchases of $12.2 million offset by the
conversion of equipment purchases from Electronic Data Systems Corporation
("EDS") to operating leases in the amount of $16.0 million.
On June 9, 1995 Spectradyne entered into the Foothill Loan which allows for
revolving advances up to a maximum amount of $40 million and bears interest
payable monthly at prime plus 1.75% with a floor of 8.5%. Proceeds from initial
advances under the Foothill Loan were used to repay outstanding balances and
accrued interest under the Old Credit Facilities. At June 30, 1995 the Company
had $24.6 million available under the Foothill loan.
The Company believes the Foothill Loan together with cash from operations
will be adequate to cover its minimum capital requirements and working capital
needs through the remainder of 1995. However, the Company's ability to maintain
or increase cash flows from operations is dependent on a number of factors, many
of which are beyond the Company's control. Until a plan of reorganization is
approved by the creditors and confirmed by the Bankruptcy Court, the long term
liquidity and adequacy of the Company's capital resources cannot be determined.
Under the Bankruptcy Code, claims arising prior to the Petition Date may
not be paid outside of a plan of reorganization without the prior approval of
the Bankruptcy Court. Certain pre-petition claims have subsequently been paid or
satisfied with the approval of the Bankruptcy Court. These claims include
certain sales and use taxes, certain freight charges, certain subcontractors
charges and salaries, wages and employee benefits.
12
<PAGE>
Additionally, as a result of the Chapter 11 filing, the Company has, for
financial reporting purposes, suspended the accrual of interest on prepetition
debt which is either unsecured or estimated to be undersecured, which will
reduce the amount of interest expense recognized through the Chapter 11 period.
The Company's liquidity and capital resources may also be affected by decisions
that it makes in connection with the Chapter 11 proceedings with respect to its
leases of equipment and real property, and the expenses which accrue during the
Chapter 11 proceedings and other factors arising from the Chapter 11
proceedings. For example, pursuant to the Bankruptcy Code, the Company will be
required to pay legal and other advisory fees and expenses associated with its
Chapter 11 case. The Company presently estimates that such expenses will be
substantial and may average as much as $500,000 per month, although such fees
and expenses cannot be predicted with any meaningful degree of certainty at this
time.
In order for the Company to reorganize and emerge from the Chapter 11
proceedings, a plan of reorganization must be confirmed by the Bankruptcy Court.
If the Company is unable to obtain confirmation of a plan of reorganization, its
creditors or equity security holders may seek a liquidation of the Company by
conversion to a Chapter 7 bankruptcy proceeding. In that event, it is likely
that additional liabilities and claims would be asserted which are not presently
reflected in the Company's condensed consolidated financial statements. In the
event of a liquidation, the amounts reflected in the condensed consolidated
financial statements would be subject to adverse adjustments in amounts which,
while not presently determinable, could be material.
Results of Operations
---------------------
The following discussion and analysis addresses the results of operations
for the three month periods ended June 30, 1995 (the "1995 Second Quarter") and
June 30, 1994 (the "1994 Second Quarter") and the six month periods ended June
30, 1995 (the "1995 Six Months") and June 30, 1994 (the "1994 Six Months").
The Company's operations consist primarily of its pay-per-view and free-to-
guest services through its ownership of Spectradyne and the Company's other
operating subsidiaries. The following table sets forth certain information
regarding the Company's pay-per-view customer base and certain statistical data
affecting pay-per-view revenues.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Hotels Served at June 30 2,184 2,404 2,184 2,404
Rooms Served at June 30 608,146 671,600 608,146 671,600
Average Price per View $7.77 $7.70 $7.75 $7.70
Revenue per Equipped Room per
Day ("RER") $0.49 $0.52 $0.50 $0.51
</TABLE>
Second Quarter Ended June 30, 1995 compared
to Second Quarter Ended June 30, 1994
Total revenues decreased to $32.1 million in the 1995 Second Quarter from
$36.5 million in the 1994 Second Quarter, a decrease of $4.5 million or 12.2%.
Of the total revenues reported in the 1995 Second Quarter, 84.3% were revenues
from pay-per-view, 10.7% were from free-to-guest and 5.1% were from other
sources.
13
<PAGE>
Pay-per-view revenues decreased to $27.0 million in the 1995 Second Quarter
from $31.1 million in the 1994 Second Quarter, a decrease of $4.0 million or
13.0%. This decrease in pay-per-view ("PPV") revenues primarily reflects the
decline in the number of rooms served, which resulted in a decrease in revenues
of approximately $2.7 million. The decline in the number of revenue producing
rooms during the quarter is due to the loss of rooms from non-renewal of certain
hotel PPV contracts as a result of the intense competition in the hotel pay-per-
view industry. RER declined from $0.52 in the 1994 Second Quarter to $0.49 in
the 1995 Second Quarter resulting in an approximate $1.7 million decline in pay-
per-view revenues for the 1995 Second Quarter. These decreases were offset
slightly by an increase in average price per view from $7.70 during the 1994
Second Quarter to $7.77 for the 1995 Second Quarter contributing $0.4 million to
pay-per-view revenue.
Free-to-Guest revenues decreased to $3.4 million in the 1995 Second Quarter
from $3.7 million in the 1994 Second Quarter, a decrease of $289,000 million or
7.8%. This decrease primarily reflects the decrease in the number of hotels
served as well as negotiated price reductions granted in connection with certain
PPV contract renewals.
Pay-per-view direct costs decreased to $9.5 million in the 1995 Second
Quarter from $10.6 million in the 1994 Second Quarter, a decrease of $1.1
million or 10.2%. As a percentage of pay-per-view revenues, pay-per-view direct
costs increased slightly to 35.3% in the 1995 Second Quarter from 34.1% in the
1994 Second Quarter. This percentage increase is partly due to increased film
licensing fees. As a result of higher viewing levels of major feature films in
the 1995 Second Quarter, film licensing costs were 16.2% of pay-per-view
revenues as compared to 15.5% in the 1994 Second Quarter. Licensing costs vary
primarily due to the relative viewing mix of more costly major motion pictures
to independently produced films. Additionally, transmission costs increased in
connection with the compressed digital video ("CDV") satellite network.
Free-to-guest direct costs increased slightly to $2.8 million in the 1995
Second Quarter from $2.7 million in the 1994 Second Quarter, an increase of
$151,000 or 5.6%. As a percentage of free-to-guest revenues, free-to-guest
direct costs increased to 83.1% in the 1995 Second Quarter from 72.5% in the
1994 Second Quarter. The increase in free-to-guest direct costs as a percentage
of free-to-guest revenues primarily reflects the price reductions in free-to-
guest revenues in connection with certain PPV contract renewals.
Operating expenses increased to $9.2 million in the 1995 Second Quarter
from $7.9 million in the 1994 Second Quarter, an increase of $1.3 million or
16.3%. Operating expenses consist primarily of maintenance of hotel systems
including contractual services performed by EDS, pay-per-view equipment rental
expense (primarily integrated receiver decoders and file servers for the digital
guest choice system) and pay-per-view equipment repairs performed by a third
party. The increase is primarily attributed to an increase in equipment lease
expense in the amount of $1.4 million for the equipment financed by EDS through
operating leases effective January 1, 1995, offset slightly by decreases in
other expenses.
Selling, general and administrative expenses increased to $6.2 million the
1995 Second Quarter from $6.1 million in the 1994 Second Quarter, an increase of
$49,000 or 1.0%. Decreases in salaries and benefits as a result of the reduction
in workforce, along with decreases in advertising and public relations
expenditures were offset by increases in legal fees and insurance costs. Legal
fees increased in connection with pending and/or settled litigation including
the On Command video suit and the shareholder suit. Insurance premiums increased
primarily as a result of the hurricanes in late 1993 resulting in claims for
property and business interruption during 1994.
Non-operating income for the 1995 Second Quarter was $139,000 and includes
adjustments to certain prior obligations which were settled for less than
anticipated. Non-operating income for the 1994 Second Quarter was $1.2 million
and is comprised of business interruption insurance proceeds from hurricanes in
1993 and certain non-operating payments received in-lieu of performance under
purchase orders for equipment by a customer.
14
<PAGE>
Interest expense (net) decreased to $12.1 million in the 1995 Second
Quarter from $13.7 million in the 1994 Second Quarter, a decrease of $1.6
million or 11.8%. The decrease is primarily due to the capitalization of
interest in the amount of $0.8 million for the 1995 Second Quarter and the non-
accrual of interest on debt instruments subject to settlement for the period
June 8, 1995 to June 30, 1995.
Reorganization items of $177,000 for the 1995 Second Quarter primarily
include legal fees in connection with the Company's Chapter 11 filing.
State and foreign income tax expense decreased to $19,000 in the 1995
Second Quarter from $370,000 in the 1994 Second Quarter, a decrease of $351,000
or 94.9%, primarily due to lower taxable income in the 1995 Second Quarter.
Deferred income tax benefits decreased to $242,000 in the 1995 Second
Quarter from $2.2 million in the 1994 Second Quarter primarily due to the
reduction in carrying value of hotel contracts recorded at December 31, 1994.
Extraordinary item of $915,000 represents the write-off of unamortized debt
issuance costs in connection with the extinguishment of the Company's Old Credit
Facilities.
Net loss increased to $19.7 million in the 1995 Second Quarter from $14.1
million in the 1994 Second Quarter, an increase of $5.2 million. The increased
net loss for the 1995 Second Quarter is primarily attributable to the decline in
pay-per-view sales, increased operating expenses, changes in deferred tax
benefits and the extraordinary item.
15
<PAGE>
Six Months Ended June 30, 1995 compared
to Six Months Ended June 30, 1994
Total revenues decreased to $65.2 million in the 1995 Six Months from $73.6
million in the 1994 Six Months, a decrease of $8.4 million or 11.4%. Of the
total revenues reported in the 1995 Six Months, 84.5% were revenues from
pay-per-view, 10.5% were from free-to-guest and 5.0% were from other sources.
Pay-per-view revenues decreased to $55.1 million in the 1995 Six Months
from $62.7 million in the 1994 Six Months, a decrease of $7.6 million or 12.1%.
This decrease in pay-per-view revenues primarily reflects the decline in the
number of rooms served which resulted in a decrease in revenues of approximately
$6.3 million. Additionally, RER declined from $0.51 in the 1994 Six Months to
$0.50 in the 1995 Six Months. The decline in RER contributed approximately $1.7
million to the decrease in the pay-per-view revenues for the 1995 Six Months.
These decreases were offset slightly by an increase in average price per view
from $7.70 during the 1994 Second Quarter to $7.75 for the 1995 Second Quarter
contributing $0.4 million to pay-per-view revenue.
Free-to-guest revenues decreased to $6.9 million in the 1995 Six Months
from $7.6 million in the 1994 Six Months, a decrease of $699,000 or 9.2%. This
decrease primarily reflects a decline in the number of hotels served and
negotiated price reductions granted in connection with certain PPV contract
renewals.
Pay-per-view direct costs decreased to $19.2 million in the 1995 Six Months
from $21.3 million in the 1994 Six Months, a decrease of $2.2 million or 10.2%.
As a percentage of pay-per-view revenues, pay-per-view direct costs increased to
34.8% in the 1995 Six Months from 34.0% in the 1994 Six Months. This increase
primarily reflects the additional transmission costs in connection with the CDV
satellite network somewhat offset by lower costs for in-room cards.
Free-to-guest direct costs decreased to $5.7 million in the 1995 Six Months
from $5.8 million in the 1994 Six Months, a decrease of $146,000 or 2.5%. As a
percentage of free-to-guest revenues, free-to-guest direct costs increased to
82.5% in the 1995 Six Months from 76.8% in the 1994 Six Months. This increase in
free-to-guest direct costs as a percentage of free-to-guest revenues primarily
reflects the price reductions in free-to-guest revenues in connection with
certain PPV contract renewals.
Operating expenses increased to $19.4 million in the 1995 Six Months from
$16.4 million in the 1994 Six Months, an increase of $3.0 million or 18.5%. In
1994 the Company made a decision to eliminate the internal field organization
and replace it by having EDS perform these services. The 1994 Six Months
includes the costs of the Company's internal field service organization in
addition to the EDS contract fees while the Company was in transition from the
internal field organization to EDS and both organizations were in place. The
elimination of the internal field organization generated savings reflected in
the 1995 Six Months of approximately $3.7 million which is offset by increases
in EDS service fees of approximately $2.7 million and equipment lease expenses
of $2.9 million. Additional EDS fees are for services not contemplated in the
original EDS agreement and include, among other charges, premium charges for
service of tape-based sites and other services beyond the scope of the original
agreement. Additionally, costs of repairs of room units and head end equipment
increased approximately $0.9 million as compared to the 1994 Six Months.
Selling, general and administrative expenses were $11.8 million in the 1995
Six Months and $11.8 million in the 1994 Six Months. Decreases in salaries and
benefits as a result of the reduction in workforce in late 1994 and reductions
in advertising and public relations expenditures were offset by increases in
legal expenses and increased property and business interruption insurance.
16
<PAGE>
Non-operating income for the 1995 Six Months was $139,000 and includes
adjustments to certain prior obligations which were settled for less than
anticipated. Non-operating income for the 1994 Six Months was $1.2 million and
is comprised of business interruption insurance proceeds from hurricanes in 1993
and certain non-operating payments received in-lieu of performance under
purchase orders for equipment by a customer.
Interest expense (net) decreased to $26.9 million in the 1995 Six Months
from $27.4 million in the 1994 Six Months, a decrease of $441,000 or 1.6%.
Interest expense increased due to the increased outstanding balance of the Reset
Notes during the 1995 Six Months as compared to the 1994 Six Months. This
increase was offset by the capitalization of interest in the amount of $1.8
million during the 1995 Six Months and the non-accrual of interest on debt
instruments subject to settlement for the period June 8, 1995 to June 30, 1995.
Reorganization items of $177,000 for the 1995 Six Months primarily include
legal fees in connection with the Company's Chapter 11 filing.
State and foreign income taxes decreased to $20,000 in the 1995 Six Months
from $701,000 in the 1994 Six Months, a decrease of $681,000 or 97.1% due to
lower taxable income in the 1995 Six Months.
Deferred income tax benefits decreased to $484,000 million in the 1995 Six
Months from $4.3 million in the 1994 Six Months primarily due to the reduction
in carrying value of hotel contracts recorded at December 31, 1994.
Extraordinary item of $915,000 represents the write-off of unamortized debt
issuance costs in connection with the extinguishment of the Company's Old Credit
Facilities.
Net loss increased to $39.6 million in the 1995 Six Months from $29.3
million in the 1994 Six Months, an increase of $10.3 million. The net loss was
greater in the 1995 Six Months primarily due to lower pay-per-view
sales,increased operating expenses, changes in deferred tax benefits and the
extraordinary item.
17
<PAGE>
PART II
Item 1. Legal Proceedings
On October 2, 1992, Spectradyne filed a lawsuit in federal district
court asserting patent infringement by On Command Video Corporation
("OCV") and Comsat Video Enterprises, Inc. ("CVE"). Subsequently, OCV
filed a counterclaim against the Company charging violations of patent
rights held by OCV. The counterclaim requested an unspecified amount of
damages and injunctive relief. Spectradyne amended its original lawsuit
to, in part, assert copyright infringement regarding certain property
management system interface software protocol against OCV and CVE. The
Company entered into a settlement agreement with OCV and CVE relating
to the lawsuit in May, 1995. After analyzing the settlement agreement
in light of the Company's Chapter 11 filings, the Company decided to
terminate the settlement agreement.
On October 20, 1994, a purported class action complaint was filed in
the United States District Court for the Northern District of Texas,
Dallas Division, styled Seth Stern v. SpectraVision Inc., Albert D.
Jerome, Michael C. Colleran, John Davis, Marvin Davis, Gerald S. Gray,
Kenneth Ziffren, John F. Berardi, Robert D. Beyer and Danny G. Hair.
The complaint alleges violations of Sections 11, 12(2) and 15 of the
Securities Act of 1933, sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 and Rule 10b-5 promulgated under that Act relating
to alleged misrepresentations and omissions concurrent with and
following the Company's public offering of Class B common stock and the
Company's offering of Senior Discount Notes, both on September 28,
1993, including but not limited to alleged misrepresentations and
omissions made in the Prospectuses. The complaint asserts that it is
brought on behalf of a class consisting of purchasers of securities of
the Company, including common stock and Senior Discount Notes, between
September 28, 1993 and August 15, 1994. On December 20, 1994, the
defendants moved to dismiss the complaint. In response to that motion,
plaintiff agreed to file an amended complaint and the motions to
dismiss were withdrawn without prejudice. On February 2, 1995,
plaintiff served an amended complaint reasserting the claims set forth
in the prior complaint and adding claims under Section 33 of the Texas
Securities Act, enlarging the class period to November 7, 1994, and
altering other allegations, including some of the allegations relating
to the alleged misrepresentations and omissions. The defendants'
motions to dismiss the amended complaint were denied. The plaintiff
seeks unspecified damages, prejudgment interest, and fees and costs of
the plaintiff. The outcome of the case cannot be predicted with any
certainty; however, the Company believes that it has meritorious
defenses to the claims, and it intends to vigorously defend itself.
Proceedings in this lawsuit with respect to the Company have been
stayed as a result of the Chapter 11 filings.
The Company and its subsidiaries and related companies are potential
and named defendants in several other lawsuits and claims arising in
the ordinary course of business. While the outcome of such claims,
lawsuits or other proceedings against the Company cannot be predicted
with certainty, management expects that such liability, to the extent
not provided for through insurance or otherwise, will not have a
material adverse effect on the financial condition of the Company.
Proceedings in connection with any lawsuit against the Company have
been stayed as a result of the Chapter 11 filings.
18
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.24 - Loan and Security Agreement by and between
Spectradyne, Inc. and Foothill Capital Corporation, dated June 9,
1995.
Exhibit 10.25 - Amendment Number One to Loan and Security
Agreement by and between Spectradyne, Inc. and Foothill Capital
Corporation dated July 20, 1995.
Exhibit 27 - Financial Data Schedules for the six months ended
June 30, 1995
(b) Reports on Form 8-K
The Company filed with the Commission on June 20, 1995 a Form 8-K
report dated June 8, 1995 to disclose the Company's June 8, 1995
filing of a voluntary petition for reorganization under Chapter
11 of the United States Bankruptcy Court.
19
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SpectraVision, Inc.
August 11, 1995 /s/ RICHARD M. GOZIA
--------------------- -----------------------------------------------
(Date) RICHARD M. GOZIA
EXECUTIVE VICE PRESIDENT
(Chief Financial Officer and officer duly
authorized to sign on behalf of the Registrant)
20
<PAGE>
EXHIBIT 10-24
--------------------------------------------------------------------------------
[LOGO OF FOOTHILL CORPORATION APPEARS HERE]
LOAN AND SECURITY AGREEMENT
by and between
SPECTRADYNE, INC.
and
FOOTHILL CAPITAL CORPORATION
Dated as of June 9, 1995
--------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<C> <S> <C>
1. DEFINITIONS AND CONSTRUCTION........................................ 1
1.1 Definitions.................................................... 1
1.2 Accounting Terms............................................... 16
1.3 Code........................................................... 16
1.4 Construction................................................... 16
1.5 Schedules and Exhibits......................................... 17
2. LOAN AND TERMS OF PAYMENT........................................... 17
2.1 Revolving Advances............................................. 17
2.2 Overadvances................................................... 18
2.3 Interest: Rates, Payments, and Calculations................... 18
2.4 Crediting Payments; Application of Collections................. 19
2.5 Statements of Obligations...................................... 20
2.6 Fees........................................................... 20
3. CONDITIONS; TERM OF AGREEMENT....................................... 21
3.1 Conditions Precedent to Initial Advance........................ 21
3.2 Conditions Subsequent to Initial Advance....................... 23
3.3 Conditions Precedent to All Advances........................... 23
3.4 Term........................................................... 24
3.5 Effect of Termination.......................................... 24
3.6 Early Termination by Borrower.................................. 24
3.7 Termination Upon Event of Default.............................. 25
4. CREATION OF SECURITY INTEREST....................................... 25
4.1 Grant of Security Interest..................................... 25
4.2 Negotiable Collateral.......................................... 26
4.3 Collection of Accounts, General Intangibles, Negotiable
Collateral..................................................... 26
4.4 Delivery of Additional Documentation Required.................. 26
4.5 Power of Attorney.............................................. 26
4.6 Right to Inspect............................................... 27
5. REPRESENTATIONS AND WARRANTIES...................................... 27
5.1 No Prior Encumbrances......................................... 27
5.2 Eligible Accounts............................................. 28
</TABLE>
-i-
<PAGE>
<TABLE>
<C> <S> <C>
5.3 Inventory and Equipment....................................... 28
5.4 Location of Inventory and Equipment........................... 28
5.5 Inventory Records............................................. 28
5.6 Location of Chief Executive Office; FEIN...................... 28
5.7 Due Organization and Qualification; No Subsidiaries........... 28
5.8 Due Authorization; No Conflict................................ 28
5.9 Litigation.................................................... 29
5.10 No Material Adverse Change in Financial Condition............. 29
5.11 Solvency...................................................... 29
5.12 Employee Benefits............................................. 29
5.13 Environmental Condition....................................... 30
5.14 Capital Stock................................................. 30
5.16 Reliance by Foothill; Cumulative.............................. 31
6. AFFIRMATIVE COVENANTS............................................... 31
6.1 Accounting System............................................. 31
6.2 Collateral Reports............................................ 31
6.3 Schedules of Accounts......................................... 32
6.4 Financial Statements, Reports, Certificates................... 32
6.5 Tax Returns................................................... 33
6.6 Inventory Reporting........................................... 33
6.7 Claims........................................................ 33
6.8 Maintenance of Inventory and Equipment........................ 33
6.9 Taxes......................................................... 33
6.10 Insurance..................................................... 34
6.11 No Setoffs or Counterclaims................................... 34
6.12 Location of Inventory and Equipment........................... 34
6.13 Compliance with Laws.......................................... 35
6.14 Employee Benefits............................................. 35
7. NEGATIVE COVENANTS.................................................. 36
7.1 Indebtedness.................................................. 36
7.2 Liens......................................................... 37
7.3 Restrictions on Fundamental Changes........................... 37
7.4 Extraordinary Transactions and Disposal of Assets............. 37
7.5 Change Name................................................... 37
7.6 Guarantee..................................................... 37
7.7 Nature of Business; Fiscal Year............................... 37
7.8 Prepayments................................................... 37
7.9 Change of Control............................................. 37
</TABLE>
-ii-
<PAGE>
<TABLE>
<C> <S> <C>
7.10 Capital Expenditures......................................... 37
7.11 Consignments................................................. 38
7.12 Distributions................................................ 38
7.13 Accounting Methods........................................... 38
7.14 Investments.................................................. 38
7.15 Transactions with Affiliates................................. 38
7.16 Suspension................................................... 39
7.17 Compensation................................................. 39
7.18 Use of Proceeds.............................................. 39
7.19 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees....................................... 39
8. EVENTS OF DEFAULT................................................... 39
8.12 Financial Covenants.......................................... 41
8.13 Operational Covenants........................................ 41
9. FOOTHILL'S RIGHTS AND REMEDIES...................................... 42
9.1 Rights and Remedies........................................... 42
9.2 Remedies Cumulative........................................... 45
10. TAXES AND EXPENSES.................................................. 45
11. WAIVERS; INDEMNIFICATION............................................ 46
11.1 Demand; Protest; etc......................................... 46
11.2 Foothill's Liability for Collateral.......................... 46
11.3 Indemnification.............................................. 46
12. NOTICES............................................................. 46
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.......................... 47
14. DESTRUCTION OF BORROWER'S DOCUMENTS................................. 48
15. GENERAL PROVISIONS.................................................. 49
15.1 Effectiveness................................................ 49
15.2 Successors and Assigns....................................... 49
15.3 Section Headings............................................. 49
15.4 Interpretation............................................... 49
15.5 Severability of Provisions................................... 49
15.6 Amendments in Writing........................................ 49
</TABLE>
-iii-
<PAGE>
<TABLE>
<C> <S> <C>
15.7 Counterparts; Telefacsimile Execution........................ 49
15.8 Revival and Reinstatement of Obligations..................... 50
15.9 Integration.................................................. 50
</TABLE>
SCHEDULES AND EXHIBITS
Schedule P-1 Permitted Liens
Schedule R-1 Real Property
Schedule 5.9 Litigation
Schedule 5.14 Capitalization
Schedule 6.12 Location of Inventory and Equipment
Exhibit G-1 Guaranty (Kalevision)
Exhibit G-2 Guaranty (SpectraVision)
Exhibit S-1 Security Agreement (Kalevision)
Exhibit S-2 Security Agreement (SpectraVision)
Exhibit S-3 Stock Pledge Agreement
-iv-
<PAGE>
LOAN AND SECURITY AGREEMENT
---------------------------
THIS LOAN AND SECURITY AGREEMENT, is entered into as of June 9, 1995, between
FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), with a
place of business located at 11111 Santa Monica Boulevard, Suite 1500, Los
Angeles, California 90025-3333, and SPECTRADYNE, INC., a Texas corporation
("Borrower"), with its chief executive office located at 1501 North Plano Road,
Richardson, Texas 75081.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1. Definitions. As used in this Agreement, the following terms
shall have the following definitions:
"Account Debtor" means any Person who is or who may become obligated under,
--------------
with respect to, or on account of an Account.
"Accounts" means all currently existing and hereafter arising accounts,
--------
contract rights, and all other forms of obligations owing to Borrower arising
out of the sale, license, or lease of goods or General Intangibles or the
rendition of services by Borrower, irrespective of whether earned by
performance, and any and all credit insurance, guaranties, or security therefor.
"Adjusted Total Liabilities" means the total of all Funded Debt of
--------------------------
SpectraVision and its Subsidiaries, exclusive of (a) the Obligations, (b) any
Funded Debt that arose prior to the Petition Date, and (c) any interest
(including accreted interest) that accrues after the Petition Date with respect
to Indebtedness that arose prior to the Petition Date.
"Administrative Fees" means (a) the allowed professional fees and
-------------------
disbursements incurred by (i) Borrower, and (ii) any statutory creditors'
committee appointed in Borrower's Chapter 11 case and expenses of the members
thereof, and (b) the fees of the United States Trustee pursuant to 28 U.S.C. (S)
1930.
"Affiliate" means, as applied to any Person, any other Person directly or
---------
indirectly controlling, controlled by, or under common control with, that
Person. For purposes of this definition, "control" as applied to any Person
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person, whether through the
ownership of voting securities, by contract, or otherwise.
"Agent" means Chemical Bank, in its capacity as agent for the Banks under
-----
the Existing Credit Agreement.
-1-
<PAGE>
"Agreement" means this Loan and Security Agreement and any extensions,
---------
riders, supplements, notes, amendments, or modifications to or in connection
with this Loan and Security Agreement.
"Annualized Consolidated EBITDA" means (a) with respect to the last day of
------------------------------
the first fiscal quarter of SpectraVision's fiscal year, Consolidated EBITDA for
such fiscal quarter then ended times four (4), (b) with respect to the last day
-----
of the second fiscal quarter of SpectraVision's fiscal year, Consolidated EBITDA
for such fiscal quarter then ended and the immediately preceding fiscal quarter
times two (2), (c) with respect to the last day of the third fiscal quarter of
-----
SpectraVision's fiscal year, Consolidated EBITDA for such fiscal quarter then
ended and the two immediately preceding fiscal quarters times one and one third
-----
(1.33), and (d) with respect to the last day of the fourth fiscal quarter of
SpectraVision's fiscal year, Consolidated EBITDA for such fiscal quarter then
ended and the three immediately preceding fiscal quarters.
"Authorized Officer" means any officer of Borrower.
------------------
"Average Unused Portion of Maximum Amount" means (a) the Maximum Amount;
----------------------------------------
less (b) the average Daily Balance of advances made by Foothill under Section
---- -------
2.1 that were outstanding during the immediately preceding month.
---
"Bankruptcy Code" means the United States Bankruptcy Code (11 U.S.C. (S)
---------------
101 et seq.), as amended, and any successor statute.
------
"Bankruptcy Court" means the United States Bankruptcy Court for Delaware.
----------------
"Bankruptcy Court Order" means an order (including an initial order entered
----------------------
following an initial hearing and a final order entered following a final
hearing) by a judge of the Bankruptcy Court, which order shall address, in form
and substance acceptable to Foothill and its counsel, the following matters:
(i) approval of Borrower's motion to obtain credit from Foothill on
the basis described herein, and approval of the terms and provisions
hereof;
(ii) the grant of first priority liens and security interests to
Foothill in and to the Collateral to secure the Obligations, and the
enforceability of such liens and security interests;
(iii) the automatic perfection of such liens and security interests;
(iv) the inability of Borrower to prime or surcharge the Collateral of
Foothill or grant other liens or security interests thereon of equal
or senior priority;
-2-
<PAGE>
(v) appropriate findings to ensure protection under Section 364(e) of
the Bankruptcy Code if an appeal is taken;
(vi) appropriate findings of fact that the amount sought for interim
financing is necessary to avoid immediate and irreparable harm to
Borrower pending a final hearing on the motion to obtain credit;
(vii) appropriate findings regarding the adequacy of notice to
creditors;
(viii) the inability of Borrower to modify the rights of Foothill in a
plan of reorganization without the consent of Foothill;
(ix) subject to the prior payment of the Administrative Fees in an
amount to be agreed upon by Foothill and Borrower, the provision of a
super-priority administrative claim to Foothill pursuant to Section
364(c)(1) and limitations on payment of other administrative expenses
prior to repayment of Foothill;
(x) approval of the remedies available to Foothill upon the occurrence
of an Event of Default;
(xi) binding effect on successors and trustees in superseding
proceedings; and
(xii) interim relief from the automatic stay of Section 362 of the
Bankruptcy Code as necessary to carry out the terms of the Loan
Documents and to permit enforcement of Foothill's rights and remedies
hereunder.
"Bankruptcy Recoveries" means all actions, causes of action, and
---------------------
proceeds thereof arising from or related to the assertion by Borrower, or its
successors, of any claims under Sections 365, 544, 545, 547, 548, 549, 550, 551,
or 553(b) of the Bankruptcy Code.
"Banks" means each of the financial institutions (other than Agent)
-----
party to the Existing Credit Agreement.
"Borrower" shall have the meaning ascribed thereto in the preamble to
--------
this Agreement.
"Borrower's Books" means all of Borrower's books and records
----------------
including: ledgers; records indicating, summarizing, or evidencing Borrower's
properties or assets (including the Collateral) or liabilities; all information
relating to Borrower's business operations or financial condition; and all
computer programs, disc or tape files, printouts, runs, or other computer
prepared information.
"Borrowing Base" has the meaning set forth in Section 2.1.
-------------- -----------
-3-
<PAGE>
"Business Day" means any day that is not a Saturday, Sunday, or other
------------
day on which national banks are authorized or required to close.
"Canada" means Spectravision of Canada, Inc., a company organized
------
under the laws of Ontario, Canada.
"Change of Control" shall be deemed to have occurred at such time as
-----------------
(a) a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of more than 30% of the total voting power of all classes of stock
then outstanding of SpectraVision normally entitled to vote in the election of
directors, or (b) SpectraVision shall fail to own free and clear of any liens of
any Person (other than Permitted Liens) and control (without being subject to
any voting trust, voting agreement, shareholders agreement, or any other
agreement or arrangement limiting or affecting the voting of such stock) at any
time not less than one hundred percent (100.0%) of the outstanding voting stock
of SPI by vote (assuming that all convertible instruments, warrants, bonds,
debentures, or options then outstanding held by Persons other than SpectraVision
have been exercised), or (c) SPI shall fail to own free and clear of any liens
of any Person (other than Permitted Liens) and control (without being subject to
any voting trust, voting agreement, shareholders agreement, or any other
agreement or arrangement limiting or affecting the voting of such stock) at any
time not less than one hundred percent (100.0%) of the outstanding voting stock
of Borrower by vote (assuming that all convertible instruments, warrants, bonds,
debentures, or options then outstanding held by Persons other than Borrower have
been exercised).
"Closing Date" means the date of the initial advance hereunder.
------------
"Code" means the California Uniform Commercial Code.
----
"Collateral" means each of the following: the Accounts; the Bankruptcy
----------
Recoveries; Borrower's Books; the Equipment; the General Intangibles; the
Inventory; the Negotiable Collateral; the Real Property; any money, or other
assets of Borrower which now or hereafter come into the possession, custody, or
control of Foothill; and the proceeds and products, whether tangible or
intangible, of any of the foregoing including proceeds of insurance covering any
or all of the Collateral, and any and all Accounts, Bankruptcy Recoveries,
Borrower's Books, Equipment, General Intangibles, Inventory, Negotiable
Collateral, Real Property, money, deposit accounts, or other tangible or
intangible property resulting from the sale, exchange, collection, or other
disposition of any of the foregoing, or any portion thereof or interest therein,
and the proceeds thereof.
"Consolidated EBITDA" means, with respect to any fiscal period of
-------------------
SpectraVision, the earnings, before deduction of fees payable under this
Agreement, interest expense, taxes,
-4-
<PAGE>
depreciation, or amortization, of SpectraVision and its Subsidiaries, calculated
on a consolidated basis in accordance with GAAP.
"Consolidated Fixed Charges" means, with respect to any fiscal period
--------------------------
of SpectraVision, the principal payments and interest expense (exclusive of fees
payable under Section 2.6 hereof) of SpectraVision and its Subsidiaries that
-----------
arise under Funded Debt first incurred after the filing by SpectraVision and its
Subsidiaries of petitions commencing cases under the Bankruptcy Code, plus lease
----
payments of SpectraVision and its Subsidiaries under capital leases which were
first entered into prior to the commencement of such cases, calculated on a
consolidated basis in accordance with GAAP.
"Consolidated Foothill Interest Expense" means, with respect to any
--------------------------------------
fiscal period of SpectraVision, the interest expense of SpectraVision and its
Subsidiaries, without duplication, owing to Foothill, calculated on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any fiscal
-----------------------------
period of SpectraVision, the interest expense of SpectraVision and its
Subsidiaries that is due and payable notwithstanding the filing by SpectraVision
and its Subsidiaries of petitions commencing cases under the Bankruptcy Code,
calculated on a consolidated basis in accordance with GAAP.
"Cumulative Consolidated EBITDA" means (a) with respect to the last
------------------------------
day of September, 1995, Consolidated EBITDA for such fiscal quarter then ended,
(b) with respect to the last day of December, 1995, Consolidated EBITDA for such
fiscal quarter then ended and the immediately preceding fiscal quarter, (c) with
respect to the last day of the first fiscal quarter of SpectraVision's fiscal
year 1996 or 1997, as applicable, Consolidated EBITDA for such fiscal quarter
then ended, (d) with respect to the last day of the second fiscal quarter of
SpectraVision's fiscal year 1996 or 1997, as applicable, Consolidated EBITDA for
such fiscal quarter then ended and the immediately preceding fiscal quarter, (e)
with respect to the last day of the third fiscal quarter of SpectraVision's
fiscal year 1996 or 1997, as applicable, Consolidated EBITDA for such fiscal
quarter then ended and the two immediately preceding fiscal quarters, and (f)
with respect to the last day of the fourth fiscal quarter of SpectraVision's
fiscal year 1996 or 1997, as applicable, Consolidated EBITDA for such fiscal
quarter then ended and the three immediately preceding fiscal quarters.
"Cumulative Consolidated Fixed Charges" means (a) with respect to the
-------------------------------------
last day of September, 1995, Consolidated Fixed Charges for such fiscal quarter
then ended, (b) with respect to the last day of December, 1995, Consolidated
Fixed Charges for such fiscal quarter then ended and the immediately preceding
fiscal quarter, (c) with respect to the last day of the first fiscal quarter of
SpectraVision's fiscal year 1996 or 1997, as applicable, Consolidated Fixed
Charges for such fiscal quarter then ended, (d) with respect to the last day of
the second fiscal quarter of SpectraVision's fiscal year 1996 or 1997, as
applicable, Consolidated Fixed Charges for such fiscal quarter then ended and
the immediately preceding fiscal quarter, (e) with respect to the last day of
the third fiscal quarter of SpectraVision's fiscal year 1996 or 1997, as
applicable,
-5-
<PAGE>
Consolidated Fixed Charges for such fiscal quarter then ended and the two
immediately preceding fiscal quarters, and (f) with respect to the last day of
the fourth fiscal quarter of SpectraVision's fiscal year 1996 or 1997, as
applicable, Consolidated Fixed Charges for such fiscal quarter then ended and
the three immediately preceding fiscal quarters.
"Daily Balance" means the amount of an Obligation owed at the end of a
-------------
given day.
"Default" means an event, condition, or default which with the giving
-------
of notice, the passage of time, or both, would be an Event of Default.
"Discount Notes" means the approximately $209,500,000 (face amount) of
--------------
11.50% senior notes due 2001 that were issued pursuant to the terms of the
Discount Notes Indenture.
"Discount Notes Indenture" means that Indenture, dated as of October
------------------------
1, 1993, by and among SpectraVision, SPI, Borrower, and First Trust National
Association as trustee relative to the Discount Notes.
"Early Termination Premium" has the meaning set forth in Section 3.6.
------------------------- -----------
"EDS" means Electronic Data Systems Corporation, a Texas corporation
---
and/or EDS Technical Products Corporation, a Texas corporation.
"EDS Contracts" means (a) the Agreement for Phase I Information
-------------
Technology Services, dated as of July 28, 1993, between Borrower and EDS, as
amended up to the Petition Date, including pursuant to Addendum No. 4, dated as
of January 1, 1995 and as further amended by Addendum No. 5, dated as of January
1, 1995, (b) the Phase II Information Technology Product and Service Agreement,
dated as of August 27, 1993, between Spectradyne Inc., a Delaware corporation
(sic) and EDS, as amended up to the Petition Date, including pursuant to
Addendum No. 2, dated as of January 1, 1995, as further amended by Addendum No.
3, dated January 1, 1995, and (c) the Personal Computer Functionality Agreement,
dated as of July 28, 1993, between SpectraVision and EDS Technical Products
Corporation, a Texas corporation, as amended up to the Petition Date, including
pursuant to Addendum No. 1, dated as of January 1, 1995.
"Eligible Accounts" means those Accounts created by Borrower in the
-----------------
ordinary course of business that arise out of Borrower's sale, lease, or license
of goods or General Intangibles or rendition of services, that strictly comply
with all of Borrower's representations and warranties to Foothill, and that are
and at all times shall continue to be acceptable to Foothill in all respects;
provided, however, that standards of eligibility may be fixed and revised from
-------- -------
time to time by Foothill in Foothill's reasonable credit judgment. Eligible
Accounts shall be net of the amount owed to Hotels and shall not include the
following:
-6-
<PAGE>
(a) Accounts that the Account Debtor has failed to pay within
ninety (90) days of invoice date or Accounts with selling terms of more than
thirty (30) days and all Accounts owed by an Account Debtor that has failed to
pay fifty percent (50%) or more of its Accounts owed to Borrower within ninety
(90) days of invoice date;
(b) Accounts with respect to which the Account Debtor is an
officer, employee, Affiliate, or agent of Borrower;
(c) Accounts on terms by reason of which the payment by the
Account Debtor may be conditional;
(d) Accounts with respect to which the Account Debtor is not a
resident of the United States;
(e) Accounts with respect to which the Account Debtor is the
United States or any department, agency, or instrumentality of the United
States;
(f) Accounts with respect to which Borrower is or may become
liable to the Account Debtor for goods sold or services rendered by the
Account Debtor to Borrower, exclusive, however, of rights of Hotels to
withhold payment of their percentage of the viewing charges which rights
arise, in the ordinary course of business pursuant to the contractual
arrangements between Borrower and the Hotels;
(g) Accounts with respect to an Account Debtor whose total
obligations owing to Borrower exceed fifteen percent (15%) of all Eligible
Accounts, to the extent of the obligations owing by such Account Debtor in
excess of such percentage;
(h) Accounts with respect to which the Account Debtor disputes
liability or makes any claim with respect thereto, or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business;
(i) Accounts the collection of which Foothill, in its reasonable
credit judgment, believes to be doubtful by reason of the Account Debtor's
financial condition; and
(j) Accounts that are payable in other than United States
Dollars.
"Equipment" means all of Borrower's present and hereafter acquired
---------
machinery, machine tools, motors, equipment, furniture, furnishings, fixtures,
vehicles (including motor vehicles and trailers), tools, parts, dies, jigs,
goods (other than consumer goods, farm products, or Inventory), wherever
located, and any interest of Borrower's in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located.
-7-
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, or any predecessor, successor, or superseding laws of
the United States of America, together with all regulations promulgated
thereunder.
"ERISA Affiliate" means any trade or business (whether or not
---------------
incorporated) which, within the meaning of Section 414 of the IRC, is: (i) under
common control with Borrower; (ii) treated, together with Borrower, as a single
employer; (iii) treated as a member of an affiliated service group of which
Borrower is also treated as a member; or (iv) is otherwise aggregated with
Borrower for purposes of the employee benefits requirements listed in IRC
Section 414(m)(4).
"ERISA Event" means any one or more of the following: (i) a Reportable
-----------
Event with respect to a Qualified Plan or a Multiemployer Plan; (ii) a
Prohibited Transaction with respect to any Plan; (iii) a complete or partial
withdrawal by Borrower or any ERISA Affiliate from a Multiemployer Plan; (iv)
the complete or partial withdrawal of Borrower or an ERISA Affiliate from a
Qualified Plan during a plan year in which it was, or was treated as, a
"substantial employer" as defined in Section 4001(a)(2) of ERISA; (v) the filing
of a notice of intent to terminate, or the treatment of a plan amendment as a
termination, under Sections 4041 or 4041A of ERISA; (vi) an event or condition
which might reasonably be expected to constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Qualified Plan or Multiemployer Plan; (vii) the imposition of any liability
under Title IV of ERISA, other than PBGC premiums due but not delinquent under
Section 4007 of ERISA, upon Borrower or any ERISA Affiliate; and (viii) a
violation of the applicable requirements of Sections 404 or 405 of ERISA, or the
exclusive benefit rule under Section 403(c) of ERISA, by any fiduciary or
disqualified person with respect to any Plan for which Borrower or any ERISA
Affiliate may be directly or indirectly liable.
"Event of Default" has the meaning set forth in Section 8.
---------------- ---------
"Existing Credit Agreement" means that certain Credit Agreement, dated as
-------------------------
of October 5, 1993, among SpectraVision, Agent, and the Banks.
"Exit Financing" shall have the meaning ascribed thereto in Section 3.6
-------------- -----------
hereof.
"FEIN" means Federal Employer Identification Number.
----
"Foothill" has the meaning set forth in the preamble to this Agreement.
--------
"Foothill Expenses" means all: costs or expenses (including taxes,
-----------------
photocopying, notarization, telecommunication and insurance premiums) required
to be paid by Borrower or any Affiliate of Borrower under any of the Loan
Documents that are paid or advanced by Foothill; documentation, filing,
recording, publication, appraisal (including periodic Collateral appraisals),
real estate survey, environmental audit, and search fees assessed, paid, or
incurred by Foothill in
-8-
<PAGE>
connection with Foothill's transactions with Borrower; costs and expenses
incurred by Foothill in the disbursement of funds to Borrower (by wire transfer
or otherwise); charges paid or incurred by Foothill resulting from the dishonor
of checks; costs and expenses paid or incurred by Foothill to correct any
default or enforce any provision of the Loan Documents, or in gaining possession
of, maintaining, handling, preserving, storing, shipping, selling, preparing for
sale, or advertising to sell the Collateral, or any portion thereof,
irrespective of whether a sale is consummated; costs and expenses paid or
incurred by Foothill in examining Borrower's Books; costs and expenses of third
party claims or any other suit paid or incurred by Foothill in enforcing or
defending the Loan Documents; Foothill's reasonable attorneys fees and expenses
incurred in advising, structuring, drafting, reviewing, administering, amending,
terminating, enforcing (including reasonable attorneys fees and expenses
incurred in connection with a "workout," a "restructuring," or an Insolvency
Proceeding concerning Borrower), defending, or concerning the Loan Documents,
irrespective of whether suit is brought; and the reasonable fees and expenses
(including reasonable attorneys fees and expenses) incurred by Participants in
connection with the transactions contemplated by this Agreement on or before the
Closing Date.
"Funded Debt" means and refers to all Indebtedness of SpectraVision or its
-----------
Subsidiaries of the type identified in clauses (a) through (d) of the definition
of "Indebtedness."
"GAAP" means generally accepted accounting principles as in effect from
----
time to time in the United States, consistently applied.
"General Intangibles" means all of Borrower's present and future general
-------------------
intangibles and other personal property (including contract rights, rights
arising under common law, statutes, or regulations, choses or things in action,
goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, rights to payment and other rights under any
royalty or licensing agreements, infringements, claims, computer programs,
computer discs, computer tapes, literature, reports, catalogs, deposit accounts,
insurance premium rebates, tax refunds, and tax refund claims), other than
goods, Accounts, and Negotiable Collateral.
"Guaranties" means the Guaranty (Kalevision) and the Guaranty
----------
(SpectraVision).
"Guaranty (Kalevision)" means that certain General Continuing Guaranty
---------------------
executed by Kalevision in favor of Foothill, substantially in the form of
Exhibit G-1 attached hereto.
-----------
"Guaranty (SpectraVision)" means that certain General Continuing Guaranty
------------------------
executed by SpectraVision in favor of Foothill, substantially in the form of
Exhibit G-2 attached hereto.
-----------
"Hazardous Materials" means all or any of the following: (a) substances
-------------------
that are defined or listed in, or otherwise classified pursuant to, any
applicable laws or regulations as "hazardous substances," "hazardous materials,"
"hazardous wastes," "toxic substances," or any
-9-
<PAGE>
other formulation intended to define, list, or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, reproductive toxicity, or "EP toxicity"; (b) oil, petroleum, or
petroleum derived substances, natural gas, natural gas liquids, synthetic gas,
drilling fluids, produced waters, and other wastes associated with the
exploration, development, or production of crude oil, natural gas, or geothermal
resources; (c) any flammable substances or explosives or any radioactive
materials; and (d) asbestos in any form or electrical equipment which contains
any oil or dielectric fluid containing levels of polychlorinated biphenyls in
excess of fifty (50) parts per million.
"Hotels" means hotels, motels, and other lodging establishments.
------
"Indebtedness" means: (a) all obligations of Borrower for borrowed money;
------------
(b) all obligations of Borrower evidenced by bonds, debentures, notes, or other
similar instruments and all reimbursement or other obligations of Borrower in
respect of letters of credit, letter of credit guaranties, bankers acceptances,
interest rate swaps, controlled disbursement accounts, or other financial
products; (c) all obligations of Borrower under capital leases; (d) all
obligations or liabilities of others secured by a lien or security interest on
any property or asset of Borrower, irrespective of whether such obligation or
liability is assumed; and (e) any obligation of Borrower guaranteeing or
intended to guarantee (whether guaranteed, endorsed, co-made, discounted, or
sold with recourse to Borrower) any indebtedness, lease, dividend, letter of
credit, or other obligation of any other Person.
"Insolvency Proceeding" means any proceeding commenced by or against any
---------------------
Person under any provision of the Bankruptcy Code or under any other bankruptcy
or insolvency law, including assignments for the benefit of creditors, formal or
informal moratoria, compositions, extensions generally with its creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
"International" means Spectradyne International, Inc., a Delaware
-------------
corporation.
"Inventory" means all present and future inventory in which Borrower has
---------
any interest, including goods held for sale or lease or to be furnished under a
contract of service and all of Borrower's present and future raw materials, work
in process, finished goods, and packing and shipping materials, wherever
located, and any documents of title representing any of the above.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
---
regulations thereunder.
"Kalevision" means Kalevision Systems, Inc. - USA, a New York corporation.
----------
"KSI" means Kalevision Systems, Inc., a company organized under the laws
---
of Ontario, Canada.
-10-
<PAGE>
"Loan Documents" means this Agreement, the Guaranties, the Lockbox
--------------
Agreements, the Mortgage, the Security Agreement (Kalevision), the Security
Agreement (SpectraVision), the Stock Pledge Agreement, any note or notes
executed by Borrower and payable to Foothill, and any other agreement entered
into, now or in the future, in connection with this Agreement.
"Lockbox Account" shall mean the depositary account established pursuant
---------------
to the respective Lockbox Agreement.
"Lockbox Agreements" means that certain Lockbox Operating Procedural
------------------
Agreement and that certain Depository Account Agreement, in form and substance
satisfactory to Foothill, both of which is among Borrower, Foothill, and the
Lockbox Bank.
"Lockbox Bank" means Bank One, Texas, N.A.
------------
"Maximum Amount" means $40,000,000.
--------------
"Mortgage" means a mortgage, deed of trust, or deed to secure debt,
--------
executed by Borrower in favor of Foothill, the form and substance of which shall
be satisfactory to Foothill, that encumbers the Real Property and the related
improvements thereto.
"Multiemployer Plan" means a multiemployer plan as defined in Sections
------------------
3(37) or 4001(a)(3) of ERISA or Section 414 of the IRC in which employees of
Borrower or an ERISA Affiliate participate or to which Borrower or any ERISA
Affiliate contribute or are required to contribute.
"Negotiable Collateral" means all of Borrower's present and future letters
---------------------
of credit, notes, drafts, instruments, certificated and uncertificated
securities (including the shares of stock of Subsidiaries of Borrower),
documents, personal property leases (wherein one of Borrower is the lessor),
chattel paper, and Borrower's Books relating to any of the foregoing.
"Obligations" means all loans, advances, debts, principal, interest
-----------
(including any interest that, but for the provisions of the Bankruptcy Code,
would have accrued), contingent obligations, premiums (including Early
Termination Premiums), liabilities (including all amounts charged to Borrower's
loan account pursuant to any agreement authorizing Foothill to charge Borrower's
loan account), obligations, fees, lease payments, guaranties, covenants, and
duties owing by Borrower to Foothill of any kind and description (whether
pursuant to or evidenced by the Loan Documents or pursuant to any other
agreement between Foothill and Borrower, and irrespective of whether for the
payment of money), whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, and including all interest not
paid when due and all Foothill Expenses that one of Borrower is required to pay
or reimburse by the Loan Documents, by law, or otherwise.
-11-
<PAGE>
"Order Entry Date" means the date on which the Bankruptcy Court enters the
----------------
interim Bankruptcy Court Order.
"Overadvance" has the meaning set forth in Section 2.2.
----------- -----------
"Participant" means any Person, other than Foothill, that has committed to
-----------
provide a portion of the financing contemplated herein.
"Pay-Off Letter" means a letter, in form and substance reasonably
--------------
satisfactory to Foothill, from the Agent respecting the amount necessary to
repay in full all of the obligations of Borrower owing to the Agent and the
Banks and obtain a termination or release of all of the security interests or
liens existing in favor of the Agent for the benefit of the Banks in and to the
properties or assets of Borrower.
"PBGC" means the Pension Benefit Guaranty Corporation as defined in Title
----
IV of ERISA, or any successor thereto.
"Permitted Dispositions" means (a) sales or other dispositions by Borrower
----------------------
of obsolete or worn out Inventory or Equipment in the ordinary course of
business, or (b) sales or other dispositions of Inventory or Equipment that do
not exceed $1,000,000 in the aggregate during any consecutive twelve (12) month
period, without any right of carryforward.
"Permitted Liens" means: (a) liens and security interests held by
---------------
Foothill; (b) liens for unpaid taxes that are not yet due and payable; (c)
liens, security interests, rights, or interests set forth on Schedule P-1
------------
attached hereto and other immaterial liens and security interests not reflected
on Schedule P-1 that Borrower, in good faith, did not have knowledge of as of
------------
the Petition Date so long as such other liens and security interests are
released or terminated within forty five (45) days of the date of discovery
thereof; (d) purchase money security interests, liens, rights, and interests of
lessors under capital leases, in each case, to the extent that the acquisition
or lease of the underlying asset was permitted under Section 7.10, and so long
------------
as the security interest or lien only secures the purchase price of the asset;
(e) easements, rights of way, reservations, covenants, conditions, restrictions,
zoning variances, eminent domain, condemnation, and other similar encumbrances
that do not materially interfere with the use or value of the property subject
thereto; (f) obligations and duties as lessee under any lease existing on the
date of this Agreement; (g) mechanics', materialmen's, warehousemen's, or
similar liens that arise by operation of law; and (h) exceptions listed in the
title insurance or commitment therefor to be delivered by Borrower hereunder in
respect of the Real Property.
"Permitted Protest" means the right of Borrower to protest any lien, tax,
-----------------
assessment, levy, non-consensual encumbrance, rental payment, or other charge,
other than any such lien or charge that secures the Obligations, provided (i) a
reserve with respect to such obligation is established on the books of Borrower
in an amount that is reasonably satisfactory to Foothill, (ii) any such protest
is instituted and diligently prosecuted by Borrower in good faith,
-12-
<PAGE>
and (iii) Foothill is satisfied that, while any such protest is pending, there
will be no impairment of the enforceability, validity, or priority of any of the
liens or security interests of Foothill in and to the property or assets of
Borrower.
"Person" means and includes natural persons, corporations, limited
------
partnerships, general partnerships, joint ventures, trusts, land trusts,
business trusts, or other organizations, irrespective of whether they are legal
entities, and governments and agencies and political subdivisions thereof.
"Personal Property Collateral" means all Collateral other than the Real
----------------------------
Property and fixtures.
"Petition Date" means the date on which Borrower files a case under
-------------
Chapter 11 of the Bankruptcy Code with the Bankruptcy Court.
"Plan" means an employee benefit plan (as defined in Section 3(3) of
----
ERISA) which Borrower or any ERISA Affiliate sponsors or maintains or to which
Borrower or any ERISA Affiliate makes, is making, or is obligated to make
contributions, including any Multiemployer Plan or Qualified Plan.
"Prohibited Transaction" means any transaction described in Section 406 of
----------------------
ERISA which is not exempt by reason of Section 408 of ERISA, and any transaction
described in Section 4975(c) or (d) of the IRC which is not exempt by reason of
Section 4975(c) of the IRC.
"Qualified Plan" means a pension plan (as defined in Section 3(2) of
--------------
ERISA) intended to be tax-qualified under Section 401(a) of the IRC which
Borrower or any ERISA Affiliate sponsors, maintains, or to which any such person
makes, is making, or is obligated to make, contributions, or, in the case of a
multiple-employer plan (as described in Section 4064(a) of ERISA), has made
contributions at any time during the immediately preceding period covering at
least five (5) plan years, but excluding any Multiemployer Plan.
"Real Property" means the parcel of real property and the related
-------------
improvements thereto identified on Schedule R-1, and any estates or interests in
------------
real property hereafter acquired by Borrower.
"Reference Rate" means the highest of the variable rates of interest, per
--------------
annum, most recently announced by (a) Bank of America, N.T. & S.A., (b) Mellon
Bank, N.A., and (c) Citibank, N.A., or any successor to any of the foregoing
institutions, as its "prime rate" or "reference rate," as the case may be,
irrespective of whether such announced rate is the best rate available from such
financial institution.
"Reportable Event" means any event described in Section 4043 (other than
----------------
Subsections (b)(7) and (b)(9)) of ERISA.
-13-
<PAGE>
"Scheduled Maturity Date" means June 15, 1997.
-----------------------
"Security Agreement (Kalevision)" means a Security Agreement between
-------------------------------
Kalevision and Foothill pursuant to which Kalevision grants Foothill a security
interest in substantially all of its accounts, equipment, general intangibles,
documents, instruments, chattel paper, deposit accounts, and inventory, which
agreement shall be substantially in the form of Exhibit S-1 attached hereto.
-----------
"Security Agreement (SpectraVision)" means a Security Agreement between
----------------------------------
SpectraVision and Foothill pursuant to which SpectraVision grants Foothill a
security interest in substantially all of its accounts, equipment, general
intangibles, documents, instruments, chattel paper, deposit accounts, and
inventory, which agreement shall be substantially in the form of Exhibit S-2
-----------
attached hereto.
"Shortfall Reserve" means, as of the date of any determination, a Dollar
-----------------
amount equal to (a) $150, times (b) the number obtained by subtracting the
-----
number of rooms under contract for the immediately preceding month from 475,000.
"SpectraVision" means SpectraVision, Inc., a Delaware corporation.
-------------
"SPI" means SPI Newco, Inc., a Delaware corporation.
---
"Stock Pledge Agreement" means a Stock Pledge Agreement among Borrower,
----------------------
KSI, Canada, International, and Foothill pursuant to which Foothill is granted a
first priority security interest in all of the issued and outstanding shares of
stock of each of Borrower's direct and indirect Subsidiaries, which agreement
shall be substantially in the form of Exhibit S-3 attached hereto.
-----------
"Subordinated Notes" means the 11.50% senior subordinated reset notes due
------------------
2002 that were issued pursuant to the terms of the Subordinated Notes Indenture.
"Subordinated Notes Indenture" means that Indenture, dated as of November
----------------------------
23, 1992, by and among SpectraVision, SPI, Borrower, and U.S. Trust Company of
Texas, N.A. as trustee relative to the Subordinated Notes.
"Subsidiary" means any corporation, association, partnership, joint
----------
venture, or other business entity of which a Person, directly or indirectly,
either (i) with respect to a corporation, owns or controls 50% or more of the
voting power and has the ability to elect at least a majority of the board of
directors or similar managing body, irrespective of whether a class or classes
shall or might have voting power by reason of the happening of any contingency,
or (ii) with respect to an association, partnership, joint venture or other
business entity, is entitled to share in 50% or more of the profits and losses,
however determined, and has voting control with respect thereto.
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"Unfunded Benefit Liability" means the excess of a Plan's benefit
--------------------------
liabilities (as defined in Section 4001(a)(16) of ERISA) over the current value
of such Plan's assets, determined in accordance with the assumptions used by the
Plan's actuaries for funding the Plan pursuant to Section 412 of the IRC for the
applicable plan year.
"Voidable Transfer" has the meaning set forth in Section 15.8.
----------------- ------------
1.2 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "SpectraVision" is used in respect of a financial covenant or a related
definition, it shall be understood to mean SpectraVision on a consolidated basis
unless the context clearly requires otherwise.
1.3 Code. Any terms used in this Agreement that are defined in the
Code shall be construed and defined as set forth in the Code unless otherwise
defined herein.
1.4 Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, the term "including" is not limiting, and the
term "or" has, except where otherwise indicated, the inclusive meaning
represented by the phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder," and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. Section,
subsection, clause, schedule, and exhibit references are to this Agreement
unless otherwise specified. Any reference in this Agreement to "rooms under
contract" shall refer to the calculation of the number of rooms at Hotels as to
which Borrower has an existing contract (including those that are on a month-to-
month basis under the automatic renewal provisions of a contract) to provide pay
movie entertainment and other programming directly to the guests thereof, such
calculation to be made in accordance with the historical accounting practices of
Borrower as of the Closing Date. Any reference in this Agreement or in the Loan
Documents to this Agreement or any of the Loan Documents shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, and supplements, thereto and thereof, as
applicable.
1.5 Schedules and Exhibits. All of the schedules and exhibits attached
to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT
2.1 Revolving Advances. (a) Subject to the terms and conditions of
this Agreement, from and after the Order Entry Date and up to the Scheduled
Maturity Date, Foothill agrees to make revolving advances to Borrower in an
amount at any one time outstanding not to exceed the Borrowing Base. For
purposes of this Agreement, "Borrowing Base," as of any date of determination,
shall mean the result of: (i)(A) Thirty Million Dollars ($30,000,000), minus
(B) the Shortfall Reserve, plus (ii) an amount equal to the lesser of: (x)
----
eighty percent (80%) of the
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amount of Eligible Accounts, (y) an amount equal to seventy five percent (75%)
of Borrower's collections with respect to Accounts for the immediately preceding
sixty (60) day period, and (z) Ten Million Dollars ($10,000,000).
(b) Anything to the contrary in Section 2.1(a) above
--------------
notwithstanding, Foothill may reduce its advance rates without declaring an
Event of Default if it determines, in its reasonable credit judgment, that
there is a material impairment of the prospect of repayment of all or any
portion of the Obligations, a material impairment of Borrower's prospects, or
a material impairment of the value or priority of Foothill's security
interests in the Collateral.
(c) Foothill shall have no obligation to make advances hereunder
to the extent they would cause the outstanding Obligations to exceed the
Maximum Amount.
(d) Foothill is authorized to make advances under this Agreement
based upon telephonic or other instructions received from anyone purporting to
be an Authorized Officer of Borrower, or without instructions if pursuant to
Section 2.3(d). Borrower agrees to establish and maintain a single designated
--------------
deposit account for the purpose of receiving the proceeds of the advances
requested by Borrower and made by Foothill hereunder. Unless otherwise agreed
by Foothill and Borrower, any advance requested by Borrower and made by
Foothill hereunder shall be made to such designated deposit account. Amounts
borrowed pursuant to this Section 2.1 may be repaid and, subject to the terms
-----------
and conditions of this Agreement, reborrowed at any time during the term of
this Agreement.
2.2 Overadvances. If, at any time or for any reason, the
amount of Obligations owed by Borrower to Foothill pursuant to Section 2.1 is
-----------
greater than either the dollar or percentage limitations set forth in Section
-------
2.1 (an "Overadvance"), Borrower immediately shall pay to Foothill, in cash, the
---
amount of such excess to be used by Foothill to repay the Obligations.
2.3 Interest: Rates, Payments, and Calculations.
(a) Interest Rate. All Obligations shall bear interest at a per
annum rate of one and three-quarters (1.75) percentage points above the
Reference Rate.
(b) Default Rate. All Obligations shall bear interest, from and
after the occurrence and during the continuance of an Event of Default, at a
per annum rate equal to five and three-quarters (5.75) percentage points above
the Reference Rate.
(c) Minimum Interest. In no event shall the rate of interest
chargeable hereunder be less than eight and one-half percent (8.50%) per
annum. To the extent that interest accrued hereunder at the rate set forth
herein would be less than the foregoing minimum rate, the interest rate
chargeable hereunder for the period in question automatically shall be deemed
increased to the minimum rate.
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<PAGE>
(d) Payments. Interest hereunder shall be due and payable, in
arrears, on the first day of each month during the term hereof. Borrower
hereby authorizes Foothill, at its option, without prior notice to Borrower,
to charge such interest, and all Foothill Expenses (as and when incurred) to
Borrower's loan account, which amounts thereafter shall accrue interest at the
rate then applicable hereunder. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.
(e) Computation. The Reference Rate as of the date of this
Agreement is nine percent (9.00%) per annum. In the event the Reference Rate
is changed from time to time hereafter, the applicable rate of interest
hereunder automatically and immediately shall be increased or decreased by an
amount equal to such change in the Reference Rate. All interest and fees
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.
(f) Intent to Limit Charges to Maximum Lawful Rate. In no event
shall the interest rate or rates payable under this Agreement, plus any other
amounts paid in connection herewith, exceed the highest rate permissible under
any law that a court of competent jurisdiction shall, in a final
determination, deem applicable. Borrower and Foothill, in executing this
Agreement intend legally to agree upon the rate or rates of interest and
manner of payment stated within it; provided, however, that, anything
-------- -------
contained herein to the contrary notwithstanding, if said rate or rates of
interest or manner of payment exceeds the maximum allowable under applicable
law, then, ipso facto as of the date of this Agreement, Borrower is and shall
---- -----
be liable only for the payment of such maximum as allowed by law, and payment
received from Borrower in excess of such legal maximum, whenever received,
shall be applied to reduce the principal balance of the Obligations to the
extent of such excess.
2.4 Crediting Payments; Application of Collections. The receipt of
any wire transfer of funds, check, or other item of payment by
Foothill (whether from transfers to Foothill by the Lockbox Bank pursuant to the
Lockbox Agreements or otherwise) immediately shall be applied to provisionally
reduce the Obligations, but shall not be considered a payment on account unless
such wire transfer is of immediately available federal funds and is made to the
appropriate deposit account of Foothill or unless and until such check or other
item of payment is honored when presented for payment. From and after the
Closing Date, Foothill shall be entitled to charge Borrower for three (3)
Business Days of `clearance' at the rate set forth in Section 2.3(a) or Section
-------------- -------
2.3(b), as applicable, on all collections, checks, wire transfers, or other
------
items of payment that are received by Foothill (regardless of whether forwarded
by the Lockbox Bank to Foothill, whether provisionally applied to reduce the
Obligations, or otherwise). This across-the-board three (3) Business Day
clearance charge on all receipts is acknowledged by the parties to constitute an
integral aspect of the pricing of Foothill's facility to Borrower, and shall
apply irrespective of the characterization of whether receipts are owned by
Borrower or Foothill, and irrespective of the level of Borrower's Obligations to
Foothill. Should any check or item of payment not be honored when presented for
payment, then Borrower shall be deemed not to have
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<PAGE>
made such payment, and interest shall be recalculated accordingly. Anything to
the contrary contained herein notwithstanding, any wire transfer, check, or
other item of payment shall be deemed received by Foothill only if it is
received into Foothill's Operating Account (as such account is identified in the
Lockbox Agreements) on or before 11:00 a.m. Los Angeles time. If any wire
transfer, check, or other item of payment is received into Foothill's Operating
Account (as such account is identified in the Lockbox Agreements) after 11:00
a.m. Los Angeles time it shall be deemed to have been received by Foothill as of
the opening of business on the immediately following Business Day.
2.5 Statements of Obligations. Foothill shall render statements to
Borrower of the Obligations, including principal, interest, fees, and including
an itemization of all charges and expenses constituting Foothill Expenses owing,
and, absent manifest error, such statements shall be conclusively presumed to be
correct and accurate and constitute an account stated between Borrower and
Foothill unless, within thirty (30) days after receipt thereof by Borrower,
Borrower shall deliver to Foothill by registered or certified mail at its
address specified in Section 12, written objection thereto describing the error
----------
or errors contained in any such statements.
2.6 Fees. Borrower shall pay to Foothill the following fees:
(a) Closing Fee. A one time closing fee of Four Hundred
Thousand Dollars ($400,000) which is earned, in full, on the Closing Date and
is due and payable by Borrower to Foothill in connection with this Agreement
on the Closing Date;
(b) Unused Line Fee. On the first day of each month during the
term of this Agreement, a fee in an amount equal to one-half of one percent
(0.50%) per annum times the Average Unused Portion of the Maximum Amount;
(c) Annual Facility Fee. On each anniversary of the Closing
Date, a fee in an amount equal to Four Hundred Thousand Dollars ($400,000),
such fee to be fully earned on each such anniversary;
(d) Financial Examination, Documentation, and Appraisal Fees.
Foothill's customary fee of Six Hundred Fifty Dollars ($650) per day per
examiner, plus out-of-pocket expenses for each financial analysis and
examination of Borrower performed by Foothill or its agents; Foothill's
customary appraisal fee of One Thousand Five Hundred Dollars ($1,500) per day
per appraiser, plus out-of-pocket expenses for each appraisal of the
Collateral performed by Foothill or its agents; and, on each anniversary of
the Closing Date, Foothill's customary fee of One Thousand Dollars ($1,000)
per year for its loan documentation review; and
(e) Servicing Fee. On the first day of each month during the
term of this Agreement, and thereafter so long as any Obligations are
outstanding, a servicing fee in an amount equal to Five Thousand Dollars
($5,000) per month.
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<PAGE>
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to Initial Advance. The obligation of
Foothill to make the initial advance is subject to the fulfillment, to the
satisfaction of Foothill and its counsel, of each of the following conditions on
or before the Closing Date:
(a) the Closing Date shall occur on or before June 15, 1995;
(b) Foothill shall have received UCC searches respecting each of
Borrower and shall have received financing statements and fixture filings duly
executed and delivered by each of Borrower;
(c) Foothill shall have received each of the following
documents, duly executed, and each such document shall be in full force and
effect:
i) the Pay-Off Letter;
ii) the Mortgage;
iii) the Guaranties;
iv) the Security Agreement (SpectraVision);
v) the Lockbox Agreements;
vi) the Stock Pledge Agreement;
(d) Foothill shall have received possession of the original
stock certificates respecting all of the issued and outstanding shares of
stock of each of Borrower's Subsidiaries, together with stock powers with
respect thereto endorsed in blank, to be held pursuant to the terms and
conditions of the Stock Pledge Agreement;
(e) Foothill shall have received a certificate from the
Secretary of Borrower attesting to the resolutions of Borrower's Board of
Directors authorizing its execution, delivery, and performance of this
Agreement and the other Loan Documents to which it is a party and authorizing
specific officers of Borrower to execute same;
(f) Foothill shall have received copies of Borrower's By-laws
and Articles or Certificate of Incorporation, as amended, modified, or
supplemented to the Closing Date, certified by the Secretary of Borrower;
(g) Foothill shall have received a certificate of corporate
status with respect to Borrower, dated within ten (10) days of the Closing
Date, by the appropriate officer
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<PAGE>
of the jurisdiction of incorporation of Borrower, which certificate shall
indicate that Borrower is in good standing in such jurisdiction;
(h) Foothill shall have received a certificate from the
insurance carrier(s) regarding the policies of insurance, together with the
endorsements thereto, as are required by Section 6.10 hereof, the form and
------------
substance of which shall be satisfactory to Foothill and its counsel;
(i) Foothill shall have received an opinion of Borrower's
counsel in form and substance satisfactory to Foothill in its sole discretion;
(j) Foothill shall have received a copy of the Subordinated
Notes Indenture, together with a certificate of the Secretary of SpectraVision
certifying same to be a true and correct and complete copy thereof;
(k) Foothill shall have received a copy of the Discount Notes
Indenture, together with a certificate of the Secretary of SpectraVision
certifying same to be a true and correct and complete copy thereof;
(I) Foothill shall have received a copies of the EDS Contracts,
together with a certificate of the Secretary of Borrower certifying same to be
a true and correct and complete copies thereof;
(m) Foothill shall have received a certificate from the
Secretary of Borrower attesting to the resolutions of Borrower's Board of
Directors authorizing Borrower's commencement of a case in the Bankruptcy
Court under Chapter 11 of the Bankruptcy Code;
(n) the Order Entry Date shall have occurred on or before June
15, 1995;
(o) Foothill shall have entered into a participation agreement
with a financial institution acceptable to Foothill providing for such
participant's participation in not less than twenty million dollars
($20,000,000) of the Maximum Amount, and such participation agreement shall be
in full force and effect; and
(p) all other documents and legal matters in connection with
the transactions contemplated by this Agreement shall have been delivered or
executed or recorded and shall be in form and substance satisfactory to
Foothill and its counsel.
3.2 Conditions Subsequent to Initial Advance. The following shall be
conditions subsequent to the making of the initial advance hereunder, shall be,
from and after the applicable date set forth herein, conditions precedent to the
making of further advances hereunder, and the failure to comply with any
provision of this Section 3.2 shall, from and after the applicable date set
-----------
forth herein, constitute an Event of Default:
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<PAGE>
(a) on or before the date that is thirty (30) days following the
Closing Date, Foothill shall have received a policy of title insurance in form
and content acceptable to Foothill, in its reasonable discretion, with respect
to the Real Property;
(b) on or before the date that is thirty (30) days following the
Closing Date, Foothill shall have received environmental reports with respect
to the Real Property; the environmental consultants retained for such reports,
the scope of the reports, and the results of the reports shall be satisfactory
to Foothill, in its reasonable discretion; and
(c) on or before the date that is thirty (30) days following the
Closing Date, Foothill shall have received an executed unlimited general
continuing guaranty by Canada of the Obligations, a security agreement granting
Foothill a security interest in all the tangible and intangible personal
property and assets of Canada to secure Canada's obligations under such
guaranty, and all financing statements or other filings necessary or appropriate
to perfect such security interest, all in form and substance satisfactory to
Foothill.
3.3 Conditions Precedent to All Advances. The following
shall be conditions precedent to all advances hereunder:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all
material respects on and as of the date of such advance as though made on and
as of such date (except to the extent that such representations and warranties
relate solely to an earlier date);
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such advance, nor shall either result from the
making thereof;
(c) no injunction, writ, restraining order, or other order of
any nature prohibiting, directly or indirectly, the making of such advance
shall have been issued and remain in force by any governmental authority
against Borrower or Foothill;
(d) the initial Bankruptcy Court Order, until entry of the final
Bankruptcy Court Order, and, thereafter, the final Bankruptcy Court Order
shall remain in full force and effect; and
(e) no motion shall have been filed requesting (i) the
appointment of a trustee in Borrower's Chapter 11 case, or (ii) the conversion
of Borrower's Chapter 11 case into a liquidating Chapter 11 case or a case
under Chapter 7 of the Bankruptcy Code.
3.4 Term. This Agreement shall become effective upon the
execution and delivery hereof by Borrower and Foothill and shall continue in
full force and effect for a term ending on the Scheduled Maturity Date. The
foregoing notwithstanding, Foothill shall have the
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right to terminate its obligations under this Agreement immediately and without
notice upon the occurrence and during the continuation of an Event of Default.
3.5 Effect of Termination. On the date of termination of this
Agreement, all Obligations immediately shall become due and payable without
notice or demand. No termination of this Agreement, however, shall relieve or
discharge Borrower of Borrower's duties, Obligations, or covenants hereunder,
and Foothill's continuing security interests in the Collateral shall remain in
effect until all Obligations have been fully and finally discharged and
Foothill's obligation to provide advances hereunder is terminated.
3.6 Early Termination by Borrower. (a) The provisions
of Section 3.4 to the contrary notwithstanding, Borrower has the option, at any
-----------
time upon ninety (90) days prior written notice to Foothill, to terminate this
Agreement by paying to Foothill, in cash, the Obligations, together with a
premium (the "Early Termination Premium") equal to Two Hundred Thousand Dollars
($200,000).
(b) In addition, in the event that Borrower succeeds in obtaining
the confirmation of a plan of reorganization, Foothill shall have the right of
first refusal to provide any financing provided for in or contemplated by such
plan of reorganization ("Exit Financing"). If Borrower provides Foothill with a
copy (in accordance with the requirements of Section 12 hereof) of a commitment
----------
to provide Exit Financing from another lender(s), Foothill shall furnish
Borrower with Foothill's written commitment to provide such Exit Financing
within fifteen (15) days of Foothill's receipt thereof. Failure to provide such
commitment within such period shall be deemed to be a refusal by Foothill to
provide such Exit Financing. In the event that Foothill fails, or refuses, to
commit to provide Exit Financing to Borrower within such period on terms
substantially similar to, or more favorable to Borrower than, the terms
contained in such commitment provided by Borrower to Foothill and if, within
ninety (90) days thereafter, Borrower accepts such commitment from such other
lender(s) and obtains such committed financing on the terms set forth in such
commitment letter, then Borrower shall have no obligation to Foothill with
respect to the Early Termination Premium. The Exit Financing terms referred to
in the preceding sentence include the principal amount, pricing (including
interest, fees, and expenses), collateral requirements, credit support (i.e.,
guaranties, letters of credit), advance rates, financial and negative covenants,
and tenor. In the event that Borrower obtains Exit Financing without honoring
the above-granted right of first refusal in favor of Foothill (either because it
doesn't extend the financing opportunity to Foothill or because it doesn't
accept an Exit Financing proposal from Foothill on terms substantially similar
to, or more favorable to Borrower than, the terms contained in the commitment
provided by Borrower to Foothill), then Borrower shall pay the Early Termination
Premium to Foothill in connection with such repayment irrespective of whether it
occurs on the Scheduled Maturity Date or otherwise. If Foothill provides the
Exit Financing to Borrower, then no Early Termination Premium shall be payable
in connection with such refinancing of the Obligations outstanding hereunder.
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Borrower and Foothill hereby acknowledge that the Early Termination Premium is
an integral component of the pricing of the credit facility hereunder and shall
be a claim of Foothill against Borrower from the date hereof that merely needs
the foregoing conditions to be satisfied in order for such claim to be due and
payable.
3.7 Termination Upon Event of Default. If Foothill terminates this
Agreement upon the occurrence of an Event of Default, in view of
the impracticability and extreme difficulty of ascertaining actual damages and
by mutual agreement of the parties as to a reasonable calculation of Foothill's
lost profits as a result thereof, Borrower shall pay to Foothill upon the
effective date of such termination, a premium in an amount equal to the Early
Termination Premium. The Early Termination Premium shall be presumed to be the
amount of damages sustained by Foothill as the result of the early termination
and Borrower agrees that it is reasonable under the circumstances currently
existing. The Early Termination Premium provided for in this Section 3.7 shall
-----------
be deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Borrower hereby grants to
Foothill a continuing security interest in all currently existing and hereafter
acquired or arising Personal Property Collateral in order to secure prompt
repayment of any and all Obligations and in order to secure prompt performance
by Borrower of each of its covenants and duties under the Loan Documents.
Foothill's security interests in the Personal Property Collateral shall attach
to all such Collateral without further act on the part of Foothill or Borrower.
The security interest granted herein and the liens granted in the Mortgage are
in addition to, and not in limitation of, any and all liens granted in the
Collateral pursuant to the terms of the Bankruptcy Court Order. Anything
contained in this Agreement or any other Loan Document to the contrary
notwithstanding, except for Permitted Dispositions, Borrower has no authority,
express or implied, to dispose of any item or portion of the Collateral.
4.2 Negotiable Collateral. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower shall, immediately upon the request of Foothill, endorse and assign
such Negotiable Collateral to Foothill and deliver physical possession of such
Negotiable Collateral to Foothill.
4.3 Collection of Accounts, General Intangibles, Negotiable
Collateral. On or before the Closing Date, Foothill, Borrower, and the
Lockbox Bank shall enter into the Lockbox Agreements, in form and substance
satisfactory to Foothill in its sole discretion, pursuant to which all of
Borrower's cash receipts, checks, and other items of payment (including,
insurance proceeds, proceeds of cash sales, rental proceeds, and tax refunds)
that are received by the Lockbox Bank are to be forwarded by the Lockbox Bank to
Foothill on a daily basis. At any time that an Event of Default has occurred
and is continuing or Foothill deems itself insecure (in accordance with Section
1208 of the Code), Foothill or Foothill's designee may: (a) notify customers or
Account Debtors of Borrower that the Accounts, General Intangibles, or
Negotiable
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Collateral have been assigned to Foothill or that Foothill has a security
interest therein; and (b) collect the Accounts, General Intangibles, and
Negotiable Collateral directly and charge the collection costs and expenses to
Borrower's loan account. Borrower agrees that it will hold in trust for
Foothill, as Foothill's trustee, any cash receipts, checks, and other items of
payment (including, insurance proceeds, proceeds of cash sales, rental proceeds,
and tax refunds) that it receives and immediately will deliver said cash
receipts, checks, and other items of payment to Foothill in their original form
as received by Borrower.
4.4 Delivery of Additional Documentation Required. At any time upon
the request of Foothill, Borrower shall execute and deliver to Foothill all
financing statements, continuation financing statements, fixture filings,
security agreements, chattel mortgages, pledges, assignments, endorsements of
certificates of title, applications for title, affidavits, reports, notices,
schedules of accounts, letters of authority, and all other documents that
Foothill may reasonably request, in form satisfactory to Foothill, to perfect
and continue perfected Foothill's security interests in the Collateral and in
order to fully consummate all of the transactions contemplated hereby and under
the other the Loan Documents.
4.5 Power of Attorney. Borrower hereby irrevocably makes,
constitutes, and appoints Foothill (and any of Foothill's officers, employees,
or agents designated by Foothill) as Borrower's true and lawful attorney, with
power to: (a) if Borrower refuses to, or fails timely to execute and deliver any
of the documents described in Section 4.4, sign the name of Borrower on any of
-----------
the documents described in Section 4.4; (b) at any time that an Event of Default
-----------
has occurred and is continuing or Foothill deems itself insecure (in accordance
with Section 1208 of the Code), sign Borrower's name on any invoice or bill of
lading relating to any Account, drafts against Account Debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to Account
Debtors; (c) send requests for verification of Accounts; (d) endorse Borrower's
name on any checks, notices, acceptances, money orders, drafts, or other item of
payment or security that may come into Foothill's possession; (e) at any time
that an Event of Default has occurred and is continuing or Foothill deems itself
insecure (in accordance with Section 1208 of the Code), notify the post office
authorities to change the address for delivery of Borrower's mail to an address
designated by Foothill, to receive and open all mail addressed to Borrower, and
to retain all mail relating to the Collateral and forward all other mail to
Borrower; (f) at any time that an Event of Default has occurred and is
continuing or Foothill deems itself insecure (in accordance with Section 1208 of
the Code), make, settle, and adjust all claims under Borrower's policies of
insurance and make all determinations and decisions with respect to such
policies of insurance; and (g) at any time that an Event of Default has occurred
and is continuing or Foothill deems itself insecure (in accordance with Section
1208 of the Code), settle and adjust disputes and claims respecting the Accounts
directly with Account Debtors, for amounts and upon terms which Foothill
determines to be reasonable, and Foothill may cause to be executed and delivered
any documents and releases which Foothill determines to be necessary. The
appointment of Foothill as Borrower's attorney, and each and every one of
Foothill's rights and powers, being coupled with an interest, is irrevocable
until all of the Obligations have been fully and finally repaid and performed
and Foothill's obligation to extend credit hereunder is terminated.
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4.6 Right to Inspect. Foothill (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter to
inspect Borrower's Books and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, quality, value,
condition of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Foothill as follows:
5.1 No Prior Encumbrances. Borrower has good and indefeasible title to
the Collateral, free and clear of liens, claims, security interests, or
encumbrances, except for Permitted Liens.
5.2 Eligible Accounts. The Eligible Accounts are, at the time of the
creation thereof and as of each date on which Borrower includes them in a
calculation or certification thereof to Foothill, bona fide existing obligations
created by the sale and delivery of goods or General Intangibles or the
rendition of services to Account Debtors in the ordinary course of Borrower's
business, unconditionally owed to Borrower without defenses, disputes, offsets,
or counterclaims.
5.3. Inventory and Equipment. All Inventory and Equipment is now
and at all times hereafter shall be of good and servicable quality, normal wear
and tear excepted.
5.4 Location of Inventory and Equipment. The Inventory and Equipment
are not stored with a bailee, warehouseman, or similar party (without Foothill's
prior written consent) and, other than Inventory that, in the ordinary course of
Borrower's business, is located at an Account Debtor's place of business, are
located only at the locations identified on Schedule 6.12 or otherwise permitted
-------------
by Section 6.12.
------------
5.5 Inventory Records. Borrower now keeps, and hereafter at all times
shall keep, correct and accurate records itemizing and describing the kind,
type, quality, and quantity of the Inventory, and Borrower's cost therefor.
5.6 Location of Chief Executive Office; FEIN. The chief executive
office of Borrower is located at the address indicated in the preamble to this
Agreement and Borrower's FEIN is 75-1371891.
5.7 Due Organization and Qualification; No Subsidiaries. Borrower is
duly organized and existing and in good standing under the laws of the
jurisdiction of its incorporation and qualified and licensed to do business in,
and in good standing in, any state where the failure to be so licensed or
qualified could reasonably be expected to have a material adverse effect on the
business, operations, condition (financial or otherwise), finances, or prospects
of Borrower
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or on the value of the Collateral. Except as set forth on Schedule 5.14,
-------------
SpectraVision has no Subsidiaries.
5.8 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's corporate powers, have
been duly authorized, and, except for the Existing Credit Agreement, are not in
conflict with nor constitute a breach of any provision contained in Borrower's
Articles or Certificate of Incorporation, or By-laws, nor will they constitute
an event of default under any material agreement to which Borrower is a party or
by which its properties or assets may be bound.
5.9 Litigation. There are no actions or proceedings pending by or
against Borrower before any court or administrative agency and Borrower does not
have knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or prosecutions
involving Borrower, except for: (a) ongoing collection matters in which Borrower
is the plaintiff; (b) matters disclosed on Schedule 5.9; and (c) matters arising
------------
after the date hereof that, if decided adversely to Borrower would not
materially impair the prospect of repayment of the Obligations or materially
impair the value or priority of Foothill's security interests in the Collateral.
5.10 No Material Adverse Change in Financial Condition. All financial
statements relating to Borrower that have been delivered by Borrower to Foothill
have been prepared in accordance with GAAP and fairly present Borrower's (or
SpectraVision's, as applicable) financial condition as of the date thereof and
its results of operations for the period then ended. There has not been a
material adverse change in the financial condition of Borrower since the date of
the latest financial statements submitted to Foothill on or before the Closing
Date.
5.11 Solvency. No transfer of property is being made by Borrower and
no obligation is being incurred by Borrower in connection with the transactions
contemplated by this Agreement or the other Loan Documents with the intent to
hinder, delay, or defraud either present or future creditors of Borrower.
5.12 Employee Benefits. Each Plan is in compliance in all material
respects with the applicable provisions of ERISA and the IRC. Each Qualified
Plan and Multiemployer Plan has been determined by the Internal Revenue Service
to qualify under Section 401 of the IRC, and the trusts created thereunder have
been determined to be exempt from tax under Section 501 of the IRC, and, to the
best knowledge of Borrower, nothing has occurred that would cause the loss of
such qualification or tax-exempt status. There are no outstanding liabilities
under Title IV of ERISA with respect to any Plan maintained or sponsored by
Borrower or any ERISA Affiliate, nor with respect to any Plan to which Borrower
or any ERISA Affiliate contributes or is obligated to contribute which could
reasonably be expected to have a material adverse effect on the financial
condition of Borrower. No Plan subject to Title IV of ERISA has any Unfunded
Benefit Liability which could reasonably be expected to have a material adverse
effect on the
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<PAGE>
financial condition of Borrower. Neither Borrower nor any ERISA Affiliate has
transferred any Unfunded Benefit Liability to a person other than Borrower or an
ERISA Affiliate or has otherwise engaged in a transaction that could be subject
to Sections 4069 or 4212(c) of ERISA which could reasonably be expected to have
a material adverse effect on the financial condition of Borrower. Neither
Borrower nor any ERISA Affiliate has incurred nor reasonably expects to incur
(x) any liability (and no event has occurred which, with the giving of notice
under Section 4219 of ERISA, would result in such liability) under Sections 4201
or 4243 of ERISA with respect to a Multiemployer Plan, or (y) any liability
under Title IV of ERISA (other than premiums due but not delinquent under
Section 4007 of ERISA) with respect to a Plan, which could, in either event,
reasonably be expected to have a material adverse effect on the financial
condition of Borrower. No application for a funding waiver or an extension of
any amortization period pursuant to Section 412 of the IRC has been made with
respect to any Plan. No ERISA Event has occurred or is reasonably expected to
occur with respect to any Plan which could reasonably be expected to have a
material adverse effect on the financial condition of Borrower. Borrower and
each ERISA Affiliate have complied in all material respects with the notice and
continuation coverage requirements of Section 4980B of the IRC.
5.13 Environmental Condition. None of Borrower's properties or assets
has ever been used by Borrower or, to the best of Borrower's knowledge, by
previous owners or operators in the disposal of, or to produce, store, handle,
treat, release, or transport, any Hazardous Materials. None of Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a Hazardous Materials
disposal site, or a candidate for closure pursuant to any environmental
protection statute. No lien arising under any environmental protection statute
has attached to any revenues or to any real or personal property owned or
operated by Borrower. Borrower has not received a summons, citation, notice, or
directive from the Environmental Protection Agency or any other federal or state
governmental agency concerning any action or omission by Borrower resulting in
the releasing or disposing of Hazardous Materials into the environment.
5.14 Capital Stock.
(a) Set forth on Schedule 5.14 is the following information
-------------
regarding SpectraVision: (i) the number of authorized shares of each class of
SpectraVision's common and preferred stock; and (ii) the number of shares
outstanding of each such class of shares. All of the outstanding capital stock
of SpectraVision has been validly issued and is fully paid and non-assessable.
(a) Set forth on Schedule 5.14 is a complete and accurate list of
-------------
SpectraVision's Subsidiaries, showing: (a) the jurisdiction of their
incorporation; (b) the number of shares of each class of common and preferred
stock authorized for each of SpectraVision's Subsidiaries; and (c) the number
outstanding and the percentage of the outstanding shares of each such class
owned (directly or indirectly) by SpectraVision or one or more of its
Subsidiaries. All
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<PAGE>
of the outstanding capital stock of each of SpectraVision's Subsidiaries has
been validly issued and is fully paid and non-assessable.
(c) Except as set forth on Schedule 5.14, no capital stock (or any
-------------
securities, instruments, warrants, option, or purchase rights, conversion or
exchange rights, calls, commitments, or claims of any character convertible into
or exercisable for capital stock) of SpectraVision or any of its Subsidiaries is
subject to issuance under any security, instrument, warrant, option or purchase
rights, conversion or exchange rights, call, commitment, or claim of any right,
title, or interest therein or thereto.
5.15 Assets of SPI. Other than the ownership by SPI of the issued and
outstanding capital stock of Borrower, SPI has no properties or assets
(including intangible assets) having a value in excess of $100,000.
5.16 Reliance by Foothill; Cumulative. Each warranty and representation
contained in this Agreement automatically shall be deemed repeated with each
advance and shall be conclusively presumed to have been relied on by Foothill
regardless of any investigation made or information possessed by Foothill. The
warranties and representations set forth herein shall be cumulative and in
addition to any and all other warranties and representations that Borrower now
or hereafter shall give, or cause to be given, to Foothill.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder shall
be available and until full and final payment of the Obligations, and unless
Foothill shall otherwise consent in writing, Borrower shall do all of the
following:
6.1 Accounting System. Maintain a standard and modern system of
accounting in accordance with GAAP with ledger and account cards or computer
tapes, discs, printouts, and records pertaining to the Collateral which contain
information as from time to time may be requested by Foothill. Borrower also
shall keep proper books of account showing all sales, claims, and adjustments to
its Inventory.
6.2 Collateral Reports. Deliver to Foothill, no later than the fifteenth
(15th) day of each month during the term of this Agreement, a detailed aging, by
total, of the Accounts, a reconciliation statement, and a summary aging, by
vendor, of all accounts payable and any book overdraft. No less frequently than
monthly, original sales invoices evidencing sales shall be mailed by Borrower to
each Account Debtor with, at Foothill's request, a copy to Foothill. Borrower
shall deliver to Foothill, as Foothill may from time to time require, collection
reports, sales journals, invoices, and other documentation respecting sales and
servicing arrangements. Absent such a request by Foothill, copies of all such
documentation shall be held by Borrower as custodian for Foothill. In addition,
from time to time, Borrower shall deliver to Foothill such
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<PAGE>
other and additional financial and collateral financial and collateral
information or documentation as Foothill may request.
6.3 Schedules of Accounts. With such regularity as Foothill shall
require, but in no event less frequently than monthly, provide Foothill with
schedules describing all Accounts, the number of rooms under contract, and the
average revenue per room per day. Foothill's failure to request such schedules
or Borrower's failure to execute and deliver such schedules shall not affect or
limit Foothill's security interests or other rights in and to the Accounts.
6.4 Financial Statements, Reports, Certificates. Deliver to Foothill:
(a) as soon as available, but in any event within thirty (30) days after the end
of each month during each of Borrower's fiscal years, a company prepared balance
sheet, income statement, and cash flow statement covering Borrower's operations
during such period; and (b) as soon as available, but in any event within ninety
(90) days after the end of each of Borrower's fiscal years, financial statements
of SpectraVision for each such fiscal year, audited by independent certified
public accountants reasonably acceptable to Foothill and certified by such
accountants to have been prepared in accordance with GAAP, together with a
certificate of such accountants addressed to Foothill stating that such
accountants do not have knowledge of the existence of any Default or Event of
Default. Such audited financial statements shall be prepared on a consolidated
and a consolidating basis and shall include a balance sheet, profit and loss
statement, and cash flow statement, and, if prepared, such accountants' letter
to management.
Together with the above, Borrower also shall deliver to Foothill
SpectraVision's Form 10-Q Quarterly Reports, Form 10-K Annual Reports, and Form
8-K Current Reports, and any other filings made by SpectraVision with the
Securities and Exchange Commission, if any, as soon as the same are filed, or
any other information that is provided by SpectraVision to its shareholders, and
any other report reasonably requested by Foothill relating to the Collateral or
the financial condition of Borrower.
Each month, together with the financial statements provided pursuant to
Section 6.4(a), Borrower shall deliver to Foothill a certificate signed by its
--------------
chief financial officer to the effect that: (i) all reports, statements, or
computer prepared information of any kind or nature delivered or caused to be
delivered to Foothill hereunder have been prepared in accordance with GAAP and
fairly present the financial condition of the subject Person; (ii) Borrower is
in timely compliance with all of its covenants and agreements hereunder and
under the other Loan Documents; (iii) the representations and warranties of
Borrower contained in this Agreement and the other Loan Documents are true and
correct in all material respects on and as of the date of such certificate, as
though made on and as of such date (except to the extent that such
representations and warranties relate solely to an earlier date); and (iv) on
the date of delivery of such certificate to Foothill there does not exist any
Default or Event of Default (or, in each case, to the extent of any non-
compliance, describing such non-compliance as to which he or she may have
knowledge and what action Borrower has taken, is taking, or proposes to take
with respect thereto).
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<PAGE>
Borrower shall have issued written instructions to its independent
certified public accountants authorizing them to communicate with Foothill and
to release to Foothill whatever financial information concerning Borrower that
Foothill may request. Borrower hereby irrevocably authorizes and directs all
auditors, accountants, or other third parties to deliver to Foothill, at
Borrower's expense, copies of Borrower's financial statements, papers related
thereto, and other accounting records of any nature in their possession, and to
disclose to Foothill any information they may have regarding Borrower's business
affairs and financial conditions.
6.5 Tax Returns. Deliver to Foothill copies of Borrower's and
SpectraVision's future federal income tax returns, and any amendments thereto,
within thirty (30) days of the filing thereof with the Internal Revenue Service.
6.6 Inventory Reporting. From time to time hereafter, but not less
frequently than monthly, execute and deliver to Foothill a report regarding
Borrower's Inventory specifying Borrower's cost therefor and further specifying
such other information as Foothill may reasonably request.
6.7 Claims. Allowances, if any, as between Borrower and its Account
Debtors shall be on the same basis and in accordance with the usual customary
practices of Borrower, as they exist at the time of the execution and delivery
of this Agreement. Within five (5) Business Days of the date thereof, Borrower
shall notify Foothill of all disputes and claims if they are in amounts that
exceed those that customarily arise in the ordinary course of business.
6.8 Maintenance of Inventory and Equipment. Keep and maintain the
Inventory and Equipment in good operating condition and repair (ordinary wear
and tear excepted), and make all necessary replacements thereto so that the
value (subject to normal depreciation) and operating efficiency thereof shall at
all times be maintained and preserved. Borrower shall not permit any item of
Inventory or Equipment to become a fixture to real estate or an accession to
other property, and the Inventory and Equipment is now and shall at all times
remain personal property.
6.9 Taxes. All assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Borrower
or any of its property have been paid, and shall hereafter be paid in full,
before delinquency or before the expiration of any extension period. Borrower
shall make due and timely payment or deposit of all federal, state, and local
taxes, assessments, or contributions required of them by law, and will execute
and deliver to Foothill, on demand, appropriate certificates attesting to the
payment thereof or deposit with respect thereto. Borrower shall make timely
payment or deposit of all tax payments and withholding taxes required of them by
applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state
disability, and local, state, and federal income taxes, and will, upon request,
furnish Foothill with proof satisfactory to Foothill indicating that Borrower
has made such payments or deposits. The foregoing to the contrary
notwithstanding, Borrower shall not be
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<PAGE>
required to pay or discharge any such assessment or tax so long as the validity
thereof shall be the subject of a Permitted Protest.
6.10 Insurance.
(a) At its expense, keep the Collateral insured against loss
or damage by fire, theft, explosion, sprinklers, and all other hazards and
risks, and in such amounts, as are ordinarily insured against by other owners
in similar businesses. Borrower also shall maintain business interruption,
public liability, product liability, and property damage insurance relating to
its ownership and use of the Collateral, as well as insurance against larceny,
embezzlement, and criminal misappropriation.
(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as may be reasonably satisfactory to
Foothill. All such policies of insurance (except those of public liability and
property damage) shall contain a 438BFU lender's loss payable endorsement, or an
equivalent endorsement in a form satisfactory to Foothill, showing Foothill as a
loss payee thereof as its interest may appear, shall contain a waiver of
warranties, and shall specify that the insurer must give at least ten (10) days
prior written notice to Foothill before canceling its policy for any reason.
Borrower shall deliver to Foothill certified copies of such policies of
insurance and evidence of the payment of all premiums therefor. All proceeds
payable under any such policy shall be payable to Foothill to be applied on
account of the Obligations.
6.11 No Setoffs or Counterclaims. All payments hereunder and under the
other Loan Documents made by or on behalf of Borrower shall be made without
setoff or counterclaim and free and clear of, and without deduction or
withholding for or on account of, any federal, state, or local taxes.
6.12 Location of Inventory and Equipment. Other than Inventory or
Equipment that is in transit, Borrower shall keep the Inventory and Equipment
only at the locations identified on Schedule 6.12 (except that, on the Closing
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Date and for the thirty days thereafter, such Schedule 6.12 need not list
-------------
locations of Account Debtors of Borrower at which Inventory or Equipment is
located, so long as such Schedule 6.12 is amended to include all states and
-------------
counties in which such Inventory or Equipment is located not later than the
thirtieth day following the Closing Date); provided, however, that Borrower may
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amend Schedule 6.12 so long as such amendment occurs by means of the delivery by
-------------
Borrower to Foothill of a written report not less frequently than monthly (such
that a change in location or additional location will be disclosed to Foothill
within thirty (30) days of the date on which the Inventory or Equipment is moved
to such new location), so long as such new location is within the continental
United States, and so long as, at the time of such written notification,
Borrower provides any financing statements or fixture filings necessary to
perfect and continue perfected Foothill's security interests in such assets and
also provides to Foothill a landlord's waiver in form and substance satisfactory
to Foothill.
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<PAGE>
6.13 Compliance with Laws. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any governmental authority,
including the Fair Labor Standards Act and the Americans With Disabilities Act,
other than laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, would not have and could not reasonably be
expected to have a material adverse effect on the business, operations,
condition (financial or otherwise), finances, or prospects of Borrower or on the
value of the Collateral to Foothill.
6.14 Employee Benefits.
(a) Promptly deliver to Foothill a written statement by the chief
financial officer of Borrower specifying the nature of any of the following
events and the actions which Borrower proposes to take with respect thereto, and
in any event within ten (10) days of becoming aware of any of them, and when
known, any action taken or threatened by the Internal Revenue Service, PBGC,
Department of Labor, or other party with respect thereto: (i) an ERISA Event
with respect to any Plan; (ii) the incurrence of an obligation to pay additional
premium to the PBGC under Section 4006(a)(3)(E) of ERISA with respect to any
Plan; and (iii) any lien on the assets of Borrower arising in connection with
any Plan.
(b) Borrower shall also promptly furnish to Foothill copies
prepared or received by Borrower or an ERISA Affiliate of: (i) at the request of
Foothill, each annual report (Internal Revenue Service Form 5500 series) and all
accompanying schedules, actuarial reports, financial information concerning the
financial status of each Plan, and schedules showing the amounts contributed to
each Plan by or on behalf of Borrower or its ERISA Affiliates for the most
recent three (3) plan years; (ii) all notices of intent to terminate or to have
a trustee appointed to administer any Plan; (iii) all written demands by the
PBGC under Subtitle D of Title IV of ERISA; (iv) all notices required to be sent
to employees or to the PBGC under Section 302 of ERISA or Section 412 of the
IRC; (v) all written notices received with respect to a Multiemployer Plan
concerning (x) the imposition or amount of withdrawal liability pursuant to
Section 4202 of ERISA, (y) a termination described in Section 4041A of ERISA, or
(z) a reorganization or insolvency described in Subtitle E of Title IV of ERISA;
(vi) the adoption of any new Plan that is subject to Title IV of ERISA or
Section 412 of the IRC by Borrower or any ERISA Affiliate; (vii) the adoption of
any amendment to any Plan that is subject to Title IV of ERISA or Section 412 of
the IRC, if such amendment results in a material increase in benefits or
Unfunded Benefit Liability; or (viii) the commencement of contributions by
Borrower or any ERISA Affiliate to any Plan that is subject to Title IV of ERISA
or Section 412 of the IRC.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder shall
be available and until full and final payment of the Obligations, Borrower will
not do (and, with respect to Sections 7.1 and 7.2, will not permit any of its
--------------------
Subsidiaries to do) any of the following without Foothill's prior written
consent:
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7.1 Indebtedness. Create, incur, assume, permit, guarantee, or otherwise
become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement;
(b) Indebtedness evidenced by the Discount Notes;
(c) Indebtedness evidenced by the Subordinated Notes;
(d) Indebtedness secured by Permitted Liens; and
(e) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b), (c), and (d) of this Section 7.1 (and continuance
-----------
or renewal of any Permitted Liens associated therewith) so long as: (i) the
terms and conditions of such refinancings, renewals, or extensions do not
materially impair the prospects of repayment of the Obligations by Borrower,
(ii) the net cash proceeds of such refinancings, renewals, or extensions do
not result in an increase in the aggregate principal amount of the
Indebtedness so refinanced, renewed, or extended, (iii) such refinancings,
renewals, refundings, or extensions do not result in a shortening of the
average weighted maturity of the Indebtedness so refinanced, renewed, or
extended, and (iv) to the extent that Indebtedness that is refinanced was
subordinated in right of payment to the Obligations, then the subordination
terms and conditions of the refinancing Indebtedness must be at least as
favorable to Foothill as those applicable to the refinanced Indebtedness.
7.2 Liens. Create, incur, assume, or permit to exist, directly or
indirectly, any lien on or with respect to any of its property or assets, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced under
Section 7.1(e) and so long as the replacement liens secure only those assets or
--------------
property that secured the original Indebtedness).
7.3 Restrictions on Fundamental Changes. Enter into any acquisition,
merger, consolidation, or reclassify its capital stock, or liquidate, wind up,
or dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
assign, lease, transfer, or otherwise dispose of, in one transaction or a series
of transactions, all or any substantial part of its business, property, or
assets, whether now owned or hereafter acquired, or acquire by purchase or
otherwise all or substantially all of the properties, assets, stock, or other
evidence of beneficial ownership of any Person.
7.4 Extraordinary Transactions and Disposal of Assets. Except for
Permitted Dispositions, enter into any transaction not in the ordinary and usual
course of Borrower's business, including the sale, lease, or other disposition
of, moving, relocation, or transfer, whether by sale or otherwise, of any of
Borrower's properties or assets.
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7.5 Change Name. Change Borrower's name, FEIN, business structure, or
identity, or add any new fictitious names.
7.6 Guarantee. Except as permitted by Section 7.1 hereof, guarantee or
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otherwise become in any way liable with respect to the obligations of any third
Person except by endorsement of instruments or items of payment for deposit to
the account of Borrower or which are transmitted or turned over to Foothill.
7.7 Nature of Business; Fiscal Year. Make any change in the principal
nature of Borrower's business operations or the date of its fiscal year.
7.8 Prepayments. Except in connection with a refinancing permitted by
Section 7.1(e), prepay any Indebtedness owing to any third Person.
--------------
7.9 Change of Control. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 Capital Expenditures. Make any capital expenditure, or any
commitment therefor, in excess of One Million Dollars ($1,000,000) for any
individual transaction or where the aggregate amount of such capital
expenditures, made or committed for in (a) fiscal year 1995, is in excess of
Thirty Five Million Dollars ($35,000,000), (b) fiscal year 1996, is in excess of
Thirty Two Million Nine Hundred Thousand Dollars ($32,900,000), and (c) fiscal
year 1997, is in excess of Twenty Eight Million Three Hundred Thousand Dollars
($28,300,000).
7.11 Consignments. Consign any Inventory or sell or lease any
Inventory on bill and hold, sale or return, sale on approval, or other
conditional terms of sale or lease.
7.12 Distributions. Make any distribution or declare or pay any
dividends (in cash or other property, other than capital stock) on,
or purchase, acquire, redeem, or retire any of Borrower's capital stock, of any
class, whether now or hereafter outstanding. The foregoing to the contrary
notwithstanding, so long as no Default or Event of Default has occurred and is
continuing, Borrower may pay cash dividends to SPI so long as SPI immediately
declares and pays a cash dividend of the same amount to SpectraVision to enable
SpectraVision to make payment of directors and officers insurance premiums, fees
payable to its directors, and other ordinary and reasonable operating expenses
of SpectraVision and SPI, in each case consistent with budgeted amounts
previously provided to Foothill, so long as such dividends are applied promptly
to pay such amounts and that in any event they do not exceed in the aggregate
One Million Nine Hundred Thousand Dollars ($1,900,000) in any fiscal year of
Borrower.
7.13 Accounting Methods. Modify or change its method of accounting or
enter into, modify, or terminate any agreement currently existing, or at any
time hereafter entered into with any third party accounting firm or payroll
service bureau for the preparation or storage of Borrower's accounting records
without said accounting firm or service bureau agreeing to provide
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Foothill information regarding the Collateral or Borrower's financial condition.
Borrower waives the right to assert a confidential relationship, if any, it may
have with any accounting firm or service bureau in connection with any
information requested by Foothill pursuant to or in accordance with this
Agreement, and agrees that Foothill may contact directly any such accounting
firm or service bureau in order to obtain such information.
7.14 Investments. Directly or indirectly make or acquire any
beneficial interest in (including stock, partnership interest, or other
securities of), or make any loan, advance, or capital contribution to, any
Person.
7.15 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms, that are fully disclosed to Foothill, and that are no
less favorable to Borrower than would be obtained in an arm's length transaction
with a non-Affiliate.
7.16 Suspension. Suspend or go out of a substantial portion of its
business.
7.17 Compensation. Increase the annual fee or per-meeting fees paid to
directors during any year by more than fifteen percent (15%) over the prior
year; pay or accrue total cash compensation, during any year, to officers in an
aggregate amount in excess of one hundred fifteen percent (115%) of that paid or
accrued in the prior year.
7.18 Use of Proceeds. Use the proceeds of the advances made hereunder
for any purpose other than: (a) on the Closing Date, (i) to repay the
outstanding principal, accrued interest, and accrued fees and expenses owing to
Agent and the Banks under the Existing Credit Agreement in accordance with the
Pay-Off Letter; and (ii) to pay transactional costs and expenses incurred in
connection with this Agreement; and, thereafter, (b) consistent with the terms
and conditions hereof, for its lawful and permitted corporate purposes.
7.19 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees. Without thirty (30) days prior written notification to
Foothill, relocate its chief executive office to a new location and so long as,
at the time of such written notification, Borrower provide any financing
statements or fixture filings necessary to perfect and continue perfected
Foothill's security interests and also provides to Foothill a landlord's waiver
in form and substance satisfactory to Foothill. The Inventory and Equipment
shall not at any time now or hereafter be stored with a bailee, warehouseman, or
similar party without Foothill's prior written consent.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
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8.1 If Borrower fails to pay when due and payable or when
declared due and payable, any portion of the Obligations (whether of principal,
interest (including any interest which, but for the provisions of the Bankruptcy
Code, would have accrued on such amounts), fees and charges due Foothill,
reimbursement of Foothill Expenses, or other amounts constituting Obligations);
8.2 (a) If Borrower fails or neglects to perform, keep, or
observe any term, provision, condition, covenant, or agreement contained in
Sections 6.1 (Accounting System), 6.2 (Collateral Reports), 6.3 (Schedule of
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Accounts), 6.4 (Financial Statements), 6.5 (Tax Returns), 6.8 (Maintenance of
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Inventory and Equipment), or 6.13 (Compliance with Laws) of this Agreement and
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such failure continues for a period of five (5) days from the date of such
failure or neglect; or (b) If Borrower fails or neglects to perform, keep, or
observe any other term, provision, condition, covenant, or agreement contained
in this Agreement or in any of the other Loan Documents (other than any such
term, provision, condition, covenant, or agreement that is the subject of
another provision of this Section 8);
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8.3 If there is a material impairment of the prospect of repayment of
any portion of the Obligations owing to Foothill or a material impairment of the
value or priority of Foothill's security interests in the Collateral;
8.4 If any material portion of Borrower's properties or assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any third Person;
8.5 If a trustee is appointed in Borrower's Chapter 11 case, or if
Borrower's Chapter 11 case becomes a liquidating Chapter 11 case or is converted
to a case under Chapter 7 of the Bankruptcy Code;
8.6 If Borrower is enjoined, restrained, or in any way prevented by
court order from continuing to conduct all or any material part of its business
affairs;
8.7 (a) If a notice of lien, levy, or assessment is filed of record
with respect to any of Borrower's assets by the United States Government, or any
department, agency, or instrumentality thereof, or if any taxes or debts owing
at any time hereafter to the United States Government, or any department,
agency, or instrumentality thereof, becomes a lien, whether choate or otherwise,
upon any of Borrower's properties and assets; or (b) if a notice of lien, levy,
or assessment is filed of record with respect to any material portion of
Borrower's assets by any state, county, municipal, or governmental agency, or if
any taxes or debts owing at any time hereafter to any one or more of such
entities becomes a lien, whether choate or otherwise, upon any of Borrower's
properties or assets and the same is not paid on the payment date thereof unless
such lien, levy, assessment, taxes, or debts are the subject of a Permitted
Protest and any lien or levy is removed within sixty (60) days of the attachment
thereof;
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8.8 If a judgment or other claim becomes a lien or encumbrance upon any
material portion of Borrower's properties or assets;
8.9 (a) If there is a default in any material agreement (other than one
or more of the EDS Contracts) to which Borrower is a party with one or more
third Persons resulting in a right by such third Persons, irrespective of
whether exercised, to accelerate the maturity of Borrower's obligations
thereunder; or (b) If, without the prior written consent of Foothill, the rights
of Borrower under any one of the EDS Contracts that constitutes an "executory
contract" or an "unexpired lease" (as those terms are used in Section 365 of the
Bankruptcy Code) are terminated; provided, however, that the foregoing shall not
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apply to any executory contract that may not be assumed or assigned under
Section 365(c)(2) of the Bankruptcy Code;
8.10 If Borrower make any payment on account of Indebtedness that has
been contractually subordinated in right of payment to the payment of the
Obligations, except to the extent such payment is permitted by the terms hereof
and by the subordination provisions applicable to such Indebtedness;
8.11 If any material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to Foothill
by Borrower or any officer, employee, agent, or director of Borrower, or if any
such warranty or representation is withdrawn;
8.12 Financial Covenants. The failure of SpectraVision to maintain:
(a) Minimum Annualized Consolidated EBITDA. A minimum level of
Annualized Consolidated EBITDA of at least (i) $13,000,000 during fiscal year
1995, (ii) $21,300,000 during fiscal year 1996, and (iii) $27,200,000 during
fiscal year 1997, in each case measured on a fiscal quarter-end basis;
(b) Minimum Fixed Charge Coverage Ratio. A ratio of aggregate
Cumulative Consolidated EBIDTA divided by Cumulative Consolidated Fixed Charges
of at least (i) 1.00:1.0 during fiscal year 1995, (ii) 1.50:1.00 during fiscal
year 1996, and (iii) 1.75:1.0 during fiscal year 1997, in each case, measured on
a fiscal quarter-end basis; and
(c) Maximum Adjusted Total Liabilities. A maximum amount of
Adjusted Total Liabilities of $35,000,000, measured on a fiscal month-end
basis.
8.13 Operational Covenants. The failure of Borrower to maintain:
(a) Minimum Number of Rooms. A minimum number of rooms under
contract of at least (i) 530,000 during the second fiscal quarter of fiscal
year 1995, (ii) 505,000 during the third fiscal quarter of fiscal year 1995,
(iii) 487,000 during the fourth fiscal quarter of fiscal year 1995, (iv)
473,000 during fiscal year 1996, and (v) 464,000 during fiscal year 1997,
measured on a fiscal quarter-end basis; and
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(b) Minimum Revenue Per Room. Average revenue per room per
day of at least (i) $0.450 during fiscal year 1995, (ii) $0.535 during fiscal
year 1996, (iii) $0.615 during fiscal year 1997, measured on a fiscal quarter-
end basis.
8.14 If the obligation of any guarantor or other third Person under any
Loan Document is limited or terminated by operation of law or by the guarantor
or other third Person thereunder, or any such guarantor or other third Person
becomes the subject of an Insolvency Proceeding; or
8.15 If (a) with respect to any Plan, there shall occur any of the
following which could reasonably be expected to have a material adverse effect
on the financial condition of Borrower: (i) the violation of any of the
provisions of ERISA; (ii) the loss by a Plan intended to be a Qualified Plan of
its qualification under Section 401(a) of the IRC; (iii) the incurrence of
liability under Title IV of ERISA; (iv) a failure to make full payment when due
of all amounts which, under the provisions of any Plan or applicable law,
Borrower or any ERISA Affiliate is required to make; (v) the filing of a notice
of intent to terminate a Plan under Sections 4041 or 4041A of ERISA; (vi) a
complete or partial withdrawal of Borrower or an ERISA Affiliate from any Plan;
(vii) the receipt of a notice by the plan administrator of a Plan that the PBGC
has instituted proceedings to terminate such Plan or appoint a trustee to
administer such Plan; (viii) a commencement or increase of contributions to, or
the adoption of or the amendment of, a Plan; and (ix) the assessment against
Borrower or any ERISA Affiliate of a tax under Section 4980B of the IRC; or (b)
the Unfunded Benefit Liability of all of the Plans of Borrower and its ERISA
Affiliates shall, in the aggregate, exceed One Hundred Thousand Dollars
($100,000).
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence of an Event of Default
Foothill may, at its election, without notice of its election and without
demand, but subject to any applicable terms and conditions set forth in the
Bankruptcy Court Order, if any, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due
and payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrower and Foothill;
(c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of Foothill, but without
affecting Foothill's rights and security interests in the Personal Property
Collateral and without affecting the Obligations;
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(d) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Foothill considers advisable, and in
such cases, Foothill will credit Borrower's loan account with only the net
amounts received by Foothill in payment of such disputed Accounts after
deducting all Foothill Expenses incurred or expended in connection therewith;
(e) Cause Borrower to hold all returned Inventory in trust for
Foothill, segregate all returned Inventory from all other property of Borrower
or in Borrower's possession and conspicuously label said returned Inventory as
the property of Foothill;
(f) Without notice to or demand upon Borrower or any guarantor,
make such payments and do such acts as Foothill considers necessary or
reasonable to protect its security interests in the Collateral. Borrower agrees
to assemble the Personal Property Collateral if Foothill so requires, and to
make the Personal Property Collateral available to Foothill as Foothill may
designate. Borrower authorizes Foothill to enter the premises where the Personal
Property Collateral is located, to take and maintain possession of the Personal
Property Collateral, or any part of it, and to pay, purchase, contest, or
compromise any encumbrance, charge, or lien that in Foothill's determination
appears to be prior or superior to its security interests and to pay all
expenses incurred in connection therewith. With respect to any of Borrower's
owned premises, Borrower hereby grants Foothill a license to enter into
possession of such premises and to occupy the same, without charge, for up to
one hundred twenty (120) days in order to exercise any of Foothill's rights or
remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to Borrower (such notice being expressly
waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of Section 9505 of the
Code), set off and apply to the Obligations any and all (i) balances and
deposits of Borrower held by Foothill (including any amounts received in the
Lockbox Accounts), or (ii) indebtedness at any time owing to or for the credit
or the account of Borrower held by Foothill;
(h) Hold, as cash collateral, any and all balances and deposits
of Borrower held by Foothill, and any amounts received in the Lockbox
Accounts, to secure the full and final repayment of all of the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Personal Property Collateral. Foothill is hereby granted a
license or other right to use, without charge, Borrower's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names, trademarks,
service marks, and advertising matter, or any property of a similar nature, as
it pertains to the Personal Property Collateral, in completing production of,
advertising for sale, and selling any Personal Property Collateral and, to the
maximum extent permitted by law, Borrower's rights under all licenses and all
franchise agreements shall inure to Foothill's benefit;
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(j) Apply to the bankruptcy court where any case of Borrower
filed under the Bankruptcy Code is pending, upon 48 hours notice to Borrower,
Borrower's counsel, counsel for the official creditors committee in such case,
the United States Trustee, and EDS (which 48 hours notice hereby conclusively
is agreed to be sufficient notice), for one or more of the following forms of
relief: (a) appointment of an examiner for Borrower; (b) appointment of a
trustee for Borrower; (c) conversion of a Chapter 11 case to a case under
Chapter 7 of the Bankruptcy Code; or (d) dismissal of the bankruptcy case.
Borrower hereby expressly agrees that 48 hours notice shall be adequate notice
for the requesting of the foregoing specified forms of relief in the event of
the occurrence and continuation of an Event of Default hereunder, and Borrower
expressly waives any right to object to the adequacy of notice in connection
with a request for any of the foregoing specified forms of relief if such 48
hours notice is given and an Event of Default is found to exist. Nothing in
this paragraph shall limit the right of Foothill to apply to the bankruptcy
court in which any bankruptcy case of Borrower is pending for such other or
further relief as may be justified and appropriate, and nothing in this
paragraph shall limit the other rights and remedies of Foothill provided for
elsewhere in this Agreement or in any other Loan Document;
(k) Sell the Personal Property Collateral at either a public
or private sale, or both, by way of one or more contracts or transactions, for
cash or on terms, in such manner and at such places (including Borrower's
premises) as Foothill determines is commercially reasonable. It is not
necessary that the Personal Property Collateral be present at any such sale;
(l) Foothill shall give notice of the disposition of the
Personal Property Collateral as follows:
(1) Foothill shall give Borrower and each holder of a
security interest in the Personal Property Collateral who has filed with
Foothill a written request for notice, a notice in writing of the time and place
of public sale, or, if the sale is a private sale or some other disposition
other than a public sale is to be made of the Personal Property Collateral, then
the time on or after which the private sale or other disposition is to be made;
(2) The notice shall be personally delivered or mailed,
postage prepaid, to Borrower as provided in Section 12, at least ten (10) days
----------
before the date fixed for the sale, or at least ten (10) days before the date on
or after which the private sale or other disposition is to be made; no notice
needs to be given prior to the disposition of any portion of the Personal
Property Collateral that is perishable or threatens to decline speedily in value
or that is of a type customarily sold on a recognized market. Notice to Persons
other than Borrower claiming an interest in the Personal Property Collateral
shall be sent to such addresses as they have furnished to Foothill;
(3) If the sale is to be a public sale, Foothill also shall
give notice of the time and place by publishing a notice one time at least ten
(10) days before the date of the sale in a newspaper of general circulation in
the county in which the sale is to be held;
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(m) Foothill may credit bid and purchase at any public sale; and
(n) Any deficiency that exists after disposition of the
Personal Property Collateral as provided above will be paid immediately by
Borrower. Any excess will be returned, without interest and subject to the
rights of third Persons, by Foothill to Borrower.
(o) In addition to the foregoing rights in this Section 9.1,
-----------
Foothill shall have all other rights and remedies available to it at law or in
equity pursuant to any other Loan Documents, including, the Mortgage.
9.2 Remedies Cumulative. Foothill's rights and remedies
under this Agreement, the Loan Documents, and all other agreements shall be
cumulative. Foothill shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by
Foothill of one right or remedy shall be deemed an election, and no waiver by
Foothill of any Event of Default shall be deemed a continuing waiver. No delay
by Foothill shall constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If Borrower fails to pay any monies (whether taxes, rents, assessments,
insurance premiums, or otherwise) due to third Persons, or fails to make any
deposits or furnish any required proof of payment or deposit, all as required
under the terms of this Agreement, but after giving effect to any right of
Permitted Protest, then, to the extent that Foothill determines that such
failure by Borrower could have a material adverse effect on Foothill's interests
in the Collateral, in its discretion and without prior notice to Borrower,
Foothill may do any or all of the following: (a) make payment of the same or
any part thereof; (b) set up such reserves in Borrower's loan account as
Foothill deems necessary to protect Foothill from the exposure created by such
failure; or (c) obtain and maintain insurance policies of the type described in
Section 6.10, and take any action with respect to such policies as Foothill
------------
deems prudent. Any such amounts paid by Foothill shall constitute Foothill
Expenses. Any such payments made by Foothill shall not constitute an agreement
by Foothill to make similar payments in the future or a waiver by Foothill of
any Event of Default under this Agreement. Foothill need not inquire as to, or
contest the validity of, any such expense, tax, security interest, encumbrance,
or lien and the receipt of the usual official notice for the payment thereof
shall be conclusive evidence that the same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1. Demand; Protest; etc. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Foothill on which Borrower may in any way be
liable.
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11.2 Foothill's Liability for Collateral. So long as Foothill complies
with its obligations, if any, under Section 9207 of the Code, Foothill shall not
in any way or manner be liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage thereto occurring or arising in any manner or
fashion from any cause; (c) any diminution in the value thereof; or (d) any act
or default of any carrier, warehouseman, bailee, forwarding agency, or other
Person. All risk of loss, damage, or destruction of the Collateral shall be
borne by Borrower.
11.3 Indemnification. Borrower agrees to defend, indemnify, save, and
hold Foothill and its officers, employees, Participants, and agents harmless
against: (a) all obligations, demands, claims, and liabilities claimed or
asserted by any other Person arising out of or relating to the transactions
contemplated by this Agreement or any other Loan Document, including any claim
of any broker or finder, and (b) all losses (including attorneys fees and
disbursements) in any way suffered, incurred, or paid by Foothill as a result of
or in any way arising out of, following, or consequential to the transactions
contemplated by this Agreement or any other Loan Document. This provision shall
survive the termination of this Agreement.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other Loan Document shall be in
writing and (except for financial statements and other informational documents
which may be sent by first-class mail, postage prepaid) shall be personally
delivered or sent by registered or certified mail, postage prepaid, return
receipt requested, or by prepaid telex, TWX, telefacsimile, or telegram (with
messenger delivery specified) to Borrower or to Foothill, as the case may be, at
its address set forth below:
If to Borrower: SPECTRADYNE, INC.
1501 North Plano Road
Richardson, Texas 75081
Attn: Mr. Richard Gozia
with copies to: HAYNES AND BOONE, L.L.P.
901 Main Street, Suite 3100
Dallas, Texas 75202
Attn: William R. Hays III, Esq.
If to Foothill: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Business Finance Division Manager
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with copies to: BROBECK, PHLEGER & HARRISON
550 South Hope Street
Los Angeles, California 90071
Attn: John Francis Hilson, Esq.
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other. All notices or demands sent in accordance with this Section 12, other
----------
than notices by Foothill in connection with Sections 9504 or 9505 of the Code,
shall be deemed received on the earlier of the date of actual receipt or three
(3) days after the deposit thereof in the mail. Borrower acknowledges and
agrees that notices sent by Foothill in connection with Sections 9504 or 9505 of
the Code shall be deemed sent when deposited in the mail or transmitted by
telefacsimile or other similar method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETATION,
AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER,
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES OF
AMERICA (INCLUDING THE BANKRUPTCY CODE), IT BEING THE INTENT OF THE PARTIES THAT
FEDERAL LAW SHALL GOVERN THE RIGHTS AND DUTIES OF THE PARTIES HERETO WITHOUT
REGARD TO THE APPLICATION OF ANY PROVISION OF STATE LAW. TO THE EXTENT THAT
FEDERAL LAW WOULD APPLY THE LAW OF ANY STATE AS THE FEDERAL RULE FOR THE
PURPOSES OF THIS AGREEMENT, THE PARTIES AGREE THAT THE LAWS OF THE STATE OF
CALIFORNIA (EXCLUSIVE OF SECTION 9102(4)-(8) OF THE CODE, SECTIONS 580a, 580d
AND 726 OF THE CODE OF CIVIL PROCEDURE, AND THE PROVISIONS OF THE VEHICLE CODE
THAT REQUIRE THE NOTATION OF A SECURED PARTY'S LIEN UPON THE CERTIFICATE OF
TITLE) SHALL BE USED TO SUPPLEMENT APPLICABLE FEDERAL LAW.
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE
BANKRUPTCY COURT. EACH OF BORROWER AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED
UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM
NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 13.
BORROWER AND FOOTHILL HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF
THE LOAN DOCUMENTS OR ANY OF THE
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TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWER
AND FOOTHILL REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENT.
All documents, schedules, invoices, agings, or other papers
delivered to Foothill may be destroyed or otherwise disposed of by Foothill four
(4) months after they are delivered to or received by Foothill, unless Borrower
requests, in writing, the return of said documents, schedules, or other papers
and makes arrangements, at Borrower's expense, for their return.
15. GENERAL PROVISIONS.
15.1. Effectiveness. This Agreement shall be binding and deemed effective
when executed by Borrower and Foothill.
15.2 Successors and Assigns. This Agreement shall bind and inure to
the benefit of the respective successors and assigns of each of the
parties; provided, however, that Borrower may not assign this Agreement or any
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rights or duties hereunder without Foothill's prior written consent and any
prohibited assignment shall be absolutely void. No consent to an assignment by
Foothill shall release Borrower from its Obligations. Foothill may assign this
Agreement and its rights and duties hereunder and no consent or approval by
Borrower is required in connection with any such assignment. Foothill reserves
the right to sell, assign, transfer, negotiate, or grant participations in all
or any part of, or any interest in Foothill's rights and benefits hereunder. In
connection with any such assignment or participation, Foothill may disclose all
documents and information which Foothill now or hereafter may have relating to
Borrower or Borrower's business. To the extent that Foothill assigns its rights
and obligations hereunder to a third Person, Foothill thereafter shall be
released from such assigned obligations to Borrower and such assignment shall
effect a novation between Borrower and such third Person.
15.3 Section Headings. Headings and numbers have been set forth herein
for convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire Agreement.
15.4 Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Foothill or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and
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shall be construed and interpreted according to the ordinary meaning of the
words used so as to fairly accomplish the purposes and intentions of all parties
hereto.
15.5 Severability of Provisions. Each provision of this Agreement shall
be severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
15.6 Amendments in Writing. This Agreement can only be amended by a
writing signed by both Foothill and Borrower.
15.7 Counterparts; Telefacsimile Execution. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of a manually executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver a manually executed
counterpart of this Agreement but the failure to deliver a manually executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.
15.8 Revival and Reinstatement of Obligations. If the incurrence or
payment of the Obligations by Borrower or any guarantor of the Obligations or
the transfer by either or both of such parties to Foothill of any property of
either or both of such parties should for any reason subsequently be declared to
be void or voidable under any state or federal law relating to creditors'
rights, including provisions of the Bankruptcy Code relating to fraudulent
conveyances, preferences, and other voidable or recoverable payments of money or
transfers of property (collectively, a "Voidable Transfer"), and if Foothill is
required to repay or restore, in whole or in part, any such Voidable Transfer,
or elects to do so upon the reasonable advice of its counsel, then, as to any
such Voidable Transfer, or the amount thereof that Foothill is required or
elects to repay or restore, and as to all reasonable costs, expenses, and
attorneys fees of Foothill related thereto, the liability of Borrower or such
guarantor automatically shall be revived, reinstated, and restored and shall
exist as though such Voidable Transfer had never been made.
15.9 Integration. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in Los Angeles, California.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By__________________________
Title:_______________________
SPECTRADYNE, INC.,
a Texas corporation
By__________________________
Title:_______________________
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EXHIBIT 10.25
AMENDMENT NUMBER ONE TO
LOAN AND SECURITY AGREEMENT
This AMENDMENT NUMBER ONE TO LOAN AND SECURITY AGREEMENT (this "Amendment")
is entered into as of July 20, 1995, by and between Foothill Capital
Corporation, a California corporation ("Foothill") and Spectradyne, Inc., a
Texas corporation ("Borrower"), with reference to the following facts:
A. Foothill and Borrower heretofore have entered into that certain Loan and
Security Agreement, dated as of June 9, 1993 (the "Agreement");
B. Borrower and the official creditors committee in Borrower's chapter 11 case
have requested that Foothill make certain amendments to the Agreement;
C. On the terms and conditions set forth herein, Foothill is willing to so
amend the Agreement; and
D. All capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Agreement, as amended hereby.
NOW, THEREFORE, in consideration of the above recitals and the mutual
premises contained herein, Foothill and Borrower hereby agree as follows:
1. Amendments to the Agreement.
---------------------------
a. Section 2.3(b) of the Agreement hereby is deleted in its
entirety and the following hereby is substituted in lieu thereof:
"(b) Default Rate. All Obligations shall bear interest, from and
after the occurrence and during the continuance of an Event of Default, at a per
annum rate equal to four and three-quarters (4.75) percentage points above the
Reference Rate."
b. Section 3.3(e) of the Agreement hereby is deleted in its
entirety.
c. Section 8.2(a) of the Agreement hereby is deleted in its
entirety and the following hereby is substituted in lieu thereof:
"(a) If Borrower fails or neglects to perform, keep, or observe any
term, provision, condition, covenant, or agreement contained in Sections 6.1
------------
<PAGE>
(Accounting System), 6.2 (Collateral Reports), 6.3 (Schedule of Accounts), 6.4
------------------------------------------------------------------------------
(Financial Statements), 6.5 (Tax Returns), 6.6 (Inventory Reporting), 6.7
-------------------------------------------------------------------------
(Claims)(as to the second sentence thereof), 6.8 (Maintenance of Inventory and
------------------------------------------------------------------------------
Equipment), 6.9 (Taxes), 6.13 (Compliance with Laws), or 6.14 (Employee
-----------------------------------------------------------------------
Benefits) of this Agreement and such failure continues for a period of ten (10)
---------
days from the date of such failure or neglect;"
2. Representations and Warranties. Borrower hereby represents and
------------------------------
warrants to Foothill that (a) the execution, delivery, and performance of this
Amendment and of the Agreement, as amended by this Amendment, are within its
corporate powers, have been duly authorized by all necessary corporate action,
and are not in contravention of any law, rule, or regulation, or any order,
judgment, decree, writ, injunction, or award of any arbitrator, court, or
governmental authority, or of the terms of its charter or bylaws, and (b) this
Amendment and the Agreement, as amended by this Amendment, constitute Borrower's
legal, valid, and binding obligation, enforceable against Borrower in accordance
with its terms.
3. Conditions Precedent to Amendment. The satisfaction of each of the
---------------------------------
following on or before July 31, 1995 shall constitute conditions precedent to
the effectiveness of this Amendment:
a. Foothill shall have received a copy of the final Bankruptcy
Court Order as entered by the Bankruptcy Court;
b. Foothill shall have received a copy of the Acknowledgement of
Guarantors, in the form of Exhibit A hereto, executed and delivered by
SpectraVision and Kalevision;
c. The representations and warranties in this Amendment, the
Agreement as amended by this Amendment, and the other Loan Documents shall be
true and correct in all respects on and as of the date hereof, as though made on
such date (except to the extent that such representations and warranties relate
solely to an earlier date); and
d. No Event of Default or event which with the giving of notice or
passage of time would constitute an Event of Default shall have occurred and be
continuing.
4. Effect on Agreement. The Agreement, as amended hereby, shall be and
-------------------
remain in full force and effect in accordance with its respective terms and
hereby is ratified and confirmed in all respects. The execution, delivery, and
performance of this Amendment shall not operate as a waiver of or, except as
expressly set forth herein, as an amendment, of any right, power, or remedy of
Foothill under the Agreement, as in effect prior to the date hereof.
2
<PAGE>
5. Miscellaneous.
-------------
a. Upon the effectiveness of this Amendment, each reference in the
Agreement to "this Agreement", "hereunder", "herein", "hereof" or words of like
import referring to the Agreement shall mean and refer to the Agreement as
amended by this Amendment.
b. Upon the effectiveness of this Amendment, each reference in the
Loan Documents to the "Loan Agreement", "thereunder", "therein", "thereof" or
words of like import referring to the Agreement shall mean and refer to the
Agreement as amended by this Amendment.
c. This Amendment shall be governed by and construed in accordance
with the laws of the State of California.
d. This Amendment may be executed in any number of counterparts, all
of which taken together shall constitute one and the same instrument and any of
the parties hereto may execute this Amendment by signing any such counterpart.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first written above.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By____________________________
Title:________________________
SPECTRADYNE, INC.,
a Texas corporation
By____________________________
Title:________________________
4
<PAGE>
EXHIBIT A
----------
Acknowledgement of Guarantors
All capitalized terms used herein but not otherwise defined herein
shall have the meanings ascribed to them in that certain Amendment Number One to
Loan and Security Agreement, dated as of July 6, 1995 (the "Amendment"). Each
of the undersigned hereby (a) represents and warrants to Foothill that the
execution, delivery, and performance of this Reaffirmation and Consent of
Guarantors are within its corporate powers, have been duly authorized by all
necessary corporate action, and are not in contravention of any law, rule, or
regulation, or any order, judgment, decree, writ, injunction, or award of any
arbitrator, court, or governmental authority, or of the terms of its charter or
bylaws, or of any contract or undertaking to which it is a party or by which any
of its properties may be bound or affected; (b) consents to the amendment of the
Agreement by the Amendment; (c) acknowledges and reaffirms its obligations owing
to Foothill under its Subsidiary Guarantee and any other Loan Documents to which
it is a party; and (d) agrees that its Subsidiary Guarantee and any such other
Loan Documents are and shall remain in full force and effect. Although each of
the undersigned has been informed of the matters set forth herein and has
acknowledged and agreed to same, it understands that Foothill has no obligation
to inform it of such matters in the future or to seek its acknowledgement or
agreement to future amendments, and nothing herein shall create such a duty.
KALEVISION SYSTEMS, INC. - USA,
a New York corporation
By ___________________________
Title:________________________
SPECTRAVISION, INC.,
a Delaware corporation
By ___________________________
Title:________________________
5
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q OF SPECTRAVISION, INC. FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000819898
<NAME> SPECTRAVISION, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,952
<SECURITIES> 0
<RECEIVABLES> 21,030
<ALLOWANCES> 1,009
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 306,846
<DEPRECIATION> 167,623
<TOTAL-ASSETS> 224,956
<CURRENT-LIABILITIES> 0
<BONDS> 494,166
<COMMON> 24
0
0
<OTHER-SE> (412,655)
<TOTAL-LIABILITY-AND-EQUITY> 224,956
<SALES> 65,208
<TOTAL-REVENUES> 65,208
<CGS> 25,884
<TOTAL-COSTS> 25,884
<OTHER-EXPENSES> 51,611
<LOSS-PROVISION> 126
<INTEREST-EXPENSE> 26,919
<INCOME-PRETAX> (39,193)
<INCOME-TAX> (464)
<INCOME-CONTINUING> (38,729)
<DISCONTINUED> 0
<EXTRAORDINARY> (915)
<CHANGES> 0
<NET-INCOME> (39,644)
<EPS-PRIMARY> (1.65)
<EPS-DILUTED> (1.65)
</TABLE>
