AMENDED AND RESTATED
FINANCING AND SECURITY AGREEMENT
Dated as of November 27, 1996
by and among
THE FIRST NATIONAL BANK OF MARYLAND
and
PRODUCTION GROUP INTERNATIONAL, INC.
EXECUTOURS, INC.
SAFARIS EVENTS, INC.
KALEIDOSCOPE EVENTS, INC.
AGENDA WASHINGTON INC.
WASHINGTON, INC.
C.H.L. VENTURES, INC.
PGI ACQUISITION COMPANY E
PGI ACQUISITION COMPANY A
PGI ACQUISITION COMPANY B
PGI COMPANY F
PGI ACQUISITION COMPANY I
PGI COMPANY S
PGI COMPANY H
PGI COMPANY P
PGI COMPANY Q
PGI COMPANY R
PGI COMPANY J
PGI COMPANY X
SPEARHEAD EXHIBITIONS LIMITED
PGI EUROPE LIMITED
▇▇▇ ▇▇▇▇▇ PRODUCTIONS, WASHINGTON, D.C., INC.
▇▇▇ ▇▇▇▇▇ PRODUCTIONS, INC.
▇▇▇ ▇▇▇▇▇ PRODUCTIONS, NEW JERSEY, INC.
▇▇▇ ▇▇▇▇▇ PRODUCTIONS-ATLANTA, INC.
▇▇▇ ▇▇▇▇▇ PRODUCTIONS WEST, INC.
RMR PRODUCTION SERVICES, INC.
TIMBERLINE WORLDWIDE, INC.
EPIC ENTERPRISES, INC.
and
EPIC ENTERPRISES OF NEVADA, INC.
TABLE OF CONTENTS
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Page
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ARTICLE I
DEFINITIONS............................................................ 2
1.1 Defined Terms............................................... 2
1.2 Uniform Commercial Code Terms............................... 14
1.3 Accounting Terms............................................ 14
1.4 ERISA Terms................................................. 14
1.5 Other Definitional Provisions............................... 15
ARTICLE II
THE WORKING CAPITAL LINE OF CREDIT..................................... 15
2.1 Working Capital Line of Credit Advances..................... 15
2.2 Repayment and Prepayment of Working Capital Line
of Credit Advances.......................................... 16
ARTICLE III
THE ACQUISITION FACILITY............................................... 17
3.1 Advances under the Acquisition Facility..................... 17
3.2 Repayment and Prepayment of Advances of the
Acquisition Facility........................................ 18
ARTICLE IV
THE EQUIPMENT FACILITY................................................. 18
4.1 Advances of the Equipment Facility.......................... 18
4.2 Repayment and Prepayment of Advances of the
Equipment Facility.......................................... 18
ARTICLE V
GENERAL CREDIT PROVISIONS.............................................. 19
5.1 Payments.................................................... 19
5.2 Illegality.................................................. 20
5.3 Increased Costs............................................. 20
5.4 Computations................................................ 22
5.5 Application of Payments..................................... 22
5.6 Reliance by Bank on Communications and
Authorizations from Production Group on behalf
of the Borrowers............................................ 22
Section 5.7 Joint and Several Liability; Right
of Contribution............................................. 22
ARTICLE VI
SECURITY............................................................... 23
6.1 Financing Documents......................................... 23
6.2 Collateral.................................................. 23
6.3 Location of Collateral; Principal Place of
Business.................................................... 24
6.4 Loss of Collateral.......................................... 25
6.5 Filing of Financing Statements; Perfection of
Security Interest in Collateral............................. 25
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES.......................................... 26
7.1 Subsidiaries................................................. 26
7.2 Good Standing................................................ 26
7.3 Corporate Authority.......................................... 26
7.4 Binding Obligations.......................................... 27
7.5 Litigation................................................... 27
7.6 No Conflicting Agreements.................................... 27
7.7 Financial Condition.......................................... 27
7.8 Tax Returns.................................................. 28
7.10 Margin Stock................................................. 28
7.11 ERISA........................................................ 28
7.12 Governmental Consents........................................ 29
7.13 No Default or Event of Default............................... 29
7.14 Other Liens.................................................. 29
7.15 Prior Names; Trade Names; Principal Place of
Business..................................................... 29
7.16 Nature of Financing; Usury................................... 29
7.17 Purposes..................................................... 29
ARTICLE VIII
CONDITIONS PRECEDENT.................................................... 30
8.1 Receipt and Approval of Documents Required by
Bank Commitment Letter....................................... 30
8.2 Approval of Bank's Counsel................................... 30
8.3 Compliance................................................... 30
8.4 Bank's Fees and Expenses..................................... 30
8.5 Principal Payment............................................ 30
8.6 Conditions to Execution of this Agreement.................... 30
8.7 Acquisitions by the Borrowers................................ 31
8.8 Termination of Standby Letters of Credit..................... 31
ARTICLE IX
AFFIRMATIVE COVENANTS................................................... 31
9.1 Financial Reporting.......................................... 31
9.2 Taxes and Claims............................................. 33
9.3 Insurance.................................................... 33
9.4 Corporate Existence.......................................... 34
9.5 Chance in Management......................................... 34
9.6 Compliance With Laws Generally............................... 34
9.7 Books and Records; Inspection................................ 34
9.8 Litigation................................................... 34
9.9 Notification of Certain Events, Events of
Default and Adverse Developments............................. 34
9.10 Addition of New Subsidiaries as Borrowers.................... 35
9.11 Debt Service Guaranty........................................ 35
9.12 Receivables Collection....................................... 36
9.13 Cash Management System....................................... 36
9.14 Inspections.................................................. 36
9.15 Further Assurances........................................... 36
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9.16 Attendance at Closings of Eligible Acquisitions............. 37
ARTICLE X
FINANCIAL COVENANTS.................................................... 37
10.1 Net Worth................................................... 37
10.2 Reserved.................................................... 37
10.3 Current Ratio............................................... 37
10.4 Total Debt Service Ratio.................................... 37
10.5 Subordinated Debt Service Ratio............................. 38
10.6 Leverage Ratio.............................................. 38
10.7 Intangible Levels........................................... 38
ARTICLE XI
NEGATIVE COVENANTS..................................................... 38
11.1 Impairment of Security...................................... 38
11.2 No Change in Control........................................ 39
11.3 Stock in Subsidiaries....................................... 39
11.4 Sale, Transfer or Encumbrance of Collateral................. 39
11.5 No Additional Indebtedness.................................. 39
11.6 Merger; Dissolution or Sale of Assets....................... 39
11.7 Distributions or Dividends to Stockholders.................. 40
11.8 Payments, Advances and Salaries to Stockholders............. 40
11.9 ERISA Compliance............................................ 40
11.10 Purposes.................................................... 41
ARTICLE XII
EVENTS OF DEFAULT; REMEDIES............................................ 41
12.1 Events of Default........................................... 41
12.2 Remedies.................................................... 43
ARTICLE XIII
MISCELLANEOUS.......................................................... 46
13.1 Notices..................................................... 46
13.2 Survival of Agreement; Successors and Assigns............... 47
13.3 Fees and Expenses of Bank................................... 48
13.4 Applicable Law; Jurisdiction; Consent to Service
of Process.................................................. 49
13.5 Waiver of Trial by Jury..................................... 49
13.6 Confession of Judgment...................................... 50
13.7 Modifications............................................... 50
13.8 No Waiver of Rights by Bank................................. 50
13.9 No Liability of Bank........................................ 50
13.10 Indemnification............................................. 51
13.11 No Partnership.............................................. 52
13.12 Time of Essence............................................. 52
13.13 Illegality.................................................. 52
13.14 Counterparts................................................ 52
13.15 Captions and Headings....................................... 52
13.16 Borrowers' Obligations Absolute and
Unconditional............................................... 52
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13.17 Extension of Termination Date............................... 52
13.18 Confidentiality............................................. 53
13.19 Initial Public Offering..................................... 53
EXHIBITS AND SCHEDULES
----------------------
EXHIBIT A - Form of Application and Agreement for Standby
Letter of Credit
EXHIBIT B - Form of Borrowing Base Certificate Production
Group Int'l, Inc. et al. Working Capital Line
-- ---
of Credit
EXHIBIT C - [Not used.]
EXHIBIT D - Form of Subordination Agreement
EXHIBIT E - Form of Assumption Agreement for New
Subsidiaries
EXHIBIT F - Form of Debt Service Guaranty
Schedule I - Description of Permitted Liens
Schedule II - Schedule of Prior Names; Trade Names;
Principal Places of Business
Schedule III - Field Examination Conditions to be Corrected
Schedule IV - Restricted Borrowers
Schedule V - Officers and Directors
Schedule VI - Outstanding Subordinated Financings
Schedule VII - Conditions Subsequent to Closing
iv
AMENDED AND RESTATED
FINANCING AND SECURITY AGREEMENT
--------------------------------
THIS AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT (this
"Agreement") is made as of this 27 day of November, 1996, among THE FIRST
NATIONAL BANK OF MARYLAND, a national banking association (the "Bank"), and
PRODUCTION GROUP INTERNATIONAL, INC., a Delaware corporation ("Production
Group"), and its subsidiaries, EXECUTOURS, INC., a Massachusetts corporation,
SAFARIS EVENTS, INC., a Virginia corporation, KALEIDOSCOPE EVENTS, INC., a
Virginia corporation, AGENDA WASHINGTON INC., a Virginia corporation,
WASHINGTON, INC., a District of Columbia corporation, C.H.L. VENTURES, INC., a
California corporation, PGI ACQUISITION COMPANY E, a Virginia corporation, PGI
COMPANY A, a Virginia corporation, PGI COMPANY B, a Virginia corporation, PGI
COMPANY F, a Virginia corporation, PGI COMPANY I, a Virginia corporation, PGI
COMPANY S, a Virginia corporation, PGI COMPANY H, a Virginia corporation, PGI
COMPANY P, a Virginia corporation, PGI COMPANY Q, a Virginia corporation, PGI
COMPANY R, a Virginia corporation, PGI COMPANY J, a Virginia corporation, PGI
COMPANY X, a Virginia corporation, SPEARHEAD EXHIBITIONS LIMITED, a United
Kingdom corporation, PGI EUROPE LIMITED, a United Kingdom corporation, ▇▇▇ ▇▇▇▇▇
PRODUCTIONS, WASHINGTON, D.C., INC., a District of Columbia corporation, ▇▇▇
▇▇▇▇▇ PRODUCTIONS, INC., a New York corporation, ▇▇▇ ▇▇▇▇▇ PRODUCTIONS, NEW
JERSEY, INC., a New Jersey corporation, ▇▇▇ ▇▇▇▇▇ PRODUCTIONS-ATLANTA, INC.,
Georgia corporation, ▇▇▇ ▇▇▇▇▇ PRODUCTIONS WEST, INC., a California corporation,
RMR PRODUCTION SERVICES, INC., an Arizona corporation, TIMBERLINE WORLDWIDE,
INC., an Arizona corporation, and EPIC ENTERPRISES, INC., a California
corporation, and EPIC ENTERPRISES OF NEVADA, INC., a Nevada corporation
(Production Group and each of its identified subsidiaries being hereinafter
identified each as a "Borrower" and collectively as the "Borrowers").
RECITALS
--------
WHEREAS, the Borrowers and the Bank entered into a Financing and Security
Agreement, dated as of October 18, 1995 (the "Original Agreement"), pursuant to
which the Bank agreed, subject to the conditions set forth therein, to provide a
Working Capital Line of Credit, an Acquisition Facility and an Equipment
Facility (collectively, the "Credit Facilities") for certain financing needs
arising from time to time of the Borrowers;
WHEREAS, pursuant to the Credit Facilities, the Borrowers have become
obligated to the Bank to repay, inter alia, outstanding principal in an amount
----- ----
equal to $5,794,444.48 as of November 27, 1996;
WHEREAS, the Borrowers and the Bank have agreed to amend and restate the
Original Agreement to, among other things, provide for (i) the modification of
certain covenants, (ii) the addition of certain financial covenants and (iii)
the modification of certain terms of the Credit Facilities;
WHEREAS, the Borrowers hereby acknowledge, and the Borrowers and the Bank
hereby agree that the amendment and restatement of the Original Agreement shall
not (i) constitute a novation or other satisfaction of any indebtedness or
obligation owed to the Bank by the Borrowers pursuant to the Original Agreement
or otherwise, (ii) constitute the creation of indebtedness separate and apart
from any existing indebtedness of the Borrowers and (iii) create a security
interest separate and apart from any security interest previously created by the
Borrowers for the benefit of the Bank; and
WHEREAS, the Borrowers and the Bank have agreed to amend and restate the
Original Agreement to be effective as of the date hereof.
AGREEMENTS
----------
NOW, THEREFORE, in consideration of the mutual agreements herein and other
good and valuable consideration, the Borrowers and the Bank hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 Defined Terms. As used in this Agreement, the following
-------------
terms shall have the following meanings:
"Acquisition Facility" shall mean the line of credit established
--------------------
pursuant to Article III of this Agreement to finance Eligible Acquisitions and
-----------
the purchase of shares from minority shareholders by any Borrower.
"Acquisition Facility Commitment" shall mean the commitment by the
-------------------------------
Bank to make direct loan advances to any Borrower to fund any of the approved
purposes for which the Acquisition Facility was established, in the aggregate
principal amount at any one time outstanding not to exceed United States Five
Million Dollars (U.S. $5,000,000).
"Acquisition Facility Obligations" shall mean the joint and several
--------------------------------
obligations of the Borrowers to repay all advances of the Acquisition Facility,
with interest thereon, at the times and in the amounts provided in the
Acquisition Facility Promissory Note, and any related obligations for the
payment of fees and expenses provided for by the terms of this Agreement.
"Acquisition Facility Promissory Note" shall mean the promissory note
------------------------------------
of even date herewith executed by the Borrowers in favor of the Bank and
containing the terms and conditions under which the principal amount of advances
made under the Acquisition Facility, together with interest thereon, will be
repaid.
2
"Advance Rate Percentage" shall mean 80% of the Borrowers' Eligible
-----------------------
Receivables for purposes of determining the Receivables Collateral Value.
"Agreement" shall mean this Amended and Restated Financing and
---------
Security Agreement, as it may from time to time be amended, supplemented or
otherwise modified in accordance with the terms hereof.
"Application and Agreement for Standby Letter of Credit" shall mean an
------------------------------------------------------
Application and Agreement for Standby Letter of Credit in the form attached
hereto as Exhibit A and made a part hereof, or in such other form which is
---------
provided by the Bank to the Borrowers as the form of Application and Agreement
which is then in use by the Bank in connection with the issuance of its Standby
Letters of Credit, which is executed by a Borrower and delivered to the Bank in
connection with a request for the issuance of a Standby Letter of Credit.
"Available Acquisition Facility Commitment" shall mean, at any
-----------------------------------------
particular time, an amount equal to the amount of the Acquisition Facility
Commitment at such time, minus the Utilized Portion of the Acquisition Facility
-----
Commitment.
"Available Equipment Facility Commitment" shall mean, at any
---------------------------------------
particular time, an amount equal to the amount of the Equipment Facility
Commitment at such time, minus the Utilized Portion of the Equipment Facility
-----
Commitment.
"Available Working Capital Line of Credit Commitment" shall mean, at
---------------------------------------------------
any particular time, an amount equal to the lesser of (a) the amount of the
Working Capital Line of Credit Commitment at such time, and (b) the Receivables
Collateral Value at such time, minus the Utilized Portion of the Working Capital
-----
Line of Credit Commitment.
"Bank Commitment Letter" shall mean the Bank's Commitment Letter dated
----------------------
August 30, 1995, addressed to the Borrowers.
"Borrowers' Account" shall mean the Production Group account with the
------------------
Bank.
"Borrowers' Obligations" shall mean, collectively, (i) the Acquisition
----------------------
Facility Obligations, the Equipment Facility Obligations and the Working Capital
Line of Credit Obligations, together with all other sums due from the Borrowers
to the Bank under the terms of the Financing Documents and (ii) all covenants,
agreements and requirements of the Borrowers under the terms of this Agreement
and the other Financing Documents.
"Business Day" shall mean a day on which commercial banking
------------
institutions are open for business in Baltimore, Maryland.
3
"Collateral" shall have the meaning given to such term in Section 6.2
---------- -----------
of this Agreement.
"Commitment Period" shall mean the period during which each of the
-----------------
Acquisition Facility Commitment, the Equipment Facility Commitment and the
Working Capital Facility Commitment, respectively, will be available to be
accessed by the Borrowers, which period begins on the date of this Agreement and
ends on the Termination Date applicable to each of the Credit Facilities.
"Consolidated EBITDA" shall mean an amount equal to the consolidated
-------------------
net income (or loss) of Borrowers as determined under GAAP for the period in
question, before (i) any provision or benefit for income taxes, (ii) any
interest income or expense, and (iii) any depreciation and amortization
(including any amortization related to granted options on the capital stock of
the Borrowers), all as determined under GAAP.
"Credit Facilities" shall mean, collectively, the Acquisition
-----------------
Facility, the Equipment Facility and the Working Capital Line of Credit.
"Current Assets" shall mean the current assets of the Borrowers as
--------------
determined under GAAP and shall include, but not be limited to, cash and
investments, Receivables and prepaid expenses.
"Current Liabilities" shall mean the current liabilities of the
-------------------
Borrowers as determined under GAAP and shall include, but not be limited to,
accounts payable, accrued expenses and current portion of long term liabilities.
"Current Ratio" shall mean the ratio of the Borrowers' Current Assets
-------------
to Current Liabilities.
"Default" shall mean any of the events specified in Section 12.1
------- ------------
hereof, whether or not any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Dollars" and the sign "$" shall mean dollars in lawful money of the
------- -
United States of America and, in relation to all payments in Dollars hereunder,
(i) same day funds paid through the Baltimore Clearing House Interbank Payments
Systems, (ii) immediately available funds paid through the Baltimore Federal
Reserve Bank or (iii) such other funds as may then be required by the customary
procedure of member banks of the Baltimore Clearing House Association for the
settlement of payments in Dollars.
"Eligible Acquisitions" shall mean any corporation which satisfies the
---------------------
following eligibility requirements or is otherwise approved in writing by the
Bank for financing under the Acquisition Facility:
4
(a) at least 30 days prior to the proposed date of acquisition,
Production Group has delivered to the Bank notice of the pending Eligible
Acquisition and financial information concerning (i) the entity to be acquired
and (ii) the effects of such acquisition on the Borrowers on a consolidated
basis all in form and substance satisfactory to Bank in its sole discretion;
(b) the corporation conducts a business which is within the same or
related lines of service businesses as those conducted by the Borrowers;
(c) the corporation has not been generating net losses on an
historical basis, taking into account any adjustments which are typically made
in accordance with GAAP as interpreted by the "Big 6" international accounting
firms when filing pro-forma post-acquisition financial statements with the
Securities and Exchange Commission (the "SEC") (i.e. the inclusion of debt and
related interest costs incurred to finance the acquisition and the exclusion of
income, charges and operating costs and owner compensation beyond customary and
reasonable salary all of which are non-recurring in nature and which will be
non-recurring following the acquisition);
(d) Production Group has delivered to the Bank at least 10 Business
Days prior to the proposed date of consummation of such Eligible Acquisition a
certificate of its chief financial officer or chief executive officer and, in
---
the event that the total purchase price of the Eligible Acquisition exceeds
$2,000,000, of Production Group's independent auditors or another independent
auditor who is engaged by Production Group to represent it in connection with
the Acquisition, to the effect that, (i) on a pro-forma combined basis for the
most recent fiscal quarter of the Borrowers, the purchase of the Eligible
Acquisition, if it had occurred during such fiscal quarter, would not have
resulted in a violation of any of the financial covenants contained in the
Financing Documents; taking into account any adjustments which are typically
made in accordance with GAAP as interpreted by the "Big 6" international
accounting firms when filing pro-forma post-acquisition financial statements
with the SEC (i.e. the inclusion of debt and related interest costs incurred to
finance the acquisition and the exclusion of income, charges and operating costs
which are non-recurring in nature and which will be nonrecurring following the
acquisition) and (ii) on a pro-forma basis for (x) the most recent fiscal year
based on a combination of the Borrowers' consolidated financial information for
such period and the most recent twelve months' financial information available
for the corporation to be acquired pursuant to the Acquisition Facility, and (y)
each fiscal year remaining until the Termination Date of the Acquisition
Facility based on both (1) the Borrowers' projections of financial condition
delivered in accordance with Section 7.7 hereof and (2) the Borrowers'
-----------
projections of financial condition delivered in accordance with Section 9.1(d)
--------------
hereof, the purchase of the Eligible Acquisition, if it had occurred during the
5
applicable period, would not have resulted in a violation of the financial
covenants set forth in Section 10.4 hereof;
------------
(e) any financing extended to the Borrowers by one or more sellers of
the corporation shall be (i) repaid (on an average weighted basis) over a period
in excess of that which would be determined on the basis of (x) a three-year
straight-line amortization schedule for any financing extended prior to the date
of this Agreement and (y) a two-year straight-line amortization schedule for any
financing extended on or after the date of this Agreement, except for those
financings outstanding on the date hereof and listed on Schedule VI attached
hereto, which does not satisfy this requirement and (ii) subordinated as to
collection to the Borrowers' Obligations to the Bank in respect of the
Acquisition Facility, which subordination shall be documented in an agreement
among the seller(s), Borrowers and Bank in substantially the form attached
hereto as Exhibit D and made a part hereof;
---------
(f) Production Group has delivered to the Bank at least 10 Business
Days prior to the date of consummation of such Eligible Acquisition a
certificate of its chief financial officer or chief executive officer to the
effect that the purchase by the Borrowers of the corporation shall not
immediately or with the passage of time cause a Default or an Event of Default
under this Agreement or the other Financing Documents; and
(g) the purchase by the Borrowers of the corporation shall not
immediately or with the passage of time cause a Default or an Event of Default
under the Financing Documents
"Eligible Receivable" and "Eligible Receivables" mean, at any time of
------------------- --------------------
determination thereof, each account which conforms and continues to conform to
the following criteria to the satisfaction of the Bank. A Receivable which is
at any time an Eligible Receivable, but which subsequently fails to meet the
requirements of the Bank for eligibility shall cease for all purposes to be an
Eligible Receivable. In addition to any other criteria for eligibility
determined by the Bank, a Receivable shall not be deemed to be eligible unless
it meets the following minimum requirements (except as the Bank may otherwise
expressly consent in writing):
(a) the Receivable is genuine and is in all respects what it purports
to be;
(b) the Receivable arose in the ordinary course of the business of any
Borrower from a bona fide outright sale or lease of goods by a Borrower, or from
services performed by a Borrower, and (i) such goods have been delivered to the
appropriate account debtor or its designees, the appropriate Borrower has in its
possession shipping and delivery receipts evidencing such shipment and delivery,
no return, rejection or repossession has occurred, and such goods have been
finally accepted by the account debtor, or
6
(ii) such services have been satisfactorily completed and accepted by the
appropriate account debtor;
(c) the Receivable is based upon an enforceable written contract for
goods delivered or for services performed, and the same were shipped, held or
performed in accordance with such order or contract; it being the intention that
advance ▇▇▇▇▇▇▇▇ not be considered as Receivables until such time as performance
is completed by the relevant Borrower;
(d) the title of the appropriate Borrower to the Receivable is
absolute and is not subject to any lien or security interest except in favor of
the Bank, and the appropriate Borrower otherwise has the full and unqualified
right and power to assign and grant a security interest in the Receivable to the
Bank as security and collateral for the payment of the Borrowers' Obligations in
respect hereof;
(e) the amount, which is shown on the books of the appropriate
Borrower and on any invoice, certificate, schedule or statement delivered to the
Bank, is owing to such borrower and no partial payment has been received unless
accurately reflected and deducted from the principal amount of the Receivable
then due and owing;
(f) the Receivable is not at that time and will not to the knowledge
of the Borrower be subject to any claim of reduction, counterclaim, setoff,
recoupment or other defense in law or equity, or any claim for credit,
allowances or adjustments by the account debtor because of returned, inferior or
damaged goods or unsatisfactory services, or for any other reason;
(g) the account debtor has not returned or refused to retain, or
otherwise notified the Borrower of any dispute concerning, or claimed
nonconformity of, any of the goods or services from the sale of which gave rise
to the account;
(h) the account debtor is not the subject of any bankruptcy or
insolvency proceedings, and the Receivable is not in the Bank's opinion unlikely
to be paid because of insolvency, potential bankruptcy, death or any other
reason;
(i) the Receivable is not subject to any potential claim of a surety
or bonding company;
(j) the Receivable does not arise from any transactions with any
affiliated entity or person of any Borrower, or employee of any Borrower;
(k) the Receivable does not represent the payment obligation of any
account debtor incorporated in or primarily conducting business outside of the
United States or United Kingdom, unless (i) the transaction giving rise to the
Receivable is supported by a letter of credit, acceptance or other credit
7
enhancement acceptable to the Bank or (ii) the Receivable represents a credit
risk which is otherwise acceptable to the Bank, is denominated in U.S. Dollars,
British Sterling or other currency acceptable to the Bank and the assignment of
the Receivable to the Bank as security for the Borrowers' Obligations has been
perfected to the satisfaction of the Bank;
(l) the Receivable does not arise from any sales on approval or
consignments, and the Receivable is not otherwise subject to any repurchase or
return agreements;
(m) if the account debtor is the United States or any instrumentality
thereof, the appropriate Borrower has assigned the rights to receive payment to
the Bank in compliance with the Assignment of Claims Act of 1940, as amended,
and any applicable regulations;
(n) the aggregate dollar amount of Receivables due from any single
account debtor does not exceed (i) 10% of the Borrower's aggregate annual
revenue and (ii) 25% of the Borrower's aggregate Receivables represented in any
---
one monthly aging report;
(o) no more than 120 days have elapsed from the invoice date and no
more than 90 days have elapsed from the date on which payment was due under the
invoice;
(p) the Receivable is not payable by an account debtor with respect to
which 50% or more of the dollar amount of such account debtor's Receivables to
any Borrower are more than 120 days from the date of invoice or more than 90
days due from the date on which payment was due under the invoice;
(q) the Receivable is not evidenced by Chattel Paper or Instruments
unless and until (i) the Bank has agreed in writing that it may be deemed
eligible and (ii) all originals of such Chattel Paper or Instruments have been
endorsed and delivered to the Bank;
(r) the Receivable is not subject to any offset and is not payable by
any account debtor who is owed any sum by any Borrower except for unrelated
trade debt owned by any Borrower to a provider of services in the ordinary
course of business;
(s) no part of the Receivable represents a progress billing or a
retainage;
(t) the Bank in the exercise of its sole and absolute discretion has
not deemed the Receivable ineligible because of uncertainty as to the
creditworthiness of the account debtor or because the Bank otherwise considers
the collateral value thereof to the Bank to be impaired or its ability to
realize such value to be insecure;
8
(u) on December 31, 1996, the Bank possesses a perfected, first
priority security interest in the assets (including the Receivables) of each of
the Borrowers listed on Schedule IV attached hereto as demonstrated by a UCC-11
search form or other comparable document obtained by the Bank at the sole cost
and expense of the Borrowers; provided, however, that to the extent the Bank
-------- -------
does not possess such perfected, first priority security interest on such date
the Borrowers, at the Bank's sole discretion and to its satisfaction, may take
all necessary steps to cure such defect as soon as possible; and
(v) to the extent Safaris Events, Inc. is the Borrower which has
performed the services related to the Receivable, the Receivable shall have been
reported on an actual invoice date satisfactory to the Bank.
In the event of any dispute, under the foregoing criteria, as to
whether an account is, or has ceased to be, an Eligible Receivable, the decision
of the Bank in the exercise of its sole and absolute discretion shall control.
"Equipment" shall mean goods purchased for or used primarily in
---------
business in which a security interest in favor of the Bank may be perfected by
the filing of UCC-1 financing statements, and shall include capital assets that
are depreciated in accordance with the Internal Revenue Code of 1986, as
amended.
"Equipment Facility" shall mean the line of credit established
------------------
pursuant to Article IV of this Agreement to fund the purchase of new equipment
----------
or refinancing of existing equipment financing by any Borrower.
"Equipment Facility Commitment" shall mean the commitment by the Bank
-----------------------------
to make direct loan advances to any Borrower to fund any of the approved
purposes for which the Equipment Facility was established in the aggregate
principal amount at any one time outstanding not to exceed United States One
Million Dollars (U.S. $1,000,000).
"Equipment Facility Obligations" shall mean the joint and several
------------------------------
obligations of the Borrowers to repay all advances of the Equipment Facility,
with interest thereon, at the times and in the amounts provided in the Equipment
Facility Promissory Note, and any related obligations for the payment of fees
and expenses provided for by the terms of this Agreement.
"Equipment Facility Promissory Note" shall mean the promissory note
----------------------------------
of even date herewith executed by the Borrowers in favor of the Bank and
containing the terms and conditions under which the principal amount of advances
made under the Equipment Facility, together with interest thereon, will be
repaid.
"Event of Default" shall mean any of the events specified in Section
---------------- -------
12.1 hereof, provided that any requirement for the
----
9
giving of notice, the lapse of time, or both, or any other condition, has been
satisfied.
"Expiry Date" shall mean, with respect to any Standby Letter of Credit
-----------
issued by the Bank hereunder, the date upon which the Bank is no longer
obligated to honor a drawing upon such Standby Letter of Credit.
"Financing Documents" shall mean, collectively, this Agreement, all
-------------------
Applications and Agreements for Standby Letters of Credit and Standby Letters of
Credit issued pursuant thereto, the Acquisition Facility Promissory Note, the
Equipment Facility Promissory Note and the Working Capital Line of Credit
Promissory Note and any other documents, certificates and agreements which are
hereafter executed and delivered by one or more Borrowers or any other Person in
connection with any of the Borrowers' Obligations.
"GAAP" shall mean United States generally accepted accounting
----
principles applied on a uniform basis consistent with principles promulgated or
adopted by the Financial Accounting Standards Board ("FASB") and its
predecessors in effect on August 31, 1996 and to the extent consistent with such
principles, the accounting practice of the Borrowers reflected in their
financial statements for their most recently ended fiscal year; provided that,
if FASB, after the date hereof, shall promulgate or adopt principles that are
materially different from those in effect on August 31, 1996, the Borrowers and
the Bank will endeavor in good faith to amend this Agreement in order to amend
the definition of GAAP to include different principles and provisions so as to
reflect in substance the same limitations and restrictions in effect prior to
such amendment to the definition of GAAP hereunder.
"Governmental Authority or Authorities" shall mean any governmental or
-------------------------------------
quasi-governmental entity, court or tribunal including, without limitation, any
department, commission, board, bureau, agency, administration, service or other
instrumentality of any foreign or domestic governmental entity.
"Initial Public Offering" shall mean the initial offering by
-----------------------
Production Group of a portion of its capital stock in a public or private
transaction.
"Intangibles" shall mean intangible assets as determined under GAAP
-----------
for the period in question and shall include but not be limited to goodwill,
investment in subsidiaries, other assets deposits, general intangibles and video
libraries.
"Leverage Ratio" shall mean, for any date, the ratio of all
--------------
outstanding borrowings and indebtedness (including but not limited to the face
amount of any letters of credit and the portion of any amount payable in
connection with any borrowing or indebtedness included in Current Liabilities
but specifically excluding trade payables incurred in the ordinary course of
business) of the Borrowers on such date to Total Equity on such date.
10
"Original Agreement" shall have the meaning given such term in the
------------------
Recitals herein.
"Participating Interest" shall mean the acquisition of a financial,
----------------------
economic or voting interest in any asset.
"Permitted Liens" shall mean (a) liens or security interests in favor
---------------
of the Bank; (b) existing liens or leases described in Schedule I attached
----------
hereto and made a part hereof; (c) liens arising or created in the future with
the prior written consent of the Bank; and (d) purchase money security interests
in equipment, except to the extent that such equipment is financed or refinanced
under the Equipment Facility.
"Person" shall mean an individual, a partnership, a limited liability
------
company, a corporation, a trust, any other organization or entity or any
government or governmental body or authority.
"Prime Rate" shall mean the greater of (a) the floating and
----------
fluctuating per annum prime rate of interest established and declared by the
Bank from time to time, and (b) the average rate, rounded to the nearest one-
tenth of one percent (0.1%), for 90-day maturity dealer-placed commercial paper
for the week most recently reported in the Federal Reserve Statistical Release
number H15, entitled "Selected Interest Rates" (or any succeeding publication).
The Prime Rate is an index determined by the Bank and does not represent the
lowest rate of interest charged by the Bank to any borrower or class of
borrowers. Each time the Prime Rate shall change, the rate of interest, which
is applicable to any of the Borrowers' Obligations bear interest on the basis of
the Prime Rate, shall change immediately and contemporaneously with each such
change of the Prime Rate.
"Proceeds" or "proceeds" shall mean, when used with respect to any
-------- --------
of the Collateral, all cash and non-cash proceeds within the meaning of the
Uniform Commercial Code as adopted by the state in which the Collateral to which
such Proceeds relate is or was located, and shall include the proceeds of any
and all insurance policies.
"Receivables Collateral Value" shall mean the Advance Rate Percentage
----------------------------
multiplied by the aggregate amount of the Borrowers' Eligible Receivables for
purposes of determining the Available Working Capital Line of Credit Commitment.
"Standby Letter of Credit" shall mean a Standby Letter of Credit
------------------------
issued by the Bank under the Working Capital Line of Credit to a designated
beneficiary for the account of a Borrower, upon receipt of an executed
Application and Agreement for Standby Letter of Credit, which Standby Letter of
Credit will be in form and content satisfactory to the Bank in all respects.
11
"Subsidiary" shall mean, with respect to any Person, any other Person
----------
owning or controlling (a) securities having ordinary voting power to elect a
majority of the board of directors (or Persons having a similar function), or
(b) other ownership interests constituting a majority voting interest.
"Subordinated Debt Service Ratio" shall mean, for any date, the ratio
-------------------------------
of Consolidated EBITDA to Subordinated Debt Service.
"Subordinated Debt Service" shall mean, for any date, an amount equal
-------------------------
to the sum of all regularly scheduled payments of principal, interest, fees and
other amounts payable during the period in question by the Borrowers with
respect to obligations, contingent or otherwise, subordinate in right of payment
to the Borrowers' Obligations including any redeemable common stock.
"Taxes" shall mean the taxes and assessments whether general or
-----
special, ordinary or extraordinary, or foreseen or unforeseen, which at any time
may be assessed, levied, confirmed or imposed on any Borrower or on any of its
properties or assets or any part thereof or in respect of any of its franchises,
businesses, income or profits.
"Termination Date" shall mean, for each of the Credit Facilities, the
----------------
date set forth below:
Credit Facility Termination Date
---------------- ----------------
Acquisition Facility May 31, 1998
Equipment Facility March 31, 1997
Working Capital Line of Credit March 31, 1997
(unless such date is not a Business Day, in which case the Termination Date
shall be the next succeeding Business Day), unless the Termination Date is
otherwise accelerated in accordance with Section 12.2 hereof or unless such
------------
Termination Date is extended in accordance with Section 13.17 hereof. The
-------------
effectiveness of this Agreement and of each of the other Financing Documents
shall not be determined on the basis of the Termination Date, it being the
intention of the parties that this Agreement and each of the other Financing
Documents remain in full force and effect until the Borrowers' Obligations have
been paid and performed in full.
"Total Debt Service Ratio" shall mean, on any date, the ratio of
------------------------
Consolidated EBITDA to Total Debt Service.
"Total Debt Service" shall mean, for any date, an amount equal to the
------------------
sum of all regularly scheduled payments of principal, interest, fees and other
amounts payable during the period in question with respect to all obligations
(excluding accounts payable outstanding 90 day or less), contingent or
otherwise, which in accordance with GAAP should be classified on a balance sheet
as liabilities(including obligations subordinate in right of payment
12
to the Borrowers' Obligations), but in any event including accounts payable
outstanding for more than 90 days, liabilities secured by any lien or security
interest on, or any pledge of, property of any of the Borrowers, whether or not
such secured liability is with or without recourse, capital leases and
subleases, redeemable common stock, letters of credit and contingent liabilities
(excluding endorsement of instruments for deposit or collection in the ordinary
course of business).
"Total Equity" shall mean all capital contributed to or retained by
------------
the Borrowers as may be referred to as shareholders' equity or another such term
in accordance with GAAP.
"Utilized Portion of the Acquisition Facility Commitment" shall mean
-------------------------------------------------------
the sum of all outstanding advances under the Acquisition Facility with respect
to which the Borrowers have not satisfied in full their Acquisition Facility
Obligations.
"Utilized Portion of the Equipment Facility Commitment" shall mean the
-----------------------------------------------------
sum of all outstanding advances under the Equipment Facility with respect to
which the Borrowers have not satisfied in full their Equipment Facility
Obligations.
"Utilized Portion of the Working Capital Line of Credit Commitment"
-----------------------------------------------------------------
shall mean the sum of (a) all outstanding loan advances with respect to which
the Borrowers have not satisfied in full their Working Capital Line of Credit
Advance Obligations, and (b) all amounts which have been drawn and not
reimbursed or are then available to be drawn by the beneficiaries of all Standby
Letters of Credit with respect to which the Borrowers have not satisfied in full
their Working Capital Line of Credit Obligations.
"Working Capital Line of Credit" shall mean the line of credit
------------------------------
established pursuant to Article II of this Agreement to provide direct loan
----------
advances and Standby Letters of Credit to finance the working capital needs of
any Borrower.
"Working Capital Line of Credit Commitment" shall mean the commitment
-----------------------------------------
by the Bank to make direct loan advances to any Borrower and to issue Standby
Letters of Credit for the account of any Borrower to satisfy any of the approved
financing needs for which the Working Capital Line of Credit was established,
the Borrowers' Obligations with respect to which shall not exceed United States
Four Million Dollars (U.S. $4,000,000) in the aggregate principal amount at any
one time outstanding.
"Working Capital Line of Credit Obligations" shall mean the joint and
------------------------------------------
several obligations of the Borrowers to repay all loan advances under the
Working Capital Line of Credit with interest thereon, at the time and in the
amounts provided in the Working Capital Line of Credit Promissory Note, and to
---
reimburse the Bank for all drawings under Standby Letters of Credit, with
interest thereon, at the times and in the amounts provided in the Applications
and Agreements for Standby Letters of Credit, and any
13
related obligations for the payment of fees and expenses provided for by the
terms of this Agreement.
"Working Capital Line of Credit Promissory Note" shall mean the
----------------------------------------------
promissory note of even date herewith executed by the Borrowers in favor of the
Bank and containing the terms and conditions under which the principal amount of
loan advances made under the Working Capital Line of Credit, together with
interest thereon, will be repaid.
Section 1.2 Uniform Commercial Code Terms.
-----------------------------
"Accounts," "Chattel Paper," "Contract Rights," "Equipment," "General
-------- ------------- --------------- --------- -------
Intangibles," "Instruments" and "Inventory" shall, in addition to any meaning
----------- ---------- ---------
given to such term in this Agreement, have the respective meanings as are given
to those terms in the Uniform Commercial Code as presently adopted and in effect
in the States in which any portion of the Collateral may be located, and shall
also cover, without limitation, (a) any property specifically included in this
Amended and Restated Agreement, (b) all property included in these respective
terms, whether now owned or existing or hereafter acquired or created and (c)
all proceeds (cash and noncash) of the foregoing and proceeds of such proceeds.
"Receivables" shall mean the Borrower's now owned or hereafter
-----------
acquired Accounts, Chattel Paper, Contract Rights, General Intangibles and
Instruments, and all cash and non-cash proceeds thereof and proceeds of such
proceeds.
Section 1.3 Accounting Terms. Unless specifically provided otherwise,
----------------
all accounting terms (such as, by way of example, "Tangible Net Worth," "Net
Worth," "Debt," and "Debt Service" shall have the definitions given to them in
accordance with GAAP as applied to the applicable Person and its Subsidiaries,
if any, on a consistent basis by its accountants in the preparation of its
previous annual financial statements, and unless otherwise indicated, all
accounting terms and covenants shall be applied on a consolidated basis. For
purposes of the financial covenants contained in Article X of this Agreement,
---------
subordinated debt which satisfies the requirements of clause (d) of the
definition of "Eligible Acquisitions" shall be treated as equity.
Section 1.4 ERISA Terms. Certain terms used in this Agreement are
-----------
defined in the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or are otherwise defined in the Internal Revenue Code of 1986, as
amended (the "Code"). When and if used in this Agreement, such terms shall have
the meanings given them in ERISA. Specifically, the following terms shall have
the following meanings:
"Accumulated Funding Deficiency" means an accumulated funding
------------------------------
deficiency, as defined in Section 302 of ERISA or Section 412(a) of the Code.
14
"Commonly Controlled Entity" means any Subsidiary or any other trade
--------------------------
or business (whether or not incorporated) which is under "common control" (as
defined in the Code) and of which any Borrower or any of its Subsidiaries is a
part.
"Multiemployer Plan" means a multiemployer plan (as defined in ERISA)
------------------
to which any Borrower or any Commonly Controlled Entity, as appropriate, has or
had an obligation to contribute.
"Plan" means any pension, profit sharing, savings, stock bonus or
----
other deferred compensation plan which is subject to the requirements of ERISA,
together with any related trusts.
"Prohibited Transaction" means a "prohibited transaction" as defined
----------------------
in Section 406 of ERISA or Section 4975 of the Code.
"Reportable Event" means a "reportable event" as defined by Title IV
----------------
of ERISA.
Section 1.5 Other Definitional Provisions.
-----------------------------
(a) All terms defined in this Agreement shall have their defined
meanings when used in any certificate or other document made or delivered
pursuant hereto.
(b) The words "hereof," "herein" and "hereunder" and words of similar
import, when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section, subsection,
schedule and exhibit references are to this Agreement unless otherwise
specified.
ARTICLE II
THE WORKING CAPITAL LINE OF CREDIT
Section 2.1 Working Capital Line of Credit Advances.
---------------------------------------
(a) Direct Loan Advances. Subject to the provisions of this
--------------------
Agreement, including the satisfaction of the conditions precedent described in
Article VIII hereof, the Bank agrees to make direct loan advances under the
------------
Working Capital Line of Credit in Dollars from time to time during the
Commitment Period, in amounts not to exceed the then Available Working Capital
Line of Credit Commitment. Direct loan advances will be made by the Bank under
the Working Capital Line of Credit in amounts of not less than $100,000 to the
Borrowers' Account within one Business Day following receipt by the Bank of a
written request therefor, together with a completed and executed Borrowing Base
Certificate substantially in the form of Exhibit B attached hereto and made a
---------
part hereof.
(b) Issuance of Standby Letters of Credit. Subject to the provisions
-------------------------------------
of this Agreement, including the satisfaction of the conditions precedent
described in Article VIII hereof, and upon
------------
15
receipt of a completed and executed Application and Agreement for Standby Letter
of Credit and a completed and executed Borrowing Base Certificate in
substantially the form attached hereto as Exhibit B and made a part hereof, the
---------
Bank agrees to issue from time to time during the Commitment Period, Standby
Letters of Credit under the Working Capital Line of Credit to beneficiaries
designated by a Borrower, in stated amounts denominated in Dollars, not to
exceed the then Available Working Capital Line of Credit Commitment. No Standby
Letter of Credit shall have an Expiry Date which is later than one calendar year
from the date of its issuance. In the event that the Expiry Date of any Standby
Letter of Credit occurs after the Termination Date, the Borrowers will be
obligated to prepay all of their Working Capital Line of Credit Obligations
relating to such Standby Letter of Credit on the day immediately preceding the
Termination Date. Standby Letters of Credit will be issued by the Bank as soon
as practicable following receipt of the related Application and Agreement, the
Borrowing Base Certificate and any other information which the Bank may require
in order to issue the requested Standby Letter of Credit all in form and content
satisfactory to the Bank in all respects.
Section 2.2 Repayment and Prepayment of Working Capital Line of Credit
----------------------------------------------------------
Advances.
--------
(a) Repayment and Prepayment of Direct Loan Advances. All direct loan
------------------------------------------------
advances under the Working Capital Line of Credit, together with interest
thereon, must be repaid in accordance with the terms of the Working Capital Line
of Credit Promissory Note. The Borrowers' Working Capital Line of Credit
Obligations with respect to direct loan advances may be prepaid under the terms
of the Working Capital Line of Credit Promissory Note and must be prepaid from
Proceeds of Receivables received by any Borrower, as provided in the Working
Capital Line of Credit Promissory Note.
(b) Reimbursement of Drawings under Standby Letters of Credit.
---------------------------------------------------------
(i) The Borrowers' Working Capital Line of Credit Obligations in
respect of each Standby Letter of Credit, including (without limitation) the
Borrowers' obligations to reimburse the Bank for all drawings honored under each
Standby Letter of Credit, together with any interest thereon, shall be set forth
in the related Application and Agreement.
(ii) The terms of each Application and Agreement for Standby Letters
of Credit are incorporated herein by reference. To the extent that there is any
direct conflict between the terms of any Application and Agreement for Standby
Letter of Credit and this Agreement, the terms of this Agreement will prevail,
except to the extent of (A) definitions contained in any Application and
Agreement or (B) any provision contained in any Application and Agreement which
subjects the Standby Letter of Credit issued pursuant thereto to the "Uniform
Customs and Practice for
16
Documentary Credits" of the International Chamber of Commerce, as adopted from
time to time.
(iii) (A) Working Capital Line of Credit Obligations may be prepaid by
the Borrowers, in whole but not in part for any one Standby Letter of Credit, at
any time, without premium or penalty; provided, however, that the Borrowers
shall give the Bank written notice of any prepayment no later than 12 noon on
the date of such prepayment, and the Borrowers shall not be entitled to (1) a
rebate of the amount so prepaid, unless the Standby Letter of Credit to which
such prepayment relates expires without having been drawn by the beneficiary
thereof, or (2) any interest on the amount so prepaid, unless the Borrowers
elect to prepay the Working Capital Line of Credit Obligations relating to
Standby Letters of Credit due to the imposition by the Bank of increased costs
in accordance with the provisions of Section 5.3 hereof, in which case, at the
-----------
time that either (A) the stated amount of each such Standby Letter of Credit is
fully drawn by the beneficiary thereof and such drawing is honored by the Bank,
or (B) each such Standby Letter of Credit expires without having been drawn by
the beneficiary thereof, the Bank shall remit to the Borrowers interest on the
amount prepaid, for the period from the date of prepayment to the date of the
occurrence described in clause (A) or (B) above, at a rate equal to the bid rate
obtainable by the Bank in the Interbank Eurodollar Market one Business Day after
the date of the prepayment for deposits in a principal amount equal to the
amount prepaid and with a maturity approximating the period from the date of
prepayment to the date of the occurrence described in clause (A) or (B), minus
all reasonable costs and expenses of the Bank incurred as a result of such
prepayment and/or as a result of the investment of such prepaid sums.
(B) Working Capital Line of Credit Obligations relating to any Standby
Letter of Credit having an Expiry Date which is later than the Termination Date
must be prepaid in full on the day immediately preceding the Termination Date,
as this date may be accelerated in accordance with Section 12.2(a) of this
---------------
Agreement or extended in the sole and absolute discretion of the Bank in
accordance with Section 13.17 of this Agreement.
-------------
(C) Unless the remaining Receivables Collateral Value continues to
support the then outstanding Borrowers' Working Capital Line of Credit
Obligations, the Borrowers' Working Capital Line of Credit Obligations relating
to Standby Letters of Credit must be prepaid from Proceeds of Receivables
received by any Borrower in amounts which exceed the Borrowers' Working Capital
Line of Credit Obligations relating to direct loan advances.
ARTICLE III
THE ACQUISITION FACILITY
Section 3.1 Advances under the Acquisition Facility. Subject to the
---------------------------------------
provisions of this Agreement, including the
17
satisfaction of the conditions precedent described in Article VIII hereof, the
------------
Bank agrees to make direct loan advances under the Acquisition Facility in
Dollars from time to time during the Commitment Period, in amounts not to exceed
the then Available Acquisition Facility Commitment. Direct loan advances under
the Acquisition Facility will be made by the Bank in amounts of not less than
$100,000 to the Borrowers' Account within one Business Day following receipt by
the Bank of written request therefore, together with all of the documents needed
to substantiate the financing of an Eligible Acquisition. On or about the
Effective Date of this Agreement and provided that all conditions precedent
described in Article VIII hereof have been satisfied, an initial advance of the
------------
Acquisition Facility will be made for the purpose of refinancing the bridge loan
in the original principal amount of $2,500,000 which was extended to the
Borrowers pursuant to the terms of the Bank Commitment Letter and related loan
documents.
Section 3.2 Repayment and Prepayment of Advances of the Acquisition
-------------------------------------------------------
Facility. The principal amount of all direct loan advances under the
--------
Acquisition Facility, together with interest thereon, must be repaid and may be
prepaid in accordance with the terms of the Acquisition Facility Promissory
Note.
ARTICLE IV
THE EQUIPMENT FACILITY
Section 4.1 Advances of the Equipment Facility. (a) Subject to the
----------------------------------
provisions of this Agreement, including the satisfaction of the conditions
precedent described in Article VIII hereof, the Bank agrees to make direct loan
------------
advances under the Equipment Facility in Dollars from time to time during the
Commitment Period, in the amount of up to 75% of the cost of new Equipment or
60% of the cost of used Equipment, not to exceed the then Available Equipment
Facility Commitment. Direct loan advances under the Equipment Facility will be
made by the Bank in amounts of not less than $100,000 to the Borrowers' Account
within one Business Day following receipt by take Bank of a written request
therefor, together with a completed and executed Borrowing Base Certificate in
substantially the form attached hereto as Exhibit B-2 and made a part hereof and
-----------
information describing the particular items of equipment to be financed or
refinanced and evidence of the release and termination of record of any liens
covering such equipment.
(b) At the written request of a Borrower, advances will be made in the
form of a loan by the Bank to fund the purchase of a portion of the cost of a
particular item of Equipment (with the balance of the purchase price to be paid
in cash by applicable Borrower prior to purchase), subject to an Equipment lease
to the Borrower.
Section 4.2 Repayment and Prepayment of Advances of the Equipment
-----------------------------------------------------
Facility. (a) The principal amount of all direct loan
--------
18
advances under the Equipment Facility, together with interest thereon, must be
repaid and may be prepaid in accordance with the terms of the Equipment Facility
Promissory Note. The Equipment Facility Obligations must be prepaid from any
Proceeds of the Equipment resulting from any sale for fair market value,
casualty or otherwise, as provided in the Equipment Facility Promissory Note.
(b) In the event that advances of the Equipment Facility are made to
finance a portion of the purchase price of the cost of a particular item of
equipment by the Bank, subject to a lease to a Borrower, the repayment of the
advances, together with the financing cost associated with the lease
transaction, will be made in accordance with an equipment lease between the Bank
and applicable Borrower, with the joint and several guaranty of the other
Borrowers, in the standard form used by the Bank in connection with similar
equipment lease transactions.
ARTICLE V
GENERAL CREDIT PROVISIONS
Section 5.1 Payments.
--------
(a) All payments by the Borrowers under this Agreement and the other
Financing Documents of the Borrowers' Obligations, except as may be otherwise
specifically provided in the Financing Documents, shall be made to the Bank at
its office located at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, not
later than 2:00 P.M., prevailing Washington, D.C. time, on the due date for such
payment. If any amount payable to the Bank hereunder by the Borrowers shall not
be paid when due or the payment is made in funds which are not immediately
available, the Borrowers agree to pay to the Bank interest, to the extent
permitted by applicable law, on such amount from such due date until such amount
shall be paid in full or until funds are immediately available, as the case may
be, at a rate which is at all times equal to (i) the then applicable rate for
such overdue Borrowers' Obligations, plus two percent (2%) per annum, or (ii) in
---- --- -----
the case of overdue fees and expense reimbursements as to which no interest rate
is anticipated, the Prime Rate, plus two percent (2%) per annum. If any amount
---- --- -----
payable hereunder shall become due on a day other than a Business Day, then such
due date shall be the next succeeding Business Day.
(b) All payments to be made hereunder by the Borrowers shall be made
in Dollars, without set-off or counterclaim and free and clear of, and without
deduction for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions, withholdings or
restrictions or conditions of any nature whatsoever now or hereafter imposed,
levied, collected, withheld or assessed against any Borrower (collectively
referred to in this paragraph as "Withholding Taxes"). If any Withholding Taxes
are imposed and required to be withheld from any such payment, the Borrowers
shall (i) increase
19
the amount of such payment so that the Bank will receive a net amount (after
giving effect to the payment of such additional amount and to the deduction of
all Withholding Taxes) equal to the amount due hereunder, (ii) pay such
Withholding Taxes to the appropriate taxing authority for the account of the
Bank, and (iii) as promptly as possible thereafter, send the Bank an original
receipt (or a copy thereof that has been stamped by the appropriate taxing
authority to certify payment) showing payment thereof, together with such
additional documentary evidence as the Bank may from time to time reasonably
require. If the Borrowers fail to perform their obligations to the Bank under
parts (ii) or (iii) of the preceding sentence, the Borrowers shall jointly and
severally indemnify the Bank for any such Withholding Taxes that are paid by the
Bank plus all incremental Withholding Taxes, interest or penalties that may
----
become payable as a consequence of such failure.
Section 5.2 Illegality. Notwithstanding any other provision of this
----------
Agreement, in the event that it shall become unlawful for the Bank to maintain
any aspect of its commitment to provide the Credit Facilities contemplated by
this Agreement, including (without limitation) the issuance of Credit Facilities
for the benefit of, or in connection with any transaction involving, any Person
resident of a country in which the Bank is not permitted by the Office of
Foreign Assets and Control of the United States Treasury Department or any other
Governmental Authority to do business, the commitment of the Bank to extend any
of the Credit Facilities so affected shall be cancelled, and, the Borrowers
agree to prepay to the Bank, within thirty (30) calendar days of receipt of
written demand by the Bank, all of the outstanding Borrowers' Obligations to
which that portion of the commitment which is terminated as a result of
illegality relates. The Bank agrees that it will take such steps as may be
reasonably available to it to avoid or mitigate any illegality, provided that
the taking of such steps shall not in the opinion of the Bank be materially
prejudicial to it.
Section 5.3 Increased Costs. In the event that any change in applicable
---------------
law, treaty, regulation or directive, or in the interpretation or application
thereof, or compliance by the Bank with any request (whether or not having the
force of law) of any relevant central bank or other comparable agency, shall
affect obligations such as the Borrowers' Obligations or credit facilities such
as the Credit Facilities with the result of any of the following:
(a) subject the Bank to any tax of any kind whatsoever (other than
Withholding Taxes referred to in Section 5.1(b) hereof for which the Bank was
--------------
reimbursed by the Borrowers pursuant to the terms of that Section) with respect
to this Agreement or any of the other Financing Documents, any portion of the
Credit Facilities which are contemplated to be extended hereunder or of the
Borrowers' Obligations with respect thereto, or any other transactions
contemplated hereby or by the terms of any of the other Financing Documents, or
20
(b) change the basis of taxation of payments to the Bank of any
portion of the Borrowers' Obligations, fees, commissions or any other amounts
payable under this Agreement or under the other Financing Documents (except for
changes in the rate of tax on the overall net income of the Bank), or
(c) impose, modify or deem applicable any reserve, special deposit or
similar requirement against foreign assets held by, or deposits in or for the
account of, or advances or loans by, or acceptances created by, or any other
acquisition of funds by, any office of the Bank, or
(d) increase the amount of capital required or expected to be
maintained by the Bank, or by any corporation controlling the Bank (a "Parent"),
or reduce the rate of return on capital earned by the Bank or any Parent, (as
determined by the Bank or any Parent taking into consideration their internal
policies with respect to capital adequacy and desired return on capital), which
increased capital or reduced rate of return on capital is applied to assets such
as the Credit Facilities or Borrowers' Obligations or any portion thereof, or
(e) impose upon the Bank any other condition with respect to this
Agreement or the transactions contemplated hereby or by the other Financing
Documents, the result of which is to increase the actual cost to the Bank of
extending any of the Credit Facilities under this Agreement or the other
Financing Documents or to reduce any amount receivable by the Bank under this
Agreement or under the other Financing Documents or to increase the capital or
reduce the rate of return on capital which the Bank or any Parent is required or
expected to maintain as a result of this Agreement, the other Financing
Documents, the Credit Facilities, the Borrowers' Obligations or any portion
thereof, then the Borrowers shall pay to the Bank within thirty (30) days of a
----
written demand by the Bank, additional amounts which will compensate the Bank or
any Parent so affected for such increased cost, reduced amount Receivable,
increased capital or reduced return on capital, as the case may be. Each such
demand by the Bank shall be accompanied by a certificate setting forth in
reasonable detail (i) the change that gave rise to such increased cost, reduced
amount receivable, increased capital or reduced rate of return on capital, (ii)
the additional amounts payable pursuant to the foregoing sentence, and (iii) a
calculation of such amount, which certificate shall be conclusive absent
manifest error.
Upon the occurrence of any of the foregoing events, the Borrowers
shall have the option, upon not less than five (5) Business Days' prior written
notice to the Bank, to prepay to the Bank all of the then outstanding Borrowers'
Obligations to which such increased costs relate and all other related sums due
by the Borrowers under the terms of this Agreement and the other Financing
Documents, in which event that portion of the Bank's commitment to extend the
Credit Facilities so affected shall immediately be cancelled. In the event that
the Borrowers elect to prepay the
21
Borrowers' Obligations or any portion thereof in accordance with the preceding
sentence, all provisions herein regarding prepayment shall apply and the
Borrower will still be obligated to pay to the Bank the additional amounts
described by this Section 5.3 with respect to all periods in which the affected
-----------
Borrowers' Obligations remained outstanding.
Section 5.4 Computations. All computations of interest and fees shall
------------
be made on the basis of a 360-day year of twelve 30-day months.
Section 5.5 Application of Payments. All payments (including
-----------------------
prepayments) made by the Borrower in respect of the Borrowers' Obligations shall
be applied by the Bank first to the payment of any prepayment fee then due,
-----
second to the payment of accrued and unpaid interest, and then to the payment of
------ ----
the principal amount of the Borrowers' Obligations to which such payment
pertains. All partial prepayments of the Acquisition Facility and the Equipment
Facility shall be applied to principal installments in the inverse order of
their maturity as specified in the Acquisition Facility Promissory Note and the
Equipment Facility Promissory Note, respectively. All partial prepayments of
the Working Capital Line of Credit shall be applied first to the repayment of
direct loan advances and then to prepayment of reimbursement obligations in
respect of Standby Letters of Credit.
Section 5.6 Reliance by Bank on Communications and Authorizations from
----------------------------------------------------------
Production Group on behalf of the Borrowers. In making advances or issuing the
-------------------------------------------
Standby Letters of Credit under any of the Credit Facilities contemplated by
this Agreement, the Bank shall be authorized to rely on any request, direction,
notice or other communication which appears to have been executed and delivered
by any one or more of the authorized of officers of Production Group who are
designated in the certificate delivered to the Bank as required by the terms of
the Bank Commitment Letter or pursuant to this Agreement and the other Financing
Documents. In the event that the officer(s) authorized to deliver such
documents or to take action hereunder on behalf of the Borrowers become
unavailable or unable to do so, the President of Production Group shall appoint
a successor or successors and shall furnish the Bank with a certified copy of
the authorizing resolution and the specimen signature of each officer so
appointed to act on behalf of the Borrowers pursuant to this Agreement and the
other Financing Documents.
Section 5.7 Joint and Several Liability; Right of Contribution. All of
--------------------------------------------------
the Borrowers' Obligations are the joint and several obligations of all of the
Borrowers and all parties which hereafter become Subsidiaries of any Borrower,
which are required by the terms of Section 9.10 of this Agreement to become
------------
Borrowers by executing and delivering an Assumption Agreement in the form
attached hereto as Exhibit E and made a part hereof.
---------
22
Notwithstanding the foregoing, each Borrower shall have a right of
contribution to obtain reimbursement from each other Borrower for any payment
made by such Borrower in respect of the Borrowers' Obligations to the extent
that such payment exceeds the benefit realized by such Borrower under the Credit
Facilities. Any right of contribution among the Borrowers which arises as a
result of payments made in respect of the Borrowers' Obligations under the
Financing Documents shall be subordinate in all respect to the Bank's right to
receive payment in full of the Borrowers' Obligations. The Borrowers
acknowledge and agree that the right of contribution set forth above shall not
in any event be construed in a manner inconsistent with the joint and several
liability of each of the Borrowers for the Borrowers' Obligations.
ARTICLE VI
SECURITY
Section 6.1 Financing Documents. The Borrowers' Obligations to the Bank
-------------------
in respect of the Credit Facilities are evidenced and secured by the Financing
Documents. This Agreement together with each of the other Financing Documents
and such filings, recordations and possessions as required hereby and thereby
collectively create a first priority, valid and enforceable security interest in
the Collateral.
Section 6.2 Collateral. As security and collateral for the repayment of
----------
the Borrowers' Obligations, each Borrower hereby grants to the Bank a lien on
and security interest in all of the following (collectively, the "Collateral"),
subject only to Permitted Liens securing purchase money or lease financing of
equipment which has not been refinanced under the Equipment Facility:
(a) All Equipment. All of the now owned and hereafter acquired
-------------
machinery, Equipment, furniture, fixtures (whether or not attached to real
property), vehicles, supplies and other tangible personal property of the
Borrower, including any leasehold interests therein and all substitutions,
replacement parts and annexations thereto, and including all improvements and
accessions thereto and all spare parts, tools, accessories and attachments now
owned or hereafter acquired in connection therewith, and any maintenance
agreements applicable thereto, and all proceeds and products thereof, including
sales proceeds, and all rights thereto.
(b) Receivables. All of the Borrower's now owned and hereafter
-----------
acquired and/or created accounts, accounts receivable, contracts, contract
rights, instruments, documents, chattel paper, notes, notes receivable, drafts,
acceptances, general intangibles (including, but not limited to, trademarks,
trade names, licenses and patents), and other choses in action (not including
salary or wages), and all proceeds and products thereof, and all rights thereto,
including, but not limited to, proceeds of inventory and returned goods and
proceeds arising from the sale or lease of or
23
the providing of inventory, goods, or services by the Borrower, as well as all
other rights of any kind, contingent or non-contingent, of each Borrower to
receive payment, benefit or credit from any person or entity, including, but not
limited to, the right to receive tax refunds or tax rebates.
(c) Inventory. All of the Borrower's now owned and hereafter acquired
---------
inventory, wherever located, including, but not limited to, goods, wares,
merchandise, materials, raw materials, parts, containers, goods in process,
finished goods, work in progress, bindings or component materials, packaging and
shipping materials and other tangible or intangible personal property held for
sale or lease or furnished or to be furnished under contracts of service or
which contribute to the finished products or the sale, promotion, storage and
shipment thereof, all goods returned for credit, repossessed, reclaimed or
otherwise reacquired by the Borrower, whether located at facilities owned or
leased by the Borrower, in the course of transport to or from account debtors,
placed on consignment, or held at storage locations, and all proceeds and
products thereof and all rights thereto, including, but not limited to, all
sales proceeds, all chattel paper related to any of the foregoing and all
documents, including, but not limited to, documents of title, bills of lading
and warehouse receipts related to any of the foregoing.
(d) Other Property. All now owned and hereafter acquired assets of
--------------
the Borrower, other than receivables, equipment and inventory, including, but
not limited to, all advances, leases, rents, chattels, leasehold improvements,
installment purchase and/or sales contracts, bonds, stocks, certificates,
deposits, trademarks, tradenames, licenses, patents and insurance policies,
including cash values.
Notwithstanding the foregoing, the Bank acknowledges and agrees that
the Collateral does not include (i) deposits held in escrow or trust by any
Borrower for another Person, or (ii) deposits held for payroll taxes.
The Borrowers further agree that the Bank shall have in respect of the
Collateral all of the rights and remedies of a secured party under the Uniform
Commercial Code of each of the States in which the Collateral or any portion
thereof is located, as well as those provided in this Agreement.
Section 6.3 Location of Collateral; Principal Place of Business. Each
---------------------------------------------------
Borrower agrees to (a) keep the Bank informed as to the location of the
Collateral and the address of the Borrower's principal place of business, (b)
give the Bank prior notice of any contemplated changes of location of Collateral
(other than any changes to the location of any other Borrower's principal place
of business or other office location described in Schedule II attached hereto
-----------
and made a part hereof), (c) give the Bank prior notice of any contemplated
changes in the Borrower's principal place of business and (d) not change the
location of any of the Collateral
24
(other than any changes to the location of any other Borrower's principal place
of business or other office location described in Schedule II attached hereto
-----------
and made a part hereof), or the Borrower's principal place of business, without
the prior written consent of the Bank.
Section 6.4 Loss of Collateral. The Bank shall not be liable for any
------------------
loss of any Collateral in its possession other than losses which occur as a
direct result of the gross negligence or wilful misconduct of the Bank's
officers, directors or employees. No loss of any Collateral shall diminish the
debt due pursuant to this Agreement and the other Financing Documents.
Section 6.5 Filing of Financing Statements; Perfection of Security
------------------------------------------------------
Interest in Collateral. Whenever permitted, the security interest created by
----------------------
this Agreement shall be perfected by the filing of financing statements which
fully comply with Article 9 of the Uniform Commercial Code, as adopted by each
of the States in which the Collateral or any portion thereof may be located, in
such offices as may be required by the Bank. In all other cases the security
interest created by this Agreement shall be perfected in accordance with all
applicable governing law. The parties agree that:
(a) with respect to any such financing statement, a carbon,
photographic or other reproduction of a security agreement or a financing
statement is sufficient as a financing statement for purposes of Section 9-402
of the Uniform Commercial Code;
(b) all necessary continuation statements shall be filed by the
secured party or its assigns named therein within the time prescribed by Article
9 of the Uniform Commercial Code, as adopted by each of the States in which the
Collateral or any portion thereof may be located, in order to continue the
perfection of the security interests created by this Agreement;
(c) if at any time any of the information contained in any financing
statement filed in connection with the security interests created by this
Agreement, including without limitation, the description or location of the
Collateral or the name and address of the applicable Borrower, shall change in
such manner as to cause such financing statement to become misleading in any
material respect or as may impair the perfection of the security interests
intended to be created by this Agreement, then the appropriate Borrower shall
promptly prepare an amendment to such financing statement as may be necessary to
continue the perfection of the security interest intended to be created by this
Agreement, obtain the signatures of the debtor and secured party upon such
amendment, and file the same in any office where such amendment is required to
be filed to continue the perfection of the security interests created by this
Agreement;
(d) upon the request of the Bank, the Borrowers shall prepare, have
executed and file any amendments to the financing
25
statements filed with respect to the security interests created by this
Agreement in such form as the Bank may require;
(e) the Borrower shall bear all costs of any and all of the filings
described in this Section 6.5, including any recordation taxes payable as a
-----------
result of such filings; and
(f) upon request by the Bank (i) at any time after the occurrence of a
Default or an Event of Default under the Financing Agreement or any of the other
Financing Documents referred to therein, (ii) for the purpose of enabling the
Bank to comply with the Financial Institutions Reform, Recovery and Enforcement
Act of 1989, as amended, or (iii) at any time that the Bank reasonably believes
that the security for the Borrowers' Obligations may be impaired, the Borrowers
shall provide, at their expense, an opinion of counsel as to the effectiveness
and perfection of the Bank's lien on the Collateral or any portion thereof.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
To induce the Bank to make the Credit Facilities available to the
Borrowers pursuant to this Agreement and the other Financing Documents, each
Borrower represents and warrants to the Bank as follows, each of such
representations and warranties to be reconfirmed by each Borrower at the time
each direct loan advance is made and each Standby Letter of Credit is issued
under any of the Credit Facilities, it being the affirmative obligation of each
Borrower to notify the Bank in writing of any facts which would in any way
affect its ability to make the representations contained in the Article VII at
-----------
any subsequent date:
Section 7.1 Subsidiaries. The only subsidiaries of Production Group
------------
International, Inc. are the other Borrowers. No other Borrower has any
Subsidiaries.
Section 7.2 Good Standing. Except as set forth on Schedule VII attached
-------------
hereto, the Borrower (i) is a corporation duly organized and existing, in good
standing, under the laws of the jurisdiction of its incorporation, (ii) has the
corporate power to own its property and to carry on its business as now being
conducted, and (iii) is duly qualified to do business and is in good standing in
each jurisdiction in which the character of the properties owned by it therein
or in which the transaction of its business makes such qualification necessary.
Section 7.3 Corporate Authority. The Borrower has full corporate power
-------------------
and authority to enter into and execute and deliver this Agreement and each of
the other Financing Documents executed and delivered by the Borrower, and to
incur and perform the Borrowers' Obligations provided for herein and therein,
all of which have been duly authorized by all proper and necessary corporate
action and all material governmental licenses,
26
authorizations, consents and approvals required. No consent or approval of
stockholders or of any other person or public authority or regulatory body is
required as a condition to the validity or enforceability of this Agreement or
any of the other Financing Documents, or if required the same has been duly
obtained.
Section 7.4 Binding Obligations. This Agreement and each of the other
-------------------
Financing Documents executed and delivered by the Borrower have been properly
executed by the Borrower, constitute valid and legally binding obligations of
the Borrower, and are fully enforceable against the Borrower in accordance with
their respective terms.
Section 7.5 Litigation. There is no litigation or proceeding pending
----------
or, so far as the Borrower knows, threatened before any court or administrative
agency which, in the opinion of the officers of the Borrower, will materially
adversely affect the financial condition or operations of the Borrower or the
authority of the Borrower to enter into, or the validity or enforceability of,
this Agreement or any of the other Financing Documents executed and delivered by
the Borrower.
Section 7.6 No Conflicting Agreements. There is (i) no charter, by-law
-------------------------
or preference stock provision of the Borrower and no provision of any existing
contract or agreement binding on the Borrower or affecting its property, and
(ii) to the knowledge of the Borrower, no law binding upon the Borrower or
affecting any of its property, which would conflict with or in any way prevent
the execution, delivery or performance of the terms of this Agreement or of any
of the other Financing Documents executed and delivered by the Borrower, or
which would be in default or violated as a result of such execution, delivery or
performance.
Section 7.7 Financial Condition. The consolidated and consolidating
-------------------
balance sheets of the Borrowers as of August 31, 1995 (certified by Ernst &
Young) and June 30, 1996, together with statements of profit and loss and of
surplus for the period then ended, together with the ten month interim statement
for the period ended June 30, 1996, prepared by the Borrowers, and together with
the projections of financial condition for fiscal years ending August 31, 1996,
August 31, 1997 and August 31, 1998, prepared by the Borrowers, all of which
were heretofore delivered to the Bank, are complete and correct and fairly
present the financial position of the Borrowers and the results of their
operations and transactions in their surplus account(s) as of the dates and for
the periods referred to and have been prepared in accordance with GAAP applied
on a consistent basis throughout the period involved; provided, however, that to
the extent such balance sheets reflect the financial information of any
corporation acquired by the Borrowers during the current fiscal year, such
financial information complies with GAAP to the best of the Borrower's knowledge
except as specifically noted, since full audit of the acquired corporation's
financial information will not take place until the fiscal year end. There are
no liabilities (of the type
27
required to be reflected on balance sheets prepared in accordance with GAAP),
direct or indirect, fixed or contingent, of any Borrower as of the date of such
balance sheets which are not reflected therein or in the notes thereto. There
has been no material adverse change in the financial condition or operations of
any Borrower since the date of such balance sheets (and to any Borrower's
knowledge no such material adverse change is pending or threatened), and no
Borrower has guaranteed the obligations of, or made any investment in or loans
to, any person except as disclosed in such balance sheets. Each Borrower has
good and marketable title to all of its properties and assets, and all of such
properties and assets are free and clear of encumbrances, except as reflected on
such balance sheets or in the notes thereto.
Section 7.8 Tax Returns. The Borrower has filed or caused to be filed
-----------
all required federal, state and local tax returns and has paid all taxes as
shown on such returns to the extent that such taxes have become due. No claims
have been assessed and are unpaid with respect to such taxes except as shown in
the financial statements referred to in Section 7.7 above.
-----------
Section 7.9 Compliance with Laws Generally. To the best of its
------------------------------
knowledge, the Borrower is not in violation of any law, ordinance, governmental
rule or regulation to which the Borrower is subject (including, without
limitation, any laws relating to employment practices or to environmental,
occupational and health standards and controls) and the violation of which would
have a material adverse effect on the conduct of the Borrower's business, and
the Borrower has obtained any and all licenses, permits, franchises and other
governmental authorizations necessary for the ownership and operation of its
properties and business.
Section 7.10 Margin Stock. None of the proceeds of any of the Credit
------------
Facilities will be used, directly or indirectly, by the Borrower for the purpose
of purchasing or carrying, or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry, any "margin
security" within the meaning of Regulation G (12 CFR Part 207), or "margin
stock" within the meaning of Regulation U (12 CFR Part 221), of the board of
Governors of the Federal Reserve System (herein called "margin security" and
"margin stock") or for any other purpose which might make the transactions
contemplated herein a "purpose credit" within the meaning of said Regulation G
or Regulation U, or cause this Agreement to violate any other regulation of the
Board of Governors of the Federal Reserve System or the Securities Exchange Act
of 1934, as amended, or the Small Business Investment Act of 1958, as amended,
or any rules or regulations promulgated under any of such statutes.
Section 7.11 ERISA. (i) Any Plan established and maintained by the
-----
Borrower or any Commonly Controlled Entity is a qualifying plan under the
applicable requirements of ERISA, and there is no current matter which would
materially adversely affect the qualified tax-exempt status of any Plan; (ii)
neither the Borrower
28
nor any Commonly Controlled Entity has engaged in or is engaging in any
Prohibited Transaction or has incurred any Accumulated Funding Deficiency in
connection with any such Plan, whether or not waived, and no Reportable Event
has occurred with respect to any Plan subject to the minimum funding
requirements of Section 412 of the Code; (iii) no Multiemployer Plan has
terminated, as that term is defined in ERISA; (iv) neither the Borrower nor any
Commonly Controlled Entity has "withdrawn" or "partially withdrawn" from any
Multiemployer Plan; and (v) no Multiemployer Plan is in "reorganization" nor has
notice been received from the administrator of any Multiemployer Plan that any
such Plan will be placed in "reorganization."
Section 7.12 Governmental Consents. Neither the nature of the Borrower's
---------------------
business or properties, nor any relationship between the Borrower and any other
entity or person, nor any circumstance in connection with the extension of the
Credit Facilities is such as to require a consent, approval or authorization of,
or filing, registration or qualification with, any Governmental Authority, on
the part of the Borrower, as a condition to the execution and delivery of this
Agreement or any of the other Financing Documents.
Section 7.13 No Default or Event of Default. No event has occurred which
------------------------------
would constitute a Default or an Event of Default under this Agreement or any of
the other Financing Documents. The Borrower is not in default under the terms of
any other agreement or instrument to which the Borrower may be a party or by
which any of the security for any of the Credit Facilities may be bound or
subject.
Section 7.14 Other Liens. The Borrower represents and warrants that,
-----------
except for Permitted Liens, there are no liens or encumbrances of any kind
affecting the Collateral or any of the Borrower's assets or property, and the
Borrower has made no contract or arrangement of any kind the performance of
which by the other party thereto would give rise to a lien on the Collateral or
any other security for the Borrowers' Obligations.
Section 7.15 Prior Names; Trade Names; Principal Place of Business. The
-----------------------------------------------------
Borrower's correct name, including any prior names and trade names, and the
location of its principal place of business, within the meaning of the Uniform
Commercial Code, and any other offices maintained by it are correctly
represented in Schedule II attached hereto and made a part hereof.
-----------
Section 7.16 Nature of Financing; Usury. The Credit Facilities are being
--------------------------
extended to a business or commercial organization, or solely for the purpose of
enabling the Borrowers to conduct a business or commercial enterprise.
Section 7.17 Purposes. None of the Borrowers have utilized any funds
--------
previously drawn under the Working Capital Line of Credit to finance, refinance
or secure an acquisition, merger or other
29
transaction whereby a Borrower would obtain an equity or other Participating
Interest in another entity.
ARTICLE VIII
CONDITIONS PRECEDENT
The obligation of the Bank to extend any of the Credit Facilities to
or on behalf of any Borrower is subject to the following conditions precedent:
Section 8.1 Receipt and Approval of Documents Required by Bank
--------------------------------------------------
Commitment Letter. All of the documents required by the Bank Commitment Letter
-----------------
shall have been received and approved by the Bank and its counsel, and the Bank
shall be satisfied that the Borrowers have otherwise complied with all of the
terms and conditions of the Bank Commitment Letter.
Section 8.2 Approval of Bank's Counsel. All legal matters incident to
--------------------------
the Credit Facilities and all documents necessary in the opinion of the Bank to
the extension of such Credit Facilities shall be satisfactory in all respects to
counsel for the Bank.
Section 8.3 Compliance. As of the date of the execution and delivery of
----------
this Agreement, (a) the Borrowers shall have complied with, and shall then be in
compliance with, all the terms, covenants and conditions of this Agreement and
in the other Financing Documents which are binding upon it, (b) there shall
exist no Default or Event of Default, and (c) the representations and warranties
contained in Article VII hereof shall be true and correct.
-----------
Section 8.4 Bank's Fees and Expenses. The Borrowers shall have paid all
------------------------
of the fees and expenses described in Section 13.3 hereof which are then due and
------------
payable.
Section 8.5 Principal Payment. On November 27, 1996, the Borrowers
-----------------
shall pay to the Bank $500,000 as a repayment of principal of a portion of the
Acquisition Facility.
Section 8.6 Conditions to Execution of this Agreement. In connection
-----------------------------------------
with the execution and delivery of this Agreement, each of the Borrowers shall
have delivered:
(a) an opinion of counsel as to its due authority to enter into this
Agreement and the enforceability of its obligations hereunder in form and
substance satisfactory to the Bank and the Bank's counsel;
(b) certified organizational documents for such Borrower;
(c) resolutions of such Borrower approving the execution, delivery and
performance of this Agreement;
30
(d) an officer's certificate indicating persons authorized to execute
this Agreement on behalf of such Borrower;
(e) each subordination agreement entered into by a party listed on
Schedule VI except for ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, and
▇▇▇▇▇ ▇▇▇▇▇▇ (Safaris Events, Inc.); and
(f) with respect to each investor entering into a debt service
guaranty pursuant to Section 9.11 hereof, an opinion of counsel as to due
authority and enforceability of such debt service guaranty.
Section 8.7 Acquisitions by the Borrowers. Any acquisition, merger or
-----------------------------
other transaction whereby a Borrower would obtain an equity or other
Participating Interest in another entity shall be an Eligible Acquisition
regardless of whether such acquisition was funded from the Acquisition Facility.
Section 8.8 Termination of Standby Letters of Credit. The Borrowers
----------------------------------------
shall:
(a) provide the Bank with written notice of each Letter of Credit,
Commercial Guaranty or other financing arrangement (the "L/C Debt") entered into
with any bank other than the Bank;
(b) by December 20, 1996, remit to the Bank as collateral security an
amount equal to the aggregate outstanding L/C Debt (which amount shall be
returned to the Borrowers by the Bank upon satisfaction of each condition set
forth in this Section 8.8 determined in the Bank's sole discretion);
(c) by December 6, 1996, make an application with the Bank pursuant to
the terms and conditions hereof for Standby Letters of Credit in an aggregate
amount equal to the aggregate outstanding L/C Debt; and
(d) not cause the renewal or extension of any outstanding L/C Debt or
the issuance of any additional L/C Debt, terminate any credit facility or
arrangement with San Diego National Bank and, to the extent acceptable by the
applicable beneficiary of L/C Debt, return to San Diego National Bank all
outstanding L/C Debt for immediate cancellation.
ARTICLE IX
AFFIRMATIVE COVENANTS
Until payment and performance in full of the Borrowers' Obligations,
each Borrower will perform each of the covenants contained in this Article IX.
----------
Section 9.1 Financial Reporting. The Borrower shall provide to the Bank
-------------------
the following financial information:
31
(a) as soon as available but in no event more than 45 days after the
end of each fiscal quarter, a consolidated balance sheet of the Borrowers as of
the close of such period and consolidated income and expense statements and a
consolidated statement of cash flows for such period, prepared in accordance
with GAAP and certified by the chief financial officer or chief executive
officer of Production Group and accompanied by a certificate of that officer as
to (i) compliance with all covenants contained in the Financing Documents and
(ii) the occurrence of any Default or Event of Default under this Agreement or
any of the other Financing Documents, and, if so, stating the facts with respect
thereto; and
(b) as soon as available but in no event more than 120 days after the
close of Production Group's fiscal year, the Borrowers shall provide the Bank
with a copy of their consolidated balance sheets as of the close of such period
and their consolidated income and expense statements and a consolidated
statement of cash flows for such period, prepared in accordance with United
States generally accepted accounting principals and examined and certified by an
independent accountant satisfactory to the Bank and accompanied by a certificate
of the chief financial officer or chief executive officer of Production Group as
to (i) compliance with all covenants contained in the Financing Documents and
(ii) the occurrence of any Default under this Agreement or any of the other
Financing Documents, and, if so, stating the facts with respect thereto;
(c) as soon as available but in no event more than 30 days after
filing with the Internal Revenue Service, the Borrowers shall provide the Bank
with a copy of their Federal income tax return for the immediately preceding
fiscal year;
(d) as soon as available but in no event more than 45 days after close
of Production Group's fiscal quarter, the Borrowers shall provide the Bank with
a copy of their projections of financial condition for each of the fiscal years
remaining until the Termination Date of the Acquisition Facility;
(e) whenever requested by the Bank, but in any event no less
frequently than once per calendar month, within 30 days after the end of the
previous month, reports with respect to (i) the Borrowers' Receivables, which
reports shall include (without limitation) customer name, dollar amount, invoice
date and number of days outstanding for each Receivable and (ii) the aging of
the Borrowers' Receivables setting forth sufficient detail concerning the length
of time each Receivable has been outstanding, collections for the prior month
and delinquencies in the prior month all satisfactory in form to the Bank; and
(f) such other information, reports or statements as the Bank may from
time to time reasonably request.
32
Section 9.2 Taxes and Claims. The Borrower shall pay and discharge all
----------------
Taxes due and owing by the Borrower to all governmental authorities, prior to
the date on which penalties attach thereto, and all lawful claims which, if
unpaid, might become a lien or encumbrance upon any of its properties; provided,
however, that in the event of a good faith dispute over Taxes, the Borrower
shall provide the Bank with a bond or other evidence satisfactory to the Bank in
its discretion of the Borrower's ability to pay such Taxes, together with any
applicable interest and penalties.
Section 9.3 Insurance. The Borrowers shall provide or cause to be
---------
provided to the Bank, and shall maintain, or cause to be maintained, in full
force and effect at all times during the term of any of the Credit Facilities
and at all times prior to the payment and performance in full of the Borrowers'
Obligations, such policies of insurance as are normally maintained by similar
businesses operating in the same vicinity as each of the Borrowers, which are
underwritten by a company or companies reasonably satisfactory to the Bank and
are in form and amounts reasonably satisfactory to the Bank, including, by way
of example and not by way of limitation, at least the following:
(a) permanent fire and hazard insurance or property damage insurance
covering all real property improvements and all Equipment and Inventory and
other personal property of all Borrowers wherever located, affording protection
against at least loss or damage by fire or other hazards covered by the standard
all-risk "extended coverage" endorsement (non-reporting form), including
vandalism and malicious mischief and such other risks as shall be customarily
covered with respect to similar property or as the Bank may from time to time
otherwise require, in amounts not less than the lesser of (i) the aggregate
principal amount of the Credit Facilities (whether or not such Credit Facilities
have been fully utilized by the Borrowers from time to time) and (ii) the
maximum amount available to the Borrowers from time to time, naming the Bank as
mortgagee and loss payee;
(b) public liability and property damage insurance for each Borrower
to afford protection in amounts of not less than (i) $1,000,000 per occurrence
and $3,000,000 for all annual occurrences in respect of bodily injury, and (ii)
$250,000 per occurrence and $500,000 for all annual occurrences in respect of
property damage, together with an endorsement naming the Bank as an additional
insured;
(c) workers' compensation insurance of each Borrower with coverage
limits in accordance with the requirements of applicable laws or regulations;
and
(d) key man life insurance on ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ in the amount of not less
than $4,000,000, together with an endorsement naming the Bank as an additional
insured.
33
Each such policy shall provide that the policy may not be surrendered,
cancelled or substantially modified (including, without limitation, cancellation
for nonpayment of premiums) without at least thirty (30) days' prior written
notice to the Bank.
Section 9.4 Corporate Existence. The Borrower shall maintain in good
-------------------
standing its existence in the State of its incorporation and shall maintain its
qualification to do business in each jurisdiction in which such qualification is
necessary for the conduct of its business in such jurisdiction.
Section 9.5 Chance in Management. The Borrower shall give the Bank
--------------------
written notice within thirty (30) days following any change in the offices of
president, chief executive officer or chief financial officer of any Borrower.
Section 9.6 Compliance With Laws Generally. The Borrower shall comply
------------------------------
with all applicable laws, ordinances, governmental rules or regulations to which
the Borrower is or becomes subject (including, without limitation, any laws
relating to employment practices or to environmental, occupational and health
standards and controls) and the violation of which would have a material adverse
effect on the conduct of the Borrower's business, and the Borrower will maintain
any and all licenses, permits, franchises and other governmental authorizations
necessary for the ownership and operation of its properties and business.
Section 9.7 Books and Records; Inspection. The Borrower will keep
-----------------------------
adequate records and books of account with respect to its business, in
accordance with GAAP; and permit the Bank, by its accountants, attorneys,
officers or other agents to examine such records and books of account and to
discuss the affairs, finances and accounts pertaining thereto with of officers
of the Borrower at its offices at any time during normal business hours.
Section 9.8 Litigation. The Borrower shall give prompt notice in
----------
writing, with a full description to the Bank, of all litigation and any other
proceedings before any court or any governmental or regulatory agency affecting
the Borrower which, if adversely decided, would materially adversely affect the
conduct of the Borrower's business, the financial condition of the Borrower, or
in any manner affect the security for the Credit Facilities or the Borrowers'
Obligations.
Section 9.9 Notification of Certain Events, Events of Default and
-----------------------------------------------------
Adverse Developments. The Borrower shall promptly notify the Bank in writing
--------------------
within fifteen (15) Business Days of obtaining knowledge of the occurrence of
the following (in each case describing in detail satisfactory to the Bank the
nature thereof and the action the Borrower proposes to take with respect
thereto):
34
(a) any Default or Event of Default under this Agreement or any of the
other Financing Documents;
(b) all actions, suits and proceedings before any court or
governmental department, commission, board, bureau, agency, or instrumentality,
domestic or foreign, affecting the Borrower which, if determined adversely to
the Borrower, could have a materially adverse effect on the financial condition,
properties or operations of the Borrower or could materially adversely affect
the security for the Borrowers' Obligations or the ability of each Borrower to
pay or perform in full the Borrowers' Obligations;
(c) any notice, claim or demand from any governmental agency which
alleges that the Borrower is in violation of any of the terms of, or has failed
to comply with, any applicable order issued pursuant to any federal or state
statute regulating its operation of business, including, but not limited to, the
Occupational Safety and Health Act and the Environmental Protection Act; or
(d) any other development in the business or affairs of the Borrower
which could have a material adverse effect on the Borrower or could adversely
affect the security for the Borrowers' Obligations of the ability of each
Borrower to pay or perform in full the Borrowers' Obligations.
Section 9.10 Addition of New Subsidiaries as Borrowers. The Borrower
-----------------------------------------
hereby agrees to cause any entity which becomes a Subsidiary to become a
Borrower under this Agreement by executing and delivering to the Bank an
Assumption Agreement in substantially the form attached hereto as Exhibit D and
---------
made a part hereof, whereupon such new Subsidiary shall become jointly and
severally liable, together with all other Borrowers, for the Borrowers'
Obligations and will be entitled to have access to each of the Credit Facilities
to the same extent as all other Borrowers. As a condition precedent to having
access to the Credit Facilities, each new Subsidiary shall provide the Bank with
certified copies of its corporate documents, resolutions authorizing the
incurrence of joint and several liability for the Borrowers' Obligations, and
Uniform Commercial Code, tax lien, judgment and pending suit searches in all
jurisdictions designated by the Bank. The Borrower hereby acknowledges that any
failure to act or delay in acting by the Bank in connection with its review of
or comment upon any materials supplied by the Borrower pursuant to this Section
9.10 or otherwise shall not result in any liability, cost or expense to the
Bank.
Section 9.11 Debt Service Guaranty. Production Group hereby agrees to
---------------------
cause Sierra Ventures IV, L.P., Trident Capital Partners Fund-I, L.P., Trident
Capital Partners Fund-I, C.V., WLD/▇▇▇▇▇▇ Partners, ▇. ▇▇▇▇ Price Threshold Fund
III, L.P. and First Plaza Group Trust to enter into a debt service guaranty
substantially in the form of Exhibit F attached hereto.
---------
35
Section 9.12 Receivables Collection. Except with respect to Spearhead
----------------------
Exhibitions Limited and PGI Europe Limited, (a) by December 31, 1996, the
Borrower shall (i) have completed and executed all paperwork and opened each
account necessary to establish a lockbox account system at the Bank and (ii) be
required to cause all amounts in any account controlled by it to be deposited to
an account of such Borrower located at and under the control of the Bank (the
"Lockbox Account") by the close of business on each Business Day thereafter, and
(b) by January 31, 1997, the Borrower shall be required to cause each account
debtor who is obligated to such Borrower for a Receivable to pay the full amount
of such Receivable to the Lockbox Account. The Borrower shall immediately
deposit any amount it receives directly from an account debtor with respect to
any Receivable into the Lockbox Account.
Section 9.13 Cash Management System. By December 31, 1996, the Borrower
----------------------
shall have completed and executed all paperwork and opened each account
necessary to establish a collection, concentration and disbursement system at
the Bank. By January 31, 1997, the Borrower shall deposit all revenues earned
and received to, and make all payments to creditors, vendors and other
applicable parties from, such collection, concentration and disbursement system
that will include payroll, investments and any lockbox or other deposit account
(including the Lockbox Account defined in Section 9.12 hereof).
------------
Section 9.14 Inspections. The Borrowers shall permit the Bank to enter
-----------
its premises for the purpose of conducting inspections into the condition of the
Borrowers' operations, including but not limited to the financial condition;
provided that, prior to the occurrence of an Event of Default, (a) only upon
twenty-four hours prior written notice and (b) only during normal business
hours. By the end of February, 1997, the Borrowers shall have adopted
procedures or established new systems to alleviate, and must have corrected, the
conditions set forth on Schedule III attached hereto and such other conditions
------------
as may be identified by the Bank.
Section 9.15 Further Assurances. The Borrower shall promptly execute and
------------------
deliver all further instruments, documents, agreements, blank instruments of
transfer and assignments including, without limitation, financing or
continuation statements, or amendments thereto, and take all further action that
may be necessary or desirable in the reasonable judgment of the Bank in order to
obtain, maintain, perfect and protect any security interest granted or purported
to be granted hereunder, including the security interest in after-acquired
Collateral granted herein, to enable the Bank to comply with the Federal
Assignment of Claims Act or any other federal or state law in order to obtain or
perfect the Bank's interest in the Collateral, to obtain dividends,
distributions and proceeds of the Collateral as provided herein and to enable
the Bank to exercise and enforce its rights and remedies hereunder and under the
Financing Documents.
36
Section 9.16 Attendance at Closings of Eligible Acquisitions. At
-----------------------------------------------
sole cost and expense (including but not limited to travel, lodging and related
costs and expenses) of the Borrower, the Bank and any counsel selected by the
Bank may attend any closing of an Eligible Acquisition without regard to
location of such closing for the primary purpose of witnessing the execution of
and collecting the documents related to such Eligible Acquisition. The Borrower
shall inform the Bank of the date and place of such closing a reasonable time
prior to such date.
ARTICLE X
FINANCIAL COVENANTS
Until payment and performance in full of the Borrowers' Obligations,
the Borrowers will comply with each of the financial covenants contained in this
Article X, each determined as of the end of the applicable fiscal quarter.
---------
Section 10.1 Net Worth. On a consolidated basis, the Borrowers shall
---------
maintain Net Worth (defined in accordance with GAAP) of not less than
$22,900,000 as of June 30, 1996, which amount shall be increased on a cumulative
basis by an amount equal to 50% of the consolidated net income generated during
each fiscal quarter; provided, however, that, at the express written consent of
-------- -------
the Bank, Net Worth may be decreased by certain non-cash related downward
adjustments in an amount not in excess of $14,500,000, as of August 31, 1996 in
connection with the Initial Public Offering; and provided, further, that all net
-------- -------
proceeds of the Initial Public Offering may be deemed to further adjust the
required minimum Net Worth such further adjustment to be at the sole discretion
of the Bank.
Section 10.2 Reserved.
Section 10.3 Current Ratio. On a consolidated basis, the Borrowers shall
-------------
maintain a Current Ratio of not less than:
0.35 for the period from November 27, 1996 through and including
November 30, 1996;
0.30 for the period from December 1, 1996 through and including
February 28, 1997;
0.50 for the period from March 1, 1997 through and including May 31,
1997;
0.30 for the period from June 1, 1997 through and including August 31,
1997;
0.40 for the period from September 1, 1997 through and including
February 28, 1998; and
0.35 for the period from March 1, 1998 through and including the
Termination Date.
Section 10.4 Total Debt Service Ratio. On a consolidated basis, the
------------------------
Borrowers shall maintain a Total Debt Service Ratio of not less than:
37
1.10 for the period from November 27, 1996 through and including
August 31, 1997; and
1.50 for the period from September 1, 1997 through and including the
Termination Date.
Section 10.5 Subordinated Debt Service Ratio. On a consolidated basis,
-------------------------------
the Borrowers shall maintain a Subordinated Debt Service Ratio of not less than:
2.00 for the period from November 27, 1996 through and including
August 31, 1997; and
3.00 for the period from September 1, 1997 through and including the
Termination Date.
Section 10.6 Leverage Ratio. On a consolidated basis, the Borrowers
--------------
shall maintain a Leverage Ratio not greater than:
1.80 for the period from November 27, 1996 through and including
November 30, 1996;
1.80 for the period from December 1, 1996 through and including
February 28, 1997; and
1.00 for the period from March 1, 1997 through and including the
Termination Date.
Section 10.7 Intangible Levels. On a consolidated basis, the Borrowers'
-----------------
Intangibles may not exceed Total Equity by:
$18,500,000 for the period from November 27, 1996 through and
including November 30, 1996;
$19,000,000 for the period from December 1, 1996 through and including
February 28, 1997;
$11,500,000 for the period from March 1, 1997 through and including
August 31, 1997;
$10,500,000 for the period from September 1, 1997 through and
including February 28, 1998; and
$9,000,000 for the period from March 1, 1998 through and including the
Termination Date.
ARTICLE XI
NEGATIVE COVENANTS
Until payment and performance in full of all of the Borrowers'
Obligations, without the written consent of the Bank, none of the Borrowers will
fail to comply with any of the following covenants.
Section 11.1 Impairment of Security. The Borrower shall not take any
----------------------
action, and shall not permit any Person to take any action, which shall impair
in any manner the value of the Collateral or any portion thereof or any other
security for the Borrowers' Obligations or the validity, priority or security of
the security interest granted to the Bank in the Collateral.
38
Section 11.2 No Change in Control.
--------------------
(a) Except in connection with the Initial Public Offering at the
express written consent of the Bank, no Borrower shall cause or permit any
change to occur in the ownership of the controlling interest in the voting stock
in Production Group.
(b) Notwithstanding anything to the contrary in the foregoing
paragraph (a) without the prior written consent of the Bank, the Borrowers may
not cause, and may not permit, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ to be removed or replaced as an
officer or director, as the case may be, of a Borrower.
Section 11.3 Stock in Subsidiaries. Production Group shall not sell,
---------------------
transfer or otherwise encumber any shares of capital stock now or hereafter
owned by it in any of the other Borrowers, except for the pledge of shares in
any acquired corporation to secure seller financing which satisfies the criteria
for an Eligible Acquisition.
Section 11.4 Sale, Transfer or Encumbrance of Collateral. Except for (a)
-------------------------------------------
the sale of Inventory in the ordinary course of business, (b) sales or transfers
of equipment for fair market value in the ordinary course of business, (c)
Permitted Liens, (d) the liens or security interests listed in Item 1d. of
Schedule VII hereof, but only for so long as permitted by Section 12.1(m), (e)
the lien or security interest granted by C.H.L. Ventures, Inc. in favor of
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇ identified as File No. 9520060351 of the Secretary of State
of California, and (e) the lien or security interest granted by Epic Enterprises
of Nevada, Inc. in favor of San Diego National Bank identified as File No.
9600229 of the Secretary of State of California, the Borrower shall not sell,
transfer, lease or further encumber, or permit any Person to sell, transfer,
lease or further encumber, any of its assets, including the Collateral or any
other security for the Borrowers' Obligations.
Section 11.5 No Additional Indebtedness. Without the prior written
--------------------------
consent of the Bank, the Borrowers will not create or incur any liability for
borrowed money or obligations in respect of operating leases in excess of
$250,000 in the aggregate at any one time outstanding, except for (a) short-term
trade indebtedness incurred in the ordinary course of the business operations of
the Borrowers, (b) subordinated debt to the seller of an acquired corporation
which debt satisfies all of the requirements of clause (d) of the definition of
"Eligible Acquisition", (c) obligations secured or evidenced by Permitted Liens,
and (d) the L/C Debt as defined in Section 8.8 hereof, subject to the
restrictions of Section 8.8.
Section 11.6 Merger; Dissolution or Sale of Assets. The Borrower shall
-------------------------------------
not enter into any merger, consolidation or dissolution or sale, lease or other
disposition of any substantial portion of its assets (except assets disposed of
in the ordinary
39
course of business for fair market value), except for (a) Collateral covered by
Permitted Liens, (b) mergers and consolidations of any Borrower into any other
Borrower, and (c) the merger of Production Group with and into Production Group
International, Inc., a Delaware corporation.
Section 11.7 Distributions or Dividends to Stockholders. Upon the
------------------------------------------
occurrence or continuation of a Default or an Event of Default, none of the
Borrowers will make any distribution, loan, advance or payment of dividend to
any of its stockholders for any purpose whatsoever at any time without the
express written consent of the Bank.
Section 11.8 Payments, Advances and Salaries to Stockholders. No Borrower
-----------------------------------------------
will pay, advance or lend, or permit any payment (including the payment of
salaries in excess of amounts contemplated by existing employment contracts to
holders of more than 5% of stock in any Borrower who are also officers of any
Borrower), advance or loan of, either directly or indirectly, any sum or sums of
money to any of its stockholders or directors for any purpose whatsoever (except
the reimbursement of expenses incurred in the normal course of business on
behalf of any Borrowers) in excess of the lesser of (a) $250,000 in the
aggregate determined by taking into account all such advances or loans, and (b)
---
any amount which would cause the Borrowers to default in compliance with any
financial covenant contained in the Financing Documents.
Section 11.9 ERISA Compliance. The Borrower shall not (a) restate or
----------------
amend any Plan established and maintained by the Borrower or any Commonly
Controlled Entity, in a manner designed to disqualify such Plan under the
applicable requirements of the Code; (b) permit any officers of the Borrower or
any Commonly Controlled Entity to materially adversely affect the qualified tax-
exempt status of any Plan of the Borrower or any Commonly Controlled Entity; (c)
engage in or permit any Commonly Controlled Entity to engage in any Prohibited
Transaction; (d) incur or permit any Commonly Controlled Entity to incur any
Accumulated Funding Deficiency, whether or not waived, in connection with any
Plan; (e) take or permit any Commonly Controlled Entity to take any action or
fail to take any action which causes a termination of any Plan in a manner which
could result in the imposition of a lien on the property of the Borrower or any
Commonly Controlled Entity pursuant to Section 4068 of ERISA; (f) fail to notify
the Bank that notice has been received of a termination of any Multiemployer
Plan to which the Borrower or any Commonly Controlled Entity has an obligation
to contribute; (g) incur or permit any Commonly Controlled Entity to incur a
complete or partial withdrawal from any Multiemployer Plan to which the Borrower
or any Commonly Controlled Entity has an obligation to contribute; or (h) fail
to notify the Bank that notice has been received from the administrator of any
Multiemployer Plan to which the Borrower or any Commonly Controlled Entity has
an obligation to contribute that any such plan will be placed in
"reorganization."
40
Section 11.10 Purposes. The Borrower shall not, without the prior written
--------
consent of the Bank, utilize any funds drawn under the Working Capital Line of
Credit to finance, refinance or secure an acquisition, merger or other
transaction whereby the Borrower obtains an equity or other Participating
Interest in another entity.
ARTICLE XII
EVENTS OF DEFAULT; REMEDIES
Section 12.1 Events of Default. Any one or more of the following events
-----------------
shall constitute an Event of Default under this Agreement:
(a) Failure to Pay Borrowers' Obligations. The Borrowers shall fail
-------------------------------------
to pay the amount of any of the Borrowers' Obligations as and when the same are
due and payable in accordance with the terms of this Agreement and the other
Financing Documents.
(b) Breach of Representation and Warranties. Any representation or
---------------------------------------
warranty made herein or in any of the Financing Documents, or in any report,
certificate, opinion (including any opinion of counsel for the Borrowers),
financial statement or other instrument delivered in connection with this
Agreement or any of the other Financing Documents shall prove to be false or
misleading in any material respect when made.
(c) Failure to Comply with Covenants. Default shall be made in the
--------------------------------
due observance or performance of any covenant, conditions or agreement contained
in Section 9.2, Section 9.3, Article X or Article XI hereof.
-------------------------------------------------
(d) Other Defaults. Default shall be made in the due observance or
--------------
performance of any other term, covenant or agreement contained in this Agreement
or in any of the other Financing Documents, and such default shall have
continued unremedied for a period of thirty (30) days after written notice
thereof shall have been given to Production Group by the Bank, or default shall
occur under any of the other Financing Documents.
(e) Change in Control. A change shall occur in the ownership of the
-----------------
controlling interest in the voting stock in Production Group to the extent such
change results in a violation of the covenant contained in Section 11.2 of this
------------
Agreement.
(f) Default Under Other Indebtedness. Default shall be made with
--------------------------------
respect to any other evidence of indebtedness or liability for borrowed money of
any Borrower (i) to the Bank, or (ii) to any other Person, if, in the case of
clause (ii) only, the effect of such default is to accelerate the maturity of
such evidence of indebtedness or liability or to permit the holder or obligee
thereof to cause any indebtedness to become due prior to
41
its stated maturity, or any such indebtedness shall not be paid as and when due
and payable.
(g) Receiver; Bankruptcy. Any Borrower shall (i) apply for or
--------------------
consent to the appointment of a receiver, trustee or liquidator of itself or any
of its property, (ii) admit in writing its inability to pay its debts as they
mature, (iii) make a general assignment for the benefit of creditors, (iv) be
adjudicated as bankrupt or insolvent or (v) file a voluntary petition in
bankruptcy, or a petition or an answer seeking reorganization or an arrangement
with creditors or to take advantage of any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution or liquidation law or statute, or
an answer admitting the material allegations of a petition filed against it in
any proceeding under any such law, or if corporate action shall be taken by any
Borrower for the purposes of effecting any of the foregoing, or (vi) by any act
indicate its consent to, approval or acquiescence in any such proceeding or the
appointment of any receiver of or trustee for any Borrower or any substantial
part of its property, or suffers any such receivership, trusteeship or
proceeding to continue undischarged for a period of 30 days.
(h) Involuntary Receiver; Bankruptcy. An order, judgment or decree
--------------------------------
shall be entered, without the application, approval or consent of any Borrower
by any court of competent jurisdiction, approving a petition seeking
reorganization of any Borrower or of all or a substantial part of the assets of
any Borrower or appointing a receiver, trustee or liquidator of any Borrower and
such order, judgment or decree shall continue unstayed and in effect for a
period of 30 days.
(i) Judgments. Any judgment in excess of $250,000 or judgments
---------
aggregating in excess of $500,000 against one or more Borrowers or any
attachment or other levy against the property of any Borrower with respect to a
claim, remains unpaid, unstayed on appeal, undischarged, unbonded or undismissed
for a period of 30 days.
(j) Execution; Attachment. Any execution or attachment shall be
---------------------
levied against the Collateral or any other security for the Borrowers'
Obligations, and such execution or attachment shall not be set aside, discharged
or stayed within thirty (30) days after the same shall have been levied.
(k) Collateral Value Exceeded. The Working Capital Line of Credit
-------------------------
Obligations shall exceed the Receivables Collateral Value, and the Borrowers
shall fail to either reduce the outstanding Working Capital Line of Credit
Obligations or satisfy the Bank that the Receivables Collateral Value will be
increased, within five (5) Business Days after written notice thereof shall have
been given to Production Group by the Bank.
(l) Debt Service Guaranty. Any party obligated to the Bank pursuant
---------------------
to a debt service guaranty entered into in accordance
42
with Section 9.11 hereof shall fail to extend its obligations thereunder in the
------------
manner, and within the time period, specified therein to a date thirty days
subsequent to the Termination Date of the last outstanding Credit Facility.
(m) Conditions Subsequent to Closing. Any of the conditions set forth
--------------------------------
on Schedule VII shall not have been met to the Bank's sole satisfaction by the
close of business on the dates set forth on Schedule VII.
Section 12.2 Remedies. Upon the occurrence of any Event of Default, and
--------
in every such Event of Default and at any time thereafter, unless such Event of
Default shall be cured to the satisfaction of the Bank, the Bank may exercise
any one or more of the following remedies.
(a) Accelerate Termination Date. Accelerate the Termination Date
---------------------------
whereupon the Acquisition Facility Commitment, the Equipment Facility Commitment
and the Working Capital Line of Credit Commitment shall terminate as of the
accelerated Termination Date.
(b) Accelerate the Borrowers' Obligations. Demand immediate payment
-------------------------------------
in full of all of the Borrowers' Obligations under this Agreement and the other
Financing Documents, including (without limitation) all accrued and unpaid
interest thereon, whether or not the Credit Facilities to which such Borrowers'
Obligations relate have become due and payable or, as in the case of Standby
Letters of Credit, may remain outstanding following repayment of the Borrowers'
Obligations relating thereto, whereupon all outstanding Borrowers' Obligations
shall become immediately due and payable without presentment, demand, protest or
any other notice of any kind, all of which are hereby expressly waived, anything
contained in this Agreement or in the other Financing Documents to the contrary
notwithstanding. The occurrence or non-occurrence of an Event of Default under
this Agreement shall in no way affect or condition the right of the Bank to
demand payment at any time of any of the Borrowers' Obligations which are
payable on demand regardless of whether or not an Event of Default has occurred.
(c) Liquidation of Security Interest in Collateral. Upon the
----------------------------------------------
occurrence of any Event of Default, and at any time during the continuance
thereof, the Bank shall have, in addition to all other rights and remedies, the
remedies of a secured party under the Uniform Commercial Code, or under any
other governing laws, including, without limitation, the right to take
possession of the Collateral (to which the Borrowers hereby specifically
consent), and for that purpose the Bank may, so far as the Borrowers can give
authority therefor, enter upon any premises on which the Collateral may be
situated and remove the same therefrom. Upon request of the Bank, the Borrowers
shall assemble and make the Collateral available to the Bank at a place to be
designated by the Bank. Unless the Collateral is perishable or threatens to
rapidly decline
43
in value, or is of a type customarily sold on a recognized market, the Bank
shall give the Borrowers at least five (5) days' prior notice of the time and
place of any public sale or the time after which any private sale or any other
intended disposition is to be made. The Bank may at any time in its discretion
transfer any securities (i.e., stock or bonds) or other property constituting
-----
the Collateral into its own name or that of its nominee and receive the income
thereon and hold the same as collateral for Borrowers' Obligations or apply it
to principal, or interest or other costs, fees or charges due on, or with
respect to, the Borrowers' Obligations. The Borrowers hereby irrevocably
constitute and appoint the Bank as the Borrowers' true and lawful attorney in
fact, with full power of substitution, at the sole cost and expense of the
Borrowers, but for the sole benefit of the Bank, to convert the Collateral to
cash, including without limitation, completing the manufacturing process of work
in process, and the sale (either public or private) of all or any portion of the
Collateral, to enforce collection of the Collateral, either in its own name or
in the name of, the Borrowers, compromising or settling with any account debtors
and prosecuting, defending, compromising or releasing any action relating to the
Collateral; to receive, open and dispose of all mail addressed to the Borrowers
and to take therefrom any remittances on or proceeds of the Collateral in which
Bank has a security interest; to notify United States Post Office authorities to
change the address for delivery of mail addressed to the Borrowers to such
address as the Bank may designate; to endorse the name of the Borrowers in favor
of the Bank upon any and all checks, drafts, money orders, notes, acceptances or
other instruments of the same or different nature; to sign and endorse the name
of the Borrowers on and to receive as secured party any of the Collateral, any
invoices, schedules of collateral, freight or express receipts and/or other
documents of title of the same or different nature relating to the Collateral;
to sign the name of the Borrowers on any notice to the account debtors or on
verification of the Collateral; and to sign and file or record on behalf of the
Borrowers any financing or continuation statements or other statements in order
to perfect, keep perfected or protect the Bank's security interest in the
Collateral. The Bank shall not be obliged to do any of the acts or exercise any
of the powers hereinabove authorized, but if the Bank elects to do any such act
or exercise any such power, it shall not be responsible to the Borrowers except
for the Bank's own willful misconduct or gross negligence. All powers conferred
upon the Bank by this Agreement, being coupled with an interest, shall be
irrevocable as long as any of the Borrowers' Obligations to the Bank shall
remain unpaid.
Upon the occurrence of any Event of Default hereunder, the Borrowers
shall assemble all of the Collateral and make the same available at a central
location designated by the Bank. Any notification required by Section 9-504 of
the Uniform Commercial Code shall be deemed reasonably and properly given if
given in the manner specified for other notices under this Agreement, at least 5
days before any sale or other disposition of the Collateral, which time period
may be decreased in the event that the Bank
44
reasonably determines that it is necessary to dispose of any portion of the
Collateral in a more expeditious manner because declining Collateral Value or
the like so dictates. Disposition shall be deemed commercially reasonable if
made pursuant to a public offering advertised at least twice in a newspaper of
general circulation in the community where the Collateral is located.
(d) Borrowers Remain Liable for Deficiency. The Borrowers are liable
--------------------------------------
for the entire amount of the Borrowers' Obligations and will remain responsible
for any deficiency in any proceeds realized upon any liquidation of Collateral.
(e) Other Rights and Remedies. In addition to any other rights or
-------------------------
remedies specifically set forth herein, the Bank shall have available to it all
rights and remedies under any of the Financing Documents and any other rights
and remedies afforded to it at law or in equity.
(f) Performance by Bank. If the Borrowers shall fail to pay any of
-------------------
the Borrowers' Obligations or the Borrowers shall otherwise fail to perform,
observe or comply with any of the conditions, covenants, terms, stipulations or
agreements contained in this Agreement or any of the other Financing Documents
and the same results in an Event of Default hereunder, the Bank, without notice
to or demand upon any Borrower, and without waiving or releasing any of the
Borrowers' Obligations or any Event of Default, and in addition to any rights or
remedies available to it under any of the other Financing Documents, may (but
shall be under no obligation to) at any time thereafter make such payment or
perform such act for the account and at the expense of the Borrowers, and may,
to the extent permitted by law, enter upon the premises of any Borrower for that
purpose and take all such action thereon as the Bank may consider necessary or
appropriate for such purpose. All sums so paid or advanced by the Bank and all
costs and expenses (including, without limitation, reasonable attorneys' fees
and expenses) incurred in connection therewith (the "Expense Payments") together
with interest thereon from the date of payment, advance or incurring until paid
in full at the rate of two percent (2%) per annum in excess of the Prime Rate
shall be paid by the Borrowers to the Bank on demand and shall constitute and
become a part of the Borrowers' Obligations.
(g) No Conditions Precedent to Exercise of Remedies. The Borrowers
-----------------------------------------------
shall not be relieved of any obligation by reason of the failure of the Bank to
comply with any request of any Borrower or of any other person to take action to
sell any of the Collateral, or otherwise to enforce any provision of the
Financing Documents, or by reason of the release, regardless of consideration,
of all or any part of the Collateral or other security for the Borrowers'
Obligations, or by reason of any agreement or stipulation between any subsequent
owner of the Collateral or other security for the Borrowers' Obligations, or the
Bank extending the time of payment or modifying the terms of the Financing
Documents without first having obtained the consent of
45
any Borrower; and in the latter event, the Borrowers shall continue to be liable
to make payments according to the terms of any such extension or modification
agreement, unless expressly released and discharged in writing by the Bank.
(h) Remedies Cumulative and Concurrent. No remedy herein conferred
----------------------------------
upon or reserved to the Bank is intended to be exclusive of any other remedies
provided for in the Financing Documents, and each and every such remedy shall be
cumulative, and shall be in addition to every other remedy given hereunder, or
under the Financing Documents, or now or hereafter existing at law or in equity
or by statute. Every right, power and remedy given by the Financing Documents
to the Bank shall be concurrent and may be pursued separately, successively or
together against the Borrowers or any of them, the Collateral or other security
for the Borrowers' Obligations or any part thereof, and every right, power and
remedy given by the Financing Documents may be exercised from time to time as
often as may be deemed expedient by the Bank.
(i) No Waiver. No delay or omission of the Bank to exercise any
---------
right, power or remedy accruing upon the happening of an Event of Default shall
impair any such right, power or remedy or shall be construed to be a waiver of
any such Event of Default or any acquiescence therein. No delay or omission on
the part of the Bank to exercise any remedy hereunder, or acceptance by the Bank
of any partial payment on account of the Borrowers' Obligations shall constitute
a waiver of any such Event of Default and each of the remedies herein provided
shall remain continuously available to the Bank.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 Notices. All communications between the parties or notices
-------
in connection with this Agreement and any of the other Financing Documents shall
be in writing (unless otherwise specified herein), hand delivered or sent by
registered airmail, postage prepaid, or by telex, telecopy or other electronic
transmission, addressed to the intended recipient at the address therefor set
forth below. All such communications and notices shall be effective upon
delivery. Either party may change its address or other information for notices
by giving notice to the other party in accordance with the provisions of this
Section.
46
(a) if to the Borrowers:
Production Group International, Inc.
One Courthouse Metro, Suite 500
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
President
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Piper & Marbury L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
(b) if to the Bank:
The First National Bank of Maryland
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Section 13.2 Survival of Agreement; Successors and Assigns.
---------------------------------------------
(a) All covenants, agreements, representations and warranties made
herein and in the certificates delivered pursuant hereto shall survive the
extension by the Bank of any of the Credit Facilities, and the execution and
delivery to the Bank of this Agreement and all of the other Financing Documents
and shall continue in full force and effect until all of the Borrowers'
Obligations have been paid and performed in full.
47
(b) Whenever in this Agreement any of the parties hereto is referred
to, such reference shall be deemed to include the successors and assigns of such
party; and all covenants, promises and agreements by or on behalf of the
Borrowers which are contained in this Agreement or in the other Financing
Documents shall inure to the benefit of the successors and assigns of the Bank.
No Borrower may assign any interest that it may have under this Agreement,
including (without limitation) the right to receive the benefit of any of the
Credit Facilities to be extended hereunder, without the prior written consent of
the Bank. Any assignment made or attempted by any Borrower without the prior
written consent of the Bank shall be void and of no effect. No consent by the
Bank to an assignment by any Borrower shall release the Borrowers as the parties
primarily obligated and liable under the terms of this Agreement unless any
Borrower shall be released specifically by the Bank in writing. No consent by
the Bank to an assignment shall be deemed to be a waiver of the requirement of
prior written consent by the Bank with respect to each and every further
assignment and as a condition precedent to the effectiveness of such assignment.
Section 13.3 Fees and Expenses of Bank. (a) Expenses. The Borrowers
------------------------- --------
will pay all out-of-pocket expenses incurred by the Bank in connection with (i)
the preparation and negotiation of this Agreement and the other Financing
Documents, (ii) the extension by the Bank of any of the Credit Facilities, (iii)
the protection of the Collateral and any other security for the repayment of the
Borrowers' Obligations, and (iv) the enforcement and protection of the rights of
the Bank in connection with this Agreement or any of the other Financing
Documents, including, but not limited to (A) the fees and disbursements of
▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇, Washington, D.C., or other counsel employed by the
Bank, and (B) the fees of the Bank's auditors.
(b) Fees Relating to Working Capital Line of Credit. (i) On
-----------------------------------------------
December 1, 1995, and on the first day of each fiscal quarter thereafter prior
to the maturity of the Working Capital Line of Credit, the Borrowers shall pay
to the Bank a fee in the amount of one quarter of one percent (1/4 of 1%) of the
average daily unused portion of the Working Capital Line of Credit Commitment
without regard to whether availability is constrained by the borrowing base.
The unused commitment fee shall be deemed to have been earned by the Bank for
the previous quarter at the time of billing and shall be non-refundable.
(ii) At the time of issuance of each Standby Letter of Credit, the
Borrowers shall pay the Bank an issuance fee in the amount of 1% per annum of
--- -----
the stated amount thereof, subject to a minimum issuance fee of $500. The
issuance fee for each Standby Letter of Credit shall be deemed to have been
earned by the Bank at the time of billing and shall be non-refundable.
(iii) On November 27, 1996, the Borrowers shall pay the Bank a
non-refundable underwriting fee equal to $50,000 for the underwriting performed
in connection with the extension and
48
restructuring of the Credit Facilities. This fee shall be deemed earned,
irrespective of whether the extension and restructuring in fact closes.
(c) Fee Relating to the Acquisition Facility. Upon execution and
----------------------------------------
delivery of the Original Agreement, the Borrowers shall pay to the Bank a
facility fee in the amount of one-half of one percent (1/2 of 1%) of the
Acquisition Facility Commitment, or $25,000. This fee shall be deemed to have
-------
been earned by the Bank at the time of billing and shall be non-refundable.
(The Bank hereby acknowledges that the fees described in this subsection have
been previously paid.)
(d) Fee Relating to the Equipment Facility. Upon execution and
--------------------------------------
delivery of the Original Agreement, the Borrowers shall pay to the Bank a
facility fee in the amount of the lesser of one-half of one percent (1/2 of 1%)
of the Equipment Facility Commitment, or $5,000. This fee shall be deemed to
------
have been earned by the Bank at the time of billing and shall be non-refundable.
(The Bank hereby acknowledges that the fees described in this subsection have
been previously paid.)
Section 13.4 Applicable Law; Jurisdiction; Consent to Service of Process.
-----------------------------------------------------------
This Agreement and all of the other Financing Documents (except where expressly,
indicated therein to the contrary) shall be construed in accordance with and
governed by the laws of the State of Maryland. The Bank and the Borrower hereby
submit to the non-exclusive jurisdiction of any Maryland court or federal court
sitting in Baltimore City over any suit, action or proceeding arising out of or
relating to this Agreement. The Borrowers hereby collectively and irrevocably
appoint the President of Production Group at the address set forth in Section
-------
13.1 of this Agreement to act as agent to accept service of process for them and
----
on their behalf in any proceeding brought pursuant to the provisions of this
subsection and to receive any notices required pursuant to or by the terms of
this Agreement.
Section 13.5 Waiver of Trial by Jury. Each of the Borrowers and the Bank
-----------------------
hereby waive trial by jury in any action or proceeding to which the Borrowers or
any of them and the Bank may be parties, arising out of or in any way pertaining
to this Agreement or any of the other Financing Documents. It is agreed and
understood that this waiver constitutes a waiver of trial by jury of all claims
against all parties to such actions or proceedings, including claims against
parties who are not parties to this Agreement.
This waiver is knowingly, willingly and voluntarily made by each of
the Borrowers and the Bank, and the Borrowers hereby represent that no
representations of fact or opinion have been made by any individual to induce
this waiver of trial by jury or to in any way modify or nullify its effect. The
Borrowers further represent that they have had the opportunity to be represented
in the signing of this Agreement and in the making of this waiver by independent
legal counsel, selected of their own free will, and
49
that they have had the opportunity to discuss this waiver with counsel.
Section 13.6 Confession of Judgment. EACH BORROWER HEREBY AUTHORIZES ANY
----------------------
ATTORNEY DESIGNATED BY THE BANK OR ANY CLERK OF ANY COURT OF RECORD TO APPEAR
FOR THE BORROWER IN ANY COURT OF RECORD AND CONFESS JUDGMENT WITHOUT PRIOR
HEARING AGAINST THE BORROWER IN FAVOR OF THE BANK FOR AND IN THE AMOUNT OF THE
UNPAID BORROWERS' OBLIGATIONS UNDER THIS AGREEMENT AND ANY OF THE OTHER
FINANCING DOCUMENTS, COSTS OF SUIT, AND ATTORNEYS' FEES OF FIFTEEN PERCENT (15%)
OF THE UNPAID BORROWERS' OBLIGATIONS. NOTWITHSTANDING THE FACT THAT THE AMOUNT
OF THE JUDGMENT WHICH MAY BE CONFESSED AGAINST THE BORROWER MAY INCLUDE
ATTORNEYS' FEE OF FIFTEEN PERCENT (15%) OF THE UNPAID BORROWERS' OBLIGATIONS,
THE BANK SHALL BE ENTITLED TO COLLECT ONLY ITS ACTUAL ATTORNEYS' FEES, WHETHER
SUCH AMOUNT SHALL BE GREATER OR LESS THAN FIFTEEN PERCENT (15%) OF THE UNPAID
BORROWERS' OBLIGATIONS. THE AUTHORITY AND POWER TO APPEAR FOR AND ENTER
JUDGMENT AGAINST THE BORROWER SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES
THEREOF OR BY ANY IMPERFECT EXERCISE THEREOF AND SHALL NOT BE EXTINGUISHED BY
ANY JUDGMENT ENTERED PURSUANT THERETO. SUCH AUTHORITY MAY BE EXERCISED ON ONE
OR MORE OCCASIONS OR FROM TIME TO TIME IN THE SAME OR DIFFERENT JURISDICTIONS AS
OFTEN AS THE BANK SHALL DEEM NECESSARY OR DESIRABLE, FOR ALL OF WHICH THIS
AGREEMENT SHALL BE A SUFFICIENT WARRANT.
It is understood and agreed that this power of attorney shall be
deemed to be a power coupled with an interest which cannot be revoked. Said
attorney-in-fact shall also have the power to prosecute and defend all actions
or proceedings in connection with the Collateral and all other security for the
Borrowers' Obligations and to take such actions and to require such performance
as the Bank may deem necessary.
Section 13.7 Modifications. No modification or waiver of any provision
-------------
of this Agreement or of any of the other Financing Documents, nor consent to any
departure by any Borrower therefrom, shall be effective unless the same shall be
in writing, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which it is given. No notice to or
demand on any Borrower in any case shall entitle any Borrower to any other or
further notice or demand in the same, similar or other circumstances.
Section 13.8 No Waiver of Rights by Bank. Neither any failure nor any
---------------------------
delay on the part of the Bank in exercising any right, power or privilege
hereunder or under this Agreement or any of the other Financing Documents shall
operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any other or further exercise or the exercise of any other right, power
or privilege.
Section 13.9 No Liability of Bank. The Bank shall not be liable for any
--------------------
act or omission by it pursuant to the provisions of this Agreement in the
absence of fraud or gross negligence. The
50
Borrowers hereby agree that the Bank shall not be chargeable for any negligence,
mistake, act or omission of any accountant, examiner, agency or attorney
employed by the Bank in making examinations, investigations or collections, or
otherwise in perfecting, maintaining, protecting or realizing upon any lien or
security interest or any other interest in the Collateral or any other security
for the Borrowers' Obligations. The Bank shall incur no liability to any
Borrower or any other party in connection with the acts or omissions of the Bank
in reliance upon any certificate or other paper believed by the Bank to be
genuine or with respect to any other thing which the Bank may do or refrain from
doing, unless such act or omission amounts to fraud or gross negligence.
By accepting or approving anything required to be observed, performed
or fulfilled by the Borrowers or to be given to the Bank pursuant to this
Agreement, including, without limitation, any certificate, balance sheet,
statement of profit and loss or other financial statement, survey, receipt,
appraisal or insurance policy, the Bank shall not be deemed to have warranted or
represented the sufficiency, legality, effectiveness or legal effect of the
same, or of any term, provision or condition thereof and any such acceptance or
approval thereof shall not be or constitute any warranty or representation with
respect thereto by the Bank.
Section 13.10 Indemnification. All acts, including any failure to act,
---------------
relating to the Collateral and any other security for the Borrowers' Obligations
by any agent, representative or designee of the Bank are performed solely for
the benefit of the Bank to assure repayment of the Borrowers' Obligations and
are not for the benefit of the Borrowers, or for the benefit of any other
person, including without limitation, purchasers, tenants or other occupants.
The Borrowers agree to jointly and severally indemnify the Bank and to hold the
Bank harmless against any loss or expense (including reasonable attorneys' fees
and expenses) resulting from any and all claims, actions, settlements or
liability for acts or failure to act in connection with the Collateral and any
other security for the Borrowers' Obligations, except for those claims which
directly result from the gross negligence or wilful misconduct of the Bank's
officers, directors or employees. In addition to all amounts payable hereunder,
the Borrowers hereby jointly and severally protect, indemnify and hold harmless
the Bank from and against, and hereby agree to defend the Bank against, any and
all claims, damages, losses, liabilities, costs or expenses whatsoever which the
Bank may, at any time, sustain or incur by reason of or in consequence of or
arising out of the extension of the Credit Facilities; it being the intention of
the parties that this Agreement shall be construed and applied to protect and
indemnify the Bank against any and all risks involved in the extension of the
Credit Facilities, including (without limitation) the issuance of the Standby
Letters of Credit, all of which risks are hereby assumed by the Borrowers,
including, without limitation, any and all risks of the acts or omissions,
whether rightful or
51
wrongful, of any present or future de jeure or de facto Governmental Authority.
-------- --------
The provisions of this Section shall survive the expiration of the Credit
Facilities, this Agreement and the other Financing Documents.
Section 13.11 No Partnership. Nothing contained in this Agreement shall
--------------
be construed in a manner to create any relationship between the Borrowers and
the Bank other than the relationship of borrowers and lender, and the Borrowers
and the Bank shall not be considered partners or co-venturers for any purpose on
account of this Agreement.
Section 13.12 Time of Essence. Time shall be of the essence for each and
---------------
every provision of this Agreement of which time is an element.
Section 13.13 Illegality. If fulfillment of any provision hereof or any
----------
transaction related hereto or to any of the other Financing Documents, at the
time performance of such provision shall be due, shall involve transcending the
limit of validity prescribed by law, then ipso facto, the obligation to be
----------
fulfilled shall be reduced to the limit of such validity; and if any clause or
provisions herein contained other than the provisions hereof pertaining to
repayment of the Borrowers' Obligations operates or would prospectively operate
to invalidate this Agreement in whole or in part, then such clause or provision
only shall be void, as though not herein contained, and the remainder of this
Agreement shall remain operative and in full force and effect; and if such
provision pertains to repayment of the Borrowers' Obligations, then, at the
option of the Bank, all of the Borrowers' Obligations to the Bank shall become
immediately due and payable.
Section 13.14 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be considered an original for all purposes;
provided, however, that all such counterparts shall together constitute one and
the same instrument.
Section 13.15 Captions and Headings. The captions and headings contained
---------------------
in this Agreement are included herein for convenience of reference only and
shall not be considered a part hereof and are not in any way intended to limit
or enlarge the terms hereof.
Section 13.16 Borrowers' Obligations Absolute and Unconditional. All of
-------------------------------------------------
the Borrowers' Obligations shall be absolute and unconditional, irrespective of
any set-off or counterclaim or the genuineness, validity, priority or
enforceability of this Agreement or any of the other Financing Documents or any
other circumstance which might otherwise constitute a legal or equitable
discharge.
Section 13.17 Extension of Termination Date. The Bank shall have the
-----------------------------
option, in its sole and absolute discretion, to extend the Termination Date with
respect to any one of the Credit Facilities
52
for additional periods. In the event that the Bank determines to make one or
more extensions of the Termination Date, it will give written notice to
Production Group not more than thirty (30) and no fewer than ten (10) days prior
to the then scheduled Termination Date. If Production Group does not receive
written notice from the Bank, during the time period specified in the preceding
sentence, indicating that the Bank has extended the Termination Date, the then
scheduled Termination Date shall be effective for all purposes of this
Agreement.
Section 13.18 Confidentiality. The Bank agrees that any confidential
---------------
information obtained from the Borrowers in connection with the Bank's initial
underwriting and ongoing administration of the Credit Facilities shall not be
disclosed to any Person, except for its regulators or any other Government
Authority requesting or requiring such information or any perspective
participant in the Credit Facilities, without the prior written consent of
Production Group, on behalf of the Borrowers. Notwithstanding the foregoing,
the Bank shall not be required to treat as confidential any legal, marketing,
financial or technical information concerning the Borrowers which:
(a) was already in possession of the Bank prior to receipt of such
information from the Borrowers;
(b) is, or becomes, the subject of a publication, or is otherwise made
available to the public without the fault of the Bank; or
(c) is received by the Bank without restriction of confidentiality
from a third party who is not under, or in violation of any obligation of
confidentiality to the Borrowers. The Bank agrees to obtain the written consent
of Production Group, on behalf of the Borrowers, prior to advertising the
provision of the Credit Facilities.
Section 13.19 Initial Public Offering. UPON THE SALE PURSUANT TO THE
-----------------------
INITIAL PUBLIC OFFERING BY ANY OF THE BORROWERS OF CAPITAL STOCK TO ANY
UNDERWRITER OR OTHER THIRD PARTY, THE BANK MAY, IN ITS SOLE DISCRETION, REVISE
THROUGH AN AMENDMENT TO THIS AGREEMENT ANY AND ALL OF THE COVENANTS OF THE
BORROWERS SET FORTH HEREIN.
53
IN WITNESS WHEREOF, each of the Borrowers and the Bank have caused
this Financing Agreement to be duly executed, sealed and delivered by their duly
authorized officers on the day and year first above written.
WITNESS: THE FIRST NATIONAL BANK OF MARYLAND
/s/ ▇▇▇▇▇ ▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (SEAL)
---------------------- -----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Title: Vice President
ATTEST: PRODUCTION GROUP INTERNATIONAL, INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
---------------------- -----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President and Chief
Executive Officer
EXEC-U-TOURS, INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
---------------------- -----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
SAFARIS EVENTS, INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
---------------------- -----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
KALEIDOSCOPE EVENTS, INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
---------------------- -----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
54
ATTEST: AGENDA WASHINGTON INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
---------------------- -----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
WASHINGTON INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
---------------------- -----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer and
Vice President
C.H.L. VENTURES, INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
---------------------- -----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
PGI ACQUISITION COMPANY E
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
---------------------- -----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
PGI ACQUISITION COMPANY A
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
---------------------- -----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
55
PGI ACQUISITION COMPANY I
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
PGI ACQUISITION COMPANY B
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
PGI ACQUISITION COMPANY F
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
PGI COMPANY S
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
PGI COMPANY H
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
PGI COMPANY P
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
56
PGI COMPANY Q
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
PGI COMPANY R
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
PGI COMPANY J
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
PGI COMPANY X
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
SPEARHEAD EXHIBITIONS LIMITED
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Director
57
PGI EUROPE LIMITED
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Director
▇▇▇ ▇▇▇▇▇ PRODUCTIONS,
WASHINGTON, D.C., INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
▇▇▇ ▇▇▇▇▇ PRODUCTIONS, INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
▇▇▇ ▇▇▇▇▇ PRODUCTIONS,
NEW JERSEY, INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
▇▇▇ ▇▇▇▇▇ PRODUCTIONS-ATLANTA, INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
58
▇▇▇ ▇▇▇▇▇ PRODUCTIONS WEST, INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
RMR PRODUCTION SERVICES, INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
TIMBERLINE WORLDWIDE, INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
EPIC ENTERPRISES, INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
EPIC ENTERPRISES OF NEVADA, INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
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