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EXHIBIT 10.48
DEBT SUBORDINATION AND INTERCREDITOR AGREEMENT
THIS AGREEMENT is made this 26th day of September, 1997 by and among
DOVE ENTERTAINMENT, INC., a California corporation, having its principal place
of business at 0000 Xxxxxxx Xxxxxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000 ("Dove"),
DOVE FOUR POINT, INC., a Florida corporation, having its principal place of
business at 0000 Xxxxxxx Xxxxxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000 ("Four Point";
Dove and Four Point, individually and collectively, "Borrower"), MEDIA EQUITIES
INTERNATIONAL, LLC a New York limited liability company having its principal
place of business at c/o Morrison Xxxxx Singer & Xxxxxxxxx, LLP, 750 Lexington
Avenue, New York , New York, ("Creditor") and SANWA BANK CALIFORNIA having a
place of business at 000 Xxxxx Xxxxxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000
("Lender").
1. Definitions.
(a) "Junior Debt" means all indebtedness, liabilities and
obligations of Borrower to Creditor of every kind and description, absolute or
contingent, due or to become due, now existing or hereafter arising, and all
increases, extensions and renewals thereof, together with all interest, fees,
charges, expenses and costs for which Borrower is now or hereafter becomes
liable to pay to Creditor, arising out of: (a) a $450,000 promissory note dated
September 26th, 1997; and (b) obligations and liabilities of the Borrower to the
Creditor contained in that certain Loan Agreement dated September 26th, 1997
between Borrower and Creditor and all amendments thereto or modifications
thereof (the "Loan Agreement").
(b) "Lender's Loan Documents" means the Term Loan Agreement dated
as of August 16, 1996 in the original principal amount of $1,365,447.27 between
Dove and Lender, the Continuing Guaranty dated August 16, 1996 executed by Four
Point and all other agreements, documents, contracts and instruments, executed
and delivered at any time by the Borrower in favor of the Lender in connection
with the loan described therein (the "Loan"), including without limitation the
Supplemental Loan Agreement and Supplemental Security Agreement, each dated on
or about April 30, 1997 and the Forbearance Agreement, Amendment, Waiver and
Release dated as of August 28, 1997 among Borrower and Lender.
(c) "Superior Debt" means all indebtedness, liabilities and
obligations of Borrower to Lender of every kind and description, whenever and
however arising, absolute or contingent, due or to become due, now existing or
hereafter arising, under the Lender's Loan Documents, and all increases,
extensions and renewals thereof, together with all interest, fees, charges,
expenses and costs for which Borrower is now or hereafter becomes liable to pay
to Lender; but not exceeding a total principal balance at any one time
outstanding of One Million Three Hundred Thousand Dollars ($1,300,000).
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2. Subordination. Creditor hereby postpones and subordinates, to the
extent and in the manner provided in this Agreement, all of the Junior Debt to
the full and final payment of all of the Superior Debt and the termination of
any obligation of Lender to extend further Superior Debt. Except as permitted in
Section 2(a) hereof, no payments shall be made on account of the Junior Debt so
long as any Superior Debt is outstanding. If Borrower issues or has issued any
instrument or document evidencing the Junior Debt, each such instrument and
document shall bear a conspicuous legend that it is subordinated to the Superior
Debt. Borrower's books shall be marked to evidence the subordination of all of
the Junior Debt to the Superior Debt. Lender is authorized to examine such books
from time to time and to make any notations required by this Agreement.
(a) Until such time as the Lender gives the creditor notice that
there has occurred a monetary default under the Lender's Loan Documents, the
Borrower shall be permitted to make, and the Creditor is permitted to receive
and retain monthly installments of interest under the Junior Debt at the rate of
ten percent (10%) per annum.
3. Security Interest Priorities. Notwithstanding (a) the time, date,
manner, method or order of the attachment and/or perfection of any mortgages,
pledges, security interests or liens granted in favor of the Creditor or the
Lender, in or on any collateral securing the Superior Debt, (b) the time or
manner of the filing of the Lender's respective financing statements or
mortgages, (c) the provisions of the UCC or any other applicable laws or court
decisions, (d) the dating, executing or delivery of any document granting
Creditor or Lender security interest and/or liens in or on any collateral, (e)
the provisions of any contract or document in effect between the Creditor or
Lender, on the one hand, and Borrower or any affiliate thereof, on the other,
(f) the giving or failure to give notice of the acquisition or expected
acquisition of any purchase money or other security interests and (g) whether
the Creditor or the Lender or any agent or bailee thereof holds possession of
any part or all of any collateral the following, as among the Creditor and the
Lender, shall be the relative priority of the security interests and liens of
the Creditor and the Lender in the collateral securing the Superior Debt:
(a) The liens, mortgages, pledges, security interests and rights
that the Lender has or may have in the collateral securing the Superior Debt
shall at all times be superior and prior to any lien or security interest of the
Creditor therein.
(b) All realizations upon the collateral securing the Superior
Debt shall be first applied to the satisfaction of the Superior Debt,
irrespective of whether at any time any part or all of the Superior Debt is due
and payable, until the Superior Debt shall be fully, finally and indefeasibly
paid in cash.
(c) If any of the collateral securing the Superior Debt is
received by the Creditor in violation of the terms of this Agreement, such
collateral shall be promptly delivered by the Creditor to the Lender in the form
received, except for the addition of any endorsement or assignment necessary to
effect a transfer of all rights to the Lender, without the necessity of demand
or request by the Lender. The Lender is irrevocably authorized to supply any
required endorsement
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or assignment that may have been omitted. Until so delivered, any such
collateral shall be held by the Creditor in trust for the Lender and shall not
be commingles with other funds or property of the Creditor.
(d) Lender may, at its option, during any period of default
relating to the Superior Debt, take such enforcement action it deems appropriate
with respect to the collateral for the Superior Debt without any requirement
that it obtain the prior consent of Creditor. Until the Superior Debt has been
fully, finally and indefeasibly paid in cash, and all of the financing
arrangements and commitments between Borrower and Lender have been terminated,
Creditor shall not take any enforcement action against any of the collateral
securing the Superior Debt without first obtaining the prior written consent of
Lender, which consent may be withheld for any reason whatsoever, in the sole
discretion of Lender.
(e) After all of the Superior Debt has been fully, finally and
indefeasibly paid in cash, and all of the financing arrangements and commitments
between Borrower and Lender have been terminated, the balance of realizations
upon the collateral securing the Superior Debt, if any, shall be paid in
accordance with Section 9-504 of the UCC.
4. Warranties and Representations of Borrower and Creditor. Borrower
and Creditor each hereby represent and warrant that: (a) Creditor has not relied
and will not rely on any representation or information of any nature made by or
received from Lender relative to Borrower in deciding to execute this Agreement
or to permit it to continue in effect; (b) as of the date hereof, the total
maximum aggregate principal amount of the Junior Debt is $450,000; (c) no part
of the Junior Debt is evidenced by any instrument, security or other writing
which has not previously been or is not simultaneously herewith being delivered
to Lender, (d) Creditor is the lawful owner of the Junior Debt and no part
thereof is subject to any defense, offset or counterclaim; (e) Creditor has not
heretofore assigned or transferred any of the Junior Debt or any interest
therein; (f) Creditor has not heretofore given any subordination with respect to
the Junior Debt which is currently effective; and (g) the only collateral or
security for the Junior Debt is a blanket lien or security interest in all of
the assets of the Borrower subordinate to the lien(s) or security interest(s) of
the Lender.
5. Negative Covenants. Until all of the Superior Debt has been fully
and indefeasibly paid and any obligations of Lender to extend further Superior
Debt is terminated: (a) Borrower shall not, directly or indirectly, make any
payment on account of the Junior Debt, except as permitted in Section 2(a)
hereof, and shall not grant any security interest in, mortgage, pledge, assign
or transfer, any of its assets to secure or satisfy all or any part of the
Junior Debt, except as stated in Section 4(g) hereof; (b) Except as provided in
Sections 2(a) or 4(g) hereof, and subject to Section 3 hereof, Creditor shall
not demand or accept from Borrower or any other person any payment of, or
collateral for the Junior Debt, nor shall Creditor enforce any part of the
Junior Debt; (c) Creditor shall not hereafter give any subordination with
respect to the Junior Debt, or transfer or assign any of the Junior Debt to any
person other than Lender; (d) Borrower will not hereafter issue any instrument,
security or other writing evidencing any part of the Junior Debt, and Creditor
will not receive any such writing, except upon the prior written approval of
Lender or at the request of and in the manner
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requested by Lender, (e) Creditor will not commence or join with any other
creditors of Borrower in commencing any bankruptcy, reorganization, receivership
or insolvency proceeding against Borrower, and (f) Borrower nor Creditor shall
otherwise take or permit any action prejudicial to or inconsistent with the
provisions of this Agreement.
6. Authority to Act for Creditor. For so long as any of the Superior
Debt shall remain unpaid, Lender shall have the right to act as Creditor's
attorney-in-fact for the purposes specified herein and Creditor hereby
irrevocably appoints Lender its true and lawful attorney, with full power of
substitution, in the name of Creditor or in the name of Lender, for the use and
benefit of Lender, without notice to Creditor or any of his representatives,
heirs or administrators, to perform the following acts, at Lender's option, at
any meeting of creditors of Borrower or in connection with any case or
proceeding, whether voluntary or involuntary, for the distribution, division or
application of the assets of Borrower or the proceeds thereof, regardless of
whether such case or proceeding is for the liquidation, dissolution, winding up
of affairs, reorganization or arrangement of Borrower, or for the composition of
the creditors of Borrower, in bankruptcy or in connection with a receivership,
or under an assignment for the benefit of creditors of Borrower or otherwise:
(a) To enforce claims comprising the Junior Debt, either in its
own name or in the name of Creditor, by proof of debt, proof of claim, suit or
otherwise;
(b) To collect any assets of Borrower distributed, divided or
applied by way of dividend or payment on account of the Junior Debt, or any
securities issued on account of the Junior Debt and to apply the same, or the
proceeds of any realization upon the same that Lender in its discretion elects
to effect, to the Superior Debt until all of the Superior Debt (including
without limitation, all interest accruing on the Superior Debt after the
commencement of any bankruptcy case) has been paid in full, rendering any
surplus to Creditor if and to the extent permitted by law;
(c) To vote claims comprising the Junior Debt to accept or reject
any plan of partial or complete liquidation, reorganization, arrangement,
composition or extension; and
(d) To take generally any action in connection with any such
meeting, case or proceeding that Creditor would be authorized to take but for
this Agreement.
In no event shall Lender be liable to Creditor for any failure to prove
the Junior Debt, to exercise any right with respect thereto or to collect any
sums payable thereon, except in the event of Lender's gross negligence (provided
Lender has received Creditor's full cooperation) or willful misconduct
7. Waivers. Borrower and Creditor each hereby waives any defense
based on the adequacy of a remedy at law which might be asserted as a bar to the
remedy of specific performance of this Agreement in any action brought therefor
by Lender. To the fullest extent permitted by law, Borrower and Creditor each
hereby further waives: presentment, demand, protest, notice of protest, notice
of default or dishonor, notice of payment or nonpayment and any and all other
notices and
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demands of any kind in connection with instruments, documents and agreements
evidencing, securing or relating in any way to all or any portion of the
Superior Debt or the Junior Debt to which Borrower or Creditor may be a party;
notice of the acceptance of this Agreement by Lender; notice of any loans made,
extensions granted or other action taken by Lender in reliance hereon, including
without limitation: (a) granting time or other indulgences to Borrower, (b)
renewing, extending, modifying or compromising any of the Superior Debt, (c)
possessing, substituting, modifying, waiving or releasing any guaranty or
collateral held as security for any of the Superior Debt, or (d) adding or
releasing any person primarily or secondarily liable thereon; and all other
demands and notices of every kind in connection with this Agreement, the
Superior Debt or Junior Debt, and no such action taken by Lender shall affect
the subordination or other provisions herein in any manner.
8. Indulgences Not Waivers. Neither the failure nor any delay on the
part of Lender to exercise any right, remedy, power or privilege hereunder or
under any instruments, documents or agreements evidencing or relating to the
Superior Debt shall operate as a waiver thereof or give rise to an estoppel, nor
be construed as an agreement to modify the terms of this Agreement, nor shall
any single or partial exercise of any right, remedy, power or privilege with
respect to any occurrence be construed as a waiver of such right, remedy, power
or privilege with respect to any other occurrence. No consent or waiver by a
party hereunder shall be effective unless it is in writing and signed by the
party making such consent or waiver, and then only to the extent specifically
stated in such writing.
9. Duration and Termination. This Agreement shall constitute a
continuing agreement of subordination and shall terminate only upon the full and
final payment of the Superior Debt and termination of any obligation of Lender
to extend any further Superior Debt. Neither the dissolution nor the bankruptcy
of any Creditor shall effect a termination hereof.
10. Administration by Lender. In the administration of the Superior
Debt, either before or after a demand or default, Creditor acknowledges and
agrees that Lender may proceed in its sole discretion, including without
limitation, raising or lowering loan advances, interest rates or fees, charging
additional fees, declining to make further advances, extending additional loans
or other financing accommodations to Borrower, increasing the dollar amounts of
Borrower's credit limits, extending credit terms and maturities, compromising
claims and exchanging and releasing collateral or obligors; all with no duty to
Creditor, and no such action shall affect the subordination or other provisions
herein in any manner.
11. New Superior Debt. If any of the Superior Debt consists of
revolving loans and such loans are at any time or times thereafter paid or
performed in full and thereafter Borrows again becomes indebted or otherwise
obligated to Lender for revolving loans, the provisions of this Agreement shall
apply to said new indebtedness, which, for purposes of this Agreement, shall be
deemed Superior Debt.
12. Subrogation. Following the final and indefeasible payment in full
of all Superior Debt, the holders of Junior Debt shall be subrogated to the
rights of the holdoffs of Superior Debt
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to receive payments or distributions of assets of the Borrows until all Junior
Debt shall be paid in full; and for the purposes of such subrogation, no
payments or distributions to the holdoffs of such Superior Debt of any cash,
property or securities to which the holdoffs of Junior Debt would otherwise be
entitled except for the provisions of this Agreement, and no payment over
pursuant to the provisions of this Agreement to the holdoffs of such Superior
Debt by the holdoffs of Junior Debt, shall, as among the Borrower and its
creditors other than the holdoffs of such Superior Debt and the holders of
Junior Debt, be deemed to be a payment by the Borrower to or on account of such
Superior Debt, it being understood that the provisions of this Agreement are
solely for the purposes of defining the relative rights of the holdoffs of such
Superior Debt, on the one hand, and the holders of the Junior Debt, on the other
hand.
13. Notices. All notices, requests, demands and other communications
required or permitted under this Agreement or by law shall be in writing and
shall be deemed to have been duly given, made and received only when delivered
against receipt or when deposited in the United States mails, certified mail,
return receipt requested, postage prepaid, or when delivered by next day express
delivery service, addressed as set forth in the first paragraph of this
Agreement. Any addressee may alter the address to which communications are to be
sent by giving notice of such change of address in conformity with the
provisions of this Paragraph 13 for the giving of notice.
14. Lender's Duties Limited. The rights granted to Lender in this
Agreement are solely for its protection and nothing herein contained imposes on
Lender any duties with respect to any property either of Borrower or of Creditor
heretofore or hereafter received by Lender. Lender has no duty to preserve
rights against prior parties on any instrument or chattel paper received from
Borrower as collateral security for the Superior Debt or any portion thereof
15. Effect on Borrower. This Agreement is being entered into solely
for the benefit of Lender and is not intended to give any rights, benefits or
privileges to Borrower or Creditor. Except as expressly et forth herein, this
Agreement shall not otherwise (i) impair or affect, as among the Borrower or its
creditors (other than the Lender) and the holdoffs of the Junior Debt, the
obligation of the Borrower, which is absolute and unconditional, to pay the
holders of Junior Debt the principal of and interest on the Junior Debt, or (ii)
affect the relative rights against the Borrower of the holder of the Junior Debt
and the creditors of the Borrower (other than the Lender), or (iii) prevent any
holder of any Junior Debt from exercising all remedies otherwise permitted by
applicable law upon default under the instrument or instruments governing the
Junior Debt.
16. Authority. Borrower and Creditor represent and warrant that they
have the legal power and authority to enter into this Agreement and that the
persons signing for each party are authorized and directed to do so.
17. Entire Agreement. Amendment. This Agreement constitutes and
expresses the entire understanding between the parties hereto with respect to
the subject matter hereof, and supersedes all prior and contemporaneous
agreements and understandings, inducements or conditions, whether express or
implied, oral or written. Neither this Agreement nor any portion or provision
hereof may
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be amended orally or in any manner other than by an agreement in writing signed
by Lender, Borrower and Creditor.
18. Additional Documentation. Borrower and Creditor shall execute and
deliver to Lender such further instruments and shall take such further action as
Lender may at any time or times request in order to carry out the provisions and
intent of this Agreement.
19. Jury Waiver. EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY
COURT IN ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH
OR IN ANY WAY RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS AGREEMENT IS A
PART AND/OR THE DEFENSE OR ENFORCEMENT OF ANY OF LENDER'S RIGHTS AND REMEDIES,
INCLUDING WITHOUT LIMITATION, TORT CLAIMS. CREDITOR ACKNOWLEDGES THAT IT MAKES
THIS WAIVER KNOWINGLY, VOLUNTARILY AND ONLY AFTER CONSIDERATION OF THE
RAMIFICATIONS OF THIS WAIVER WITH HIS ATTORNEY.
20. Successors and Assigns. This Agreement shall inure to the benefit
of Lender, its successors and assigns, and shall be binding upon both Borrower
and Creditor and their respective heirs, personal representatives, successors
and assigns.
21. Defects Waived. This Agreement is effective notwithstanding any
defect in the validity or enforceability of any instrument or document
evidencing the Superior Debt.
22. Governing Law. The validity, construction and enforcement of this
Agreement shall be governed by the internal laws of the State of California.
23. Severability. The provisions of this Agreement are independent of
and separable from each other. If any provision hereof shall for any reason be
held invalid or unenforceable, it is the intent of the parties that such
invalidity or unenforceability shall not affect the validity or enforceability
of any other provision hereof, and that this Agreement shall be construed as if
such invalid or unenforceable provision had never been contained herein.
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24. Counterparts. This Agreement may be executed in separate
counterparts and by each party on a separate counterpart, each of which, when
executed and delivered, shall be deemed to be an original. Such counterparts
shall together constitute one and the same instrument
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed, sealed and delivered. this 26th day of September, 1997.
DOVE ENTERTAINMENT, INC.
By: /s/ XXXX XXXXXX
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Name: Xxxx Xxxxxx
Title: Chief Financial Officer
DOVE FOUR POINT, INC.
By: /s/ XXXX XXXXXX
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Name: Xxxx Xxxxxx
Title: Chief Financial Officer
MEDIA EQUITIES INTERNATIONAL, LLC
By: /s/ XXX XXXXXXXXXX
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Name:
Title:
SANWA BANK CALIFORNIA
By: /s/ E. XXXXX XXXXX
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Name: E. Xxxxx Xxxxx
Title: Vice President
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