| (a) |
The
account has resulted from the sale of goods or the performance of
services
by the Borrower in the ordinary course of the Borrower’s business and
without any further obligation on the part of the Borrower to service,
repair, or maintain any such goods sold other than pursuant to any
applicable warranty.
|
| (b) |
There
are no conditions which must be satisfied before the Borrower is
entitled
to receive payment of the account. Accounts arising from COD sales,
consignments or guaranteed sales are not
acceptable.
|
| (c) |
The
debtor upon the account does not claim any defense to payment of
the
account, whether well founded or
otherwise.
|
| (d) |
The
account is not the obligation of an account debtor who has asserted
or may
assert any counterclaims or offsets against the Borrower (including
offsets for any “contra accounts” owned by the Borrower to the account
debtor for goods purchased by the Borrower or for services performed
for
the Borrower).
|
| (e) |
The
account represents a genuine obligation of the debtor for goods sold
to
and accepted by the debtor, or for services performed for and accepted
by
the debtor. To the extent any credit balances exist in favor of the
debtor, such credit balances shall be deducted from the account
balance.
|
| (f) |
The
account balance does not include the amount of any finance or service
charges payable by the account debtor. To the extent any finance
charges
or service charges are included, such amounts shall be deducted from
the
account balance.
|
| (g) |
The
Borrower has sent an invoice to the debtor in the amount of the
account.
|
| (h) |
The
Borrower is not prohibited by the laws of the state where the account
debtor is located from bringing an action in the courts of that state
to
enforce the debtor’s obligation to pay the account. The Borrower has taken
all appropriate actions to ensure access to the courts of the state
where
the account debtor is located, including, where necessary, the filing
of a
Notice of Business Activities Report or other similar filing with
the
applicable state agency or the qualification by the Borrower as a
foreign
corporation authorized to transact business in such
state.
|
| (i) |
The
account is owned by the Borrower free of any title defects or any
liens or
interests of others except the security interest in favor of the
Bank.
|
| (j) |
The
debtor upon the account is not any of the
following:
|
| (i) |
An
employee, affiliate, parent or subsidiary of the Borrower, or an
entity
which has common officers or directors with the
Borrower.
|
| (ii) |
The
U.S. government or any agency of department of the U.S. government
unless
the Bank agrees in writing to accept the obligation, the Borrower
complies
with the procedures in the Federal Assignment of Claims Act of 1940
(41 U.S.C. § 15) with respect to the obligation, and the
underlying contract expressly provides that neither the U.S. government
nor any agency or department thereof shall have the right of set-off
against the Borrower.
|
| (iii) |
Any
state, county, city or town or
municipality.
|
| (iv) |
Any
person or entity located in a foreign
country.
|
| (k) |
The
account is not in default. An account will be considered in default
if any
of the following occur:
|
| (l) |
The
account is not paid within 90 days from its invoice date or
60 days from its due date, whichever occurs first, provided
that, so long as NewsCorp maintains a credit rating of not lower
than BBB
by Standard & Poors, accounts in an aggregate amount at any time of up
to Five Hundred Thousand Dollars ($500,000) owed to the Borrower by
20th
Century Fox may be outstanding for up to 120 days from their invoice
date
or 90 days from their due date, whichever occurs
first;
|
| (i) |
the
debtor obligated upon the account suspends business, makes a general
assignment for the benefit of creditors, or fails to pay its debts
generally as they come due; or
|
| (ii) |
any
petition is filed by or against the debtor obligated upon the account
under any bankruptcy law or any other law or laws for the relief
of
debtors.
|
| (iii) |
The
account is not the obligation of a debtor who is in default (as defined
above) on 50% or more of the accounts upon which such debtor is
obligated.
|
| (m) |
The
account does not arise from the sale of goods which remain in the
Borrower’s possession or under the Borrower’s
control.
|
| (n) |
The
account is not evidenced by a promissory note or chattel paper, nor
is the
account debtor obligated to the Borrower under any other obligation
which
is evidenced by a promissory note.
|
| (o) |
The
account is otherwise acceptable to the
Bank.
|
| (a) |
During
the availability period described below, the Bank will provide a
line of
credit (the “Facility”) to the Borrower. The amount of the Facility (the
“Facility Commitment”) is equal to the lesser of (i) the Credit Limit
or (ii) the Borrowing Base as determined by the Bank from time to
time in accordance with this
Agreement.
|
| (b) |
The
Facility is a revolving line of credit. During the availability period,
the Borrower may repay principal amounts and reborrow
them.
|
| (c) |
The
Borrower agrees not to permit the principal balance outstanding to
exceed
the Facility Commitment. If the Borrower exceeds this limit, the
Borrower
will immediately pay the excess to the Bank upon the Bank’s
demand.
|
| (a) |
A
borrowing certificate, in form and detail satisfactory to the Bank,
setting forth the Acceptable Receivables on which the requested extension
of credit is to be based.
|
| (b) |
Copies
of the invoices or the record of invoices from the Borrower’s sales
journal for such Acceptable Receivables and a listing of the names
and
addresses of the debtors obligated
thereunder.
|
| (c) |
Copies
of the delivery receipts, purchase orders, shipping instructions,
bills of
lading and other documentation pertaining to such Acceptable
Receivables.
|
| (d) |
Copies
of the cash receipts journal pertaining to the borrowing
certificate.
|
| (a) |
The
Borrower will pay interest on September 1, 2007, and then on the
first day
of each month thereafter until payment in full of any principal
outstanding under the Facility.
|
| (b) |
The
Borrower will repay in full any principal, interest or other charges
outstanding under the Facility no later than the Facility Expiration
Date.
|
| (c) |
Any
interest period for an optional interest rate (as described below)
shall
expire no later than the Facility Expiration
Date.
|
| (a) |
The
interest rate is a rate per year equal to the Bank’s Prime Rate plus the
Applicable Margin as defined below.
|
| (b) |
The
Prime Rate is the rate of interest publicly announced from time to
time by
the Bank as its Prime Rate. The Prime Rate is set by the Bank based
on
various factors, including the Bank’s costs and desired return, general
economic conditions and other factors, and is used as a reference
point
for pricing some loans. The Bank may price loans to its customers
at,
above, or below the Prime Rate. Any change in the Prime Rate shall
take
effect at the opening of business on the day specified in the public
announcement of a change in the Bank’s Prime
Rate.
|
|
Applicable
Margin
(in
percentage points per annum)
|
|||
|
Pricing
Level
|
Fixed
Charge Coverage Ratio
|
Prime
Rate +
|
LIBOR
RATE +
|
|
1
|
<
1.15x
|
0.00
|
2.50
|
|
2
|
<
1.25x
|
(0.25)
|
2.25
|
|
3
|
<
1.35x
|
(0.50)
|
2.00
|
|
4
|
<
1.50x
|
(0.75)
|
1.75
|
|
5
|
>
1.50x
|
(1.00)
|
1.50
|
| (a) |
During
the availability period, at the request of the Borrower, the Bank
will
issue standby letters of credit with a maximum maturity of 365 days
but
not to extend beyond the Facility Expiration Date. The standby letters
of
credit may include a provision providing that the maturity date will
be
automatically extended each year for an additional year unless the
Bank
gives written notice to the contrary; provided, however, that each
standby
letter of credit must include a final maturity date of not later
than one
hundred eighty (180) days after the Facility Expiration Date and
which
will not be subject to automatic
extension.
|
| (b) |
The
amount of the standby letters of credit outstanding at any one time
(including the drawn and unreimbursed amounts of the standby letters
of
credit) may not exceed One Million Dollars
($1,000,000).
|
| (c) |
In
calculating the principal amount outstanding under the Facility
Commitment, the calculation shall include the amount of any
standby letters of credit outstanding, including amounts drawn on
any
standby letters of credit and not yet
reimbursed.
|
| (d) |
The
Borrower agrees:
|
| (i) |
Any
sum drawn under a standby letter of credit may, at the option of
the Bank,
be added to the principal amount outstanding under this Agreement.
The
amount will bear interest and be due as described elsewhere in this
Agreement.
|
| (ii) |
If
there is a default under this Agreement, to immediately prepay and
make
the Bank whole for any outstanding standby letters of
credit.
|
| (iii) |
The
issuance of any standby letter of credit and any amendment to a standby
letter of credit is subject to the Bank’s written approval and must be in
form and content satisfactory to the Bank and in favor of a beneficiary
acceptable to the Bank.
|
| (iv) |
To
sign the Bank’s form Application and Agreement for Standby Letter of
Credit.
|
| (v) |
To
pay any issuance and/or other fees that the Bank notifies the Borrower
will be charged for issuing and processing standby letters of credit
for
the Borrower.
|
| (vi) |
To
allow the Bank to automatically charge its checking account for applicable
fees, discounts, and other charges.
|
| (vii) |
To
pay the Bank a non-refundable fee equal to one and one-half percent
(1.5%)
per annum of the outstanding undrawn amount of each standby letter
of
credit, payable annually in advance, calculated on the basis of the
face
amount outstanding on the day the fee is calculated. If there is
a default
under this Agreement, at the Bank’s option, the amount of the fee shall be
increased to six percent (6%) per annum, effective starting on the
day the
Bank provides notice of the increase to the
Borrower.
|
| (a) |
The
interest period during which the LIBOR Rate will be in effect will
be 30,
60 or 90 days or one year. The first day of the interest period must
be a
day other than a Saturday or a Sunday on which banks are open for
business
in New York and London and dealing in offshore dollars (a “LIBOR Banking
Day”). The last day of the interest period and the actual number of days
during the interest period will be determined by the Bank using the
practices of the London inter-bank
market.
|
| (b) |
Each
LIBOR Rate Portion will be for an amount not less than Five Hundred
Thousand Dollars ($500,000).
|
| (c) |
The
“LIBOR Rate” means the interest rate determined by the following formula.
(All amounts in the calculation will be determined by the Bank as
of the
first day of the interest period.)
|
| (i) |
“London
Inter-Bank Offered Rate” means, for any applicable interest period, the
rate per annum equal to the British Bankers Association LIBOR Rate
(“BBA
LIBOR”), as published by Reuters (or other commercially available source
providing quotations of BBA LIBOR as selected by the Bank from time
to
time) at approximately 11:00 a.m. London time two (2) London Banking
Days
before the commencement of the interest period, for U.S. Dollar deposits
(for delivery on the first day of such interest period) with a term
equivalent to such interest period. If such rate is not available
at such
time for any reason, then the rate for that interest period will
be
determined by such alternate method as reasonably selected by the
Bank. A
“London Banking Day” is a day on which banks in London are open for
business and dealing in offshore
dollars.
|
| (ii) |
“Reserve
Percentage” means the total of the maximum reserve percentages for
determining the reserves to be maintained by member banks of the
Federal
Reserve System for Eurocurrency Liabilities, as defined in Federal
Reserve
Board Regulation D, rounded upward to the nearest 1/100 of one percent.
The percentage will be expressed as a decimal, and will include,
but not
be limited to, marginal, emergency, supplemental, special, and other
reserve percentages.
|
| (d) |
The
Borrower shall irrevocably request a LIBOR Rate Portion no later
than
12:00 noon Pacific time on the LIBOR Banking Day preceding the day
on
which the London Inter-Bank Offered Rate will be set, as specified
above.
For example, if there are no intervening holidays or weekend days
in any
of the relevant locations, the request must be made at least three
days
before the LIBOR Rate takes effect.
|
| (e) |
The
Bank will have no obligation to accept an election for a LIBOR Rate
Portion if any of the following described events has occurred and
is
continuing:
|
| (i) |
Dollar
deposits in the principal amount, and for periods equal to the interest
period, of a LIBOR Rate Portion are not available in the London inter-bank
market; or
|
| (ii) |
the
LIBOR Rate does not accurately reflect the cost of a LIBOR Rate
Portion.
|
| (f) |
Each
prepayment of a LIBOR Rate Portion, whether voluntary, by reason
of
acceleration or otherwise, will be accompanied by the amount of accrued
interest on the amount prepaid and a prepayment fee as described
below. A
“prepayment” is a payment of an amount on a date earlier than the
scheduled payment date for such amount as required by this
Agreement.
|
| (g) |
The
prepayment fee shall be in an amount sufficient to compensate the
Bank for
any loss, cost or expense incurred by it as a result of the prepayment,
including any loss of anticipated profits and any loss or expense
arising
from the liquidation or reemployment of funds obtained by it to maintain
such Portion or from fees payable to terminate the deposits from
which
such funds were obtained. The Borrower shall also pay any customary
administrative fees charged by the Bank in connection with the foregoing.
For purposes of this paragraph, the Bank shall be deemed to have
funded
each Portion by a matching deposit or other borrowing in the applicable
interbank market, whether or not such Portion was in fact so
funded.
|
| (a) |
Closing
Fee.
The Borrower agrees to pay a loan fee in the amount of Thirty-Three
Thousand Dollars ($33,000). This fee is due on the Facility Commencement
Date.
|
| (b) |
Unused
Commitment Fee.
The Borrower agrees to pay a fee on any difference between the Facility
Commitment and the amount of credit it actually uses, determined
by the
average of the daily amount of credit outstanding during the specified
period. The fee will be calculated at 0.25% per year. The calculation
of
credit outstanding shall include the undrawn amount of letters of
credit.
This fee is due in arrears on September 1, 2007, and on the same
day of
each following quarter in
arrears until the expiration of the availability
period.
|
| (c) |
Waiver
Fee.
If the Bank, at its discretion, agrees to waive or amend any terms
of this
Agreement, the Borrower will, at the Bank’s option, pay the Bank a fee for
each waiver or amendment in an amount advised by the Bank at the
time the
Borrower requests the waiver or amendment. Nothing in this paragraph
shall
imply that the Bank is obligated to agree to any waiver or amendment
requested by the Borrower. The Bank may impose additional requirements
as
a condition to any waiver or
amendment.
|
| (d) |
Late
Fee.
To the extent permitted by law, the Borrower agrees to pay a late
fee in
an amount not to exceed four percent (4%) of any payment that is
more than
fifteen (15) days late. The imposition and payment of a late fee
shall not
constitute a waiver of the Bank’s rights with respect to the default,
including Bank’s right to charge interest at the default interest rate
provided for in Section 6.6.
|
| (a) |
The
Borrower agrees to reimburse the Bank for any expenses it incurs
in the
preparation of this Agreement and any agreement or instrument required
by
this Agreement. Expenses include, but are not limited to, reasonable
attorneys’ fees, including any allocated costs of the Bank’s in-house
counsel to the extent permitted by applicable
law.
|
| (b) |
The
Borrower agrees to reimburse the Bank for the cost of periodic field
examinations of the Borrower’s books, records and collateral, and
appraisals of the collateral, at such intervals as the Bank may reasonably
require. The actions described in this paragraph may be performed
by
employees of the Bank or by independent
appraisers.
|
| (a) |
Each
payment by the Borrower will be made in U.S. Dollars and immediately
available funds by direct debit to a deposit account as specified
below.
|
| (b) |
Each
disbursement by the Bank and each payment by the Borrower will be
evidenced by records kept by the Bank. In addition, the Bank may,
at its
discretion, require the Borrower to sign one or more promissory
notes.
|
| (a) |
The
Bank may honor telephone or telefax instructions for advances or
repayments or
for the designation of optional interest rates and telefax requests
for
the issuance of letters of credit given, or purported to be given,
by any
one of the individuals authorized to sign loan agreements on behalf
of the
Borrower, or any other individual designated by any one of such authorized
signers.
|
| (b) |
Advances
will be deposited in and repayments will be withdrawn from the Borrower’s
designated deposit account with the Bank (the “Designated Bank
Account”).
|
| (c) |
The
Borrower will indemnify and hold the Bank harmless from all liability,
loss, and costs in connection with any act resulting from telephone
or
telefax instructions the Bank reasonably believes are made by any
individual authorized by the Borrower to give such instructions.
This
paragraph will survive this Agreement’s termination, and will benefit the
Bank and its officers, employees, and
agents.
|
| (a) |
The
Borrower agrees that interest and principal payments and any fees
will be
deducted automatically on the due date from the Designated Deposit
Account.
|
| (b) |
The
Borrower will maintain sufficient funds in the account on the dates
the
Bank enters debits authorized by this Agreement. If there are insufficient
funds in the account on the date the Bank enters any debit authorized
by
this Agreement, the Bank may reverse the
debit.
|
| (a) |
The
Bank may make advances under this Agreement to prevent or cover an
overdraft on any account of the Borrower with the Bank. Each such
advance
will accrue interest from the date of the advance or the date on
which the
account is overdrawn, whichever occurs first, at the interest rate
described in this Agreement. The Bank may make such advances even
if the
advances may cause any credit limit under this Agreement to be
exceeded.
|
| (b) |
The
Bank may reduce the amount of credit otherwise available under this
Agreement by the amount of any overdraft on any account of the Borrower
with the Bank.
|
| (a) |
2777
Ontario Street, Burbank, CA 91504;
and
|
| (b) | 1220 N. Highland Avenue, Hollywood, CA 90038. |
| (a) |
Secretary
Certificates.
Secretary certificates from the secretary of the Borrower and the
Guarantor, attaching the authorizations required by Paragraph 7.1,
the
organizational documents required by Paragraph 7.2, signatures and
incumbency information regarding officers and such other information
as
the Bank may reasonably request.
|
| (b) |
Closing
Date Borrowing Certificate.
A
completed borrowing certificate on the Bank’s standard form, demonstrating
the Borrower’s borrowing base on the date of this
Agreement.
|
| (c) |
Closing
Date Compliance Certificate.
A
completed compliance certificate on the Bank’s standard form,
demonstrating that as of the date of this Agreement, the Borrower
is in
compliance with all of the financial covenants required under this
Agreement.
|
| (d) |
Disbursement
Instructions.
A
disbursement instruction letter signed by the Borrower, authorizing
the
Bank to utilize the proceeds of the initial advances to be made on
the
date of this Agreement to pay the closing fee payable to the Bank
on such
date pursuant to Section 3.1(a) above and to pay such other items as
the Borrower may direct.
|
| (e) |
Financial
Statements.
The Bank shall have received and been satisfied with the results
of (i)
the consolidated financial statements of the Borrower and its subsidiaries
for the fiscal year ended December 31, 2006, including balance sheets,
income and cash flow statements audited by independent public accountants
of recognized national standing and prepared in conformity with GAAP,
(ii)
the unaudited consolidated financial statements of the Borrower and
its
subsidiaries for the fiscal quarter ended March 31, 2007, including
balance sheets, income and cash flow statements, prepared in conformity
with GAAP, and (iii) such other financial information relating to
the
Borrower and its subsidiaries as the Bank may reasonably
require.
|
| (f) |
Additional
Information.
The Bank shall have received and been satisfied with its review of
such
additional information relating to litigation, tax, accounting, labor,
insurance, material contracts, contingent liabilities and management
matters affecting the Borrower and the Guarantor as the Bank may
reasonably request.
|
| (a) |
Satisfactory
Updated Field Examination.
The Bank shall have completed and been satisfied with the results
of an
updated field examination of the Borrower’s assets and books and
records.
|
| (b) |
Satisfactory
Due Diligence Review.
The Bank shall have completed and been satisfied with the results
of its
due diligence review, including a satisfactory review of the terms
and
conditions of all of the Borrower’s related party debt, the Borrower’s
sources of funds.
|
| (c) |
No
Material Adverse Change.
There shall not have occurred a material adverse change in the business,
assets, liabilities (actual or contingent), operations, condition
(financial or otherwise) or prospects of the Borrower and its subsidiaries
taken as a whole or in the facts and information regarding such entities
as indicated on the internally-prepared financial statements for
the
Borrower’s fiscal year ended December 31,
2005.
|
| (d) |
No
Material Adverse Litigation.
There shall not be as of the date of this Agreement any action, suit,
investigation or proceeding pending or threatened in any court or
before
any arbitrator or governmental authority that purports (i) to materially
and adversely affect the Borrower or its subsidiaries, or (ii) to
affect
any transaction contemplated hereby or the ability of the Borrower
or its
subsidiaries or any other guarantor to perform their respective
obligations under this Agreement or any of the other loan documents
entered into in connection with this
Agreement.
|
| (e) |
Minimum
Opening Availability.
The Borrower shall have borrowing availability under the Facility
Commitment of not less than $2,000,000 after giving effect to the
payment
of all of the Borrower’s trade payables to within 30 days of written terms
and of any and all book overdrafts.
|
| (f) |
Termination
of Prior Loan Agreement; Release of the Bank’s Liens under Prior Loan
Documents.
The Bank and Old Point.360 shall have terminated the Prior Loan Agreement,
the Bank shall have no further funding obligations to Old Point.360
under
the Prior Loan Agreement, and the Bank shall have released and terminated
all security interests and liens on the assets of Old Point.360 or
the
Guarantor received and held by the Bank in connection with the
indebtedness under the Prior Loan
Agreement.
|
| (g) |
Satisfactory
DG Merger Documents.
The Bank and its counsel shall have been reasonably satisfied with
their
review of the DG Merger Documents and with all aspects of the transactions
contemplated thereunder.
|
|
(h)
|
Transfer
of Assets to the Borrower; Occurrence of Merger.
Old Point.360 shall have transferred to Borrower all of the assets
of all
businesses of Old Point.360 other than the Old Point.360 spot advertising
business, and the Merger shall have
occurred.
|
| (a) |
To
use the proceeds of the Facility only for working capital and general
corporate purposes and for the issuance of standby letters of
credit.
|
| (b) |
The
proceeds of the credit extended under this Loan Agreement may not
be used
directly or indirectly to purchase or carry any “margin stock” as that
term is defined in Regulation U of the Board of Governors of the
Federal
Reserve System, or extend credit to or invest in other parties for
the
purpose of purchasing or carrying any such “margin stock,” or to reduce or
retire any indebtedness incurred for such
purpose.
|
| (a) |
A
Borrowing Certificate as of the last day of each month within ten
(10)
days after month end and, upon the Bank’s request, copies of the invoices
or the record of invoices from the Borrower’s sales journal for the
Borrower’s Acceptable Receivables and a listing of the names and addresses
of the debtors obligated thereunder, copies of the delivery receipts,
purchase orders, shipping instructions, bills of lading and other
documentation pertaining to such Acceptable Receivables, and copies
of the
cash receipts journal pertaining to the Borrowing
Certificate.
|
| (b) |
Upon
the Bank's request, a detailed aging of the Borrower’s receivables by
invoice or a summary aging by account debtor, as specified by the
Bank.
|
| (c) |
Upon
the Bank's request, a summary aging by vendor of accounts
payable.
|
| (d) |
If
the Bank requires the Borrower to deliver the proceeds of accounts
receivable to the Bank upon collection by the Borrower, a schedule
of the
amounts so collected and delivered to the
Bank.
|
| (e) |
Upon
the Bank’s request, a listing of the names and addresses of all debtors
obligated upon the Borrower’s accounts
receivable.
|
| (f) |
Copies
of all letters of credit issued in support of the Borrower’s accounts
receivable.
|
| (g) |
Promptly
upon the Bank’s request, such other books, records, statements, lists of
property and accounts, budgets, forecasts or reports as to the Borrower
and the Guarantor as the Bank may
request.
|
| (h) |
Within
90 days after the fiscal year end, the annual financial statements
of the
Borrower. These financial statements must be audited (with an opinion
satisfactory to the Bank) by a Certified Public Accountant acceptable
to
the Bank. The statements shall be prepared on a consolidated
basis.
|
| (i) |
Within
45 days after the period’s end in the case of the first three fiscal
quarters of each fiscal year of the Borrower and within 60 days after
the
end of the fourth fiscal quarter of each such fiscal year, quarterly
financial statements of the Borrower, certified and dated by an authorized
financial officer. These financial statements may be company-prepared.
The
statements shall be prepared on a consolidated
basis.
|
| (j) |
Promptly,
upon sending or receipt, copies of any management letters and
correspondence relating to management letters, sent or received by
the
Borrower to or from the Borrower’s auditor. If no management letter is
prepared, the Bank may, in its discretion, request a letter from
such
auditor stating that no deficiencies were noted that would otherwise
be
addressed in a management letter.
|
| (k) |
Copies
of the Form 10-K Annual Report, Form 10-Q Quarterly Report and Form
8-K
Current Report for the Borrower concurrent with the date of filing
with
the Securities and Exchange
Commission.
|
| (l) |
Financial
projections covering a time period acceptable to the Bank and specifying
the assumptions used in creating the projections. The projections
shall be
provided to the Bank no less often than 45 days after the end of
each
fiscal year.
|
| (m) |
Within
45 days after the end of each fiscal quarter, a
compliance certificate of the Borrower, signed by an authorized financial
officer and setting forth (i) the information and computations (in
sufficient detail) to establish that the Borrower is in compliance
with
all financial covenants at the end of the period covered by the financial
statements then being furnished and (ii) whether there existed as
of the
date of such financial statements and whether there exists as of
the date
of the certificate, any default under this Agreement and, if any
such
default exists, specifying the nature thereof and the action the
Borrower
is taking and proposes to take with respect
thereto.
|
| (a) |
Acquiring
goods, supplies, or merchandise on normal trade
credit.
|
| (b) |
Endorsing
negotiable instruments received in the usual course of
business.
|
| (c) |
The
Borrower’s term loan indebtedness to GECC, the aggregate original
principal amount of which on a cumulative basis from the date of
this
Agreement shall not exceed Seven Million Dollars
($7,000,000).
|
| (d) |
Obtaining
surety bonds in the usual course of
business.
|
| (e) |
Liabilities,
lines of credit and leases in existence on the date of this Agreement
disclosed in writing to the Bank.
|
| (f) |
Additional
debts and lease obligations for the acquisition of fixed assets,
to the
extent permitted elsewhere in this
Agreement.
|
| (a) |
Liens
and security interests in favor of the
Bank.
|
| (b) |
Liens
for taxes not yet due.
|
| (c) |
Liens
outstanding on the date of this Agreement disclosed in writing to
the
Bank, including liens in favor of GECC, which are subject to the
terms of
the intercreditor agreement required by Paragraph 7.11
hereof.
|
| (d) |
Additional
purchase money security interests in assets acquired after the date
of
this Agreement, if the total principal amount of debts secured by
such
liens does not exceed Five Hundred Thousand Dollars ($500,000) at
any one
time.
|
| (a) |
Not
to sell, assign, lease, transfer or otherwise dispose of any part
of the
Borrower’s business or the Borrower’s assets except in the ordinary course
of the Borrower’s business.
|
| (b) |
Not
to sell, assign, lease, transfer or otherwise dispose of any assets
for
less than fair market value, or enter into any agreement to do
so.
|
| (c) |
Not
to enter into any sale and leaseback agreement covering any of its
fixed
assets.
|
| (d) |
To
maintain and preserve all rights, privileges, and franchises the
Borrower
now has.
|
| (e) |
To
make any repairs, renewals, or replacements to keep the Borrower’s
properties in good working
condition.
|
| (a) |
Existing
investments disclosed to the Bank in
writing.
|
| (b) |
Investments
in the Borrower’s current
subsidiaries.
|
| (c) |
Investments
in any of the following:
|
| (i) |
certificates
of deposit;
|
| (ii) |
U.S.
treasury bills and other obligations of the federal
government;
|
| (iii) |
readily
marketable securities (including commercial paper, but excluding
restricted stock and stock subject to the provisions of Rule 144
of the
Securities and Exchange
Commission).
|
| (a) |
Existing
extensions of credit disclosed to the Bank in
writing.
|
| (b) |
Extensions
of credit to the Borrower’s current
subsidiaries.
|
| (c) |
Extensions
of credit in the nature of accounts receivable or notes receivable
arising
from the sale or lease of goods or services in the ordinary course
of
business to non-affiliated
entities.
|
| (a) |
Haig
S. Bagerdjian to cease to be the chief executive officer of the Borrower
unless within sixty (60) days after Mr. Bagerdjian ceases to hold
such
office the Borrower secures a replacement chief executive officer
satisfactory to the Bank.
|
| (b) |
Haig
S. Bagerdjian to cease to own directly or indirectly, beneficially
or of
record, at least fifteen (15%) of all shares of voting securities
of the
Borrower (provided that such percentage may be less than fifteen
percent
(15%), but not less than seven and one-half percent (7.5%), if such
reduction is due to the issuance of shares of voting securities of
the
Borrower as consideration for an acquisition permitted under Paragraph
9.14(b) below).
|
| (c) |
Individuals
who constituted the Borrower’s board of directors as of the date of this
Agreement (collectively, the “Existing Directors”) to cease to constitute
a majority of the directors then in office (provided that the Existing
Directors may constitute less than a majority if such
reduction
is
due to the appointment of additional directors in connection with
an
acquisition permitted under Paragraph 9.14(b)
below).
|
| (a) |
Except
as permitted under Paragraph 9.14(b) below, enter into any consolidation,
merger, or other combination, or become a partner in a partnership,
a
member of a joint venture, or a member of a limited liability
company.
|
| (b) |
Acquire
or purchase a business or its assets for total purchase consideration
of
more than Four Million Dollars ($4,000,000) in any fiscal year or
acquire
or purchase a business or its assets irrespective of the amount of
total
annual purchase consideration if Borrower cannot demonstrate to Bank’s
reasonable satisfaction that Borrower would be in pro forma compliance
with the financial and other covenants set forth in this Agreement
after
giving effect to such acquisition or
purchase.
|
| (c) |
Engage
in any business activities substantially different from the Borrower’s
present business.
|
| (d) |
Liquidate
or dissolve the Borrower’s
business.
|
| (e) |
Voluntarily
suspend its business for more than seven (7) days in any thirty (30)
day
period.
|
| (a) |
Any
lawsuit over One Million Dollars ($1,000,000) against the Borrower
or the
Guarantor.
|
| (b) |
Any
substantial dispute between any governmental authority and the Borrower
or
the Guarantor.
|
| (c) |
Any
event of default under this Agreement, or any event which, with notice
or
lapse of time or both, would constitute an event of
default.
|
| (d) |
Any
material adverse change in the Borrower’s (or the Guarantor’s) business
condition (financial or otherwise), operations, properties or prospects,
or ability to repay the credit.
|
| (e) |
Any
change in the Borrower’s name, legal structure, place of business, or
chief executive office if the Borrower has more than one place of
business.
|
| (f) |
Any
actual contingent liabilities of the Borrower (or the Guarantor),
and any
such contingent liabilities which are reasonably foreseeable, where
such
liabilities are in excess of One Million Dollars ($1,000,000) in
the
aggregate.
|
| (a) |
General
Business Insurance.
To maintain insurance satisfactory to the Bank as to amount, nature
and
carrier covering property damage (including loss of use and occupancy)
to
any of the Borrower’s properties, business interruption insurance, public
liability insurance including coverage for contractual liability,
product
liability and workers’ compensation, and any other insurance which is
usual for the Borrower’s business. Each policy shall provide for at least
thirty (30) days prior notice to the Bank of any cancellation
thereof.
|
| (b) |
Insurance
Covering Collateral.
If required by the Bank, to maintain all risk property damage insurance
policies covering the tangible property comprising the collateral.
Each
such insurance policy required by the Bank must be for the full
replacement cost of the collateral and include a replacement cost
endorsement. Such insurance (if required by the Bank) must be issued
by an
insurance company acceptable to the Bank and must include a lender’s loss
payable endorsement in favor of the Bank in a form acceptable to
the
Bank.
|
| (c) |
Evidence
of Insurance.
Upon the request of the Bank, to deliver to the Bank a copy of each
insurance policy, or, if permitted by the Bank, a certificate of
insurance
listing all insurance in force.
|
| (a) |
This
paragraph concerns the resolution of any controversies or claims
between
the parties, whether arising in contract, tort or by statute, including
but not limited to controversies or claims that arise out of or relate
to:
(i) this agreement (including any renewals, extensions or
modifications); or (ii) any document related to this agreement
(collectively a “Claim”). For the purposes of this arbitration provision
only, the term “parties” shall include any parent corporation, subsidiary
or affiliate of the Bank involved in the servicing, management or
administration of any obligation described or evidenced by this
agreement.
|
| (b) |
At
the request of any party to this agreement, any Claim shall be resolved
by
binding arbitration in accordance with the Federal Arbitration Act
(Title
9, U.S. Code) (the “Act”). The Act will apply even though this agreement
provides that it is governed by the law of a specified state. The
arbitration will take place on an individual basis without resort
to any
form of class action.
|
| (c) |
Arbitration
proceedings will be determined in accordance with the Act, the
then-current rules and procedures for the arbitration of financial
services disputes of the American Arbitration Association or any
successor
thereof (“AAA”), and the terms of this paragraph. In the event of any
inconsistency, the terms of this paragraph shall control. If AAA
is
unwilling or unable to (i) serve as the provider of arbitration or
(ii) enforce any provision of this arbitration clause, the Bank may
designate another arbitration organization with similar procedures
to
serve as the provider of
arbitration.
|
| (d) |
The
arbitration shall be administered by AAA and conducted, unless otherwise
required by law, in any U.S. state where real or tangible personal
property collateral for this credit is located or if there is no
such
collateral, in the state specified in the governing law section of
this
agreement. All Claims shall be determined by one arbitrator; however,
if
Claims exceed Five Million Dollars ($5,000,000), upon the request
of any
party, the Claims shall be decided by three arbitrators. All arbitration
hearings shall commence within ninety (90) days of the demand for
arbitration and close within ninety (90) days of commencement and
the
award of the arbitrator(s) shall be issued within thirty (30) days
of the
close of the hearing. However, the arbitrator(s), upon a showing
of good
cause, may extend the commencement of the hearing for up to an additional
sixty (60) days. The arbitrator(s) shall provide a concise written
statement of reasons for the award. The arbitration award may be
submitted
to any court having jurisdiction to be confirmed, judgment entered
and
enforced.
|
| (e) |
The
arbitrator(s) will give effect to statutes of limitation in determining
any Claim and may dismiss the arbitration on the basis that the Claim
is
barred. For purposes of the application of the statute of limitations,
the
service on AAA under applicable AAA rules of a notice of Claim is
the
equivalent of the filing of a lawsuit. Any dispute concerning this
arbitration provision or whether a Claim is arbitrable shall be determined
by the arbitrator(s). The arbitrator(s) shall have the power to award
legal fees pursuant to the terms of this
agreement.
|
| (f) |
This
paragraph does not limit the right of any party to: (i) exercise
self-help remedies, such as but not limited to, setoff; (ii) initiate
judicial or non-judicial foreclosure against any real or personal
property
collateral; (iii) exercise any judicial or power of sale rights, or
(iv) act in a court of law to obtain an interim remedy, such as but
not limited to, injunctive relief, writ of possession or appointment
of a
receiver, or additional or supplementary
remedies.
|
| (g) |
The
procedure described above will not apply if the Claim, at the time
of the
proposed submission to arbitration, arises from or relates to an
obligation to the Bank secured by real property. In this case, all
of the
parties to this agreement must consent to submission of the Claim
to
arbitration. If both parties do not consent to arbitration, the Claim
will
be resolved as follows: The parties will designate a referee (or
a panel
of referees) selected under the auspices of AAA in the same manner
as
arbitrators are selected in AAA administered proceedings. The designated
referee(s) will be appointed by a court as provided in California
Code of
Civil Procedure Section 638 and the following related sections. The
referee (or presiding referee of the panel) will be an active attorney
or
a retired judge. The award that results from the decision of the
referee(s) will be entered as a judgment in the court that appointed
the
referee, in accordance with the provisions of California Code of
Civil
Procedure Sections 644 and 645.
|
| (h) |
The
filing of a court action is not intended to constitute a waiver of
the
right of any party, including the suing party, thereafter to require
submittal of the Claim to
arbitration.
|
| (i) |
By
agreeing to binding arbitration, the parties irrevocably and voluntarily
waive any right they may have to a trial by jury in respect of any
Claim.
Furthermore, without intending in any way to limit this agreement
to
arbitrate, to the extent any Claim is not arbitrated, the parties
irrevocably and voluntarily waive any right they may have to a trial
by
jury in respect of such Claim to the maximum extent they may legally
do so
under applicable California law. This provision is a material inducement
for the parties entering into this
agreement.
|
| (a) |
represent
the sum of the understandings and agreements between the Bank and
the
Borrower concerning this credit;
|
| (b) |
replace
any prior oral or written agreements between the Bank and the Borrower
concerning this credit; and
|
| (c) |
are
intended by the Bank and the Borrower as the final, complete and
exclusive
statement of the terms agreed to by
them.
|
|
Bank
of America
By___________________________
Daniel
M. Timmons
Vice
President
|
New
360,
a
California corporation
(which
intends to change its name to Point.360 after the date
hereof)
By_____________________________
Alan
R. Steel
Executive
Vice President,
Finance
and Administration
and
Chief Financial Officer
|
|
|
Address
where notices to
the
Bank are to be sent:
Bank
of America, N.A.
333
South Hope Street,
13th
Floor
Los
Angeles, California 90071
Attn:
Daniel Timmons
Telephone:
(213) 621-7180
Facsimile:
(213) 621-3610
E-mail:
daniel.timmons@
bankofamerica.com
|
Address
where notices to
the
Borrower are to be sent::
Point.360
2777
North Ontario Street
Burbank,
California 91504
Attn:
Chief Financial Officer
Telephone:
(818) 565-1400
Facsimile:
(818) 847-2503
E-mail:
asteel@point360.com
|
|
Page
|
|||||||
|
1.
|
DEFINITIONS
|
1
|
|||||
|
2.
|
THE
FACILITY: LINE OF CREDIT AMOUNT AND TERMS
|
4
|
|||||
|
2.1.
Line of Credit Amount
|
4
|
||||||
|
|
2.2.
Availability Period
|
4
|
|||||
|
2.3.
Conditions to Availability of Credit
|
5
|
||||||
|
2.4.
Repayment Terms
|
5
|
||||||
|
2.5.
Interest Rate
|
5
|
||||||
|
2.6.
Optional Interest Rates
|
5
|
||||||
|
2.7.
Applicable Margin
|
6
|
||||||
|
2.8.
Standby Letters of Credit
|
6
|
||||||
|
3.
|
OPTIONAL
INTEREST RATE
|
8
|
|||||
|
3.1.
Optional Rates
|
8
|
||||||
|
3.2.
LIBOR Rate
|
8
|
||||||
|
4.
|
FEES
AND EXPENSES
|
10
|
|||||
|
4.1.
Fees
|
10
|
||||||
|
4.2.
Expenses
|
10
|
||||||
|
4.3.
Reimbursement Costs
|
10
|
||||||
|
5.
|
COLLATERAL
|
11
|
|||||
|
6.
|
DISBURSEMENTS,
PAYMENTS AND COSTS
|
11
|
|||||
|
6.1.
Disbursements and Payments
|
11
|
||||||
|
6.2.
Telephone and Telefax Authorization
|
11
|
||||||
|
6.3.
Direct Debit
|
11
|
||||||
|
6.4.
Banking Days
|
11
|
||||||
|
6.5.
Interest Calculation
|
12
|
||||||
|
6.6.
Default Rate
|
12
|
||||||
|
6.7.
Taxes
|
12
|
||||||
|
6.8.
Overdrafts
|
12
|
||||||
|
6.9.
Payments in Kind
|
13
|
||||||
|
7.
|
CONDITIONS
|
13
|
|||||
|
7.1.
Authorizations
|
13
|
|
Page
|
|||||||
|
7.2.
Governing Documents
|
13
|
||||||
|
7.3.
Guaranty
|
13
|
||||||
|
7.4.
Security Agreements
|
13
|
||||||
|
7.5.
Stock Pledge
|
13
|
||||||
|
7.6.
Perfection and Evidence of Priority
|
13
|
||||||
|
7.7.
Payment of Fees
|
14
|
||||||
|
7.8.
Pay down of GECC Term Loans
|
14
|
||||||
|
7.9.
Good Standing
|
14
|
||||||
|
7.10.
Legal Opinion
|
14
|
||||||
|
7.11.
Intercreditor Agreement
|
14
|
||||||
|
7.12.
Landlord Agreements
|
14
|
||||||
|
7.13.
Insurance
|
14
|
||||||
|
7.14.
Other Required Documentation
|
14
|
||||||
|
7.15.
Other Conditions
|
15
|
||||||
|
8.
|
REPRESENTATIONS
AND WARRANTIES
|
16
|
|||||
|
8.1.
Formation
|
16
|
||||||
|
8.2.
Authorization
|
16
|
||||||
|
8.3.
Enforceable Agreement
|
16
|
||||||
|
8.4.
Good Standing
|
16
|
||||||
|
8.5.
No Conflicts
|
17
|
||||||
|
8.6.
Financial Information
|
17
|
||||||
|
8.7.
Lawsuits
|
17
|
||||||
|
8.8.
Collateral
|
17
|
||||||
|
8.9.
Permits, Franchises
|
17
|
||||||
|
8.10.
Other Obligations
|
17
|
||||||
|
8.11.
Tax Matters
|
17
|
||||||
|
8.12.
No Event of Default
|
17
|
||||||
|
8.13.
Insurance
|
18
|
||||||
|
8.14.
Governmental Authorization
|
18
|
||||||
|
9.
|
COV
NANTS
|
18
|
|
Page
|
|||||||
|
9.1.
Use of Proceeds
|
18
|
||||||
|
9.2.
Financial Information
|
18
|
||||||
|
9.3.
[Reserved.]
|
|
20
|
|||||
|
9.4.
Basic Fixed Charge Coverage Ratio
|
20
|
||||||
|
9.5.
Dividends and Distributions
|
20
|
||||||
|
9.6.
Bank as Principal Depository
|
20
|
||||||
|
9.7.
Other Debts
|
20
|
||||||
|
9.8.
Other Liens
|
21
|
||||||
|
9.9.
Maintenance of Assets
|
21
|
||||||
|
9.10.
Investments
|
21
|
||||||
|
9.11.
Loans
|
22
|
||||||
|
9.12.
Change of Management
|
22
|
||||||
|
9.13.
Change of Control
|
22
|
||||||
|
9.14.
Additional Negative Covenants
|
23
|
||||||
|
9.15.
Notices to Bank
|
23
|
||||||
|
9.16.
Insurance
|
24
|
||||||
|
9.17.
Compliance with Laws
|
24
|
||||||
|
9.18.
ERISA Plans
|
24
|
||||||
|
9.19.
Books and Records
|
24
|
||||||
|
9.20.
Audits
|
25
|
||||||
|
9.21.
Perfection of Liens
|
25
|
||||||
|
9.22.
Cooperation
|
25
|
||||||
|
10.
|
DEFAULT
AND REMEDIES
|
25
|
|||||
|
10.1.
Failure to Pay
|
25
|
||||||
|
10.2.
Other Bank Agreements
|
25
|
||||||
|
10.3.
Cross-default
|
25
|
||||||
|
10.4.
False Information
|
26
|
||||||
|
10.5.
Bankruptcy
|
26
|
||||||
|
10.6.
Receivers
|
26
|
||||||
|
10.7.
Lien Priority
|
26
|
|
Page
|
|||||||
|
10.8.
Judgments
|
26
|
||||||
|
10.9.
Material Adverse Change
|
26
|
||||||
|
10.10.
Government Action
|
26
|
||||||
|
10.11.
Default under Related Documents
|
27
|
||||||
|
10.12.
Other Breach Under Agreement
|
27
|
||||||
|
11.
|
ENFORCING
THIS AGREEMENT; MISCELLANEOUS
|
27
|
|||||
|
11.1.
Disposition of Schedules and Reports
|
27
|
||||||
|
11.2.
Returned Merchandise
|
27
|
||||||
|
11.3.
Verification of Receivables
|
27
|
||||||
|
11.4.
Waiver of Confidentiality
|
27
|
||||||
|
11.5.
GAAP
|
28
|
||||||
|
11.6.
California Law
|
28
|
||||||
|
11.7.
Successors and Assigns
|
28
|
||||||
|
11.8.
Arbitration and Waiver of Jury Trial
|
28
|
||||||
|
11.9.
Severability; Waivers
|
30
|
||||||
|
11.10.
Attorneys’ Fees
|
30
|
||||||
|
11.11.
One Agreement
|
30
|
||||||
|
11.12.
Indemnification
|
31
|
||||||
|
11.13.
Notices
|
31
|
||||||
|
11.14.
Headings
|
31
|
||||||
|
11.15.
Counterparts
|
31
|