<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended March 31, 2000
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________to_________
Commission File Number 0-23000
The Harvey Entertainment Company
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(Exact name of registrant as specified in its charter)
California 95-4217605
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11835 W. Olympic Blvd., Suite 550, Los Angeles, California 90064
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(Address of principal executive offices)
Registrant's phone number, including area code (310) 444-4100
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Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 15, 2000
- ---------------- --------------------------------------
Common Stock, no par value 4,549,441 (7,551,515 shares, including
3,002,074 shares into which the Series A
Preferred Stock could be converted)
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THE HARVEY ENTERTAINMENT COMPANY AND SUBSIDIARIES
INDEX
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets - March 31, 2000 (Unaudited) and
December 31, 1999 1 - 2
Condensed Consolidated Statements of Operations (Unaudited) - Three
Months Ended March 31, 2000 and 1999 3
Condensed Consolidated Statements of Cash Flows (Unaudited) - Three
Months Ended March 31, 2000 and 1999 4 - 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 7 - 9
PART II - OTHER INFORMATION 10
</TABLE>
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THE HARVEY ENTERTAINMENT COMPANY AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
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<TABLE>
<CAPTION>
March 31,
2000 December 31,
ASSETS (Unaudited) 1999
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<S> <C> <C>
Cash and cash equivalents $ 2,167,000 $ 5,825,000
Marketable securities 1,846,000 2,037,000
Other investments 500,000 --
Accounts receivable, net of allowance for doubtful accounts
of $287,000 and $235,000 in 2000 and 1999, respectively 690,000 634,000
Prepaid expenses and other assets 1,011,000 907,000
Income tax receivable 540,000 540,000
Film inventory, net of accumulated amortization of $9,124,000
and $9,124,000 in 2000 and 1999, respectively 11,819,000 9,398,000
Fixed assets, net of accumulated depreciation of $793,000
and $755,000 in 2000 and 1999, respectively 489,000 432,000
Goodwill, net of accumulated amortization of $1,384,000
and $1,352,000 in 2000 and 1999, respectively 1,211,000 1,243,000
Trademarks, copyrights and other intangibles net of
accumulated amortization of $462,000 and $401,000 in
2000 and 1999, respectively 1,247,000 1,283,000
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TOTAL ASSETS $21,520,000 $22,299,000
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</TABLE>
1
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THE HARVEY ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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<TABLE>
<CAPTION>
March 31,
2000 December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited) 1999
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<S> <C> <C>
LIABILITIES:
Accounts payable and accrued expenses $ 569,000 $ 440,000
Accrued marketing expenses 892,000 1,200,000
Participations payable 664,000 556,000
Accrued rent 56,000 37,000
------------ ------------
Total liabilities 2,181,000 2,233,000
------------ ------------
Series A convertible preferred stock, $100 stated value, 300,000
shares authorized, 203,000 and 199,000 shares issued and outstanding
at March 31, 2000 and December 31, 1999, respectively, liquidation
preference of $20,264,000 and $19,915,000 at March 31, 2000 and
December 31, 1999, respectively 16,725,000 16,376,000
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par value, 3,000,000 shares authorized (300,000 shares
have been designated as Series A convertible preferred stock) -- --
Common stock, no par value, 30,000,000 shares
authorized, 4,187,000 issued and outstanding 22,268,000 22,268,000
Additional paid in capital 4,523,000 4,523,000
Accumulated other comprehensive loss (3,228,000) (3,037,000)
Accumulated deficit (20,949,000) (20,064,000)
------------ ------------
Total stockholders' equity 2,614,000 3,690,000
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 21,520,000 $ 22,299,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
2
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THE HARVEY ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
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2000 1999
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<S> <C> <C>
OPERATING REVENUES:
Merchandising and licensing $ 882,000 $ 430,000
Publishing -- 132,000
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Net operating revenues 882,000 562,000
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OPERATING EXPENSES:
Cost of sales 206,000 303,000
Selling, general and administrative expenses 1,143,000 2,311,000
Amortization of film inventory -- 250,000
Amortization of goodwill, trademarks, copyrights and other 93,000 57,000
Depreciation expense 38,000 53,000
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Total operating expenses 1,480,000 2,974,000
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LOSS FROM OPERATIONS (598,000) (2,412,000)
OTHER (EXPENSES)/INCOME (2,000) 22,000
INTEREST INCOME/(EXPENSE), NET 64,000 (19,000)
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NET LOSS $ (536,000) $(2,409,000)
Preferred stock dividends (349,000) --
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NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $ (885,000) $(2,409,000)
=========== ===========
NET LOSS PER SHARE OF COMMON STOCK:
Basic and Diluted $ (0.21) $ (0.58)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and Diluted 4,187,000 4,187,000
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</TABLE>
See accompanying notes to consolidated financial statements.
3
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THE HARVEY ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
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2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (536,000) $(2,409,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Write-off of accounts receivable -- 200,000
Depreciation 38,000 53,000
Amortization of film inventory -- 250,000
Amortization of goodwill, trademark, copyrights and other 93,000 57,000
Changes in operating assets and liabilities:
Other investments (500,000) --
Accounts receivable, net (56,000) 128,000
Prepaid expenses and other assets (104,000) 6,000
Income taxes receivable, net of income taxes payable -- 24,000
Investment in film inventory (2,421,000) 104,000
Accounts payable and accrued expenses 129,000 (163,000)
Accrued marketing expense (308,000) --
Participations payable 108,000 (102,000)
Accrued rent and other liabilities 19,000 (4,000)
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Net cash used in operating activities (3,538,000) (1,856,000)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment (95,000) (6,000)
Investments in trademarks and copyrights (25,000) (145,000)
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Net cash used in investing activities (120,000) (151,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft -- 56,000
Repayment on line of credit, net -- 1,500,000
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Net cash provided by financing activities -- 1,556,000
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NET DECREASE IN CASH AND CASH EQUIVALENTS (3,658,000) (451,000)
CASH AND CASH EQUIVALENTS, Beginning of period 5,825,000 451,000
------------ ------------
CASH AND CASH EQUIVALENTS, End of period $ 2,167,000 $ --
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
(continued)
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THE HARVEY ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------
2000 1999
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<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION :
Cash received/(paid) during the quarter for:
Interest $ 64,000 $(19,000)
Income taxes $ -- $(18,000)
</TABLE>
5
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THE HARVEY ENTERTAINMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BACKGROUND AND OPERATIONS - The Harvey Entertainment Company, together with its
wholly-owned subsidiaries Harvey Comics, Inc. and Baby Huey Productions, Inc.
(the "Company") owns and exploits a library of widely recognized classic
characters and other intellectual property assets, including a related film
inventory of animated short features. The Company is the successor to Harvey
Comics, Inc. which was founded in 1939 by the Harvey family. In 1989, the
Company's predecessor purchased Harvey Comics, Inc. to exploit its intellectual
property and in 1993 the Company completed its initial public offering of common
stock. The roster of the Company's classic characters includes the well know
characters Casper the Friendly Ghost, Richie Rich, Baby Huey, Wendy the Good
Little Witch, and Hot Stuff, among many others.
In the opinion of the Company's management, the accompanying unaudited condensed
consolidated financial statements as of March 31, 2000 and for the three month
periods ended March 31, 2000 and 1999 contain all adjustments, which include
normal recurring accruals, necessary to present fairly the consolidated
financial position of the Company as of March 31, 2000 and the consolidated
results of operations and consolidated cash flows for the three month periods
ended March 31, 2000 and 1999.
The results of operations for the interim periods of the Company's fiscal year
are not necessarily indicative of the results to be expected for the entire
year. Certain reclassifications of 1999 amounts have been made in order to
conform with the 2000 financial statement presentation.
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION - The consolidated
financial statements include the accounts of The Harvey Entertainment Company
and its wholly owned subsidiaries, Harvey Comics, Inc. and Baby Huey
Productions, Inc. All significant intercompany accounts and transactions have
been eliminated in consolidation.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
COMPREHENSIVE INCOME - Effective January 1, 1998, the Company adopted the
provisions SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130
establishes standards for reporting comprehensive income and its components in
financial statements. Comprehensive income, as defined, includes all changes in
equity during a period from non-owner sources.
NET INCOME (LOSS) PER SHARE - Basic earnings per share is based upon the net
earnings applicable to common shares outstanding during the period. Diluted
earnings per share reflects the effect of the assumed exercise of stock options
and warrants only in the periods in which such effect would be dilutive.
* * * * * *
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RECENT DEVELOPMENTS FOR THE COMPANY
STRATEGIC ACQUISITION
On September 24, 1999, the Company signed a letter of intent for the acquisition
of PM Entertainment, a privately-owned producer and distributor of motion
pictures in the United States home video, television and internet broadcasting
markets as well as all media in international markets. The PM Entertainment
acquisition closed effective as of April 3, 2000. The purchase price consisted
of $10,000,000, $6,500,000 of which was paid in cash at closing and the balance
provided through the issuance by the Company of: (1) $1,450,000 in shares of the
Company's common stock and (2) a $2,050,000 subordinated note to be paid over
five future quarterly periods. The Company also assumed existing bank debt in
the amount of approximately $5,300,000. In connection with the acquisition of PM
Entertainment, the Company also purchased from Imperial Bank a loan, secured by
the motion picture "Inferno", by paying a down payment of $2,000,000 and
obtaining a loan from Imperial Bank in the amount of approximately $4,800,000.
No financial results from the operations of PM Entertainment are included in the
Company's accompanying Condensed Consolidated Financial. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
CREDIT FACILITY
Effective as of April 3, 2000 the Company entered into a new five year,
$25,000,000 revolving credit facility with The Chase Manhattan Bank ("Chase
Bank") to provide operating funds and a portion of the acquisition financing of
the PM Entertainment acquisition. The facility is secured by substantially all
of the assets of the Company (including PM Entertainment) and replaces a
$2,500,000 facility with City National Bank that expired in April 1999. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
RESULTS OF OPERATIONS
The Company's business plan is in the process of being implemented. Thus any
possible results will not be realized until subsequent periods, if ever.
The Company is in production on one animated direct-to-video featuring the
Company's classic character Casper entitled "Casper's Haunted Christmas."
Development and production of all other new products of the Company are subject
to financing and distribution alternatives. The Company has continued to develop
and exploit its licensing and merchandise rights for the Company's portfolio of
classic characters.
Revenues - Net merchandising and licensing revenues were $882,000 and $430,000
in 2000 and 1999, respectively, an increase of $452,000. In 2000, $500,000 of
revenues were generated from the licensing of the Richie Rich character for use
in an internet company's website. The merchandising revenues in 2000 and 1999
consist of new licenses for the worldwide merchandising of the Harvey Classic
Characters entered into by the Company's in-house licensing division. Although
merchandising licenses are generally granted for a period of one to three years,
the minimum guaranteed license revenues are recognized when the license period
begins, provided certain conditions have been met. Due to this accounting
treatment, revenue fluctuations from the Company's merchandising activities will
likely recur in the future on a quarterly and annual basis. The ongoing success
of the merchandising program is in part dependent upon the
7
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attractiveness, future marketability and the release of new product involving
the Harvey Classic Characters or the potential acquisition of new characters.
Net publishing revenues related to the Company's former monthly magazine were
zero in 2000 and $132,000 in 1999. Publishing sales in 1999 were on a fully
returnable basis recorded upon shipment, net of a reserve based on estimated
returns. Publishing revenues also included sales of advertising space and
subscriptions to the Company's magazine. The publication of the magazine was
ceased with the July 1999 issue, resulting from management's decision to focus
on the Company's core entertainment business operations.
Cost of Sales - Merchandising costs of sales were $206,000 and $170,000 in 2000
and 1999, respectively. The increase in cost of sales is due to an increase in
merchandising activity in 2000.
Publishing costs of sales were zero in 2000 and $133,000 in 1999.
Selling, General and Administrative Expenses - Selling, general and
administrative expenses were $1,143,000 and $2,311,000 for 2000 and 1999,
respectively, a decrease of $1,168,000. The decrease in selling, general and
administrative expenses in 2000 is primarily due to lower costs incurred for
consulting services throughout the year and an overall decrease in other
overhead expenses.
Depreciation and Amortization - Depreciation expense was $38,000 and $53,000 in
2000 and 1999, respectively. The decrease in depreciation was due to the
writeoff of certain related leasehold improvements. Amortization of the film
library was zero and $250,000 in 2000 and 1999, respectively. Included in the
1999 film amortization amount is related to the recognition of an additional
writeoff of the 1999 direct-to-video, "Baby Huey's Great Easter Adventure."
Amortization of trademarks, copyrights and other was $61,000 in 2000 and $25,000
in 1999. Amortization of goodwill was $32,000 in both 2000 and 1999.
Other (Expense)/Income - Other (expenses)/income was $(2,000) and $22,000 in
2000 and 1999, respectively. Other income in 1999 resulted primarily from
currency exchange rate adjustments.
Interest Income/(Expense), Net - was $64,000 and ($19,000) in 2000 and 1999,
respectively. Interest income in 2000 is primarily a result of the investment of
capital into money market funds. Interest expense in 1999 was a result of
financing charges related to the outstanding City National Bank Line of Credit
balance as of March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $3,538,000 and $1,856,000 in 2000 and
1999, respectively. The increase in cash used in operating activities was
primarily due to the increase in film production activity.
Net cash used in investing activities was $120,000 and $151,000 in 2000 and
1999, respectively.
Net cash provided by financing activities was zero and $1,556,000 in 2000 and
1999, respectively. The cash provided by financing activities in 1999 resulted
from the cash borrowings from the Company's line of credit.
Effective as of April 3, 2000 the Company entered into a new five year,
$25,000,000 revolving credit facility with The Chase Manhattan Bank (the "Chase
Credit Facility") to provide operating funds and a portion of the acquisition
financing of the PM Entertainment acquisition. Borrowings under the Chase Credit
Facility are limited to $15,000,000 until additional participant lenders are
added to the Chase Credit
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Facility, at which time the borrowings available will be increased, up to a
maximum of $25,000,000. Borrowings under the Chase Credit Facility are
determined under a borrowing base calculation, which includes certain allowable
accounts receivable, film and intellectual property rights, and are secured by
substantially all of the assets of the Company and PM Entertainment. Interest is
payable on the outstanding borrowings under the Chase Credit Facility at the
rate of either 1.5% per annum above the prime rate (as defined in the Chase
Credit Facility) or 2.5% per annum above the London Interbank Offered Rate, at
the Company's election. The Chase Credit Facility requires the Company to meet
certain financial ratios.
On September 24, 1999, the Company signed a letter of intent for the acquisition
of all of the outstanding stock of PM Entertainment, a privately-owned producer
and distributor of motion pictures in the United States home video, television
and internet broadcasting markets as well as all media in international markets.
The closing of the PM Entertainment acquisition occurred effective as of April
3, 2000. The purchase price consisted of $10,000,000, $6,500,000 of which was
paid in cash at closing and the balance provided through the issuance by the
Company of: (1) $1,450,000 in shares of the Company's common stock and (2) a
$2,050,000 subordinated note to be paid over five future quarterly periods. The
Company also assumed existing bank debt in the amount of approximately
$5,300,000. In connection with the acquisition of PM Entertainment, the Company
also purchased from Imperial Bank a loan, secured by the motion picture
"Inferno", by paying a down payment of $2,000,000 and obtaining a loan from
Imperial Bank in the amount of approximately $4,800,000. PM Entertainment
operates out of a 120,000 square foot office, production and post-production
facility located just outside the Los Angeles area. As part of the PM
Entertainment acquisition, the Company has entered into a two-year lease
arrangement with a purchase option for the facilities. No financial results from
the operations of PM Entertainment are included in the Company's accompanying
Condensed Consolidated Financial Statements. In accordance with the Accounting
Principles Board Opinion No. 16 ("APB 16"), this acquisition will be accounted
for under the purchase method of accounting.
Management believes that the Company's current and anticipated sources of
working capital will provide adequate liquidity for the Company's operating
financial needs for at least the next twelve months. In addition to the
acquisition of PM Entertainment noted above, from time to time the Company
considers acquisition and investment possibilities, including film libraries and
companies ancillary to the Company's business, subject to the availability of
financing, as necessary. No assurance can be given that such financing will be
available or, if available, will be at costs comparable to current financings or
on terms acceptable to the Company.
INFLATION AND SEASONALITY
Inflation has not been material to the Company during the past five years.
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PART II - OTHER INFORMATION
ITEM 1. - Legal Proceedings
In December 1999, the Company received a notice from the heirs of the
Oriolo family (the "Oriolo Heirs"), attempting to revoke the Company's
rights in the Casper character. The Company believed that the claim
was without merit and vigorously defended itself by filing a
counterclaim against the Oriolo Heirs. In March 2000, the parties to
the dispute entered into a settlement agreement whereby the Oriolo
Heirs reaffirmed the Company's exclusive ownership rights to the
copyright and trademark to the Casper character in perpetuity.
The Company is not currently involved in any other material legal
proceedings.
ITEM 2. - Changes in Securities and Use of Proceeds
None
ITEMS 3. and 4. are omitted as not applicable.
ITEM 5. - Other Information None
ITEM 6. - Exhibits and Reports and Form 8-K
ITEM 6. (A) - Exhibit 10.82 Credit, Security, Guaranty and Pledge Agreement
dated as of April 3, 2000 among the Company, the
other Borrowers referred to therein, the
Guarantors referred to therein, the Lenders
referred to therein and The Chase Manhattan Bank
as Administrative Agent and Issuing Bank
Exhibit 27 Financial Data Schedule (Electronic Filing Only)
ITEM 6. (B) - Reports on Form 8-K
None
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
THE HARVEY ENTERTAINMENT COMPANY
AND SUBSIDIARIES (Registrant)
May 19, 2000 /s/Ronald B. Cushey
-------------------------------
Name: Ronald B. Cushey
Title: Executive Vice President and Chief Financial Officer
11
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EXHIBIT 10.82
================================================================================
CREDIT, SECURITY, GUARANTY AND PLEDGE AGREEMENT
DATED AS OF APRIL 3, 2000
AMONG
THE HARVEY ENTERTAINMENT COMPANY
THE OTHER BORROWERS REFERRED TO HEREIN
AND
THE GUARANTORS REFERRED TO HEREIN
AND
THE LENDERS REFERRED TO HEREIN
AND
THE CHASE MANHATTAN BANK,
AS ADMINISTRATIVE AGENT
AND
AS ISSUING BANK
================================================================================
<PAGE> 2
CREDIT, SECURITY, GUARANTY AND PLEDGE AGREEMENT, dated as of April 3, 2000 (as
amended, supplemented or otherwise modified, renewed or replaced from time to
time, the "Credit Agreement"), among (i) The Harvey Entertainment Company and
the other Borrowers referred to herein; (ii) the Guarantors referred to herein;
(iii) the Lenders referred to herein and (iv) THE CHASE MANHATTAN BANK, a New
York banking corporation, as agent for the Lenders (in such capacity, the
"Administrative Agent") and as the issuer of letters of credit (in such capacity
the "Issuing Bank").
INTRODUCTORY STATEMENT
All terms not otherwise defined above or in this Introductory Statement
are as defined in Article 1 hereof or as defined elsewhere herein.
The Borrowers have requested that the Lenders make available a
$25,000,000 five-year secured revolving credit facility (the "Facility") (of
which only $15,000,000 has been committed as of the date hereof) the proceeds of
which will be applied (i) first, to refinance the existing debt of PM in the
approximate amount of $5,276,352; (ii) second, to finance a portion of the
acquisition costs, in an aggregate amount not to exceed $6,500,000, relating to
the PM Acquisition (as defined below), and (iii) third, for general working
capital purposes including, but not limited to, payment of amounts owing by PM
(as defined below) under the Shareholder Notes (as defined below); provided that
the Shareholder Notes shall not be prepaid, in whole or in part.
With regard to the portion of the Facility which is not committed as of
the date hereof, the Administrative Agent is being given authority to accept
commitments from additional Lenders in accordance with the provisions set forth
below.
To provide assurance for the repayment of the Loans and the other
Obligations of the Borrowers hereunder, the Borrowers will, among other things,
provide or cause to be provided to the Administrative Agent, for the benefit of
itself, the Issuing Bank and the Lenders, the following (each as more fully
described herein):
(i) a guaranty of the Obligations by each of the Guarantors pursuant
to Article 9 hereof, if applicable;
(ii) a security interest in the Collateral from each of the Credit
Parties pursuant to Article 8 hereof; and
(iii) a pledge by each of the Pledgors of the Pledged Securities owned
by it pursuant to Article 10 hereof.
<PAGE> 3
Subject to the terms and conditions set forth herein, the Administrative
Agent is willing to act as agent for the Lenders, the Issuing Bank is willing to
issue the Letters of Credit and each Lender is willing to make Loans to the
Borrowers and to participate in the Letters of Credit as provided herein, in an
aggregate amount at any one time outstanding not in excess of its Commitment
hereunder.
Accordingly, the parties hereto hereby agree as follows:
1. DEFINITIONS
For the purposes hereof unless the context otherwise requires, all
Section references herein shall be deemed to correspond with Sections herein,
the following terms shall have the meanings indicated, all accounting terms not
otherwise defined herein shall have the respective meanings accorded to them
under GAAP and all terms defined in the UCC and not otherwise defined herein
shall have the respective meanings accorded to them therein. Unless the context
otherwise requires, any of the following terms may be used in the singular or
the plural, depending on the reference:
"Acceptable L/C" shall mean an irrevocable letter of credit which (i) is
in form and on terms acceptable to the Administrative Agent, (ii) is payable in
Dollars at an office of the issuing or confirming bank in New York City, and
(iii) is issued or confirmed by (a) any Person that on the date of issuance or
confirmation of the letter of credit, is a Lender; (b) any New York
Clearinghouse bank; or (c) any other bank which the Administrative Agent may in
its sole discretion determine to be of acceptable credit quality.
"Acceptable Obligor" shall mean any Person or Affiliated Group listed on
Schedule 2 hereto (as modified from time to time in accordance with Section 2.15
hereof).
"Administrative Agent" shall mean The Chase Manhattan Bank, in its
capacity as agent for the Lenders hereunder or such successor Administrative
Agent as may be appointed pursuant to Section 12.11 hereof.
"Affiliate" shall mean any Person which, directly or indirectly, is in
control of, is controlled by, or is under common control with, another Person.
For purposes of this definition, a Person shall be deemed to be "controlled by"
another Person if such latter Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of such
controlled Person whether by contract or otherwise.
"Affiliated Group" shall mean a group of Persons, each of which is an
Affiliate (other than by reason of having common directors or officers) of some
other Person in the group.
"Aggregate Total Exposure" shall mean the sum of Total Film Exposure and
Total TV Exposure.
-2-
<PAGE> 4
"Allowable Amount" shall mean, with respect to any Acceptable Obligor,
such amount as may be specified on Schedule 2 hereto (as applicable) as the
maximum aggregate exposure for such Acceptable Obligor (as modified from time to
time in accordance with Section 2.15 hereof).
"Alternate Base Rate" shall mean, for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the
Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day
plus 1% and (c) the Federal Funds Effective Rate in effect for such day plus 1/2
of 1%. For purposes hereof, "Prime Rate" shall mean the rate of interest per
annum publicly announced from time to time by the Administrative Agent as its
prime rate in effect at its principal office in New York City. "Base CD Rate"
shall mean the sum of (a) the product of (i) the Three-Month Secondary CD Rate
and (ii) Statutory Reserves and (b) the Assessment Rate. "Three-Month Secondary
CD Rate" shall mean, for any day, the secondary market rate for three-month
certificates of deposit reported as being in effect on such day (or, if such day
is not a Business Day, the next preceding Business Day) by the Board through the
public information telephone line of the Federal Reserve Bank of New York (which
rate will, under current practices of the Board, be published in Federal Reserve
Statistical Release H.15(519) during the week following such day), or, if such
rate shall not be so reported on such day or such next preceding Business Day,
the average of the secondary market quotations for three-month certificates of
deposit of major money center banks in New York City received at approximately
10:00 a.m., New York City time, on such day (or, if such day shall not be a
Business Day, on the next preceding Business Day) by the Administrative Agent
from three New York City negotiable certificate of deposit dealers of recognized
standing selected by it. "Statutory Reserves" shall mean a fraction (expressed
as a decimal), the numerator of which is the number one and the denominator of
which is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board and any other banking authority to which
the Administrative Agent is subject for new negotiable nonpersonal time deposits
in Dollars of over $100,000 with maturities approximately equal to three months.
Statutory Reserves shall be adjusted automatically on and as of the effective
date of any change in any reserve percentage. "Federal Funds Effective Rate"
shall mean, for any day, the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers, as published on the next succeeding Business Day by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for the day of such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it. If for any reason the
Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Base CD
Rate or the Federal Funds Effective Rate or both for any reason, including the
inability or failure of the Administrative Agent to obtain sufficient quotations
in accordance with the terms hereof, the Alternate Base Rate shall be determined
without regard to clause (b) or (c), or both, of the first sentence of this
definition, as appropriate, until the circumstances giving rise to such
inability no longer exist. Any change in the Alternate Base Rate due to a change
in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds
Effective Rate shall be effective on the
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effective date of such change in the Prime Rate, the Three-Month Secondary CD
Rate or the Federal Funds Effective Rate, respectively.
"Alternate Base Rate Loan" shall mean a Loan based on the Alternate Base
Rate in accordance with the provisions of Article 2 hereof.
"Applicable Law" shall mean all provisions of statutes, rules,
regulations and orders of the United States, any state thereof or municipality
therein or of any foreign governmental body or of any regulatory agency
applicable to the Person in question, and all orders and decrees of all courts
and arbitrators in proceedings or actions in which the Person in question is a
party.
"Applicable Margin" shall mean (i) in the case of Alternate Base Rate
Loans, 1.5% per annum and (ii) in the case of Eurodollar Loans, 2.5% per annum.
"Approved Completion Guarantor" shall mean a financially sound and
reputable completion guarantor approved by the Required Lenders. The Required
Lenders hereby pre-approve as a completion guarantor (i) Fireman's Fund
Insurance Company, acting through its agent, International Film Guarantors, L.P.
(the general partner of which is International Film Guarantors, Inc.) (ii)
Cinema Completions International Inc./Continental Casualty Company and (iii)
Film Finances, Inc. (only to the extent the completion guarantee is accompanied
by a "cut-through endorsement" in form and substance and from an insurer
acceptable to the Administrative Agent); provided, however, that any such
pre-approval may be revoked by the Administrative Agent if deemed appropriate in
its sole discretion or if so instructed by the Required Lenders, at any time
upon 30 days prior written notice to the Borrower; but further, provided, that
such pre-approval may not be revoked with regard to an item of Product if a
Completion Bond has already been issued for such item of Product.
"Assessment Rate" shall mean, for any date, the annual assessment rate
(rounded upwards, if necessary, to the next higher 1/100 of 1%) most recently
estimated by the Administrative Agent as the then current net annual assessment
rate that will be employed in determining amounts payable by the Administrative
Agent to the Federal Deposit Insurance Corporation (or any successor) for
insurance by such Corporation (or such successor) of time deposits made in
Dollars at the Administrative Agent's domestic offices.
"Assignment and Acceptance" shall mean an agreement substantially in the
form of Exhibit J hereto, executed by the assignor, assignee and other parties
as contemplated thereby.
"Authorized Officer" shall mean the Parent's Chairman, Chief Financial
Officer or Chief Operating Officer.
"Bankruptcy Code" shall mean the Bankruptcy Reform Act of 1978, as
heretofore and hereafter amended, as codified at 11 U.S.C. ss. 101 et seq.
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"Board" shall mean the Board of Governors of the Federal Reserve System
of the United States of America.
"Borrowers" shall mean The Harvey Entertainment Company, a California
corporation, Harvey Comics, Inc., a New York corporation and PM.
"Borrowing" shall mean a group of Loans of a single Interest Rate Type
and as to which a single Interest Period is in effect on a single day.
"Borrowing Base" shall mean, at any date for which the amount thereof is
to be determined, an amount equal to the aggregate (without double counting) of
the following:
(i) 100% of Eligible Receivables from Acceptable Obligors secured by
an Acceptable L/C, plus
(ii) 85% of Eligible Receivables from Acceptable Obligors located
within the United States or Canada (including the domestic
distribution for amounts not included in clause (i) above), plus
(iii) 80% of Eligible Receivables from Acceptable Obligors located
outside the United States or Canada, plus
(iv) 50% of Other Receivables, plus
(v) 50% of the Eligible Film Library Amount, plus ----
(vi) 33% of the Intellectual Property Library Amount;
provided, however, that
(1) credit in the Borrowing Base attributable to any Acceptable
Obligor or, if such Acceptable Obligor is part of an
Affiliated Group, to such Affiliated Group, may not exceed
15% of the total Borrowing Base;
(2) the Borrowing Base shall not include any amounts which are
attributable to an item of Product which has not been
Completed unless a Completion Bond with respect to such
item of Product has been delivered to the Administrative
Agent;
(3) the amount included in the Borrowing Base at any time for
Other Receivables shall not exceed in the aggregate 20% of
the sum of the amounts included in the Borrowing Base under
subparagraphs (i), (ii) and (iii) above, or $50,000 in the
aggregate for any obligor who is not an Acceptable Obligor;
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(4) from the date hereof to December 31, 2000, credit in the
Borrowing Base attributable to amounts under sub-paragraphs
(v) and (vi) above in the aggregate, may not exceed 70% of
the total Borrowing Base and from January 1, 2001 to
December 31, 2001, credit in the Borrowing Base
attributable to amounts under sub-paragraphs (v) and (vi)
above in the aggregate, may not exceed 80% of the total
Borrowing Base; and
(5) the Borrowing Base shall not include any amounts which are
attributable to an item of Product which is the subject of
any Negative Pick Up Obligation.
"Borrowing Base Certificate" shall have the meaning given to such term in
Section 5.1(e) hereof.
"Borrowing Certificate" shall mean a borrowing certificate, substantially
in the form of Exhibit H hereto, to be delivered by the Borrower to the
Administrative Agent in connection with each Borrowing.
"Budgeted Negative Cost" shall mean, with respect to any item of Product,
the amount of the cash budget (stated in Dollars) for such item of Product
including all costs customarily included in connection with the acquisition of
all underlying literary, musical and other rights with respect to such item of
Product and in connection with the preparation, production and completion of
such item of Product including costs of materials, equipment, physical
properties, personnel and services utilized in connection with such item of
Product, both "above-the-line" and "below-the-line", any completion bond fee,
and all other items customarily included in negative costs, including finance
charges and interest expense, but excluding production fees and overhead charges
payable to a Credit Party and fees payable or allocable to a Credit Party under
any license or other agreement relating to the acquisition, use or exploitation
of rights owned by a Credit Party with respect to any item of Product.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which banks are required or permitted to close in the State of New York
or the State of California; provided, however, that when used in connection with
a Eurodollar Loan, the term "Business Day" shall also exclude any day on which
banks are not open for dealings in Dollar deposits on the London Interbank
Market.
"Capital Expenditures" shall mean, with respect to any Person for any
period, the sum of (i) the aggregate of all expenditures by such Person during
that period which, in accordance with GAAP, are or should be included in
"additions to property, plant or equipment" or similar items included in cash
flows (including Capital Leases) and (ii) to the extent not covered by clause
(i) hereof, the aggregate of all expenditures properly capitalized in accordance
with GAAP by such Person to acquire, by purchase or otherwise, the business,
property or fixed assets of, or stock or other evidence of beneficial ownership
of, any other Person (other than the
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portion of such expenditures allocable in accordance with GAAP to net current
assets or which is allocable to the acquisition of items of Product).
"Capital Lease", as applied to any Person, shall mean any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
accordance with GAAP, is or should be accounted for as a capital lease on the
balance sheet of that Person.
"Cash Collateral Account" shall have the meaning given to such term in
Section 11.1 hereof.
"Cash Equivalents"shall mean (i) marketable securities issued, or
directly and fully guaranteed or insured, by the United States of America or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States of America is pledged in support thereof) having maturities of
not more than twelve months from the date of acquisition, (ii) time deposits,
demand deposits, certificates of deposit, acceptances or prime commercial paper
or repurchase obligations for underlying securities of the types described in
clause (i) entered into with, any Lender or any commercial bank having a
short-term deposit rating of at least A-2 or the equivalent thereof by Standard
& Poor's Corporation or at least P-2 or the equivalent thereof by Moody's
Investors Service, Inc., (iii) commercial paper with a rating of A-1 or A-2 or
the equivalent thereof by Standard & Poor's Corporation or P-1 or P-2 or the
equivalent thereof by Moody's Investors Service, Inc. and in each case maturing
within twelve months after the date of acquisition or (iv) any mutual fund or
other pooled investment vehicle which invests principally in the foregoing
obligations.
"Chain of Title" shall have the meaning given to such term in Section
5.19 hereof.
"Change in Control" shall mean that any Person or group (such term being
used as defined in Section 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended) owns more than 25% of the voting stock of the Parent.
"Change in Management" shall mean that a person acceptable to the
Administrative Agent shall fail to replace Roger Burlage as Chairman of the
Parent within one hundred and twenty (120) days after the earlier of (i) the
date on which Roger Burlage ceases to perform the functions and services of
Chairman of the Parent and (ii) the later of (x) the date on which Roger Burlage
notifies the Parent that he intends to cease performing such functions and
services and (y) 120 days before the date on which he ceases to perform the
functions and services of Chairman of the Parent.
"Chase Clearing Account" shall mean the account of the Administrative
Agent (for the benefit of itself, the Issuing Bank and the Lenders) maintained
at the office of The Chase Manhattan Bank, Loan and Agency Services Group, One
Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention: Ganesh
Persaud, designated as the "Harvey Bank Clearing Account", Account No.
323143202.
"City National" shall mean City National Bank, a California banking
corporation.
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"Closing Date" shall mean the date on which the conditions precedent set
forth in Section 4.1 hereof have been satisfied or waived.
"Code" shall mean the Internal Revenue Code of 1986 and the rules and
regulations issued thereunder, as now and hereafter in effect, as codified at 26
U.S.C.ss. 1 et seq. or any successor provision thereto. -- ----
"Collateral" shall mean with respect to each Credit Party, all of such
Credit Party's right, title and interest in and to all personal property,
tangible and intangible, wherever located or situated and whether now owned,
presently existing or hereafter acquired or created, including, but not limited
to, all goods, accounts, instruments, intercompany obligations, contract rights,
partnership and joint venture interests, documents, chattel paper, general
intangibles, goodwill, equipment, machinery, inventory, investment property,
copyrights, trademarks, trade names, insurance proceeds, cash, deposit accounts
and the Pledged Securities, and any proceeds thereof, products thereof or income
therefrom, further including but not limited to, all of such Credit Party's
right, title and interest in and to each and every item and type of Product, the
scenario, screenplay or script upon which an item of Product is based, all of
the properties thereof, tangible and intangible, and all domestic and foreign
copyrights and all other rights therein and thereto, of every kind and
character, whether now in existence or hereafter to be made or produced, and
whether or not in possession of such Credit Party, including with respect to
each and every item of Product and without limiting the foregoing language, each
and all of the following particular rights and properties (to the extent they
are now owned or hereafter created or acquired by such Credit Party):
(i) all scenarios, screenplays and/or scripts at every stage thereof;
(ii) all common law and/or statutory copyright and other rights in all
literary and other properties (hereinafter called "said literary
properties") which form the basis of such item of Product and/or
which are or will be incorporated into such item of Product, all
component parts of such item of Product consisting of said
literary and other properties, all motion picture rights in and to
the story, all treatments of said story and said literary
properties, together with all preliminary and final screenplays
used and to be used in connection with such item of Product, and
all other literary material upon which such item of Product is
based or from which it is adapted;
(iii) all motion picture rights in and to all music and musical
compositions used and to be used in such item of Product, if any,
including, each without limitation, all rights to record,
rerecord, produce, reproduce or synchronize all of said music and
musical compositions in and in connection with motion pictures;
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(iv) all tangible personal property relating to such item of Product,
including, without limitation, all exposed film, developed film,
positives, negatives, prints, positive prints, answer prints,
special effects, preparing materials (including interpositives,
duplicate negatives, internegatives, color reversals,
intermediates, lavenders, fine grain master prints and matrices,
and all other forms of pre-print elements), sound tracks, cutouts,
trims and any and all other physical properties of every kind and
nature relating to such item of Product whether in completed form
or in some state of completion, and all masters, duplicates,
drafts, versions, variations and copies of each thereof, in all
formats whether on film, videotape, disk or otherwise and all
music sheets and promotional materials relating to such item of
Product (collectively, the "Physical Materials");
(v) all collateral, allied, subsidiary and merchandising rights
appurtenant or related to such item of Product including, without
limitation, the following rights: all rights to produce remakes,
sequels or prequels to such item of Product, based upon such item
of Product, said literary properties or the theme of such item of
Product and/or the text or any part of said literary properties;
all rights throughout the world to broadcast, transmit and/or
reproduce by means of television (including commercially
sponsored, sustaining and subscription or "pay" television) or by
any process analogous thereto, now known or hereafter devised,
such item of Product or any remake, sequel or prequel to the item
of Product; all rights to produce primarily for television or
similar use, a motion picture or series of motion pictures, by use
of film or any other recording device or medium now known or
hereafter devised, based upon such item of Product, said literary
properties or any part thereof, including, without limitation,
based upon any script, scenario or the like used in such item of
Product; all merchandising rights including, without limitation,
all rights to use, exploit and license others to use and exploit
any and all commercial tie-ups of any kind arising out of or
connected with said literary properties, such item of Product, the
title or titles of such item of Product, the characters of such
item of Product and/or said literary properties and/or the names
or characteristics of said characters and including further,
without limitation, any and all commercial exploitation in
connection with or related to such item of Product, any remake,
sequel or prequel thereof and/or said literary properties;
(vi) all statutory copyrights, domestic and foreign, obtained or to be
obtained on such item of Product, together with any and all
copyrights obtained or to be obtained in connection with such item
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of Product or any underlying or component elements of such item of
Product, including, in each case without limitation, all
copyrights on the property described in subparagraphs (i) through
(v) inclusive, of this definition, together with the right to
copyright (and all rights to renew or extend such copyrights) and
the right to sue in the name of any of the Credit Parties for
past, present and future infringements of copyright;
(vii) all insurance policies and completion bonds connected with such
item of Product and all proceeds which may be derived therefrom;
(viii) all rights to distribute, sell, rent, license the exhibition of
and otherwise exploit and turn to account such item of Product,
the Physical Materials, the motion picture rights in and to the
story and/or other literary material upon which such item of
Product is based or from which it is adapted, and the music and
musical compositions used or to be used in such item of Product;
(ix) any and all sums, proceeds, money, products, profits or increases,
including money profits or increases (as those terms are used in
the UCC or otherwise) or other property obtained or to be obtained
from the distribution, exhibition, sale or other uses or
dispositions of such item of Product or any part of such item of
Product, including, without limitation, all sums, proceeds,
profits, products and increases, whether in money or otherwise,
from the sale, rental or licensing of such item of Product and/or
any of the elements of such item of Product including, without
limitation, from collateral, allied, subsidiary and merchandising
rights, and further including, without limitation, all monies held
in any Collection Account;
(x) the dramatic, nondramatic, stage, television, radio and publishing
rights, title and interest in and to such item of Product, and the
right to obtain copyrights and renewals of copyrights therein;
(xi) the name or title of such item of Product and all rights of such
Credit Party to the use thereof, including, without limitation,
rights protected pursuant to trademark, service mark, unfair
competition and/or any other applicable statutes, common law, or
other rule or principle of law;
(xii) any and all contract rights and/or chattel paper which may arise
in connection with such item of Product;
(xiii) all accounts and/or other rights to payment which such Credit
Party presently owns or which may arise in favor of such Credit
Party in
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the future, including, without limitation, any refund or rebate
in connection with a completion bond or otherwise, all accounts
and/or rights to payment due from Persons in connection with the
distribution of such item of Product, or from the exploitation of
any and all of the collateral, allied, subsidiary, merchandising
and other rights in connection with such item of Product;
(xiv) any and all "general intangibles" (as that term is defined in the
UCC) not elsewhere included in this definition, including, without
limitation, any and all general intangibles consisting of any
right to payment which may arise in connection with the
distribution or exploitation of any of the rights set out herein,
and any and all general intangible rights in favor of such Credit
Party for services or other performances by any third parties,
including actors, writers, directors, individual producers and/or
any and all other performing or nonperforming artists in any way
connected with such item of Product, any and all general
intangible rights in favor of such Credit Party relating to
licenses of sound or other equipment, or licenses for any
photograph or photographic or other processes, and any and all
general intangibles related to the distribution or exploitation of
such item of Product including general intangibles related to or
which grow out of the exhibition of such item of Product and the
exploitation of any and all other rights in such item of Product
set out in this definition;
(xv) any and all goods including, without limitation, inventory (as
that term is defined in the UCC) which may arise in connection
with the creation, production or delivery of such item of Product
and which goods pursuant to any production or distribution
agreement or otherwise are owned by such Credit Party;
(xvi) all and each of the rights, regardless of denomination, which
arise in connection with the acquisition, creation, production,
completion of production, delivery, distribution, or other
exploitation of such item of Product, including, without
limitation, any and all rights in favor of such Credit Party, the
ownership or control of which are or may become necessary or
desirable, in the opinion of the Administrative Agent, in order to
complete production of such item of Product in the event that the
Administrative Agent exercises any rights it may have to take over
and complete production of such item of Product;
(xvii) any and all documents issued by any pledgeholder or bailee with
respect to such item of Product or any Physical Materials (whether
or not in completed form) with respect thereto;
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(xviii) any and all Production Accounts or other bank accounts
established by such Credit Party with respect to such item of
Product;
(xix) any and all rights of such Credit Party under any Distribution
Agreements relating to such item of Product; and
(xx) any and all rights of such Credit Party under contracts relating
to the production or acquisition of such item of Product,
including but not limited to, all contracts which have been
delivered to the Administrative Agent pursuant to this Credit
Agreement.
"Collection Account" shall have the meaning given to such term in Section
8.3(a) hereof.
"Commitment" shall mean the commitment of each Lender to make Loans to
the Borrowers and participate in Letters of Credit from the Initial Date
applicable to such Lender through the Commitment Termination Date up to an
aggregate amount, at any one time, not in excess of the amount set forth (i)
opposite its name in the Schedule of Commitments appearing in Schedule 1 hereto,
as adjusted from time to time by any applicable Assignment and Acceptance to
which it is a party, or (ii) in any applicable Assignment and Acceptance(s) to
which it may be a party, as the case may be, as such amount may be reduced from
time to time in accordance with the terms of this Credit Agreement.
"Commitment Fee" shall have the meaning given to such term in Section
2.5(a) hereof.
"Commitment Termination Date" shall mean (i) April 3, 2005 or (ii) such
earlier date on which the Commitments shall terminate in accordance with Section
2.6 or Article 7 hereof.
"Complete" or "Completed" or "Completion" shall mean with respect to any
item of Product that (A) either (i) sufficient elements have been delivered by
the applicable Credit Party to, and accepted by, a Person (other than the Credit
Parties or any Affiliate thereof) to permit such Person to exhibit, sell or
otherwise exploit the item of Product in the theatrical or other medium for
which the item of Product is intended for initial exploitation, (ii) the Parent
has certified to the Administrative Agent that an independent laboratory has in
its possession a complete final 35mm or 70 mm (or other size which has become
standard in the industry) composite positive print, video master or other
equivalent master copy of the item of Product as finally cut, main and end
titled, edited, scored and assembled, with sound track printed thereon in
perfect synchronization with the photographic action and fit and ready for
exhibition and distribution in the theatrical or other medium for which the item
of Product is intended for initial exploitation, provided that if such
certification shall not be verified to the Administrative Agent by such
independent laboratory within 20 business days thereafter, such item of Product
shall revert to being Uncompleted until the Administrative Agent receives such
verification or (iii) in
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the case of any internet or interactive item of Product which is only delivered
to a Credit Party or any Affiliate thereof, the applicable Credit Party or
Affiliate has notified the Administrative Agent that sufficient elements have
been delivered to it to permit the exploitation of such internet or interactive
item of Product and has provided the Administrative Agent with details of such
elements provided, that the Administrative Agent shall be entitled in its
reasonable discretion to determine that such internet or interactive item of
Product has not been Completed, and (B) if such item of Product was acquired
from a third party, the entire fixed acquisition price or minimum advance shall
have been paid to the extent then due and there is no condition or event (other
than the payment of money not yet due) the occurrence of which might result in
the applicable Credit Party losing any of its rights in such item of Product.
"Completion Bond" shall mean with respect to any item of Product a
completion bond, in form and substance satisfactory to the Administrative Agent,
issued by an Approved Completion Guarantor, which bond (i) names the
Administrative Agent (for the benefit of the Administrative Agent, the Issuing
Bank and the Lenders) as a beneficiary thereof to the extent of the applicable
Credit Party's financial interest in such item of Product and (ii) at least
guarantees that such item of Product will be Completed in a timely manner, or
else payment made to the Administrative Agent (on behalf of the Administrative
Agent, the Issuing Bank and the Lenders) of an amount at least equal to the
aggregate amount expended on the production of such item of Product by or on
behalf of the applicable Credit Party plus interest on, and other bank charges
with respect to, such amount.
"Consolidated Capital Base" shall mean the sum of (i) the amount of
stockholders' equity of the Parent and its Consolidated Subsidiaries and (ii)
the amount of equity securities which are subject to mandatory redemption or
redemption at the option of the security holder less the amount of minority
interests in its Consolidated Subsidiaries provided, that the calculation of
Consolidated Capital Base shall be made without regard to adjustments reasonably
required by accounting pronouncements relating to any warrant issued by the
Parent in favor of the Administrative Agent.
"Consolidated Subsidiaries" shall mean all Subsidiaries of a Person which
are required or permitted to be consolidated with such Person for financial
reporting purposes in accordance with GAAP.
"Contribution Agreement" shall mean the contribution agreement
substantially in the form of Exhibit G hereto, as the same may be amended,
supplemented or otherwise modified, renewed or replaced from time to time.
"Copyright Security Agreement" shall mean a Copyright Security Agreement,
substantially in the form of Exhibit C-1 hereto, as the same may be amended,
supplemented or otherwise modified, renewed or replaced from time to time by
delivery of a Copyright Security Agreement Supplement or otherwise.
"Copyright Security Agreement Supplement" shall mean a Copyright Security
Agreement Supplement substantially in the form of Exhibit C-2 hereto.
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"Credit Party" shall mean any of the Borrowers or any of the Guarantors.
"Currency Agreement" shall mean any foreign exchange contract, currency
swap agreement, futures contract, option contract, synthetic cap or other
similar agreement designed to protect a Credit Party against fluctuations in
currency values.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Distribution Agreements" shall mean (i) any and all agreements entered
into by a Credit Party, pursuant to which such Credit Party has sold, leased,
licensed or assigned distribution rights or other exploitation rights to any
item of Product to an un-Affiliated Person and (ii) any and all agreements
hereafter entered into by a Credit Party pursuant to which such Credit Party
sells, leases, licenses or assigns distribution rights or other exploitation
rights to an item of Product to an un-Affiliated Person.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"Eligible Assignee" shall mean (i) a commercial bank organized under the
laws of the United States, or any State thereof, and having total assets in
excess of $1,000,000,000; (ii) a savings and loan association or savings bank
organized under the laws of the United States, or any State thereof, and having
a net worth of at least $100,000,000, calculated in accordance with GAAP; (iii)
a commercial bank organized under the laws of any other country which is a
member of the Organization for Economic Cooperation and Development ("OECD"), or
a political subdivision of any such country, and having total assets in excess
of $1,000,000,000, provided that such bank is acting through a branch,
subsidiary or agency located in the country in which it is organized or another
country which is also a member of the OECD; or (iv) the central bank of any
country which is a member of the OECD.
"Eligible Film Library Amount" shall initially be equal to $18,250,000,
which amount shall be equal to the sum of the net present value of the
unexploited rights to the items of Product of each of the Credit Parties;
provided, however, that (i) there will be monthly reductions between annual
redeterminations to reflect decreases, if any, in the remaining value of unsold
library rights, such decreases being in the amount reflected in, and resulting
from, any agreement pertaining to the licensing, distribution or sale of library
product including, without limitation, deductions of all amounts received or due
under contractual sales, distribution and licensing agreements entered into at
any time between annual redeterminations with respect to any item of Product,
(ii) "Eligible Film Library Amount"shall be redetermined with respect to the
Credit Parties on an annual basis by an independent consultant approved by the
Administrative Agent using methodology consistent with the initial valuation
done by Richard L. Medress of Cineval, LLC and (iii) the Administrative Agent
shall be entitled to exclude from the computation of Eligible Film Library
Amount any library credit which has not been valued by an independent consultant
and in a manner in each case, approved by the Administrative Agent.
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"Eligible Receivables" shall mean, at any date at which the amount
thereof is to be determined, an amount equal to the sum of the present values
(discounted, in the case of amounts which are not due and payable within 12
months following the date of determination, on a quarterly basis by a rate of
interest equal to the interest rate in effect on the Notes on the date of the
computation with regard to Alternate Base Rate Loans) of (a) all net amounts
which pursuant to a binding agreement are contractually obligated to be paid to
any Credit Party either unconditionally or subject only to normal delivery
requirements, and which are reasonably expected by the Parent to be payable and
collected from Acceptable Obligors, minus (b) the sum, without double counting,
of (i) the following items (based on the relevant Credit Party's then best
estimates): royalties, residuals, commissions, participations and other payments
to third parties, collection/distribution expenses and commissions, home video
fulfillment costs, taxes (including foreign withholding, remittance and similar
taxes) chargeable in respect of such accounts receivable, and any other
projected expenses of a Credit Party arising in connection with such amounts and
(ii) the outstanding amount of unrecouped advances made by a distributor to the
extent subject to repayment by a Credit Party or adjustment pursuant to approved
distribution agreements but Eligible Receivables shall not include amounts
which:
(i) are in the aggregate due from a single Acceptable Obligor in
excess of the Allowable Amount with respect to such Acceptable
Obligor or, in the case of an Affiliated Group, in the aggregate
due from the relevant Acceptable Obligors with respect to that
Affiliated Group;
(ii) which in the reasonable discretion of the Administrative Agent,
are subject to material conditions precedent to payment (including
a material performance obligation or a material executory aspect
on the part of a Credit Party or any other party or obligations
contingent upon future events not within the relevant Credit
Party's direct control);
(iii) to the extent such receivables are (i) more than ninety (90) days
past due, in the case of receivables due from an obligor which has
its principal place of business and jurisdiction of incorporation
or formation within the United States, or (ii) more than one
hundred and twenty (120) days past due, in the case of receivables
due from an obligor which has its principal place of business and
jurisdiction of incorporation or formation located outside the
United States;
(iv) which are domestic theatrical receivables due from any obligor in
connection with the theatrical exhibition, distribution or
exploitation of an item of Product that are still outstanding four
(4) months after their creation;
(v) in excess of 10% of the lesser of the aggregate amount of the
Borrowing Base and the Total Commitment then in effect if they are
to be paid in a currency other than United States Dollars unless
hedged in a manner satisfactory to the Administrative Agent;
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<PAGE> 17
(vi) to the extent included in the Credit Parties' estimated bad debts;
(vii) due from any obligor which has 20% or more of the total receivable
amount from such obligor 120 or more days past due (exclusive of
amounts that are being disputed or contested in good faith);
(viii) for which there is bona fide request for a material credit,
adjustment, compromise, offset, counterclaim or dispute; provided,
however, that only the amount in question shall be excluded from
such receivable;
(ix) which are attributable to an item of Product or right in which a
Credit Party cannot warrant sufficient title to the underlying
rights to justify such receivable;
(x) in which the Administrative Agent (for the benefit of itself, the
Issuing Bank and the Lenders) does not have a first perfected
security interest under the Uniform Commercial Code and applicable
copyright law;
(xi) which are determined by the Administrative Agent in its reasonable
discretion, acting in good faith, upon written notice from the
Administrative Agent to the Parent and effective 10 days
subsequent to the Parent's receipt of such notice, to be
unacceptable (it being understood that certain unacceptable
receivables may be made acceptable and may be included in the
Borrowing Base if secured by an Acceptable L/C);
(xii) which relate to an item of Product or right as to which the
Administrative Agent has not received a fully executed laboratory
access letter or a pledgeholder agreement for each laboratory
holding physical elements sufficient to fully exploit the rights
held by the Credit Party in such item of Product;
(xiii) which will be subject to repayment to the extent not earned by
performance;
(xiv) which are attributable to any item of Product which has not been
Completed unless the relevant Credit Party is in compliance with
all covenants hereunder applicable to the production of such item
of Product, including without limitation, delivery of any required
completion guarantee;
(xv) which are attributable to any item of Product which has not been
Completed and for which a completion guarantee is required
hereunder, to the extent there is not in effect a Completion
Guaranty from an Approved Completion Guarantor or to the extent
that such receivable amounts
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<PAGE> 18
exceed the amount which would be paid to the relevant Credit Party
under the related completion guarantee if the item of Product were
abandoned as of the date of computation of the Borrowing Base
(except that if a Letter of Credit is issued hereunder in order to
support the Credit Party's minimum payment obligation to acquire
distribution rights in an item of Product, amounts attributable to
such rights may be treated as Eligible Receivables (even though
the Item of Product has not yet been Completed) but only if: (A)
proof of Completion of the item of Product is presented in order
to draw under the Letter of Credit, (B) the portion of the
Borrowing Base attributable to such Eligible Receivables for any
item of Product does not exceed the amount of such letter of
credit for such item of Product, and (C) such amounts otherwise
meet all of the applicable criteria for inclusion as Eligible
Receivables); or
(xvi) will not become due and payable until one year or more after the
Maturity Date.
In the event the Administrative Agent notifies the Parent that the
Administrative Agent has determined that a Person or Affiliated Group is to be
deleted as an Acceptable Obligor, no additional Eligible Receivable from such
Person or Affiliated Group may be included in the Borrowing Base subsequent to
such notice unless the Administrative Agent thereafter determines that such
Person or Affiliated Group is an Acceptable Obligor. In the event the
Administrative Agent notifies the Parent that the Administrative Agent has
determined that the Allowable Amount with respect to an Acceptable Obligor is to
be decreased, no additional Eligible Receivable from such Acceptable Obligor may
be included in the Borrowing Base if such inclusion would result in the
aggregate amount of Eligible Receivables from such Acceptable Obligor exceeding
the Allowable Amount after giving effect to such reduction unless the
Administrative Agent thereafter determines that the Allowable Amount may be
increased.
"Employment Agreement" shall mean the employment agreement dated April 5,
1999, between the Parent and Roger A. Burlage.
"Environmental Laws" shall mean any and all federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees
or requirements of any Governmental Authority regulating, relating to, or
imposing liability or standards of conduct concerning, any Hazardous Material or
environmental protection or health and safety, as now or at any time hereafter
in effect, including without limitation, the Clean Water Act also known as the
Federal Water Pollution Control Act ("FWPCA"), 33 U.S.C.ss.1251 et seq., the
Clean Air Act ("CAA"), 42 U.S.C.ss.ss.7401 et seq., the Federal Insecticide,
Fungicide and Rodenticide Act ("FIFRA"), 7 U.S.C.ss.ss. 136 et seq., the Surface
Mining Control and Reclamation Act ("SMCRA"), 30 U.S.C.ss.ss.1201 et seq., the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
42 U.S.C.ss.9601 et seq., the Superfund Amendments and Reauthorization Act of
1986 ("SARA"), Public Law 99-499, 100 Stat. 1613, the Emergency Planning and
Community Right to Know Act ("ECPCRKA"), 42 U.S.C.ss.11001 et seq., the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C.ss.6901 et seq., the
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<PAGE> 19
Occupational Safety and Health Act as amended ("OSHA"), 29 U.S.C.ss.655
andss.657, together, in each case, with any amendment thereto, and the
regulations adopted and the publications promulgated thereunder and all
substitutions thereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as heretofore and hereafter amended, as codified at 29 U.S.C.ss. 1001 et seq.
and the regulations promulgated thereunder.
"ERISA Affiliate" shall mean each Person (as defined in Section 3(9) of
ERISA) which is treated as a single employer with any Credit Party under Section
414(b), (c), (m) or (o) of the Code.
"Eurodollar Loan" shall mean a Loan based on the LIBO Rate in accordance
with the provisions of Article 2 hereof.
"Event of Default" shall have the meaning given to such term in Article 7
hereof.
"Fee Letter" shall mean that certain letter agreement dated as of April
3, 2000 between the Borrowers on the one hand, and the Administrative Agent and
Chase Securities Inc. on the other hand, relating to the payment of certain fees
by the Borrowers.
"Fundamental Documents" shall mean, this Credit Agreement, the Notes, the
Pledgeholder Agreements, the Laboratory Access Letters, the Copyright Security
Agreement, the Copyright Security Agreement Supplements, the Trademark Security
Agreement, the Notices of Assignment and Irrevocable Instruction, the
Contribution Agreement, the Instruments of Assumption and Joinder, UCC financing
statements and any other ancillary documentation which is required to be or is
otherwise executed by any Credit Party and delivered to the Administrative Agent
in connection with this Credit Agreement or any of the documents listed above.
"GAAP" shall mean generally accepted accounting principles in the United
States of America in effect from time to time consistently applied (except for
accounting changes in response to FASB releases, or other authoritative
pronouncements).
"Governmental Authority" shall mean any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, or any court, in each case whether of the United States or any
foreign jurisdiction.
"Guarantors" shall mean all of the direct and indirect Subsidiaries of
the Borrowers (other than the Borrowers and IAC), now existing or hereafter
acquired or created, including, without limitation, Baby Huey Productions, Inc.,
a California corporation, PMFSC and Shadow Hills Post, LLC, a California limited
liability company.
"Guaranty" shall mean, as to any Person, any direct or indirect
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, Capital Lease, dividend or other
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<PAGE> 20
monetary obligation ("primary obligation") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent, (a) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the purchase
or payment of any such primary obligation or (ii) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, or (c) to purchase property, securities or
services, in each case, primarily for the purpose of assuring the performance by
the primary obligor of any such primary obligation. The amount of any Guaranty
shall be deemed to be an amount equal to (x) the stated or determinable amount
of the primary obligation in respect of which such Guaranty is made (or, if the
amount of such primary obligation is not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder)) or (y) the stated maximum liability under such
Guaranty, whichever is less.
"Hazardous Materials" shall mean any flammable materials, explosives,
radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic
substances, or similar materials defined in any Environmental Law.
"HCI" shall mean Harvey Comics, Inc., a New York corporation.
"IAC" shall mean Inferno Acquisition Corp., a California corporation.
"Imperial" shall mean Imperial Bank, a California banking corporation.
"Indebtedness" shall mean (without double counting), at any time and with
respect to any Person, (i) indebtedness of such Person for borrowed money
(whether by loan or the issuance and sale of debt securities) or for the
deferred purchase price of property or services purchased (other than amounts
constituting trade payables (payable within 90 days) arising in the ordinary
course of business); (ii) obligations of such Person in respect of letters of
credit, acceptance facilities, or drafts or similar instruments issued or
accepted by banks and other financial institutions for the account of such
Person; (iii) obligations of such Person under Capital Leases and any financing
lease involving substantially the same economic effect; (iv) deferred payment
obligations of such Person resulting from the adjudication or settlement of any
litigation; and (v) indebtedness of others of the type described in clauses (i),
(ii), (iii) and (iv) hereof which such Person has (a) directly or indirectly
assumed or guaranteed in connection with a Guaranty or (b) secured by a Lien on
the assets of such Person, whether or not such Person has assumed such
indebtedness.
"Inferno Loan Agreement" shall mean the loan agreement dated as of April
3, 2000 among IAC, Imperial and Natexis.
"Inferno Sale Agreement" shall mean the sale and assignment agreement
dated as of April 3, 2000 among IAC, on the one hand and Imperial and Natexis,
on the other hand.
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"Initial Date" shall mean (i) in the case of the Administrative Agent and
the Issuing Bank, the date hereof, (ii) in the case of each Lender which is an
original party to this Credit Agreement, the date hereof and (iii) in the case
of any other Lender, the effective date of the Assignment and Acceptance
pursuant to which it became a Lender.
"Instrument of Assumption and Joinder" shall mean an Instrument of
Assumption and Joinder substantially in the form of Exhibit L hereto.
"Intellectual Property Library Amount" shall initially be equal to
$20,400,000, which amount shall be equal to the sum of the net present value of
the unexploited rights to the licensing, merchandising and trademark rights
relating to the characters used in the items of Product of each of the Credit
Parties; provided, however, that (i) there will be quarterly reductions between
annual redeterminations each equal to 5% of the greater of (x) the Intellectual
Property Library Amount, as most recently redetermined in accordance with the
provisions hereof and (y) $20,400,000, (ii) "Intellectual Property Library
Amount" shall be redetermined with respect to the Credit Parties on an annual
basis by an independent consultant approved by the Administrative Agent using
methodology consistent with the initial valuation done by Consor and (iii) the
Administrative Agent shall be entitled to exclude from the computation of
Intellectual Property Library Amount any library credit which has not been
approved by an independent consultant and in a manner in each case, approved by
the Administrative Agent. The "Intellectual Property Library Amount" will not
double count any value included in computing the Eligible Film Library Amount.
"Interest Deficit" shall have the meaning given to such term in Section
2.13 hereof.
"Interest Payment Date" shall mean (i) as to any Eurodollar Loan having
an Interest Period of one, two or three months, the last day of such Interest
Period, (ii) as to any Eurodollar Loan having an Interest Period of more than
three months, the last day of such Interest Period and, in addition, each date
during such Interest Period that would be the last day of an Interest Period
commencing on the same day as the first day of such Interest Period but having a
duration of three months or an integral multiple thereof and (iii) with respect
to Alternate Base Rate Loans, the last Business Day of each March, June,
September and December (commencing the last Business Day of March, 2000).
"Interest Period" shall mean as to any Eurodollar Loan, the period
commencing on the date such Loan is made, continued or converted or the last day
of the preceding Interest Period and ending on the numerically corresponding day
(or if there is no corresponding day, the last day) in the calendar month that
is one, two, three, six or twelve months thereafter as the Borrowers may elect;
provided, however, that (i) if any Interest Period would end on a day which
shall not be a Business Day, such Interest Period shall be extended to the next
succeeding Business Day, unless such next succeeding Business Day would fall in
the next calendar month, in which case, such Interest Period shall end on the
next preceding Business Day, (ii) no Interest Period may be selected which would
end later than the Maturity Date, (iii) interest shall accrue from and including
the first day of such Interest Period to but excluding the last date of such
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Interest Period and (iv) no Interest Period of six or twelve months may be
selected unless such Interest Period is generally available in the market (as
determined by the Administrative Agent at the time of each request) and is
consented to by all the Lenders.
"Interest Rate Protection Agreement" shall mean any interest rate swap
agreement, interest rate cap agreement, synthetic cap, collar or floor or other
financial agreement or arrangement designed to protect a Credit Party against
fluctuations in interest rates.
"Interest Rate Type" shall have the meaning given to such term in Section
2.1(d) hereof.
"Investment" shall mean any stock, evidence of indebtedness or other
securities of any Person, any loan, advance, contribution of capital, extension
of credit or commitment therefor (including, without limitation, the Guaranty of
loans made to others, but excluding current trade and customer accounts
receivable arising in the ordinary course of business and payable in accordance
with customary trading terms in the ordinary course of business), any purchase
of (i) any security of another Person or (ii) any business or undertaking of any
Person or any commitment to make any such purchase, or any other investment.
"Issuing Bank" shall mean The Chase Manhattan Bank, a New York banking
corporation in its capacity as such or such successor as may be appointed
pursuant to Section 12.12 hereof.
"Laboratory" shall mean any laboratory acceptable to the Administrative
Agent which is located in the United States and is a party to a Pledgeholder
Agreement or a Laboratory Access Letter.
"Laboratory Access Letter" shall mean a letter agreement among (i) a
Laboratory holding any elements of any item of Product to which any Credit Party
has the right of access, (ii) such Credit Party and (iii) the Administrative
Agent, substantially in the form of Exhibit D hereto or a form otherwise
acceptable to the Administrative Agent.
"L/C Exposure" shall mean, at any time, the amount expressed in Dollars
of the aggregate face amount of all drafts which may then or thereafter be
presented by beneficiaries under all Letters of Credit then outstanding plus
(without duplication), the face amount of all drafts which have been presented
or accepted under all Letters of Credit but have not yet been paid or have been
paid but not reimbursed, whether directly or from the proceeds of a Loan
hereunder.
"Lender" and "Lenders" shall mean the financial institutions whose names
appear at the foot hereof and any assignee of a Lender pursuant to Section 13.3
hereof, and their respective successors.
"Lending Office" shall mean, with respect to any of the Lenders, the
branch or branches (or affiliate or affiliates) from which such Lender's
Eurodollar Loans or Alternate Base
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Rate Loans, as the case may be, are made or maintained and for the account of
which all payments of principal of, and interest on, such Lender's Eurodollar
Loans or Alternate Base Rate Loans are made, as notified to the Administrative
Agent from time to time.
"Letter of Credit" shall mean a letter of credit issued by the Issuing
Bank pursuant to Section 2.3 hereof.
"LIBO Rate" shall mean, with respect to the Interest Period for a
Eurodollar Loan, an interest rate per annum equal to the quotient (rounded
upwards to the next 1/100 of 1%) of (A) the average of the rates at which Dollar
deposits approximately equal in principal amount to the Administrative Agent's
portion of such Eurodollar Loan and for a maturity equal to the applicable
Interest Period are offered to the Lending Office of the Administrative Agent in
immediately available funds in the London Interbank Market for Eurodollars at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period divided by (B) one minus the applicable
statutory reserve requirements of the Administrative Agent, expressed as a
decimal (including without duplication or limitation, basic, supplemental,
marginal and emergency reserves), from time to time in effect under Regulation D
or similar regulations of the Board. It is agreed that for purposes of this
definition, Eurodollar Loans made hereunder shall be deemed to constitute
Eurocurrency Liabilities as defined in Regulation D and to be subject to the
reserve requirements of Regulation D (for so long as such requirements are in
effect).
"Lien" shall mean any mortgage, copyright mortgage, pledge, security
interest, encumbrance, lien or charge of any kind whatsoever (including, without
limitation, any conditional sale or other title retention agreement, any
agreement to grant a security interest at a future date, any lease in the nature
of security, and the filing of, or agreement to give, any financing statement
under the Uniform Commercial Code of any jurisdiction).
"Loan" or "Loans" shall have the meaning given to such term in Section
2.1(a) hereof.
"Margin Stock" shall be as defined in Regulation U of the Board.
"Material Adverse Effect" shall mean any change or effect that (a) has a
materially adverse effect on the business, assets, properties, operations,
financial condition or prospects of the Credit Parties taken as a whole, (b)
materially impairs the legal right, power or authority of any Credit Party to
perform its respective obligations under the Fundamental Documents to which it
is a party, (c) materially impairs the validity or enforceability of, or
materially impairs the rights, remedies or benefits available to the Lenders
under, the Fundamental Documents or (d) results in the aggregate amount of the
Borrowing Base being less than the sum of the aggregate principal amount of all
Loans then outstanding plus the then current L/C Exposure.
"Maturity Date" shall mean April 3, 2005.
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"Multiemployer Plan" shall mean a plan described in Section 4001(a)(3) of
ERISA.
"Natexis" shall mean Natexis Banque, a French banking corporation.
"Negative Pickup Obligation" means, with respect to any item of Product
produced by a third party, a commitment to pay a certain sum of money or other
Investment made by the Credit Party in order to obtain ownership or distribution
rights in such item of Product, but which does not require any payment unless or
until the requirements of clause (A) of the definition of Completion have been
satisfied. Negative Pickup Obligation includes both "traditional"negative pickup
arrangements and indirect structures.
"Note" or "Notes" shall have the meaning given to such term in Section
2.2 hereof.
"Notice of Assignment and Irrevocable Instructions" shall mean the Notice
of Assignment and Irrevocable Instructions substantially in the form of Exhibit
K hereto or in such other form as shall be acceptable to the Administrative
Agent, including, without limitation, the inclusion of such notice and
instructions in a Distribution Agreement.
"Obligations" shall mean the obligation of the Borrowers to make due and
punctual payment of (i) principal of and interest on the Loans, the Commitment
Fees, any reimbursement obligations in respect of Letters of Credit, costs and
attorneys' fees and all other monetary obligations of the Borrowers to the
Administrative Agent, the Issuing Bank or any Lender under this Credit
Agreement, the Notes, any other Fundamental Document or the Fee Letter, (ii) all
amounts payable by the Borrowers to any Lender under any Currency Agreement or
Interest Rate Protection Agreement, provided that the Administrative Agent shall
have received written notice thereof within ten (10) Business Days after
execution of such Currency Agreement or Interest Rate Protection Agreement and
(iii) amounts payable to The Chase Manhattan Bank in connection with any bank
account maintained by the Borrowers or any other Credit Party at The Chase
Manhattan Bank or any other banking services provided to the Borrowers or any
other Credit Party by The Chase Manhattan Bank.
"Other Receivables" shall mean those receivables that meet all of the
requirements of an "Eligible Receivable" other than that the obligor is not an
Acceptable Obligor.
"Parent" shall mean The Harvey Entertainment Company, a California
corporation.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"Percentage" shall mean with respect to any Lender, the percentage of the
Total Commitment represented by such Lender's Commitment.
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"Permitted Encumbrances" shall mean Liens permitted under Section 6.2
hereof.
"Person" shall mean any natural person, corporation, division of a
corporation, limited liability company, partnership, trust, joint venture,
association, company, estate, unincorporated organization or government or any
agency or political subdivision thereof.
"Physical Materials" shall have the meaning given to such term in
paragraph (iv) of the definition of "Collateral" herein.
"Plan" shall mean an employee benefit plan within the meaning of Section
3(3) of ERISA, other than a Multiemployer Plan, maintained or contributed to by
any Credit Party, or any ERISA Affiliate, or any other plan covered by Title IV
of ERISA that covers employees of the Credit Parties.
"Pledged Collateral" shall mean the Pledged Securities and any proceeds
(as defined in Section 9-306(1) of the UCC) of the Pledged Securities.
"Pledged Securities" shall mean (i) all of the issued and outstanding
capital stock of each of the Credit Parties (other than the Parent and PMFSC)
and IAC and (ii) 66% of the stock of PMFSC, in each case as initially listed on
Schedule 3.7.
"Pledgeholder Agreement" shall mean a laboratory pledgeholder agreement
among a Credit Party (or Credit Parties), the Administrative Agent, certain
distributors (as applicable), the Approved Completion Guarantor (if there is
one), and one or more Laboratories, substantially in the form of Exhibit E-1 or
Exhibit E-2 hereto, or in such other form and with such additional parties as
shall be acceptable to the Administrative Agent.
"Pledgors" shall mean those Credit Parties that own any of the Pledged
Securities.
"PM" shall mean Pepin/Merhi Entertainment Group, Inc., a California
corporation.
"PM Acquisition" shall mean the acquisition of all of the issued and
outstanding capital stock of PM by the Parent pursuant to the Stock Purchase
Agreement.
"PM Acquisition Documents" shall mean the Stock Purchase Agreement and
all other documents entered into or delivered in connection therewith or with
the PM Acquisition.
"PMFSC" shall mean Pepin-Merhi Entertainment Group FSC, Ltd., a
corporation organized under the laws of the United States Virgin Islands.
"PM Shareholders" shall mean Joseph P. Merhi, George Shamieh and Richard
J. Pepin, in their capacity as shareholders of all of the capital stock of PM.
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"Print and Advertising Expenses" shall mean the actual out-of-pocket
print and advertising expenses associated with theatrical and home video release
in any medium of an item of Product which a Credit Party is contractually
obligated to pay or has paid.
"Pro Rata Share" shall mean with respect to any Obligation or other
amount, each Lender's pro rata share of such Obligation or other amount
determined in accordance with such Lender's Percentage.
"Product" shall mean any motion picture, film or video tape or any
episode thereof produced for theatrical, non-theatrical or television release or
for release in any other medium, in each case whether recorded on film,
videotape, cassette, cartridge, disc or on or by any other means, method,
process or device whether now known or hereafter developed, or any comic book or
other work, with respect to which any Credit Party (i) is the copyright owner or
(ii) acquires an equity interest or distribution rights; provided, that (y) all
of the episodes of any television series for a broadcast season shall be
collectively regarded as being one (1) item of Product and (z) for the purposes
of the definitions of "Borrowing Base", "Eligible Film Library Amount" and
"Intellectual Property Library Amount", as used throughout this Agreement,
"Product" shall not include any comic book or other written work. The term "item
of Product" shall include, without limitation, the scenario, screenplay or
script upon which such item of Product is based, all of the properties thereof,
tangible and intangible, and whether now in existence or hereafter to be made or
produced, whether or not in possession of a Credit Party, and all rights therein
and thereto, of every kind and character.
"Production Account(s)" shall mean individually or collectively, as the
context so requires, each demand deposit account(s) established by a Credit
Party at a commercial bank located in the United States or otherwise acceptable
to the Administrative Agent, for the sole purpose of paying the production costs
of a particular item of Product, and, where applicable, as to which the Approved
Completion Guarantor for such item of Product, has agreed in writing that
amounts deposited in such account shall be deemed available for production of
such item of Product, for purposes of the Completion Bond for such item of
Product.
"Quiet Enjoyment" shall be as defined in Section 8.13 hereof.
"Regulation D" shall mean Regulation D of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Regulation T" shall mean Regulation T of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Regulation U" shall mean Regulation U of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Regulation X" shall mean Regulation X of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
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"Reportable Event" shall mean any reportable event as defined in Section
4043(c) of ERISA, other than a reportable event as to which provision for 30-day
notice to the PBGC would be waived under applicable regulations had the
regulations in effect on the Closing Date been in effect on the date of
occurrence of such reportable event.
"Required Lenders" shall mean (i) Lenders holding at least 51% of the
unpaid principal amount of the Loans and L/C Exposure then outstanding or (ii)
if no Loans and no Letters of Credit are then outstanding, Lenders holding at
least 51% of the Total Commitment.
"Restricted Payment" shall mean (i) any distribution, cash dividend or
other direct or indirect payment on account of shares of any class of stock of,
partnership interest in, or any other equity interest of, a Credit Party, other
than a dividend, distribution or other payment payable solely in additional
shares of common and preferred stock, (ii) any redemption or other acquisition,
re-acquisition or retirement by a Credit Party of any shares of any class of its
own stock or equity interest(s) of another Credit Party or an Affiliate, now or
hereafter outstanding, (iii) any payment made to retire, or obtain the surrender
of, any outstanding warrants, puts or options or other rights to purchase or
otherwise acquire shares of any class of stock of, or any equity interest in, a
Credit Party or an Affiliate, now or hereafter outstanding and (iv) any payment
by a Credit Party of principal of, premium, if any, or interest on, or any
redemption, purchase, retirement, defeasance, sinking fund or similar payment
with respect to, any Subordinated Debt or any Indebtedness under any of the
Shareholder Notes in each case, now or hereafter outstanding.
"Shareholder Notes" shall mean the promissory notes dated April 3, 2000
in the aggregate principal amount of $3,500,000, which are issued by the Parent
in favor of the PM Shareholders in connection with the PM Acquisition on terms
acceptable to the Administrative Agent, and are subordinated to the Obligations
of the Parent on subordination terms acceptable to the Administrative Agent.
"Stock Purchase Agreement" means the stock purchase agreement dated as of
April 3, 2000, in form and substance satisfactory to the Administrative Agent,
pursuant to which the Parent acquires contemporaneously with this Credit
Agreement all of the issued and outstanding capital stock of PM.
"Subordinated Debt" shall mean all Indebtedness (other than Indebtedness
under the Shareholder Notes) of any of the Credit Parties that is subordinated
to the Obligations pursuant to written agreements, containing interest rates,
payment terms, maturities, amortization schedules, covenants, defaults,
remedies, subordination provisions and other material terms in form and
substance satisfactory to the Administrative Agent.
"Subsidiary" shall mean with respect to any Person, any corporation,
association, joint venture, partnership or other business entity (whether now
existing or hereafter organized) of which at least a majority of the voting
stock or other ownership interests having ordinary voting power for the election
of directors (or the equivalent) is, at the time as of which any
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determination is being made, owned or controlled by such Person or one or more
subsidiaries of such Person or by such Person and one or more subsidiaries of
such Person.
"Total Commitment" shall mean the aggregate amount of the Commitments
then in effect of all of the Lenders, as such amount may be reduced from time to
time in accordance with the terms of this Credit Agreement.
"Total Film Exposure" shall mean the Budgeted Negative Cost plus Print
and Advertising Expenses minus the aggregate amount of pre-sales or revenue
received or receivable, with respect to all items of Product comprising
theatrical motion pictures.
"Total TV Exposure" shall mean the Budgeted Negative Cost minus the
aggregate amount of pre-sales or revenue received or receivable with respect to
all television Product.
"Trademark Security Agreement" shall mean the Trademark Security
Agreement substantially in the form of Exhibit F hereto to be executed by the
Borrowers, as such agreement may be amended, supplemented or otherwise modified,
renewed or replaced from time to time.
"UCC" shall mean the Uniform Commercial Code as in effect in the State of
New York on the date of execution of this Credit Agreement (as amended from time
to time).
"Uncompleted" shall mean not Completed.
"Unrelated Producer" shall mean any Person, who is not an Affiliate of
any Credit Party, who produces any item of Product, which has not been developed
in whole or in part by or for any Credit Party and is not based upon any
underlying literary or other property owned by or licensed to any Credit Party.
2. THE LOANS
SECTION 2.1. Loans.
(a) Each Lender, severally and not jointly, agrees, upon the terms and
subject to the conditions hereof, to make loans (the "Loans") to the Borrowers
on any Business Day and from time to time from the Closing Date to but excluding
the Commitment Termination Date, each in a principal amount which when added to
the aggregate principal amount of all Loans then outstanding to the Borrowers
from such Lender, plus such Lender's Pro Rata Share of the then current L/C
Exposure does not exceed such Lender's Commitment.
(b) Notwithstanding anything to the contrary above, a Lender shall not be
obligated to make any Loan or to incur any incremental L/C Exposure if, as a
result thereof, the sum of the aggregate principal amount of all Loans then
outstanding plus the then current L/C Exposure would exceed (i) the Total
Commitment then in effect or (ii) the Borrowing Base.
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(c) Subject to the terms and conditions of this Credit Agreement, at any
time prior to the Commitment Termination Date, the Borrowers may borrow, repay
and re-borrow amounts up to the aggregate amount of the Commitments.
(d) Each Loan shall be either an Alternate Base Rate Loan or Eurodollar
Loan (each such type of Loan, an "Interest Rate Type") as the applicable
Borrower may request. Subject to Section 2.10(d), each Lender may at its option
fulfill its Commitment with respect to any Eurodollar Loan by causing a foreign
branch or affiliate to make such Loan, provided that any exercise of such option
shall not affect the obligation of the Borrowers to repay such Loan in
accordance with the terms hereof and of the relevant Note. Subject to the other
provisions of this Section, Section 2.7(b) and Section 2.11, Loans of more than
one Interest Rate Type may be outstanding at the same time.
(e) Each Loan requested hereunder on any date shall be made by each
Lender in accordance with its respective Percentage.
(f) The Borrowers shall give the Administrative Agent prior written,
facsimile or telephonic (promptly confirmed in writing) notice of each Borrowing
hereunder; such notice shall be irrevocable and to be effective, must be
received by the Administrative Agent not later than 2:00 p.m., New York City
time, (i) in the case of Alternate Base Rate Loans, on the Business Day
preceding the date on which such Loan is to be made and (ii) in the case of
Eurodollar Loans, on the third Business Day preceding the date on which such
Loan is to be made. Such notice shall specify (A) the amount of the requested
Loan, (B) the date on which such Loan is to be made (which shall be a Business
Day), and (C) whether the Loan then being requested is to be (or what portion or
portions thereof are to be) an Alternate Base Rate Loan or a Eurodollar Loan and
the Interest Period or Interest Periods with respect thereto in the case of
Eurodollar Loans. In the case of a Eurodollar Loan, if no election of an
Interest Period is specified in such notice, such notice shall be deemed a
request for an Interest Period of one month. If no election is made as to the
Interest Rate Type of any Loan, such notice shall be deemed a request for an
Alternate Base Rate Loan.
(g) The Administrative Agent shall promptly notify each Lender of its
proportionate share of each Borrowing, the date of such Borrowing, the Interest
Rate Type of each Loan being requested and the Interest Periods applicable
thereto. On the borrowing date specified in such notice, each Lender shall make
its share of the Borrowing available at the office of The Chase Manhattan Bank,
Loan and Agency Services Group, One Chase Manhattan Plaza, 8th Floor, New York,
New York 10081, Attention: Ganush Persaud for credit to the Chase Clearing
Account and in each case, no later than 12:00 noon New York City time, in
Federal or other immediately available funds.
(h) Notwithstanding any provision to the contrary in this Credit
Agreement, the Borrowers shall not, in any notice of borrowing under this
Section 2.1 request any Eurodollar Loan which, if made, would result in an
aggregate of more than six (6) separate Eurodollar Loans of any Lender being
outstanding hereunder at any one time. For purposes of the foregoing,
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Eurodollar Loans having Interest Periods commencing or ending on different days
shall be considered separate Eurodollar Loans.
(i) The aggregate amount of any Borrowing consisting of Eurodollar Loans
shall be in a minimum aggregate principal amount of $500,000 or such greater
amount which is an integral multiple of $100,000 and the aggregate amount of any
Borrowing consisting of Alternate Base Rate Loans shall be in a minimum
aggregate principal amount of $500,000 or such greater amount which is an
integral multiple of $100,000 (or such lesser amount as shall equal (i) the
available but unused portion of the Total Commitment then in effect or (ii) the
amount of any Borrowing to fund drawings under Letters of Credit).
(j) The Administrative Agent shall disburse the proceeds of Loans by
depositing them directly to the account specified to the Administrative Agent by
the Borrowers in writing.
SECTION 2.2. Notes; Repayment. (a) The Loans made by each Lender
hereunder shall be evidenced by a promissory note substantially in the form of
Exhibit A hereto (each a "Note") in the face amount of such Lender's Commitment,
payable to the order of such Lender, duly executed on behalf of the Borrowers
and dated as of the date hereof. The outstanding principal balance of each Loan
as evidenced by a Note shall be payable in full on the Maturity Date, subject to
mandatory prepayment as provided in Section 2.7 hereof and acceleration as
provided in Article 7 hereof.
(b) Each of the Notes shall bear interest on the outstanding principal
balance thereof as set forth in Section 2.4 hereof. Each Lender and the
Administrative Agent on its behalf is hereby authorized by the Borrowers, but
not obligated, to enter on the reverse of, or on an attachment to, the
appropriate Note the amount of each Loan, the amount of each payment or
prepayment of principal or interest and the other information provided for
therein, in the appropriate spaces; provided, however, that the failure of any
Lender or the Administrative Agent to enter the amount of such Loans, payments
or prepayments or other information, or any error with respect thereto, shall
not in any manner affect the obligation of the Borrowers to repay the Loans.
(c) All amounts received by the Administrative Agent from or on behalf of
the Borrowers as a payment or prepayment of, or interest on, the Notes shall be
applied among the Notes of the Lenders on a pro rata basis in accordance with
the outstanding Loans owed to each Lender.
SECTION 2.3. Letters of Credit. (a) (i) Upon the terms and subject to the
conditions hereof and of Applicable Law, the Issuing Bank agrees, upon the
request of the Borrowers, to issue Letters of Credit (and to extend Letters of
Credit previously issued hereunder) payable in Dollars from time to time after
the Closing Date and prior to the Commitment Termination Date, provided,
however, that (A) the Borrowers shall not request, and the Issuing Bank shall
not issue, any Letter of Credit if, after giving effect thereto, the sum of the
then current L/C Exposure, plus the aggregate principal amount of all Loans then
outstanding would exceed the lesser of the then current amount of the Borrowing
Base or the Total
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Commitment then in effect and (B) the Borrowers shall not request, and the
Issuing Bank shall not issue (or extend), any Letter of Credit having an
expiration date (x) later than the tenth day prior to the Commitment Termination
Date or (y) more than one year after its date of issuance.
(ii) Immediately upon the issuance of each Letter of Credit, each Lender
shall be deemed to, and hereby agrees to, have irrevocably purchased from the
Issuing Bank a participation in such Letter of Credit in accordance with such
Lender's Percentage.
(iii) Each Letter of Credit may, at the option of the Issuing Bank,
provide that the Issuing Bank may (but shall not be required to) pay all or any
part of the maximum amount which may at any time be available for drawing
thereunder to the beneficiary thereof upon the occurrence or continuation of an
Event of Default and the acceleration of the maturity of the Loans, provided
that, if payment is not then due to the beneficiary, the Issuing Bank shall
deposit the funds in question in a segregated account with the Issuing Bank to
secure payment to the beneficiary and any funds so deposited shall be paid to
the beneficiary of the Letter of Credit if conditions to such payment are
satisfied or returned to the Issuing Bank for distribution to the Lenders (or,
if all Obligations shall have been paid in full in cash, to the Borrowers) if no
payment to the beneficiary has been made and the final date available for
drawings under the Letter of Credit has passed. Each payment or deposit of funds
by the Issuing Bank as provided in this paragraph shall be treated for all
purposes of this Credit Agreement as a drawing duly honored by such Issuing Bank
under the related Letter of Credit.
(b) Whenever the Borrowers desire the issuance of a Letter of Credit,
they shall deliver to the Administrative Agent and the Issuing Bank a written
notice no later than 2:00 p.m. (New York City time) at least three (3) Business
Days prior to the proposed date of issuance. That notice shall specify (i) the
proposed date of issuance (which shall be a Business Day), (ii) the face amount
of the Letter of Credit, (iii) the expiration date of the Letter of Credit and
(iv) the name and address of the beneficiary. Such notice shall be accompanied
by a brief description of the underlying transaction and upon request of the
Issuing Bank or the Administrative Agent, the Borrowers shall provide additional
details regarding the underlying transaction. Concurrently with the giving of
written notice of a request for the issuance of a Letter of Credit, the
Borrowers shall provide a precise description of the documents and the verbatim
text of any certificate to be presented by the beneficiary of such Letter of
Credit which, if presented by such beneficiary prior to the expiration date of
the Letter of Credit, would require the Issuing Bank to make payment under the
Letter of Credit; provided, however, that the Issuing Bank, in its reasonable
discretion, may require customary changes in any such documents and certificates
to be presented by the beneficiary. Upon issuance of each Letter of Credit, the
Issuing Bank shall notify the Administrative Agent of the issuance of such
Letter of Credit. Promptly after receipt of such notice, the Administrative
Agent shall notify each Lender of the issuance and the amount of such Lender's
respective participation in the applicable Letter of Credit.
(c) The acceptance and payment of drafts under any Letter of Credit shall
be made in accordance with the terms of such Letter of Credit and the Uniform
Customs and Practice for Documentary Credits, International Chamber of Commerce
Publication No. 500, as adopted or amended from time to time. The Issuing Bank
shall be entitled to honor any drafts
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and accept any documents presented to it by the beneficiary of such Letter of
Credit in accordance with the terms of such Letter of Credit and believed by the
Issuing Bank in good faith to be genuine. The Issuing Bank shall not have any
duty to inquire as to the accuracy or authenticity of any draft or other drawing
documents which may be presented to it, but shall be responsible only to
determine in accordance with customary commercial practices that the documents
which are required to be presented before payment or acceptance of a draft under
any Letter of Credit have been delivered and that they comply on their face with
the requirements of that Letter of Credit.
(d) If the Issuing Bank shall make payment on any draft presented under a
Letter of Credit (regardless of whether a Default, Event of Default or
acceleration has occurred), the Issuing Bank shall give notice of such payment
to the Administrative Agent and the Lenders and each Lender hereby authorizes
and requests the Issuing Bank to advance for its account, pursuant to the terms
hereof, its share of such payment based upon its participation in the Letter of
Credit and agrees promptly to reimburse the Issuing Bank in immediately
available funds for the Dollar equivalent of the amount so advanced on its
behalf by the Issuing Bank. If any such reimbursement is not made by any Lender
in immediately available funds on the same day on which the Issuing Bank shall
have made payment on any such draft, such Lender shall pay interest thereon to
the Issuing Bank at a rate per annum equal to the Issuing Bank's cost of
obtaining overnight funds in the New York Federal Funds Market for the three (3)
Business Days following the time such Lender fails to make the reimbursement and
thereafter at a rate per annum equal to the Alternate Base Rate plus the
Applicable Margin.
(e) Each of the Borrowers is absolutely, unconditionally and irrevocably
obligated to reimburse all amounts drawn under each Letter of Credit. If any
draft is presented under a Letter of Credit, the payment of which is required to
be made at any time on or before the Commitment Termination Date, then payment
by the Issuing Bank of such draft shall constitute an Alternate Base Rate Loan
hereunder and interest shall accrue from the date the Issuing Bank makes payment
on such draft under such Letter of Credit. If any draft is presented under a
Letter of Credit, the payment of which is required to be made after the
Commitment Termination Date or at the time when an Event of Default or Default
shall have occurred and then be continuing, then the Borrowers shall immediately
pay to the Issuing Bank, in immediately available funds, the full amount of such
draft together with interest thereon at a rate per annum of 2% in excess of the
rate then in effect for Alternate Base Rate Loans from the date on which the
Issuing Bank makes such payment of such draft until the date it receives full
reimbursement for such payment from the Borrowers. Each of the Borrowers further
agrees that the Issuing Bank may reimburse itself for such drawing from the
balance in the Chase Clearing Account or from the balance in any other account
of any Borrowers maintained with the Issuing Bank.
(f) (i) The Borrower agrees to pay the following amounts to the Issuing
Bank with respect to Letters of Credit issued by it hereunder:
(A) with respect to the issuance, amendment or transfer of each
Letter of Credit and each drawing made thereunder, documentary and
processing charges in accordance with the Issuing Bank's standard
schedule for such charges in effect at
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the time of such issuance, amendment, transfer or drawing, as the case
may be; and
(B) a fronting fee payable to the Issuing Bank for the period from
and including the Closing Date to, but excluding, the Maturity Date,
computed at a rate equal to 1/4 of 1% per annum of the daily average L/C
Exposure, such fee to be due and payable in arrears on and through the
last Business Day of each March, June, September and December in each
year (commencing on the last Business Day of March, 2000) prior to the
Maturity Date or the expiration of the last outstanding Letter of Credit
(whichever is later) and on the later of the Maturity Date and the
expiration of the last outstanding Letter of Credit.
(ii) The Borrower agrees to pay to the Administrative Agent for
distribution to each Lender in respect of its L/C Exposure, such Lender's Pro
Rata Share of a commission equal to (A) a per annum percentage rate equal to the
Applicable Margin for Eurodollar Loans multiplied by (B) the average daily
amount of the L/C Exposure. Such commission shall be due and payable in arrears
on and through the last Business Day of each March, June, September and December
(commencing the last Business Day of March, 2000) prior to the Maturity Date or
the expiration of the last outstanding Letter of Credit (whichever is later) and
on the later of the Maturity Date and the expiration of the last outstanding
Letter of Credit; and
(iii) Promptly upon receipt by the Issuing Bank or the Administrative
Agent of any amount described in clause (ii) of this Section 2.3(f), or any
amount described in Section 2.3(e) previously reimbursed to the Issuing Bank by
the Lenders, the Issuing Bank or the Administrative Agent (as applicable) shall
distribute to each Lender its Pro Rata Share of such amount. Amounts payable
under clauses (i)(A) and (i)(B) of this Section 2.3(f) shall be paid directly to
the Issuing Bank and shall be for its exclusive use.
(g) If by reason of (i) any change in Applicable Law after the Initial
Date, or in the interpretation or administration thereof (including, without
limitation, any request, guideline or policy not having the force of law) by any
Governmental Authority charged with the administration or interpretation
thereof, or (ii) compliance by the Issuing Bank or any Lender with any
direction, request or requirement (whether or not having the force of law)
issued after the Closing Date by any Governmental Authority or monetary
authority, including, without limitation, any change whether or not proposed or
published prior to the Initial Date and any modifications to Regulation D
occurring after the Initial Date:
(A) the Issuing Bank or any Lender shall be subject to any tax,
levy, impost, duty, fee, charge, deduction or withholding of any nature
with respect to any Letter of Credit (other than withholding tax imposed
by the United States of America or any other tax, levy, impost, duty,
fee, charge, deduction or withholding (1) that is measured with respect
to the overall net income of the Issuing Bank or such Lender or of a
Lending Office of the Issuing Bank or such Lender, and that is imposed by
the United States of America, or by the jurisdiction in which the Issuing
Bank or such Lender is incorporated, or in which
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such Lending Office is located, managed or controlled or in which the
Issuing Bank or such Lender has its principal office or a presence which
is not otherwise connected with, or required by, this transaction (or any
political subdivision or taxing authority thereof or therein) or (2) that
is imposed solely by reason of the Issuing Bank or such Lender failing to
make a declaration of, or otherwise to establish, non-residence or to
make any other claim for exemption, or otherwise to comply with any
certification, identification, information, documentation or reporting
requirements prescribed under the laws of the relevant jurisdiction, in
those cases where the Issuing Bank or such Lender may properly make the
declaration or claim or so establish non-residence or otherwise comply),
or to any variation thereof or to any penalty with respect to the
maintenance or fulfillment of its obligations under this Section 2.3,
whether directly or by such being imposed on or suffered by the Issuing
Bank or any Lender;
(B) the basis of taxation of any fee or amount payable hereunder
with respect to any Letter of Credit or any participation therein shall
be changed;
(C) any reserve, deposit or similar requirement is or shall be
applicable, imposed or modified in respect of any Letter of Credit issued
by the Issuing Bank or participations therein purchased by any Lender; or
(D) there shall be imposed on the Issuing Bank or any Lender any
other condition regarding this Section 2.3, any Letter of Credit or any
participation therein;
and the result of the foregoing is to directly or indirectly increase the cost
to the Issuing Bank or any Lender of issuing, making or maintaining any Letter
of Credit or of purchasing or maintaining any participation therein, or to
reduce the amount receivable in respect thereof by the Issuing Bank or any
Lender, then and in any such case the Issuing Bank or such Lender may, at any
time, notify the Borrowers, and the Borrowers shall promptly pay the Issuing
Bank or such Lender upon its demand such amounts as the Issuing Bank or such
Lender may specify to be necessary to compensate the Issuing Bank or such Lender
for such additional cost or reduced receipt. Sections 2.10(b), (c) and (d) shall
in all instances apply to the Issuing Bank and any Lender with respect to the
Letters of Credit issued hereunder. The determination by the Issuing Bank or any
Lender, as the case may be, of any amount due pursuant to this Section 2.3 as
set forth in a certificate setting forth the calculation thereof in reasonable
detail shall, in the absence of manifest error, be final, conclusive and binding
on all of the parties hereto.
(h) If at any time when an Event of Default shall have occurred and be
continuing, any Letters of Credit shall remain outstanding, then the
Administrative Agent may, and if directed by the Required Lenders shall, require
the Borrowers to deliver to the Administrative Agent Cash Equivalents in an
amount equal to the full amount of the L/C Exposure or to furnish other security
acceptable to the Required Lenders. Any amounts so delivered pursuant to the
preceding sentence shall be applied to reimburse the Issuing Bank for the amount
of any drawings honored under Letters of Credit; provided, however, that if
prior to
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the Maturity Date, (i) no Default or Event of Default is then continuing, then
the Administrative Agent shall return all of such collateral relating to such
deposit to the Borrowers if requested by them or (ii) Letters of Credit shall
expire or be returned by the beneficiary so that the amount of the Cash
Equivalents delivered to the Administrative Agent hereunder shall exceed the
then current L/C Exposure, then such excess shall first be applied to pay any
Obligations then due under this Credit Agreement and the remainder shall be
returned to the Borrowers.
(i) Notwithstanding the termination of the Commitments and the payment of
the Loans, the obligations of the Borrowers under this Section 2.3 shall remain
in full force and effect until the Administrative Agent, the Issuing Bank and
the Lenders shall have been irrevocably released from their obligations with
regard to any and all Letters of Credit.
SECTION 2.4. Interest. (a) In the case of an Alternate Base Rate Loan,
interest shall be payable at a rate per annum (computed on the basis of the
actual number of days elapsed over a year of 365/366 days, as the case may be,
during such times as the Alternate Base Rate is based upon the Prime Rate, and
over a year of 360 days at all other times) equal to the Alternate Base Rate
plus the Applicable Margin for Alternate Base Rate Loans. Interest shall be
payable in arrears on each Alternate Base Rate Loan on each applicable Interest
Payment Date and on the Maturity Date.
(b) In the case of a Eurodollar Loan, interest shall be payable at a rate
per annum (computed on the basis of the actual number of days elapsed over a
year of 360 days) equal to the LIBO Rate plus the Applicable Margin for
Eurodollar Loans. Interest shall be payable on each Eurodollar Loan on each
applicable Interest Payment Date, on the Maturity Date and on the date of a
conversion of such Eurodollar Loan to an Alternate Base Rate Loan. The
Administrative Agent shall determine the applicable LIBO Rate for each Interest
Period as soon as practicable on the date when such determination is to be made
in respect of such Interest Period and shall promptly notify the Borrowers and
the Lenders of the applicable interest rate so determined. Such determination
shall be conclusive absent manifest error.
(c) Interest in respect of any Loan hereunder shall accrue from and
including the date of such Loan to but excluding the date on which such Loan is
paid or, if applicable, converted to a Loan of a different Interest Rate Type.
(d) Anything in this Credit Agreement or the Notes to the contrary
notwithstanding, the interest rate on the Loans or with respect to any drawing
under a Letter of Credit shall in no event be in excess of the maximum rate
permitted by Applicable Law.
SECTION 2.5. Commitment Fee and Other Fees. (a) The Borrowers agree to
pay to the Administrative Agent for the account of each Lender on the last
Business Day of each March, June, September and December in each year
(commencing on the last Business Day of March, 2000) prior to the Commitment
Termination Date, on the date of any termination or reduction of the Total
Commitment, and on the Commitment Termination Date, a fee (the "Commitment Fee"
and collectively, for all the Lenders, the "Commitment Fees") of 1/2 of 1% per
annum (computed on the basis of the actual number of days elapsed during the
preceding period
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or quarter over a year of 360 days) on the average daily amount during the
preceding period or quarter by which such Lender's Commitment (as such
Commitment may be reduced in accordance with the provisions of this Credit
Agreement) exceeded the sum of such Lender's Percentage of the L/C Exposure plus
the aggregate principal amount of such Lender's outstanding Loans.
(b) The Commitment Fees shall commence to accrue on the date this Credit
Agreement is executed by all the parties hereto.
(c) In addition, the Borrowers agree to pay to the Administrative Agent,
on the date this Credit Agreement is executed by all the parties hereto, any and
all fees that are then due and payable pursuant to the Fee Letter.
SECTION 2.6. Termination and/or Reduction of the Commitments. (a) Upon at
least three (3) Business Days' prior written, facsimile or telephonic notice
(provided that such telephonic notice is immediately followed by written
confirmation) to the Administrative Agent, the Borrowers may at any time in
whole permanently terminate, or from time to time in part permanently reduce,
the Total Commitment. In the case of a partial reduction, each such reduction of
the Total Commitment shall be in a minimum aggregate principal amount of
$3,500,000 or an integral multiple thereof; provided, however, that the Total
Commitment may not be reduced to an amount less than the sum of the aggregate
principal amount of all Loans then outstanding, plus the then current L/C
Exposure. Any partial reduction of the Total Commitment shall be made among the
Lenders ratably in accordance with their respective Percentages.
(b) Simultaneously with each such termination or reduction of the Total
Commitment, the Borrowers shall pay to the Administrative Agent for the benefit
of the Lenders all accrued and unpaid Commitment Fees on the amount of the
Commitment so terminated or reduced through the date of such termination or
reduction.
SECTION 2.7. Default Interest; Alternate Rate of Interest. (a) So long as
an Event of Default shall have occurred and be continuing (after, as well as
before judgment), the Borrowers shall on demand from time to time pay interest,
to the extent permitted by Applicable Law, on any then unpaid amount of the
Obligations at a rate per annum of 2% in excess of the rate otherwise in effect
(computed as aforesaid).
(b) In the event, and on each occasion, that on or before the day on
which the LIBO Rate for a Eurodollar Loan is to be determined as set forth
herein, (i) the Administrative Agent shall have received notice from any Lender
of such Lender's determination (which determination, absent manifest error,
shall be conclusive) that Dollar deposits in an amount equal to the principal
amount of such Lender's percentage of the Eurodollar Loan are not generally
available in the London Interbank Market or that the rate at which such Dollar
deposits are being offered will not adequately and fairly reflect the cost to
such Lender of making or maintaining the principal amount of such Lender's
Percentage of the Eurodollar Loan during the applicable Interest Period or (ii)
the Administrative Agent shall have determined that reasonable means do
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not exist for ascertaining the applicable LIBO Rate, the Administrative Agent
shall, as soon as practicable thereafter, give written or facsimile notice of
such determination by such Lender or the Administrative Agent to the Borrowers
and the Lenders and any request by the Borrowers for a Eurodollar Loan pursuant
to Section 2.1 or conversion to or continuation as a Eurodollar Loan pursuant to
Section 2.8, made after receipt of such notice and until the circumstances
giving rise to such notice no longer exist, shall be deemed to be a request for
an Alternate Base Rate Loan; provided, however, that in the circumstances
described in clause (i) above, such deemed request shall only apply to the
affected Lender's portion thereof.
SECTION 2.8. Continuation and Conversion of Loans. The Borrowers shall
have the right, at any time, (i) to convert any Eurodollar Loan or portion
thereof to an Alternate Base Rate Loan or to continue any Eurodollar Loan or
portion thereof for a successive Interest Period, or (ii) to convert any
Alternate Base Rate Loan or portion thereof to a Eurodollar Loan, subject to the
following:
(a) the Borrowers shall give the Administrative Agent prior written,
facsimile or telephonic (promptly confirmed in writing) notice of each
continuation or conversion hereunder, of at least three (3) Business Days for
any continuation as or conversion to a Eurodollar Loan; such notice shall be
irrevocable and to be effective, must be received by the Administrative Agent on
the day required not later than 2:00 p.m. New York City time;
(b) no Event of Default or Default shall have occurred and be continuing
at the time of any conversion to a Eurodollar Loan or continuation of a
Eurodollar Loan into a subsequent Interest Period;
(c) the aggregate principal amount of Loans continued as, or converted
to, Eurodollar Loans as part of the same continuation or conversion, shall be in
a minimum amount of $500,000 or in such greater amount which is an integral
multiple of $100,000;
(d) if fewer than all Loans at the time outstanding shall be continued or
converted, such continuation or conversion shall be made pro rata among the
Lenders in accordance with the respective Percentage of the principal amount of
such Loans held by the Lenders immediately prior to such continuation or
conversion;
(e) no Alternate Base Rate Loan (or portion thereof) may be converted to
a Eurodollar Loan and no Eurodollar Loan may be continued as a Eurodollar Loan
if, after such conversion or continuation, and after giving effect to any
concurrent prepayment of Loans, an aggregate of more than six (6) separate
Eurodollar Loans would be outstanding hereunder (for purposes of determining the
number of such Loans outstanding, Loans with different Interest Periods shall be
counted as different Eurodollar Loans even if made on the same date);
(f) the Interest Period with respect to a new Eurodollar Loan effected by
a continuation or conversion shall commence on the date of such continuation or
conversion;
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(g) if a Eurodollar Loan is converted to an Alternate Base Rate Loan
other than on the last day of the Interest Period with respect thereto, the
amounts required by Section 2.9 shall be paid upon such conversion;
(h) accrued interest on a Eurodollar Loan (or portion thereof) being
converted or continued to an Alternate Base Rate Loan shall be paid by the
Borrowers at the time of conversion or continuation (as applicable); and
(i) each request for a continuation as, or conversion to, a Eurodollar
Loan which fails to state an applicable Interest Period shall be deemed to be a
request for an Interest Period of one month.
Subject to the foregoing, in the event that the Borrowers shall not give notice
to continue or convert any Eurodollar Loan as provided above, such Loan (unless
repaid) shall automatically be converted to an Alternate Base Rate Loan at the
expiration of the then current Interest Period. The Administrative Agent shall,
after it receives notice from the Borrower, promptly give the Lenders notice of
any continuation or conversion.
SECTION 2.9. Prepayment of Loans; Reimbursement of Lenders. (a) Subject
to the terms of paragraph (b) of this Section 2.9, the Borrowers shall have the
right at their option at any time and from time to time to prepay without
premium or penalty (i) any Alternate Base Rate Loan, in whole or in part, upon
at least one Business Day's prior written, telephonic (promptly confirmed in
writing) or facsimile notice to the Administrative Agent, in the principal
amount of $500,000 or such greater amount which is an integral multiple of
$100,000 if prepaid in part, or the remaining balance of such Loan if prepaid in
full and (ii) any Eurodollar Loan, in whole or in part, upon at least three
Business Days' prior written, telephonic (promptly confirmed in writing) or
facsimile notice, in the principal amount of $500,000 or such greater amount
which is an integral multiple of $100,000 if prepaid in part, or the remaining
balance of such Loan if prepaid in full. Each notice of prepayment shall specify
the prepayment date, each Loan to be prepaid and the principal amount thereof,
shall be irrevocable and shall commit the Borrowers to prepay such Loan in the
amount and on the date stated therein. All prepayments under this Section 2.9(a)
shall be accompanied by accrued but unpaid interest on the principal amount
being prepaid to (but not including) the date of prepayment.
(b) The Borrowers shall reimburse each Lender on demand for any loss
incurred or to be incurred by such Lender (i) in the reemployment of the funds
released (x) by any prepayment or conversion (for any reason whatsoever) of a
Eurodollar Loan if such Loan is prepaid or converted prior to the last day of
the Interest Period for such Loan or (y) in the event that after the Borrowers
deliver a notice of borrowing under Section 2.2 or notice of continuation or
conversion under Section 2.8 in respect of a Eurodollar Loan, such Loan is not
made, continued or converted on the first day of the Interest Period specified
in the applicable notice for any reason other than (I) a suspension or
limitation under Section 2.7(b) of the right of the Borrowers to select a
Eurodollar Loan or (II) a breach by such Lender of its obligation to fund such
Loan when it was otherwise required to do so hereunder, or (ii) as a result of
any Borrower's failure to prepay any Loan on the date specified in any
prepayment notice delivered
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pursuant to Section 2.9(a). Such loss shall be the amount as reasonably
determined by such Lender as (A) the excess, if any, of (1) the amount of
interest which would have accrued to such Lender on the amount so paid or not
borrowed, continued or converted at a rate of interest equal to the interest
rate applicable to such Loan pursuant to Section 2.4 hereof, for the period from
the date of such payment or failure to borrow, continue or convert to the last
day (x) in the case of a payment prior to the last day of the Interest Period
for such Loan, of the then current Interest Period for such Loan, or (y) in the
case of a failure to borrow, continue or convert, of the Interest Period for
such Loan which would have commenced on the date of such failure to borrow,
continue or convert, over (2) the amount realized by such Lender in reemploying
the funds not advanced or the funds received in prepayment or realized from the
Loan not so continued or converted during the period referred to above; or (B)
the loss, cost or expenses incurred by reason of the acquisition of deposits or
other funds by such Lender to fulfill obligations incurred in anticipation of
such prepayment. Each Lender shall deliver to the Borrowers and to the
Administrative Agent from time to time one or more certificates setting forth
the amount of such loss (and in reasonable detail the manner of computation
thereof) as determined by such Lender, which certificates shall be conclusive
absent manifest error. The Borrower shall pay such Lender the amounts shown on
such certificate within ten (10) days of the Borrowers' receipt of such
certificate. Each Lender shall deliver to the Borrowers and to the
Administrative Agent from time to time one or more certificates setting forth
the amount of such loss (and in reasonable detail the manner of computation
thereof) as determined by such Lender, which certificates shall be conclusive
absent manifest error. The Borrowers shall pay the Administrative Agent for the
account of such Lender the amounts shown on such certificate within ten (10)
days of the Borrowers' receipt of such certificate.
(c) If at any time the aggregate principal amount of outstanding Loans
plus the L/C Exposure exceeds (i) the Borrowing Base as set forth on the most
recent Borrowing Base Certificate or (ii) the Total Commitment, the Borrowers
shall immediately pay down the Loans outstanding or otherwise eliminate such
excess.
(d) In the event any prepayment hereunder would result in the incurrence
by any Lender of a loss described in Section 2.9(b), such proceeds shall be
deposited into the Cash Collateral Account until such time as such prepayment
would no longer result in the incurrence of any such loss, at which time the
proceeds shall be applied to prepay outstanding Loans; provided that no Event of
Default has occurred or is then continuing.
(e) Unless otherwise designated in writing by the Borrowers, all
prepayments shall be applied to the applicable principal payment set forth in
this Section 2.9, first to that amount of such applicable payment then
maintained as Alternate Base Rate Loans by the Borrowers, and then, to that
amount of such applicable principal payment maintained as Eurodollar Loans by
the Borrowers in order of the scheduled expiry of Interest Periods with respect
thereto.
(f) All prepayments shall be accompanied by accrued but unpaid interest
on the principal amounts being prepaid to but not including the date of
prepayment.
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SECTION 2.10. Change in Circumstances. (a) In the event that after the
Initial Date as determined for any Lender, any change in Applicable Law or in
the interpretation or administration thereof (including, without limitation, any
request, guideline or policy not having the force of law) by any Governmental
Authority charged with the administration or interpretation thereof or, with
respect to clauses (ii), (iii) or (iv) below any changes in conditions, shall
occur which shall:
(i) subject any Lender to, or increase the net amount of, any tax,
levy, impost, duty, charge, fee, deduction or withholding with respect to
any Eurodollar Loan (other than withholding tax imposed by the United
States of America or any political subdivision or taxing authority
thereof or therein or any other tax, levy, impost, duty, charge, fee,
deduction or withholding (x) that is measured with respect to the overall
net income of such Lender or of a Lending Office of such Lender, and that
is imposed by the United States of America, or by the jurisdiction in
which such Lender or Lending Office is incorporated, in which such
Lending Office is located, managed or controlled or in which such Lender
has its principal office or a presence not otherwise connected with, or
required by, this transaction (or any political subdivision or taxing
authority thereof or therein), or (y) that is imposed solely by reason of
any Lender failing to make a declaration of, or otherwise to establish,
nonresidence, or to make any other claim for exemption, or otherwise to
comply with any certification, identification, information, documentation
or reporting requirements prescribed under the laws of the relevant
jurisdiction, in those cases where a Lender may properly make such
declaration or claim or so establish nonresidence or otherwise comply);
or
(ii) change the basis of taxation of any payment to any Lender of
principal of or interest on any Eurodollar Loan or other fees and amounts
payable to any Lender hereunder, or any combination of the foregoing,
other than withholding tax imposed by the United States of America or any
political subdivision or taxing authority thereof or therein or any other
tax, levy, impost, duty, charge, fee, deduction or withholding that is
measured with respect to the overall net income of such Lender or of a
Lending Office of such Lender, and that is imposed by the United States
of America, or by the jurisdiction in which such Lender or Lending Office
is incorporated, in which such Lending Office is located, managed or
controlled or in which such Lender has its principal office or a presence
not otherwise connected with, or required by, this transaction (or any
political subdivision or taxing authority thereof or therein); or
(iii) impose, modify or deem applicable any reserve, deposit or
similar requirement against any assets held by, deposits with or for the
account of, or loans or commitments by, an office of such Lender with
respect to any Eurodollar Loan; or
(iv) impose upon such Lender or the London Interbank Market any
other condition with respect to the Eurodollar Loans or this Credit
Agreement;
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and the result of any of the foregoing shall be to increase the actual cost to
such Lender of making or maintaining any Eurodollar Loan hereunder or to reduce
the amount of any payment (whether of principal, interest or otherwise) received
or receivable by such Lender in connection with any Eurodollar Loan hereunder,
or to require such Lender to make any payment in connection with any Eurodollar
Loan hereunder, in each case by or in an amount which such Lender in its sole
judgment shall deem material, then and in each case, the Borrowers agree to pay
to the Administrative Agent for the account of such Lender, as provided in
paragraph (c) below, such amounts as shall be necessary to compensate such
Lender for such cost, reduction or payment.
(b) If at any time and from time to time after the Initial Date, any
Lender shall have determined that the applicability of any law, rule, regulation
or guideline regarding capital adequacy which is adopted after the Initial Date,
or any change in any of the foregoing or in the interpretation or administration
of any of the foregoing by any Governmental Authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
the compliance by any Lender (or any Lending Office of such Lender) or any
Lender's holding company with any request or directive issued after the Initial
Date regarding capital adequacy (whether or not having the force of law) of any
such authority, central bank or comparable agency, has or would have the effect
of reducing the rate of return on such Lender's capital or on the capital of
such Lender's holding company, if any, as a consequence of this Credit Agreement
or the Loans made or Letters of Credit issued or participated in by such Lender
pursuant hereto to a level below that which such Lender or such Lender's holding
company could have achieved but for such applicability, adoption, change or
compliance (taking into consideration such Lender's policies and the policies of
such Lender's holding company with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time the Borrowers agree
to pay to the Administrative Agent for the account of such Lender, as provided
in paragraph (c) below, such additional amount or amounts as will compensate
such Lender or such Lender's holding company for any such reduction suffered to
the extent attributable to this Credit Agreement or the Loans made or Letters of
Credit issued or participated in pursuant hereto.
(c) Each Lender shall deliver to the Borrowers and to the Administrative
Agent from time to time one or more certificates setting forth the amounts due
to such Lender under paragraphs (a) or (b) above, the changes as a result of
which such amounts are due and the manner of computing such amounts. Each such
certificate shall be conclusive in the absence of manifest error. The Borrowers
shall pay to the Administrative Agent for the account of each such Lender the
amounts shown as due on any such certificate within ten (10) business days after
the Borrowers' receipt of the same. No failure on the part of any Lender to
demand compensation under paragraph (a) or (b) above on any one occasion shall
constitute a waiver of its right to demand such compensation on any other
occasion. The protection of this Section 2.10 shall be available to each Lender
regardless of any possible contention of the invalidity or inapplicability of
any law, regulation or other condition which shall give rise to any demand by
such Lender for compensation hereunder.
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(d) Each Lender agrees that after it becomes aware of the occurrence of
an event or the existence of a condition that (i) would cause it to incur any
increased cost hereunder or render it unable to perform its agreements hereunder
for the reasons specifically set forth in Section 2.3(g), this Section 2.10,
Section 2.11 or Section 2.12(e) or (ii) would require the Borrowers to pay an
increased amount under Section 2.3(g), this Section 2.10, Section 2.11 or
Section 2.12(e), it will use reasonable efforts to make, fund or maintain the
affected Loans of such Lender, or, if applicable, to participate in Letters of
Credit as required by Section 2.3 through another Lending Office of such Lender
if as a result thereof the additional monies which would otherwise be required
to be paid or the reduction of amounts receivable by such Lender thereunder in
respect of such Loans, Letters of Credit or participations therein would be
materially reduced, or such inability to perform would cease to exist, or the
increased costs which would otherwise be required to be paid in respect of such
Loans, Letters of Credit or participations therein pursuant to Section 2.3(g),
this Section 2.10, Section 2.11 or Section 2.12(e) would be materially reduced
or the taxes or other amounts otherwise payable under Section 2.3(g), this
Section 2.10, Section 2.11 or Section 2.12(e) would be materially reduced, and
if, as determined by such Lender, in its sole discretion, the making, funding or
maintaining of such Loans, Letters of Credit or participations therein through
such other Lending Office would not otherwise materially adversely affect such
Loans, Letters of Credit or participations therein or such Lender.
(e) Each Lender will use reasonable efforts to notify the Borrowers,
through the Administrative Agent, of any event of which it has knowledge that
will entitle such Lender to compensation pursuant to subsections 2.3(g), 2.9(b),
this Section 2.10, Section 2.11, or Section 2.12(e). No failure by any Lender to
give (or delay in giving) such notice shall adversely affect such Lender's
rights to such compensation.
SECTION 2.11. Change in Legality. (a) Notwithstanding anything to the
contrary contained elsewhere in this Credit Agreement, if any change after the
Initial Date in Applicable Law, guideline or order, or in the interpretation
thereof by any Governmental Authority charged with the administration thereof,
shall make it unlawful for any Lender to make or maintain any Eurodollar Loan or
to give effect to its obligations as contemplated hereby with respect to a
Eurodollar Loan, then, by written notice to the Borrowers and the Administrative
Agent, such Lender may (i) declare that Eurodollar Loans will not thereafter be
made by such Lender hereunder and/or (ii) require that, subject to Section
2.9(b), all outstanding Eurodollar Loans made by it be converted to Alternate
Base Rate Loans, whereupon all of such Eurodollar Loans shall automatically be
converted to Alternate Base Rate Loans, as of the effective date of such notice
as provided in paragraph (b) below. Such Lender's pro rata portion of any
subsequent Eurodollar Loan shall, instead, be an Alternate Base Rate Loan unless
such declaration is subsequently withdrawn.
(b) A notice to the Borrowers by any Lender pursuant to paragraph (a)
above shall be effective for purposes of clause (ii) thereof, if lawful, on the
last day of the current Interest Period for each outstanding Eurodollar Loan;
and in all other cases, on the date of receipt of such notice by the Borrowers.
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SECTION 2.12. United States Withholding. (a) Prior to the date of the
initial Loans hereunder, and prior to the effective date set forth in the
Assignment and Acceptance with respect to any Lender becoming a Lender after the
date hereof, and from time to time thereafter if requested by the Borrowers or
the Administrative Agent or required because, as a result of a change in law or
a change in circumstances or otherwise, a previously delivered form or statement
becomes incomplete or incorrect in any material respect, each Lender organized
under the laws of a jurisdiction outside the United States shall provide, if
applicable, the Administrative Agent and the Borrowers with complete, accurate
and duly executed forms or other statements prescribed by the Internal Revenue
Service of the United States certifying such Lender's exemption from, or
entitlement to a reduced rate of, United States withholding taxes (including
backup withholding taxes) with respect to all payments to be made to such Lender
hereunder and under any other Fundamental Document.
(b) The Borrowers and the Administrative Agent shall be entitled to
deduct and withhold any and all present or future taxes or withholdings, and all
liabilities with respect thereto, from payments to a Lender hereunder or under
any other Fundamental Document, if and to the extent that the Borrowers or the
Administrative Agent in good faith determines that such deduction or withholding
is required by the law of the United States, including, without limitation, any
applicable treaty of the United States. In the event the Borrowers or the
Administrative Agent shall so determine that deduction or withholding of taxes
is required, they shall advise the affected Lender as to the basis of such
determination prior to actually deducting and withholding such taxes. In the
event the Borrowers or the Administrative Agent shall so deduct or withhold
taxes from amounts payable hereunder, they (i) shall pay to, or deposit with,
the appropriate taxing authority in a timely manner the full amount of taxes it
has deducted or withheld; (ii) shall provide to each Lender from whom taxes were
deducted or withheld, evidence of payment of such taxes to, or the deposit
thereof with, the appropriate taxing authority and a statement setting forth the
amount of taxes deducted or withheld, the applicable rate, and any other
information or documentation reasonably requested by such Lender; and (iii)
shall forward to each such Lender any official tax receipts or other
documentation with respect to the payment or deposit of the deducted or withheld
taxes as may be issued from time to time by the appropriate taxing authority.
Unless the Borrowers and the Administrative Agent have received forms or other
documents satisfactory to them indicating that payments hereunder or under any
Note are not subject to United States withholding tax or are subject to such tax
at a rate reduced by an applicable tax treaty, the Borrowers or the
Administrative Agent may withhold taxes from such payments at the applicable
statutory rate in the case of payments to or for any Lender organized under the
laws of a jurisdiction outside the United States.
(c) Each Lender agrees (i) that as between it and the Borrowers or the
Administrative Agent, such Lender shall be the Person to deduct and withhold
taxes, and to the extent required by law, it shall deduct and withhold taxes on
amounts that such Lender may remit to any other Person(s) by reason of any
undisclosed transfer or assignment of an interest in this Credit Agreement to
such other Person(s) pursuant to Section 13.3; and (ii) to indemnify the
Borrowers and the Administrative Agent and any officers, directors, agents,
employees or representatives of the Borrowers or the Administrative Agent
against, and to hold them harmless from, any tax, interest, additions to tax,
penalties, reasonable counsel and accountants' fees,
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disbursements or payments arising from the assertion by any appropriate taxing
authority of any claim against them relating to a failure to withhold taxes as
required by law with respect to amounts described in clause (i) of this
paragraph (c) or arising from the reliance by the Borrowers or the
Administrative Agent on any form or other document furnished by such Lender and
purporting to establish a basis for not withholding, or for withholding at a
reduced rate, taxes with respect to payments hereunder or under any other
Fundamental Document.
(d) Each assignee of a Lender's interest in this Credit Agreement in
conformity with Section 13.3 shall be bound by this Section 2.12, so that such
assignee will have all of the obligations and provide all of the forms and
statements and all indemnities, representations and warranties required to be
given under this Section 2.12.
(e) Notwithstanding the foregoing, in the event that any withholding
taxes or additional United States withholding taxes shall become payable solely
as a result of any change in any statute, treaty, ruling, determination or
regulation occurring after the Initial Date in respect of any sum payable by the
Borrowers hereunder or under any other Fundamental Document to any Lender or the
Administrative Agent (i) the sum payable by the Borrowers shall be increased as
may be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 2.12) such
Lender or the Administrative Agent (as the case may be) receives an amount equal
to the sum it would have received had no such deductions been made, (ii) the
Borrowers shall make such deductions, (iii) the Borrowers shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with Applicable Law and (iv) the Borrowers shall forward to such
Lender or the Administrative Agent (as the case may be) the official tax
receipts or other documentation pursuant to Section 2.12(b). In addition, the
Borrowers shall indemnify each Lender and the Administrative Agent for any
additional withholding taxes paid by such Lender or the Administrative Agent, as
the case may be, or any liability (including penalties and interest) arising
therefrom or with respect thereto, whether or not such additional withholding
taxes were correctly or legally asserted.
(f) In the event that a Lender receives a refund of or credit for taxes
withheld or paid pursuant to clause (e) of this Section, which credit or refund
is identifiable by such Lender as being a result of taxes withheld or paid in
connection with sums payable hereunder or under any other Fundamental Document,
such Lender shall promptly notify the Administrative Agent and the Borrowers and
shall remit to the Borrowers the amount of such refund or credit allocable to
payments made hereunder or under any other Fundamental Document.
(g) Each Lender agrees that after it becomes aware of the occurrence of
an event that would cause the Borrowers to pay any amount pursuant to clause (e)
of this Section 2.12, it will use reasonable efforts to notify the Borrowers of
such event and, to the extent not inconsistent with such Lender's internal
policies, will use its reasonable efforts to make, fund or maintain the affected
Loans of such Lender, or, if applicable, to participate in Letters of Credit
through another Lending Office of such Lender if as a result thereof the
additional monies which would otherwise be required to be paid by reason of
Section 2.13(e) in respect of such Loans, Letters of Credit or participations
therein would be materially reduced, and if, as determined by
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such Lender, in its discretion, the making, funding or maintaining of such
Loans, Letters of Credit or participations therein through such other Lending
Office would not otherwise materially adversely affect such Loans, Letters of
Credit or participations therein or such Lender.
SECTION 2.13. Interest Adjustments. If the provisions of this Credit
Agreement or any Note would at any time require payment by the Borrowers to a
Lender of any amount of interest in excess of the maximum amount then permitted
by Applicable Law with respect to any Loan, the interest payments to that Lender
shall be reduced to the extent necessary in order that such Lender shall not
receive interest in excess of such maximum amount. If, as a result of the
foregoing, a Lender shall receive interest payments hereunder or under a Note in
an amount less than the amount otherwise provided hereunder, such deficit
(hereinafter called the "Interest Deficit") will, to the fullest extent
permitted by Applicable Law, cumulate and will be carried forward (without
interest) until the termination of this Credit Agreement. Interest otherwise
payable to a Lender hereunder and under a Note for any subsequent period shall
be increased by the maximum amount of the Interest Deficit that may be so added
without causing such Lender to receive interest in excess of the maximum amount
then permitted by Applicable Law with respect to the Loans.
The amount of any Interest Deficit relating to a Loan and the Note shall
be treated as a prepayment penalty and shall, to the fullest extent permitted by
Applicable Law, be paid in full at the time of any optional prepayment by the
Borrowers to the Lenders of all the Loans at that time outstanding pursuant to
Section 2.9(a) hereof and a termination of the Commitments under Section 2.6.
The amount of any Interest Deficit relating to a particular Loan and Note at the
time of any complete payment of the Loans at that time outstanding (other than
an optional prepayment thereof pursuant to Section 2.9(a) hereof and a
termination of the Commitments under Section 2.6) shall be canceled and not
paid.
SECTION 2.14. Manner of Payments. All payments of principal and interest
by the Borrowers in respect of any Loans shall be pro rata among the Lenders in
accordance with their Percentage. All payments by the Borrowers hereunder and
under the Notes shall be made without offset or counterclaim in Dollars, in
immediately available funds, at the office of The Chase Manhattan Bank, Loan and
Agency Services Group, One Chase Manhattan Plaza, 8th Floor, New York, New York
10081, Attention: Ganesh Persaud, for credit to the Chase Clearing Account, no
later than 12:00 noon, New York City time, on the date on which such payment
shall be due. Any payment received at such office after such time shall be
deemed received on the following Business Day.
SECTION 2.15. Provisions Relating to the Borrowing Base. (a) The
Administrative Agent or the Required Lenders may from time to time by written
notice to the Borrowers (i) delete any Person or Affiliated Group from the
schedule of Acceptable Obligors or (ii) decrease the Allowable Amount for any
Acceptable Obligor, in each case, as the Administrative Agent or the Required
Lenders, as the case may be, acting in good faith may deem appropriate. Any such
notice shall be prospective only, i.e., to the extent that giving effect to such
notice would otherwise result in a mandatory prepayment by the Borrowers under
Section 2.9(d), such notice shall not be given effect for purposes of such
mandatory prepayment,
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but shall nevertheless be effective for all other purposes under this Credit
Agreement immediately upon the Borrowers' receipt of such notice.
(b) The Required Lenders may (either independently or after a request has
been received from the Borrowers) from time to time by written notice to the
Borrowers add or reinstate a Person or Affiliated Group to the schedule of
Acceptable Obligors or increase or reinstate the Allowable Amount for any
Acceptable Obligor, as they may in their discretion deem appropriate.
(c) In the event the Administrative Agent or the Required Lenders
notifies the Borrowers that a Person or Affiliated Group is to be deleted as an
Acceptable Obligor in accordance with Section 2.15(a), no additional Eligible
Receivables from such Person or Affiliated Group may be included in the
Borrowing Base subsequent to such notice unless the Administrative Agent or the
Required Lenders thereafter notifies the Borrowers that such Person or
Affiliated Group is reinstated as an Acceptable Obligor in accordance with
Section 2.15(b). In the event the Administrative Agent or the Required Lenders
notify the Borrowers that the Allowable Amount with respect to an Acceptable
Obligor is to be reduced in accordance with Section 2.15(a), no additional
Eligible Receivables from such Acceptable Obligor may be included in the
Borrowing Base subsequent to such notice if such inclusion would result in the
aggregate amount of Eligible Receivables from such Acceptable Obligor being in
excess of the Allowable Amount for such Acceptable Obligor after giving effect
to such reduction unless the Administrative Agent or the Required Lenders
thereafter notifies the Borrowers that the Allowable Amount for such Acceptable
Obligor is increased in accordance with Section 2.15(b); provided, however, that
the Allowable Amount for such Acceptable Obligor shall automatically be restored
to its former amount upon request of the Borrowers if the Administrative Agent
is satisfied in good faith that the circumstances which caused the
Administrative Agent or the Required Lenders, as the case may be, to reduce such
Allowable Amount are no longer continuing.
3. REPRESENTATIONS AND WARRANTIES OF CREDIT PARTIES
In order to induce the Administrative Agent, the Issuing Bank and the
Lenders to enter into this Credit Agreement and to make the Loans and issue or
purchase participations in the Letters of Credit provided for herein, the Credit
Parties, jointly and severally, make the following representations and
warranties to, and agreements with, the Administrative Agent, the Issuing Bank
and the Lenders, all of which shall survive the execution and delivery of this
Credit Agreement, the issuance of the Notes, the making of the Loans and the
issuance of the Letters of Credit:
SECTION 3.1. Existence and Power. (a) Each of the Credit Parties is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and is in good standing as a foreign
corporation in all jurisdictions where (i) the nature of its properties or
business so requires and (ii) the failure to be in good standing would render
any Eligible Receivable unenforceable or would give rise to a material
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liability of such Credit Party (a list of such jurisdictions as of the date
hereof is attached hereto as Schedule 3.1(a)).
(b) Each of the Credit Parties has the power and authority (i) to own its
respective properties and carry on its respective business as now being
conducted, (ii) to execute, deliver and perform, as applicable, its obligations
under the Fundamental Documents and any other documents contemplated thereby to
which it is or will be a party, and (iii) to grant to the Administrative Agent,
for the benefit of the Administrative Agent, the Issuing Bank and the Lenders, a
security interest in the Collateral as contemplated by Article 8 and in the
Pledged Securities as contemplated by Article 10 hereof; and in the case of the
Guarantors, to guaranty the Obligations as contemplated by Article 9 hereof.
SECTION 3.2. Authority and No Violation. (a) The execution, delivery and
performance of this Credit Agreement and the other Fundamental Documents to
which it is a party, by each Credit Party, the grant to the Administrative Agent
for the benefit of the Administrative Agent, the Issuing Bank and the Lenders of
the security interest in the Collateral and the Pledged Securities as
contemplated herein and by the other Fundamental Documents and, in the case of
the Borrowers, the Borrowings hereunder and the execution, delivery and
performance of the Notes and, in the case of each Guarantor, the guaranty of the
Obligations as contemplated in Article 9 hereof, (i) have been duly authorized
by all necessary corporate action on the part of each such Credit Party, (ii)
will not constitute a violation of any provision of Applicable Law in any
material respect or any order of any Governmental Authority applicable to such
Credit Party, or any of its properties or assets in any material respect, (iii)
will not violate any provision of the Certificate of Incorporation, By-Laws, or
any other organizational document of any Credit Party, (iv) will not violate any
provision of any Distribution Agreement, indenture, agreement, bond, note or
other similar instrument to which such Credit Party is a party or by which such
Credit Party or any of its properties or assets are bound in any material
respect, (v) will not be in conflict with, result in a breach of, or constitute
(with due notice or lapse of time or both) a default under, or create any right
to terminate, any such Distribution Agreement, indenture, agreement, bond, note
or other instrument, and (vi) will not result in the creation or imposition of
any Lien, charge or encumbrance of any nature whatsoever upon any of the
properties or assets of any of the Credit Parties other than pursuant to this
Credit Agreement or the other Fundamental Documents.
(b) There are no restrictions on the transfer of any of the Pledged
Securities other than as a result of this Credit Agreement or applicable
securities laws and the regulations promulgated thereunder.
SECTION 3.3. Governmental Approval. All authorizations, approvals,
registrations or filings from or with any Governmental Authority (other than UCC
financing statements, the Copyright Security Agreement and the Trademark
Security Agreement which will be delivered to the Administrative Agent on or
prior to the Closing Date, in form suitable for recording or filing with the
appropriate filing office) required for the execution, delivery and performance
by any Credit Party of this Credit Agreement and the other Fundamental Documents
to which it is a party, and the execution and delivery by the Borrowers of the
Notes,
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have been duly obtained or made, and are in full force and effect, and if any
further authorizations, approvals, registrations or filings should hereafter
become necessary, the Credit Parties shall obtain or make all such
authorizations, approvals, registrations or filings.
SECTION 3.4. Binding Agreements. This Credit Agreement and the other
Fundamental Documents when executed, will constitute the legal, valid and
binding obligations of each Credit Party that is a party thereto, enforceable
against such Credit Party in accordance with their respective terms, subject, as
to the enforcement of remedies, to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and to general principles of equity.
SECTION 3.5. Financial Statements. (a) (i) The audited consolidated
balance sheet of the Parent and its Consolidated Subsidiaries at the fiscal year
ended December 31, 1998 and (ii) the unaudited consolidated balance sheet of the
Parent and its Consolidated Subsidiaries for the quarter ended September 30,
1999, together with the related statements of income and the related notes and
supplemental information for the audited statements, have been prepared in
accordance with GAAP in effect as of such date consistently applied, except as
otherwise indicated in the notes to such financial statements and subject in the
case of unaudited statements to changes resulting from year-end and audit
adjustments. All of such financial statements fairly present the financial
position or the results of operations of the Parent and its Consolidated
Subsidiaries on a consolidated basis at the dates or for the periods indicated,
subject to year-end and audit adjustments in the case of unaudited statements,
and reflect all known liabilities, contingent or otherwise, that GAAP require,
as of such dates, to be shown or reserved against.
(b) (i) The audited consolidated balance sheet of PM and its Consolidated
Subsidiaries at the fiscal year ended February 28, 1999 and (ii) the unaudited
consolidated balance sheet of PM and its Consolidated Subsidiaries for the
quarter ended August 31, 1999, together with the related statements of income
and the related notes and supplemental information for the audited statements,
have been prepared in accordance with GAAP in effect as of such date
consistently applied, except as otherwise indicated in the notes to such
financial statements and subject in the case of unaudited statements to changes
resulting from year-end and audit adjustments. All of such financial statements
fairly present the financial position or the results of operations of PM and its
Consolidated Subsidiaries on a consolidated basis at the dates or for the
periods indicated, subject to year-end and audit adjustments in the case of
unaudited statements, and reflect all known liabilities, contingent or
otherwise, that GAAP require, as of such dates, to be shown or reserved against.
SECTION 3.6. No Material Adverse Change. (a) There has been no material
adverse change with respect to the business, operations, performance, assets,
properties, condition (financial or otherwise) or prospects of (i) the Credit
Parties (other than PM) taken as a whole from September 30, 1999 or (ii) PM from
November 30, 1999.
(b) No Credit Party has entered or is entering into the arrangements
contemplated hereby and by the other Fundamental Documents, or intends to make
any transfer or incur any obligations hereunder or thereunder, with actual
intent to hinder, delay or defraud either present
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or future creditors. On and as of the Closing Date, on a pro forma basis after
giving effect to all Indebtedness (including the Loans and all costs and
expenses relating to the acquisition of PM by the Parent) (i) each Credit Party
expects the cash available to such Credit Party, after taking into account all
other anticipated uses of the cash of such Credit Party (including the payments
on or in respect of debt referred to in clause (iii) of this Section 3.6(b)),
will be sufficient to satisfy all final judgments for money damages which have
been docketed against such Credit Party or which may be rendered against such
Credit Party in any action in which such Credit Party is a defendant (taking
into account the reasonably anticipated maximum amount of any such judgment and
the earliest time at which such judgment might be entered); (ii) the sum of the
present fair saleable value of the assets of each Credit Party will exceed the
probable liability of such Credit Party on its debts (including its Guaranties);
(iii) no Credit Party will have incurred or intends to, or believes that it
will, incur debts beyond its ability to pay such debts as such debts mature
(taking into account the timing and amounts of cash to be received by such
Credit Party from any source, and of amounts to be payable on or in respect of
debts of such Credit Party and the amounts referred to in clause (i)); and (iv)
each Credit Party believes it will have sufficient capital with which to conduct
its present and proposed business and the property of such Credit Party does not
constitute unreasonably small capital with which to conduct its present or
proposed business. For purposes of this Section 3.6, "debt" means any liability
or a claim, and "claim" means (y) right to payment whether or not such right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured, or (z)
right to an equitable remedy for breach of performance if such breach gives rise
to a payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured.
SECTION 3.7. Ownership of Pledged Securities, Subsidiaries, etc. (a)
Annexed hereto as Schedule 3.7 is a correct and complete list as of the date
hereof, of each Credit Party showing, as to each, (i) its name, (ii) the
jurisdiction in which it was incorporated and (iii) its authorized
capitalization, the number of shares of its capital stock outstanding and the
ownership of its capital stock.
(b) Except for (i) the ownership by the Parent of 50% of the membership
interests in Harvey Fashions, LLC, (ii) the ownership by the Parent of 468,883
shares of Kushner Locke common stock, (iii) the ownership by PM of 5,672 shares
of Metromedia International Group, Inc. common stock, (iv) the ownership by the
Parent of 68,181.82 shares of Tutornet.com, Inc. common stock, (v) the ownership
by the Parent of an option to purchase 45,455 shares of Tutornet.com, Inc.
common stock at $11.00 per share, and (vi) the ownership by the Parent of a
warrant to purchase 25,000 shares of LearningSoft Corporation common stock at
$2.52 per share, no Credit Party owns any voting stock or other beneficial
interest, either directly or indirectly, in any Person other than another Credit
Party.
SECTION 3.8. Copyrights, Trademarks and Other Rights. (a) On the date
hereof, the items of Product listed on Schedule 3.8(a) hereto comprise all of
the Product in which any Credit Party has any right, title or interest (either
directly, through a joint venture or partnership or otherwise). The copyright
registration number and the character of the interests
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held by the relevant Credit Party for such items of Product are set forth across
from the description of such item of Product and as to each item of Product
owned by any Credit Party, the Credit Party holding such interests has duly
recorded its interests in the United States Copyright Office and has delivered
copies of all such recordations to the Administrative Agent. Schedule 3.8(a)
also identifies the location of the best available Physical Materials related to
each item of Product owned by Credit Parties. To the best of each Credit Party's
knowledge, all items of Product and all component parts thereof do not and will
not violate or infringe upon any copyright, right of privacy, trademark, patent,
trade name, performing right or any literary, dramatic, musical, artistic,
personal, private, several, care, contract, property or copyright right or any
other right of any Person or contain any libelous or slanderous material. There
is no claim, suit, action or proceeding pending or threatened against any Credit
Party that involves a claim of infringement of any copyright with respect to any
item of Product owned by such Credit Party which would have a Material Adverse
Effect on such Credit Party, and no Credit Party has any knowledge of any
existing infringement by any other Person of any copyright held by any Credit
Party with respect to any item of Product owned by such Credit Party.
(b) Schedule 3.8(b) hereto (i) lists all the trademarks registered by any
Credit Party on the date hereof and identifies the Credit Party which registered
each such trademark and (ii) specifies as to each, the jurisdictions in which
such trademark has been issued or registered (or, if applicable, in which an
application for such issuance or registration has been filed), including the
respective registration or application numbers and applicable dates of
registration or application and (iii) specifies as to each, as applicable,
material licenses, sublicenses and other material agreements as of the date
hereof (other than any agreements which relate to the exploitation of an item of
Product), to which any Credit Party is a party and pursuant to which any Person
is authorized to use such trademark. Each trademark set forth on Schedule 3.8(b)
will be included on Schedule A to the Trademark Security Agreement to be
delivered to the Administrative Agent on or prior to the Closing Date pursuant
to Section 4.1(h).
(c) All applications and registrations for all copyrights, trademarks,
service marks, trade names and service names in which any Credit Party has any
right, title or interest are valid and in full force and effect and are not
subject to the payment of any taxes or maintenance fees or the taking of any
other actions by the Credit Parties to maintain their validity or effectiveness.
SECTION 3.9. Fictitious Names. Except as disclosed on Schedule 3.9, none
of the Credit Parties has done business, is doing business or intends to do
business other than under its full corporate name, including, without
limitation, under any trade name or other doing business name.
SECTION 3.10. Title to Properties. The Credit Parties have good title to
each of the properties and assets reflected on the most recent financial
statements delivered pursuant to Section 5.1(a) hereof (other than such
properties or assets disposed of in the ordinary course of business since the
date of such financial statements) and all such properties and assets are free
and clear of Liens, except Permitted Encumbrances.
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SECTION 3.11. Places of Business. The chief executive office of each
Credit Party is, on the date hereof, as set forth on Schedule 3.11 hereto. All
of the places where each Credit Party keeps the records concerning the
Collateral on the date hereof or regularly keeps any goods included in the
Collateral on the date hereof are also listed on Schedule 3.11 hereto.
SECTION 3.12. Litigation. Schedule 3.12 sets forth a list of all actions,
suits or other proceedings at law or in equity by or before any arbitrator or
arbitration panel, or any Governmental Authority or any investigation by any
Governmental Authority of the affairs of, or to the best of each Credit Party's
knowledge, threatened action, suit or other proceeding against or affecting, any
Credit Party or any of their respective properties or rights. There are no
actions, suits or other proceedings at law or in equity by or before any
arbitrator or arbitration panel, or any Governmental Authority (including, but
not limited to, matters relating to environmental liability) or any
investigation by any Governmental Authority of the affairs of, or to the best of
each Credit Party's knowledge, threatened action, suit or other proceeding
against or affecting, any Credit Party or of any of their respective properties
or rights which either (A) if adversely determined, could reasonably be expected
to have a Material Adverse Effect, or (B) relate to this Credit Agreement or any
of the transactions contemplated hereby. No Credit Party is in default with
respect to any order, writ, injunction, decree, rule or regulation of any
Governmental Authority binding upon such Person, which default could reasonably
be expected to have a Material Adverse Effect.
SECTION 3.13. Federal Reserve Regulations. No Credit Party is engaged
principally or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock. No part of
the proceeds of the Loans will be used, directly or indirectly, whether
immediately, incidentally or ultimately (i) to purchase or carry any Margin
Stock or to extend credit to others for the purpose of purchasing or carrying
any Margin Stock, or (ii) for any other purpose, in each case, violative of or
inconsistent with any of the provisions of any regulation of the Board,
including, without limitation, Regulations T, U and X thereto.
SECTION 3.14. Investment Company Act. No Credit Party is, or will during
the term of this Credit Agreement be, (i) an "investment company", within the
meaning of the Investment Company Act of 1940, as amended, or (ii) subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act or any foreign, federal or local statute or any other Applicable Law
of the United States of America or any other jurisdiction, in each case limiting
its ability to incur indebtedness for money borrowed as contemplated hereby or
by any other Fundamental Document.
SECTION 3.15. Taxes. Each Credit Party has filed or caused to be filed
all federal, state, local and foreign tax returns which are required to be filed
with any Governmental Authority after giving effect to applicable extensions,
and has paid or has caused to be paid all taxes as shown on said returns or on
any assessment received by them in writing, to the extent that such taxes have
become due, except as permitted by Section 5.13 hereof. No Credit Party knows of
any material additional assessments or any basis therefor. The Credit Parties
believe
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that the charges, accrual and reserves on its books in respect of taxes or other
governmental charges are accurate.
SECTION 3.16. Compliance with ERISA. (a) Each Plan has been maintained
and operated in all material respects in accordance with all applicable laws,
including ERISA and the Code, and each Plan intended to qualify under Section
401(a) of the Code so qualifies. No Reportable Event has occurred in the last
five years as to any Plan, and the present value of all benefits under all Plans
subject to Title IV of ERISA (based on those assumptions used to fund such
Plans) did not, in the aggregate, as of the last annual valuation date
applicable thereto, exceed the actuarial value of the assets of such Plans
allocable to such benefits. No material liability has been, and no circumstances
exist pursuant to which any material liability could be, imposed upon any Credit
Party or ERISA Affiliate (i) under Sections 4971 through 4980E of the Code,
Sections 502(i) or 502(l) of ERISA, or under Title IV of ERISA with respect to
any Plan or Multiemployer Plan, or with respect to any plan heretofore
maintained by any Credit Party or ERISA Affiliate, or any entity that heretofore
was an ERISA Affiliate, (ii) for the failure to fulfill any obligation to
contribute to any Multiemployer Plan, or (iii) with respect to any Plan that
provides post-retirement welfare coverage (other than as required pursuant to
Section 4980B of the Code). Neither any Credit Party nor any ERISA Affiliate has
received any notification that any Multiemployer Plan is in reorganization or
has been terminated within the meaning of Title IV of ERISA, and no
Multiemployer Plan is reasonably expected to be in reorganization or to be
terminated.
(b) The execution, delivery and performance of the Fundamental Documents
and the consummation of the transactions contemplated hereby and thereby will
not involve any "prohibited transaction" within the meaning of ERISA or the
Code.
SECTION 3.17. Agreements. (a) No Credit Party is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement or instrument (including, without
limitation, any Distribution Agreement) to which it is a party which could
reasonably be expected to result in a Material Adverse Effect.
(b) Schedule 3.17 is a true and complete listing as of the date hereof of
(i) all credit agreements, indentures, and other agreements related to any
indebtedness for borrowed money of any Credit Party, other than the Fundamental
Documents, (ii) all joint venture agreements to which any Credit Party is a
party, (iii) all material Distribution Agreements, (iv) all agreements or other
arrangements pursuant to which a Credit Party has granted a Lien to any Person
and (v) all other contractual arrangements entered into by a Credit Party or by
which any Credit Party is bound which arrangements are material to any Credit
Party, including but not limited to, Guaranties and employment agreements. The
Credit Parties have delivered or made available to the Administrative Agent a
true and complete copy of each agreement described on Schedule 3.17, including
all exhibits and schedules. For purposes of this Section 3.17, a Distribution
Agreement or other contract, agreement or arrangement shall be deemed "material"
if the Credit Parties reasonably expect that any Credit Party would, pursuant to
the terms thereof, (A) recognize future revenues in excess of $100,000, (B)
incur liabilities or obligations in excess
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of $100,000 or (C) likely suffer damages or losses in excess of $100,000 by
reason of the breach or termination thereof.
SECTION 3.18. Security Interest. This Credit Agreement and the other
Fundamental Documents, when executed and delivered and, upon the making of the
initial Loan hereunder, will create and grant to the Administrative Agent for
the benefit of the Administrative Agent, the Issuing Bank and the Lenders (upon
(i) the filing of the appropriate UCC-1 financing statements with the filing
offices listed on Schedule 3.18, (ii) the filing of the Copyright Security
Agreement with the U.S. Copyright Office, (iii) the filing of the Trademark
Security Agreement with the U.S. Patent and Trademark Office and (iv) the
delivery of the Pledged Securities with appropriate stock powers to the
Administrative Agent) valid and first priority perfected security interests in
the Collateral, (subject only to Permitted Encumbrances) and in the Pledged
Securities.
SECTION 3.19. Disclosure. Neither this Credit Agreement nor any other
Fundamental Document nor any agreement, document, certificate or statement
furnished to the Administrative Agent for the benefit of the Administrative
Agent, the Issuing Bank and the Lenders by any Credit Party in connection with
the transactions contemplated hereby, at the time it was furnished or delivered,
contained any untrue statement of a material fact regarding the Credit Parties
or, when taken together with all such other agreements, documents, certificates
and statements, omitted to state a material fact necessary under the
circumstances under which it was made in order to make the statements contained
herein or therein not misleading. There is no fact known to any Credit Party
(other than general industry conditions or facts which have been disclosed to
the Lenders in writing) which would have or could reasonably be expected in the
future to have a Material Adverse Effect.
SECTION 3.20. Environmental Liabilities. (a) No Credit Party has used,
stored, treated, transported, manufactured, refined, handled, produced or
disposed of any Hazardous Materials on, under, at, from or in any way affecting,
any of its properties or assets owned or leased by a Credit Party, in any manner
which at the time of the action in question violated any Environmental Law
governing the use, storage, treatment, transportation, manufacture, refinement,
handling, production or disposal of Hazardous Materials and to the best of each
Credit Party's knowledge, no prior owner of such property or asset or any
tenant, subtenant, prior tenant or prior subtenant thereof has used Hazardous
Materials on or affecting such property or asset, or otherwise, in any manner
which at the time of the action in question violated any Environmental Law
governing the use, storage, treatment, transportation, manufacture, refinement,
handling, production or disposal of Hazardous Materials.
(b) To the best of each Credit Party's knowledge (i) no Credit Party has
any obligations or liabilities, known or unknown, matured or not matured,
absolute or contingent, assessed or unassessed, which could reasonably be
expected to have a Material Adverse Effect and (ii) no claims have been made
against any of the Credit Parties in the past five years and no presently
outstanding citations or notices have been issued against any of the Credit
Parties, which could reasonably be expected to have a Material Adverse Effect
which in either case have been or are imposed by reason of or based upon any
provision of any Environmental Law,
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including, without limitation, any such obligations or liabilities relating to
or arising out of or attributable, in whole or in part, to the manufacture,
processing, distribution, use, treatment, storage, disposal, transportation or
handling of any Hazardous Materials by any Credit Party, or any of its
employees, agents, representatives or predecessors in interest in connection
with or in any way arising from or relating to any of the Credit Parties or any
of their respective owned or leased properties, or relating to or arising from
or attributable, in whole or in part, to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation or handling of
any such substance, by any other Person at or on or under any of the real
properties owned or used by any of the Credit Parties or any other location
where such could have a Material Adverse Effect.
SECTION 3.21. Pledged Securities. (a) All of the Pledged Securities are
duly authorized, validly issued, fully paid and non-assessable, and are owned
and held by the Pledgors, free and clear of any Liens, other than those created
pursuant to this Credit Agreement or Permitted Encumbrances and there are no
restrictions on the transfer of the Pledged Securities other than as a result of
this Credit Agreement or applicable securities laws and the regulations
promulgated thereunder. Except as set forth on Schedule 3.7, there are no
outstanding rights, warrants, options, or agreements to purchase or otherwise
acquire any shares of the stock or securities or obligations of any kind
convertible into any shares of capital stock, of the issuers of the Pledged
Securities. The Pledged Securities are owned by the Persons specified on
Schedule 3.7.
(b) Except as set forth on Schedule 3.7, there are no warrants, options,
conversion or similar rights currently outstanding with respect to, and no
agreements to purchase or otherwise acquire, any shares of the capital stock or
other equity interests of any issuer of any of the Pledged Securities; and there
are no securities or obligations of any kind convertible into any shares of the
capital stock or other equity interests of any issuer of any of the Pledged
Securities.
(c) Article 10 of this Credit Agreement creates in favor of the
Administrative Agent (on behalf of the Administrative Agent, the Issuing Bank
and the Lenders) a valid, binding and enforceable security interest in, and Lien
upon, all right, title and interest of the Pledgors in the Pledged Securities
and constitutes a fully perfected first and prior security interest and Lien
upon all right, title and interest of the Pledgors in such Pledged Securities.
SECTION 3.22. Compliance with Laws. No Credit Party is in violation of
any Applicable Law except for such violations in the aggregate which would not
have a Material Adverse Effect. The Borrowings hereunder, the intended use of
the proceeds of the Loans as described in the preamble hereto and as
contemplated by Section 5.18 hereof and any other transactions contemplated
hereby will not violate any Applicable Law.
SECTION 3.23. Subsidiaries. Since the date hereof, no Credit Party has
acquired or created any new direct or indirect Subsidiary other than in
accordance with the provisions of Section 6.27 hereof.
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SECTION 3.24. Year 2000. The Year 2000 date change has not resulted in
disruption of any Credit Party's or any of its Subsidiaries' computer hardware,
software, databases, systems and other equipment containing embedded microchips
(including systems and equipment supplied by others or with which any Credit
Party's or Subsidiary's systems interface), or to such Credit Party's or such
Subsidiary's operations or business systems, or to the best of such Credit
Party's or such Subsidiary's knowledge, to the operations or business systems of
such Credit Party's major vendors, customers, suppliers and counterparties. None
of the Credit Parties has any reason to believe that liabilities and
expenditures related to the Year 2000 date-change (including, without
limitation, costs caused by reprogramming errors, the failure of others' systems
or equipment, and the potential liability, if any, of any Credit Party or any of
its Subsidiaries for Year 2000 related costs incurred or disruption experienced
by others) will result in a Default or a Material Adverse Effect.
SECTION 3.25. PM Acquisition Due Diligence Investigation. The Parent has
exercised due care in completing its due diligence investigation relating to the
PM Acquisition and the Administrative Agent may, in its discretion, rely on the
results of such due diligence investigation by the Parent, but shall be under no
obligation to do so.
SECTION 3.26. PMFSC. No real, personal or other property is owned by
PMFSC.
4. CONDITIONS OF LENDING
SECTION 4.1. Conditions Precedent to Initial Loan or Letter of Credit.
The obligation of the Issuing Bank to issue the initial Letter of Credit, and of
each Lender to make the initial Loan or participate in the initial Letter of
Credit, is subject to the satisfaction in full of the following conditions
precedent:
(a) Corporate Documents. The Administrative Agent shall have received,
with copies for each of the Lenders:
(i) a copy of the articles or certificate of incorporation of each
Credit Party, certified on a recent date by the Secretary of State of
such Credit Party's jurisdiction of incorporation or organization, as the
case may be;
(ii) a certificate of the Secretary of State of such jurisdiction
of incorporation, dated as of a recent date as to the good standing of,
and payment of taxes by, each Credit Party which certificate lists the
charter documents on file in the office of such Secretary of State;
(iii) a certificate dated as of a recent date as to the good
standing of each Credit Party issued by the Secretary of State of each
jurisdiction in which such Credit Party is qualified as a foreign
corporation as listed in Schedule 3.1(a) hereto;
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(iv) a certificate of the Secretary of each Credit Party, dated
the Closing Date and certifying (A) that attached thereto is a true and
complete copy of the by-laws of such party as in effect on the date of
such certification; (B) that attached thereto is a true and complete copy
of the resolutions adopted by the Board of Directors of such party
authorizing the execution, delivery and performance in accordance with
their respective terms of the Fundamental Documents executed by such
Credit Party and any other documents required or contemplated hereunder
or thereunder, the grant of the security interests in the Collateral, and
in the case of the Borrowers, the borrowings hereunder, and, in the case
of the Parent, the PM Acquisition, and that such resolutions have not
been amended, rescinded or supplemented and are currently in effect; (C)
that the certificate of incorporation of such party have not been amended
since the date of the last amendment thereto indicated on the
certificates of the Secretary of State furnished pursuant to clause (i)
above; and (D) as to the incumbency and specimen signature of each
officer of such party executing any Fundamental Document (such
certificate to contain a certification by another officer of such party
as to the incumbency and signature of the officer signing the certificate
referred to in this clause (iv)); and
(v) such additional supporting documents as the Administrative
Agent or its counsel or any Lender may reasonably request.
(b) Credit Agreement; Notes. The Administrative Agent shall have received
(i) executed counterparts of this Credit Agreement, which, when taken together,
bear the signatures of the Administrative Agent, the Issuing Bank, all of the
Credit Parties and all of the Lenders and (ii) the Notes executed by the
Borrowers.
(c) Opinion of Counsel. The Administrative Agent shall have received the
written opinion of Sidley & Austin, counsel to the Credit Parties, dated the
Closing Date and addressed to the Administrative Agent and the Lenders which
opinion shall be substantially in the form attached hereto as Exhibit B and in
form and substance satisfactory to the Administrative Agent and Morgan, Lewis &
Bockius LLP, counsel to the Administrative Agent.
(d) No Material Adverse Change. No material adverse change shall have
occurred with respect to the business, operations, performance, assets,
properties, condition (financial or otherwise) or prospects of the Credit
Parties taken as a whole from September 30, 1999 except for changes due to
general economic conditions which are outside the control of the Credit Parties.
(e) Insurance. The Parent shall have furnished the Administrative Agent
with (i) a summary of all existing insurance coverage, (ii) evidence acceptable
to the Administrative Agent that the insurance policies required by Section 5.5
have been obtained and are in full force and effect and (iii) Certificates of
Insurance with respect to all existing insurance coverage which certificates
shall name The Chase Manhattan Bank, as Administrative Agent, as the Certificate
holder and shall evidence the Credit Parties' compliance with Section 5.5(f)
with respect to all insurance coverage existing as of the Closing Date.
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(f) Borrowing Base Certificate. The Administrative Agent shall have
received an initial Borrowing Base Certificate substantially in the form of
Exhibit I hereto, signed by an Authorized Officer.
(g) Security and Other Documentation. The Administrative Agent shall have
received fully executed copies of (i) Pledgeholder Agreements for each item of
Product for which a Credit Party has control over any physical elements thereof
as listed on Schedule 3.8(a) hereto; (ii) a Copyright Security Agreement listing
each item of Product in which any Credit Party has a copyrightable interest (as
listed on Schedule 3.8(a) hereto) executed by each such Credit Party; (iii) a
Trademark Security Agreement for each trademark in which any Credit Party has
any interest (as listed on Schedule 3.8(b) hereto) executed by each such Credit
Party; (iv) Laboratory Access Letters for each item of Product where any Credit
Party has access rights to any physical elements of such item of Product; (v)
appropriate UCC-1 financing statements relating to the Collateral; and (vi) the
Pledged Securities with appropriate undated stock powers executed in blank.
(h) Security Interests in Copyrights and other Collateral. The
Administrative Agent shall have received evidence satisfactory to it that each
Credit Party, has sufficient right, title and interest in and to the Collateral
and other assets which it purports to own (including appropriate licenses under
copyright), as set forth in the documents and other materials presented to the
Lenders, to enable such Credit Party to perform the Distribution Agreements to
which such Credit Party is a party and as to each Credit Party, to grant to the
Administrative Agent for the benefit of the Administrative Agent, the Issuing
Bank and the Lenders the security interests contemplated by the Fundamental
Documents, and that all financing statements, copyright filings and other
filings under Applicable Law necessary to provide the Administrative Agent for
the benefit of itself, the Issuing Bank and the Lenders with a first priority
perfected security interest in the Pledged Securities and Collateral (subject in
the case of the Collateral, to Permitted Encumbrances) have been filed or
delivered to the Administrative Agent in satisfactory form for filing.
(i) Payment of Fees. All fees and expenses then due and payable by any
Credit Party to the Administrative Agent and/or the Lenders in connection with
the transactions contemplated hereby or as required by the Fee Letter shall have
been paid.
(j) PM Acquisition.
(i) The Administrative Agent shall have completed a due diligence
investigation relating to the PM Acquisition and the results of such
investigation shall have been satisfactory to the Administrative Agent;
(ii) The Parent and the PM Shareholders shall have entered into
each of the PM Acquisition Documents and IAC, Imperial and Natexis have entered
into the Inferno Sale Agreement, each of which shall be in full force and
effect. All conditions precedent to the consummation of the PM Acquisition as
set forth in the PM Acquisition Documents shall have been satisfied, and not
waived except with the consent of the Administrative Agent and the
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Required Lenders, to the satisfaction of the Administrative Agent. The PM
Acquisition shall have been, or shall be, consummated contemporaneously
hereunder in accordance with the Stock Purchase Agreement and Applicable Law;
(iii) As of the date hereof, PM shall be a Credit Party for all
the purposes of this Credit Agreement; and
(iv) On or prior to the Closing Date, the structure and all terms
of, and all documentation for, the PM Acquisition shall be satisfactory in form
and substance to the Administrative Agent.
(k) Subordination Agreements. The Administrative Agent shall have
received from each PM Shareholder in whose favor a Shareholder Note has been
issued by the Parent, a subordination agreement in form and substance acceptable
to the Administrative Agent, pursuant to which the obligations of the Parent to
such PM Shareholder are fully and effectively subordinated to the payment in
full of the Obligations.
(l) Imperial and City National Releases. The Administrative Agent shall
have received from each of Imperial and City National (i) a release in form and
substance satisfactory to the Administrative Agent pursuant to which Imperial
fully and effectively releases all of the security interests granted to it by PM
pursuant to the Revolving Credit Loan and Security Agreement dated as of July
20, 1995, as amended, between PM and Imperial or otherwise, and City National
fully and effectively releases all of the security interests granted to it by
HCI pursuant to the Revolving Loan and Security Agreement dated as of October
27, 1993 between HCI and City National or otherwise and (ii) all appropriate
UCC-3 financing statement terminations and laboratory pledgeholder agreement
terminations in each case, in form and substance satisfactory to the
Administrative Agent.
(m) Notices of Assignment and Irrevocable Instructions. The
Administrative Agent shall have received, to the extent not already received,
with respect to each Eligible Receivable included in the initial Borrowing Base
Certificate, a Notice of Assignment and Irrevocable Instructions executed by the
appropriate Credit Party.
(n) Chain of Title. The Administrative Agent shall have received copies
of all agreements, instruments of transfer or other instruments (in recordable
form) (including, without limitation, the rights agreements) necessary to
establish, to the satisfaction of the Administrative Agent, (i) the applicable
Credit Party's ownership of sufficient copyright rights in the literary
properties upon which each item of Product, which is included in the Borrowing
Base, is to be based to enable such Credit Party to produce and/or distribute
such item of Product and to grant to the Administrative Agent for the benefit of
the Lenders the security interests which are contemplated by this Credit
Agreement, and (ii) the interest of such Credit Party in the literary and other
properties upon which each item of Product, which is included in the Borrowing
Base, is to be based.
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(o) Litigation. No litigation, inquiry, injunction or restraining order
shall be pending, entered or threatened which involves this Credit Agreement or
which in the Administrative Agent's good faith judgment could reasonably be
expected to have a Material Adverse Effect.
(p) UCC Searches. The Administrative Agent shall have received UCC,
copyright office and other searches satisfactory to it indicating that no other
filings, encumbrances or transfers (other than in connection with Permitted
Encumbrances) with regard to the Collateral are of record in any jurisdiction in
which it shall be necessary or desirable for the Administrative Agent to make a
UCC filing in order to provide the Administrative Agent (for the benefit of the
Administrative Agent, the Issuing Bank or the Lenders) with a perfected security
interest in the Collateral.
(q) ERISA. The Administrative Agent shall have received copies of all
Plans of the Credit Parties that are in existence on the Closing Date, and
descriptions of those that are committed to on the Closing Date.
(r) Contribution Agreement. The Administrative Agent shall have received
a fully executed Contribution Agreement duly executed by each of the Credit
Parties.
(s) Material Agreements. The Administrative Agent shall have received a
copy, certified by the Borrower, of each agreement listed on Schedule 3.17 and
each original Acceptable L/C in existence on the Closing Date.
(t) Employment Agreement. The Administrative Agent shall have received a
copy, certified by an Authorized Officer, of the executed Employment Agreement
and the Employment Agreement shall be satisfactory to the Administrative Agent.
(u) Required Consents and Approvals. The Administrative Agent shall be
satisfied that all required consents and approvals have been obtained with
respect to the transactions contemplated hereby and by the PM Acquisition from
all Governmental Authorities with jurisdiction over the business and activities
of any Credit Party and from any other entity whose consent or approval the
Administrative Agent in its reasonable discretion deems necessary to the
transactions contemplated hereby and by the PM Acquisition.
(v) Federal Reserve Regulations. The Administrative Agent shall be
satisfied that the provisions of Regulations T, U and X of the Board will not be
violated by the transactions contemplated hereby.
(w) Compliance with Laws. The Administrative Agent shall be satisfied
that the transactions contemplated hereby will not violate any provision of
Applicable Law, or any order of any court or other agency of the United States
or any state thereof applicable to any of the Credit Parties or any of their
respective properties or assets.
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(x) Approval of Counsel to the Administrative Agent. All legal matters
incident to this Credit Agreement and the transactions contemplated hereby shall
be reasonably satisfactory to Morgan, Lewis & Bockius LLP, counsel to the
Administrative Agent.
(y) Other Documents. The Administrative Agent shall have received such
other documentation as the Administrative Agent may reasonably request.
SECTION 4.2. Conditions Precedent to Each Loan and Letter of Credit. The
obligation of the Issuing Bank to issue each Letter of Credit and of the Lenders
to make each Loan and to participate in each Letter of Credit (including the
initial Loan and/or Letter of Credit) are subject to the following conditions
precedent:
(a) Notice. The Administrative Agent shall have received a notice with
respect to such Borrowing or the Issuing Bank shall have received a notice with
respect to such Letter of Credit as required by Article 2 hereof.
(b) Borrowing Certificate. The Administrative Agent shall have received a
Borrowing Certificate with respect to such Borrowing, duly executed by an
Authorized Officer on behalf of the Borrowers.
(c) Representations and Warranties. The representations and warranties
set forth in Article 3 hereof and in the other Fundamental Documents shall be
true and correct in all material respects on and as of the date of each
Borrowing and/or issuance of a Letter of Credit hereunder (except to the extent
that such representations and warranties expressly relate to an earlier date)
with the same effect as if made on and as of such date.
(d) No Event of Default. On the date of each Borrowing or issuance of
each Letter of Credit, no Default or Event of Default shall have occurred and be
continuing, nor shall any such event occur by reason of the making of such Loan
or the issuance of such Letter of Credit.
Each request for a Borrowing or for issuance of a Letter of Credit shall be
deemed to be a representation and warranty by the Borrowers on the date of such
Borrowing or issuance of such Letter of Credit as to the matters specified in
paragraphs (c) and (d) of this Section 4.2.
5. AFFIRMATIVE COVENANTS
From the date hereof and for so long as the Commitments shall be in
effect, any amount shall remain outstanding under the Notes, any L/C Exposure
shall remain outstanding or any Obligation shall remain unpaid or unsatisfied,
each Credit Party agrees that, unless the Required Lenders shall otherwise
consent in writing, each of them will, and will cause each of its Subsidiaries
to:
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SECTION 5.1. Financial Statements and Reports. Furnish or cause to be
furnished to the Administrative Agent, the Issuing Bank and each of the Lenders:
(a) Within ninety (90) days after the end of each fiscal year of the
Parent (commencing with fiscal year 1999), the audited consolidated balance
sheet of the Parent and its Consolidated Subsidiaries, in each case as at the
end of, and the related statements of income, stockholders' equity and cash
flows for, such year, and the corresponding figures as at the end of, and for,
the preceding fiscal year, accompanied by an unqualified report and opinion of
PricewaterhouseCoopers LLP or such other independent public accountant of
nationally recognized standing as shall be retained by the Parent and be
satisfactory to the Required Lenders, which report and opinion shall be prepared
in accordance with generally accepted auditing standards relating to reporting
and which report and opinion shall contain no material exceptions or
qualifications except for qualifications relating to accounting changes (with
which such independent public accountants concur) in response to FASB releases
or other authoritative pronouncements, together with a certificate signed by an
Authorized Officer, to the effect that such financial statements fairly present
the financial position of the Parent and its Consolidated Subsidiaries as at the
dates indicated and the results of their operations for the periods indicated in
conformity with GAAP.
(b) Within forty-five (45) days after the end of each of the first three
fiscal quarters of each of its fiscal years, the unaudited consolidated balance
sheets of the Parent and its Consolidated Subsidiaries as at the end of, and the
related unaudited consolidated statements of income, stockholders' equity and
cash flow for, such quarter, and for the portion of the fiscal year through the
end of such quarter, and the corresponding figures as at the end of such
quarter, and for the corresponding period, in the preceding fiscal year,
together with a certificate signed by an Authorized Officer, to the effect that
such financial statements, while not examined by independent public accountants,
reflect, in the opinion of the Parent, all adjustments necessary to present
fairly the financial position of the Parent and its Consolidated Subsidiaries as
at the end of the fiscal quarter and the results of operations for the quarter
then ended in conformity with GAAP, subject to normal year-end audit adjustments
and the absence of footnotes;
(c) Simultaneously with the delivery of the statements referred to in
paragraphs (a) and (b) of this Section 5.1, a certificate of an Authorized
Officer in form and substance reasonably satisfactory to the Administrative
Agent (i) stating whether or not such Authorized Officer has knowledge, after
due inquiry, of any condition or event which would constitute an Event of
Default or Default and, if so, specifying each such condition or event and the
nature thereof, (ii) demonstrating in reasonable detail compliance with the
provisions of Sections 6.11, 6.15, 6.16, 6.18, 6.19 and 6.20 hereof and
including supporting schedules and (iii) certifying that all filings required
under Section 5.8 hereof have been made and listing each such filing that has
been made since the date of the last certificate delivered in accordance with
this Section 5.1(c);
(d) Together with each set of audited financial statements required by
paragraph (a) above, a certificate from the independent public accountants
rendering the report thereon (i) stating that they have made such examination or
investigation as is necessary to
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enable it to express an informed opinion as to the matters referred to in
clauses (ii) and (iii) of this Section 5.1(d), it being understood that no
special audit procedures are required hereby, (ii) stating whether, in
connection with their audit examination, any condition or event, at any time
during, or at the end of, the accounting period covered by such financial
statements, which constitutes an Event of Default under covenants relating to
accounting matters has come to their attention, and if such a condition or event
has come to their attention, specifying the nature and period, if known, of
existence thereof and (iii) stating that, insofar as they relate to accounting
matters, the matters set forth in the compliance certificate delivered therewith
pursuant to clause (ii) of paragraph (c) above at the end of the fiscal year are
stated in accordance with the terms of this Credit Agreement;
(e) On or prior to the twenty-fifth day of each month and within ten (10)
days following any other request by the Administrative Agent, a certificate
("Borrowing Base Certificate") substantially in the form of Exhibit I hereto,
setting forth the amount of each component included in the Borrowing Base as of
the last Business Day of the preceding month, attached to which shall be
detailed information as required by such certificate including, without
limitation, supporting schedules showing the calculation of each component of
the Borrowing Base (the Parent, at its option, may furnish additional Borrowing
Base Certificates setting forth such information as of such other dates as it
may deem appropriate);
(f) Promptly upon their becoming available, copies of all audits,
studies, reports or evaluations prepared for or submitted to any of the Credit
Parties by any outside professional firm or service, including, without
limitation, any comment letter submitted by the Credit Parties' accountants to
management in connection with their annual audit;
(g) Within 10 days of receipt thereof by each Borrower, copies of all
management letters issued to such Borrower by its auditors;
(h) Promptly upon their becoming available, copies of (i) all
registration statements, proxy statements, notices and reports which the Parent
or any other Credit Party shall file with any securities exchange or with the
Securities and Exchange Commission or any successor agency and (ii) all reports,
financial statements, press releases and other information which the Parent or
any other Credit Party shall release, send or make available to its common
stockholders generally;
(i) Simultaneously with the delivery of the statements referred to in
paragraph (a) of this Section 5.1, the calculation of the Eligible Film Library
Amount and the calculation of the Intellectual Property Library Amount computed
as of the last Business Day of the prior fiscal year as contemplated by the
definitions of "Eligible Film Library Amount" and "Intellectual Property Library
Amount" respectively.
(j) From time to time such additional information regarding the financial
condition or business of any of the Credit Parties, any item of Product, any
Distribution Agreement, any Eligible Receivable or the Collateral, as the
Administrative Agent or any Lender acting through the Administrative Agent may
reasonably request.
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SECTION 5.2. Corporate Existence; Compliance with Laws. Do or cause to be
done all things necessary (i) to preserve, renew and keep in full force and
effect its corporate existence, rights, licenses, permits and franchises and
(ii) to comply with all applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, any Governmental Authority, except as
otherwise permitted under Section 6.7.
SECTION 5.3. Maintenance of Properties. Keep its tangible properties
which are material to its business in good repair, working order and condition
(ordinary wear and tear excepted) and, from time to time (i) make all necessary
and proper repairs, renewals, replacements, additions and improvements thereto
and (ii) comply at all times with the provisions of all material leases and
other material agreements to which it is a party so as to prevent any loss or
forfeiture thereof or thereunder unless compliance therewith is being currently
contested in good faith by appropriate proceedings and appropriate reserves have
been established in accordance with GAAP.
SECTION 5.4. Notice of Material Events. (a) Promptly upon any executive
officer of any Credit Party obtaining knowledge of (i) any Default or Event of
Default, (ii) any material adverse change in the condition (financial or
otherwise) or operations of any Credit Party, (iii) any action or event which
could reasonably be expected to materially and adversely affect the performance
of the Credit Parties' obligations under this Credit Agreement or any other
Fundamental Document, the repayment of the Notes or the security interests
granted to the Administrative Agent for the benefit of the Administrative Agent,
the Issuing Bank or the Lenders under this Credit Agreement or any other
Fundamental Document, (iv) any other event which could reasonably be expected to
result in a Material Adverse Effect, (v) the opening of any office of any Credit
Party or the change of the executive office or the principal place of business
of any Credit Party or of the location of any Credit Party's books and records
with respect to the Collateral, (vi) any change in the name of any Credit Party,
(vii) any other event which could reasonably be expected to materially and
adversely impact upon the amount or collectible of accounts receivable of the
Credit Parties or otherwise materially decrease the value of the Collateral or
the Pledged Securities, (viii) any proposed material amendment to any agreements
that are part of the Collateral or (ix) any Person giving any notice to any
Credit Party or taking any other action to enforce remedies with respect to a
claimed default or event or condition of the type referred to in paragraph (h)
or (i) of Article 7.1, such Credit Party shall promptly give written notice
thereof to the Administrative Agent specifying the nature and period of
existence of any such condition or event, or specifying the notice given or
action taken by such Person and the nature of such claimed Event of Default or
condition and what action any Credit Party has taken, is taking and proposes to
take with respect thereto.
(b) Promptly upon any executive officer of any Credit Party obtaining
knowledge of (i) the institution of, or threat of, any action, suit, proceeding,
investigation or arbitration by any Governmental Authority or other Person
against or affecting any Credit Party or any of its assets or any item of
Product, or (ii) any material development in any such action, suit, proceeding,
investigation or arbitration (whether or not previously disclosed to the
Lenders), which, in the case of (i) or (ii), could reasonably be expected to
have a Material Adverse Effect, such Credit Party shall promptly give written
notice thereof to the Administrative Agent and
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provide such other information as may be available to it to enable the Lenders
to evaluate such matters; and, in addition to the requirements set forth in
clauses (i) and (ii) of this subsection (b), such Credit Party upon request
shall promptly give notice of the status of any action, suit, proceeding,
investigation or arbitration covered by a report delivered to the Lenders
pursuant to clause (i) and (ii) above to the Lenders and provide such other
information as may be reasonably available to it to enable the Lenders to
evaluate such matters.
SECTION 5.5. Insurance. (a) Keep its assets which are of an insurable
character insured (to the extent and for the time periods consistent or greater
than normal industry standards) by financially sound and reputable insurers
against loss or damage by fire, explosion, theft or other hazards which are
included under extended coverage in amounts not less than the insurable value of
the property insured or such lesser amounts, and with such self-insured
retention or deductible levels, as are consistent with normal industry
standards.
(b) Maintain with financially sound and reputable insurers, insurance
against other hazards and risks and liability to Persons and property to the
extent and in the manner consistent or greater than normal industry standards.
(c) Maintain, or cause to be maintained, in effect during the period from
the commencement of principal photography of each item of Product produced by
any Credit Party or from the date of acquisition of each item of Product
acquired by any Credit Party, through the third anniversary of the date on which
such item of Product is Completed and as otherwise required by applicable
contracts, a so-called "Errors and Omissions" policy covering all such items of
Product, and cause such Errors and Omissions policy to provide coverage to the
extent and in such manner as is customary for items of Product of like type but;
at minimum, to the extent and in such manner as is required under all applicable
contracts relating thereto.
(d) Maintain, or cause to be maintained, in effect during the period from
the commencement of principal photography of each item of Product produced by
any Credit Party, or from the date of acquisition of each item of Product
acquired by any Credit Party (i) until such time as the Administrative Agent
shall have been provided with satisfactory evidence of the existence of one
negative or master tape in one location and an interpositive, internegative or
duplicate master tape in another location of the final version of the Completed
Product, insurance on the negatives and sound tracks or master tapes of such
item of Product in an amount not less than the cost of re-shooting the principal
photography of the item of Product, and (ii) until principal photography of such
item of Product has been concluded, a cast insurance policy with respect to such
item of Product, which provides coverage to the extent and in such manner as is
customary for items of Product of a like type, but at minimum, to the extent
required under all applicable contracts relating thereto.
(e) Maintain, or cause to be maintained, in effect distributor's "Errors
and Omissions" insurance to the extent and in amounts consistent or greater than
normal industry standards.
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(f) Cause all such above-described insurance (excluding worker's
compensation insurance) to (i) provide for the benefit of the Lenders that 30
days' prior written notice of cancellation, termination, non-renewal or lapse or
material change of coverage shall be given to the Administrative Agent; (ii)
name the Administrative Agent for the benefit of the Administrative Agent, the
Issuing Bank and the Lenders as a loss payee (except for "Errors and Omissions"
insurance and other third party liability insurance), provided, however, that so
long as no Event of Default has occurred or is continuing, production insurance
recoveries received prior to Completion or abandonment of an item of Product may
be utilized to finance the production of such an item of Product, and property
insurance proceeds may be used to repair damage in respect of which such
proceeds were received; and (iii) to the extent that none of the Administrative
Agent, the Issuing Bank or the Lenders shall be liable for premiums or calls,
name the Administrative Agent (for the benefit of the Administrative Agent, the
Issuing Bank and the Lenders) as additional insureds including, without
limitation, under any "Errors and Omissions" policy.
(g) Render to the Administrative Agent upon the request of the
Administrative Agent a broker's report in form and substance satisfactory to the
Administrative Agent as to all such insurance coverage including such detail as
the Administrative Agent may request.
SECTION 5.6. Production and Distribution. Cause each item of Product
being produced by any Credit Party to be produced in accordance with the
standards set forth in, and within the time period established in, all
agreements with respect to such item of Product to which such Credit Party is a
party, subject to the terms and conditions of such agreements.
SECTION 5.7. Music. When an item of Product has been scored, if requested
by the Administrative Agent, deliver to the Administrative Agent within a
reasonable period of time after such request (a) written evidence of the music
synchronization rights, if any, obtained from the composer or the licensor of
the music and (b) copies of all music cue sheets with respect to such item of
Product.
SECTION 5.8. Copyrights and Trademarks. (a) Within thirty (30) days after
(i) the initial release or broadcast of each item of Product, to the extent any
Credit Party is or becomes the copyright proprietor thereof or otherwise
acquires a copyrightable interest and (ii) any Credit Party acquires any
trademark, service mark, trade name or service name, take any and all actions
necessary to register the copyright for such item of Product or such trademark,
service mark, trade name or service name, in the name of such Credit Party
(subject to a Lien in favor of the Administrative Agent for the benefit of
itself, the Issuing Bank and the Lenders pursuant to the Copyright Security
Agreement and the Trademark Security Agreement) in conformity with the laws of
the United States and such other jurisdictions as the Administrative Agent may
reasonably specify, and (x) immediately deliver to the Administrative Agent (i)
written evidence of the presentation for registration of any and all such
copyrights for inclusion in the Collateral under this Credit Agreement and (ii)
a Copyright Security Agreement Supplement or a Trademark Security Agreement
relating to such item of Product or such trademark, service mark, trade name or
service name, executed by such Credit Party and (y) immediately after receipt
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thereof, deliver to the Administrative Agent written evidence of the
registration of any and all such copyrights for inclusion in the Collateral
under this Credit Agreement.
(b) Obtain instruments of transfer or other documents evidencing the
interest of any Credit Party with respect to the copyright relating to items of
Product in which such Credit Party is not entitled to be the initial copyright
proprietor and any trademark, service mark, trade name or service name which
such Credit Party acquires, and promptly record such instruments of transfer on
the United States Copyright Register or the United States Trademark Register and
such other jurisdictions as the Administrative Agent may specify.
SECTION 5.9. Books and Records. (a) Maintain or cause to be maintained at
all times true and complete books and records of its financial operations and
provide the Administrative Agent and its representatives access to such books
and records and to any of its properties or assets upon reasonable notice and
during regular business hours in order that the Administrative Agent may make
such audits and examinations and make abstracts from such books, accounts,
records and other papers pertaining to the Collateral (including, but not
limited to, Eligible Receivables included in the Borrowing Base) and upon
notification to the Credit Parties, permit the Administrative Agent or its
representatives to discuss the affairs, finances and accounts with, and be
advised as to the same by, officers and independent accountants, all as the
Administrative Agent may deem appropriate for the purpose of verifying the
accuracy of the Borrowing Base Certificates and the various other reports
delivered by any Credit Party to the Administrative Agent, the Issuing Bank
and/or the Lenders pursuant to this Credit Agreement or for otherwise
ascertaining compliance with this Credit Agreement or any other Fundamental
Document.
(b) If, prior to an Event of Default, the Administrative Agent wishes to
confirm with account debtors and other payors the amounts and terms of any or
all Eligible Receivables included in the Borrowing Base, the Administrative
Agent will so notify the Credit Parties. The Administrative Agent agrees to have
such confirmation made through the Credit Parties' auditors. If for any reason
such auditors fail to proceed with the confirmations, the Administrative Agent
may proceed to make such confirmations directly with account debtors and other
payors. Each of the Credit Parties hereby agrees that, upon the occurrence and
during the continuance of an Event of Default, the Administrative Agent shall be
entitled to confirm directly with account debtors and other payors, the amounts
and terms of all accounts receivable.
SECTION 5.10. Third Party Audit Rights. Promptly notify the
Administrative Agent of, and at all times allow the Administrative Agent access
to the results of, all audits conducted by any Credit Party of any third party
licensee, partnership or joint venture under any agreement with respect to any
item of Product included in the Collateral. The Credit Parties will exercise
their audit rights with respect to any such third party licensees, partnerships
and joint ventures upon the reasonable request of the Administrative Agent to
the extent that the Credit Parties shall have the right to conduct such audits.
After an Event of Default has occurred and is continuing, the Administrative
Agent shall have the right to exercise through any Credit Party, such Credit
Party's right to audit any obligor under an agreement with respect to any item
of Product included in the Collateral.
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SECTION 5.11. Observance of Agreements. Duly observe and perform all
material terms and conditions of all material agreements with respect to the
exploitation of items of Product and diligently protect and enforce the rights
of the Credit Parties under all such agreements in a manner consistent with
prudent business judgment and subject to the terms and conditions of such
agreements.
SECTION 5.12. Laboratories; No Removal. (a) To the extent any Credit
Party has control over, or rights to receive, any of the Physical Materials
relating to any item of Product, deliver or cause to be delivered to a
Laboratory or Laboratories all negative and preprint material, master tapes and
all sound track materials with respect to each such item of Product and deliver
to the Administrative Agent a fully executed Pledgeholder Agreement with respect
to such materials. To the extent that any Credit Party has only rights of access
to preprint material or master tapes and has not created duplicate materials
sufficient to exploit its rights and has not stored such duplicate materials at
a Laboratory that has delivered a Pledgeholder Agreement to the Administrative
Agent, then the Credit Parties will deliver to the Administrative Agent a fully
executed Laboratory Access Letter covering such materials. Prior to requesting
any such Laboratory to deliver such negative or other preprint or sound track
material or master tapes to another Laboratory, any such Credit Party shall
provide the Administrative Agent with a Pledgeholder Agreement or Laboratory
Access Letter, as appropriate, executed by such other Laboratory and all other
parties to such Pledgeholder Agreement (including the Administrative Agent).
Each Credit Party hereby agrees not to deliver or remove or cause the delivery
or removal of the original negative and film or sound materials or master tapes
with respect to any item of Product owned by such Credit Party or in which such
Credit Party has an interest (i) to a location outside the United States or (ii)
to any state or jurisdiction where UCC-1 financing statements have not been
filed against such Credit Party.
(b) During production of any item of Product produced by any Credit
Party, such Credit Party shall promptly deliver the daily rushes for such item
of Product to the appropriate Laboratory.
(c) With respect to items of Product Completed after the Closing Date,
promptly after Completion, deliver to the Administrative Agent and the
Laboratories which are signatories to Pledgeholder Agreements a revised schedule
of Product on deposit with such Laboratories.
SECTION 5.13. Taxes and Charges; Indebtedness in Ordinary Course of
Business. Duly pay and discharge, or cause to be paid and discharged, before the
same shall become in arrears (after giving effect to applicable extensions), all
taxes, assessments, levies and other governmental charges, imposed upon any
Credit Party or its properties, sales and activities, or any part thereof, or
upon the income or profits therefrom, as well as all claims for labor,
materials, or supplies which if unpaid might by law become a Lien upon any
property of any Credit Party; provided, however, that any such tax, assessment,
levy or charge need not be paid if the validity or amount thereof shall
currently be contested in good faith by appropriate proceedings and if such
Credit Party shall have set aside on its books reserves (the presentation of
which is segregated to the extent required by GAAP) adequate with respect
thereto if reserves
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shall be deemed necessary; and provided, further, that such Credit Party will
pay all such taxes, assessments, levies or other governmental charges forthwith
upon the commencement of proceedings to foreclose any Lien which may have
attached as security therefor. Each of the Credit Parties will promptly pay when
due, or in conformance with customary trade terms, all other indebtedness
incident to its operations.
SECTION 5.14. Liens. Defend the Collateral (including, without
limitation, the Pledged Securities) against any and all Liens howsoever arising,
other than Permitted Encumbrances, and in any event defend against any attempted
foreclosure.
SECTION 5.15. Further Assurances; Security Interests. (a) Upon the
request of the Administrative Agent, duly execute and deliver, or cause to be
duly executed and delivered, at the cost and expense of the Credit Parties, such
further instruments as may be necessary or desirable in the reasonable judgment
of the Administrative Agent to carry out the provisions and purposes of this
Credit Agreement and the other Fundamental Documents.
(b) Upon the request of the Administrative Agent, promptly execute and
deliver or cause to be executed and delivered, at the cost and expense of the
Credit Parties, such further instruments as may be appropriate in the reasonable
judgment of the Administrative Agent, to provide the Administrative Agent for
the benefit of the Administrative Agent, the Issuing Bank and the Lenders a
first perfected Lien in the Collateral and any and all documents (including,
without limitation, the execution, amendment or supplementation of any financing
statement and continuation statement or other statement) for filing under the
provisions of the UCC and the rules and regulations thereunder, or any other
Applicable Law, and perform or cause to be performed such other ministerial acts
which are reasonably necessary or advisable, from time to time, in order to
grant and maintain in favor of the Administrative Agent for the benefit of
itself, the Issuing Bank and the Lenders the security interest in the Collateral
contemplated hereunder and under the other Fundamental Documents, subject only
to Permitted Encumbrances.
(c) Promptly undertake to deliver or cause to be delivered to the
Administrative Agent and the Lenders from time to time such other documentation,
consents, authorizations and approvals in form and substance reasonably
satisfactory to the Administrative Agent, as the Administrative Agent shall deem
reasonably necessary or advisable to perfect or maintain the Liens of the
Administrative Agent for the benefit of itself, the Issuing Bank and the
Lenders.
SECTION 5.16. ERISA Compliance and Reports. Furnish to the Administrative
Agent (a) as soon as possible, and in any event within thirty (30) days after
any executive officer of a Credit Party has knowledge that (i) any Reportable
Event with respect to any Plan has occurred, a statement of an executive officer
of the Credit Party, setting forth on behalf of such Credit Party details as to
such Reportable Event and the action which it proposes to take with respect
thereto, together with a copy of the notice, if any, required to be filed of
such Reportable Event given to the PBGC or (ii) an accumulated funding
deficiency has been incurred or an application has been made to the Secretary of
the Treasury for a waiver or modification of the
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minimum funding standard or an extension of any amortization period under
Section 412 of the Code with respect to a Plan, a Plan or Multiemployer Plan has
been or is proposed to be terminated, reorganized, partitioned or declared
insolvent under Title IV of ERISA, proceedings have been instituted to terminate
a Plan, a proceeding has been instituted pursuant to Section 515 of ERISA to
collect a delinquent contribution to a Multiemployer Plan, or any such Credit
Party or ERISA Affiliate will incur any liability (including any contingent or
secondary liability) to or on account of the termination of or withdrawal from a
Plan or Multiemployer Plan under Sections 4062, 4063, 4201 or 4204 of ERISA, a
statement of an executive officer of the Credit Party, setting forth details as
to such event and the action the applicable Credit Party proposes to take with
respect thereto, (b) promptly upon reasonable request of the Administrative
Agent, copies of each annual and other report with respect to each Plan and (c)
promptly after receipt thereof, a copy of any notice any Credit Party or ERISA
Affiliate may receive from the PBGC relating to the PBGC's intention to
terminate any Plan or to appoint a trustee to administer any Plan.
SECTION 5.17. Environmental Laws. (a) Promptly notify the Administrative
Agent upon any Credit Party becoming aware of any violation or potential
violation or non-compliance with, or liability or potential liability under any
Environmental Laws which, when taken together with all other pending violations
would reasonably be expected to have a Material Adverse Effect, and promptly
furnish to the Administrative Agent all notices of any nature which any Credit
Party may receive from any Governmental Authority or other Person with respect
to any violation, or potential violation or non-compliance with, or liability or
potential liability under any Environmental Laws which, in any case or when
taken together with all such other notices, could reasonably be expected to have
a Material Adverse Effect.
(b) Comply with and use reasonable efforts to ensure compliance by all
tenants and subtenants with all Environmental Laws, and obtain and comply in all
respects with and maintain and use best efforts to ensure that all tenants and
subtenants obtain and comply in all respects with and maintain any and all
licenses, approvals, registrations or permits required by Environmental Laws,
except where failure to do so would not have a Material Adverse Effect.
(c) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under all
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities, except where failure to
do so would not have a Material Adverse Effect. Any order or directive whose
lawfulness is being contested in good faith by appropriate proceedings shall be
considered a lawful order or directive when such proceedings, including any
judicial review of such proceedings, have been finally concluded by the issuance
of a final non-appealable order; provided, however, that the appropriate Credit
Party shall have set aside on its books reserves (the presentation of which is
segregated to the extent required by GAAP) adequate with respect thereto if
reserves shall be deemed necessary.
(d) Defend, indemnify and hold harmless the Administrative Agent, the
Issuing Bank and the Lenders, and their respective employees, agents, officers
and directors, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs
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and expenses of whatever kind or nature, known or unknown, contingent or
otherwise, arising out of, or in any way related to the violation of or
non-compliance by any Credit Party with any Environmental Laws, or any orders,
requirements or demands of Governmental Authorities related thereto, including,
without limitation, reasonable attorney and consultant fees, investigation and
laboratory fees, court costs and litigation expenses, but excluding therefrom
all claims, demands, penalties, fines, liabilities, settlements, damages, costs
and expenses arising out of or resulting from (i) the gross negligence or
willful acts or willful misconduct of any indemnified party or (ii) any acts or
omissions of any indemnified party occurring after any indemnified party is in
possession of, or controls the operation of, any property or asset.
SECTION 5.18. Use of Proceeds. Apply the proceeds of the Loans (i) first,
to refinance the existing debt of PM in the approximate amount of $5,276,352;
(ii) second, to finance a portion of the acquisition costs, in an aggregate
amount not to exceed $6,500,000, relating to the PM Acquisition and (iii) third,
for general working capital purposes including, but not limited to, payment of
amounts owing by PM under the Shareholder Notes; provided that no amount due
under the Shareholder Notes shall be prepaid, in whole or in part.
SECTION 5.19. Uncompleted Items of Product. In the case of an item of
Product which is included in the Borrowing Base, not later than the commencement
of principal photography of such item of Product (in the case of an item of
Product produced by or under the control of a Credit Party) or not later than
the date of any payment of any portion of the acquisition cost for such item of
Product (in the case of an item of Product being acquired from a third party),
deliver to the Administrative Agent each of the following to the extent
applicable (it being understood that in the case of an item of Product being
acquired from a third party in accordance with the provisions of this Credit
Agreement: (A) clauses (1) and (8) below shall not be applicable and (B) a
Pledgeholder Agreement or Laboratory Access Letter shall be delivered pursuant
hereto, if not already covered by a Pledgeholder Agreement, within five (5) days
after payment of any portion of the acquisition cost):
(1) the budget and cash flow schedule for such item of Product,
(2) a schedule identifying all agreements executed in connection with
such item of Product, in the case of an item of Product produced
by or under the control of a Credit Party which provide for
deferments of compensation or participations (as distinguished
from residuals), in either case, payable by any Credit Party from
its share of revenues,
(3) copies of such of the foregoing agreements as the Lenders may
reasonably request,
(4) certificates or binders of insurance with respect to such item of
Product, in the case of an item of Product produced by or under
the control of a Credit Party (and policies of insurance if
requested by the Administrative Agent and provided such policies
are in the Credit Parties' possession or are
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otherwise available to the Credit Parties), including all forms of
insurance coverage required by Section 5.5 hereof,
(5) copies of all instruments of transfer or other instruments (in
recordable form) ("Chain of Title" documents) necessary to
establish, to the reasonable satisfaction of the Administrative
Agent, in the appropriate Credit Party ownership of sufficient
rights under copyright in the literary properties upon which such
item of Product is to be based to enable such Credit Party to
produce and/or distribute such item of Product and to grant the
Administrative Agent the security interests therein which are
contemplated by this Credit Agreement and the other Fundamental
Documents which Chain of Title documents shall evidence to the
Administrative Agent's satisfaction the Credit Party's rights in,
and with respect to, such item of Product,
(6) evidence of the registration in the name of, or the transfer to, a
Credit Party of the copyright in the item of Product and/or the
literary and other properties upon which the item of Product is to
be based (all as required by Section 5.8 hereof) and an executed
Copyright Security Agreement Supplement with respect to such item
of Product or such literary and other properties (as applicable),
(7) to the extent not already covered by an existing Pledgeholder
Agreement, executed Pledgeholder Agreement(s) with respect to such
item of Product,
(8) a Completion Bond with respect to such item of Product,
(9) a Borrowing Base Certificate which sets forth the Borrowing Base
as of a date no more than seven (7) Business Days prior to the
date by which this Section 5.19(a) must be satisfied for an item
of Product and
(10) a copy of any Notice of Assignment and Irrevocable Instructions
executed in connection with any receivable with respect to such
item of Product.
SECTION 5.20. Negative Cost Statements. Deliver to the Administrative
Agent, within sixty (60) days after each item of Product produced by a Credit
Party is Completed, a tentative negative cost statement, and within 120 days
after each such item of Product is Completed, a final negative cost statement.
SECTION 5.21. Distribution Agreements, Acceptable L/C's, Etc.
(a) Take all action necessary to effect the transfer of all Acceptable
L/C's to the Administrative Agent for the benefit of the Lenders including,
without limitation, timely preparation and acquisition of all documents, drafts
or other instruments required to effect such transfer to the Administrative
Agent.
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(b) Furnish to the Administrative Agent, concurrently with the delivery
of each Borrowing Base Certificate, (i) a list in the form of Schedule 3.17
hereto of all Distribution Agreements executed during the preceding month and
all material amendments to existing Distribution Agreements which amendments
were executed during the preceding month and (ii) copies of all Notices of
Assignment and Irrevocable Instructions (as required by Section 8.3 hereof)
executed during the preceding month.
(c) From time to time (i) furnish to the Administrative Agent such
information and reports regarding the Distribution Agreements to which any
Credit Party is a party as the Administrative Agent may reasonably request and
(ii) upon the occurrence and continuation of an Event of Default and the
reasonable request of the Administrative Agent, make to the other parties to a
Distribution Agreement to which any Credit Party is a party such demands and
requests for information and reports or for action as the Credit Party is
entitled to make under each such Distribution Agreement.
(d) Take all action on its part to be performed necessary to effect
timely payments under all Acceptable L/C's, including, without limitation,
timely preparation, acquisition and presentation of all documents, drafts or
other instruments required to effect payment thereunder.
SECTION 5.22. Location of Production Accounts. Promptly inform the
Administrative Agent of the location of the Production Account for each item of
Product produced by a Credit Party.
SECTION 5.23. Employment Agreement. Ensure that the Employment Agreement
and any employment agreement between the Parent and Roger Burlage or any person
acceptable to the Administrative Agent who replaces Roger Burlage as Chairman of
the Parent in accordance with the provisions of this Agreement, shall be in form
and on terms acceptable to the Administrative Agent.
SECTION 5.24. Negative Pick Up Obligations. Use best efforts to utilize
the proceeds of the Loans for all of its financial requirements and incur,
create, assume or suffer to exist any Negative Pick Up Obligation only to the
extent necessary to conduct its business and in accordance with the provisions
of this Credit Agreement.
SECTION 5.25. Inferno Liens. Ensure (i) that all Liens in favor of
Imperial under the Inferno Loan Agreement shall relate solely to the right,
title and interest of IAC in and to all personal property relating to the motion
picture entitled "Inferno" and (ii) that promptly after all amounts under the
Inferno Loan Agreement have been paid in full, all Liens in favor of Imperial
thereunder are fully and effectively discharged.
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6. NEGATIVE COVENANTS
From the date hereof and for so long as the Commitments shall be in
effect, any amount shall remain outstanding under the Notes, any Letter of
Credit shall remain outstanding or any Obligation shall remain unpaid or
unsatisfied, each Credit Party agrees that, unless the Required Lenders shall
otherwise consent in writing, it will not and will not allow any of its
Subsidiaries to:
SECTION 6.1. Limitations on Indebtedness. Incur, create, assume or suffer
to exist any preferred stock or Indebtedness or permit any partnership or joint
venture in which any Credit Party is a general partner to incur, create, assume
or suffer to exist any Indebtedness other than:
(a) the Indebtedness represented by the Notes and the other
Obligations;
(b) Guaranties permitted pursuant to Section 6.3 hereof;
(c) Indebtedness in respect of secured purchase money financing
(including Capital Leases), to the extent permitted by Section 6.2(d);
(d) Indebtedness in respect of the Shareholder Notes;
(e) Subordinated Debt approved by the Administrative Agent;
(f) liabilities relating to net or gross profit participations,
deferments and guild residuals with respect to the production or
acquisition of items of Product;
(g) Indebtedness in respect of inter-company advances constituting
Investments permitted under Section 6.4(b);
(h) Unsecured liabilities to Unrelated Producers for acquisitions
of rights or Product incurred in the ordinary course of business
including, without limitation, Negative Pick Up Obligations;
(i) preferred stock of the Parent;
(j) liabilities under any Capital Lease outstanding at any time in
the maximum aggregate amount of $100,000; and
(k) Indebtedness in respect of the Inferno Loan Agreement.
SECTION 6.2. Limitations on Liens. Incur, create, assume or suffer to
exist any Lien on any of its revenue stream, property or assets, whether now
owned or hereafter acquired, except:
(a) the Liens of the Administrative Agent (for the benefit of the
Administrative Agent, the Issuing Bank and the Lenders) under this Credit
Agreement,
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the other Fundamental Documents and any other document contemplated
hereby or thereby;
(b) Liens to secure any Subordinated Debt permitted pursuant to
Section 6.1(d) hereof, in each case, on terms and conditions satisfactory
to the Administrative Agent;
(c) existing Liens listed on Schedule 6.2 hereof;
(d) purchase money Liens not to exceed $100,000 granted to the
vendor or Person financing the acquisition of property, plant or
equipment if (i) the Lien is limited to the particular assets acquired;
(ii) the Indebtedness secured by the Lien does not exceed the acquisition
cost of the particular assets acquired and (iii) such transaction does
not otherwise violate this Credit Agreement;
(e) Liens pursuant to written security agreements in favor of
guilds which are required pursuant to collective bargaining agreements on
terms satisfactory to the Administrative Agent;
(f) Liens to secure distribution, exhibition and/or exploitation
rights of licensees pursuant to Distribution Agreements or of licensors
from whom any Credit Party has obtained any distribution rights or other
exploitation rights to any item of Product or Liens to secure production
advances on an item of Product which Liens, in each case, are on terms
satisfactory to the Administrative Agent;
(g) deposits under worker's compensation, unemployment insurance
and social security and similar laws or to secure statutory obligations
or surety, appeal, performance or other similar bonds (other than
completion bonds) or to secure performance as lessee under leases of real
or personal property and other obligations of a like nature, in each case
incurred in the ordinary course of business;
(h) Liens customarily granted or incurred in the ordinary course
of business with regard to services rendered by laboratories and
production houses, record warehouses and suppliers of materials and
equipment;
(i) Liens arising out of attachments, judgments or awards as to
which an appeal or other appropriate proceedings for contest or review
are timely commenced (and as to which foreclosure and other enforcement
proceedings shall not have been commenced (unless fully bonded or
otherwise effectively stayed)) and as to which appropriate reserves have
been established in accordance with GAAP;
(j) Liens for taxes, assessments or other governmental charges or
levies due and payable, the validity or amount of which is currently
being contested in good faith by appropriate proceedings pursuant to the
terms of Section 5.13 hereof;
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(k) possessory Liens (other than those of Laboratories and
production houses) which (i) occur in the ordinary course of business,
(ii) secure normal trade debt which is not yet due and payable and (iii)
do not secure Indebtedness;
(l) customary Liens in favor of Approved Completion Guarantors
granted in connection with Completion Bonds; and
(m) Liens arising by virtue of any statutory or common law
provision relating to banker's liens, rights of setoff or similar rights
with respect to deposit accounts; and
(n) So long as any amounts under the Inferno Loan Agreement remain
outstanding, Liens in favor of Imperial thereunder.
SECTION 6.3. Limitation on Guaranties. Incur, create, assume or suffer to
exist any Guaranty (including any obligation as a general partner of a
partnership or as a joint venturer of a joint venture in respect of Indebtedness
of such partnership or joint venture), either directly or indirectly, except:
(a) Negative Pickup Obligations owing to Unrelated Producers and
incurred in the ordinary course of business;
(b) performance guarantees in the ordinary course of business
under guild agreements, or to suppliers or laboratories which are
providing services in connection with the production, acquisition,
distribution or exploitation of any item of Product by or for a Credit
Party;
(c) the endorsement of negotiable instruments for deposit or
collection in the ordinary course of business;
(d) the Guaranties made by the Guarantors pursuant to Article 9
hereof; and
(e) any Guaranty made by a Credit Party with respect to any
obligation of another Credit Party.
SECTION 6.4. Limitations on Investments. Create, make or incur any
Investment after the date hereof, except:
(a) the purchase of Cash Equivalents;
(b) Investments (whether as equity or loans) by one Credit Party
in another Credit Party (other than the Parent);
(c) Investments by the Parent in Harvey Fashion, LLC in the
maximum aggregate amount of $125,000;
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(d) Guaranties permitted under Section 6.3 to the extent
constituting Investments;
(e) Existing Investments listed on Schedule 6.4 hereto; and
(f) Other Investments approved by the Administrative Agent.
SECTION 6.5. Restricted Payments. Pay, declare, make or become obligated
to make any Restricted Payment, except:
(a) the declaration and payment of dividends and/or distributions
to the Parent by any direct or indirect wholly-owned Subsidiary of the
Parent;
(b) to the extent permitted under Section 13.16 hereof, payments
with respect to intercompany Indebtedness, intercompany receivables or
intercompany advances constituting Investments permitted under Section
6.4 hereof; and
(c) payments of any amount owing under the Shareholder Notes, so
long as no Event of Default is continuing at the time of (and after
giving effect to) the making of such payment to the Shareholders.
SECTION 6.6. Limitation on Leases. Create, incur or assume any lease
expense (excluding Capital Leases and amounts included in the budget of any item
of Product) for any twelve consecutive months in excess of $1,700,000 for all
Credit Parties in the aggregate.
SECTION 6.7. Consolidation, Merger, Sale or Purchase of Assets, etc.
(a) Whether in one transaction or a series of transactions, wind
up, liquidate or dissolve its affairs, or enter into any transaction of
merger or consolidation, or sell or otherwise dispose of all or
substantially all of its property, stock or assets or agree to do or
suffer any of the foregoing, except that any Subsidiary of a Credit Party
may merge with and into, or transfer assets to, another Subsidiary of the
Credit Party or with and into, or transfer assets to, the Credit Party
provided, that (i) if any such transaction involves the Parent, then the
Parent must be the surviving entity in each such transaction and (ii) if
any such transaction involves a Credit Party that is a Subsidiary of the
Parent but does not involve the Parent, then such Credit Party must be
the surviving entity in any such transaction.
SECTION 6.8. Receivables. Sell, discount or otherwise dispose of notes,
accounts receivable or other obligations owing to any Credit Party except for
the purpose of collection in the ordinary course of business.
SECTION 6.9. Sale and Leaseback. Enter into any arrangement with any
Person or Persons, whereby in contemporaneous transactions any Credit Party
sells essentially all of its right, title and interest in an item of Product and
acquires or licenses the right to distribute or exploit such item of Product in
media and markets accounting for substantially all the value of
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such item of Product, unless such arrangement does not impair the collateral
position of the Administrative Agent, the Issuing Bank and the Lenders and is
evidenced by documentation acceptable to the Administrative Agent.
SECTION 6.10. Places of Business; Change of Name. Change the location of
its chief executive office or principal place of business or any of the
locations where it keeps any portion of the Collateral or its books and records
with respect to the Collateral or change its name without in each case (i)
giving the Administrative Agent ten (10) days written notice following such
change and (ii) filing any additional Uniform Commercial Code financing
statements, and such other documents requested by the Administrative Agent to
maintain perfection of the security interest of the Administrative Agent for the
benefit of the Administrative Agent, the Issuing Bank and the Lenders in the
Collateral.
SECTION 6.11. Limitations on Capital Expenditures. Make, or incur any
obligation to make, Capital Expenditures (including the amount of obligations
under Capital Leases incurred during the relevant period and excluding amounts
included in the Budgeted Negative Cost of an item of Product which is approved
by the Administrative Agent) for the fiscal year ended December 31, 2000 in
excess of $750,000 and for each subsequent fiscal year in excess of $500,000, in
each case in the aggregate for all Credit Parties and their Subsidiaries on a
cumulative basis from and after the date this Credit Agreement is executed by
all the parties hereto.
SECTION 6.12. Transactions with Affiliates. Enter into any transaction
with any of its Affiliates (other than any transaction which is solely among
Credit Parties) unless such transaction (i) occurs in the ordinary course of
business on an arm's-length basis and (ii) is approved by the Administrative
Agent.
SECTION 6.13. Business Activities. Engage in any business activities
other than activities relating to the acquisition, development, production, post
production, distribution and other exploitation of theatrical motion pictures,
video product, television product, internet and interactive product and fashion
product, in each case in accordance with the provisions of this Credit Agreement
and including ancillary rights (e.g., music publishing, soundtrack album,
merchandising, publishing, television spin-offs and direct-to-video features).
SECTION 6.14. Fiscal Year End. Maintain or change its fiscal year end to
other than December 31, in each year.
SECTION 6.15. Cash Overhead Expense. Permit aggregate allocated and
unallocated overhead cash expenses to exceed $12,000,000 in the fiscal year
ended December 31, 2000 or to exceed in any subsequent fiscal year 105% of the
maximum amount permitted for the immediately preceding fiscal year.
SECTION 6.16. Consolidated Capital Base. Permit the Consolidated Capital
Base of the Parent at any time to be less than $17,000,000 plus (i) 100% of the
net proceeds of all new equity invested in the Parent and its Consolidated
Subsidiaries subsequent to the date hereof
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and (ii) 50% of net earnings for each fiscal year without any deduction for
losses, if any, in each case after January 1, 2000.
SECTION 6.17. Principal Photography. Permit more than ten (10) items of
Product to have started principal photography and not yet be Completed at any
one time.
SECTION 6.18. Budget. Permit the Budgeted Negative Cost for any item of
Product comprising a theatrical motion picture to exceed $3,500,000 or the
Budgeted Negative Cost for any television Product to exceed $5,000,000.
SECTION 6.19. Aggregate Total Exposure. Permit the Aggregate Total
Exposure to exceed $15,000,000 at any time.
SECTION 6.20. Liquidity. Fail to satisfy the Administrative Agent that
the Credit Parties will have sufficient cash available from their operations,
Loans under this Agreement and amounts committed to be funded by third parties
approved by the Administrative Agent, to satisfy all projected uses of cash
during the ensuing 12 months, all as demonstrated by a quarterly certificate
signed on behalf of the Parent by an Authorized Officer. Such certificate shall
show sources and uses on a quarterly basis, will be supported by projections,
which include an amount equal to 110% of the budget for all items of Product for
which any Credit Party has a completion risk (i.e. payment by such Credit Party
is not conditioned upon delivery) and show anticipated Borrowing Base
availability sufficient to support Borrowings hereunder, and shall state that
the projections attached thereto were prepared in good faith based upon
reasonable assumptions.
SECTION 6.21. Distribution Arrangements. Enter into any major
distribution arrangement in connection with a substantial portion of items of
Product produced or to be produced by a Credit Party (other than standard
distribution agreements in the ordinary course of the Credit Party's business)
without the prior approval of the Administrative Agent as to the terms of, and
parties to, such arrangement.
SECTION 6.22. Bank Accounts. After the date hereof, open or maintain any
bank account other than (a) accounts maintained at the Administrative Agent, (b)
accounts maintained at financial institutions approved by the Administrative
Agent and listed on Schedule 6.22, or (c) a Production Account, as to which the
Administrative Agent shall have received notice.
SECTION 6.23. ERISA Compliance. Engage in a "prohibited transaction", as
defined in Section 406 of ERISA or Section 4975 of the Code, with respect to any
Plan or Multiemployer Plan or knowingly consent to any other "party in interest"
or any "disqualified person", as such terms are defined in Section 3(14) or
ERISA and Section 4975(e)(2) of the Code, respectively, engaging in any
"prohibited transaction", with respect to any Plan or Multiemployer Plan; or
permit any Plan to incur any "accumulated funding deficiency", as defined in
Section 302 of ERISA or Section 412 of the Code, unless such incurrence shall
have been waived in advance by the Internal Revenue Service; or terminate any
Plan in a manner
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which could result in the imposition of a Lien on any property of any Credit
Party pursuant to Section 4068 of ERISA; or breach or knowingly permit any
employee or officer or any trustee or administrator of any Plan to breach any
fiduciary responsibility imposed under Title I of ERISA with respect to any
Plan; engage in any transaction which would result in the incurrence of a
liability under Section 4069 of ERISA; or fail to make contributions to a Plan
or Multiemployer Plan which could result in the imposition of a Lien on any
property of any Credit Party pursuant to Section 302(f) of ERISA or Section
412(n) of the Code, if the occurrence of any of the foregoing events (alone or
in the aggregate) would result in a liability which has a Material Adverse
Effect.
SECTION 6.24. Hazardous Materials. Cause or permit any of its properties
or assets to be used to generate, manufacture, refine, transport, treat, store,
handle, dispose, transfer, produce or process Hazardous Materials, except in
compliance in all material respects with all applicable Environmental Laws, nor
release, discharge, dispose of or permit or suffer any release or disposal as a
result of any intentional act or omission on its part of Hazardous Materials
onto any such property or asset in violation of any Environmental Law.
SECTION 6.25. Use of Proceeds of Loans and Requests for Letters of
Credit. Use the proceeds of Loans or request any Letter of Credit hereunder
other than for the purposes set forth in, and as required by, Section 5.18
hereof.
SECTION 6.26. Interest Rate Protection Agreements, etc. Enter into any
Interest Rate Protection Agreement or Currency Agreement for other than bona
fide hedging purposes.
SECTION 6.27. Subsidiaries. Acquire or create any new direct or indirect
Subsidiary; provided, however, that a Credit Party may incorporate additional
Subsidiaries if `each such Subsidiary executes an Instrument of Assumption and
Joinder in the form attached hereto as Exhibit L whereby such Subsidiary becomes
a Credit Party hereunder and the certificates representing 100% of the shares of
capital stock of such Subsidiary held by such Credit Party become part of the
Pledged Securities hereunder and are delivered to the Administrative Agent
together with stock powers for each such certificate executed in blank.
SECTION 6.28. Television Product. Produce any television Product unless
at least 75% of the Budgeted Negative Cost thereof is covered by Eligible
Receivables and amounts due under any co-production agreement relating to such
television Product; provided that for the purposes of this Section 6.28 only an
Eligible Receivable need not be payable by and collectable from an Acceptable
Obligor.
SECTION 6.29. PMFSC. Permit PMFSC to own any real, personal or other
property.
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7. EVENTS OF DEFAULT
SECTION 7.1. In the case of the happening and during the continuance of
any of the following events (herein called "Events of Default"):
(a) any representation or warranty made by a Credit Party in this Credit
Agreement or any other Fundamental Document to which it is a party or any
statement or representation made by a Credit Party in any report, financial
statement, certificate or other document furnished to the Administrative Agent
or any Lender pursuant to this Credit Agreement or any other Fundamental
Document, shall prove to have been false or misleading in any material respect
when made or delivered;
(b) default shall be made in the payment of principal of the Notes as and
when due and payable, whether by reason of maturity, mandatory prepayment,
acceleration or otherwise;
(c) default shall be made in the payment of interest on the Notes,
Commitment Fees or other monetary Obligations, when and as the same shall become
due and payable, whether at the due date thereof or at a date fixed for
prepayment thereof or by acceleration thereof or otherwise and such default
shall continue unremedied for three (3) Business Days;
(d) default shall be made in the due observance or performance of any
covenant, condition or agreement contained in Sections 5.1, 5.4 or 5.18 or
Article 6 of this Agreement;
(e) failure to submit any Borrowing Base Certificate to the
Administrative Agent within ten (10) Business Days of the date such certificate
was due pursuant to the terms of this Credit Agreement; provided, however, that
a failure to deliver a Borrowing Base Certificate when due shall not constitute
an Event of Default if and for so long as there are no Loans or Letters of
Credit outstanding.
(f) default shall be made by any Credit Party in the due observance or
performance of any other covenant, condition or agreement to be observed or
performed pursuant to the terms of this Credit Agreement or any other
Fundamental Document, and such default shall continue unremedied for thirty (30)
days after the applicable Credit Party or receives notice or obtains knowledge
of such occurrence;
(g) default shall be made with respect to any payment of any Indebtedness
of any Credit Party in excess of $250,000 in the aggregate (other than the
Obligations) when due, or in the performance of any other obligation incurred in
connection with any such Indebtedness if the effect of such non-payment default
is to accelerate the maturity of such Indebtedness or to permit the holder
thereof to cause such Indebtedness to become due prior to its stated maturity
and such default shall not be remedied, cured, waived or consented to within the
period of grace with respect thereto;
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(h) any Credit Party shall generally not pay its debts as they become due
or shall admit in writing its inability to pay its debts, or shall make a
general assignment for the benefit of creditors; or any Credit Party shall
commence any case, proceeding or other action seeking to have an order for
relief entered on its behalf as a debtor or to adjudicate it a bankrupt or
insolvent or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property or shall file an answer or
other pleading in any such case, proceeding or other action admitting the
material allegations of any petition, complaint or similar pleading filed
against it or consenting to the relief sought therein; or any Credit Party shall
take any action to authorize, or in contemplation of, any of the foregoing;
(i) any involuntary case, proceeding or other action against any Credit
Party shall be commenced seeking to have an order for relief entered against it
as debtor or to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, liquidation, dissolution or composition
of it or its debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, or seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its property, and such case, proceeding or other action (i)
results in the entry of any order for relief against it or (ii) shall remain
undismissed for a period of sixty (60) days;
(j) final judgment(s) for the payment of money in excess of $10,000 in
the aggregate shall be rendered against any Credit Party and within thirty (30)
days from the entry of such judgment shall not have been discharged or stayed
pending appeal or shall not have been discharged within thirty (30) days from
the entry of a final order of affirmance on appeal;
(k) (i) failure by any Credit Party or ERISA Affiliate to make any
contributions required to be made to a Plan subject to Title IV of ERISA or
Multiemployer Plan, (ii) any accumulated funding deficiency (within the meaning
of Section 4971 of the Code) shall exist with respect to any Plan (whether or
not waived), (ii) the present value of all benefits under all Plans subject to
Title IV of ERISA (based on those assumptions used to fund such Plans) exceeds,
in the aggregate, as of the last annual valuation date applicable thereto, the
actuarial value of the assets of such Plans allocable to such benefits, (iii)
any Credit Party or ERISA Affiliate shall have been notified by the sponsor of a
Multiemployer Plan that it has incurred withdrawal liability to such
Multiemployer Plan, or that a Multiemployer Plan is in reorganization or is
being terminated, (iv) a Reportable Event with respect to a Plan shall have
occurred, (v) the withdrawal by any Credit Party or ERISA Affiliate from a Plan
during a plan year in which it was a substantial employer (within the meaning of
Section 4001(a)(2) or 4062(e) of ERISA), (vi) the termination of a Plan, or the
filing of a notice of intent to terminate a Plan under Section 4041(c) of ERISA,
(vii) the institution of proceedings to terminate, or the appointment of a
trustee with respect to, a Plan by the PBGC, (viii) any other event or condition
which could constitute grounds under Section 4042(a) of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan, or (ix)
the imposition of a Lien pursuant to Section 412 of the Code or Section 302 of
ERISA as to any Credit Party or ERISA Affiliate;
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(l) this Credit Agreement, the Copyright Security Agreement, any
Copyright Security Agreement Supplement or any Trademark Security Agreement
(each a "Security Document") shall, for any reason, not be or shall cease to be
in full force and effect or shall be declared null and void or any of the
Security Documents shall not give or shall cease to give the Administrative
Agent the Liens, rights, powers and privileges purported to be created thereby
in favor of the Administrative Agent for the benefit of the Administrative
Agent, the Issuing Bank and the Lenders, superior to and prior to the rights of
all third Persons and subject to no other Liens (other than Permitted
Encumbrances), or the validity or enforceability of the Liens granted, to be
granted, or purported to be granted, by any of the Security Documents shall be
contested by any Credit Party or any of their respective Affiliates, provided
that no such defect in the Security Documents shall give rise to an Event of
Default under this paragraph (l) unless such defect shall affect Collateral that
is or should be subject to a Lien in favor of the Administrative Agent having an
aggregate value in excess of $100,000;
(m) a Change in Management shall occur;
(n) a Change in Control shall occur;
(o) failure by IAC within ten (10) days after the date on which all
amounts under the Inferno Loan Agreement have been indefeasibly paid in full,
(i) to grant in favor of the Administrative Agent for the benefit of the
Administrative Agent, the Issuing Bank and the Lenders, a valid and first
priority perfected security interest in all of IAC's personal property, tangible
and intangible, wherever located or situated and whether now owned, presently
existing or hereafter acquired or created including, without limitation, all of
IAC's right, title and interest relating to the motion picture entitled
"Inferno" or (ii) to execute an Instrument of Assumption and Joinder in the form
attached hereto as Exhibit L whereby IAC becomes a Credit Party hereunder;
(p) failure by the Credit Parties within thirty (30) days after the
Closing Date to furnish to the Administrative Agent each of the documents listed
on Schedule 7.1 hereto,
then, in every such event and at any time thereafter during the continuance of
such event, the Administrative Agent may, or if directed by the Required
Lenders, shall, take any or all of the following actions, at the same or
different times: (x) terminate forthwith the Commitments, (y) declare the
principal of and the interest on the Loans and the Notes and all other amounts
payable hereunder or thereunder to be forthwith due and payable, whereupon the
same shall become and be forthwith due and payable, without presentment, demand,
protest, notice of acceleration or other notice of any kind, all of which are
hereby expressly waived, anything in this Credit Agreement or in the Notes to
the contrary notwithstanding and/or (z) require the Borrowers to deliver to the
Administrative Agent from time to time, Cash Equivalents in an amount equal to
the full amount of L/C Exposure or to furnish other security therefor acceptable
to the Required Lenders. If an Event of Default specified in paragraph (h) or
(i) above shall have occurred, the Commitments shall automatically terminate and
the principal of, and interest on, the Loans and the Notes and all other amounts
payable hereunder and thereunder shall automatically become due and payable
without presentment, demand, protest, or other notice of
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any kind, all of which are hereby expressly waived, anything in this Credit
Agreement or the Notes to the contrary notwithstanding. Such remedies shall be
in addition to any other remedy available to the Administrative Agent, the
Issuing Bank or the Lenders pursuant to Applicable Law or otherwise.
SECTION 7.2. Notwithstanding anything to the contrary herein, the parties
hereto acknowledge and agree that the execution, delivery and performance of the
Inferno Loan Agreement shall not constitute an Event of Default hereunder save
that if (i) performance of the Inferno Loan Agreement results in a default under
any of Sections 6.11, 6.15, 6.16 or 6.20 of this Agreement, or (ii) default
shall be made with respect to the performance of any obligation by IAC or the
Parent under or in connection with the Inferno Loan Agreement, then, at any time
thereafter during the continuance of such default, the Administrative Agent may,
or if directed by the Required Lenders, shall, take any or all of the following
actions, at the same or different times: (x) terminate forthwith the Commitments
(y) declare the principal of and the interest on the Loans and the Notes and all
other amounts payable hereunder or thereunder to be forthwith due and payable,
whereupon the same shall become and be forthwith due and payable without
presentment, demand, protest, notice of acceleration or other notice of any
kind, all of which are hereby expressly waived, anything in this Credit
agreement or in the Notes to the contrary notwithstanding and/or (z) require the
Borrowers to deliver to the Administrative Agent from time to time, Cash
Equivalents in an amount equal to the full amount of L/C Exposure or to furnish
other security therefor acceptable to the Required Lenders. Such remedies shall
be in addition to any other remedy available to the Administrative Agent, the
Issuing Bank or the Lenders pursuant to Applicable Law or otherwise.
8. GRANT OF SECURITY INTEREST; REMEDIES
SECTION 8.1. Security Interests. Each of the Borrowers, as security for
the due and punctual payment of the Obligations (including interest accruing on
and after the filing of any petition in bankruptcy or of reorganization of any
Borrower whether or not post filing interest is allowed in such proceeding) and
each of the Guarantors, as security for its obligations under Article 9 hereof,
hereby mortgage, pledge, assign, transfer, set over, convey and deliver to the
Administrative Agent (for the benefit of the Administrative Agent, the Issuing
Bank and the Lenders) and grant to the Administrative Agent (for the benefit of
the Administrative Agent, the Issuing Bank and the Lenders) a security interest
in the Collateral.
SECTION 8.2. Use of Collateral. So long as no Event of Default shall have
occurred and be continuing, and subject to the various provisions of this Credit
Agreement and the other Fundamental Documents, a Credit Party may use the
Collateral in any lawful manner except as otherwise provided hereunder.
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SECTION 8.3. Collection Accounts. (a) The Credit Parties will maintain or
establish a collection bank account ("Collection Account") maintained at the
office of the Chase Manhattan Bank, 270 Park Avenue, New York, New York 10017,
Attention: Stella Milas, Account No. 323143148 and will direct, by Notice of
Assignment and Irrevocable Instructions, all Persons who become licensees,
buyers or account debtors under receivables with respect to any item of Product
included in the Collateral to make payments under or in connection with the
license agreements, sales agreements or receivables directly to the Collection
Account. Upon agreement between the Administrative Agent and the Credit Parties,
a Collection Account may also serve as the Cash Collateral Account, provided
that such Collection Account is in the name of the Administrative Agent (for the
benefit of itself, the Issuing Bank and the Lenders) and is under the sole
dominion and control of the Administrative Agent.
(b) The Credit Parties will execute such documentation as may be required
by the Administrative Agent in order to effectuate the provisions of this
Section 8.3.
(c) In the event a Credit Party receives payment from any Person or
proceeds under an Acceptable L/C, which payment should have been remitted
directly to the Collection Account, such Credit Party shall promptly remit such
payment or proceeds to the appropriate Collection Account to be applied in
accordance with the terms of this Credit Agreement.
SECTION 8.4. Credit Parties to Hold in Trust. Upon the occurrence and
during the continuance of an Event of Default, each of the Credit Parties will,
upon receipt by it of any revenue, income, profits or other sums in which a
security interest is granted by this Article 8, payable pursuant to any
agreement or otherwise, or of any check, draft, note, trade acceptance or other
instrument evidencing an obligation to pay any such sum, hold the sum or
instrument in trust for the Administrative Agent (for the benefit of itself, the
Issuing Bank and the Lenders), segregate such sum or instrument from their own
assets and forthwith, without any notice, demand or other action whatsoever (all
notices, demands, or other actions on the part of the Administrative Agent, the
Issuing Bank or the Lenders being expressly waived), endorse, transfer and
deliver any such sums or instruments or both, to the Administrative Agent to be
applied to the repayment of the Obligations in accordance with the provisions of
Section 8.7 hereof.
SECTION 8.5. Collections, etc. Upon the occurrence and during the
continuance of an Event of Default, the Administrative Agent may, in its sole
discretion, in its name (on behalf of the Administrative Agent, the Issuing Bank
and the Lenders) or in the name of any Credit Party or otherwise, demand, sue
for, collect or receive any money or property at any time payable or receivable
on account of or in exchange for, or make any compromise or settlement deemed
desirable with respect to, any of the Collateral, but shall be under no
obligation so to do, or the Administrative Agent may extend the time of payment,
arrange for payment in installments, or otherwise modify the terms of, or
release, any of the Collateral, without thereby incurring responsibility to, or
discharging or otherwise affecting any liability of, any Credit Party. The
Administrative Agent will not be required to take any steps to preserve any
rights against prior parties to the Collateral. If any Credit Party fails to
make any payment or take any action required hereunder, the Administrative Agent
may make such payments and take all such
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actions as the Administrative Agent reasonably deems necessary to protect the
Administrative Agent's (on behalf of the Administrative Agent, the Issuing Bank
and the Lenders) security interests in the Collateral and/or the value thereof,
and the Administrative Agent is hereby authorized (without limiting the general
nature of the authority herein above conferred) to pay, purchase, contest or
compromise any Liens that in the judgment of the Administrative Agent appear to
be equal to, prior to or superior to the security interests of the
Administrative Agent (on behalf of the Administrative Agent, the Issuing Bank
and the Lenders) in the Collateral (other than Permitted Encumbrances) and any
Liens not expressly permitted by this Credit Agreement.
SECTION 8.6. Possession, Sale of Collateral, etc. Upon the occurrence and
during the continuance of an Event of Default, the Administrative Agent, the
Issuing Bank and the Lenders may enter upon the premises of any Credit Party or
wherever the Collateral may be, and take possession of the Collateral, and may
demand and receive such possession from any Person who has possession thereof,
and the Administrative Agent, the Issuing Bank and the Lenders may take such
measures as they deem necessary or proper for the care or protection thereof,
including the right to remove all or any portion of the Collateral, and with or
without taking such possession may sell or cause to be sold, whenever the
Administrative Agent, the Issuing Bank and the Lenders shall decide, in one or
more sales or parcels, at such prices as the Administrative Agent, the Issuing
Bank and the Lenders may deem appropriate, and for cash or on credit or for
future delivery, without assumption of any credit risk, all or any portion of
the Collateral, at any broker's board or at public or private sale, without
demand of performance but with 10 days' written notice to the Credit Parties of
the time and place of any such public sale or sales (which notice the Credit
Parties hereby agree is reasonable) and with such other notices as may be
required by Applicable Law and cannot be waived, and none of the Administrative
Agent, the Issuing Bank and the Lenders shall have any liability should the
proceeds resulting from a private sale be less than the proceeds realizable from
a public sale, and the Administrative Agent, the Issuing Bank, the Lenders or
any other Person may be the purchaser of all or any portion of the Collateral so
sold and thereafter hold the same absolutely, free (to the fullest extent
permitted by Applicable Law) from any claim or right of whatever kind, including
any equity of redemption, of any Credit Party, any such demand, notice, claim,
right or equity being hereby expressly waived and released. At any sale or sales
made pursuant to this Article 8, the Administrative Agent, the Issuing Bank and
the Lenders may bid for or purchase, free (to the fullest extent permitted by
Applicable Law) from any claim or right of whatever kind, including any equity
of redemption, of any Credit Party, any such demand, notice, claim, right or
equity being hereby expressly waived and released, any part of or all of the
Collateral offered for sale, and may make any payment on account thereof by
using any claim for moneys then due and payable to the Administrative Agent, the
Issuing Bank and the Lenders by any Credit Party hereunder as a credit against
the purchase price. The Administrative Agent, the Issuing Bank and the Lenders
shall in any such sale make no representations or warranties with respect to the
Collateral or any part thereof, and none of the Administrative Agent, the
Issuing Bank and the Lenders shall be chargeable with any of the obligations or
liabilities of any Credit Party. Each Credit Party hereby agrees (i) that it
will indemnify and hold the Administrative Agent, the Issuing Bank and the
Lenders harmless from and against any and all claims with respect to the
Collateral asserted before the taking of actual possession or control of the
relevant Collateral by the Administrative Agent, the Issuing Bank and the
Lenders pursuant to this Article 8, or arising
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out of any act of, or omission to act on the part of, any Person (other than the
Administrative Agent, the Issuing Bank or Lenders) prior to such taking of
actual possession or control by the Administrative Agent, the Issuing Bank and
the Lenders (whether asserted before or after such taking of possession or
control), or arising out of any act on the part of any Credit Party or its
Affiliates or agents before or after the commencement of such actual possession
or control by the Administrative Agent, the Issuing Bank and the Lenders; and
(ii) none of the Administrative Agent, the Issuing Bank and the Lenders shall
have any liability or obligation to any Credit Party arising out of any such
claim except for acts of willful misconduct or gross negligence. Subject only to
the lawful rights of third parties, any laboratory which has possession of any
of the Collateral is hereby constituted and appointed by the Credit Parties as
pledgeholder for the Administrative Agent, the Issuing Bank and the Lenders and,
upon the occurrence of an Event of Default, each such pledgeholder is hereby
authorized (to the fullest extent permitted by Applicable Law) to sell all or
any portion of the Collateral upon the order and direction of the Administrative
Agent, and each Credit Party hereby waives any and all claims, for damages or
otherwise, for any action taken by such pledgeholder in accordance with the
terms of the UCC not otherwise waived hereunder. In any action hereunder, the
Administrative Agent, the Issuing Bank and the Lenders shall be entitled if
permitted by Applicable Law to the appointment of a receiver without notice, to
take possession of all or any portion of the Collateral and to exercise such
powers as the court shall confer upon the receiver. Notwithstanding the
foregoing, upon the occurrence of an Event of Default, and during the
continuation of such Event of Default, the Administrative Agent, the Issuing
Bank and the Lenders shall be entitled to apply, without prior notice to any of
the Credit Parties, any cash or cash items constituting Collateral in the
possession of the Administrative Agent, the Issuing Bank and the Lenders to
payment of the Obligations.
SECTION 8.7. Application of Proceeds on Default. Upon the occurrence and
during the continuance of an Event of Default, the balances in the Chase
Clearing Account, the Collection Account(s), the Cash Collateral Account(s) or
in any other account of any Credit Party with a Lender, all other income on the
Collateral, and all proceeds from any sale of the Collateral pursuant hereto
shall be applied first toward payment of the reasonable out-of-pocket costs and
expenses paid or incurred by the Administrative Agent in enforcing this Credit
Agreement, in realizing on or protecting any Collateral and in enforcing or
collecting any Obligations or any Guaranty thereof, including, without
limitation, court costs and the reasonable attorney's fees and expenses incurred
by the Administrative Agent for which the Parent has received an invoice in
reasonable detail, then to satisfy or provide cash collateral for all
Obligations relating to the Letters of Credit, and then to the indefeasible
payment in full of the Obligations in accordance with Section 12.2(b) hereof;
provided, however, that, the Administrative Agent may in its discretion apply
funds comprising the Collateral to pay the cost (i) of completing any item of
Product owned in whole or in part by any Credit Party in any stage of production
and (ii) of making delivery to the distributors of such item of Product. Any
amounts remaining after such indefeasible payment in full shall be remitted to
the appropriate Credit Party or as a court of competent jurisdiction may
otherwise direct.
SECTION 8.8. Power of Attorney. Upon the occurrence and during the
continuance of an Event of Default which is not waived in writing by the
Required Lenders,
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(a) each Credit Party does hereby irrevocably make, constitute and appoint the
Administrative Agent or any of its officers or designees its true and lawful
attorney-in-fact with full power in the name of the Administrative Agent, such
other Person or such Credit Party to receive, open and dispose of all mail
addressed to any Credit Party, and to endorse any notes, checks, drafts, money
orders or other evidences of payment relating to the Collateral that may come
into the possession of the Administrative Agent with full power and right to
cause the mail of such Persons to be transferred to the Administrative Agent's
own offices or otherwise, and to do any and all other acts necessary or proper
to carry out the intent of this Credit Agreement and the grant of the security
interests hereunder and under the Fundamental Documents, and each Credit Party
hereby ratifies and confirms all that the Administrative Agent or its
substitutes shall properly do by virtue hereof; (b) each Credit Party does
hereby further irrevocably make, constitute and appoint the Administrative Agent
or any of its officers or designees its true and lawful attorney-in-fact in the
name of the Administrative Agent or any Credit Party (i) to enforce all of such
Credit Party's rights under and pursuant to all agreements with respect to the
Collateral, all for the sole benefit of the Administrative Agent for the benefit
of the Administrative Agent, the Issuing Bank and the Lenders and to enter into
such other agreements as may be necessary or appropriate in the judgment of the
Administrative Agent to complete the production, distribution or exploitation of
any item of Product which is included in the Collateral, (ii) to enter into and
perform such agreements as may be necessary in order to carry out the terms,
covenants and conditions of the Fundamental Documents that are required to be
observed or performed by any Credit Party, (iii) to execute such other and
further mortgages, pledges and assignments of the Collateral, and related
instruments or agreements, as the Administrative Agent may reasonably require
for the purpose of perfecting, protecting, maintaining or enforcing the security
interests granted to the Administrative Agent for the benefit of the
Administrative Agent, the Issuing Bank and the Lenders hereunder and under the
other Fundamental Documents, and (iv) to do any and all other things necessary
or proper to carry out the intention of this Credit Agreement and the grant of
the security interests hereunder and under the other Fundamental Documents. Each
of the Credit Parties hereby ratifies and confirms in advance all that the
Administrative Agent as such attorney-in-fact or its substitutes shall properly
do by virtue of this power of attorney.
SECTION 8.9. Financing Statements, Direct Payments. Each Credit Party
hereby authorizes the Administrative Agent to file UCC financing statements and
any amendments thereto or continuations thereof, any Copyright Security
Agreement, any Copyright Security Agreement Supplement, any Trademark Security
Agreement and any other appropriate security documents or instruments and to
give any notices necessary or desirable to perfect the Lien of the
Administrative Agent for the benefit of itself, the Issuing Bank and the Lenders
on the Collateral, in all cases without the signature of any Credit Party or to
execute such items as attorney-in-fact for any Credit Party; provided, that the
Administrative Agent shall provide copies of any such documents or instruments
to the Borrowers. Upon the occurrence and during the continuance of an Event of
Default, each Credit Party further authorizes the Administrative Agent to notify
any account debtors that all sums payable to any Credit Party relating to the
Collateral shall be paid directly to the Administrative Agent.
SECTION 8.10. Further Assurances. Upon the request of the Administrative
Agent, each Credit Party hereby agrees to duly and promptly execute and deliver,
or cause to be
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duly executed and delivered, at the cost and expense of the Credit Parties, such
further instruments as may be necessary or proper, in the reasonable judgment of
the Administrative Agent, to carry out the provisions and purposes of this
Article 8 or to perfect and preserve the Liens of the Administrative Agent for
the benefit of itself, the Issuing Bank and the Lenders hereunder and under the
Fundamental Documents, in the Collateral or any portion thereof.
SECTION 8.11. Termination and Release. The security interests granted
under this Article 8 shall terminate when all the Obligations have been
indefeasibly fully paid and performed and the Commitments shall have terminated
and all Letters of Credit shall have expired or been terminated or canceled.
Upon request by the Credit Parties (and at the sole expense of the Credit
Parties) after such termination, the Administrative Agent will take all
reasonable action and do all things reasonably necessary, including executing
UCC termination statements, Pledgeholder Agreement terminations, termination
letters to account debtors and copyright releases, to terminate the security
interest granted to it (for the benefit of the Administrative Agent, the Issuing
Bank and the Lenders) hereunder.
SECTION 8.12. Remedies Not Exclusive. The remedies conferred upon or
reserved to the Administrative Agent in this Article 8 are intended to be in
addition to, and not in limitation of, any other remedy or remedies available to
the Administrative Agent. Without limiting the generality of the foregoing, the
Administrative Agent, the Issuing Bank and the Lenders shall have all rights and
remedies of a secured creditor under Article 9 of the UCC and under any other
Applicable Law.
SECTION 8.13. Quiet Enjoyment. The Administrative Agent, the Issuing Bank
and the Lenders acknowledge and agree that their security interest hereunder is
subject to the rights of Quiet Enjoyment (as defined below) of parties (which
are not Affiliates of any Credit Party) to Distribution Agreements, whether
existing on the date hereof or hereafter executed. For the purpose hereof,
"Quiet Enjoyment" shall mean in connection with the rights of a licensee (which
is not an Affiliate of any Credit Party) under a Distribution Agreement, the
Administrative Agent, the Issuing Bank and the Lenders' agreement that their
rights under this Credit Agreement and the other Fundamental Documents and in
the Collateral are subject to the rights of such licensee to distribute, exhibit
and/or to exploit the item of Product licensed to them under such Distribution
Agreement, and to receive prints or tapes or have access to preprint material or
master tapes in connection therewith and that even if the Lenders shall become
the owner of the Collateral in case of an Event of Default, the Lenders'
ownership rights shall be subject to the rights of said parties under such
agreement, provided, however, that such licensee shall not be in default under
the relevant Distribution Agreement. The Administrative Agent agrees that, upon
the reasonable request of a Credit Party, it will provide written confirmation
(in form reasonably acceptable to the Administrative Agent) of such rights of
Quiet Enjoyment to licensees under the Distribution Agreements. None of the
foregoing constitutes an agreement by the Administrative Agent, the Issuing Bank
or the Lenders to the granting of any security interest to any Person under any
Distribution Agreement, except as otherwise permitted pursuant to Section 6.2.
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SECTION 8.14. Continuation and Reinstatement. Each Credit Party further
agrees that the security interest granted hereunder shall continue to be
effective or be reinstated, as the case may be, if at any time payment or any
part thereof of any Obligation is rescinded or must otherwise be restored by the
Administrative Agent, the Issuing Bank or the Lenders upon the bankruptcy or
reorganization of any Credit Party or otherwise.
9. GUARANTY
SECTION 9.1. Guaranty. (a) Each Guarantor unconditionally and irrevocably
guarantees to the Administrative Agent, Issuing Bank and the Lenders the due and
punctual payment by, and performance of, the Obligations (including interest
accruing on and after the filing of any petition in bankruptcy or of
reorganization of the obligor whether or not post filing interest is allowed in
such proceeding). Each Guarantor further agrees that the Obligations may be
increased, extended or renewed, in whole or in part, without notice or further
assent from it (except as may be otherwise required herein), and it will remain
bound upon this Guaranty notwithstanding any extension or renewal of any
Obligation.
(b) Each Guarantor waives presentation to, demand for payment from and
protest to, as the case may be, any Credit Party or any other guarantor of any
of the Obligations, and also waives notice of protest for nonpayment, notice of
acceleration and notice of intent to accelerate. The obligations of each
Guarantor hereunder shall not be affected by (i) the failure of the
Administrative Agent, the Issuing Bank or the Lenders to assert any claim or
demand or to enforce any right or remedy against any Borrower or any Guarantor
or any other guarantor under the provisions of this Credit Agreement or any
other agreement or otherwise; (ii) any extension or renewal of any provision
hereof or thereof; (iii) the failure of the Administrative Agent, the Issuing
Bank or the Lenders to obtain the consent of the Guarantor with respect to any
rescission, waiver, compromise, acceleration, amendment or modification of any
of the terms or provisions of this Credit Agreement, the Notes or of any other
agreement; (iv) the release, exchange, waiver or foreclosure of any security
held by the Administrative Agent for the Obligations or any of them; (v) the
failure of the Administrative Agent, the Issuing Bank or the Lenders to exercise
any right or remedy against any other Guarantor or any other guarantor of the
Obligations; or (vi) the release or substitution of any Guarantor or any other
guarantor of the Obligations. Without limiting the generality of the foregoing
or any other provision hereof (including, without limitation, Section 13.6
hereof), to the extent permitted by applicable law, each Guarantor hereby
expressly waives any and all benefits which might otherwise be available to it
under California Civil Code Sections 2799, 2809, 2810, 2815, 2819, 2820, 2821,
2822, 2838, 2839, 2845, 2848, 2849, 2850, 2899 and 3433.
(c) Each Guarantor further agrees that this Guaranty constitutes a
guaranty of performance and of payment when due and not just of collection, and
waives any right to require that any resort be had by the Administrative Agent,
the Issuing Bank or any Lender to any security held for payment of the
Obligations or to any balance of any deposit, account or credit on the books of
the Administrative Agent, the Issuing Bank or any Lender in favor of any
Borrower or any Guarantor, or to any other Person.
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(d) Each Guarantor hereby expressly assumes all responsibilities to
remain informed of the financial condition of the Borrowers, the Guarantors and
any other guarantors of the Obligations and any circumstances affecting the
Collateral or the Pledged Securities or the ability of the Borrowers to perform
under this Credit Agreement.
(e) Each Guarantor's obligations under the Guaranty shall not be affected
by the genuineness, validity, regularity or enforceability of the Obligations,
the Notes or any other instrument evidencing any Obligations, or by the
existence, validity, enforceability, perfection, or extent of any collateral
therefor or by any other circumstance relating to the Obligations which might
otherwise constitute a defense to this Guaranty. The Administrative Agent, the
Issuing Bank and the Lenders make no representation or warranty with respect to
any such circumstances and have no duty or responsibility whatsoever to any
Guarantor in respect to the management and maintenance of the Obligations or any
collateral security for the Obligations.
SECTION 9.2. No Impairment of Guaranty, etc. The obligations of each
Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (except payment and performance in full
of the Obligations), including, without limitation, any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject to any
defense or set-off, counterclaim, recoupment or termination whatsoever by reason
of the invalidity, illegality or unenforceability of the Obligations or
otherwise. Without limiting the generality of the foregoing, the obligations of
each Guarantor hereunder shall not be discharged or impaired or otherwise
affected by the failure of the Administrative Agent, the Issuing Bank or any
Lender to assert any claim or demand or to enforce any remedy under this Credit
Agreement or any other agreement, by any waiver or modification of any provision
hereof or thereof, by any default, failure or delay, willful or otherwise, in
the performance of the Obligations, or by any other act or thing or omission or
delay to do any other act or thing which may or might in any manner or to any
extent vary the risk of such Guarantor or would otherwise operate as a discharge
of such Guarantor as a matter of law, unless and until the Obligations are paid
in full, the Commitments have terminated and each outstanding Letter of Credit
has expired or otherwise been terminated.
SECTION 9.3. Continuation and Reinstatement, etc. (a) Each Guarantor
further agrees that its guaranty hereunder shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any Obligation is rescinded or must otherwise be restored by the Administrative
Agent, the Issuing Bank or the Lenders upon the bankruptcy or reorganization of
a Borrower or a Guarantor, or otherwise. In furtherance of the provisions of
this Article 9, and not in limitation of any other right which the
Administrative Agent, the Issuing Bank or the Lenders may have at law or in
equity against a Borrower, a Guarantor or any other Person by virtue hereof,
upon failure of the Borrowers to pay any Obligation when and as the same shall
become due, whether at maturity, by acceleration, after notice or otherwise,
each Guarantor hereby promises to and will, upon receipt of written demand by
the Administrative Agent on behalf of itself, the Issuing Bank and/or the
Lenders, forthwith pay or cause to be paid to the Administrative Agent for the
benefit of itself, the Issuing Bank and/or the Lenders (as applicable) in cash
an amount equal to the unpaid amount of all the Obligations with interest
thereon at a rate of interest equal to the rate specified in Section 2.7(a)
hereof, and thereupon the
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Administrative Agent shall assign such Obligation, together with all security
interests, if any, then held by the Administrative Agent in respect of such
Obligation, to the Guarantors making such payment; such assignment to be
subordinate and junior to the rights of the Administrative Agent on behalf of
itself, the Issuing Bank and the Lenders with regard to amounts payable by the
Borrowers in connection with the remaining unpaid Obligations and to be pro
tanto to the extent to which the Obligation in question was discharged by the
Guarantor or Guarantors making such payments.
(b) All rights of a Guarantor against the Borrowers, arising as a result
of the payment by such Guarantor of any sums to the Administrative Agent for the
benefit of the Administrative Agent, the Issuing Bank and/or the Lenders or
directly to the Lenders hereunder by way of right of subrogation or otherwise,
shall in all respects be subordinated and junior in right of payment to, and
shall not be exercised by such Guarantor until and unless, the prior final and
indefeasible payment in full of all the Obligations. If any amount shall be paid
to such Guarantor for the account of the Borrowers, such amount shall be held in
trust for the benefit of the Administrative Agent, segregated from such
Guarantor's own assets, and shall forthwith be paid to the Administrative Agent
on behalf of the Administrative Agent, the Issuing Bank and/or the Lenders to be
credited and applied to the Obligations, whether matured or unmatured.
SECTION 9.4. Limitation on Guaranteed Amount etc. Notwithstanding any
other provision of this Article 9, the amount guaranteed by each Guarantor
hereunder shall be limited to the extent, if any, required so that its
obligations under this Article 9 shall not be subject to avoidance under Section
548 of the Bankruptcy Code or to being set aside or annulled under any
Applicable Law relating to fraud on creditors. In determining the limitations,
if any, on the amount of any Guarantor's obligations hereunder pursuant to the
preceding sentence, it is the intention of the parties hereto that any rights of
subrogation or contribution which such Guarantor may have under this Article 9,
any other agreement or Applicable Law shall be taken into account.
10. PLEDGE
SECTION 10.1. Pledge. Each Pledgor, as security for the due and punctual
payment of the Obligations (including interest accruing on and after the filing
of any petition in bankruptcy or of reorganization of a Borrower whether or not
post filing interest is allowed in such proceeding) in the case of the Borrowers
and as security for its obligations under Article 9 hereof in the case of a
Pledgor which is a Guarantor, hereby pledges, hypothecates, assigns, transfers,
sets over and delivers unto the Administrative Agent for the benefit of itself,
the Issuing Bank and the Lenders, a security interest in all Pledged Collateral
now owned or hereafter acquired by it. On the Closing Date, the Pledgors shall
deliver to the Administrative Agent the definitive instruments (if any)
representing all Pledged Securities, accompanied by undated stock powers, duly
endorsed or executed in blank by the appropriate Pledgor, and such other
instruments or documents as the Administrative Agent or its counsel shall
reasonably request.
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SECTION 10.2. Covenant. Each Pledgor covenants that as stockholder of
each of its respective Subsidiaries it will not take any action to allow any
additional shares of common stock, preferred stock or other equity securities of
any of its respective Subsidiaries or any securities convertible or exchangeable
into common or preferred stock of such Subsidiaries to be issued, or grant any
options or warrants, unless such securities are pledged to the Administrative
Agent (for the benefit of itself, the Issuing Bank and the Lenders) as security
for the Obligations.
SECTION 10.3. Registration in Nominee Name; Denominations. The
Administrative Agent shall have the right (in its sole and absolute discretion)
to hold the certificates representing any Pledged Securities (a) in its own name
(on behalf of the Administrative Agent, the Issuing Bank and the Lenders) or in
the name of its nominee or (b) in the name of the appropriate Pledgor, endorsed
or assigned in blank or in favor of the Administrative Agent. The Administrative
Agent shall have the right to exchange the certificates representing any of the
Pledged Securities for certificates of smaller or larger denominations for any
purpose consistent with this Credit Agreement.
SECTION 10.4. Voting Rights; Dividends; etc. (a) The appropriate Pledgor
shall be entitled to exercise any and all voting and/or consensual rights and
powers accruing to an owner of the Pledged Securities being pledged by it
hereunder or any part thereof for any purpose not inconsistent with the terms
hereof, at all times, except as expressly provided in paragraph (c) below.
(b) All dividends or distributions of any kind whatsoever (other than
cash dividends or distributions paid while no Event of Default is continuing)
received by a Pledgor, whether resulting from a subdivision, combination, or
reclassification of the outstanding capital stock of the issuer or received in
exchange for Pledged Securities or any part thereof or as a result of any
merger, consolidation, acquisition, or other exchange of assets to which the
issuer may be a party, or otherwise, shall be and become part of the Pledged
Securities pledged hereunder and shall immediately be delivered to the
Administrative Agent to be held subject to the terms hereof. All dividends and
distributions which are received contrary to the provisions of this subsection
(b) shall be received in trust for the benefit of the Administrative Agent, the
Issuing Bank and the Lenders, segregated from such Pledgor's own assets, and
shall be delivered to the Administrative Agent.
(c) Upon the occurrence and during the continuance of an Event of Default
and notice from the Administrative Agent of the transfer of such rights to the
Administrative Agent, all rights of a Pledgor (i) to exercise the voting and/or
consensual rights and powers which it is entitled to exercise pursuant to this
Section and (ii) to receive and retain cash dividends and distributions shall
cease, and all such rights shall thereupon become vested in the Administrative
Agent, which shall have the sole and exclusive right and authority to exercise
such voting and/or consensual rights and receive such cash dividends and
distributions until such time as such Event of Default has been cured.
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SECTION 10.5. Remedies Upon Default. If an Event of Default shall have
occurred and be continuing, the Administrative Agent, on behalf of itself, the
Issuing Bank and the Lenders, may sell the Pledged Securities, or any part
thereof, at public or private sale or at any broker's board or on any securities
exchange, for cash, upon credit or for future delivery as the Administrative
Agent shall deem appropriate subject to the terms hereof or as otherwise
provided in the UCC. The Administrative Agent shall be authorized at any such
sale (if it deems it advisable to do so) to restrict to the full extent
permitted by Applicable Law the prospective bidders or purchasers to Persons who
will represent and agree that they are purchasing the Pledged Securities for
their own account for investment and not with a view to the distribution or sale
thereof, and upon consummation of any such sale, the Administrative Agent shall
have the right to assign, transfer, and deliver to the purchaser or purchasers
thereof the Pledged Securities so sold. Each such purchaser at any such sale
shall hold the property sold absolutely, free from any claim or right on the
part of any Pledgor. The Administrative Agent shall give the Pledgors ten (10)
days' written notice of any such public or private sale, or sale at any broker's
board or on any such securities exchange, or of any other disposition of the
Pledged Securities. Such notice, in the case of public sale, shall state the
time and place for such sale and, in the case of sale at a broker's board or on
a securities exchange, shall state the board or exchange at which such sale is
to be made and the day on which the Pledged Securities, or portion thereof, will
first be offered for sale at such board or exchange. Any such public sale shall
be held at such time or times within ordinary business hours and at such place
or places as the Administrative Agent may fix and shall state in the notice of
such sale. At any such sale, the Pledged Securities, or portion thereof, to be
sold may be sold in one lot as an entirety or in separate parcels, as the
Administrative Agent may (in its sole and absolute discretion) determine. The
Administrative Agent shall not be obligated to make any sale of the Pledged
Securities if it shall determine not to do so, regardless of the fact that
notice of sale of the Pledged Securities may have been given. The Administrative
Agent may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the time and
place fixed for sale, and such sale may, without further notice, be made at the
time and place to which the same was so adjourned. In case the sale of all or
any part of the Pledged Securities is made on credit or for future delivery, the
Pledged Securities so sold shall be retained by the Administrative Agent until
the sale price is paid by the purchaser or purchasers thereof, but the
Administrative Agent shall not incur any liability in case any such purchaser or
purchasers shall fail to take up and pay for the Pledged Securities so sold and,
in case of any such failure, such Pledged Securities may be sold again upon like
notice. At any sale or sales made pursuant to this Section 10.5, the
Administrative Agent (on behalf of itself, the Issuing Bank and/or the Lenders)
may bid for or purchase, free from any claim or right of whatever kind,
including any equity of redemption, of the Pledgors, any such demand, notice,
claim, right or equity being hereby expressly waived and released, any or all of
the Pledged Securities offered for sale, and may make any payment on the account
thereof by using any claim for moneys then due and payable to the Administrative
Agent, the Issuing Bank (to the extent it consents) or any consenting Lender by
any Credit Party as a credit against the purchase price; and the Administrative
Agent, upon compliance with the terms of sale, may hold, retain and dispose of
the Pledged Securities without further accountability therefor to any Pledgor or
any third party (other than the Issuing Bank and/or the Lenders). The
Administrative Agent shall in any such sale make no representations or
warranties with respect to the Pledged Securities or any part thereof, and shall
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not be chargeable with any of the obligations or liabilities of the Pledgors
with respect thereto. Each Pledgor hereby agrees (i) it will indemnify and hold
the Administrative Agent, the Issuing Bank and the Lenders harmless from and
against any and all claims with respect to the Pledged Securities asserted
before the taking of actual possession or control of the Pledged Securities by
the Administrative Agent pursuant to this Credit Agreement, or arising out of
any act of, or omission to act on the part of, any Person prior to such taking
of actual possession or control by the Administrative Agent (whether asserted
before or after such taking of possession or control), or arising out of any act
on the part of any Pledgor, its agents or Affiliates before or after the
commencement of such actual possession or control by the Administrative Agent
and (ii) the Administrative Agent, the Issuing Bank and the Lenders shall have
no liability or obligation arising out of any such claim. As an alternative to
exercising the power of sale herein conferred upon it, the Administrative Agent
may proceed by a suit or suits at law or in equity to foreclose upon the
Collateral and Pledged Securities under this Credit Agreement and to sell the
Pledged Securities, or any portion thereof, pursuant to a judgment or decree of
a court or courts having competent jurisdiction.
SECTION 10.6. Application of Proceeds of Sale and Cash. The proceeds of
sale of the Pledged Securities sold pursuant to Section 10.5 hereof shall be
applied by the Administrative Agent on behalf of itself, the Issuing Bank and
the Lenders as follows:
(i) to the payment of all reasonable out-of-pocket costs and
expenses paid or incurred by the Administrative Agent in connection with
such sale, including, without limitation, all court costs and the
reasonable fees and expenses of counsel for the Administrative Agent in
connection therewith, and the payment of all reasonable out-of-pocket
costs and expenses paid or incurred by the Administrative Agent in
enforcing this Credit Agreement, in realizing or protecting any
Collateral and in enforcing or collecting any Obligations or any Guaranty
thereof, including, without limitation, court costs and the reasonable
attorney's fees and expenses incurred by the Administrative Agent in
connection therewith;
(ii) to satisfy or provide cash collateral for all Obligations
relating to the Letters of Credit; and
(iii) to the indefeasible payment in full of the Obligations in
accordance with Section 12.2(b) hereof;
provided, however, that the Administrative Agent may in its discretion apply
funds comprising the Collateral to pay the cost (i) of completing any item of
Product owned in whole or in part by any Credit Party in any stage of production
and (ii) of making delivery to the distributors of such item of Product. Any
amounts remaining after such indefeasible payment in full shall be remitted to
the appropriate Pledgor, or as a court of competent jurisdiction may otherwise
direct.
SECTION 10.7. Securities Act, etc. In view of the position of each
Pledgor in relation to the Pledged Securities pledged by it, or because of other
present or future
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circumstances, a question may arise under the Securities Act of 1933, as
amended, as now or hereafter in effect, or any similar statute hereafter enacted
analogous in purpose or effect (such Act and any such similar statute as from
time to time in effect being hereinafter called the "Federal Securities Laws"),
with respect to any disposition of the Pledged Securities permitted hereunder.
Each Pledgor understands that compliance with the Federal Securities Laws may
very strictly limit the course of conduct of the Administrative Agent if the
Administrative Agent were to attempt to dispose of all or any part of the
Pledged Securities, and may also limit the extent to which or the manner in
which any subsequent transferee of any Pledged Securities may dispose of the
same. Similarly, there may be other legal restrictions or limitations affecting
the Administrative Agent in any attempt to dispose of all or any part of the
Pledged Securities under applicable Blue Sky or other state securities laws, or
similar laws analogous in purpose or effect. Under Applicable Law, in the
absence of an agreement to the contrary, the Administrative Agent may perhaps be
held to have certain general duties and obligations to a Pledgor to make some
effort towards obtaining a fair price even though the Obligations may be
discharged or reduced by the proceeds of a sale at a lesser price. Each Pledgor
waives to the fullest extent permitted by Applicable Law any such general duty
or obligation to it, and the Pledgors and/or the Credit Parties will not attempt
to hold the Administrative Agent responsible for selling all or any part of the
Pledged Securities at an inadequate price, even if the Administrative Agent
shall accept the first offer received or does not approach more than one
possible purchaser. Without limiting the generality of the foregoing, the
provisions of this Section 10.7 would apply if, for example, the Administrative
Agent were to place all or any part of the Pledged Securities for private
placement by an investment banking firm, or if such investment banking firm
purchased all or any part of the Pledged Securities for its own account, or if
the Administrative Agent placed all or any part of the Pledged Securities
privately with a purchaser or purchasers.
SECTION 10.8. Continuation and Reinstatement. Each Pledgor further agrees
that its pledge hereunder shall continue to be effective or be reinstated, as
the case may be, if at any time payment, or any part thereof, of any Obligation
is rescinded or must otherwise be restored by the Administrative Agent, the
Issuing Bank or the Lenders upon the bankruptcy or reorganization of any Pledgor
or otherwise.
SECTION 10.9. Termination. The pledge referenced herein shall terminate
when all of the Obligations shall have been indefeasibly fully paid and
performed and the Commitments shall have terminated, and all L/C Exposure shall
have expired or been terminated or canceled, at which time the Administrative
Agent shall assign and deliver to the appropriate Pledgor, or to such Person or
Persons as such Pledgor shall designate, against receipt, such of the Pledged
Securities (if any) as shall not have been sold or otherwise applied by the
Administrative Agent pursuant to the terms hereof and shall still be held by it
hereunder, together with appropriate instruments of reassignment and release.
Any such reassignment shall be free and clear of all Liens, arising by, under or
through the Administrative Agent but shall otherwise be without recourse upon or
warranty by the Administrative Agent and at the expense of the Pledgors.
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11. CASH COLLATERAL
SECTION 11.1. Cash Collateral Accounts. On or prior to the Closing Date,
there shall be established with the Administrative Agent a collateral account in
the name of the Administrative Agent (the "Cash Collateral Account"), into which
the appropriate Credit Parties shall from time to time deposit amounts pursuant
to the express provisions of this Credit Agreement requiring or permitting such
deposits. Except to the extent otherwise provided in this Article 11, the Cash
Collateral Accounts shall be under the sole dominion and control of the
Administrative Agent.
SECTION 11.2. Investment of Funds. (a) The Administrative Agent is hereby
authorized and directed to invest and reinvest the funds from time to time
transferred or deposited into the Cash Collateral Account, so long as no Event
of Default has occurred and is continuing, on the instructions of the Borrowers
(provided that any such instructions given verbally shall be confirmed promptly
in writing) or, if the Borrowers shall fail to give such instructions upon
delivery of any such funds, in the sole discretion of the Administrative Agent,
provided that in no event may the Borrowers give instructions to the
Administrative Agent to, or may the Administrative Agent in its discretion,
invest or reinvest funds in the Cash Collateral Account in other than Cash
Equivalents.
(b) Any net income or gain on the investment of funds from time to time
held in the Cash Collateral Account, shall be promptly reinvested by the
Administrative Agent as a part of the Cash Collateral Account; and any net loss
on any such investment shall be charged against the Cash Collateral Account.
(c) None of the Administrative Agent, the Issuing Bank and the Lenders
shall be a trustee for any of the Credit Parties, or shall have any obligations
or responsibilities, or shall be liable for anything done or not done, in
connection with the Cash Collateral Account, except as expressly provided
herein. The Administrative Agent, the Issuing Bank and the Lenders shall not
have any obligation or responsibility and shall not be liable in any way for any
investment decision made in accordance with this Section 11.2 or for any
decrease in the value of the investments held in the Cash Collateral Account.
SECTION 11.3. Grant of Security Interest. For value received and to
induce the Issuing Bank to issue Letters of Credit and the Lenders to make Loans
to the Borrowers and to acquire participations in Letters of Credit from time to
time as provided for in this Credit Agreement, as security for the payment of
all of the Obligations, each of the Credit Parties hereby assigns to the
Administrative Agent (for the benefit of itself, the Issuing Bank and the
Lenders) and grants to the Administrative Agent (for the benefit of itself, the
Issuing Bank and the Lenders), a first and prior Lien upon all of such Credit
Party's rights in and to the Cash Collateral Account, all cash, documents,
instruments and securities from time to time held therein, and all rights
pertaining to investments of funds in the Cash Collateral Account and all
products and proceeds of any of the foregoing. All cash, documents, instruments
and securities from time to time on deposit in the Cash Collateral Account, and
all rights pertaining to investments of funds in the Cash Collateral Account
shall immediately and without any need for any further action on the part of any
of the Credit Parties, the Issuing Bank, any Lender or the
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Administrative Agent, become subject to the Lien set forth in this Section 11.3,
be deemed Collateral for all purposes hereof and be subject to the provisions of
this Credit Agreement.
SECTION 11.4. Remedies. At any time during the continuation of an Event
of Default, the Administrative Agent may sell any documents, instruments and
securities held in the Cash Collateral Account and may immediately apply the
proceeds thereof and any other cash held in the Cash Collateral Account in
accordance with Section 11.2. Following the sale of any documents, instruments
or securities held in the Cash Collateral Account or the application of the
proceeds thereof or any other cash held in the Cash Collateral Account, the
Administrative Agent shall as soon as practicable give the Parent a notice
specifying in reasonable detail such sale or application of proceeds or other
cash.
12. THE ADMINISTRATIVE AGENT AND THE ISSUING BANK
SECTION 12.1. Administration by the Administrative Agent. (a) The general
administration of the Fundamental Documents and any other documents contemplated
by this Credit Agreement or any other Fundamental Document shall be by the
Administrative Agent or its designees. Except as otherwise expressly provided
herein, each of the Lenders hereby irrevocably authorizes the Administrative
Agent, at its discretion, to take or refrain from taking such actions as agent
on its behalf and to exercise or refrain from exercising such powers under the
Fundamental Documents, the Notes and any other documents contemplated by this
Credit Agreement or any other Fundamental Document as are expressly delegated by
the terms hereof or thereof, as appropriate, together with all powers reasonably
incidental thereto. The Administrative Agent shall have no duties or
responsibilities except as set forth in the Fundamental Documents.
(b) The Lenders hereby authorize the Administrative Agent (in its sole
discretion):
(i) in connection with the sale or other disposition of any asset
included in the Collateral or the capital stock of any Guarantor, to the
extent undertaken in accordance with the terms of this Credit Agreement,
to release a Lien granted to it (for the benefit of the Administrative
Agent, the Issuing Bank and the Lenders) on such asset or capital stock
and/or to release such Guarantor from its obligations hereunder;
(ii) to determine that the cost to the Borrowers or another Credit
Party is disproportionate to the benefit to be realized by the
Administrative Agent, the Issuing Bank and the Lenders by perfecting a
Lien in a given asset or group of assets included in the Collateral
(other than any item which is to be included in the Borrowing Base) and
that the Borrowers or other Credit Party should not be required to
perfect such Lien in favor of the Administrative Agent (for the benefit
of itself, the Issuing Bank and the Lenders);
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(iii) to appoint subagents to be the holder of record of a Lien to
be granted to the Administrative Agent (for the benefit of the
Administrative Agent, the Issuing Bank and the Lenders);
(iv) to confirm in writing the right of Quiet Enjoyment of
licensees pursuant to the terms of Section 8.13;
(v) in connection with an item of Product being produced by a
Credit Party, the principal photography of which is being done outside
the United States, to approve arrangements with such Credit Party as
shall be satisfactory to the Administrative Agent with respect to the
temporary storage of the original negative film, the original sound track
materials or other Physical Materials of such item of Product in a
production laboratory located outside the United States;
(vi) to enter into and perform its obligations under the other
Fundamental Documents;
(vii) to enter into intercreditor and/or subordination agreements
on terms acceptable to the Administrative Agent with (A) the unions
and/or the guilds with respect to the security interests in favor of such
unions and/or guilds required pursuant to the terms of the collective
bargaining agreements or (B) with Persons who have been granted Liens
which are permitted pursuant to Section 6.2(f) hereof or (C) any licensee
or licensor having any rights to any item of Product or (D) Persons
providing any services in connection with any item of Product;
(viii) to accept commitments from Persons which satisfy the
definition of "Eligible Assignee" for the remaining $20,000,000 of the
Facility not committed to as of the date hereof by (i) obtaining an
executed counterpart of this Agreement from each such Person, (ii)
amending Schedule 1 hereto to add each such Person's name and Commitment
and circulating the amended Schedule 1 to the Issuing Bank, the Lenders
and the Credit Parties and (iii) recording in the Register (as defined in
Section 13.3(e) hereof) the name and address of each such Person and the
Commitment of, and principal amount of the Loans owing to, it, whereupon
(y) the Borrowers shall execute and deliver to the Administrative Agent a
Note (substantially in the form of Exhibit A hereto) to the order of each
such Person in an amount equal to its Commitment and (z) each such Person
shall be a party hereto, have the rights and obligations of a Lender
hereunder and under the other Fundamental Documents and shall be bound by
the provisions hereof; and
(ix) upon the acceptance of additional commitments pursuant to
Section 12.1(b)(viii) hereof, to allocate equitably among the Lenders the
Alternate Base Rate Loans and Eurodollar Loans so as to achieve pro rata
status.
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SECTION 12.2. Advances and Payments. (a) On the date of each Loan, the
Administrative Agent shall be authorized (but not obligated) to advance, for the
account of each of the Lenders, the amount of the Loan to be made by it in
accordance with its Percentage hereunder. Each of the Lenders hereby authorizes
and requests the Administrative Agent to advance for its account, pursuant to
the terms hereof, the amount of the Loan to be made by it, and each of the
Lenders agrees forthwith to reimburse the Administrative Agent in immediately
available funds for the amount so advanced on its behalf by the Administrative
Agent. If any such reimbursement is not made in immediately available funds on
the same day on which the Administrative Agent shall have made any such amount
available on behalf of any Lender, such Lender shall pay interest to the
Administrative Agent at a rate per annum equal to the Administrative Agent's
cost of obtaining overnight funds in the New York Federal Funds Market for the
first three days following the time when the Lender fails to make the required
reimbursement, and thereafter at a rate per annum equal to the Alternate Base
Rate plus the Applicable Margin for Alternate Base Rate Loans. If and to the
extent that any such reimbursement shall not have been made to the
Administrative Agent, the Borrowers agree to repay to the Administrative Agent
forthwith on demand a corresponding amount with interest thereon for each day
from the date such amount is made available to the Borrowers until the date such
amount is repaid to the Administrative Agent, in the case of an Alternate Base
Rate Loan, at the Alternate Base Rate plus the Applicable Margin for Alternate
Base Rate Loans and, in the case of a Eurodollar Loan, at the LIBO Rate plus the
Applicable Margin for Eurodollar Loans.
(b) As between the Administrative Agent and the Lenders, any amounts
received by the Administrative Agent in connection with the Fundamental
Documents, the application of which is not otherwise provided for, shall be
applied, first, to pay the accrued but unpaid Commitment Fees in accordance with
each Lender's Percentage, second, to pay accrued but unpaid interest on the
Notes in accordance with the amount of outstanding Loans owed to each Lender,
third, to pay the principal balance outstanding on the Notes (with amounts
payable on the principal balance outstanding on the Notes in accordance with the
amount of outstanding Loans owed to each Lender) and amounts outstanding under
Currency Agreements and Interest Rate Protection Agreements, and fourth, to pay
any other amounts then due under this Credit Agreement. All amounts to be paid
to any Lender by the Administrative Agent shall be credited to that Lender,
after collection by the Administrative Agent, in immediately available funds
either by wire transfer or deposit in such Lender's correspondent account with
the Administrative Agent, or as such Lender and the Administrative Agent shall
from time to time agree.
SECTION 12.3. Sharing of Setoffs and Cash Collateral. Each of the Lenders
agrees that if it shall, through the exercise of a right of banker's lien,
setoff or counterclaim against any Credit Party (including, but not limited to,
a secured claim under Section 506 of Title 11 of the United States Code or other
security or interest arising from, or in lieu of, such secured claim and
received by such Lender under any applicable bankruptcy, insolvency or other
similar law) or otherwise, obtain payment in respect of its Loans as a result of
which the unpaid portion of its Loans and L/C Exposure is proportionately less
than the unpaid portion of Loans and L/C Exposure of any of the other Lenders
(a) it shall promptly purchase at par (and shall be deemed to have thereupon
purchased) from such other Lenders a participation in the Loans or Letters of
Credit of such other Lenders, so that the aggregate unpaid principal amount of
each of the
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Lender's Loans and its participation in Loans and Letters of Credit of the other
Lenders shall be in the same proportion to the aggregate unpaid principal amount
of all Loans then outstanding and L/C Exposure as the principal amount of its
Loans and L/C Exposure prior to the obtaining of such payment was to the
principal amount of all Loans outstanding and L/C Exposure prior to the
obtaining of such payment and (b) such other adjustments shall be made from time
to time as shall be equitable to ensure that the Lenders share such payment pro
rata. If all or any portion of such excess payment is thereafter recovered from
the Lender which originally received such excess payment, such purchase (or
portion thereof) shall be canceled and the purchase price restored to the extent
of such recovery. The Credit Parties expressly consent to the foregoing
arrangements and agree that any Lender or Lenders holding (or deemed to be
holding) a participation in a Note or Letter of Credit may exercise any and all
rights of banker's lien, setoff or counterclaim with respect to any and all
moneys owing by the Borrower to such Lender or Lenders as fully as if such
Lender or Lenders held a Note and was the original obligee thereon or was the
issuer of the Letter of Credit, in the amount of such participation.
SECTION 12.4. Notice to the Lenders. Upon receipt by the Administrative
Agent or the Issuing Bank from any of the Credit Parties of any communication
calling for an action on the part of the Lenders, or upon notice to the
Administrative Agent of any Event of Default, the Administrative Agent or the
Issuing Bank will in turn immediately inform the other Lenders in writing (which
shall include facsimile communications) of the nature of such communication or
of the Event of Default, as the case may be.
SECTION 12.5. Liability of the Administrative Agent and Issuing Bank. (a)
The Administrative Agent or the Issuing Bank, when acting on behalf of the
Lenders, may execute any of its duties under this Credit Agreement or the other
Fundamental Documents by or through its officers, agents, or employees and
neither the Administrative Agent, the Issuing Bank nor their respective
officers, agents or employees shall be liable to the Lenders or any of them for
any action taken or omitted to be taken in good faith, nor be responsible to the
Lenders or to any of them for the consequences of any oversight or error of
judgment, or for any loss, unless the same shall happen through its gross
negligence or willful misconduct. The Administrative Agent, the Issuing Bank and
their respective directors, officers, agents, and employees shall in no event be
liable to the Lenders or to any of them for any action taken or omitted to be
taken by it pursuant to instructions received by it from the Required Lenders or
in reliance upon the advice of counsel selected by it with reasonable care.
Without limiting the foregoing, neither the Administrative Agent, the Issuing
Bank nor any of their respective directors, officers, employees, or agents shall
be responsible to any of the Lenders for the due execution, validity,
genuineness, effectiveness, sufficiency, or enforceability of, or for any
statement, warranty, or representation in, or for the perfection of any security
interest contemplated by, this Credit Agreement, any other Fundamental Document
or any related agreement, document or order, or for freedom of any of the
Collateral or any of the Pledged Securities from prior Liens or security
interests, or shall be required to ascertain or to make any inquiry concerning
the performance or observance by the Borrower or any other Credit Party of any
of the terms, conditions, covenants, or agreements of this Credit Agreement, any
other Fundamental Document, or any related agreement or document.
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(b) None of the Administrative Agent (in its capacity as agent for the
Lenders), the Issuing Bank or any of their respective directors, officers,
employees, or agents shall have any responsibility to the Borrower or any other
Credit Party on account of the failure or delay in performance or breach by any
of the Lenders (other than The Chase Manhattan Bank) of any of such Lender's
obligations under this Credit Agreement, the other Fundamental Documents or any
related agreement or document or in connection herewith or therewith. No Lender
nor any of its directors, officers, employees or agents shall have any
responsibility to the Borrower or any other Credit Party on account of the
failure or delay in performance or breach by any other Lender of such other
Lender's obligations under this Credit Agreement, the other Fundamental
Documents or any related agreement or document or in connection herewith or
therewith.
(c) The Administrative Agent, as agent for the Lenders hereunder and the
Issuing Bank in such capacity, shall be entitled to rely on any communication,
instrument, or document believed by it to be genuine or correct and to have been
signed or sent by a Person or Persons believed by it to be the proper Person or
Persons, and it shall be entitled to rely on advice of legal counsel,
independent public accountants, and other professional advisers and experts
selected by it.
SECTION 12.6. Reimbursement and Indemnification. Each of the Lenders
agrees (i) to reimburse the Administrative Agent for such Lender's Pro Rata
Share of any expenses and fees incurred for the benefit of the Lenders under the
Fundamental Documents, including, without limitation, counsel fees and
compensation of agents and employees paid for services rendered on behalf of the
Lenders, and any other expense incurred in connection with the operations or
enforcement thereof not reimbursed by or on behalf of the Borrower, (ii) to
indemnify and hold harmless the Administrative Agent and any of its directors,
officers, employees, or agents, on demand, in accordance with such Lender's
Percentage, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against, it or any of them in any way relating to or arising out of any
Completion Bond, the Fundamental Documents or any related agreement or document,
or any action taken or omitted by it or any of them under any Completion Bond,
the Fundamental Documents or any related agreement or document, to the extent
not reimbursed by or on behalf of the Borrower or any other Credit Party (except
such as shall result from its gross negligence or willful misconduct) and (iii)
to indemnify and hold harmless the Issuing Bank and any of its directors,
officers, employees, or agents, on demand, in the amount of its Pro Rata Share,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by, or asserted
against it or any of them in any way relating to or arising out of the issuance
of any Letters of Credit or the failure to issue Letters of Credit if such
failure or issuance was at the direction of the Required Lenders (except as
shall result from the gross negligence or willful misconduct of the Person to be
reimbursed, indemnified or held harmless, as applicable). To the extent
indemnification payments made by the Lenders pursuant to this Section 12.6 are
subsequently recovered by the Administrative Agent or the Issuing Bank from a
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Credit Party, the Administrative Agent will promptly refund such previously paid
indemnity payments to the Lenders.
SECTION 12.7. Rights of Administrative Agent. It is understood and agreed
that the Administrative Agent shall have the same duties, rights and powers as a
Lender hereunder (including the right to give such instructions) as any of the
other Lenders and may exercise such rights and powers, as well as its rights and
powers under other agreements and instruments to which it is or may be party,
and engage in other transactions with any Credit Party or Affiliate thereof, as
though it were not the Administrative Agent of the Lenders or the Issuing Bank
under this Credit Agreement and the other Fundamental Documents.
SECTION 12.8. Independent Investigation by Lenders. Each of the Lenders
acknowledges that it has decided to enter into this Credit Agreement and the
other Fundamental Documents and to make the Loans and participate in the Letters
of Credit hereunder based on its own analysis of the transactions contemplated
hereby and of the creditworthiness of the Credit Parties and agrees that neither
the Administrative Agent nor the Issuing Bank shall bear any responsibility
therefor.
SECTION 12.9. Agreement of Required Lenders. Upon any occasion requiring
or permitting an approval, consent, waiver, election or other action on the part
of the Required Lenders, action shall be taken by the Administrative Agent for
and on behalf of, or for the benefit of, all Lenders upon the direction of the
Required Lenders and any such action shall be binding on all Lenders. No
amendment, modification, consent or waiver shall be effective except in
accordance with the provisions of Section 13.11 hereof.
SECTION 12.10. Notice of Transfer. The Administrative Agent and the
Issuing Bank may deem and treat any Lender which is a party to this Credit
Agreement as the owner of such Lender's respective portions of the Loans and
participations in Letters of Credit for all purposes, unless and until a written
notice of the assignment or transfer thereof executed by any such Lender shall
have been received by the Administrative Agent and become effective in
accordance with Section 13.3 hereof.
SECTION 12.11. Successor Administrative Agent The Administrative Agent
may resign at any time by giving written notice thereof to the Lenders and the
Parent, but such resignation shall not become effective until acceptance by a
successor administrative agent of its appointment pursuant hereto. Upon any such
resignation, the retiring Administrative Agent shall promptly appoint a
successor administrative agent from among the Lenders which successor shall be
experienced and sophisticated in entertainment industry lending, provided that
such replacement is reasonably acceptable (as evidenced in writing) to the
Required Lenders and the Parent; provided, however, that such approval by the
Parent shall not be required at any time when a Default or Event of Default is
continuing. If no successor administrative agent shall have been so appointed by
the retiring Administrative Agent and shall have accepted such appointment,
within 30 days after the retiring Administrative Agent's giving of notice of
resignation, the Parent may appoint a successor administrative agent (which
successor may be replaced by the Required Lenders; provided that such successor
is experienced and sophisticated
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in entertainment industry lending and reasonably acceptable to the Parent),
which shall be either a Lender or a commercial bank organized under the laws of
the United States of America or of any State thereof and shall have a combined
capital and surplus of at least $250,000,000 and shall be experienced and
sophisticated in entertainment industry lending. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor administrative
agent, such successor administrative agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations under this Credit Agreement, the other
Fundamental Documents and any other credit documentation. After any retiring
Administrative Agent's resignation hereunder as Administrative Agent, the
provisions of this Article 12 and Article 13 shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Administrative Agent
under this Credit Agreement.
SECTION 12.12. Successor Issuing Bank. The Issuing Bank may resign at any
time by giving prior written notice thereof to the Lenders and the Parent, but
such resignation shall not become effective until acceptance by a successor
Issuing Bank of its appointment pursuant hereto. Upon any such resignation, the
retiring Issuing Bank shall promptly appoint a successor Issuing Bank from among
the Lenders, provided that such replacement is reasonably acceptable (as
evidenced in writing) to the Required Lenders and the Parent and has a credit
rating at least as high as that of the Issuing Bank; provided, however, that
such approval by the Parent shall not be required at any time when a Default or
Event of Default is continuing. If no successor Issuing Bank shall have been so
appointed by the retiring Issuing Bank and shall have accepted such appointment,
within 30 days after the retiring Issuing Bank's giving of notice of
resignation, the Parent may appoint a successor Issuing Bank (which successor
may be replaced by the Required Lenders; provided that such successor is
reasonably acceptable to the Parent), which shall be either a Lender or a
commercial bank organized or licensed under the laws of the United States of
America or of any State thereof and shall have a combined capital and surplus of
at least $250,000,000. Upon the acceptance of any appointment as Issuing Bank
hereunder by a successor Issuing Bank, such successor Issuing Bank shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Issuing Bank, and the retiring Issuing Bank shall be
discharged from its duties and obligations under this Credit Agreement, the
other Fundamental Documents and any other credit documentation, except with
respect to Letters of Credit which are outstanding at the time of the
resignation unless the successor Issuing Bank replaces the retiring Issuing Bank
as the issuing bank on such Letters of Credit. The Parent and each Lender hereby
agrees that each will use its commercially reasonable efforts to replace any
such outstanding Letters of Credit issued by the retiring Issuing Bank. After
any retiring Issuing Bank's resignation hereunder as Issuing Bank, the
provisions of this Article 12 and Article 13 shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Issuing Bank under
this Credit Agreement.
13. MISCELLANEOUS
SECTION 13.1. Notices. Notices and other communications provided for
herein shall be in writing and shall be delivered or mailed (or if by facsimile
communications
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equipment, delivered by such equipment) addressed, (a) if to the Administrative
Agent, the Issuing Bank or The Chase Manhattan Bank, to it at 270 Park Avenue,
37th floor, New York, New York 10017, Attn: Joan Fitzgibbon, Facsimile No.:
(212) 270-4584 with a copy to Chase Securities Inc., 1800 Century Park East,
Suite 400, Los Angeles, California 90067, Attn: Janice Weissman, Facsimile No.:
(310) 788-5628, and to The Chase Manhattan Bank, Agent Bank Services Department,
One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attn.: Ganesh
Persaud, Facsimile No.: (212) 552-5700, or (b) if to any Credit Party to it at
11835 West Olympic Boulevard, Suite 550, Los Angeles, CA 90064, Attn: Ronald B.
Cushey, Facsimile No.: (310) 444-4103, or (c) if to a Lender, to it at its
address set forth on the signature pages hereto, or such other address as such
party may from time to time designate by giving written notice to the other
parties hereunder. Any failure of the Administrative Agent or a Lender giving
notice pursuant to this Section 13.1, to provide a courtesy copy to a party as
provided herein, shall not affect the validity of such notice. All notices and
other communications given to any party hereto in accordance with the provisions
of this Credit Agreement shall be deemed to have been given on the fifth
Business Day after the date when sent by registered or certified mail, postage
prepaid, return receipt requested, if by mail, or upon receipt by such party, if
by any telegraphic or facsimile communications equipment, in each case addressed
to such party as provided in this Section 13.1 or in accordance with the latest
unrevoked written direction from such party.
SECTION 13.2. Survival of Agreement, Representations and Warranties, etc.
All warranties, representations and covenants made by any of the Credit Parties
herein, in any other Fundamental Document or in any certificate or other
instrument delivered by it or on its behalf in connection with this Credit
Agreement or any other Fundamental Document shall be considered to have been
relied upon by the Administrative Agent, Issuing Bank and the Lenders and,
except for any terminations, amendments, modifications or waivers thereof in
accordance with the terms hereof, shall survive the making of the Loans and the
issuance of the Letters of Credit herein contemplated and the execution and
delivery to the Administrative Agent of the Notes regardless of any
investigation made by the Administrative Agent, Issuing Bank or the Lenders or
on their behalf and shall continue in full force and effect so long as any
Obligation is outstanding and unpaid and so long as any Letter of Credit remains
outstanding and so long as the Commitments have not been terminated. All
statements in any such certificate or other instrument shall constitute
representations and warranties by the Credit Parties hereunder.
SECTION 13.3. Successors and Assigns; Syndications; Loan Sales;
Participations. (a) Whenever in this Credit Agreement any of the parties hereto
is referred to, such reference shall be deemed to include the successors and
assigns of such party; provided, however, that neither any Borrower nor any
other Credit Party may assign its rights hereunder without the prior written
consent of the Administrative Agent, the Issuing Bank and all of the Lenders,
and all covenants, promises and agreements by or on behalf of any of the Credit
Parties which are contained in this Credit Agreement shall inure to the benefit
of the successors and assigns of the Administrative Agent, the Issuing Bank and
the Lenders.
(b) Each of the Lenders may (but only with the prior written consent of
the Administrative Agent and the Issuing Bank, which consent shall not be
unreasonably withheld)
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assign all or a portion of its interests, rights and obligations under this
Credit Agreement (including, without limitation, all or a portion of its
Commitment and the same portion of all Loans at the time owing to it and the
Notes held by it and its obligations and rights with regard to Letters of
Credit); provided, however, that (i) each assignment shall be of a constant, and
not a varying, percentage of the assigning Lender's interests, rights and
obligations under this Credit Agreement, (ii) each assignment shall be in a
minimum Commitment amount (or at any time after the Commitment Termination Date,
minimum Loan amount) equal to 10% of the Total Commitment and (iii) the parties
to each such assignment shall execute and deliver to the Administrative Agent,
for its acceptance and recording in the Register (as defined below), an
Assignment and Acceptance, together with the assigning Lender's original Note
and a processing and recordation fee of $3,500 to be paid to the Administrative
Agent by the assigning Lender or the assignee. Upon such execution, delivery,
acceptance and recording, from and after the effective date specified in each
Assignment and Acceptance, which effective date shall not (unless otherwise
agreed to by the Administrative Agent) be earlier than five Business Days after
the date of acceptance and recording by the Administrative Agent, (x) the
assignee thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
and under the other Fundamental Documents and shall be bound by the provisions
hereof and (y) the assigning Lender thereunder shall, to the extent provided in
such Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Credit Agreement except that, notwithstanding such
assignment, any rights and remedies available to the Borrowers for any breaches
by such assigning Lender of its obligations hereunder while a Lender shall be
preserved after such assignment and such Lender shall not be relieved of any
liability to the Borrowers due to any such breach. In the case of an Assignment
and Acceptance covering all or the remaining portion of the assigning Lender's
rights and obligations under this Credit Agreement, such assigning Lender shall
cease to be a party hereto.
(c) Each Lender may at any time make an assignment of its interests,
rights and obligations under this Credit Agreement, without the consent of the
Administrative Agent, the Issuing Bank or the Credit Parties, to (i) any
Affiliate of such Lender or (ii) any other Lender hereunder; provided that after
giving effect to such assignment, the assignee's Percentage shall not exceed
20%. Any such assignment to any Affiliate of the assigning Lender or any other
Lender hereunder shall not be subject to the requirement of Section 13.3(b) that
the amount of the Commitment (or Loans if applicable) of the assigning Lender
subject to each assignment be in a minimum principal amount of 10% of the Total
Commitment and any such assignment to any Affiliate of the assigning Lender
shall not release the assigning Lender of its remaining obligations hereunder,
if any.
(d) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than the
representation and warranty that it is the legal and beneficial owner of the
interest being assigned thereby and that such interest is free and clear of any
adverse claim, the assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Credit Agreement or any other
Fundamental Document or the execution,
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legality, validity, enforceability, genuineness, sufficiency or value of the
Fundamental Documents or any other instrument or document furnished pursuant
hereto or thereto; (ii) such assignor Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of any of
the Credit Parties or the performance or observance by any of the Credit Parties
of any of their obligations under the Fundamental Documents or any other
instrument or document furnished pursuant thereto; (iii) such assignee confirms
that it has received a copy of this Credit Agreement, together with copies of
the most recent financial statements delivered pursuant to Sections 5.1(a) and
5.1(b) (if such financial statements shall have theretofore been delivered) and
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Assignment and Acceptance;
(iv) such assignee agrees that it will, independently and without reliance upon
the assigning Lender, the Administrative Agent, the Issuing Bank or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Credit Agreement or any other Fundamental Document; (v) such
assignee appoints and authorizes the Administrative Agent and the Issuing Bank
to take such action as the agent on its behalf and to exercise such powers under
this Credit Agreement as are delegated to the Administrative Agent or the
Issuing Bank by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vi) such assignee agrees that it will be bound by the
provisions of this Credit Agreement and will perform in accordance with their
terms all of the obligations which by the terms of this Credit Agreement are
required to be performed by it as a Lender.
(e) The Administrative Agent shall maintain at its address at which
notices are to be given to it pursuant to Section 13.1 a copy of each Assignment
and Acceptance and a register for the recordation of the names and addresses of
the Lenders and the Commitments of, and principal amount of the Loans owing to,
each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive, in the absence of manifest error, and the Credit Parties,
the Administrative Agent, the Issuing Bank and the Lenders may treat each Person
whose name is recorded in the Register as a Lender hereunder for all purposes of
the Fundamental Documents. The Register shall be available for inspection by any
Credit Party or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(f) Subject to the foregoing, upon its receipt of an Assignment and
Acceptance executed by an assigning Lender and an assignee together with the
assigning Lender's original Note and the processing and recordation fee, the
Administrative Agent shall, if such Assignment and Acceptance has been completed
and is in the form of Exhibit L hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt written notice thereof to the Parent. Within five (5) Business
Days after receipt of the notice, the Borrowers, at their own expense, shall
execute and deliver to the Administrative Agent, in exchange for the surrendered
Note, a new Note to the order of such assignee in an amount equal to the
Commitment assumed by it pursuant to such Assignment and Acceptance and if the
assigning Lender has retained a Commitment hereunder a new Note to the order of
the assigning Lender in an amount equal to the Commitment retained by it
hereunder. Such new Notes shall be in an aggregate principal amount equal to the
aggregate principal amount of the surrendered Note and shall otherwise be in
substantially the form of Exhibit A
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hereto. In addition the Credit Parties will promptly, at their own expense,
execute such amendments to the Fundamental Documents to which each is a party
and such additional documents, and take such other actions as the Administrative
Agent or the assignee Lender may reasonably request in order to give such
assignee Lender the full benefit of the Liens contemplated by the Fundamental
Documents.
(g) Each of the Lenders may, without the consent of any of the Credit
Parties or the Administrative Agent or the other Lenders, sell participations to
one or more banks or other entities in all or a portion of its rights and
obligations under this Credit Agreement (including, without limitation, all or a
portion of its Commitment and the Loans owing to it and the Note held by it and
its participation in Letters of Credit); provided, however, that (i) any such
Lender's obligations under this Credit Agreement shall remain unchanged, (ii)
such participant shall not be granted any voting rights or any right to control
the vote of such Lender under this Credit Agreement, except with respect to
proposed changes to interest rates applicable to its participation, the amount
of its participation in the Commitments, final maturity of its participation in
any Loan, releases of all or substantially all the Collateral and fees (as
applicable to such participant), (iii) any such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iv) the participating banks or other entities shall be entitled to the cost
protection provisions contained in Sections 2.3(g), 2.10, 2.11 and 2.12 hereof
but a participant shall not be entitled to receive pursuant to such provisions
an amount larger than its share of the amount to which the Lender granting such
participation would have been entitled to receive and (v) the Credit Parties,
the Administrative Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's and its participants'
rights and obligations under this Credit Agreement.
(h) A Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section 13.3, disclose to
the assignee or participant or proposed assignee or participant, any information
relating to any of the Credit Parties furnished to the Administrative Agent or
such Lender by or on behalf of the Borrowers; provided that prior to any such
disclosure, each such assignee or participant or proposed assignee or
participant shall agree in writing, to preserve the confidentiality of any
confidential information relating to any of the Credit Parties received from
such Lender.
(i) Any assignment pursuant to paragraph (b) or (c) of this Section 13.3
shall constitute an amendment of the Schedule of Commitments as of the effective
date of such assignment.
(j) The Credit Parties consents that any Lender may at any time and from
time to time pledge or otherwise grant a security interest in any Loan or in any
Note evidencing the Loans (or any part thereof) to any Federal Reserve Bank.
SECTION 13.4. Expenses; Documentary Taxes. Whether or not the
transactions hereby contemplated shall be consummated, the Borrower agrees to
pay (a) all reasonable out-of-pocket expenses incurred by the Administrative
Agent or Chase Securities Inc. in connection with, or growing out of, the
performance of due diligence, the syndication of the
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credit facility contemplated hereby, the negotiation, preparation, execution,
delivery, waiver or modification and administration of this Credit Agreement and
any other documentation contemplated hereby, the making of the Loans and the
issuance of the Letters of Credit, the Collateral, the Pledged Securities, any
Fundamental Document or any Completion Bond for an item of Product, including
but not limited to, the reasonable out-of-pocket costs and internally allocated
charges of audit or field examinations of the Administrative Agent in connection
with the administration of this Credit Agreement, the verification of financial
data and the transactions contemplated hereby, and the reasonable fees and
disbursements of Morgan, Lewis & Bockius LLP, counsel for the Administrative
Agent and the Issuing Bank and any other counsel that the Administrative Agent
or the Issuing Bank shall retain, and (b) all reasonable out-of-pocket expenses
incurred by the Administrative Agent or the Issuing Bank in the enforcement or
protection (as distinguished from administration) of the rights and remedies of
the Issuing Bank or the Lenders in connection with this Credit Agreement, the
other Fundamental Documents, the Letters of Credit or the Notes, or as a result
of any transaction, action or non-action arising from any of the foregoing,
including but not limited to, the reasonable fees and disbursements of any
counsel for the Administrative Agent or the Issuing Bank. Such payments shall be
made on the date this Credit Agreement is executed by the Borrower and
thereafter on demand. The Borrower agrees that it shall indemnify the
Administrative Agent, the Issuing Bank and the Lenders from and hold them
harmless against any documentary taxes, assessments or charges made by any
Governmental Authority by reason of the execution and delivery of this Credit
Agreement or the Notes or the issuance of the Letters of Credit. The obligations
of the Borrower under this Section shall survive the termination of this Credit
Agreement, the payment of the Loans and/or the expiration of any Letter of
Credit.
SECTION 13.5. Indemnity. The Credit Parties agree (a) to indemnify and
hold harmless the Administrative Agent and the Lenders and their respective
directors, officers, employees and agents and, in addition, in connection with
matters relating to a Letter of Credit, the Issuing Bank and its directors,
officers, employees and agents (each an "Indemnified Party") (to the full extent
permitted by Applicable Law) from and against any and all claims, demands,
losses, judgments, damages and liabilities (including liabilities for penalties)
incurred by any of them as a result of, or arising out of, or in any way related
to, or by reason of, any investigation, litigation or other proceeding (whether
or not any Lender or the Administrative Agent is a party thereto) related to the
entering into and/or performance of any Fundamental Document or the use of the
proceeds of any Loans hereunder or the issuance of any Letter of Credit or the
consummation of any other transaction contemplated in any Fundamental Document,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation, litigation or other
proceeding (but excluding any such losses, liabilities, claims, damages or
expenses of an Indemnified Party (i) to the extent incurred by reason of the
gross negligence or willful misconduct of such Indemnified Party and (ii)
arising out of or resulting from litigation among Indemnified Parties in
connection with the Fundamental Documents or in any way related to the
transactions contemplated hereby to which litigation the Parent is not a party).
If any proceeding, including any governmental investigation, shall be instituted
involving any Indemnified Party, in respect of which indemnity may be sought
against the Credit Parties, such Indemnified Party shall promptly notify the
Parent in writing, and the Parent shall assume the defense thereof on behalf of
such Indemnified Party including the
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employment of counsel (reasonably satisfactory to such Indemnified Party) and
payment of all reasonable expenses. Any Indemnified Party shall have the right
to employ separate counsel in any such proceeding and participate in the defense
thereof, but the fees and expenses of such separate counsel shall be at the
expense of such Indemnified Party unless (i) the employment of such separate
counsel has been specifically authorized by the Parent or (ii) the named parties
to any such action (including any impleaded parties) include such Indemnified
Party and the Parent and such Indemnified Party shall have been advised by
counsel to the Administrative Agent that there may be one or more legal defenses
available to such Indemnified Party which are different from or in additional to
those available to the Parent (in which case the Parent shall not have the right
to assume the defense of such action on behalf of such Indemnified Party). At
any time after the Parent has assumed the defense of any proceeding involving
any Indemnified Party in respect of which indemnity has been sought against the
Parent, such Indemnified Party may elect, by written notice to the Parent, to
withdraw its request for indemnity and thereafter the defense of such proceeding
shall be maintained by counsel of the Indemnified Party's choosing and at the
Indemnified Party's expense. The foregoing indemnity agreement includes any
reasonable costs incurred by an Indemnified Party in connection with any action
or proceeding which may be instituted in respect of the foregoing by the
Administrative Agent or the Issuing Bank or by any other Person either against
the Administrative Agent, the Issuing Bank or the Lenders or in connection with
which any officer or employee of the Administrative Agent, the Issuing Bank or
the Lenders is called as a witness or deponent, including, but not limited to,
the reasonable fees and disbursements of Morgan, Lewis & Bockius LLP, counsel to
the Administrative Agent and any out-of-pocket costs incurred by the
Administrative Agent, the Issuing Bank or the Lenders in appearing as a witness
or in otherwise complying with legal process served upon them. The obligations
of the Parent under this Section 13.5 shall survive the termination of this
Credit Agreement, payment of the Loans and/or the expiration or termination of
any L/C Exposure and shall inure to the benefit of any Person who was a Lender
notwithstanding such Person's assignment of all its Loans and Commitment
hereunder.
If a Credit Party shall fail to do any act or thing which it has
covenanted to do hereunder, under a Fundamental Document or a Completion Bond
for an item of Product, or any representation or warranty of a Credit Party
shall be breached, the Administrative Agent may (but shall not be obligated to)
do the same or cause it to be done or remedy any such breach and there shall be
added to the Obligations hereunder the cost or expense incurred by the
Administrative Agent in so doing, and any and all amounts expended by the
Administrative Agent in taking any such action shall be repayable to it upon its
demand therefor and shall bear interest at a rate per annum of 2% in excess of
the rate then in effect for Alternate Base Rate Loans from time to time in
effect from the date advanced to the date of repayment.
SECTION 13.6. CHOICE OF LAW. THIS CREDIT AGREEMENT AND THE NOTES SHALL IN
ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE
STATE OF NEW YORK WHICH ARE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED
WHOLLY WITHIN SUCH STATE AND, IN THE CASE OF PROVISIONS RELATING TO INTEREST
RATES, ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. EACH LETTER OF CREDIT
SHALL BE GOVERNED BY, AND SHALL
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<PAGE> 110
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN
SUCH LETTER OF CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM
CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS, INTERNATIONAL CHAMBER OF COMMERCE
PUBLICATION NO. 500 AS ADOPTED OR AMENDED FROM TIME TO TIME (THE "UNIFORM
CUSTOMS") AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF
THE STATE OF NEW YORK.
SECTION 13.7. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY
APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES, AND
COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR
OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
CREDIT AGREEMENT, THE SUBJECT MATTER HEREOF, ANY OTHER FUNDAMENTAL DOCUMENT OR
THE SUBJECT MATTER THEREOF, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE. EACH PARTY HERETO
ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER PARTIES HERETO THAT THE
PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH SUCH
OTHER PARTIES HAVE RELIED, ARE RELYING AND WILL RELY IN ENTERING INTO THIS
CREDIT AGREEMENT AND ANY OTHER FUNDAMENTAL DOCUMENT. ANY PARTY MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 13.7 WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF ANY OTHER PARTY TO THE WAIVER OF ITS RIGHTS TO TRIAL
BY JURY.
SECTION 13.8. WAIVER WITH RESPECT TO DAMAGES. EACH CREDIT PARTY
ACKNOWLEDGES THAT NEITHER THE ADMINISTRATIVE AGENT, THE ISSUING BANK NOR ANY
LENDER HAS ANY FIDUCIARY RELATIONSHIP WITH, OR FIDUCIARY DUTY TO, ANY CREDIT
PARTY ARISING OUT OF OR IN CONNECTION WITH THIS CREDIT AGREEMENT OR ANY OTHER
FUNDAMENTAL DOCUMENT AND THE RELATIONSHIP BETWEEN THE ADMINISTRATIVE AGENT, THE
ISSUING BANK AND THE LENDERS, ON THE ONE HAND, AND THE CREDIT PARTIES, ON THE
OTHER HAND, IN CONNECTION THEREWITH IS SOLELY THAT OF DEBTOR AND CREDITOR. TO
THE EXTENT PERMITTED BY APPLICABLE LAW, NO CREDIT PARTY SHALL ASSERT, AND EACH
CREDIT PARTY HEREBY WAIVES, ANY CLAIMS AGAINST THE ADMINISTRATIVE AGENT, THE
ISSUING BANK AND THE LENDERS ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT,
CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES)
ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF, THIS CREDIT AGREEMENT,
ANY FUNDAMENTAL DOCUMENT, ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR
THEREBY, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
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<PAGE> 111
SECTION 13.9. No Waiver. No failure on the part of the Administrative
Agent or any Lender or the Issuing Bank to exercise, and no delay in exercising,
any right, power or remedy hereunder, under the Notes or any other Fundamental
Document or with regard to any Letter of Credit shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. All remedies hereunder are cumulative and are not
exclusive of any other remedies provided by law.
SECTION 13.10. Extension of Payment Date. Except as otherwise
specifically provided in Article 2 hereof, should any payment or prepayment of
principal of or interest on the Notes or any other amount due hereunder, become
due and payable on a day other than a Business Day, the due date of such payment
or prepayment shall be extended to the next succeeding Business Day and, in the
case of a payment or prepayment of principal, interest shall be payable thereon
at the rate herein specified during such extension.
SECTION 13.11. Amendments, etc. No modification, amendment or waiver of
any provision of this Credit Agreement or any other Fundamental Document, and no
consent to any departure by a Credit Party herefrom or therefrom, shall in any
event be effective unless the same shall be in writing and signed by the
Required Lenders and acknowledged and agreed to by the Parent and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no such modification,
amendment, waiver or consent shall, without the written consent of (a) each
affected Lender, (i) change the Commitment of such Lender, (ii) reduce the
interest payable on such Lender's Loans, (iii) reduce the rate at which the
Commitment Fees are payable to such Lender or (iv) reduce the fees payable to
such Lender with respect to Letters of Credit issued hereunder as set forth in
Section 2.3(f), (i) and (ii) and (b) all Lenders, (i) amend or modify any
provision of this Credit Agreement which provides for the unanimous consent or
approval of the Lenders, (ii) release any material amount of Collateral or any
of the Pledged Securities (except as contemplated herein) or release any
Guarantor from its obligations hereunder (except as contemplated herein), (iii)
alter the final scheduled maturity or principal amount of any Loan, (iv)
subordinate the Obligations hereunder to other Indebtedness or subordinate the
security interests of the Administrative Agent in the Collateral except as
permitted by Section 12.1, (v) amend the definition of "Required Lenders", (vi)
materially amend the definition of "Borrowing Base" or any of the defined terms
used therein (except as contemplated by Section 2.15 hereof), (vii) materially
amend the definition of "Collateral", or (viii) amend or modify this Section
13.11. No such modification, amendment, waiver or consent shall amend Section
2.3 hereof without the written consent of the Administrative Agent and the
Issuing Bank. No such amendment or modification may adversely affect the rights
and obligations of the Administrative Agent hereunder without its prior written
consent or the rights and obligations of the Issuing Bank without its prior
written consent. No notice to or demand on any of the Credit Parties shall
entitle such Credit Party to any other or further notice or demand in the same,
similar or other circumstances. Each holder of a Note shall be bound by any
amendment, modification, waiver or consent authorized as provided herein,
whether or not such Note shall have been marked to indicate such amendment,
modification, waiver or consent and any consent by any holder of such Note shall
bind any Person subsequently acquiring such Note, whether or not such Note is so
marked.
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<PAGE> 112
SECTION 13.12. Severability. Any provision of this Credit Agreement or of
the Notes which is invalid, illegal or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such invalidity,
illegality or unenforceability without invalidating the remaining provisions
hereof, and any such invalidity, illegality or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 13.13. SERVICE OF PROCESS. EACH PARTY HERETO (EACH A "SUBMITTING
PARTY") HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATE COURTS OF
THE STATE OF NEW YORK IN NEW YORK COUNTY AND TO THE JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, FOR THE PURPOSES OF
ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS CREDIT
AGREEMENT (INCLUDING, BUT NOT LIMITED TO, THE LETTERS OF CREDIT), THE SUBJECT
MATTER HEREOF, ANY OTHER FUNDAMENTAL DOCUMENT AND THE SUBJECT MATTER THEREOF.
EACH SUBMITTING PARTY TO THE EXTENT PERMITTED BY APPLICABLE LAW (A) HEREBY
WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE,
IN ANY SUCH SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN THE ABOVE-NAMED COURTS,
ANY CLAIM THAT IT IS NOT SUBJECT PERSONALLY TO THE JURISDICTION OF SUCH COURTS,
THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE
SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE
OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THIS CREDIT AGREEMENT, THE
SUBJECT MATTER HEREOF, THE OTHER FUNDAMENTAL DOCUMENT OR THE SUBJECT MATTER
THEREOF (AS APPLICABLE) MAY NOT BE ENFORCED IN OR BY SUCH COURT, (B) HEREBY
WAIVES THE RIGHT TO REMOVE ANY SUCH ACTION, SUIT OR PROCEEDING INSTITUTED BY THE
ADMINISTRATIVE AGENT, THE ISSUING BANK OR A LENDER IN STATE COURT TO FEDERAL
COURT OR TO REMAND TO STATE COURT ANY SUCH ACTION, SUIT OR PROCEEDING INSTITUTED
BY THE ADMINISTRATIVE AGENT, THE ISSUING BANK OR A LENDER IN FEDERAL COURT, AND
(C) HEREBY WAIVES THE RIGHT TO ASSERT IN ANY SUCH ACTION, SUIT OR PROCEEDING ANY
OFFSETS OR COUNTERCLAIMS EXCEPT COUNTERCLAIMS THAT ARISE OUT OF THE SUBJECT
MATTER HEREOF. EACH CREDIT PARTY HEREBY AGREES THAT THE PROCESS BY WHICH ANY
SUIT, ACTION OR PROCEEDING IS BEGUN MAY BE SERVED ON IT BY BEING DELIVERED TO
LEXIS DOCUMENT SERVICES, INC. AT 41 STATE STREET, SUITE 608, ALBANY, NEW YORK,
12207. EACH CREDIT PARTY HEREBY CONSENTS TO SERVICE OF PROCESS BY MAIL, TO THE
PERSON AND AT THE ADDRESS SET FORTH IN THIS SECTION 13.13. NOTHING HEREIN SHALL
AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. EACH
SUBMITTING PARTY AGREES THAT ITS SUBMISSION TO JURISDICTION AND CONSENT TO
SERVICE OF PROCESS IN ACCORDANCE WITH THE PROVISIONS HEREOF IS MADE FOR THE
EXPRESS BENEFIT OF EACH OF THE OTHER SUBMITTING PARTIES. FINAL JUDGMENT AGAINST
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<PAGE> 113
ANY SUBMITTING PARTY IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE,
AND MAY BE ENFORCED IN ANY OTHER JURISDICTION (X) BY SUIT, ACTION OR PROCEEDING
ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE
OF THE FACT AND OF THE AMOUNT OF INDEBTEDNESS OR LIABILITY OF THE SUBMITTING
PARTY THEREIN DESCRIBED OR (Y) IN ANY OTHER MANNER PROVIDED BY OR PURSUANT TO
THE LAWS OF SUCH OTHER JURISDICTION, PROVIDED, HOWEVER, THAT THE ADMINISTRATIVE
AGENT, THE ISSUING BANK OR A LENDER MAY AT ITS OPTION BRING SUIT, OR INSTITUTE
OTHER JUDICIAL PROCEEDINGS AGAINST A SUBMITTING PARTY OR ANY OF ITS ASSETS IN
ANY STATE OR FEDERAL COURT OF THE UNITED STATES OR OF ANY COUNTRY OR PLACE WHERE
THE SUBMITTING PARTY OR SUCH ASSETS MAY BE FOUND.
SECTION 13.14. Headings. Section headings used herein and the Table of
Contents are for convenience only and are not to affect the construction of or
be taken into consideration in interpreting this Credit Agreement.
SECTION 13.15. Execution in Counterparts. This Credit Agreement may be
executed in any number of counterparts, each of which shall constitute an
original, but all of which taken together shall constitute one and the same
instrument.
SECTION 13.16. Joint and Several Liability of the Borrowers. Unless
otherwise specifically provided for herein, the Borrowers are and will be
jointly and severally liable for each and every representation, covenant and
obligation to be performed by the Borrowers under this Agreement, the Notes and
the other Fundamental Documents and the invalidity, unenforceability or
illegality of this Agreement and/or the Notes and/or the release by the Lenders
of any Borrower hereunder and/or under the Notes and/or any other Fundamental
Document will not affect the obligations of any other Borrower under this
Agreement and/or the Notes and/or any other Fundamental Document which will
otherwise remain valid and legally binding obligations of the other Borrowers.
Each of the Borrowers hereby covenants and agrees that (i) it will not enforce
or otherwise exercise any rights of reimbursement, subrogation, contribution or
other similar rights with respect to the Obligations against any Person,
including without limitation any other Borrower, prior to the payment in full of
the Obligations, (ii) that it shall not be subrogated to the rights of the
Lenders or any other Borrower in whole or in part, prior to payment in full of
the monetary Obligations and (iii) so long as there shall exist any Event of
Default, all Indebtedness, claims and liabilities now or hereafter owing by a
Borrower to any other Borrower or, if by law any Borrower is subrogated to the
rights of the Lenders or any other Borrower, such rights are hereby subordinated
to the prior payment in full of the Obligations and are so subordinated as a
claim against such Borrower or any of its assets, whether such claim be in the
ordinary course of business or in the event of voluntary or involuntary
liquidation, dissolution, insolvency or bankruptcy, so that no payment with
respect to any such Indebtedness, claim or liability will be made or received
while any of the Obligations are outstanding.
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<PAGE> 114
SECTION 13.17. Subordination of Intercompany Indebtedness, Receivables
and Advances. (a) Each Credit Party hereby agrees that any intercompany
Indebtedness or other intercompany receivables or intercompany advances of any
other Credit Party, directly or indirectly, in favor of such Credit Party of
whatever nature at any time outstanding shall be completely subordinate in right
of payment to the prior payment in full of the Obligations, and that no payment
on any such Indebtedness, receivable or advance shall be made (i) except
intercompany receivables and intercompany advances permitted pursuant to the
terms hereof may be repaid and intercompany Indebtedness permitted pursuant to
the terms hereof may be repaid, in each case so long as no Default or Event of
Default, shall have occurred and be continuing and (ii) except as specifically
consented to by all the Lenders in writing, until the prior payment in full of
all the Obligations and termination of the Commitments.
(b) In the event that any payment on any such Indebtedness shall be
received by such Credit Party other than as permitted by Section 13.16(a) before
payment in full of all Obligations and termination of the Commitments, such
Credit Party shall receive such payments and hold the same in trust for,
segregate the same from its own assets and shall immediately pay over to, the
Administrative Agent on behalf of itself, the Issuing Bank and the Lenders all
such sums to the extent necessary so that the Administrative Agent, the Issuing
Bank and the Lenders shall have been paid all Obligations owed or which may
become owing.
SECTION 13.18. Entire Agreement. This Credit Agreement (including the
Exhibits and Schedules hereto) represents the entire agreement of the parties
with regard to the subject matter hereof and the terms of any letters and other
documentation entered into between any of the parties hereto (other than the Fee
Letter) prior to the execution of this Credit Agreement which relate to Loans to
be made or the Letters of Credit to be issued hereunder shall be replaced by the
terms of this Credit Agreement.
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<PAGE> 115
Credit Agreement IN WITNESS WHEREOF, the parties hereto have caused this
Credit Agreement to be duly executed as of the day and the year first written.
BORROWERS:
THE HARVEY ENTERTAINMENT COMPANY
By /s/ Roger A. Burlage
------------------------------------
Name:
Title:
HARVEY COMICS, INC.
By /s/ Roger A. Burlage
------------------------------------
Name:
Title:
PEPIN/MERHI ENTERTAINMENT GROUP, INC.
By /s/ Roger A. Burlage
------------------------------------
Name:
Title:
GUARANTORS:
BABY HUEY PRODUCTIONS, INC.
By /s/ Susan Woo
------------------------------------
Name: Susan Woo
Title: Secretary
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<PAGE> 116
PEPIN/MERHI ENTERTAINMENT GROUP
FSC, LTD.
By /s/ Glenn Weisberger
------------------------------------
Name: Glenn Weisberger
Title: Secretary
SHADOW HILLS POST, LLC
By /s/ Glenn Weisberger
------------------------------------
Name: Glenn Weisberger
Title: on behalf of its Sole Member,
The Harvey Entertainment
Company
LENDERS:
THE CHASE MANHATTAN BANK,
individually and as Administrative Agent
By /s/ Edmond DeForest
------------------------------------
Name: Edmond DeForest
Title: Vice President
Address: 270 Park Avenue, 37th Floor
New York, NY 10017
Attention: Joan Fitzgibbon
Facsimile: (212) 270-4164
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<PAGE> 117
Exhibits*
---------
Description Exhibit
- ----------- -------
Form of Note A
Form of Opinion of Sidley & Austin, counsel to Borrower B
Form of Copyright Security Agreement C-1
Form of Copyright Security Agreement Supplement C-2
Form of Laboratory Access Letter D
Form of Pledgeholder Agreement (Uncompleted Picture) E-1
Form of Pledgeholder Agreement (Completed Picture) E-2
Form of Trademark Security Agreement F
Form of Contribution Agreement G
Form of Borrowing Certificate H
Form of Borrowing Base Certificate I
Form of Assignment and Acceptance J
Form of Notice of Assignment and Irrevocable Instructions K
Form of Instrument of Assumption and Joinder L
Schedules
---------
Description* Schedule
- ----------- --------
Schedule of Commitments 1
Acceptable Obligors/Allowable Amounts 2
List of Jurisdictions 3.1(A)
Ownership of Pledged Securities, Subsidiaries 3.7
Items of Product 3.8(A)
Trademarks, Material Licenses, Material Agreements 3.8(B)
Fictitious Names 3.9
Chief Executive Office, Location of Collateral and Records 3.11
Litigation 3.12
Agreements 3.17
Filing Offices for UCC-1 Financing Statements 3.18
Existing Liens 6.2
Existing Investments 6.4
Bank Accounts 6.22
Additional Agreements 7.1
* The Schedules and Exhibits are omitted from this filing. The Company agrees
to furnish supplementally a copy of any Schedule or Exhibit to the Commission
upon request.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000904350
<NAME> THE HARVEY ENTERTAINMENT COMPANY
<MULTIPLIER> 1,000
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1.00
<CASH> 2,167
<SECURITIES> 1,846
<RECEIVABLES> 977
<ALLOWANCES> 287
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,282
<DEPRECIATION> 793
<TOTAL-ASSETS> 21,520
<CURRENT-LIABILITIES> 0
<BONDS> 0
16,725
0
<COMMON> 22,268
<OTHER-SE> (19,654)
<TOTAL-LIABILITY-AND-EQUITY> 21,520
<SALES> 882
<TOTAL-REVENUES> 882
<CGS> 0
<TOTAL-COSTS> 206
<OTHER-EXPENSES> 1,276
<LOSS-PROVISION> 60
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (536)
<INCOME-TAX> 0
<INCOME-CONTINUING> (536)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (536)
<EPS-BASIC> (.21)
<EPS-DILUTED> (.21)
</TABLE>
