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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: December 20, 1996
CHILDREN'S BROADCASTING CORPORATION
(Exact Name of Registrant as Specified in Charter)
Minnesota 0-21534 41-1663712
(State or Other Juris- (Commission File No.)(IRS Employer Identification No.)
diction of Incorporation)
724 First Street North, Minneapolis, Minnesota 55401
(Address of principal executive offices, including zip code)
(612) 338-3300
(Registrant's telephone number, including area code)
<PAGE>
ITEM 5. OTHER EVENTS.
The Company entered into an agreement (the "Credit Agreement") with
Foothill Capital Corporation ("Foothill") to address the Company's working
capital requirements through the creation of three credit facilities (the
"Facilities") on November 25, 1996. The Credit Agreement provides the
Company with working capital through (a) a $11,500,000 senior secured term
loan (the "Term Loan") collateralized by the assets of the Company, payable
over four years, (b) a $1,000,000 senior secured reducing/revolving line of
credit (the "Revolving Loan") secured by the Company's accounts receivable,
and (c) a $4,000,000 acquisition facility (the "Acquisition Loan") secured by
future assets acquired by the Company. The Facilities mature on November 26,
2000. The Company's indebtedness under the Facilities is secured by a first
priority lien on substantially all the assets of the Company and its
subsidiaries, by a pledge of its subsidiaries' stock and by a guarantee of
its subsidiaries. Additionally, the Company granted Foothill a warrant to
purchase 50,000 shares of the Company's Common Stock. The Company was
required to pay various service and commitment fees as are standard within
the industry. Approximately $3,600,000 of the loan proceeds were held back
by Foothill pending performance by the Company of certain post-closing
conditions.
Funds available from the Term Loan may be used for working capital needs
and acquisitions, including the purchase of the radio broadcast license and
certain other assets of WAUR-AM in the Chicago market. The Revolving Loan
may be used for working capital needs and for acquisitions. Advances are not
to exceed 80% of eligible accounts receivable less reserves determined by
Foothill as determined by material adverse changes. The Term Loan is to be
repaid monthly in 42 installments of principal in the amount of 1/54 of the
term loan amount beginning in month seven of the Credit Agreement. The
Acquisition Loan is to be repaid monthly based upon a five-year amortization
schedule, commencing on the first month following funding. Interest rates
under the Facilities are payable at the prime rate plus 2.75%.
The Credit Agreement contains a number of financial covenants which,
among other things, require the Company to maintain specified financial
ratios and impose certain limitations on the Company with respect to the
amount of funding available for each acquisition under the Acquisition Loan.
The Credit Agreement contains positive covenants which, among other things,
require the Company to (i) provide Foothill with various collateral reports,
including certain reports on a daily basis; (ii) provide Foothill with
periodic financial information, including certain information on a per
broadcasting system basis; (iii) maintain several varieties of insurance; and
(iv) engage in certain subsidiary restructuring in connection with
acquisitions permitted under the Credit Agreement. The Credit Agreement
contains negative covenants which, among other things, prohibit the Company
from (i) becoming liable to indebtedness or liens, beyond those contemplated
by the Credit Agreement; (ii) entering into any fundamental change
transaction; (iii) making any change in the principal nature of its business;
(iv) causing, permitting, or suffering, directly or indirectly, any change of
control; (v) making any distribution or declaring or paying any dividends;
(vi) making any investments, other than those permitted under the
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Credit Agreement; (vii) entering into or permitting to exist any material
transaction with an affiliate; and (viii) cancelling or terminating any of
its communications franchise agreements.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(c) Exhibits
Exhibit 99 Loan and Security Agreement by and between
Children's Broadcasting Corporation and Foothill
Capital Corporation, dated November 25, 1996
<PAGE>
. SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: December 20, 1996 CHILDREN'S BROADCASTING CORPORATION
By: /s/ James G. Gilbertson
--------------------------------
James G. Gilbertson
Chief Operating Officer
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EXHIBIT 99
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- -------------------------------------------------------------------------------
[Logo]
LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
CHILDREN'S BROADCASTING CORPORATION
AND
FOOTHILL CAPITAL CORPORATION
DATED AS OF NOVEMBER 25, 1996
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- -------------------------------------------------------------------------------
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TABLE OF CONTENTS
PAGE(S)
1. DEFINITIONS AND CONSTRUCTION........................................ 1
1.1 Definitions.................................................... 1
1.2 Accounting Terms............................................... 27
1.3 Code........................................................... 27
1.4 Construction................................................... 27
1.5 Schedules and Exhibits......................................... 28
2. LOAN AND TERMS OF PAYMENT........................................... 28
2.1 Revolving Advances............................................. 28
2.2 Term Loan...................................................... 28
2.3 Appraisals; Mandatory Prepayments of the Term Loan............. 29
2.4 Acquisition Loans.............................................. 30
2.5 Overadvances................................................... 30
2.6 Interest: Rates, Payments, and Calculations................... 31
2.7 Collection of Accounts......................................... 32
2.8 Crediting Payments; Application of Collections................. 32
2.9 Designated Account............................................. 33
2.10 Maintenance of Loan Account; Statements of Obligations......... 33
2.11 Fees........................................................... 33
3. CONDITIONS; TERM OF
AGREEMENT........................................................... 34
3.1 Conditions Precedent to the Initial Advance, the Term Loan, and
the Initial Acquisition Loan................................... 34
3.2 Conditions Precedent to all Advances, the Term Loan, and all
Acquisition Loans.............................................. 38
3.3 Condition Subsequent........................................... 39
3.4 Term........................................................... 40
3.5 Effect of Termination.......................................... 40
3.6 Early Termination by Borrower.................................. 40
3.7 Termination Upon Event of Default.............................. 40
4. CREATION OF SECURITY
INTEREST............................................................ 41
4.1 Grant of Security Interest..................................... 41
4.2 Negotiable Collateral.......................................... 41
4.3 Collection of Accounts, General Intangibles, and Negotiable
Collateral..................................................... 41
4.4 Delivery of Additional Documentation Required.................. 42
4.5 Power of Attorney.............................................. 42
4.6 Right to Inspect............................................... 43
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5. REPRESENTATIONS AND
WARRANTIES.......................................................... 43
5.1 No Encumbrances................................................ 44
5.2 Eligible Accounts.............................................. 44
5.3 Licenses and Permits........................................... 44
5.4 Equipment...................................................... 44
5.5 Location of Inventory and Equipment............................ 44
5.6 [intentionally omitted]........................................ 45
5.7 Location of Chief Executive Office; FEIN....................... 45
5.8 Due Organization and Qualification; Subsidiaries............... 45
5.9 Due Authorization; No Conflict................................. 46
5.10 Litigation..................................................... 47
5.11 No Material Adverse Change..................................... 48
5.12 Solvency....................................................... 48
5.13 Employee Benefits.............................................. 48
5.14 Environmental Condition........................................ 48
5.15 Key Leases; Tower Leases....................................... 49
5.16 LPMA; Network Affiliates....................................... 49
5.17 No Default In Communication Franchise Agreements............... 49
5.18 Governmental Authority......................................... 49
6. AFFIRMATIVE COVENANTS............................................... 50
6.1 Accounting System.............................................. 50
6.2 Collateral Reporting........................................... 50
6.3 Financial Statements, Reports, Certificates.................... 51
6.4 Tax Returns.................................................... 53
6.5 Guarantor Reports.............................................. 53
6.6 Returns........................................................ 53
6.7 Title to Equipment............................................. 53
6.8 Maintenance of Equipment....................................... 53
6.9 Taxes.......................................................... 53
6.10 Insurance...................................................... 54
6.11 No Setoffs or Counterclaims.................................... 56
6.12 Location of Inventory and Equipment............................ 56
6.13 Compliance with Laws........................................... 56
6.14 Employee Benefits.............................................. 56
6.15 Leases......................................................... 57
6.16 Government Authorization....................................... 57
6.17 Off-the-Air Reports............................................ 58
6.18 Notices........................................................ 58
6.19 Permitted Acquisitions; Permitted Unrestricted Subsidiary
Acquisitions................................................... 58
6.20 License Renewals............................................... 58
7. NEGATIVE
COVENANTS........................................................... 59
7.1 Indebtedness................................................... 59
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7.2 Liens......................................................... 60
7.3 Restrictions on Fundamental Changes........................... 60
7.4 Disposal of Assets............................................ 60
7.5 Change Name................................................... 60
7.6 Guarantee..................................................... 60
7.7 Nature of Business............................................ 61
7.8 Prepayments and Amendments.................................... 61
7.9 Change of Control............................................. 61
7.10 Consignments.................................................. 61
7.11 Distributions................................................. 61
7.12 Accounting Methods............................................ 61
7.13 Investments................................................... 62
7.14 Transactions with Affiliates.................................. 62
7.15 Suspension.................................................... 62
7.16 Communication Franchise Agreements............................ 62
7.17 Use of Proceeds............................................... 63
7.18 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees........................................ 63
7.19 No Prohibited Transactions Under ERISA........................ 63
7.20 Financial Covenants........................................... 64
7.21 Capital Expenditures.......................................... 66
8. EVENTS OF DEFAULT.................................................. 66
9. FOOTHILL'S RIGHTS AND REMEDIES..................................... 69
9.1 Rights and Remedies........................................... 69
9.2 Remedies Cumulative........................................... 72
10. TAXES AND EXPENSES................................................. 72
11. WAIVERS; INDEMNIFICATION........................................... 73
11.1 Demand; Protest; etc.......................................... 73
11.2 Foothill's Liability for Collateral........................... 73
11.3 Indemnification............................................... 73
12. NOTICES............................................................ 74
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER......................... 75
14. DESTRUCTION OF OBLIGORS' DOCUMENTS................................. 76
15. GENERAL PROVISIONS................................................. 76
15.1 Effectiveness................................................. 76
15.2 Successors and Assigns........................................ 76
15.3 Section Headings.............................................. 77
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15.4 Interpretation................................................ 77
15.5 Severability of Provisions.................................... 77
15.6 Amendments in Writing......................................... 77
15.7 Counterparts; Telefacsimile Execution......................... 77
15.8 Revival and Reinstatement of Obligations...................... 77
15.9 Integration................................................... 78
SCHEDULES AND EXHIBITS
----------------------
Schedule P-1 Permitted Liens
Schedule R-1 Guarantor Real Property Collateral
Schedule 5.3 Licenses and Permits and Renewals thereof
Schedule 5.7 FEINs
Schedule 5.8 Subsidiaries and Capital Stock thereof
Schedule 5.10 Litigation
Schedule 5.13 ERISA Benefit Plans
Schedule 5.14 Environmental Condition
Schedule 5.15(a) Key Leases
Schedule 5.15(b) Tower Leases
Schedule 5.16(a) LPMAs
schedule 5.16(b) Network Affiliates
Schedule 6.12 Location of Inventory and Equipment
Schedule 7.1 Permitted Indebtedness
Schedule 7.14 Permitted Transactions with Affiliates
Exhibit A-1 Form of Borrower's Affiliation Agreement
Exhibit C-1 Form of Compliance Certificate
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (THIS "AGREEMENT"), is entered into as of
November 25, 1996, 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 CHILDREN'S
BROADCASTING CORPORATION, a Minnesota corporation ("Borrower"), with its chief
executive office located at 724 First Street, Fourth Floor, Minneapolis,
Minnesota 55401.
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:
"ABC PARTIES" has the meaning set forth in the definition of
"Eligible Accounts."
"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 an
Obligor arising out of the sale or lease of goods or the rendition of services
by an Obligor, irrespective of whether earned by performance, and any and all
credit insurance, guaranties, or security therefor.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person existing
at the time such Person becomes an Unrestricted Subsidiary or is assumed in
connection with the acquisition of assets or properties from such Person, and
not incurred by such Person in connection with, or in anticipation of, such
acquisition or such Person becoming an Unrestricted Subsidiary.
"ACQUIRED SYSTEM" has the meaning set forth in SECTION 6.19.
"ACQUISITION" means any purchase or other acquisition by the
Borrower of the assets or stock of any other Person, other than the purchase of
inventory or equipment in the ordinary course of business.
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"ACQUISITION LOAN COMMITMENT" has the meaning set forth in
SECTION 2.4.
"ACQUISITION LOAN" has the meaning set forth in SECTION 2.4.
"ADVANCES" has the meaning set forth in SECTION 2.1(a).
"ADVERTISING AGENCY ACCOUNT DEBTOR" means any Account Debtor that
is an advertising agency.
"AFFILIATE" means, as applied to any Person, any other Person who
directly or indirectly controls, is controlled by, is under common control with
or is a director or officer of such Person. For purposes of this definition,
"control" means the possession, directly or indirectly, of the power to vote 5%
or more of the securities having ordinary voting power for the election of
directors or the direct or indirect power to direct the management and policies
of a Person.
"AFFILIATION AGREEMENT" means an Affiliation Agreement between
Borrower and a Network Affiliate, substantially in the form of EXHIBIT A-1.
"AGREEMENT" has the meaning set forth in the preamble hereto.
"ALTERNATIVE LIQUIDATION VALUE" means, in respect of any asset,
the net liquidation value of such asset as determined pursuant to a Permitted
Liquidation Value Dispute Resolution. Any determination of the net liquidation
value of such asset that is not made in strict compliance with each of the
procedures set forth in the definition of "Permitted Liquidation Value Dispute
Resolution" shall not constitute an Alternative Liquidation Value.
"AUTHORIZED PERSON" means any officer or other employee of
Borrower.
"AVERAGE UNUSED PORTION OF MAXIMUM REVOLVING AMOUNT" means, as of
any date of determination, (a) the Maximum Revolving Amount, LESS (b) the
average Daily Balance of Advances that were outstanding during the immediately
preceding month.
"BANKRUPTCY CODE" means the United States Bankruptcy Code (11
U.S.C. Section 101 ET SEQ.), as amended, and any successor statute.
"BENEFIT PLAN" means a "defined benefit plan" (as defined in
Section 3(35) of ERISA) for which Borrower, any Subsidiary of Borrower, or any
2
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ERISA Affiliate has been an "employer" (as defined in Section 3(5) of ERISA)
within the past six years.
"BIA" means Broadcast Investment Advisors.
"BOOKS" means all of the Obligors' books and records including:
ledgers; records indicating, summarizing, or evidencing the Obligors' properties
or assets (including the Collateral) or liabilities; all information relating to
the Obligors' business operations or financial condition; and all computer
programs, disk or tape files, printouts, runs, or other computer prepared
information.
"BORROWER" has the meaning set forth in the preamble to this
Agreement.
"BORROWER COLLATERAL" means all right, title, or interest with
respect of Borrower with respect to the following:
(a) the Accounts,
(b) the Books,
(c) the Equipment,
(d) the General Intangibles,
(e) the Inventory,
(f) the Negotiable Collateral,
(g) the Real Property Collateral,
(h) any money, or other assets of one or more of Borrower that
now or hereafter come into the possession, custody, or control of Foothill, and
(i) 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, 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.
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"BORROWER PERSONAL PROPERTY COLLATERAL" means all Borrower
Collateral other than the Borrower Real Property Collateral.
"BORROWER REAL PROPERTY COLLATERAL" means any Real Property now
owned or hereafter acquired by Borrower.
"BORROWING BASE" has the meaning set forth in SECTION 2.1(a).
"BROADCAST SYSTEM" means all of the properties and operating
rights constituting a complete, fully integrated system for transmitting radio
signals from a transmitter licensed by the FCC, together with any sub-system
which is ancillary to any system referred to above.
"BUSINESS DAY" means any day that is not a Saturday, Sunday, or
other day on which national banks are authorized or required to close.
"CERTIFICATE OF DESIGNATION" means Borrower's Certificate of
Designation of Preferences and Rights of Convertible Preferred Stock Series
1993-A.
"CHANGE OF CONTROL" shall be deemed to have occurred at such time
as (a) Borrower shall cease to own and control, beneficially, directly, and of
record, all of the issued and outstanding capital stock of each of the
Guarantors, or (b) 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 10% of the total voting power of all
classes of stock then outstanding of Borrower entitled to vote in the election
of directors.
"CLOSING DATE" means the date of the first to occur of the making
of the initial Advance, the initial funding of the Term Loan, or the making of
the initial Acquisition Loan.
"CODE" means the California Uniform Commercial Code.
"COLLATERAL" means the Borrower Collateral and the Guarantor
Collateral.
"COLLATERAL ACCESS AGREEMENT" means a landlord waiver, mortgagee
waiver, bailee letter, or acknowledgement agreement of any warehouseman,
processor, lessor, consignee, or other Person in possession of, having a Lien
upon, or having rights or interests in the Equipment or Inventory, in each case,
in form and substance satisfactory to Foothill.
4
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"COLLATERAL ASSIGNMENTS OF KEY LEASES" means one or more
collateral assignments, mortgages, or deeds of trust, in form and substance
reasonably satisfactory to Foothill, between one or more of the Obligors
(including Borrower) and Foothill respecting the hypothecation of such Obligor's
rights under the Key Leases.
"COLLATERAL ASSIGNMENTS OF TOWER LEASES" means one or more
collateral assignments, mortgages, or deeds of trust, in form and substance
reasonably satisfactory to Foothill, between one of the Obligors and Foothill
respecting the hypothecation of such Obligor's rights under the Tower Leases.
"COLLECTIONS" means all cash, checks, notes, instruments, and
other items of payment (including, insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds).
"COMMUNICATIONS FRANCHISE" means a franchise, license, right,
permit, authorization, consent, or other instrument granted by the United States
(including FCC Licenses), or any state, city, town, county, or other
municipality or other political subdivision thereof, whether pursuant to or in
any franchise, ordinance, license or other agreement or otherwise, pursuant to
which a Person has, or is given, the right to construct, maintain or operate a
Communications System, or any part thereof.
"COMMUNICATION FRANCHISE AGREEMENTS" means all of the Obligors'
agreements related to any Communications Franchise or Communication System.
"COMMUNICATIONS SYSTEM" means any Broadcast System or any
business or activity (including the ownership or leasing of property) directly
relating to the ownership or operation thereof other than the development or
syndication of programming for others.
"COMPLIANCE CERTIFICATE" means a certificate substantially in
the form of EXHIBIT C-1 and delivered by the chief accounting officer of
Borrower to Foothill.
"CONCENTRATION ACCOUNT" means account number 6355036114 of
Borrower maintained with the Concentration Account Bank.
"CONCENTRATION ACCOUNT AGREEMENT" means an agreement in form and
substance reasonably satisfactory to Foothill, among Borrower, Foothill, and the
Concentration Account Bank.
5
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"CONCENTRATION ACCOUNT BANK" means Norwest Bank Minnesota,
National Association.
"CONSOLIDATED CURRENT ASSETS" means, as of any date of
determination, the aggregate amount of all current assets of Borrower that
would, in accordance with GAAP, be classified on a balance sheet as current
assets.
"CONSOLIDATED CURRENT LIABILITIES" means, as of any date of
determination, the aggregate amount of all current liabilities of Borrower that
would, in accordance with GAAP, be classified on a balance sheet as current
liabilities. For purposes of this definition, all Obligations outstanding under
this Agreement shall be deemed to be current liabilities without regard to
whether they would be deemed to be so under GAAP.
"CONTROL AGREEMENTS" means the agreements with financial
intermediaries or depositaries required under SECTION 3.1(c)(12) hereof.
"COPYRIGHT SECURITY AGREEMENT" means a Copyright Security
Agreement executed and delivered by Borrower, the form and substance of which is
reasonably satisfactory to Foothill.
"CRLA" means Children's Radio of Los Angeles, Inc., a Minnesota
corporation.
"CRNY" means Children's Radio of New York, Inc., a New Jersey
corporation.
"DAHL" means Mr. Christopher Dahl.
"DAILY BALANCE" means the amount of an Obligation owed at the end
of a given day.
"DEEMS ITSELF INSECURE" means that the Person deems itself
insecure in accordance with the provisions of Section 1208 of the Code.
"DEFAULT" means an event, condition, or default that, with the
giving of notice, the passage of time, or both, would be an Event of Default.
"DESIGNATED ACCOUNT" means account number 180192002426 of
Borrower maintained with Borrower's Designated Account Bank, or such other
deposit account of Borrower (located within the United States) which has been
designated, in writing and from time to time, by Borrower to Foothill.
6
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"DESIGNATED ACCOUNT BANK" means First Bank System of Minnesota,
whose office is located at 601 Second Avenue South, Minneapolis, Minnesota
55402, and whose ABA number is 091-000-022.
"DILUTION" means, in each case based upon the experience of the
immediately prior 3 months, the result of dividing the Dollar amount of (a) bad
debt write-downs, discounts, advertising, returns, promotions, credits, or other
dilution with respect to the Accounts, by (b) the Obligors' Collections
(excluding extraordinary items) plus the Dollar amount of clause (a).
"DISBURSEMENT LETTER" means an instructional letter executed and
delivered by Borrower to Foothill regarding the extensions of credit to be made
on the Closing Date, the form and substance of which shall be satisfactory to
Foothill.
"DOLLARS OR $" means United States dollars.
"EARLY TERMINATION PREMIUM" has the meaning set forth in SECTION
3.6.
"ELIGIBLE ACCOUNTS" means those Accounts created by an Obligor
(net of reserves for offsets in respect of barter transactions) in the ordinary
course of business, that arise out of an Obligor's rendition of services, that
strictly comply with each and all of the representations and warranties
respecting Accounts made to Foothill in the Loan Documents, and that are and at
all times 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 not include the following:
(a) Accounts that the Account Debtor has failed to pay within
120 days of invoice date or Accounts with selling terms of more than 30 days;
(b) (i) Accounts owed by an Account Debtor or its Affiliates
(other than an Advertising Agency Account Debtor or its Affiliates) where 50% or
more of all Accounts owed by that Account Debtor (or its Affiliates) are deemed
ineligible under clause (a) above;
(ii) Accounts, that were created on behalf of a particular
client of an Advertising Agency Account Debtor, owed by an Advertising Agency
Account Debtors where 50% or more of the Accounts owed by that Advertising
Agency Account Debtor (or its Affiliates) related to that particular client are
deemed ineligible under clause (a) above or where 50% or more of all Accounts
owed by that Advertising Agency Account Debtor (or its Affiliates) are deemed
ineligible under clause (a) above;
7
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(c) Accounts owed by an Advertising Agency Account Debtor or its
Affiliates to the extent of advertising commissions owed thereto;
(d) Accounts owed by an Account Debtor or its Affiliates to the
extent of finance charges in respect thereof;
(e) Accounts owed by the American Broadcasting Corporation (ABC)
or its Affiliates (including The Walt Disney Company, Capital Cities/ABC Inc.,
ABC Holding Company, Inc., and ABC Radio Network, Inc.) (collectively, the "ABC
Parties");
(f) Accounts with respect to which the Account Debtor is an
employee, Affiliate, or agent of an Obligor;
(g) Accounts with respect to which the payment by the Account
Debtor may be conditional;
(h) Accounts that are not payable in Dollars or with respect to
which the Account Debtor: (i) does not maintain its chief executive office in
the United States, or (ii) is not organized under the laws of the United States
or any State thereof, or (iii) is the government of any foreign country or
sovereign state, or of any state, province, municipality, or other political
subdivision thereof, or of any department, agency, public corporation, or other
instrumentality thereof, unless (y) the Account is supported by an irrevocable
letter of credit satisfactory to Foothill (as to form, substance, and issuer or
domestic confirming bank) that has been delivered to Foothill and is directly
drawable by Foothill, or (z) the Account is covered by credit insurance in form
and amount, and by an insurer, satisfactory to Foothill;
(i) Accounts with respect to which the Account Debtor is either
(i) the United States or any department, agency, or instrumentality of the
United States (exclusive, however, of Accounts with respect to which the
applicable Obligor has complied, to the satisfaction of Foothill, with the
Assignment of Claims Act, 31 U.S.C. Section 3727), or (ii) any State of the
United States (exclusive, however, of Accounts owed by any State that does not
have a statutory counterpart to the Assignment of Claims Act);
(j) except as otherwise provided in clause (k) of this
definition, Accounts with respect to which the Account Debtor is a creditor of
an Obligor, has or has asserted a right of setoff, has disputed its liability,
or has made any claim with respect to the Account;
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(k) Accounts with respect to an Account Debtor whose total
obligations owing to all Obligors exceed 10% of all Eligible Accounts, to the
extent of the obligations owing by such Account Debtor in excess of such
percentage;
(l) Accounts with respect to which the Account Debtor is subject
to any Insolvency Proceeding, or becomes insolvent, or goes out of business;
(m) Accounts the collection of which Foothill, in its reasonable
credit judgment, believes to be doubtful by reason of the Account Debtor's
financial condition;
(n) Accounts with respect to which the services giving rise to
such Account have not been performed and accepted by the Account Debtor, or the
Account otherwise does not represent a final sale;
(o) Accounts with respect to which the Account Debtor is located
in the states of New Jersey, Minnesota, Indiana, or West Virginia (or any other
state that requires a creditor to file a Business Activity Report or similar
document in order to bring suit or otherwise enforce its remedies against such
Account Debtor in the courts or through any judicial process of such state),
unless the applicable Obligor has qualified to do business in New Jersey,
Minnesota, Indiana, West Virginia, or such other states, or has filed a Notice
of Business Activities Report with the applicable division of taxation, the
department of revenue, or with such other state offices, as appropriate, for the
then-current year, or is exempt from such filing requirement; and
(p) Accounts that represent progress payments or other advance
billings that are due prior to the completion of performance by an Obligor of
the subject contract for services.
"EQUIPMENT" means all of the Obligors' present and hereafter
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools, parts, goods
(other than consumer goods, farm products, or Inventory), wherever located,
including, (a) any assets acquired by one or more of the Obligors with the
proceeds of a Acquisition Loan, (b) any interest of any of the Obligors in any
of the foregoing, and (c) all attachments, accessories, accessions,
replacements, substitutions, additions, and improvements to any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, 29 U.S.C. Sections 1000 et seq., amendments thereto, successor statutes,
and regulations or guidance promulgated thereunder.
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"ERISA AFFILIATE" means (a) any corporation subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any party subject to ERISA that is a party to an arrangement
with Borrower and whose employees are aggregated with the employees of Borrower
under IRC Section 414(o).
"ERISA EVENT" means (a) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan, (b) the withdrawal of Borrower, any of its
Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year in which
it was a "substantial employer" (as defined in Section 4001(a)(2) of ERISA),
(c) the providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041(c) of ERISA), (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan,
(e) any event or condition (i) that provides a basis under Section 4042(a)(1),
(2), or (3) of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the
partial or complete withdrawal within the meaning of Sections 4203 and 4205 of
ERISA, of Borrower, any of its Subsidiaries or ERISA Affiliates from a
Multiemployer Plan, or (g) providing any security to any Plan under Section
401(a)(29) of the IRC by Borrower or its Subsidiaries or any of their ERISA
Affiliates.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 8.
"EXISTING LENDER" means Bank of Denver.
"EXISTING LENDER PAY-OFF LETTER" means a letter, in form and
substance reasonably satisfactory to Foothill, from Existing Lender respecting
the amount necessary to repay in full all of the obligations of Group owing to
Existing Lender (other than a mortgage financing of approximately $225,000) and
obtain a termination or release of all of the Liens existing in favor of
Existing Lender (other than Liens with respect to the Real Property that secures
the mortgage financing) on the properties or assets of the Obligors.
"FCC" means the United States Federal Communications Commission
(or any successor agency, commission, bureau, department, or other political
subdivision of the United States).
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"FCC LICENSE" means any license, permit, certificate of
compliance, franchise, approval, or authorization, rented or issued by the FCC
for the operation of a Broadcast System.
"FEIN" means Federal Employer Identification Number.
"FOOTHILL" has the meaning set forth in the preamble to this
Agreement.
"FOOTHILL ACCOUNT" has the meaning set forth in SECTION 2.7.
"FOOTHILL EXPENSES" means all: actual costs or expenses
(including taxes, and insurance premiums) required to be paid by any Obligor
under any of the Loan Documents that are paid or incurred by Foothill;
reasonable fees or charges paid or incurred by Foothill in connection with
Foothill's transactions with any Obligor, including, fees or charges for
photocopying, notarization, couriers and messengers, telecommunication, public
record searches (including tax lien, litigation, and UCC searches and including
searches with the patent and trademark office, the copyright office, or the
department of motor vehicles), filing, recording, publication, appraisal
(including periodic collateral appraisals), real estate surveys, real estate
title policies and endorsements, and environmental audits; actual costs and
expenses incurred by Foothill in the disbursement of funds to Borrower (by wire
transfer or otherwise); actual charges paid or incurred by Foothill resulting
from the dishonor of checks; reasonable 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; reasonable
costs and expenses paid or incurred by Foothill in examining the Books;
reasonable costs and expenses of third party claims or any other suit paid or
incurred by Foothill in enforcing or defending the Loan Documents or in
connection with the transactions contemplated by the Loan Documents or
Foothill's relationship with Borrower or any guarantor; and Foothill's
reasonable attorneys fees and expenses incurred in advising, structuring,
drafting, reviewing, administering, amending, terminating, enforcing (including
attorneys fees and expenses incurred in connection with a "workout," a
"restructuring," or an Insolvency Proceeding concerning any Obligor), defending,
or concerning the Loan Documents, irrespective of whether suit is brought.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"GENERAL INTANGIBLES" means all of the Obligors' present and
future general intangibles and other personal property (including contract
rights, rights arising
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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 (including all FCC Licenses), Communications
Franchise Agreements, infringement claims, computer programs, information
contained on computer disks or tapes, literature, reports, catalogs, deposit
accounts, insurance premium rebates, tax refunds, and tax refund claims), other
than goods, Accounts, and Negotiable Collateral.
"GOVERNING DOCUMENTS" means the certificate or articles of
incorporation, by-laws, or other organizational or governing documents of any
Person.
"GROUP" means Children's Radio Group, Inc., a Minnesota
corporation.
"GUARANTOR COLLATERAL" means all right, title, or interest of any
Guarantor with respect to the following:
(a) the Accounts,
(b) the Books,
(c) the Equipment,
(d) the General Intangibles,
(e) the Inventory,
(f) the Negotiable Collateral,
(g) the Real Property Collateral,
(h) any money, or other assets of one or more of the Guarantors
that now or hereafter come into the possession, custody, or control of Foothill,
and
(i) the proceeds and products, whether tangible or intangible,
of any of the foregoing, including proceeds of insurance covering any or all of
the Guarantor Collateral, and any and all Accounts, 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.
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"GUARANTOR PERSONAL PROPERTY COLLATERAL" means all Guarantor
Collateral other than the Guarantor Real Property Collateral.
"GUARANTOR REAL PROPERTY COLLATERAL" means the parcels of real
property and the related improvements thereto identified on SCHEDULE R-1 and any
Real Property hereafter acquired by one or more of the Guarantors (including the
Real Property that is to be acquired by CRLA and that is referred to as the
"Mira Loma site."
"GUARANTOR SECURITY AGREEMENT" means that certain Security
Agreement, dated as of even date herewith, made by the Guarantors in favor of
Foothill, pursuant to which they grant to Foothill a security interest in all
the Guarantor Personal Property Collateral to secure their present and future
obligations to Foothill pursuant to the Guaranty.
"GUARANTOR STOCK PLEDGE AGREEMENT" means that certain Stock
Pledge Agreement made by the Guarantors (other than License Subs) in favor of
Foothill, pursuant to which they grant to Foothill a security interest in, among
other things, all the capital stock of the License Subs in order to secure their
present and future obligations to Foothill pursuant to the Guaranty.
"GUARANTORS" means any one or more of CRLA, CRNY, Group, and each
other Subsidiary of Borrower formed or acquired from time to time.
"GUARANTY" means that certain Guaranty, dated as of even date
herewith, made by each of the Guarantors in favor of Foothill, pursuant to which
they guaranty the payment and performance of all present and future Obligations.
"HAZARDOUS MATERIALS" means (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 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 that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
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"HMSPA" means, collectively, Hessian McKasy & Soderberg, P.A.,
for itself and its co-counsel representing Borrower in the litigation between
Borrower and one or more of the ABC Parties described in SCHEDULE 5.10.
"INDEBTEDNESS" means: (a) all obligations of one or more of the
Obligors for borrowed money, (b) all obligations of one or more of the Obligors
evidenced by bonds, debentures, notes, or other similar instruments and all
reimbursement or other obligations of one or more of the Obligors in respect of
letters of credit, bankers acceptances, interest rate swaps, or other financial
products, (c) all obligations of one or more of the Obligors under capital
leases, (d) all obligations or liabilities of others secured by a Lien on any
property or asset of one or more of the Obligors, irrespective of whether such
obligation or liability is assumed, (e) any obligation of one or more of the
Obligors guaranteeing or intended to guarantee (whether guaranteed, endorsed,
co-made, discounted, or sold with recourse to one or more of the Obligors) any
indebtedness, lease, dividend, letter of credit, or other obligation of any
other Person, and (f) any Prohibited Preferred Stock.
"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, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
"INVENTORY" means all present and future inventory in which one
or more of the Obligors has any interest, including goods held for sale or lease
or to be furnished under a contract of service and all of the Obligors' present
and future raw materials, work in process, finished goods, and packing and
shipping materials, wherever located.
"INVESTMENT PROPERTY" means "investment property" as that term is
defined in Section 9-115 of the Uniform Commercial Code and as defined in
California Senate Bill 1591 which was approved by the Governor on September 14,
1996 and will be effective on January 1, 1997.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"KCAZ LPMA" means the LPMA between Borrower and Group, on the one
hand, and KBEA/KXTR Broadcasting Companies, on the other hand, in respect of the
KCAZ-AM Communications System.
"KEY LEASES" means (a) that certain lease between Borrower and
5501 Building Co., a partnership, relative to the lease by Borrower of its
broadcasting
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studio located in Saint Louis Park, Minnesota, (b) that certain lease between
Borrower and 724 Associates, a partnership, relative to the lease by Borrower of
its administrative offices located in Saint Louis Park, Minnesota, and (c) any
and all contracts, licenses, leases, or other agreements relative to any
Obligor's use or operation of satellite dishes, satellite up-link systems,
satellite down-link systems, or other broadcasting facilities.
"KPLS SELLERS" means any one or more of Daniel Villanueva, the D.
Villanueva Family Trust, James Villanueva, the J. Villanueva Family Trust, and
the Niebla Family Trust.
"KPLS SELLERS' COLLATERAL" means the assets of Borrower and CRLA
in which, as of the Closing Date, the KPLS Sellers have a Lien to secure the
KPLS Sellers Indebtedness of CRLA.
"KPLS SELLERS' INDEBTEDNESS" means (a) the $315,489.72 of
Indebtedness owed by CRLA to the KPLS Sellers pursuant to the Non-Competition
Agreement, and (b) the option to purchase CRLA granted by Borrower and CRLA to
the KPLS Sellers pursuant to the Option Agreement, which option is exercisable
if, among other things, Borrower fails to redeem, in the approximate aggregate
amount of $2,902,130, all of the 1993-A Preferred Stock at the time set forth in
and in accordance with the Certificate of Designation.
"KPLS SELLERS' PAY-OFF LETTER" means a letter, in form and
substance reasonably satisfactory to Foothill, from the KPLS Sellers respecting
the amount necessary to repay in full all of the KPLS Sellers' Indebtedness and
obtain a termination or release of all of the Liens existing in favor of the
KPLS Sellers on the KPLS Sellers' Collateral.
"LEGAL FEE STOCK" means the 200,000 shares of common stock of
Borrower issued by Borrower to HSMPA as a retainer for legal fees incurred or to
be incurred by HMSPA in connection with the litigation between Borrower and one
or more of the ABC Parties described in SCHEDULE 5.10.
"LICENSE SUB" means a separate, special purpose Subsidiary formed
and solely owned by an Obligor owning and operating a Broadcast System for the
purpose of holding, as that Subsidiary's sole asset, the FCC License(s) in
respect of such Broadcast System.
"LIEN" means any interest in property securing an obligation owed
to, or a claim by, any Person other than the owner of the property, whether such
interest shall be based on the common law, statute, or contract, whether such
interest shall be recorded or perfected, and whether such interest shall be
contingent upon the
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occurrence of some future event or events or the existence of some future
circumstance or circumstances, including the lien or security interest arising
from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment,
deposit arrangement, security agreement, adverse claim or charge, conditional
sale or trust receipt, or from a lease, consignment, or bailment for security
purposes and also including reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Real Property.
"LIQUIDATION VALUE" means, in respect of any asset, (a) the net
liquidation value of such asset as determined by BIA or a similarly qualified
appraisal company selected by Foothill, or (b) if applicable, the Alternative
Liquidation Value of such asset; it being understood and agreed that, in the
event that Borrower and Foothill fail to agree in good faith on the identity of
the Acceptable Appraiser (as defined in the definition of "Permitted Liquidation
Value Dispute Resolution") within the period allowed therefor, the Liquidation
Value of such asset shall be the value set forth in item (a) of this definition.
"LOAN ACCOUNT" has the meaning set forth in SECTION 2.10.
"LOAN DOCUMENTS" means this Agreement, the Disbursement Letter,
the Concentration Account Agreement, the Mortgages, the Collateral Assignments
of Key Leases, the Collateral Assignments of Tower Leases, the Guaranty, the
Guarantor Security Agreement, the Guarantor Stock Pledge Agreement, the Control
Agreements, the Stock Pledge Agreement, the Trademark Security Agreement, (if
and when executed and delivered pursuant hereto) the Copyright Security
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.
"LPMA" means a local programming and marketing agreement between
an Obligor and the owner of a Broadcast System relative to the operation by
Obligor of such Broadcast System.
"MATERIAL ADVERSE CHANGE" means, with respect to any Obligor, (a)
a material adverse change in the business, prospects, operations, results of
operations, assets, liabilities or condition (financial or otherwise) of such
Obligor, (b) the material impairment of such Obligor's ability to perform its
obligations under the Loan Documents to which it is a party or of Foothill to
enforce the Obligations or the "Guarantied Obligations" (as defined in the
Guaranty) or realize upon that Obligor's Collateral, (c) a material adverse
effect on the value of that Obligor's Collateral or the amount that Foothill
would be likely to receive (after giving consideration to delays in payment and
costs of enforcement) in the liquidation of such collateral, or (d) a
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material impairment of the priority of Foothill's Liens with respect to that
Obligor's Collateral.
"MATURITY DATE" has the meaning set forth in SECTION 3.4.
"MAXIMUM AMOUNT" means, as of any date of determination, the sum
of (a) the Maximum Revolving Amount, (b) the then outstanding principal balance
of the Term Loan plus any unadvanced balance of the Term Loan Commitment, and
(c) the then outstanding principal balance of the Acquisition Loans plus the
unadvanced balance of the Acquisition Loan Commitment.
"MAXIMUM REVOLVING AMOUNT" means $1,000,000.
"MCGUINNESS PAY-OFF LETTER" means a letter, in form and substance
reasonably satisfactory to Foothill, from Mr. Joseph McGuinness respecting the
amount necessary to repay in full all of the obligations of Group owing to him
under the consulting agreement referenced in item (a)(i)(y) of SECTION 7.17 and
obtain a termination or release of all of the Liens existing in favor of him on
the properties or assets of the Obligors.
"MORTGAGES" means one or more mortgages, deeds of trust, or deeds
to secure debt, executed by an Obligor in favor of Foothill, the form and
substance of which shall be satisfactory to Foothill, that encumber the Real
Property Collateral and the related improvements thereto.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA) to which Borrower, any of its Subsidiaries, or any
ERISA Affiliate has contributed, or was obligated to contribute, within the past
six years.
"NEGOTIABLE COLLATERAL" means all of the Obligors' present and
future letters of credit, notes, drafts, instruments, Investment Property,
documents, personal property leases (wherein an Obligor is the lessor), chattel
paper, and Books relating to any of the foregoing.
"NET ISSUANCE PROCEEDS" means, in respect of any issuance of
equity securities, cash proceeds received in connection therewith, net of
reasonable out-of-pocket costs and expenses paid or incurred in connection
therewith in favor of any Person not an Affiliate of any Obligor, such costs and
expenses to be consistent with standard investment banking practices for similar
issuances.
"NETWORK AFFILIATE" means a Person (that is not an Affiliate of
any Obligor) to whom Borrower grants, pursuant to an Affiliation Agreement, the
exclusive
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license to broadcast Borrower's programming over the air within the exclusive
broadcast area represented by such Person's radio station signal contour as
identified in such Affiliation Agreement.
"NEWCO" has the meaning set forth within the definition of
"Restructuring Transactions."
"NEW YORK TOWER LEASES" means each of the Tower Leases
(pre-existing and the recently agreed upon lease) relative to the WJDM-AM
Elizabeth, New Jersey (serving the New York City broadcast area) Communications
System.
"1993-A PREFERRED STOCK" means Borrower's Convertible Preferred
Stock Series 1993-A.
"NON-COMPETITION AGREEMENT" means that certain Non-Competition
Agreement, dated August 23, 1994, among Borrower and the KPLS Sellers.
"OBLIGATIONS" means all loans, Advances, debts, principal,
interest (including any interest that, but for the provisions of the Bankruptcy
Code, would have accrued), contingent reimbursement obligations under any
outstanding Letters of Credit, premiums (including Early Termination Premiums),
liabilities (including all amounts charged to Borrower's Loan Account pursuant
hereto), obligations, fees, charges, costs, or Foothill Expenses (including any
fees or expenses that, but for the provisions of the Bankruptcy Code, would have
accrued), 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 any debt, liability, or obligation owing from
Borrower to others that Foothill may have obtained by assignment or otherwise,
and further including all interest not paid when due and all Foothill Expenses
that Borrower is required to pay or reimburse by the Loan Documents, by law, or
otherwise.
"OBLIGORS" means Borrower and the Guarantors, or any of them.
"OPTION AGREEMENT" means that certain Option and Repurchase
Agreement, dated August 23, 1994, among Borrower, CRLA, and the KPLS Sellers.
"ORDINARY COURSE DISPOSITIONS" means the sale, exchange, or other
disposition, free and clear of Foothill's security interest (other than its
security interest in the proceeds of such sale, exchange, or other disposition)
of (a) Inventory in the
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ordinary course of the Obligors' business, and (b) Equipment that is
substantially worn, damaged, or obsolete in the ordinary course of the Obligors'
business.
"OVERADVANCE" has the meaning set forth in SECTION 2.5.
"PARTICIPANT" means any Person to which Foothill has sold a
participation interest in its rights under the Loan Documents.
"PBGC" means the Pension Benefit Guaranty Corporation as defined
in Title IV of ERISA, or any successor thereto.
"PERMITTED ACQUISITION" means an Acquisition of all or
substantially all of the assets or stock of another Person made by Borrower so
long as (a) no Default or Event of Default shall have occurred and be continuing
or would result from the consummation of the proposed Acquisition, (b) the
assets being acquired, or the Person whose capital stock is being acquired, are
useful in or engaged in, as applicable, the business of the Obligors as such
business exists on the Closing Date, (c) Borrower has provided Foothill with
confirmation, supported by detailed calculations, that on a PRO FORMA basis
created by adding the historical consolidated financial statements of Borrower
(including the consolidated financial statements of any other Person or assets
that were the subject of a prior Permitted Acquisition during the relevant
period) to the historical consolidated financial statements of the Person to be
acquired (or the historical financial statements related to the assets to be
acquired) pursuant to the proposed Acquisition, Borrower would have been in
compliance with the financial covenants in SECTION 7.20 hereof for the 12 months
ending as of the fiscal quarter ended immediately prior to the proposed date of
consummation of such proposed Acquisition, (d) Foothill has completed its audit,
appraisal, and standard due diligence with respect to the assets or Person that
is to be the subject of the proposed Acquisition and the results thereof are
reasonably satisfactory to Foothill, (e)(i) in the case of the acquisition of
capital stock of a Person, such Person is acquired directly by Borrower, (ii) in
the case of the acquisition of the assets of a Person, Borrower has formed a new
Station Sub and a new License Sub to acquire such assets, and (iii) in either
such case, Borrower and such new Subsidiaries shall have complied with SECTION
6.19, and (f) in connection with such proposed Acquisition, Borrower may not use
directly or indirectly the proceeds of Advances in connection with the
consummation of such proposed Acquisition and shall provide an officer's
certificate certifying that no such proceeds have been used, directly or
indirectly, to consummate such Acquisition.
"PERMITTED LIENS" means (a) Liens held by Foothill, (b) Liens for
unpaid taxes that either (i) are not yet due and payable or (ii) are the subject
of Permitted Protests, (c) Liens set forth on SCHEDULE P-1, (d) the interests of
lessors under operating leases and purchase money Liens of lessors under capital
leases to the
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extent that the acquisition or lease of the underlying asset is permitted under
SECTION 7.21 and so long as the Lien only attaches to the asset purchased or
acquired and only secures the purchase price of the asset, (e) Liens arising by
operation of law in favor of warehousemen, landlords, carriers, mechanics,
materialmen, laborers, or suppliers, incurred in the ordinary course of business
of the Obligors and not in connection with the borrowing of money, and which
Liens either (i) are for sums not yet due and payable, or (ii) are the subject
of Permitted Protests, (f) Liens arising from deposits made in connection with
obtaining worker's compensation or other unemployment insurance, (g) Liens or
deposits to secure performance of bids, tenders, or leases (to the extent
permitted under this Agreement), incurred in the ordinary course of business of
the Obligors and not in connection with the borrowing of money, (h) Liens
arising by reason of security for surety or appeal bonds in the ordinary course
of business of the Obligors, (i) Liens of or resulting from any judgment or
award that would not have a Material Adverse Effect and as to which the time for
the appeal or petition for rehearing of which has not yet expired, or in respect
of which an Obligor is in good faith prosecuting an appeal or proceeding for a
review, and in respect of which a stay of execution pending such appeal or
proceeding for review has been secured, (j) Liens with respect to the Real
Property Collateral that are exceptions to the commitments for title insurance
issued in connection with the Mortgages, as accepted by Foothill, (k) with
respect to any Real Property that is not part of the Real Property Collateral,
easements, rights of way, zoning and similar covenants and restrictions, and
similar encumbrances that customarily exist on properties of Persons engaged in
similar activities and similarly situated and that in any event do not
materially interfere with or impair the use or operation of the Collateral by
the Obligors or the value of Foothill's Lien thereon or therein, or materially
interfere with the ordinary conduct of the business of the Obligors, (l) Liens
of Existing Lender in and to the Real Property that secures the mortgage
financing provided by Existing Lender to Group, and (m) Liens securing Permitted
Unrestricted Subsidiary Indebtedness so long as the Lien only attaches to the
assets and properties of the relevant Unrestricted Subsidiary.
"PERMITTED LIQUIDATION VALUE DISPUTE RESOLUTION" means, in
respect of any asset, the following process: (a) in the event that Foothill
shall notify Borrower in writing of the Liquidation Value of such asset
determined under an appraisal performed by or on behalf of Foothill (the date
that Foothill so notifies Borrower being the "Foothill Value Notice Date") and
Borrower disputes such Liquidation Value, Borrower shall notify Foothill in
writing of the existence of such dispute within 2 Business Days following the
Foothill Value Notice Date (the date that Borrower so notifies Foothill being
the "Disputed Value Notice Date"); (b) Borrower shall identify in writing to
Foothill another appraisal company acceptable to Foothill and with nationally
recognized experience in respect of the appraisal of radio broadcasting
enterprises (the "Acceptable Appraiser") within 5 Business Days following the
Disputed Value Notice Date (the date that Borrower so identifies to Foothill and
Foothill accepts in writing the Acceptable Appraiser being the "Appraiser
Acceptance
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Date"); and (c) the Acceptable Appraiser shall determine the net liquidation
value of such asset within 2 weeks following the Appraiser Acceptance Date
pursuant to procedures and methods reasonably acceptable to Borrower and
Foothill, which determination shall be binding on Borrower and Foothill.
"PERMITTED NETWORK AFFILIATE INVESTMENTS" means one or more
acquisitions by Borrower of not more than 20% (on a fully diluted basis) of the
issued and outstanding equity Securities of any Network Affiliate in the
ordinary course of Borrower's business and not for speculative purposes;
PROVIDED, HOWEVER, that the aggregate amount of all Permitted Network Affiliate
Investments shall not exceed $1,000,000 at any time outstanding.
"PERMITTED PROTEST" means the right of an Obligor to protest any
Lien other than any such Lien that secures the Obligations, tax (other than
payroll taxes or taxes that are the subject of a United States federal tax
lien), or rental payment, provided that (a) a reserve with respect to such
obligation is established on the books of the applicable Obligor in an amount
that is reasonably satisfactory to Foothill, (b) any such protest is instituted
and diligently prosecuted by such Obligor in good faith, and (c) 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 of Foothill in
and to the Collateral.
"PERMITTED LEGAL FEE STOCK REDEMPTIONS" means redemptions by
Borrower of the Legal Fee Stock in an aggregate amount not to exceed $1,000,000
for the purpose of satisfying the invoiced amount of fees and costs incurred by
HMSPA in connection with the litigation between Borrower and one or more of the
ABC Parties described in SCHEDULE 5.10.
"PERMITTED UNRESTRICTED SUBSIDIARY ACQUISITION" means an
Acquisition made by one of the Unrestricted Subsidiaries so long as (a) no
Default or Event of Default shall have occurred and be continuing or would
result from the consummation of the proposed Acquisition, (b) at least 10 days
prior to the consummation of any proposed Permitted Unrestricted Subsidiary
Acquisition, Borrower shall have provided Foothill with a written description,
in reasonable detail, of the proposed Permitted Unrestricted Subsidiary
Acquisition, (c) Borrower may not use, directly or indirectly, the proceeds of
any Advances or any Acquisition Loan in connection with the consummation of such
proposed Acquisition and shall provide an officer's certificate certifying that
no such proceeds have been used, directly or indirectly, to consummate such
Acquisition in whole or in part, (d) the assets or properties being acquired, or
the Person whose Securities are being acquired, are useful in or engaged in, as
applicable, the operation of one or more Communications Systems, (e) in the case
of the acquisition of Securities of a Person, at or prior to the consummation of
such Acquisition, either (i) such Person is merged with and into an
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existing Unrestricted Subsidiary, with such Unrestricted Subsidiary being the
surviving entity in such merger, or (ii) such Person is designated as a
Unrestricted Subsidiary in a writing sent to Foothill by Borrower, and, at or
prior to the consummation of such Acquisition, Borrower and such new
Subsidiaries shall have complied with SECTION 6.19; PROVIDED, HOWEVER, that if
any such Unrestricted Subsidiary is incurring Permitted Unrestricted Subsidiary
Indebtedness in connection with the consummation of such Acquisition and to the
extent the holder of such Indebtedness requires that such Indebtedness be
secured by a first priority Lien in favor of such holder on all material assets
of such Unrestricted Subsidiary, the holder of such Permitted Unrestricted
Subsidiary Indebtedness shall consent to a second priority Lien in favor of
Foothill with respect to the subject assets until the related Permitted
Unrestricted Subsidiary Indebtedness is repaid, at which time Foothill shall
have a first priority Lien with respect thereto, (f) in the case of the
acquisition of assets or properties of a Person, (i) such assets or properties
are acquired by an existing Station Sub and an existing License Sub that are
Unrestricted Subsidiaries, or (ii) such assets or properties are acquired by a
newly formed Station Sub and a newly formed License Sub that are Unrestricted
Subsidiaries identified in a writing sent to Foothill by Borrower, and, at or
prior to the consummation of such Acquisition, Borrower and such new
Subsidiaries shall have complied with SECTION 6.19; PROVIDED, HOWEVER, that that
if any such Unrestricted Subsidiary is incurring Permitted Unrestricted
Subsidiary Indebtedness in connection with the consummation of such Acquisition
and to the extent the holder of such Indebtedness requires that such
Indebtedness be secured by a first priority Lien in favor of such holder on all
material assets of such Unrestricted Subsidiary, the holder of such Permitted
Unrestricted Subsidiary Indebtedness shall consent to a second priority Lien in
favor of Foothill with respect to the subject assets until the related Permitted
Unrestricted Subsidiary Indebtedness is repaid, at which time Foothill shall
have a first priority Lien with respect thereto.
"PERMITTED UNRESTRICTED SUBSIDIARY INDEBTEDNESS" means
Indebtedness incurred by an Unrestricted Subsidiary (including Acquired
Indebtedness) to Persons other than an Obligor in connection with the
consummation of a Permitted Unrestricted Subsidiary Acquisition, so long as (a)
no Default or Event of Default exists at the time of the incurrence thereof, or
would exist after giving effect thereto, (b) such Indebtedness is on terms and
conditions satisfactory to Foothill, in its reasonable discretion, and (c) such
Indebtedness is in an amount, with respect to each Permitted Unrestricted
Subsidiary Acquisition, not to exceed at any time 70% of the sum of (i) the
purchase price paid in connection with such Permitted Unrestricted Subsidiary
Acquisition, and (ii) the aggregate costs of any renovations made with respect
to the assets or properties acquired in such Permitted Unrestricted Subsidiary
Acquisition, PROVIDED, HOWEVER, that (y) such Indebtedness shall be non-recourse
to any Obligor (other than for any customary carve-outs for environmental and
"bad deed" indemnities by any Unrestricted Subsidiary), but may be recourse to
the applicable Unrestricted Subsidiary (which Unrestricted Subsidiary shall have
no
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material Indebtedness, assets, or properties, other than those acquired in
connection with Permitted Unrestricted Subsidiary Acquisitions), and (z) if
required by the holder of such Indebtedness, such Indebtedness may be secured by
a first priority Lien upon in favor of such holder on all material assets of
such Unrestricted Subsidiary only.
"PERMITTED UNRESTRICTED SUBSIDIARY INVESTMENTS" means, so long as
no Default or Event of Default has occurred and is continuing, loans or capital
contributions by Borrower in or to any of the Unrestricted Subsidiaries in an
amount not to exceed, in the aggregate, an amount equal to: (a) in respect of
the Unrestricted Subsidiaries consisting of one new Station Sub and one new
License Sub to be formed and used in connection with Borrower's Acquisition of
the WAUR-AM 930, Sandwich, Illinois Communications System (serving the Chicago
broadcast area), $2,000,000; and (b) in respect of all other Unrestricted
Subsidiaries, $2,000,000.
"PERSON" means and includes natural persons, corporations,
limited liability companies, limited partnerships, general partnerships, limited
liability 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 the Borrower Personal
Property Collateral and the Guarantor Personal Property Collateral.
"PLAN" means any employee benefit plan, program, or arrangement
maintained or contributed to by Borrower or with respect to which it may incur
liability.
"PREFERRED STOCK" means the capital stock of any class or classes
(however designated) that is preferred as to the payment of dividends, or as to
the distribution of assets upon any voluntary or involuntary liquidation or
dissolution of the issuing Person, over shares of capital stock of any other
class of such Person.
"PROHIBITED PREFERRED STOCK" means and refers to any Preferred
Stock that by its terms is mandatorily redeemable for consideration other than
preferred stock of the same class or common stock or is subject to any other
payment obligation (including any obligation to pay dividends, other than
dividends of preferred stock of the same class and series payable in kind or
dividends of common stock) or is redeemable at the option of the holder thereof
for cash or assets or securities (other than distributions in kind of preferred
stock of the same class and series or of common stock) of the issuer or any of
its Subsidiaries.
"QUALIFIED TRANSACTION" means (a) an underwritten registered
public offering of equity securities (other than Prohibited Preferred Stock) of
Borrower,
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or (b) the consummation of an investment in Borrower by one or more Strategic
Partners.
"REAL PROPERTY" means any estates or interests in real property
now owned or hereafter acquired by one or more of the Obligors.
"REAL PROPERTY COLLATERAL" means Borrower Real Property
Collateral and Guarantor Real Property Collateral.
"REFERENCE RATE" means the variable rate of interest, per annum,
most recently announced by Norwest Bank Minnesota, National Association, or any
successor thereto, as its "base rate," irrespective of whether such announced
rate is the best rate available from such financial institution.
"REPORTABLE EVENT" means any of the events described in
Section 4043(c) of ERISA or the regulations thereunder other than a Reportable
Event as to which the provision of 30 days notice to the PBGC is waived under
applicable regulations.
"RESTRICTED SUBSIDIARY" shall mean any Subsidiary of Borrower
that is not an Unrestricted Subsidiary.
"RESTRUCTURING TRANSACTIONS" means the following transactions,
(a)(i) the due organization by Borrower of a new, directly owned Subsidiary
("Newco") of Borrower and the contribution and transfer by Borrower to Newco of
all of the assets of Borrower relative to the operation of the WWTC-AM,
Minneapolis, Minnesota Communications System, (ii) the due organization by Newco
of a License Sub and the contribution and transfer by Newco to such License Sub
of the FCC License in respect of the WWTC-AM, Minneapolis, Minnesota
Communications System, (iii) the due organization by CRLA of a License Sub and
the contribution and transfer by CRLA to such License Sub of the FCC License in
respect of the KPLS-AM, Orange, California Communications System, (iv) the due
organization by CRNY of a License Sub and the contribution and transfer by CRNY
to such License Sub of the FCC License in respect of the WJDM-AM, Elizabeth, New
Jersey Communications System, (v) the due organization by Group of 7 separate
Station Subs and the contribution and transfer by Group to each such Station Sub
of all of the assets of one of the Communications Systems owned and operated by
Group (other than the FCC Licenses in respect thereof) and (vi) the due
organization by Group of 7 separate License Subs and the contribution and
transfer by Group to each such License Sub of one of the FCC Licenses in respect
of each of the Communications Systems owned and operated by Group, (b) the
execution and delivery by Newco, each such Station Sub, and each such License
Sub of a joinder to the Guaranty, a joinder to the Guarantor Security Agreement,
UCC-1 financing statements, fixture filings, Collateral Access
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Agreements, Collateral Assignments of Tower Leases, Collateral Assignments of
Key Leases, and Mortgages, (c) the execution and delivery by Borrower of an
appropriate amendment to the Stock Pledge Agreement and the delivery to Foothill
of possession of the original stock certificates respecting all of the issued
and outstanding shares of stock of Newco together with stock powers with respect
thereto endorsed in blank, (d) the execution and delivery by each Guarantor of
the Guarantor Stock Pledge Agreement and the delivery to Foothill of possession
of the original stock certificates respecting all of the issued and outstanding
shares of stock of each such Station Sub and each such License Sub together with
stock powers with respect thereto endorsed in blank, (e) the receipt by the
Obligors of the necessary FCC approvals to the transfer of such licenses to such
License Subs, and (f) upon the completion of each of the foregoing transactions,
the merger of Group with and into Borrower, with Borrower as the surviving
entity.
"RETIREE HEALTH PLAN" means an "employee welfare benefit plan"
within the meaning of Section 3(1) of ERISA that provides benefits to
individuals after termination of their employment, other than as required by
Section 601 of ERISA.
"SECURITIES ACCOUNT" means a "securities account" as that term is
defined in Section 8-501 of the uniform Code and as defined in California Senate
Bill 1591 which was approved by the Governor on September 14, 1996 and will be
effective on January 1, 1997.
"SECURITY" shall have the meaning set forth in Section 2(1) of
the Securities Act of 1933, as amended.
"SOLVENT" means, with respect to any Person on a particular date,
that on such date (a) at fair valuations, all of the properties and assets of
such Person are greater than the sum of the debts, including contingent
liabilities, of such Person, (b) the present fair salable value of the
properties and assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize upon its
properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it will,
incur debts beyond such Person's ability to pay as such debts mature, and
(e) such Person is not engaged in business or a transaction, and is not about to
engage in business or a transaction, for which such Person's properties and
assets would constitute unreasonably small capital after giving due
consideration to the prevailing practices in the industry in which such Person
is engaged. In computing the amount of contingent liabilities at any time, it
is intended that such liabilities will be computed at the amount that, in light
of all the facts and circumstances existing at such time, represents the amount
that reasonably can be expected to become an actual or matured liability.
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"STATION SUB" means a separate, special purpose Subsidiary formed
and solely owned by Borrower for the purpose of owning and operating an
individual Broadcast System.
"STOCK PLEDGE AGREEMENT" means a Stock Pledge Agreement, dated as
of even date herewith, between Borrower and Foothill, pursuant to which Borrower
grants Foothill a security interest in, among other things, all of the issued
and outstanding capital stock of the Guarantors.
"STOCKHOLDER EQUITY" means, as of any date of determination,
Borrower's total stockholder's equity.
"STRATEGIC PARTNER" means a Person that (a) is not an Affiliate
of any Obligor, (b) is not a bank, finance company, insurance or other financial
institution or fund that is engaged in making, purchasing or otherwise investing
in commercial loans in the ordinary course of its business, and (c) is in the
telecommunications business, the entertainment programming business, or a
business reasonably related to the foregoing.
"SUBSIDIARY" of a Person means a corporation, partnership,
limited liability company, or other entity in which that Person directly or
indirectly owns or controls the shares of stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors (or
appoint other comparable managers) of such corporation, partnership, limited
liability company, or other entity.
"TERM LOAN" has the meaning set forth in SECTION 2.2.
"TERM LOAN COMMITMENT" means $11,500,000.
"TOWER LEASES" means (a) that certain lease between Borrower and
Dahl relative to the lease by Borrower of the tower or antenna, and related real
property, at which Borrower transmits the broadcasting signals for its WWTC-AM,
Communications System, (b) that certain lease between Group and Dahl relative to
the lease by Group of the tower or antenna, and related real property, at which
Group transmits the broadcasting signals for its KYCR-AM Communications System,
and (c) any and all other present or future leases between an Obligor and a
third Person relative to the lease by such Obligor of a transmitting tower,
antenna, or the real property on which either or both is situated.
"TRADEMARK SECURITY AGREEMENT" means a Trademark Security
Agreement executed and delivered by Borrower, the form and substance of which is
reasonably satisfactory to Foothill.
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"TRIGGERING EVENT" means any of (a) the occurrence and
continuation of an Event of Default, or (b) Foothill deems itself insecure.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of Borrower that
is formed or acquired after the Closing Date in connection with the consummation
of a Permitted Unrestricted Subsidiary Acquisition and that (a) is designated as
being an "Unrestricted Subsidiary" in a writing delivered by Borrower to
Foothill at the time of such formation or acquisition, (b) except as otherwise
provided in the definition of "Permitted Unrestricted Subsidiary Indebtedness,"
all of such Subsidiary's liabilities are non-recourse to Borrower or any
Restricted Subsidiary, and (c) no Affiliate of Borrower owns any capital stock
(or other interests) of such Subsidiary (except that any Station Sub that is an
Unrestricted Subsidiary may own the capital stock of the related License Sub
that is an Unrestricted Subsidiary).
"VOIDABLE TRANSFER" has the meaning set forth in SECTION 15.8.
"WARRANT AGREEMENT" means a warrant agreement respecting 50,000
shares of Borrower's common stock, in form and substance reasonably satisfactory
to Foothill.
"WORKING CAPITAL" means the result of (a) Consolidated Current
Assets MINUS (b) Consolidated Current Liabilities.
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 "Borrower" is used in respect of a financial covenant or a related
definition, it shall be understood to mean Borrower 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. An Event of
Default shall "continue" or be "continuing" until such Event of Default has been
waived in writing by Foothill. Section,
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subsection, clause, schedule, and exhibit references are to this Agreement
unless otherwise specified. 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, joinders, 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,
Foothill agrees to make advances ("Advances") to Borrower in an amount
outstanding not to exceed at any one time the lesser of (i) the Maximum
Revolving Amount, or (ii) the Borrowing Base. For purposes of this Agreement,
"Borrowing Base", as of any date of determination, shall mean the result of:
(y) 80% of Eligible Accounts, MINUS
(z) the aggregate amount of reserves, if any, established
by Foothill under SECTION 2.1(b).
(b) Anything to the contrary in SECTION 2.1(a) above
notwithstanding, Foothill may create reserves against or reduce its advance
rates based upon Eligible Accounts without declaring an Event of Default if
there occurs a material increase in Dilution or if Foothill determines that
there has occurred a Material Adverse Change.
(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) 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 TERM LOAN. (a) Foothill has agreed to make a term loan (the "Term
Loan") to Borrower in the original aggregate principal amount, subject to
Section 2.2(b), of (i) the Term Loan Commitment, PLUS (ii) the amount of the
Closing Fee under SECTION 2.11(a). The Term Loan shall be repaid in monthly
installments of principal of $220,100.00 each. Each such installment shall be
due and payable on the
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first day of each month commencing on the first day of the seventh month
following the Closing Date and continuing on the first day of each succeeding
month until and including the date on which the unpaid balance of the Term Loan
is paid in full. The outstanding principal balance and all accrued and unpaid
interest under the Term Loan shall be due and payable upon the termination of
this Agreement, whether by its terms, by prepayment, by acceleration, or
otherwise. All amounts outstanding under the Term Loan shall constitute
Obligations.
(b) (i) Foothill shall be entitled to withhold an additional
$1,500,000 from the amount of the Term Loan until the date, if ever, that (A)
Borrower satisfies each and every one of the conditions subsequent set forth in
SECTIONS 3.3(a), (b), (c), AND (d) hereof, and (B) Foothill receives
duly-executed Collateral Assignment(s) of Tower Leases in respect of the New
York Tower Leases, together with appropriate consents to hypothecation from the
relevant lessor(s) under the New York Tower Leases, at which time such withheld
amount shall become available to Borrower; PROVIDED, HOWEVER, that, in any
event, such withheld amount shall not be available to Borrower at any time after
the 60th day following the Closing Date if Borrower fails to satisfy clause (A)
or clause (B) hereof prior to the such 60th day.
(ii) Foothill shall be entitled to withhold an additional
$2,500,000 from the amount of the Term Loan until the date, if ever, of
Borrower's satisfaction of all of the conditions subsequent set forth in SECTION
3.3 hereof, at which time such withheld amount shall become available to
Borrower; PROVIDED, HOWEVER, that, in any event, such withheld amount shall not
be available to Borrower at any time after the 210th day following the Closing
Date if Borrower fails to satisfy all of the conditions subsequent set forth in
SECTION 3.3 hereof prior to the earlier to occur of (y) such 210th day and (z)
the latest date set forth in SECTION 3.3 hereof.
2.3 APPRAISALS; MANDATORY PREPAYMENTS OF THE TERM LOAN. Foothill
shall have the right to have each Broadcast System of the Obligors reappraised
by BIA (or a similarly qualified appraisal company selected by Foothill) from
time to time after the Closing Date for the purpose of redetermining the
Liquidation Value of such Broadcast Systems. In the absence of the occurrence
and continuation of an Event of Default, such appraisals shall occur no more
frequently than annually. To the extent that the then extant outstanding
aggregate principal amount under the Term Loan and all Acquisition Loans exceeds
33.33% of the aggregate Liquidation Value of all Broadcast Systems that are
owned and operated by Borrower and the Restricted Subsidiaries, Borrower shall
repay the Term Loan and the Acquisition Loans by an amount equal to such excess,
and such prepayments shall be applied first to the scheduled installments of the
Term Loan in inverse order of their maturity until the Term Loan is paid in full
and then to the scheduled installments of the outstanding Acquisition Loans in
inverse order of their maturity.
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2.4 ACQUISITION LOANS. From and after the date of Borrower's
satisfaction of all of the conditions subsequent set forth in SECTION 3.3
hereof, and subject to the terms and conditions of this Agreement, Foothill
agrees to make a series of term loans to Borrower (each, an "Acquisition Loan")
in aggregate amount not to exceed $4,000,000 (the "Acquisition Loan Commitment")
in order to partially finance the consummation of one or more Permitted
Acquisitions. The foregoing to the contrary notwithstanding, (a) each requested
Acquisition Loan shall be in a principal amount of not less than (i) $250,000,
or (ii) such lesser amount as is the then unfunded balance of the Acquisition
Loan Commitment, and (b) each Acquisition Loan shall be in an amount, as
determined by Foothill, not to exceed the lowest of (i) 35% of the total
purchase consideration (including seller consideration consisting of cash,
compensation for "non-compete agreements," promissory notes issued to seller (to
the extent, if any, permitted by Foothill), or other types of debt and equity
instruments (to the extent, if any, permitted by Foothill)) for the applicable
Permitted Acquisition to be paid by Borrower, (ii) 50% of the cash portion of
such purchase consideration, and (iii) 50% of the Liquidation Value of the
properties and assets to be acquired by Borrower or its Subsidiary in such
Permitted Acquisition.
Each Acquisition Loan shall be repayable (subject to the last sentence
of this paragraph) in 60 equal monthly installments of principal, such
installments to be payable on the first day of each month commencing with the
first day of the first month following the date on which the Acquisition Loan is
made and continuing on the first day of each succeeding month until and
including the date on which the unpaid balance of the applicable Acquisition
Loan is paid in full. The outstanding principal balance and all accrued and
unpaid interest under each Acquisition Loan shall be due and payable upon the
termination of this Agreement, whether by its terms, by prepayment, by
acceleration, or otherwise.
Subject to the foregoing, each Acquisition Loan shall be made by
Foothill at such times and in such amounts as Borrower may request in writing,
shall be advanced directly to the applicable seller in connection with the
subject Permitted Acquisition. All amounts outstanding under the Acquisition
Loans shall constitute Obligations.
2.5 OVERADVANCES. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Foothill pursuant to SECTIONS 2.1 AND 2.4 is
greater than either the Dollar or percentage limitations set forth in SECTIONS
2.1 OR 2.4 (an "Overadvance"), Borrower immediately shall pay to Foothill, in
cash, the amount of such excess to be used by Foothill to repay the outstanding
Obligations.
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2.6 INTEREST: RATES, PAYMENTS, AND CALCULATIONS.
(a) Interest Rate. All Obligations shall bear interest at a per
annum rate of 2.75 percentage points above the Reference Rate.
(b) [Intentionally Omitted]
(c) Default Rate. Upon the occurrence and during the
continuation of an Event of Default, all Obligations shall bear interest at a
per annum rate equal to 5.75 percentage points above the Reference Rate.
(d) Minimum Interest. In no event shall the rate of interest
chargeable hereunder for any day be less than 9.00% per annum. To the extent
that interest accrued hereunder at the rate set forth herein would be less than
the foregoing minimum daily rate, the interest rate chargeable hereunder for
such day automatically shall be deemed increased to the minimum rate.
(e) Payments. Interest payable 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, all Foothill Expenses (as and when incurred),
the fees and charges provided for in SECTION 2.11 (as and when accrued or
incurred), and all installments or other payments due under the Term Loan, the
Acquisition Loans, or any Loan Document to Borrower's Loan Account, which
amounts thereafter shall accrue interest at the rate then applicable to Advances
hereunder. Any interest not paid when due shall be compounded and shall
thereafter accrue interest at the rate then applicable to Advances hereunder.
(f) Computation. The Reference Rate as of the date of this
Agreement is 8.25% 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 360 day year for the actual number
of days elapsed.
(g) 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 and delivering 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
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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.
2.7 COLLECTION OF ACCOUNTS. Borrower shall at all times maintain the
Concentration Account and shall deposit (and cause the other Obligors to
deposit, and, by its execution and delivery of the Guaranty or a joinder
thereto, each of the Guarantors hereby agrees to deposit) all Collections with
respect to the Accounts, General Intangibles, and Negotiable Collateral and
other amounts received by any Obligor from any source immediately upon receipt
into the Concentration Account or into a deposit account of such Obligor the
proceeds of which are remitted on a daily basis to the Concentration Account.
Borrower, Foothill, and the Concentration Account Bank shall enter into an
agreement that, among other things, shall provide that the Concentration Account
Bank shall remit all proceeds received in the Concentration Account to an
account (the "Foothill Account") maintained by Foothill at a depositary selected
by Foothill. No arrangement contemplated hereby shall be modified by any
Obligor without the prior written consent of Foothill.
2.8 CREDITING PAYMENTS; APPLICATION OF COLLECTIONS. The receipt of
any Collections by Foothill (whether from transfers to Foothill by the
Concentration Account or otherwise) immediately shall be applied provisionally
to reduce the Obligations outstanding under SECTION 2.1, but shall not be
considered a payment on account unless such Collection item is a wire transfer
of immediately available federal funds and is made to the Foothill Account or
unless and until such Collection item is honored when presented for payment.
From and after the Closing Date, Foothill shall be entitled to charge Borrower
for 2 Business Days of `clearance' or `float' at the rate set forth in SECTION
2.6(a) or SECTION 2.6(c), as applicable, on all Collections that are received by
Foothill (regardless of whether forwarded by the Concentration Account Bank to
Foothill, whether provisionally applied to reduce the Obligations under SECTION
2.1, or otherwise). This across-the-board 2 Business Day clearance or float
charge on all Collections is acknowledged by the parties to constitute an
integral aspect of the pricing of Foothill's financing of Borrower, and shall
apply irrespective of the characterization of whether receipts are owned by an
Obligor or Foothill, and whether or not there are any outstanding Advances, the
effect of such clearance or float charge being the equivalent of charging 2
Business Days of interest on such Collections. Should any Collection item not
be honored when presented for payment, then Borrower shall be deemed not to have
made such payment, and interest shall be recalculated accordingly. Anything to
the contrary contained herein notwithstanding, any Collection item shall be
deemed received by Foothill only if it is received into the Foothill Account on
a Business Day on or before 11:00 a.m. California time. If any Collection item
is received into the Foothill Account on a non-Business Day or after 11:00 a.m.
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California time on a Business Day, it shall be deemed to have been received by
Foothill as of the opening of business on the immediately following Business
Day.
2.9 DESIGNATED ACCOUNT. Foothill is authorized to make the Advances,
the Term Loan, and the Acquisition Loans under this Agreement based upon
telephonic or other instructions received from anyone purporting to be an
Authorized Person, or without instructions if pursuant to SECTION 2.6(e).
Borrower agrees to establish and maintain the Designated Account with the
Designated Account Bank for the purpose of receiving the proceeds of the
Advances, the Term Loan, and the Acquisition Loans requested by Borrower and
made by Foothill hereunder. Unless otherwise agreed by Foothill and Borrower,
any Advance, the Term Loan, and the Acquisition Loans requested by Borrower and
made by Foothill hereunder shall be made to the Designated Account.
2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS. Foothill
shall maintain an account on its books in the name of Borrower (the "Loan
Account") on which Borrower will be charged with all Advances, the Term Loan,
and all Acquisition Loans made by Foothill to Borrower or for Borrower's
account, including, accrued interest, Foothill Expenses, and any other payment
Obligations of Borrower. In accordance with SECTION 2.8, the Loan Account will
be credited with all payments received by Foothill from Borrower or for
Borrower's account, including all amounts received in the Foothill Account from
the Concentration Account Bank. Foothill shall render statements regarding the
Loan Account to Borrower, including principal, interest, fees, and including an
itemization of all charges and expenses constituting Foothill Expenses owing,
and such statements shall be conclusively presumed to be correct and accurate
and constitute an account stated between Borrower and Foothill unless, within 30
days after receipt thereof by Borrower, Borrower shall deliver to Foothill
written objection thereto describing the error or errors contained in any such
statements.
2.11 FEES. Borrower shall pay to Foothill the following fees:
(a) Closing Fee. A closing fee of $385,000, which amount shall
be included in the Term Loan but shall be earned in full and non-refundable as
of the Closing Date; in this regard, the payment of such closing fee as set
forth above shall constitute a repayment in full of the commitment fee
previously earned by Foothill and evidenced by a promissory note issued by
Borrower to the order of Foothill;
(b) Acquisition Loan. An Acquisition Loan funding fee of 2.75%
of the amount of each Acquisition Loan, which fee shall be earned in full,
non-refundable, and due and payable in cash at the time of funding of such
Acquisition Loan;
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(c) Annual Facility Fee. An annual fee (the "Annual Fee") on
each anniversary of the Closing Date in an amount equal to (i) on the first
anniversary of the Closing Date, 0.50% times the sum of (x) the Maximum
Revolving Amount, plus (y) the then outstanding amount of the Term Loan, plus
(z) the then outstanding amount of all Acquisition Loans, (ii) on the second
anniversary of the Closing Date, 0.75% times the sum of (x) the Maximum
Revolving Amount, plus (y) the then outstanding amount of the Term Loan, plus
(z) the then outstanding amount of all Acquisition Loans; and (iii) on the third
anniversary of the Closing Date, 1.00% times the sum of (x) the Maximum
Revolving Amount, plus (y) the then outstanding amount of the Term Loan, plus
(z) the then outstanding amount of all Acquisition Loans. The applicable Annual
Fee would be fully-earned and non-refundable on each anniversary of the Closing
Date;
(d) Financial Examination and Appraisal Fees. Foothill's
customary fee of $650 per day per examiner, plus out-of-pocket expenses for each
financial analysis and examination (i.e., audits) of Borrower performed by
personnel employed by Foothill; Foothill's customary appraisal fee of $1,500 per
day per appraiser, plus out-of-pocket expenses for each appraisal of the
Collateral performed by personnel employed by Foothill; PROVIDED, HOWEVER, that
Borrower shall not be obligated to reimburse Foothill with respect to appraisals
of the same item of Collateral that occur more frequently than once in any
calendar year, unless an Event of Default has occurred and is continuing, in
which case Borrower shall be obligated to reimburse Foothill with respect to as
many appraisals as Lender deems necessary to conduct; and, the actual charges
paid or incurred by Foothill if it elects to employ the services of one or more
third Persons to perform such financial analyses and examinations (i.e., audits)
of Borrower or to appraise the Collateral; 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 $2,500.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE, THE TERM LOAN, AND
THE INITIAL ACQUISITION LOAN. The obligation of Foothill to make the initial
Advance, to make the Term Loan, or to make the initial Acquisition Loan 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 November 25, 1996;
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(b) Foothill shall have received searches reflecting the filing
of its financing statements and fixture filings;
(c) Foothill shall have received each of the following
documents, duly executed, and each such document shall be in full force and
effect:
(1) the Concentration Account Agreement;
(2) the Disbursement Letter;
(3) the Existing Pay-Off Letter, together with UCC
termination statements and other documentation evidencing
the termination by Existing Lender of its Liens on the
properties and assets (other than Liens with respect to the
Real Property that secures mortgage financing provided by
Existing Lender to Group) of the Obligors;
(4) the KPLS Sellers Pay-Off Letter, together with UCC
termination statements and other documentation evidencing
the termination by the KPLS Sellers of its Liens on the KPLS
Sellers' Collateral;
(5) the McGuinness Pay-Off Letter, together with UCC
termination statements and other documentation evidencing
the termination by Mr. Joseph McGuinness of his Liens on the
properties and assets of the Obligors;
(6) the Warrant;
(7) each of the Mortgages, except to the extent Foothill
permits one or more of the same to be delivered after the
Closing Date pursuant to SECTION 3.3(e) hereof;
(8) each of the Collateral Assignments of Key Leases,
together with an appropriate consent to hypothecation from
the lessor under the relevant Key Lease, except to the
extent Foothill permits one or more of the same to be
delivered after the Closing Date pursuant to SECTION 3.3
hereof; it being understood that all Collateral Assignments
of Key Leases and consents thereto in respect of leases
wherein the lessor is an Affiliate of one or more Obligors
shall be delivered on or before the Closing Date;
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(9) the Collateral Assignments of Tower Leases, together
with an appropriate consent to hypothecation from the lessor
under the relevant Tower Lease, except to the extent
Foothill permits one or more of the same to be delivered
after the Closing Date pursuant to SECTION 3.3 hereof; it
being understood that all Collateral Assignments of Tower
Leases and consents thereto in respect of: (y) leases
wherein the lessor is an Affiliate of one or more Obligors;
and (z) leases wherein the lessor is one or more of the KPLS
Sellers; in each case, shall be delivered on or before the
Closing Date;
(10) the Trademark Security Agreement;
(11) the Stock Pledge Agreement;
(12) Borrower, Foothill, and each applicable financial
intermediary or depositary shall enter into a control
agreement that, among other things, provides that, from and
after the giving of notice by Foothill to such financial
intermediary or depositary, it shall take instructions
solely from Foothill with respect to the applicable
Securities Account and related securities entitlements or
deposit account, as applicable. Foothill agrees that it
will not give such notice unless a Triggering Event has
occurred. Borrower agrees that it will not transfer assets
out of such Securities Accounts or deposit accounts other
than in the ordinary course of business and, if to another
financial intermediary or depositary, unless the Borrower,
Foothill, and the substitute financial intermediary or
depositary have entered into a control agreement of the type
described above. No arrangement contemplated hereby shall
be modified by Borrower without the prior written consent of
Foothill. Upon the occurrence of a Triggering Event,
Foothill may elect to notify the financial intermediary to
liquidate the securities entitlements in such Securities
Account and may elect to notify the financial intermediary
or depositary to remit the proceeds in the Securities
Account or deposit account to the Foothill Account;
(13) the Guarantor Security Agreement;
(14) the Guaranty;
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(15) the Guarantor Stock Pledge Agreement;
(d) Foothill shall have received possession of the shares of
stock of each of the Subsidiaries of Borrower, as well as stock powers with
respect thereto endorsed in blank;
(e) Foothill shall have received a certificate from the
Secretary of each Obligor attesting to the resolutions of such Obligor's Board
of Directors authorizing its execution, delivery, and performance of the Loan
Documents to which such Obligor is a party and authorizing specific officers of
such Obligor to execute the same;
(f) Foothill shall have received copies of each Obligor's
Governing Documents, as amended, modified, or supplemented to the Closing Date,
certified by the Secretary of the applicable Obligor;
(g) Foothill shall have received a certificate of status with
respect to each Obligor, dated within 10 days of the Closing Date, such
certificate to be issued by the appropriate officer of the jurisdiction of
organization of such Obligor, which certificate shall indicate that such Obligor
is in good standing in such jurisdiction;
(h) Foothill shall have received certificates of status with
respect to each Obligor, each dated within 15 days of the Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions in
which its failure to be duly qualified or licensed would constitute a Material
Adverse Change, which certificates shall indicate that such Obligor is in good
standing in such jurisdictions;
(i) Foothill shall have received a certificate of insurance,
together with the endorsements thereto, as are required by SECTION 6.10, the
form and substance of which shall be satisfactory to Foothill and its counsel;
(j) Foothill shall have received such Collateral Access
Agreements from lessors and other third persons as Foothill may require, except
to the extent Foothill permits one or more of the same to be delivered after the
Closing Date pursuant to SECTION 3.3(e) hereof;
(k) Foothill shall have received consolidating balance sheet
information in form reasonably acceptable to Foothill, as of the Closing Date,
for each Communications System (as if such Communications System were a separate
legal entity) and a detailed description of such Communications System's
liabilities;
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(l) Foothill shall have received a copy of each LPMA, each Key
Lease, and each Tower Lease together with a certificate of the Secretary of the
relevant Obligor certifying same to be a true and correct copy thereof;
(m) Foothill shall have received an opinion of Borrower's
counsel (including FCC counsel) in form and substance satisfactory to Foothill
in its sole discretion;
(n) Foothill shall have received (i) appraisals of the Real
Property Collateral and appraisals of the individual Communications Systems, in
each case satisfactory to Foothill, and (ii) mortgagee title insurance policies
(or marked commitments to issue the same) for the Real Property Collateral
issued by a title insurance company satisfactory to Foothill (each a "Mortgage
Policy" and, collectively, the "Mortgage Policies") in amounts satisfactory to
Foothill assuring Foothill that the Mortgages on such Real Property Collateral
are valid and enforceable first priority mortgage Liens on such Real Property
Collateral free and clear of all defects and encumbrances except Permitted
Liens, and the Mortgage Policies shall otherwise be in form and substance
reasonably satisfactory to Foothill; in each case, except to the extent Foothill
permits one or more of the same to be delivered after the Closing Date pursuant
to SECTION 3.3(e) hereof;
(o) Foothill shall have received satisfactory evidence that all
tax returns required to be filed by Borrower have been timely filed and all
taxes upon Borrower or its properties, assets, income, and franchises (including
real property taxes and payroll taxes) have been paid prior to delinquency,
except such taxes that are the subject of a Permitted Protest; and
(p) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered, executed,
or recorded and shall be in form and substance reasonably satisfactory to
Foothill and its counsel.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES, THE TERM LOAN, AND ALL
ACQUISITION LOANS. The following shall be conditions precedent to all Advances,
the Term Loan, and all Acquisition Loans 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 extension of credit, as though made on
and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date);
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(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof; and
(c) no injunction, writ, restraining order, or other order of
any nature prohibiting, directly or indirectly, the extending of such credit
shall have been issued and remain in force by any governmental authority against
Borrower, Foothill, or any of their Affiliates.
3.3 CONDITION SUBSEQUENT. As conditions subsequent to initial
closing hereunder, Borrower shall perform or cause to be performed each of the
following (the failure by Borrower to so perform or cause to be performed any of
the following constituting an Event of Default):
(a) within 30 days of the Closing Date, deliver to Foothill the
certified copies of the policies of insurance, together with the endorsements
thereto, as are required by SECTION 6.10, the form and substance of which shall
be satisfactory to Foothill and its counsel.
(b) within 60 days following the Closing Date, deliver to
Foothill each of the Collateral Assignments of Key Leases, together with an
appropriate consent to hypothecation from the lessor under the relevant Key
Lease, to the extent the same were not required by Foothill to be delivered on
or before the Closing Date under SECTION 3.1.
(c) (i) within 60 days following the Closing Date, deliver to
Foothill the Collateral Assignment(s) of Tower Leases with respect to the New
York Tower Leases, together with an appropriate consent to hypothecation from
the lessor under the New York Tower Leases, if and to the extent the same was
not required by Foothill to be delivered on or before the Closing Date under
SECTION 3.1.
(ii) within 60 days following the Closing Date, deliver to
Foothill each of the Collateral Assignments of Tower Leases (other than in
respect of the New York Tower Leases), together with an appropriate consent to
hypothecation from the lessor under the relevant Tower Lease, to the extent the
same were not required by Foothill to be delivered on or before the Closing Date
under SECTION 3.1.
(d) within 30 days following the Closing Date, deliver to
Foothill each of the Mortgages (and Foothill shall have received opinions of
Foothill's several local counsel relative thereto, each in form and substance
satisfactory to Foothill in its reasonable (from the perspective of a secured
lender) discretion), Collateral Access Agreements, Mortgage Policies, in each
case, to the extent the same
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were not required by Foothill to be delivered on or before the Closing Date
under SECTION 3.1.
(e) within 180 days following the Closing Date, deliver to
Foothill satisfactory evidence of the consummation of each of the Restructuring
Transactions.
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 date that is 4 years from the Closing Date
(the "Maturity Date"), unless sooner terminated pursuant to the terms hereof.
The foregoing notwithstanding, Foothill shall have the 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 Borrower Collateral and the
Guarantor Collateral shall remain in effect until all Obligations have been
fully and finally discharged and Foothill's obligation to provide additional
credit hereunder is terminated.
3.6 EARLY TERMINATION BY BORROWER. The provisions of SECTION 3.4
that allow termination of this Agreement by Borrower only on the Maturity Date
notwithstanding, Borrower has the option, at any time upon 90 days prior written
notice to Foothill, to terminate this Agreement by paying to Foothill, in cash,
the Obligations, in full, together with a premium (the "Early Termination
Premium") equal to (a) on or before the second anniversary of the Closing Date,
an amount equal to the product of (i) $20,000 TIMES (ii) the number of months
(or portion thereof) between the date of such termination and the second
anniversary of the Closing Date, and (b) thereafter, zero (-0-); PROVIDED,
HOWEVER, that Borrower shall be obligated to pay only 50% of the Early
Termination Premium otherwise payable under SECTION 3.6(a) in the event that
Borrower timely exercises its option to terminate this Agreement (and timely
terminates this Agreement) under and pursuant to this SECTION 3.6 with the
proceeds received by Borrower from the consummation of a Qualified Transaction.
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
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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 right, title, and interest of Borrower in
and to all currently existing and hereafter acquired or arising Borrower
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 Borrower Personal Property Collateral shall attach to all Borrower Personal
Property Collateral without further act on the part of Foothill or Borrower.
Anything contained in this Agreement or any other Loan Document to the contrary
notwithstanding, except for Ordinary Course Dispositions, no Obligor has any
authority, express or implied, to dispose of any item or portion of the Personal
Property Collateral or the Real Property Collateral. Anything to the contrary
in this Agreement or the other Loan Documents notwithstanding, to the extent
this Agreement or any other Loan Document purports to grant to Foothill a
security interest in the FCC Licenses, Foothill shall only have a security
interest in such FCC Licenses at such times and to the extent that a security
interest in such FCC Licenses is not prohibited under applicable law and
Foothill agrees that, to the extent prior FCC approval is required pursuant to
the Communications Act of 1934, as amended, or the rules and regulations of the
FCC for (a) the operation and effectiveness of any remedy hereunder or under any
Loan Document, or (b) taking any action that may be taken by Foothill hereunder
or under any Loan Document, such remedy or action will be subject to such prior
FCC approval having been obtained by or in favor of Foothill; and Borrower will
use, and shall cause each of the other Obligors to (and, by its execution and
delivery of the Guaranty or a joinder thereto, each of the Guarantors hereby
agrees to) use, its reasonable best efforts to obtain any such approval as
promptly as possible after Foothill first becomes entitled to exercise such
remedy or action.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower, immediately upon the request of Foothill, shall (and shall cause each
of the other Obligors to, and, by its execution and delivery of the Guaranty or
a joinder thereto, each of the Guarantors hereby agrees to) endorse and deliver
physical possession of such Negotiable Collateral to Foothill.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE
COLLATERAL. At any time, Foothill or Foothill's designee may (a) notify
customers or
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Account Debtors of the Obligors that the Accounts, General Intangibles, or
Negotiable 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 the Loan Account. Borrower agrees that it will (and will cause each of the
other Obligors to, and, by its execution and delivery of the Guaranty or a
joinder thereto, each of the Guarantors hereby agrees to) hold in trust for
Foothill, as Foothill's trustee, any Collections that it receives and
immediately will deliver said Collections to Foothill in their original form as
received by the applicable Obligor.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time upon
the request of Foothill, Borrower shall (and shall cause each of the other
Obligors (including each new License Sub or Station Sub, whether Restricted
Subsidiary or Unrestricted Subsidiary) to, and, by its execution and delivery of
the Guaranty or a joinder thereto, each of the Guarantors (including each new
License Sub or Station Sub) hereby agrees to) execute and deliver to Foothill
all financing statements, continuation financing statements, fixture filings,
security agreements, pledges, assignments, collateral assignments, mortgages,
leasehold mortgages, deeds of trust, leasehold deeds of trust, endorsements of
certificates of title, applications for title, affidavits, reports, notices,
schedules of accounts, letters of authority, and all other documents that
Foothill reasonably may request, in form satisfactory to Foothill, to perfect
and continue perfected Foothill's security interests in the Collateral (whether
now owned or hereafter arising or acquired), and in order to fully consummate
all of the transactions contemplated hereby and under the other Loan Documents.
In this regard and without limiting the generality of the foregoing, Foothill
shall have the right to require Borrower to: (a) obtain phase-I environmental
reports and real estate surveys with respect to the Real Property Collateral
from environmental consultants and surveyors and setting forth results, in each
case, acceptable to Foothill in its sole discretion; (b) at such time or times
as Borrower or any Guarantor acquires any copyright registered with the United
States Copyright Office or applies for registration of any copyright with the
United States Copyright Office, execute and deliver (or cause such Guarantor to
execute and deliver (and, by its execution and delivery of the Guaranty or a
joinder thereto, each of the Guarantors hereby agrees to execute and deliver))
promptly a Copyright Security Agreement or joinder or supplement thereto in
respect of such copyrights or copyright applications; (c) cause CRLA to execute
and deliver a Mortgage with respect to the Real Property that it is to acquire
in Southern California that is referred to as the "Mira Loma" site; and (d)
cause CRNY to execute and deliver a Collateral Assignment of Tower Lease with
respect to its new Tower Lease.
4.5 POWER OF ATTORNEY. Borrower hereby irrevocably makes,
constitutes, and appoints (and hereby causes each of the other Obligors to make,
constitute, and appoint, and, by its execution and delivery of the Guaranty or a
joinder
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thereto, each of the Guarantors hereby makes, constitutes, and appoints)
Foothill (and any of Foothill's officers, employees, or agents designated by
Foothill) as the Obligors' true and lawful attorney, with power to (a) if any
Obligor refuses to, or fails timely to execute and deliver any of the documents
described in SECTION 4.4, sign the name of such Obligor 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, sign any Obligor'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 any Obligor's name on any Collection item 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, notify the post office authorities
to change the address for delivery of any Obligor's mail to an address
designated by Foothill, to receive and open all mail addressed to an Obligor,
and to retain all mail relating to the Collateral and forward all other mail to
the Obligors in care of Borrower, (f) at any time that an Event of Default has
occurred and is continuing or Foothill deems itself insecure, make, settle, and
adjust all claims under the Obligors' 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, settle and adjust disputes and claims respecting the
Accounts directly with Account Debtors, for amounts and upon terms that Foothill
determines to be reasonable, and Foothill may cause to be executed and delivered
any documents and releases that Foothill determines to be necessary. The
appointment of Foothill as the Obligors' 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.
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 the Books and to check, test, and appraise the Collateral in order to
verify any or all of the Obligors' financial condition or the amount, quality,
value, condition of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Foothill to enter into this Agreement, Borrower
makes the following representations and warranties which shall be true, correct,
and complete in all respects as of the date hereof, and shall be true, correct,
and complete in all respects as of the Closing Date, and at and as of the date
of the making of each Advance, Term Loan, or Acquisition Loan made thereafter,
as though made on and as of the date of such Advance, Term Loan, or Acquisition
Loan (except to the extent that such representations and warranties relate
solely to an earlier date) and such
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representations and warranties shall survive the execution and delivery of this
Agreement:
5.1 NO ENCUMBRANCES. The Obligors have good and indefeasible title
to the Collateral, free and clear of Liens except for Permitted Liens.
5.2 ELIGIBLE ACCOUNTS. The Eligible Accounts are bona fide existing
obligations created by the sale and delivery of broadcasting time or the
production or syndication of radio programming to Account Debtors in the
ordinary course of the Obligors' business, unconditionally owed to one or more
of the Obligors without defenses, disputes, offsets, counterclaims, or rights of
return or cancellation. The services giving rise to such Eligible Accounts has
been fully performed. No Obligor has received any notice of actual or imminent
bankruptcy, insolvency, or material impairment of the financial condition of any
Account Debtor, or, in the case of an Advertising Agency Account Debtor, of the
underlying client of such Advertising Agency Account Debtor, regarding any
Eligible Account.
5.3 LICENSES AND PERMITS. All material licenses, permits, and
consents and similar rights (including FCC Licenses) required from any Federal,
state, or local governmental body for the ownership, construction, use, and
operation of the Communications Systems and other properties now owned and
operated by any of the Obligors, have been validly issued and are in full force
and effect and each Obligor is in compliance, in all material respects, with all
of the provisions thereof and none of such licenses, permits, or consents is the
subject of any pending or, to the best of Borrower's knowledge and belief,
threatened proceeding for the revocation, cancellation, suspension, or
non-renewal thereof. As of the Closing Date or of each subsequent date on which
Borrower delivers to Foothill an updated schedule pursuant to Section 6.20, set
forth on SCHEDULE 5.3 is a complete and accurate list of all such licenses,
permits, and consents, and such schedule identifies the date by which an
application for the renewal of such license, permit, or consent must be filed
and describes the status of each such pending application. Each of the Obligors
owns or possesses all material patents, trademarks, trade names, copyrights, and
other similar rights necessary for the conduct of its business as now carried
on, without any known conflict of the rights of others.
5.4 EQUIPMENT. All of the Equipment is used or held for use in the
Obligors' business and is fit for such purposes.
5.5 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 are located only at the locations identified on
SCHEDULE 6.12 or otherwise permitted by SECTION 6.12.
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5.6 [INTENTIONALLY OMITTED]
5.7 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief executive
office of Borrower and each Guarantor is located at the address indicated in the
preamble to this Agreement and the FEINs for each of the Obligors are as set
forth on SCHEDULE 5.7; PROVIDED, HOWEVER, that from time to time, Borrower shall
be entitled to update SCHEDULE 5.7 to add the FEINs of newly created or acquired
Subsidiaries.
5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) 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 reasonably could be expected to have a Material
Adverse Change.
(b) Each Guarantor 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 reasonably could be expected to have a
Material Adverse Change.
(c) Set forth on SCHEDULE 5.8 is a complete and accurate list of
Borrower's direct and indirect Subsidiaries, showing: (i) the jurisdiction of
their incorporation; (ii) the number of shares of each class of common and
preferred stock authorized for each of such Subsidiaries; and (iii) the number
and the percentage of the outstanding shares of each such class owned directly
or indirectly by Borrower; PROVIDED, HOWEVER, that from time to time, Borrower
shall be entitled to update SCHEDULE 5.8 to add the required information
concerning newly created or acquired Subsidiaries. All of the outstanding
capital stock of each such Subsidiary has been validly issued and is fully paid
and non-assessable.
(d) Except as set forth on SCHEDULE 5.8, no capital stock (or
any securities, instruments, warrants, options, purchase rights, conversion or
exchange rights, calls, commitments or claims of any character convertible into
or exercisable for capital stock) of Borrower is subject to the issuance of any
security, instrument, warrant, option, purchase right, conversion or exchange
right, call, commitment or claim of any right, title, or interest therein or
thereto.
(e) Except as set forth on SCHEDULE 5.8, no capital stock (or
any securities, instruments, warrants, options, purchase rights, conversion or
exchange rights, calls, commitments or claims of any character convertible into
or exercisable for capital stock) of any direct or indirect Subsidiary of
Borrower is subject to the
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issuance of any security, instrument, warrant, option, purchase right,
conversion or exchange right, call, commitment or claim of any right, title, or
interest therein or thereto.
5.9 DUE AUTHORIZATION; NO CONFLICT.
(a) (i) The execution, delivery, and performance by Borrower of
this Agreement and the Loan Documents to which it is a party have been duly
authorized by all necessary corporate action. (ii) The execution, delivery, and
performance by each of the other Obligors of the Loan Documents to which it is a
party have been duly authorized by all necessary corporate action.
(b) (i) The execution, delivery, and performance by Borrower of
this Agreement and the Loan Documents to which it is a party do not and will not
(w) violate any provision of federal, state, or local law or regulation
(including Regulations G, T, U, and X of the Federal Reserve Board) applicable
to Borrower, the Governing Documents of Borrower, or any order, judgment, or
decree of any court or other Governmental Authority binding on any Obligor,
(x) conflict with, result in a breach of, or constitute (with due notice or
lapse of time or both) a default under any material contractual obligation or
material lease of any Obligor, (y) result in or require the creation or
imposition of any Lien of any nature whatsoever upon any properties or assets of
any Obligor, other than Permitted Liens, or (z) require any approval of
stockholders or any approval or consent of any Person under any material
contractual obligation of any Obligor.
(ii) The execution, delivery, and performance by each of the
other Obligors of the Loan Documents to which it is a party do not and will not
(w) violate any provision of federal, state, or local law or regulation
(including Regulations G, T, U, and X of the Federal Reserve Board) applicable
to such Obligor, the Governing Documents of such Obligor, or any order,
judgment, or decree of any court or other Governmental Authority binding on any
Obligor, (x) conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under any material contractual
obligation or material lease of any Obligor, (y) result in or require the
creation or imposition of any Lien of any nature whatsoever upon any properties
or assets of any Obligor, other than Permitted Liens, or (z) require any
approval of stockholders or any approval or consent of any Person under any
material contractual obligation of any Obligor.
(c) (i) Other than the filing of appropriate financing
statements, fixture filings, and Mortgages, the execution, delivery, and
performance by Borrower of this Agreement and the Loan Documents to which
Borrower is a party do not and will not require any registration with, consent,
or approval of, or notice to, or other
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action with or by, any federal, state, foreign, or other Governmental Authority
or other Person.
(ii) Other than the filing of appropriate financing
statements, fixture filings, and Mortgages, the execution, delivery, and
performance by each of the other Obligors of the Loan Documents to which such
Obligor is a party do not and will not require any registration with, consent,
or approval of, or notice to, or other action with or by, any federal, state,
foreign, or other Governmental Authority or other Person.
(d) (i) This Agreement and the Loan Documents to which Borrower
is a party, and all other documents contemplated hereby and thereby, when
executed and delivered by Borrower will be the legally valid and binding
obligations of Borrower, enforceable against Borrower in accordance with their
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors' rights generally.
(ii) The Loan Documents to which each of the other Obligors
is a party, and all other documents contemplated hereby and thereby, when
executed and delivered by such Obligor will be the legally valid and binding
obligations of such Obligor, enforceable against such Obligor in accordance with
their respective terms, except as enforcement may be limited by equitable
principles or by bankruptcy, insolvency, reorganization, moratorium, or similar
laws relating to or limiting creditors' rights generally.
(e) (i) The Liens granted by Borrower to Foothill in and to its
properties and assets pursuant to this Agreement and the other Loan Documents
are validly created, perfected, and first priority Liens, subject only to
Permitted Liens.
(ii) The Liens granted by each of the other Obligors to
Foothill in and to its properties and assets pursuant to the Loan Documents are
validly created, perfected, and first priority Liens, subject only to Permitted
Liens.
5.10 LITIGATION. There are no actions or proceedings pending by or
against any Obligor before any court or administrative agency and neither
Borrower nor any other Obligor has any knowledge or belief of any pending,
threatened, or imminent litigation, governmental investigations, or claims,
complaints, actions, or prosecutions involving any Obligor, except for: (a)
ongoing collection matters in which one or more of the Obligors is the
plaintiff; (b) matters disclosed on SCHEDULE 5.10; and (c) matters arising after
the date hereof that, if decided adversely to such Obligor, would not have a
Material Adverse Change.
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5.11 NO MATERIAL ADVERSE CHANGE. All financial statements relating to
Borrower or any guarantor of the Obligations that have been delivered by
Borrower to Foothill have been prepared in accordance with GAAP (except, in the
case of unaudited financial statements, for the lack of footnotes and being
subject to year-end audit adjustments) and fairly present Borrower's (or such
guarantor's, as applicable) financial condition as of the date thereof and
Borrower's results of operations for the period then ended. There has not been
a Material Adverse Change with respect to Borrower (or such guarantor, as
applicable) since the date of the latest financial statements submitted to
Foothill on or before the Closing Date.
5.12 SOLVENCY. (a) Borrower is Solvent. 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.
(b) Each of the other Obligors is Solvent. No transfer of
property is being made by such Obligor and no obligation is being incurred by
such Obligor 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 such Obligor.
5.13 EMPLOYEE BENEFITS. None of Borrower, any of its Subsidiaries, or
any of their ERISA Affiliates maintains or contributes to any Benefit Plan,
other than those listed on SCHEDULE 5.13. Borrower, each of its Subsidiaries
and each ERISA Affiliate have satisfied the minimum funding standards of ERISA
and the IRC with respect to each Benefit Plan to which it is obligated to
contribute. No ERISA Event has occurred nor has any other event occurred that
may result in an ERISA Event that reasonably could be expected to result in a
Material Adverse Change. None of Borrower or its Subsidiaries, any ERISA
Affiliate, or any fiduciary of any Plan is subject to any direct or indirect
liability with respect to any Plan under any applicable law, treaty, rule,
regulation, or agreement. None of Borrower or its Subsidiaries or any ERISA
Affiliate is required to provide security to any Plan under Section 401(a)(29)
of the IRC.
5.14 ENVIRONMENTAL CONDITION. None of any Obligor's properties or
assets has ever been used by any Obligor 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 except as
disclosed on Schedule 5.14 (and, to the extent set forth on such schedule, any
such production, storage, handling, treatment, release, or transport of such
Hazardous Materials by any Obligor is in compliance with all applicable laws and
regulations in respect thereof). None of any Obligor's properties or assets has
ever been designated or identified in any manner
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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 any Obligor. No Obligor has 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 any Obligor
resulting in the releasing or disposing of Hazardous Materials into the
environment.
5.15 KEY LEASES; TOWER LEASES. (a) All Key Leases of the Obligors are
identified on Schedule 5.15(a) and each Obligor party to each of the Key Leases
is in compliance in all material respects with all of the terms of that Key
Lease the failure to comply with which reasonably could be expected to result in
a termination or non-renewal thereof or a change therein materially adverse to
that Obligor.
(b) All Tower Leases of the Obligors are identified on Schedule
5.15(b) and each Obligor party to each of the Tower Leases is in compliance in
all material respects with all of the terms of that Tower Lease the failure to
comply with which reasonably could be expected to result in a termination or
non-renewal thereof or a change therein materially adverse to that Obligor.
5.16 LPMA; NETWORK AFFILIATES. (a) All LPMAs of the Obligors are
identified on Schedule 5.16(a) and each Obligor party to each of the LPMAs is in
compliance with all of the terms of that LPMA the failure to comply with which
reasonably could be expected to result in a termination or non-renewal thereof
or a change therein materially adverse to that Obligor.
(b) All Network Affiliates of Borrower and a description of any
Permitted Network Affiliate Investments of Borrower in such Network Affiliates
are identified on Schedule 5.16(b); PROVIDED, HOWEVER, that from time to time,
Borrower shall be entitled to update SCHEDULE 5.16(b) to add the required
information concerning new Network Affiliates or Permitted Network Affiliate
Investments.
5.17 NO DEFAULT IN COMMUNICATION FRANCHISE AGREEMENTS. No material
default by any Obligor exists under any Communication Franchise Agreement to
which it is a party and no event has occurred or exists which, with notice or
lapse of time or both, would constitute a default by Borrower thereunder and
each such Communication Franchise Agreement has been duly authorized, executed,
and delivered by such Obligor and is in full force and effect.
5.18 GOVERNMENTAL AUTHORITY. No consent, authorization, approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body or any other Person is required (i) for the grant by any Obligor
of the
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security interest in the Collateral granted hereby or for the execution,
delivery or performance of this Agreement and the other Loan Documents by
Borrower and the other Obligors, (ii) for the perfection of such security
interest or the exercise by Foothill of the rights and remedies provided for in
this Agreement or the other Loan Documents, or (iii) except for the consents,
authorizations, approvals, actions, notices and filings with the FCC and other
governmental authorities, all of which have been duly obtained, taken, given or
made and are in full force and effect and are not subject to any conditions
(other than those conditions generally applicable to entities holding licenses,
permits, consents or authorizations granted or issued by the FCC and other
governmental authorities with respect to Broadcast Systems and Communications
Systems).
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 (and, where
applicable, cause each of the other Obligors to, and, by its execution and
delivery of the Guaranty or a joinder thereto, each of the Guarantors hereby
agrees to) do all of the following:
6.1 ACCOUNTING SYSTEM. Maintain a standard and modern system of
accounting that enables Borrower and each of the other Obligors to produce
financial statements in accordance with GAAP, and maintain records pertaining to
the Collateral that contain information as from time to time may be requested by
Foothill. The Obligors also shall keep a modern inventory reporting system that
shows all additions, sales, claims, returns, and allowances with respect to the
Inventory.
6.2 COLLATERAL REPORTING. Provide Foothill with the following
documents at the following times in form satisfactory to Foothill: (a) on each
Business Day, a sales journal, collection journal, and credit register, in each
case in respect of each Communications System and the overall radio network of
the Obligors, (b) on a monthly basis and, in any event, by no later than the
10th day of each month during the term of this Agreement, (i) a detailed
calculation of the Borrowing Base, and (ii) a detailed aging, by total and in
respect of each Communications System and the overall radio network of the
Obligors, of the Accounts, together with a reconciliation to the detailed
calculation of the Borrowing Base previously provided to Foothill, (c) on a
monthly basis and, in any event, by no later than the 10th day of each month
during the term of this Agreement, a summary aging, by vendor and in respect of
each Communications System and the overall radio network of the Obligors, of
each Obligor's accounts payable and any book overdraft, (d) upon request, copies
of invoices in connection with the Accounts, customer statements, credit memos,
remittance advices and reports, deposit slips, and other documents in connection
with
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the Accounts, (e) on a quarterly basis, a detailed list of each Obligor's
customers on a per Communications System basis and on the basis of the overall
radio network of the Obligors, (f) on a monthly basis, a calculation of the
Dilution for the prior month; and (g) such other reports as to the Collateral or
the financial condition of the Obligors as Foothill may request from time to
time.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to
Foothill: (a) as soon as available, but in any event within 30 days after the
end of each of the first, second, fourth, fifth, seventh, eighth, tenth, and
eleventh months during each of the Obligors' fiscal years, a company prepared
balance sheet, income statement, and statement of cash flow covering the
Obligors' operations (including the overall radio network of the Obligors)
during such period; (b) as soon as available, but in any event within 45 days
after the end of each of the third, sixth, ninth, and twelfth months during each
of the Obligors' fiscal years, a company prepared balance sheet, income
statement, and statement of cash flow covering the Obligors' operations
(including the overall radio network of the Obligors) for the fiscal quarter
then ended; and (c) as soon as available, but in any event within 90 days after
the end of each of the Obligors' fiscal years, financial statements of the
Obligors for each such fiscal year, audited by independent certified public
accountants reasonably acceptable to Foothill and certified, without any
qualifications, 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 include a
balance sheet, profit and loss statement, and statement of cash flow on a per
Communications System basis as well as on the basis of the overall radio network
of the Obligors, and, if prepared, such accountants' letter to management. In
addition to the financial statements referred to above, Borrower agrees to
deliver balance sheet information in form reasonably acceptable to Foothill and
prepared on a consolidating, per Obligor basis AND per Communications System
basis, so as to present Borrower and each such related entity separately and to
present each Communications System separately, and financial statements prepared
on a consolidated basis.
Together with the above, Borrower also shall deliver to Foothill
Borrower's Form 10-Q Quarterly Reports, Form 10-K Annual Reports, and Form 8-K
Current Reports, and any other filings made by Borrower with the Securities and
Exchange Commission, if any, as soon as the same are filed, or any other
information that is provided by Borrower to its securitiesholders, and any other
report reasonably requested by Foothill relating to the financial condition of
Borrower or any of the other Obligors.
Each month, together with the financial statements provided
pursuant to SECTION 6.3(a) or SECTION 6.3(b), as the case may be, Borrower shall
deliver to Foothill a certificate signed by its chief financial officer to the
effect that: (i) all
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financial statements delivered or caused to be delivered to Foothill hereunder
have been prepared in accordance with GAAP (except, in the case of unaudited
financial statements, for the lack of footnotes and being subject to year-end
audit adjustments) and fairly present the financial condition of Borrower, its
Subsidiaries, and each of their respective Communications Systems, (ii) the
representations and warranties of the Obligors 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), (iii) for each month that also is the date on which a financial
covenant in SECTION 7.20 is to be tested, a Compliance Certificate demonstrating
in reasonable detail compliance at the end of such period with the applicable
financial covenants contained in SECTION 7.20, and (iv) on the date of delivery
of such certificate to Foothill there does not exist any condition or event that
constitutes a Default or Event of Default (or, in the case of clauses (i), (ii),
or (iii), to the extent of any non-compliance, describing such non-compliance as
to which he or she may have knowledge and what action the relevant Obligor has
taken, is taking, or proposes to take with respect thereto).
Borrower (and, if required, each of the other Obligors) 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 the Obligors that Foothill may
request. Borrower hereby irrevocably authorizes and directs (and hereby agrees
to cause promptly each of the other Obligors to irrevocably authorize and
direct, and, by its execution and delivery of the Guaranty or a joinder thereto,
each of the Guarantors hereby irrevocably authorizes and directs) all auditors,
accountants, or other third parties to deliver to Foothill, at Borrower's
expense, copies of the Obligors' 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 the Obligors' business
affairs and financial conditions.
Deliver to Foothill not less than 10 Business Days prior to the
closing of any proposed Permitted Acquisition each of the following (a) a
detailed description of the assets or stock that are the subject of such
proposed Permitted Acquisition, (b) a term sheet or other description setting
forth the essential terms and basic structure of the proposed Permitted
Acquisition (including, purchase consideration and method and structure of
payment; in this regard, if the purchase price includes a seller note,
non-compete agreement, or other right to payment, Borrower shall detail the
economic terms thereof), (c) projected statements of income for the Person or
assets that are proposed to be acquired for at least a 1 year period following
such proposed Permitted Acquisition (including a summary of assumptions or PRO
FORMA adjustments for such projections), and (d) a sources and uses calculation
showing the proposed amount of
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Indebtedness, if any, to be utilized in connection with the consummation of the
proposed Permitted Acquisition.
6.4 TAX RETURNS. Deliver to Foothill copies of each of the Obligors'
future federal income tax returns, and any amendments thereto, within 30 days of
the filing thereof with the Internal Revenue Service.
6.5 GUARANTOR REPORTS. To the extent the same are not covered by
Section 6.3 hereof, cause any guarantor of any of the Obligations to deliver
(and by its execution and delivery of the Guaranty or a joinder thereto, each of
the Guarantors hereby agrees to deliver) its annual financial statements at the
time when Borrower provides its audited financial statements to Foothill and
copies of all federal income tax returns as soon as the same are available and
in any event no later than 30 days after the same are required to be filed by
law.
6.6 RETURNS. Cause returns and allowances, if any, as between any
Obligor and its Account Debtors to be on the same basis and in accordance with
the usual customary practices of such Obligor, as they exist at the time of the
execution and delivery of this Agreement. If, at a time when no Event of
Default has occurred and is continuing, any Account Debtor returns any Inventory
to any Obligor, such Obligor promptly shall determine the reason for such return
and, if such Obligor accepts such return, issue a credit memorandum (with a copy
to be sent to Foothill) in the appropriate amount to such Account Debtor. If,
at a time when an Event of Default has occurred and is continuing, any Account
Debtor returns any Inventory to any Obligor, such Obligor promptly shall
determine the reason for such return and, if Foothill consents (which consent
shall not be unreasonably withheld), issue a credit memorandum (with a copy to
be sent to Foothill) in the appropriate amount to such Account Debtor.
6.7 TITLE TO EQUIPMENT. Upon Foothill's request, immediately deliver
to Foothill, properly endorsed, any and all evidences of ownership of,
certificates of title, or applications for title to any items of Equipment.
6.8 MAINTENANCE OF EQUIPMENT. Maintain the Equipment in good
operating condition and repair (ordinary wear and tear excepted), and make all
necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved. Other than those items
of Equipment that constitute fixtures on the Closing Date, no Obligor shall
permit any item of Equipment to become a fixture to real estate or an accession
to other property, and such Equipment shall at all times remain personal
property.
6.9 TAXES. (a) Cause all assessments and taxes, whether real,
personal, or otherwise, due or payable by, or imposed, levied, or assessed
against any
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Obligor or any of its property to be paid in full, before delinquency or before
the expiration of any extension period, except to the extent that the validity
of such assessment or tax shall be the subject of a Permitted Protest.
(b) Make due and timely payment or deposit of all such federal,
state, and local taxes, assessments, or contributions required of it by law, and
execute and deliver to Foothill, on demand, appropriate certificates attesting
to the payment thereof or deposit with respect thereto.
(c) Make timely payment or deposit of all tax payments and
withholding taxes required of it 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, upon request, furnish Foothill with proof satisfactory to
Foothill indicating that the applicable Obligor has made such payments or
deposits.
6.10 INSURANCE.
(a) At its expense, keep the Personal Property 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, and shall cause
each Obligor to (and, by its execution and delivery of the Guaranty or a joinder
thereto, each of the Guarantors hereby agrees to), maintain business
interruption (including in respect of each Communications System), public
liability, product liability, and property damage insurance relating to the
Obligors' ownership and use of the Personal Property Collateral, as well as
insurance against larceny, embezzlement, and criminal misappropriation.
(b) At its expense, obtain and maintain (i) insurance of the
type necessary to insure the Improvements and Chattels (as such terms are
defined in the Mortgages), for the full replacement cost thereof, against any
loss by fire, lightning, windstorm, hail, explosion, aircraft, smoke damage,
vehicle damage, earthquakes, elevator collision, and other risks from time to
time included under "extended coverage" policies, in such amounts as Foothill
may require, but in any event in amounts sufficient to prevent Borrower from
becoming a co-insurer under such policies, (ii) combined single limit bodily
injury and property damages insurance against any loss, liability, or damages
on, about, or relating to each parcel of Real Property Collateral, in an amount
of not less than $1,000,000; (iii) business rental insurance covering annual
receipts for a 12 month period for each parcel of Real Property Collateral; and
(iv) insurance for such other risks as Foothill may require. Replacement costs,
at Foothill's option, may be redetermined by an insurance appraiser,
satisfactory to Foothill, not more frequently than once every 12 months at
Borrower's cost.
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(c) 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 insurance required herein shall be written by companies which are
authorized to do insurance business in the State of California. All hazard
insurance and such other insurance as Foothill shall specify, shall contain a
California Form 438BFU (NS) mortgagee endorsement, or an equivalent endorsement
satisfactory to Foothill, showing Foothill as sole loss payee thereof, and shall
contain a waiver of warranties. Every policy of insurance referred to in this
SECTION 6.10 shall contain an agreement by the insurer that it will not cancel
such policy except after 30 days prior written notice to Foothill and that any
loss payable thereunder shall be payable notwithstanding any act or negligence
of any Obligor or Foothill which might, absent such agreement, result in a
forfeiture of all or a part of such insurance payment and notwithstanding
(i) occupancy or use of the Real Property Collateral for purposes more hazardous
than permitted by the terms of such policy, (ii) any foreclosure or other action
or proceeding taken by Foothill pursuant to the Mortgages upon the happening of
an Event of Default, or (iii) any change in title or ownership of the Real
Property Collateral. Borrower shall deliver to Foothill certified copies of
such policies of insurance and evidence of the payment of all premiums therefor.
(d) Original policies or certificates thereof satisfactory to
Foothill evidencing such insurance shall be delivered to Foothill at least
30 days prior to the expiration of the existing or preceding policies. Borrower
shall give Foothill prompt notice of any loss covered by such insurance, and
Foothill shall have the right to adjust any loss. Foothill shall have the
exclusive right to adjust all losses payable under any such insurance policies
without any liability to any Obligor whatsoever in respect of such adjustments.
Any monies received as payment for any loss under any insurance policy including
the insurance policies mentioned above, shall be paid over to Foothill to be
applied at the option of Foothill either to the prepayment of the Obligations
without premium, in such order or manner as Foothill may elect, or shall be
disbursed to the applicable Obligor under stage payment terms satisfactory to
Foothill for application to the cost of repairs, replacements, or restorations.
All repairs, replacements, or restorations shall be effected with reasonable
promptness and shall be of a value at least equal to the value of the items or
property destroyed prior to such damage or destruction. Upon the occurrence of
an Event of Default, Foothill shall have the right to apply all prepaid premiums
to the payment of the Obligations in such order or form as Foothill shall
determine.
(e) Borrower shall not, and shall not cause, suffer, or permit
any of the other Obligors to (and by its execution and delivery of the Guaranty
or a joinder thereto, each of the Guarantors hereby agrees not to), take out
separate insurance concurrent in form or contributing in the event of loss with
that required to be maintained under this SECTION 6.10, unless Foothill is
included thereon as named insured with the loss payable to Foothill under a
standard California 438BFU
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(NS) Mortgagee endorsement, or its local equivalent. Borrower immediately shall
notify (and cause the applicable Obligor immediately to notify, and, by its
execution and delivery of the Guaranty or a joinder thereto, each of the
Guarantors hereby agrees immediately to notify) Foothill whenever such separate
insurance is taken out, specifying the insurer thereunder and full particulars
as to the policies evidencing the same, and originals of such policies
immediately shall be provided to Foothill.
6.11 NO SETOFFS OR COUNTERCLAIMS. Make payments hereunder and under
the other Loan Documents by or on behalf of Borrower and the other Obligors
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. Keep the Inventory and
Equipment only at the locations identified on SCHEDULE 6.12; PROVIDED, HOWEVER,
that Borrower may amend SCHEDULE 6.12 so long as such amendment occurs by
written notice to Foothill not less than 30 days prior to 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, the applicable Obligor 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
Collateral Access Agreement.
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 Change.
6.14 EMPLOYEE BENEFITS.
(a) Promptly, and in any event within 10 Business Days after
Borrower or any of its Subsidiaries knows or has reason to know that an ERISA
Event has occurred that reasonably could be expected to result in a Material
Adverse Change, a written statement of the chief financial officer of Borrower
describing such ERISA Event and any action that is being taking with respect
thereto by Borrower, any such Subsidiary or ERISA Affiliate, and any action
taken or threatened by the IRS, Department of Labor, or PBGC. Borrower or such
Subsidiary, as applicable, shall be deemed to know all facts known by the
administrator of any Benefit Plan of which it is the plan sponsor, (ii)
promptly, and in any event within 3 Business Days after the filing thereof with
the IRS, a copy of each funding waiver request filed with respect to any Benefit
Plan and all communications received by Borrower, any of its Subsidiaries or, to
the knowledge of Borrower, any ERISA Affiliate with respect to
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such request, and (iii) promptly, and in any event within 3 Business Days after
receipt by Borrower, any of its Subsidiaries or, to the knowledge of Borrower,
any ERISA Affiliate, of the PBGC's intention to terminate a Benefit Plan or to
have a trustee appointed to administer a Benefit Plan, copies of each such
notice.
(b) Cause to be delivered to Foothill, upon Foothill's request,
each of the following: (i) a copy of each Plan (or, where any such plan is not
in writing, complete description thereof) (and if applicable, related trust
agreements or other funding instruments) and all amendments thereto, all written
interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of Borrower or its Subsidiaries;
(ii) the most recent determination letter issued by the IRS with respect to each
Benefit Plan; (iii) for the three most recent plan years, annual reports on Form
5500 Series required to be filed with any governmental agency for each Benefit
Plan; (iv) all actuarial reports prepared for the last three plan years for each
Benefit Plan; (v) a listing of all Multiemployer Plans, with the aggregate
amount of the most recent annual contributions required to be made by Borrower
or any ERISA Affiliate to each such plan and copies of the collective bargaining
agreements requiring such contributions; (vi) any information that has been
provided to Borrower or any ERISA Affiliate regarding withdrawal liability under
any Multiemployer Plan; and (vii) the aggregate amount of the most recent annual
payments made to former employees of Borrower or its Subsidiaries under any
Retiree Health Plan.
6.15 LEASES. Pay when due all rents and other amounts payable under
any leases to which an Obligor is a party or by which an Obligor's properties
and assets are bound (including the Key Leases and the Tower Leases), unless
such payments are the subject of a Permitted Protest. To the extent that any
Obligor fails timely to make payment of such rents and other amounts payable
when due under its leases, Foothill shall be entitled, in its discretion, to
reserve an amount equal to such unpaid amounts against the Borrowing Base.
6.16 GOVERNMENT AUTHORIZATION. Borrower shall deliver to Foothill, as
soon as practicable, and in any event within ten (10) days after the receipt by
any Obligor from the FCC or any other governmental agency having jurisdiction
over the operations of any Obligor or filing or receipt thereof by any Obligor,
(i) copies of any order or notice of the FCC or such other agency or court of
competent jurisdiction which designates any material FCC License or other
material franchise, permit, or other governmental operating authorization of any
Obligor, or any application therefor, for a hearing or which refuses renewal or
extension of, or revokes or suspends the authority of any Obligor to construct
or operate a Communications System (or portion thereof), (ii) a copy of any
competing application filed with respect to any such FCC License or other
authorization, or application therefor, of any Obligor, or any citation, notice
of violation, or order to show cause issued by the FCC or other agency or any
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complaint filed by the FCC or other agency which is available to any Obligor,
and (iii) a copy of any notice or application by any Obligor requesting
authority to or notifying the FCC of its intent to cease broadcasting on any
broadcast station for any period in excess of ten (10) days.
6.17 OFF-THE-AIR REPORTS. Borrower shall deliver promptly to Foothill
notice of each occurrence of a period of twenty-four (24) consecutive hours or
more during which any Communications System owned or operated by any Obligor was
not broadcasting.
6.18 NOTICES. Borrower promptly shall deliver, and shall cause each
of the Obligors to deliver promptly (and, by its execution and delivery of the
Guaranty or a joinder thereto, each of the Guarantors hereby agrees to deliver
promptly), to Foothill all material written notices received by it with respect
to the Collateral, including, the Communication Franchise Agreements.
6.19 PERMITTED ACQUISITIONS; PERMITTED UNRESTRICTED SUBSIDIARY
ACQUISITIONS. In connection with any Permitted Acquisition or Permitted
Unrestricted Subsidiary Acquisition of a Communications System or Broadcast
System (an "Acquired System"), Borrower shall cause each of the following to be
satisfied: (i) organize a License Sub to hold each of the FCC Licenses in
respect of the Acquired System and organize a Station Sub to hold all assets of
the Acquired System other than the FCC Licenses; (b) cause each of such License
Sub and such Station Sub to execute and deliver all appropriate joinder
documents to make it an Obligor party to the Loan Documents (including the
Guaranty and the Guarantor Security Agreement) and of appropriate UCC-1
financing statements, fixture filings, Collateral Access Agreements, Collateral
Assignments of Tower Leases, Collateral Assignments of Key Leases, and
Mortgages; (c) cause the execution and delivery by the applicable Obligors of
one or more appropriate supplements/joinders to the Stock Pledge Agreement or
the Guarantor Stock Pledge Agreement, and the delivery to Foothill of possession
of the original stock certificates, respecting all of the issued and outstanding
shares of stock of such License Sub and such Station Sub, together with stock
powers with respect thereto endorsed in blank; PROVIDED, HOWEVER, that to the
extent, if any, that such shares are required to be delivered to the holder of
Permitted Unrestricted Subsidiary Indebtedness that is secured by a first
priority Lien on such shares in favor of such holder, Borrower, in lieu of the
foregoing requirement of delivery of such stock certificates and stock powers,
shall cause such holder to deliver to Foothill a duly executed bailee agreement,
in form and substance reasonably satisfactory to Foothill, in respect of the
second priority Lien in favor of Foothill on such shares.
6.20 LICENSE RENEWALS. Commencing on the date six months following
the Closing Date and continuing every six months thereafter, Borrower shall
deliver
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to Foothill an updated SCHEDULE 5.3 reflecting thereon, as of the date of such
delivery, the information described in Section 5.3.
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 will not cause, suffer, or permit any of the other Obligors to
do (and by its execution and delivery of the Guaranty or a joinder thereto, each
Guarantor hereby agrees that it will not do), any of the following without
Foothill's prior written consent:
7.1 INDEBTEDNESS. Except with respect to Permitted Unrestricted
Subsidiary Investments, 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 set forth on SCHEDULE 7.1 attached hereto;
(c) Indebtedness of the Obligors secured by Permitted Liens;
(d) Indebtedness of any Obligor (other than Unrestricted
Subsidiaries) owing to any other Obligor (other than Unrestricted Subsidiaries);
PROVIDED, HOWEVER, that (i) such intercompany Indebtedness shall not be
evidenced by promissory notes or any other instruments, and (ii) such
Intercompany Indebtedness shall not arise from one or a series of related
transactions between any two or more Obligors pursuant to which an Obligor would
be able to take an action that would not be permitted, or to refrain from taking
an action that would be required, under the Credit Documents but for such
transaction or transactions;
(e) Permitted Unrestricted Subsidiary Indebtedness; and
(f) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b), (c), (d), and (e) 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
or the "Guarantied Obligations" (as defined in the Guaranty) by any Guarantor,
(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
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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 or such Guarantied
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.
Anything contained in this SECTION 7.1 to the contrary notwithstanding, in no
event shall Borrower or any of the Restricted Subsidiaries co-make, endorse,
guaranty, or otherwise become liable or have any recourse with respect to any
Indebtedness or other liabilities (including Permitted Unrestricted Subsidiary
Indebtedness) of any of the Unrestricted Subsidiaries.
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 only encumber those assets
or property that secured the original Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation, reorganization, or recapitalization, 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 property or assets (collectively, a "Fundamental Change Transaction"),
except for: (a) the Restructuring Transactions; (b) Permitted Acquisitions
permitted under SECTION 7.13; (c) Permitted Unrestricted Subsidiary
Acquisitions; and (d) Fundamental Change Transactions involving solely
Unrestricted Subsidiaries.
7.4 DISPOSAL OF ASSETS. Except for Ordinary Course Dispositions,
sell, lease, assign, transfer, or otherwise dispose of any properties or assets
of any of the Obligors.
7.5 CHANGE NAME. Change any Obligor's name, FEIN, corporate
structure (within the meaning of Section 9402(7) of the Code), or identity, or
add any new fictitious name.
7.6 GUARANTEE. Guarantee or 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 an Obligor subject
to a Concentration Account Agreement or which are transmitted or turned over to
Foothill.
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7.7 NATURE OF BUSINESS. Make any change in the principal nature of
Borrower's and the other Obligors' business, taken as a whole, without the prior
written consent of Foothill, which shall not be unreasonably (from the
perspective of a secured lender) withheld. Without limiting the generality of
the foregoing, Borrower and the Obligors shall be permitted to change the format
of programming of one or more of their Broadcast Systems from any
non-"children's format" programming to "children's format" programming.
7.8 PREPAYMENTS AND AMENDMENTS.
(a) Except in connection with a refinancing permitted by SECTION
7.1(d), prepay, redeem, retire, defease, purchase, or otherwise acquire any
Indebtedness owing to any third Person, other than the Obligations in accordance
with this Agreement; and
(b) Directly or indirectly, amend, modify, alter, increase, or
change any of the terms or conditions of any agreement, instrument, document,
indenture, or other writing evidencing or concerning Indebtedness permitted
under SECTIONS 7.1(b), (c), OR (d).
7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 CONSIGNMENTS. Consign any Inventory or sell any Inventory on
bill and hold, sale or return, sale on approval, or other conditional terms of
sale.
7.11 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 capital stock of any Obligor, of any class,
whether now or hereafter outstanding; PROVIDED, HOWEVER, that any Subsidiary of
Borrower may pay dividends or other distributions to Borrower; PROVIDED FURTHER
that Borrower may make Permitted Legal Fee Stock Redemptions from time to time
so long as Borrower delivers to Foothill concurrently therewith a certificate of
the Secretary of Borrower certifying that Borrower has elected to satisfy its
obligations under the relevant invoices of HMSPA referenced therein by means of
a Permitted Legal Fee Stock Redemption and attesting to the aggregate amount of
Permitted Legal Fee Stock Redemptions made by Borrower (after giving effect to
the subject redemption).
7.12 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 service
bureau for the preparation or storage of any Obligor's accounting records
without said accounting firm or service bureau agreeing to provide Foothill
information regarding the Collateral or
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such Obligor's financial condition. Borrower hereby waives, and hereby agrees
to cause the other Obligors to waive (and by its execution and delivery of the
Guaranty or a joinder thereto, each Guarantor hereby 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 or any other Loan Document, and
agrees that Foothill may contact directly any such accounting firm or service
bureau in order to obtain such information.
7.13 INVESTMENTS. Except for Permitted Unrestricted Subsidiary
Investments, directly or indirectly make, acquire, or incur any liabilities
(including contingent obligations) for or in connection with (a) except for
Permitted Network Affiliate Investments, the acquisition of the securities
(whether debt or equity) of, or other interests in, a Person, (b) loans,
advances, capital contributions, or transfers of property to a Person, or (c)
the acquisition of all or substantially all of the properties or assets of a
Person; PROVIDED, HOWEVER, that the foregoing shall not prohibit any Obligor
from making any such investment in any other Obligor, so long as all of the
issued and outstanding capital stock of any Guarantor is and continues to be
owned by only one other Obligor.
7.14 TRANSACTIONS WITH AFFILIATES. Except for those transactions
described on SCHEDULE 7.14 attached hereto, directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of the Obligors
(other than an Obligor) except for transactions that are in the ordinary course
of the Obligors' business, upon fair and reasonable terms, that are fully
disclosed to Foothill, and that are no less favorable to the Obligors, or any of
them, than would be obtained in an arm's length transaction with a
non-Affiliate.
7.15 SUSPENSION. Suspend or go out of a substantial portion of its
business.
7.16 COMMUNICATION FRANCHISE AGREEMENTS. Except solely as, and solely
to the extent, expressly permitted pursuant to this Agreement (i) cancel or
terminate any of the Communication Franchise Agreements or consent to or accept
any cancellation or termination thereof, (ii) sell, assign, or otherwise dispose
of (by operation of law or otherwise) any part of its respective interest or
rights under any Communication Franchise Agreements, (iii) amend, supplement, or
otherwise modify any of the Communication Franchise Agreements in any way that
could reasonably be expected to be materially adverse to any Obligor, (iv) waive
any material default under or breach of any of the Communication Franchise
Agreements or waive, fail to enforce, forgive, or release any material right,
interest, or entitlement of any kind, howsoever arising under or in respect of
any of the Communication Franchise Agreements or vary or agree to the variation
in any respect of any of the material
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provisions of any of the Communication Franchise Agreements in a manner that
would be materially adverse to any Obligor, or (v) petition, request, or take
any other legal or administrative action which seeks, or may reasonably be
expected, to rescind, terminate, or suspend any of the Communication Franchise
Agreements or amend or modify any of the Communication Franchise Agreements in
any respect of any of the material provisions of any of the Communication
Franchise Agreements in a manner that would be materially adverse to any
Obligor. Borrower, at its expense, will, and will cause each of the other
Obligors to (and by its execution and delivery of the Guaranty or a joinder
thereto, each Guarantor hereby agrees that it will), perform and comply, in all
material respects, with all terms and provisions of each of the Communication
Franchise Agreements required to be performed or complied with by it, will
maintain each of the Communication Franchise Agreements in full force and
effect, will enforce each of the Communication Franchise Agreements in
accordance with their respective terms.
7.17 USE OF PROCEEDS. Use (a) the proceeds of the Advances and the
Term Loan made hereunder for any purpose other than (i) on the Closing Date, (w)
to repay in full the outstanding principal, accrued interest, and accrued fees
and expenses owing to Existing Lender (other than a mortgage financing of
approximately $225,000), (x) to repay in full the KPLS Sellers' Indebtedness
owing to the KPLS Sellers, (y) to repay in full the obligations of Group under a
Consulting Agreement, dated October 29, 1993, as amended, between Group and Mr.
John McGuinness, and (z) to pay transactional costs, expenses, and fees incurred
in connection with this Agreement, and (ii) thereafter, consistent with the
terms and conditions hereof, for its lawful and permitted corporate purposes,
and (b) the proceeds of the Acquisition Loans made hereunder for any purpose
other than to finance, in part, Permitted Acquisitions in accordance with
SECTION 2.4; PROVIDED, HOWEVER, that in no event shall the proceeds of any
Advance or any Acquisition Loan be used to finance, in whole or in part,
directly or indirectly, any Permitted Unrestricted Subsidiary Acquisition.
7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND
EQUIPMENT WITH BAILEES. Relocate its chief executive office to a new location
without providing 30 days prior written notification thereof to Foothill,
unless, at the time of such written notification, the applicable Obligor
provides any financing statements or fixture filings necessary to perfect and
continue perfected Foothill's security interests and also provides to Foothill a
Collateral Access Agreement with respect to such new location. 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.
7.19 NO PROHIBITED TRANSACTIONS UNDER ERISA. Directly or indirectly:
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(a) engage, or permit any Subsidiary of Borrower to engage, in
any prohibited transaction which is reasonably likely to result in a civil
penalty or excise tax described in Sections 406 of ERISA or 4975 of the IRC for
which a statutory or class exemption is not available or a private exemption has
not been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the IRC), whether or not waived;
(c) fail, or permit any Subsidiary of Borrower to fail, to pay
timely required contributions or annual installments due with respect to any
waived funding deficiency to any Benefit Plan;
(d) terminate, or permit any Subsidiary of Borrower to
terminate, any Benefit Plan where such event would result in any liability of
Borrower, any of its Subsidiaries or any ERISA Affiliate under Title IV of
ERISA;
(e) fail, or permit any Subsidiary of Borrower to fail, to make
any required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of Borrower to fail, to pay
any required installment or any other payment required under Section 412 of the
IRC on or before the due date for such installment or other payment;
(g) amend, or permit any Subsidiary of Borrower to amend, a Plan
resulting in an increase in current liability for the plan year such that either
of Borrower, any Subsidiary of Borrower or any ERISA Affiliate is required to
provide security to such Plan under Section 401(a)(29) of the IRC; or
(h) withdraw, or permit any Subsidiary of Borrower to withdraw,
from any Multiemployer Plan where such withdrawal is reasonably likely to result
in any liability of any such entity under Title IV of ERISA;
which, individually or in the aggregate, results in or reasonably would be
expected to result in a claim against or liability of Borrower, any of its
Subsidiaries or any ERISA Affiliate in excess of $10,000.
7.20 FINANCIAL COVENANTS. Fail to maintain:
(a) Stockholder Equity. Stockholder Equity, measured on a
fiscal quarter-end basis, of at least the amount set forth below:
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Qtr/Yr Minimum Stockholder Equity
------ --------------------------
Q4/1996 $14,100,000
Q1/1997 $14,100,000
Q2/1997 $14,100,000
Q3/1997 $14,100,000
Q4/1997 $14,100,000
Q1/1998 $13,200,000
Q2/1998 $13,200,000
Q3/1998 $13,200,000
Q4/1998 $13,200,000
Q1/1999 $12,700,000
Q2/1999 $12,700,000
Q3/1999 $12,700,000
Q4/1999 $12,700,000
Q1/2000 $12,700,000
Q2/2000 $12,700,000
Q3/2000 $12,700,000
Q4/2000 $12,700,000
(b) Working Capital. Working Capital, measured on a fiscal
quarter-end basis, of at least the amount set forth below:
Qtr/Yr Minimum Working Capital
------ -----------------------
Q4/1996 $2,000,000
Q1/1997 $2,000,000
Q2/1997 $2,000,000
Q3/1997 $2,000,000
Q4/1997 $2,000,000
Q1/1998 $900,000
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Qtr/Yr Minimum Working Capital
------ -----------------------
Q2/1998 $900,000
Q3/1998 $900,000
Q4/1998 $900,000
Q1/1999 $4,000,000
Q2/1999 $4,000,000
Q3/1999 $4,000,000
Q4/1999 $4,000,000
Q1/2000 $14,000,000
Q2/2000 $14,000,000
Q3/2000 $14,000,000
Q4/2000 $14,000,000
7.21 CAPITAL EXPENDITURES. Make capital expenditures in any fiscal
year in excess of (a) $1,250,000 during 1997, and (b) $750,000 during any other
fiscal year.
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:
8.1 (a) 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);
PROVIDED, HOWEVER, that in the case of Overadvances that are caused by the
charging of interest, fees, or Foothill Expenses to Borrower's loan account with
Foothill, such event shall not constitute an Event of Default unless, within
three (3) Business Days telephonic notice of such Overadvance, Borrower fails to
prepay, or otherwise eliminate, such Overadvance; or
(b) If any other Obligor fails to pay when due and payable or
when declared due and payable, any portion of the "Guarantied Obligations" (as
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defined in the Guaranty) (whether in respect 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 or any other Obligor fails or neglects to
perform, keep, or observe, in any material respect, any term, provision,
condition, covenant, or agreement contained in SECTIONS 6.2 (Collateral
Reports), 6.3 (Financial Statements), 6.16 (Governmental Authorization), 6.18
(Notices), or 6.20 (License Renewals) of this Agreement and such failure
continues for a period of five (5) days from the date Foothill sends Borrower
telephonic or written notice of such failure or neglect; (b) If Borrower or any
other Obligor fails or neglects to perform, keep, or observe, in any material
respect, any term, provision, condition, covenant, or agreement contained in
SECTIONS 6.4 (Tax Returns), 6.5 (Guarantor Reports), 6.7 (Title to Equipment),
6.12 (Location of Inventory and Equipment), 6.13 (Compliance with Laws), 6.14
(Employee Benefits), or 6.15 (Leases) of this Agreement and such failure
continues for a period of fifteen (15) days from the date of such failure or
neglect; (c) If Borrower or any other Obligor fails or neglects to perform,
keep, or observe, in any material respect, any term, provision, condition,
covenant, or agreement contained in SECTIONS 6.1 (Accounting System), 6.6
(Returns), or 6.8 (Maintenance of Equipment) of this Agreement and such failure
continues for a period of fifteen (15) days from the date Foothill sends
Borrower telephonic or written notice of such failure or neglect; or (d) If
Borrower or any other Obligor fails or neglects to perform, keep, or observe, in
any material respect, any other term, provision, condition, covenant, or
agreement contained in this Agreement, in any of the Loan Documents, or in any
other present or future agreement between one or more of the Obligors and
Foothill (other than any such term, provision, condition, covenant, or agreement
that is the subject of another provision of this SECTION 8);
8.3 If there is a Material Adverse Change;
8.4 If any material portion of any Obligor'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 an Insolvency Proceeding is commenced by any Obligor;
8.6 If an Insolvency Proceeding is commenced against any Obligor and
any of the following events occur: (a) such Obligor consents to the institution
of the Insolvency Proceeding against it; (b) the petition commencing the
Insolvency Proceeding is not timely controverted; (c) the petition commencing
the Insolvency Proceeding is not dismissed within 45 calendar days of the date
of the filing thereof; PROVIDED, HOWEVER, that, during the pendency of such
period, Foothill shall be relieved
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of its obligation to extend credit hereunder; (d) an interim trustee is
appointed to take possession of all or a substantial portion of the properties
or assets of, or to operate all or any substantial portion of the business of,
any Obligor; or (e) an order for relief shall have been issued or entered
therein;
8.7 If any Obligor is enjoined, restrained, or in any way prevented
by court order from continuing to conduct all or any material part of its
business affairs;
8.8 If a notice of Lien, levy, or assessment is filed of record with
respect to any properties or assets of any of the Obligors by the United States
Government, or any department, agency, or instrumentality thereof, or 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 properties or assets of any of the
Obligors and the same is not paid on the payment date thereof;
8.9 If a judgment or other claim becomes a Lien or encumbrance upon
any material portion of any Obligor's properties or assets;
8.10 If there is a default in any material agreement to which an
Obligor is a party with one or more third Persons and such default (a) occurs at
the final maturity of the obligations thereunder, or (b) results in a right by
such third Person(s), irrespective of whether exercised, to accelerate the
maturity of an Obligor's obligations thereunder;
8.11 If an Obligor makes 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 of the
subordination provisions applicable to such Indebtedness;
8.12 If any material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to Foothill
by any Obligor or any officer, employee, agent, or director of any Obligor, or
if any such warranty or representation is withdrawn;
8.13 If the obligation of any Guarantor or other third Person under
its guaranty or other Loan Document is limited or terminated by operation of law
or by such Guarantor or other third Person thereunder, or any such other third
Person becomes the subject of an Insolvency Proceeding; or
8.14 If any Obligor fails to keep in full force and effect, suffers
the termination or revocation of, terminates, forfeits, or suffers a materially
adverse amendment to, any Communications Franchise or Communications Franchise
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Agreement at any time held by any Obligor that is necessary to the operation of
any Communications System owned by any Obligor.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the
continuation, of an Event of Default Foothill may, at its election, without
notice of its election and without demand, do any one or more of the following,
all of which are authorized by Borrower (and hereby caused by Borrower to be
authorized by each of the other Obligors (and, by its execution and delivery of
the Guaranty or a joinder thereto, each of the Guarantors hereby authorizes
same)):
(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 or
the Real Property Collateral and without affecting the Obligations;
(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) Borrower agrees that, upon the occurrence of and during the
continuance of an Event of Default and at Foothill's request, Borrower will, and
will cause each other Obligor to (and, by its execution and delivery of the
Guaranty or a joinder thereto, each of the Guarantors hereby agrees to),
immediately file such applications for approval and shall take all other and
further actions required by Foothill to obtain such approvals or consents of
regulatory authorities as are necessary to transfer ownership and control to
Foothill, of the FCC Licenses held by it, or its interest in any Person holding
any such FCC License. To enforce the provisions of this SECTION 9.1(e),
Foothill is empowered to request the appointment of a receiver from any court of
competent jurisdiction. Such receiver shall be instructed to seek from the FCC
an involuntary transfer of control of any FCC License for the purpose
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of seeking a bona fide purchaser to whom control will ultimately be
transferred. Borrower hereby agrees to authorize, and shall cause each other
Obligor to authorize (and, by its execution and delivery of the Guaranty or a
joinder thereto, each of the Guarantors hereby agrees to authorize), such an
involuntary transfer of control upon the request of the receiver so appointed
and, if Borrower or such other Obligor shall refuse to authorize the
transfer, its approval may be required by the court. Upon the occurrence and
continuance of an Event of Default, Borrower shall, and shall cause each of
the other Obligors to (and, by its execution and delivery of the Guaranty or
a joinder thereto, each of the Guarantors hereby agrees to), further use its
reasonable best efforts to assist in obtaining approval of the FCC, if
required, for any action or transactions contemplated by this Agreement or
the Loan Documents, including, preparation, execution, and filing with the
FCC of the assignor's or transferor's portion of any application or
applications for consent to the assignment of any FCC License or transfer of
control necessary or appropriate under the FCC's rules and regulations for
approval of the transfer or assignment of any portion of the Collateral,
together with any FCC License or other authorization. Borrower acknowledges,
and shall cause each of the other Obligors to acknowledge (and, by its
execution and delivery of the Guaranty or a joinder thereto, each of the
Guarantors hereby acknowledges), that the assignment or transfer of FCC
Licenses is integral to Foothill's realization of the value of the
Collateral, that there is no adequate remedy at law for failure by Borrower
or any other Obligor to comply with the provisions of this SECTION 9.1(e) and
that such failure would not be adequately compensable in damages, and
therefore agrees that the agreements contained in this SECTION 9.1(e) may be
specifically enforced.
(f) Cause Borrower or any other Obligor to hold all Inventory in
trust for Foothill, segregate all Inventory from all other property of the
Obligors or in the Obligors' possession and conspicuously label said Inventory
as the property of Foothill;
(g) Without notice to or demand upon any Obligor or any other
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, and cause each of the other Obligors to (and, by its
execution and delivery of the Guaranty or a joinder thereto, each of the
Guarantors hereby 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, and hereby agrees to
cause each of the other Obligors promptly to authorize (and, by its execution
and delivery of the Guaranty or a joinder thereto, each of the Guarantors hereby
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
conflict with its security interests and to pay all expenses incurred in
connection therewith. With
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respect to any owned or leased premises of any of the Obligors, Borrower hereby
grants, and hereby causes each of the other Obligors immediately to grant (and,
by its execution and delivery of the Guaranty or a joinder thereto, each of the
Guarantors hereby grants), Foothill a license to enter into possession of such
premises and to occupy the same, without charge, for up to 120 days in order to
exercise any of Foothill's rights or remedies provided herein, at law, in
equity, or otherwise;
(h) Without notice to any Obligor (such notice hereby being
expressly waived by Borrower and caused by Borrower to be waived by each of the
other Obligors, and, by its execution and delivery of the Guaranty or a joinder
thereto, each of the Guarantors hereby waives same), 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 or any of the other Obligors held by
Foothill, or (ii) indebtedness at any time owing to or for the credit or the
account of Borrower or any of the other Obligors held by Foothill;
(i) Hold, as cash collateral, any and all balances and deposits
of Borrower or any of the other Obligors held by Foothill to secure the full and
final repayment of all of the Obligations;
(j) 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. Borrower hereby grants, and agrees to
cause each of the other Obligors to grant (and, by its execution and delivery of
the Guaranty or a joinder thereto, each of the Guarantors hereby grants), to
Foothill a license or other right to use, without charge, the Obligors' 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 the Obligors' rights under all licenses and all franchise
agreements shall inure to Foothill's benefit;
(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 any of the Obligors'
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:
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(1) Foothill shall give the applicable Obligor 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 such Obligor as provided in SECTION 12, at least 5 days
before the date fixed for the sale, or at least 5 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
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 5
days before the date of the sale in a newspaper of general circulation in the
county in which the sale is to be held;
(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.
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 any Obligor fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) 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 or any other Loan Document, then, to
the extent that Foothill
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determines that such failure by that Obligor could result in a Material Adverse
Change, in its discretion and without prior notice to any Obligor, 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, 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,
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 or any other Obligor may in any way be
liable.
11.2 FOOTHILL'S LIABILITY FOR COLLATERAL. Borrower hereby agrees
that, and agrees to cause each of the other Obligors to agree that (and, by its
execution and delivery of the Guaranty or a joinder thereto, each of the
Guarantors hereby agrees that), 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 and the other Obligors.
11.3 INDEMNIFICATION. Borrower shall pay, indemnify, defend, and hold
Foothill, each Participant, and each of their respective officers, directors,
employees, counsel, agents, and attorneys-in-fact (each, an "Indemnified
Person") harmless (to the fullest extent permitted by law) from and against any
and all claims, demands, suits, actions, investigations, proceedings, and
damages, and all reasonable attorneys fees and disbursements and other costs and
expenses actually incurred in connection therewith (as and when they are
incurred and irrespective of whether suit is brought), at any time asserted
against, imposed upon, or incurred by any of them in connection with or as a
result of or related to the execution, delivery, enforcement, performance, and
administration of this Agreement and any other Loan Documents or
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the transactions contemplated herein, and with respect to any investigation,
litigation, or proceeding related to this Agreement, any other Loan Document, or
the use of the proceeds of the credit provided hereunder (irrespective of
whether any Indemnified Person is a party thereto), or any act, omission, event
or circumstance in any manner related thereto (INCLUDING THE NEGLIGENCE OF
BORROWER) (all the foregoing, collectively, the "Indemnified Liabilities").
Borrower shall have no obligation to any Indemnified Person under this SECTION
11.3 with respect to any Indemnified Liability that a court of competent
jurisdiction finally determines to have resulted proximately from the gross
negligence or willful misconduct of such Indemnified Person. This provision
shall survive the termination of this Agreement and the repayment of the
Obligations.
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), overnight courier, or telefacsimile to Borrower or to
Foothill, as the case may be, at its address set forth below:
IF TO BORROWER: CHILDREN'S BROADCASTING CORPORATION
724 First Street, Fourth Floor
Minneapolis, Minnesota 55401
Attn: Mr. James G. Gilbertson
Fax No. 612.338.4318
WITH COPIES TO: CHILDREN'S BROADCASTING CORPORATION
724 First Street, Fourth Floor
Minneapolis, Minnesota 55401
Attn: Lance W. Riley, Esq.
Fax No. 612.330.9558
IF TO FOOTHILL: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Business Finance Division Manager
Fax No. 310.478.9788
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WITH COPIES TO: BROBECK, PHLEGER & HARRISON LLP
550 South Hope Street
Los Angeles, California 90071
Attn: John Francis Hilson, Esq.
Fax No. 213.745.3345
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 3 days
after the deposit thereof in the mail. Borrower, for itself and each of the
other Obligors, 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 personally delivered, or, where permitted by law,
transmitted telefacsimile or other similar method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN AN ANOTHER LOAN DOCUMENT), THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS
OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER
OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE
STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH
FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT
MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF BORROWER (FOR
ITSELF AND ON BEHALF OF EACH OF THE OTHER OBLIGORS) 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 (FOR ITSELF
AND ON BEHALF OF EACH OF THE OTHER OBLIGORS) AND FOOTHILL HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
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CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS
OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.
EACH OF BORROWER (FOR ITSELF AND ON BEHALF OF EACH OF THE OTHER OBLIGORS) AND
FOOTHILL REPRESENTS THAT IT 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 OBLIGORS' DOCUMENTS.
All documents, schedules, invoices, agings, or other papers delivered
to Foothill may be destroyed or otherwise disposed of by Foothill 4 months after
they are delivered to or received by Foothill, unless the applicable Obligor
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 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 the other Loan Documents and its rights and duties hereunder and thereunder
and no consent or approval by Borrower or any other Obligor 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 and under the other
Loan Documents. In connection with any such assignment or participation,
Foothill may disclose all documents and information which Foothill now or
hereafter may have relating to any Obligor or any Obligor's business. To the
extent that Foothill assigns its rights and obligations hereunder or under any
other Loan Document to a third Person, Foothill thereafter shall be released
from such assigned obligations to the relevant Obligor and such assignment shall
effect a novation between the relevant Obligor and such third Person.
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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 or
any other Obligor, whether under any rule of construction or otherwise. On the
contrary, this Agreement has been reviewed by all parties (including Borrower
for itself and on behalf of each of the other Obligors) and 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 an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The foregoing shall apply to each other Loan Document MUTATIS
MUTANDIS.
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
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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.
CHILDREN'S BROADCASTING CORPORATION, a Minnesota
corporation
By /s/ James G. Gilbertson
------------------------------------------------
Title: Chief Operating Officer
FOOTHILL CAPITAL CORPORATION,
a California corporation
By /s/ Tricia McLoughlin
------------------------------------------------
Title: Senior Vice President
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