-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SXL+6E8Te+Oc6ibb24rmSNviQDMWPjWZiwiXVipB/1AS3LpXf8Hyw1er2WZS8tmq MlR2QZdyEeAlBpKxd8fqbg== 0001014733-04-000007.txt : 20040316 0001014733-04-000007.hdr.sgml : 20040316 20040315180737 ACCESSION NUMBER: 0001014733-04-000007 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040315 ITEM INFORMATION: Other events FILED AS OF DATE: 20040316 FILER: COMPANY DATA: COMPANY CONFORMED NAME: POINT 360 CENTRAL INDEX KEY: 0001014733 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ALLIED TO MOTION PICTURE PRODUCTION [7819] IRS NUMBER: 954272619 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-21917 FILM NUMBER: 04670805 BUSINESS ADDRESS: STREET 1: 7083 HOLLYWOOD BLVD SUITE 200 STREET 2: SUITE 200 CITY: HOLLYWOOD STATE: CA ZIP: 90028 BUSINESS PHONE: 3239577990 MAIL ADDRESS: STREET 1: 7083 HOLLYWOOD BLVD SUITE 200 STREET 2: SUITE 200 CITY: HOLLYWOOD STATE: CA ZIP: 90028 FORMER COMPANY: FORMER CONFORMED NAME: VDI MULTIMEDIA DATE OF NAME CHANGE: 19991115 FORMER COMPANY: FORMER CONFORMED NAME: VDI MEDIA DATE OF NAME CHANGE: 19960516 8-K 1 f8k2004-2.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) November 26, 2003 ------------------------------- POINT.360 - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) California - -------------------------------------------------------------------------------- (State or other jurisdiction of incorporation) 0-21917 95-4272619 - ------------------------------- ---------------------------------------------- (Commission File Number) (IRS Employer Identification No.) 7083 Hollywood Boulevard, Suite 200, Hollywood, CA 90028 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (323) 957-7990 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) ---------------------------------------------------------- (Former name or former address, if changed since last report) Item 5. OTHER EVENTS. REAL PROPERTY LEASE: In November 2003, Point.360 (the "Company") leased a 64,600 square foot building in Los Angeles, California, for the purpose of consolidating four vault locations then occupying approximately 71,000 square feet. After the initial build-out of the new facility and termination of the existing leases during 2004, the resulting annual lease and operating expense levels are expected to be favorable to the Company. As part of the transaction, the Company paid $600,000 for an option to purchase the building for approximately $8,600,000. Additionally, the landlord, General Electric Capital Business Asset Funding Corporation ("General Electric"), has committed to finance approximately $6,500,000 of the purchase price at a fixed interest rate of 7.75% over 15 years. The Company is not obligated to purchase the building or, if the option is exercised, borrow any portion of the purchase price from General Electric. During the period between November 2004 and the May 2005 purchase option date, the Company will decide whether or not to purchase the building. Pursuant to the lease, General Electric also advanced the Company $800,000 to pay for improvements to the building. Any portion of the $800,000 not spent by November 25, 2004 will have to be returned to General Electric. CREDIT FACILITIES: In March 2004, the Company and its banks entered an agreement which provides up to $10 million of revolving credit availability for two years and a five-year $8 million term loan. For the first two years of the term loan, the Company can re-borrow all principal payments to finance up to 80% of capital equipment purchases. The agreement provides for interest at the banks' prime rate or LIBOR plus 2.25% and 2.50% for the revolver and term loan, respectively, and requires the Company to maintain certain financial covenant ratios. The credit facilities are secured by all of the Company's assets. The term loan requires principal payments of $1.6 million annually. Item 7. FINANCIAL STATEMENTS AND EXHIBITS. 10.1 Lease Agreement dated November 26, 2003 between the Company and General Electric Capital Business Asset Funding Corporation. 10.2 Credit Agreement dated March 12, 2004 among the Company, Union Bank of California, N.A. and U.S. National Bank Association SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Point.360 ---------------------------------- (Registrant) Date: March 15, 2004 By: /s/ Alan R. Steel ---------------------------------- Alan R. Steel Executive Vice President, Finance and Administration, Chief Financial Officer 2 EX-10 2 geleaseagrmt.txt EXHIBIT 10.1 LEASE AGREEMENT Between GENERAL ELECTRIC CAPITAL BUSINESS ASSET FUNDING CORPORATION, as Lessor and POINT.360, as Lessee Dated as of November 26, 2003 TABLE OF CONTENTS PAGE Article I Section 1.01. Lease of Premises; Title and Condition.....................1 Section 1.02. Use........................................................1 Section 1.03. Term.......................................................2 Section 1.04. Rent.......................................................3 Section 1.05. Payment of Rent............................................3 Section 1.06. Late Payment Charge........................................3 Article II Section 2.01. Disclaimer of Representation by Lessor.....................3 Section 2.02. Premises Leased "As Is"....................................3 Section 2.03. Maintenance and Repair.....................................4 Section 2.04. Alterations, Replacements and Additions....................4 Section 2.05. Encumbrances...............................................5 Section 2.06. Replacement of Lessor's Fixtures and Lessor's Equipment....5 Section 2.07. Lessee To Comply With Covenants............................5 Section 2.08. Lessor's Cooperation Clause................................6 Section 2.09. No Third-party Claims Against Lessor.......................6 Article III Section 3.01. Removal....................................................6 Article IV Section 4.01. Restriction on Assignment or Other Transfer................6 Section 4.02. Information About Proposed Transferee......................6 Section 4.03. Terms Relating to Consent..................................6 Section 4.04. Subleases..................................................7 Section 4.05. Original Documents to Lessor...............................7 Section 4.06. Effect of Transfer.........................................7 Section 4.07. Collection of Rent.........................................7 Article V Section 5.01. Net Lease..................................................7 Section 5.02. Taxes and Assessments; Compliance With Law.................8 Section 5.03. Utility Services...........................................9 Section 5.04. No Adverse Possession......................................9 Section 5.05. Entry by Lessor............................................9 Section 5.06. Liens......................................................9 Section 5.07. Indemnification............................................9 Section 5.08. Environmental Compliance..................................10 Article VI Section 6.01. Compensation..............................................11 Section 6.02. Casualty..................................................11 Section 6.03. Condemnation..............................................12 Section 6.04. Required Insurance Coverage...............................13 Section 6.05. Separate Insurance Coverages..............................14 Section 6.06. Compliance With Insurance Requirements....................14 Section 6.07. Additional Coverages......................................14 Section 6.08. Policy Provisions.........................................14 Section 6.09. Companies and Form of Policies............................14 Section 6.10. Handling of Proceeds by Lessee............................14 Section 6.11. Handling of Proceeds by Depository........................15 Section 6.12. Certificates of Coverage..................................15 Section 6.13. Procurement by Lessor.....................................15 Article VII Section 7.01. Events of Default.........................................15 Section 7.02. Remedies Upon Lessee's Default............................16 Article VIII Section 8.01. Lessee's Notices and Remedies.............................18 Section 8.02. Fee Mortgagee's Right To Cure.............................18 Article IX Section 9.01. Subordination and Nondisturbance..........................18 Section 9.02. Election Not To Subordinate...............................19 Section 9.03. Attornment................................................19 Section 9.04. Limitations on Lessee.....................................19 Section 9.05. No Merger of Fee and Leasehold Estates....................19 Section 9.06. Changes to Lease Required by Fee Mortgagee................19 Article X Section 10.01. Estoppel Certificate......................................19 Section 10.02. Financial Information.....................................19 Article XI Section 11.01. Quiet Enjoyment...........................................20 Article XII Section 12.01. Lessor's Reversionary Interest; Surrender of Premises.....20 Section 12.02. Delivery of Rents and Records.............................20 Section 12.03. Acceptance of Surrender...................................20 Section 12.04. Holding Over..............................................20 Article XIII Section 13.01. Definition of "Lessor.....................................20 Section 13.02. Exculpation of Lessor.....................................21 Article XIV Section 14.01. No Waiver, etc., by Parties...............................21 Section 14.02. Notices, Etc..............................................21 Section 14.03. Separability..............................................21 Section 14.04. Headings..................................................21 Section 14.05. Relationship of Parties; Disclaimer.......................21 Section 14.06. Operating Lease...........................................21 Section 14.07. Joint Obligation..........................................22 Section 14.08. Prior Agreements..........................................22 Section 14.09. Recording.................................................22 Section 14.10. Proration of Rent.........................................22 Section 14.11. Authorization of Lease....................................22 Section 14.12. Applicable Law............................................22 Section 14.13. United States Funds.......................................22 Section 14.14. Time of Performance.......................................22 Section 14.15. "Force Majeure" Delays....................................22 Section 14.16. Waiver of Jury Trial......................................22 Section 14.17. Attorneys' Fees...........................................22 Section 14.18. Amendments................................................23 Section 14.19. Successors and Assigns....................................23 Section 14.20. Brokers...................................................23 Section 14.21. Construction..............................................23 Section 14.22. Execution in Counterparts.................................23 Section 14.23. Exhibits and Riders.......................................23 SCHEDULE A........LEGAL DESCRIPTION SCHEDULE B........CONTRACTUAL REQUIREMENTS SCHEDULE C........PERMITTED EXCEPTIONS SCHEDULE D........LESSEE INSURANCE REQUIREMENTS SCHEDULE E........PERMANENT LOAN INSURANCE REQUIREMENTS LEASE AGREEMENT THIS LEASE AGREEMENT (this "Lease") is made and entered into as of the day of November, 2003 by and between GENERAL ELECTRIC CAPITAL BUSINESS ASSET FUNDING CORPORATION, a Delaware corporation ("Lessor"), and Point.360, a California corporation (herein, together with permitted successors and assigns, called "Lessee"). Article I......... Section 1.01...... Lease of Premises; Title and Condition. In consideration of the rents and covenants herein stipulated to be paid and performed by Lessee and upon the terms and conditions herein specified, Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the premises (the "Premises") consisting of: (a) that parcel of land more particularly described in Schedule A attached hereto and made a part hereof (the "Land") having an address at 2701 Media Center Drive, Los Angeles, California; (b) all of the buildings, structures, facilities, installations and other improvements of every kind and description now or hereafter in, on, over and under the Land (collectively, the "Improvements"); (c) any movable or not permanently affixed fixtures, machinery, equipment, furnishings, moveable walls or partitions, or other personal property used or procured for use in connection with the operation, maintenance and protection of the Premises, which are located on or in the Improvements on the Commencement Date (as defined in Section 1.03), including (without limitation) plumbing, gas, electrical, heating, ventilating, lighting and air conditioning systems, facilities used to provide any utility services, parking and common area facilities, refrigeration, garbage disposal, and all landscaping, paving and parking areas, but except items, if any, included within the category of Lessee's Equipment (collectively referred to herein as "Lessor's Equipment"). "Lessee's Equipment" shall mean all machinery, equipment, furniture, furnishings and other personal property (i) installed by Lessee or its permitted sublessees or permitted occupants in, on or about the Premises and (ii) not used or procured for use in connection with the operation, maintenance and protection of the Premises, as such, but used or procured for use directly in connection with the business conducted thereon; (d) all fixtures, machinery, equipment, and other items of property, now or hereafter permanently affixed to or incorporated into the Improvements, including (without limitation) boilers, furnaces, heaters, electrical equipment, incineration, air and water pollution control, waste disposal, sprinkler systems, fire and theft protection equipment, plumbing, heating, ventilating, lighting and air conditioning systems, facilities used to provide any utility services, parking and common area facilities, and refrigeration systems and equipment, together with all replacements, modifications, and alterations thereto, all of which, to the greatest extent permitted by law, are hereby deemed by the parties hereto to constitute real estate (collectively referred to herein as "Lessor's Fixtures") (all the foregoing being included within the term "Improvements"); and (e) all of Lessor's right, title and interest, if any, in and to all easements, rights-of-way, appurtenances and other rights and benefits associated with the Land and to all public or private streets, roads, avenues, alleys or passways, open or proposed, on or abutting the Land, including (without limitation) the Contractual Requirements (as defined in Section 2.07 hereof) attached hereto as Exhibit B (all of the foregoing being included within the term "Land"). The Premises are leased to Lessee in their present condition without representation or warranty by Lessor and subject to the rights of parties in possession, to the existing state of title, the existing state and quality of Improvements, any state of facts that an accurate survey or physical inspection thereof might show, all zoning regulations, restrictions, rules and ordinances, building restrictions and other laws and regulations now in effect or hereafter adopted by any governmental authority having jurisdiction, to all applicable Legal Requirements (as defined in Subsection 5.02(b)) now or hereafter in effect and to Permitted Exceptions listed in Schedule C attached hereto. Lessee has examined the Premises and title to the Premises and has found all of the same satisfactory for all purposes. Section 1.02...... Use. Lessee may use the Premises or cause it to be used only for Permitted Uses. "Permitted Uses" are defined as all uses permitted by law, the certificate of occupancy and regulations of the applicable local planning, building and other agencies. Lessee shall not use the Premises for any other purpose without the prior written consent of Lessor, which consent may be withheld in its absolute discretion. Without limiting the generality of the foregoing, Lessor may condition or withhold such consent if the proposed use will significantly alter the character or purpose or detract or diminish the value or operating efficiency of the Premises, significantly impair the revenue-producing capability of the Premises, adversely affect the ability of Lessee to comply with this Lease, increase the use, handling, generation, storage, transportation or disposal of any Hazardous Materials or constitute a nuisance. Section 1.03...... Term. (a) This Lease shall be for a term (the "Initial Lease Term") commencing on November __, 2003 (the "Commencement Date") and ending at midnight on November ___, 2018 (the "Expiration Date") or such earlier date as this Lease is terminated pursuant to its terms. (b) On the Commencement Date, Lessor shall provide Lessee the sum of Eight Hundred Thousand Dollars ($800,000) to be used by Lessee to pay costs incurred by Lessee for alterations, additions or improvements to the Premises (the "Tenant Improvements"). Such Tenant Improvements shall be completed within one (1) year of the Commencement Date. All Tenant Improvements shall be completed in a good and workmanlike manner and in compliance with all applicable Legal Requirements and Insurance Requirements. (c) Lessee shall have the right and option to extend the Initial Lease Term for two additional periods of five years each, each commencing at midnight on the day on which the then existing term of this Lease expires (each an "Extended Term" and, together with the Initial Lease Term, referred to herein as the "Lease Term"), unless this Lease shall have expired or be terminated pursuant to any provision hereof or Lessee is in default under this Lease. Lessee shall, if at all, exercise its option to extend the Lease Term for any Extended Term by giving written notice of exercise of such option (the "Extension Notice") no sooner than 30 months and no later than 24 months prior to expiration of the then existing term of this Lease. Upon the delivery of the Extension Notice, the Lease Term shall be automatically extended for the next succeeding Extended Term on the terms and conditions provided herein. Upon the request of Lessor or Lessee, the parties hereto will, at the expense of Lessee, execute and exchange an instrument in recordable form setting forth the extension of the Lease Term in accordance with this Section 1.03. All terms and conditions of this Lease shall remain in full force and effect during any and all Extended Terms. Lessee may not exercise its right to deliver an Extension Notice at any time that an Event of Default has occurred and is continuing hereunder. (d) At the end of the eighteenth (18th) month of this Lease ("Closing"), Lessee shall have the option to purchase the Premises (the "Purchase Option") for the original purchase price of $8,571,500 (the "Purchase Price"). The Purchase Option may be exercised only if Lessee has given written notice to Lessor of its intent to exercise the Purchase Option prior to the end of the fifteenth (15th) month of this Lease (the "Purchase Notice"). Lessee may not exercise its right to deliver the Purchase Notice (i) at any time that an Event of Default has occurred and is continuing or (ii) if this Lease has been cancelled or terminated. Lessee shall pay a fee of $600,000 to Lessor at the inception of this Lease as consideration for the Purchase Option. Lessee may assign the Purchase Option. (1) The Purchase Price shall be payable in full at the Closing of the purchase in immediately available funds denominated in United States currency. Lessee shall pay all costs and expenses associated with the purchase including, without limitation, recording and transfer fees and taxes, reasonable attorney fees of Lessor, title insurance premiums, survey costs and escrow fees. There shall be no proration of real estate taxes or any other adjustment to the Purchase Price. Lessee shall be liable for the Basic Rent and all other sums due hereunder through the Closing date. (2) At Closing Lessor shall convey title to Lessee through a quitclaim deed. Lessor's conveyance of the Premises shall be strictly "AS IS" without representation or warranty or any kind except with respect to Lessor's actions as owner of the Premises. (3) If Lessee shall fail to complete the purchase of the Premises at the end of the 18th month of the Lease in accordance with the terms set forth above, then (i) Lessee's right to exercise the Purchase Option shall terminate, (ii) Lessee shall reimburse Lessor for all costs and expenses incurred in connection with any attempted exercise of the Purchase Option and (iii) Lessee shall remain as Lessee hereunder through the remainder of the Initial Lease Term with the right to extend the Initial Lease Term as set forth in Section 1.03(b) hereof. (4) Upon exercising the Purchase Option, provided there is no material adverse change in Lessee's financial conditions Lessor agrees to provide Lessee, upon Lessee's request, with permanent mortgage financing on the Premises. The terms of such financing shall include: a loan to value ratio of 75% (based upon an MAI appraisal of the Premises), a fixed interest rate of 7.75%, a 15 year term with an amortization period of 20 years. Lessee will not be obligated to pay an origination fee, but will be responsible for all of Lessor's out of pocket costs, including but not limited to transfer taxes, legal costs, appraisal fees, title and escrow expenses. This agreement by Lessor to provide financing to Lessee shall not be assignable or transferable by Lessee. Section 1.04...... Rent. (a) During the first year of the Lease Term, Lessee shall pay to Lessor the Basic Rent of $736,679.00 per annum. On each Adjustment Date (as defined below), the Basic Rent shall be Adjusted for the period from such Adjustment Date until the next Adjustment Date. "Adjusted" shall mean that the Basic Rent for such period shall be increased from the Basic Rent in effect just prior to the Adjustment Date by the annual percentage increase in the Consumer Price Index (defined below) in effect on such Adjustment Date. The "Consumer Price Index" is that Consumer Price Index for All Urban Consumers (Los Angeles-Riverside-Orange County, California) computed and issued bimonthly by the Bureau of Labor Statistics of the U.S. Department of Labor. "Adjustment Date" means, each of the thirteenth (13th), eighteenth (18th) and thirtieth (30th) month anniversaries of this Lease and each one year anniversary of the thirtieth (30th) month of this Lease through the Initial Lease Term and any Extended Term. The Basic Rent shall be payable in equal monthly installments, in advance, on the first day of each and every month. Lessee shall perform all its obligations under this Lease at its sole cost and expense, and shall pay all Basic Rent, additional charges and any other sum due hereunder when due and payable, without notice or demand. (b) Lessee shall pay, as additional rent, all other amounts, costs, expenses, liabilities and obligations that Lessee herein assumes or agrees to pay, and will reimburse Lessor for any payments thereof made by Lessor in accordance with the terms and requirements of this Lease (collectively, "Additional Rent"). Such expenses shall include (without limitation) (i) the cost of air conditioning, electricity, heating, mechanical, ventilation, water and sewer, and any elevator systems and all other utilities, and the cost of supplies and equipment, and maintenance and service contracts in connection therewith, (ii) the cost of repairs, maintenance and cleaning of any common areas, (iii) the cost of fire, extended coverage, sprinkler, public liability, property damage and other insurance, (iv) wages, salaries and other labor costs, including taxes, insurance, retirement, medical and other employee benefits, (v) fees, charges and other costs, including management fees, consulting fees, legal fees and accounting fees, of all independent contractors engaged by Lessor or reasonably charged by Lessor if Lessor performs management services in connection with the Premises, (vi) the cost of any license, permit or inspection fees, (vii) reasonable reserves to cover costs of long-term programmed maintenance, including (without limitation) HVAC and any elevator system maintenance, (viii) all taxes and assessments pursuant to Section 5.02(a) and (ix) any other costs and expenses of any other kind whatsoever reasonably incurred in managing, operating, maintaining and repairing the Premises, but excluding costs of any special services rendered to individual tenants (including Lessee) for which a special charge is made, other costs billed to and paid by individual tenants (including Lessee) and costs paid by proceeds of insurance. In the event of any failure by Lessee to pay any of the Additional Rent, Lessor shall have all rights, powers and remedies provided for herein or by law as in the case of nonpayment of the Basic Rent. Section 1.05...... Payment of Rent. Lessee will pay to Lessor all Basic Rent and Additional Rent by good check or checks subject to collection, at the principal office of Lessor, or at such other place or to such agent as Lessor from time to time may designate by written notice to Lessee given not later than the twentieth day of the month for the following and subsequent months. Section 1.06...... Late Payment Charge. If Lessee shall fail to make payment of any installment of Basic Rent, any payment of Additional Rent or any payment of any other sums required by this Lease as provided in this Lease within ten days after such payment is due (regardless of any notice requirements for purposes of Article VII), Lessee shall pay to Lessor, in addition to such Basic Rent, Additional Rent or other sum, a late charge equal to 5% of the amount so delinquent, said charge being intended as stipulated compensation for the additional costs and expenses incurred by Lessor because of such late payment and not as a penalty. Article II........ Section 2.01...... Disclaimer of Representation by Lessor. Lessee is fully familiar with the physical condition of the Premises and all Improvements. Lessor has made no representation as to the condition of the Premises or Improvements or the fitness or availability thereof for any particular use and none shall be implied from this Lease, and Lessor shall not be liable for any latent or patent defect therein. Section 2.02...... Premises Leased "As Is". THE PREMISES, INCLUDING IMPROVEMENTS, ARE DEMISED AND LEASED TO LESSEE "AS IS" AND IN THEIR PRESENT CONDITION WITHOUT ANY REPRESENTATION OR WARRANTY BY LESSOR AS TO THEIR COMPLIANCE WITH APPLICABLE LEGAL REQUIREMENTS AND INSURANCE REQUIREMENTS (AS DEFINED IN SECTION 6.04) NOW OR HEREAFTER IN EFFECT OR AS TO THEIR COMPLIANCE WITH APPLICABLE TERMS AND CONDITIONS OF ANY CONTRACTUAL REQUIREMENTS (AS DEFINED IN SECTION 2.07). LESSEE HAS INSPECTED, IS FULLY FAMILIAR WITH AND HEREBY ACCEPTS THE PREMISES AND HAS FOUND THE SAME TO BE SATISFACTORY TO IT FOR ALL PURPOSES RELATING TO THIS LEASE. LESSOR SHALL HAVE NO LIABILITY WHATSOEVER TO LESSEE IN RESPECT OF OR ARISING OUT OF THE EXISTING STATE OF TITLE TO THE PREMISES OR OF THE EXISTING CONDITION, STAGE OF COMPLETION OR QUALITY OF CONSTRUCTION OF THE IMPROVEMENTS. LESSOR MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE PREMISES OR OF ANY FIXTURES OR OTHER ITEMS CONSTITUTING ANY PORTION THEREOF, OR THE LOCATION, USE, DESCRIPTION, DESIGN, MERCHANTABILITY, FITNESS FOR USE FOR A PARTICULAR PURPOSE, CONDITION OR DURABILITY THEREOF, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, OR WITH RESPECT TO LESSOR'S TITLE THERETO OR OWNERSHIP THEREOF, AND ALL RISKS INCIDENT THERETO SHALL BE BORNE BY LESSEE. Section 2.03...... Maintenance and Repair. (a) Lessee acknowledges that it has received the Premises in good order and repair. Lessee, at its own expense, will maintain all parts of the Premises in good repair and condition and will take all action and will make all structural and nonstructural, foreseen and unforeseen and ordinary and extraordinary changes and repairs that may be required to keep all parts of the Premises in good repair and condition (including, without limitation, all painting, glass, utilities, conduits, fixtures and equipment, foundation, roof, exterior walls, heating and air conditioning systems, wiring, plumbing, sprinkler systems and other utilities, and all paving, sidewalks, roads, parking areas, curbs and gutters and fences). Lessor shall not be required to maintain, repair or rebuild all or any part of the Premises. Lessee waives the right to require Lessor to maintain, repair or rebuild all or any part of the Premises or make repairs at the expense of Lessor pursuant to any Legal Requirement, agreement, contract, covenant, condition or restrictions at any time. (b) Replacement of or major repairs to all structural or mechanical systems shall be undertaken by Lessee at its sole cost and expense. Such replacements shall be made pursuant to and in accordance with plans and specifications approved in advance by Lessor as required for Major Alterations. (c) Lessee shall have the benefit of, and the right to enforce, all builders' and manufacturers' warranties issued for the benefit of the Premises so long as Lessee is not in default under the terms of this Lease and all costs of Lessor's cooperation are borne by Lessee. Lessor agrees to promptly cooperate with Lessee to the extent necessary or desirable to enforce the provisions of all warranties. Section 2.04...... Alterations, Replacements and Additions. With respect to any alteration, change, addition or improvement (herein collectively referred to as an "Alteration") to any portion of the Premises: (a) If such Alteration is not structural in nature and does not affect the condition of the Improvements or any utilities and does not lessen the value of the Premises as it is at the commencement of such work, and if the cost thereof is less than $125,000, Lessor's consent to such Alteration shall not be required. Such Alterations (referred to herein as "Minor Alterations") shall be expeditiously completed in a good and workmanlike manner and in compliance with all applicable Legal Requirements and Insurance Requirements. Lessee shall pay the increased premium, if any, charged by the insurance companies carrying insurance policies on the Premises, to cover the additional risk during the course of such work. Lessee shall provide Lessor upon request with evidence of payment for all work done within 90 days after completion thereof. All such Alterations made by Lessee to the existing (as of the date of this Lease) Improvements, Lessor's Fixtures and Lessor's Equipment shall be and become part of the Premises. (b) If such Alteration is structural in nature or adversely affects the value or utility of the Improvements or lessens the value of the Premises as it is at the commencement of such work in any material respect, or if the cost thereof is $125,000 or more, Lessor's prior written consent to such alteration thereto shall be required, which consent shall not be unreasonably withheld, delayed or conditioned. Such Alterations (referred to herein as "Major Alterations") shall be performed in accordance with the following requirements: (i) Before commencing any Major Alteration, Lessee shall, upon request, at Lessee's own cost and expense, deliver to Lessor an endorsement to the commercial general liability policy required by this Lease, which endorsement shall provide that such insurance will cover work in progress; (ii) Lessee shall pay the increased premium, if any, charged by the insurance companies carrying insurance policies on the Premises, to cover the additional risk during the course of such work; (iii) All such Alterations made by Lessee to the existing (as of the date of this Lease) Improvements, Lessor's Fixtures and Lessor's Equipment shall be and become a part of the Premises; (iv) Lessee shall, prior to the commencement of such work, submit plans and specifications to Lessor for Lessor's approval. If Lessor approves such plans and specifications, Lessee shall obtain all necessary approvals from municipal departments and bureaus and from any other municipal, state and federal authorities having supervision or jurisdiction of the Premises, and a copy of all such necessary approvals shall be delivered to Lessor; (v) All of such work shall be completed substantially in accordance with the plans and specifications approved by Lessor and in accordance with all Legal Requirements; (vi) No building now or hereafter erected upon the Premises shall be demolished, nor shall Major Alteration be made thereto, without the prior written consent of Lessor; (vii) Lessee shall provide Lessor upon request with evidence of payment for all work done within 90 days after completion thereof; and (viii) Prior to the commencement of any such work, Lessee shall furnish Lessor such security or assurances as are reasonably required by Lessor to assure completion of the Major Alteration and payment of the costs thereof, including Lessor's reasonable approval of the proposed construction budget or estimated costs of construction and Lessee's assurance that Lessee can and will pay all costs of construction and will discharge all construction liens which may be asserted on account of the work. (c) The provisions of this Section shall also apply with respect to any Alterations undertaken by any subtenant of any portion of the Premises. Section 2.05...... Encumbrances. If all or any part of the Improvements shall encroach upon any property, street or right-of-way adjoining or adjacent to the Premises, or shall violate the agreements or conditions affecting the Premises or any part thereof, or shall hinder, obstruct or impair any easement or right-of-way to which the Premises are subject, then, promptly after written request of Lessor (unless such encroachment, violation, hindrance, obstruction or impairment is not material) or of any person so affected, Lessee shall, at its expense, either (a) obtain valid and effective waivers or settlements of all claims, liabilities and damages resulting therefrom or (b) if Lessor consents thereto, make such changes, including alteration or removal, to the Improvements and take such other action as shall be necessary to remove or eliminate such encroachments, violations, hindrances, obstructions or impairments. Section 2.06...... Replacement of Lessor's Fixtures and Lessor's Equipment. (a) Lessee may, from time to time, and upon not less than 30 days' prior written notice to Lessor, remove and dispose of any of Lessor's Fixtures and Lessor's Equipment constituting a major component of the Premises (i.e. plumbing, gas, electrical, heating, ventilating, lighting and air conditioning systems) with Lessor's prior written consent. Such consent shall not be unreasonably withheld so long as Lessee immediately replaces such Lessor's Fixtures and Lessor's Equipment, constituting a major component of the Premises, with items which are at least equal in value and general utility to those removed, which are free of any liens or security interests and the fee title to which is conveyed directly to Lessor and made subject to this Lease. (b) Lessee may, from time to time, and upon not less than 30 days' prior written notice to Lessor, remove and dispose of any of Lessor's Fixtures and Lessor's Equipment which does not constitute a major component of the Premises so long as Lessee immediately replaces such Lessor's Fixtures and Lessor's Equipment which are not major components of the Premises with items which are at least equal in value and general utility to those removed. Such components must be free of any liens or security interests and the fee title to such must be, upon placement of such components upon the Premises, conveyed directly to Lessor and made subject of this Lease. Section 2.07...... Lessee To Comply With Covenants. Lessee agrees that it will not use the Premises, or any part thereof, or suffer or permit the same to be used in any manner or suffer or do anything upon the Premises or any part thereof which may violate any material covenant, condition, reservation, agreement, easement or restriction to which the Premises may be subject on the Commencement Date or which may be imposed after said date which are consented to in writing by Lessee, and Lessee agrees that it will observe and perform and will comply with and carry out the provisions of all Contractual Requirements during the Lease Term. "Contractual Requirements" are defined as all obligations required under any covenants, conditions and restrictions, easement agreements, operating agreements, equipment leases or other contractual obligations applicable to and binding upon the Premises. Section 2.08...... Lessor's Cooperation Clause. Upon reasonable request from time to time, Lessor shall join with Lessee in executing: (a) any conveyance, dedication, grant of easement or license or other instrument as shall be reasonably necessary to provide public utility service to the Premises or in order to allow the Permitted Uses of the Premises by Lessee and (b) to the extent that the signature or approval of Lessor is required by any governmental body, applications for such permits or other governmental authorization or approvals. Lessor will join in such applications or other documentation without any cost or liability to Lessor in connection therewith, and Lessee shall indemnify and hold Lessor harmless from any cost, liability or expense arising therefrom. Section 2.09...... No Third-party Claims Against Lessor. Nothing contained in this Lease shall constitute the consent or request of Lessor, express or implied, by inference or otherwise, to any person, firm or entity for the performance of any labor or the furnishing of any materials or other property in respect of the Premises or any part thereof, or as giving Lessee any authority to contract for or permit the rendering of any services or the furnishing of any materials or other property so as to permit the making of any claim against Lessor. Nothing in this Lease shall be deemed as giving Lessee any right, power or authority to contract for or permit the rendering of any service or the furnishing of any material that would give rise to any mechanic's or other lien against Lessor's interest in the Premises. NOTICE IS HEREBY GIVEN THAT LESSOR WILL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO LESSEE, OR TO ANYONE HOLDING AN INTEREST IN THE PREMISES (OR ANY PART THEREOF) THROUGH OR UNDER LESSEE, AND THAT NO CONSTRUCTION, MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LESSOR IN THE PREMISES. Article III....... Section 3.01...... Removal. Lessee may remove Lessee's Equipment at any time during the Lease Term. Any of Lessee's Equipment not removed by Lessee prior to the expiration of the Lease or earlier termination shall be considered abandoned by Lessee and may be appropriated, sold, destroyed or otherwise disposed of by Lessor without notice to Lessee. Lessee shall pay Lessor upon demand all reasonable costs and expenses incurred by Lessee in removing, storing and disposing of same. Lessee will repair at its expense all damage to the Premises necessarily caused by the removal of Lessee's Equipment, whether effected by Lessee or by Lessor. Article IV........ Section 4.01...... Restriction on Assignment or Other Transfer. Lessee covenants and agrees for Lessee and its successors, assigns and legal representatives that neither this Lease nor the Lease Term and estate hereby granted, nor any part hereof or thereof, will be assigned or mortgaged, pledged or encumbered by Lessee or otherwise transferred (whether voluntarily, involuntarily, by operation of law, or otherwise) or for any purpose other than as set forth herein, without the prior written consent of Lessor in every case (a "Transfer"), except in accordance with this Section. For the purposes of this Section, a Transfer shall be deemed to include any transfer, assignment or encumbrance of the controlling interests in Lessee, whether occurring by reason of one transaction or cumulatively in any two or more transactions; provided, however, for purposes of this Section, a change in the control of Lessee, a corporation whose stock is publicly traded on a national stock exchange, shall not be deemed a Transfer. Any sublease of more than 20% of the leaseable floor area of the Premises will be deemed a Transfer; provided, however, that room rental or occupancy agreements, however designated, in the ordinary course of business will not require Lessor's consent or be deemed a Transfer. If the Transfer involves an assignment of this Lease, the assignee shall execute and deliver to Lessor an agreement in form and substance in all respects reasonably satisfactory to Lessor whereby such assignee assumes and agrees to be bound by and perform all of the obligations of Lessee under this Lease. Section 4.02...... Information About Proposed Transferee. Notwithstanding anything contained in Section 4.01, in the event Lessee wishes to assign or otherwise make a Transfer of this Lease, Lessee shall first notify Lessor of the name of the proposed transferee and of the material terms, provisions and conditions contained in the proposed Transfer, and shall provide Lessor with such information as to the proposed transferee's financial condition, business experience and standing as Lessor may reasonably require. Section 4.03...... Terms Relating to Consent. Lessor shall have the absolute right to withhold or condition its consent to any proposed Transfer unless the following conditions are met: (a) the proposed transferee is of a financial standing which in Lessor's judgment will allow such proposed transferee to meet its obligations under this Lease as they become due; (b) the Premises will be used by such transferee for a Permitted Use; (c) there shall be no material default by Lessee which has not been cured within any (if any) applicable cure period under any of the terms, covenants and conditions of this Lease at the time that Lessor's consent to any such Transfer is requested or on the effective date of the Transfer; and (d) Lessee shall reimburse Lessor for any reasonable expenses that may be incurred by Lessor in connection with the proposed Transfer, including (without limitation) the costs of making investigations as to the acceptability of a proposed transferee and all legal expenses incurred in connection with the granting of any requested consent to the Transfer; (e) any request for an assignment of this Lease shall be accompanied by the proposed instrument of assignment and the assignment document will provide that the assignee cannot further transfer its interest without complying with the transfer requirements of this Lease. Section 4.04...... Subleases. Lessee may sublease up to 20% in the aggregate of the Premises to one or more subtenants without the consent of Lessor and otherwise with Lessor's consent, provided the sublease is subordinate to this Lease and to the Fee Mortgage, and the sublessee does not require a nondisturbance agreement with Lessor. "Fee Mortgage" means any mortgage, deed of trust or similar instrument encumbering real property to secure an obligation made by Lessor which is at any time a lien on Lessor's interest in the Premises, the beneficiary of which is referred to herein as "Fee Mortgagee." To the extent Lessor's consent is required, the sublease shall be submitted to Lessor for review and approval. All subleases shall expressly be made subject to the provisions of this Lease. Any sublease of all or a portion of the Premises shall specifically state that it is subject and subordinate to the terms and conditions of this Lease and to the Fee Mortgage, that it shall be limited by the provisions hereof and that the lessee thereunder shall not have any other or further rights than Lessee has under this Lease. No sublease shall extend for any period longer than the term of this Lease. Section 4.05...... Original Documents to Lessor. In the event this Lease is assigned or if more than 10% of the Premises is sublet a duplicate original of the instrument of assignment or subletting, as the case may be, shall be sent to Lessor within 10 days after the effective date thereof. Any assignee of this Lease shall assume the obligations of Lessee hereunder and a duplicate original of such assumption shall be delivered to Lessor together with the aforesaid duplicate original of the assignment instrument. Section 4.06...... Effect of Transfer. No such assignment, Transfer or sublease shall release Lessee from liability hereunder or affect or reduce any obligations of Lessee named herein or of any other Lessee assuming this Lease or affect or reduce the rights of Lessor hereunder. All obligations of Lessee named herein and of any other Lessee assuming this Lease shall continue in full effect as the joint and several obligations of a principal and not of a guarantor or surety, as though no assignment, Transfer or sublease had been made. In connection therewith, Lessee named herein and each succeeding Lessee assuming this Lease agrees that the joint and several liability of each hereunder shall continue in full force and effect and shall not be terminated or affected by any action which Lessor may take or fail to take against any Lessee hereunder or by reason of any waiver of, or failure to enforce, any rights or remedies reserved to Lessor, or otherwise. Section 4.07...... Collection of Rent. If Lessee's interest in this Lease is assigned, whether or not in violation of the provisions hereof, Lessor may collect Basic Rent and Additional Rent from the assignee. If the Premises is sublet to, or occupied by, or used by, any person other than Lessee, whether or not in violation hereof, Lessor after default by Lessee under this Lease, may collect Basic Rent and Additional Rent from the subtenant, user or occupant. In either case, no such assignment, sublease or collection shall affect Lessee's obligations hereunder, and Lessor shall apply the net amount collected to the Basic Rent, Additional Rent and other obligations of Lessee reserved in this Lease in such order as Lessor elects. Article V......... Section 5.01...... Net Lease. (a) It is expressly understood and agreed by and between the parties that this Lease is an absolute net lease, and the Basic Rent and all other sums payable hereunder to or on behalf of Lessor shall be paid without notice or demand and without setoff, counterclaim, abatement, suspension, deduction or defense. (b) Except as otherwise expressly provided in the Lease, this Lease shall not terminate, nor shall Lessee have any right to terminate this Lease or be entitled to the abatement of any rent or any reduction thereof, nor shall the obligations hereunder of Lessee be otherwise affected, by reason of any damage to or destruction of all or any part of the demised premises from whatever cause, the taking of the demised premises or any portion thereof by condemnation or otherwise, the prohibition, limitation or restriction of Lessee's use of the demised premises, or interference with such use by any private person or corporation, or by reason of any eviction by paramount title or otherwise, or for any other cause whether similar or dissimilar to the foregoing, any present or future law to the contrary notwithstanding, it being the intention of the parties hereto that the rent and all other charges payable hereunder to or on behalf of Lessor shall continue to be payable in all events and the obligations of Lessee hereunder shall continue unaffected, unless the requirement to pay or perform the same shall be terminated pursuant to an express provision of this Lease. Nothing contained in this Section shall be deemed a waiver by Lessee of any rights that it may have to bring a separate action with respect to any default by Lessor hereunder or under any other agreement. (c) Lessee covenants and agrees that it will remain obligated under this Lease in accordance with its terms and that Lessee will not take any action to terminate, rescind or avoid this Lease, notwithstanding the bankruptcy, insolvency, reorganization, composition, readjustment, liquidation, dissolution, winding-up or other proceeding affecting Lessor in any such proceeding and notwithstanding any action with respect to this Lease which may be taken by any trustee or receiver of Lessor in any such proceeding or by any court in any such proceeding. (d) Lessee waives all rights now or hereafter conferred by law (i) to quit, terminate or surrender this Lease or the demised premises or any part thereof or (ii) to any abatement, suspension, deferment or reduction of the rent, or any other sums payable hereunder to or on behalf of Lessor, regardless of whether such rights shall arise from any present or future constitution, statute or rule of law. Section 5.02...... Taxes and Assessments; Compliance With Law. (a) Lessee shall pay, prior to any interest, penalty, fine or cost that may be added for nonpayment: (i) all taxes, assessments, levies, fees, water and sewer rents and charges and all other governmental charges, general and special, ordinary and extraordinary, foreseen and unforeseen, which are, at any time prior to or during the Lease Term hereof, imposed or levied upon or assessed against or which arise with respect to (A) the Premises, (B) any Basic Rent, Additional Rent or other sums payable hereunder, (C) this Lease or the leasehold estate hereby created or (D) the operation, possession or use of the Premises; (ii) all gross receipts or similar taxes (i.e., taxes based upon gross income which fail to take into account deductions with respect to depreciation, interest, taxes or ordinary and necessary business expenses, in each case relating to the Premises) imposed or levied upon, assessed against or measured by any Basic Rent, Additional Rent or other sums payable hereunder; (iii) all sales, value added, ad valorem, use and similar taxes at any time levied, assessed or payable on account of the acquisition, ownership, leasing, operation, possession or use of the Premises; and (iv) all charges of utilities, communications and similar services serving the Premises. Lessee shall not be required to pay any franchise, estate, inheritance, transfer, income, capital gains or similar tax of Lessor unless such tax is imposed, levied or assessed in substitution for any other tax, assessment, charge or levy which Lessee is required to pay pursuant to this Section; provided, however, that if, at any time during the Lease Term, the method of taxation shall be such that there shall be assessed, levied, charged or imposed on Lessor a capital levy or other tax directly on the rents received therefrom, or upon the value of the Premises or any present or future improvement or improvements on the Premises, then all such levies and taxes or the part thereof so measured or based shall be payable by Lessee, and Lessee shall pay and discharge the same as herein provided. Lessee will furnish to Lessor, promptly after demand therefor, proof of payment of all items referred to above which are payable by Lessee. If any such assessment may legally be paid in installments, Lessee may pay such assessment in installments; in such event, Lessee shall be liable only for installments which become due and payable with respect to any tax period occurring in whole or in part during the Lease Term hereof; provided, however, that all amounts referred to in this Section for the fiscal or tax year in which the Lease Term shall expire shall be apportioned so that Lessee shall pay those portions thereof which correspond with the portion of such year as are within the Lease Term hereby demised. (b) Lessee shall comply with and cause the Premises to comply with and shall assume all obligations and liabilities with respect to (i) all laws, ordinances and regulations and other governmental rules, orders and determinations presently in effect or hereafter enacted, made or issued, whether or not presently contemplated (collectively, "Legal Requirements"), applicable to the Premises or the ownership, operation, use or possession thereof and (ii) all agreements, contracts, insurance policies (including, without limitation, to the extent necessary to prevent cancellation thereof and to insure full payment of any claims made under such policies), agreements, covenants, conditions and restrictions now or hereafter applicable to the Premises or the ownership, operation, use or possession thereof, including (without limitation) all such Legal Requirements, contracts, agreements, covenants, conditions and restrictions that require structural, unforeseen or extraordinary changes; provided, however, that, with respect to any of the obligations of Lessee in clause (ii) above which are not now in existence, Lessee shall not be required to so comply unless Lessee is either a party thereto or has given its written consent thereto, or unless the same is occasioned by Legal Requirements or Lessee's default (including any failure or omission by Lessee) under this Lease. Nothing in clause (ii) of the immediately preceding sentence or the following sentence shall modify the obligations of Lessee under Section 5.07. (c) If an Event of Default shall occur and be continuing, upon the request of Lessor, Lessee shall, in addition to and concurrently with the payment of Basic Rent as required in Subsection 1.04(a), each month pay one-twelfth of the amount (as estimated by Lessor) of the annual taxes and assessments described in Subsection 5.02(a) and the annual premiums for insurance required in Section 6.04 next becoming due and payable with respect to the Premises, and Lessee shall also pay to Lessor on demand therefor the amount by which the actual taxes and assessments and insurance premiums exceed the payment by Lessee required in this subsection. Section 5.03...... Utility Services. Lessee agrees to arrange for, and to pay or cause to be paid all charges for, gas, water, sewer, electricity, light, heat, power, telephone or other communication service or other utility or service used, rendered or supplied to, upon or in connection with the Premises or any portion thereof, throughout the Lease Term, and to indemnify Lessor and save it harmless against any liability or damages arising from any interruption, curtailment or stoppage of any such utility or service. Lessee shall also, at its sole cost and expense, procure or cause to be procured any and all necessary permits, licenses or other authorizations required for the lawful and proper use and for the installation and maintenance upon the Premises of wires, pipes, conduits, tubes and other equipment and appliances for use in supplying any such utility service to or upon the Premises. Lessee expressly agrees that Lessor is not, nor shall it be, required to furnish to Lessee or any other occupant of the Premises, during the demised term, any water, sewer service, gas, heat, electricity, light, power or any other facilities, equipment, labor, materials or services of any kind whatsoever. Section 5.04...... No Adverse Possession. Lessee shall not suffer or permit the Premises or any part or parts thereof to be used in such manner as might reasonably tend to impair Lessor's title to the Premises or any portion thereof, or in such manner as might reasonably make possible a claim or claims of adverse usage or adverse possession, or of implied dedication of the Premises or any portion thereof. Section 5.05...... Entry by Lessor. Lessor, the Fee Mortgagee and their authorized representatives shall have the right to enter the Premises or any portion thereof at all reasonable times upon reasonable prior notice (except in cases of emergency, where no notice will be required) to Lessee (a) for the purpose of inspecting the same (including without limitation any environmental inspection) or, after the occurrence of an Event of Default by Lessee in completing any alterations or repairs required hereunder, for the purpose of doing any work, and may take all such action thereon as may be necessary or appropriate for any such purpose (but nothing contained in this Lease or otherwise shall create or imply any duty upon the part of Lessor to make any such inspection or do any such work), and (b) for the purpose of showing the Premises to prospective purchasers and mortgagees and, within 12 months prior to the expiration of the Lease Term, for the purpose of showing the same to prospective lessees. No such entry shall constitute an eviction of Lessee. Section 5.06...... Liens. Lessee will remove and discharge any charge, lien, security interest or encumbrance upon the Premises or upon any Basic Rent, Additional Rent or other sums payable hereunder which arises for any reason, including (without limitation) all liens which arise out of the possession, use, occupancy, construction, repair or rebuilding of the Premises or by reason of labor or materials furnished or claimed to have been furnished to Lessee or for the Premises, but not including (a) the liens and encumbrances set forth in Schedule C, (b) this Lease and any assignment hereof or any sublease permitted hereunder and (c) any mortgage, charge, lien, security interest or encumbrance created or caused by Lessor or its agents, employees or representatives without the consent of Lessee. Lessee may provide a bond or other security acceptable to Lessor to remove or pay all costs associated with the removal of any such lien. Nothing contained in this Lease shall be construed as constituting the consent or request of Lessor, express or implied, to or for the performance (on behalf of or for the benefit of Lessor) by any contractor, laborer, materialman or vendor, of any labor or services or for the furnishing of any materials for any construction, alteration, addition, repair or demolition of or to the Premises or any part thereof. Notice is hereby given that Lessor will not be liable for any labor, services or materials furnished or to be furnished to Lessee, or to anyone holding an interest in the Premises or any part thereof through or under Lessee, and that no mechanic's or other liens for any such labor, services or materials shall attach to or affect the interest of Lessor in and to the Premises. Section 5.07...... Indemnification. Lessee will defend, protect, indemnify and save harmless Lessor, its agents and employees and the Fee Mortgagee, from and against any and all liabilities, obligations, damages, losses, penalties, claims, causes of action, costs, charges and/or expenses, including reasonable attorneys' fees and expenses, which may be imposed upon or incurred by or asserted against Lessor, its agents or employees or the Fee Mortgagee by reason of (a) any accident, injury to any person (including death) or damage to property occurring on or about the Premises from all causes whatsoever (except to the extent caused by any act of sole negligence or willful misconduct of Lessor or Fee Mortgagee), (b) any loss arising out of any work performed on Premises by Lessee or any agent, employee or contractor of Lessee or by any assignee or sublessee of Lessee or any agent, employee or contractor of any such assignee or sublessee, (c) any default on the part of Lessee to perform or comply with any term of this Lease, (d) any claim for the performance of labor or the furnishing of materials or other property at Lessee's request or at the request of anyone claiming under Lessee or performed by Lessor in respect of the Premises or any part thereof, (e) any action or proceeding pertaining to the Premises to which Lessor, its agents or employees or the Fee Mortgagee is made a party or in which it becomes necessary in the judgment of Lessor to defend or uphold the validity of the interest of Lessor in the Premises and (f) any acts, omissions, or negligence of Lessee or the sublessees, contractors, agents, employees, invitees, customers, concessionaires or licensees of Lessee (except to the extent caused by any act of sole negligence or willful misconduct of Lessor or Fee Mortgagee). Lessor will defend, protect, indemnify and save harmless Lessee, its agents and employees, from and against any and all liabilities, obligations, damages, losses, penalities, claims, causes of action, costs, charges and/or expense, including reasonable attarneys' fees and expenses, which may be imposed upon or incurred by or asserted against Lessee, its agents or employees by reason of willful misconduct or any actively negligent act of Lessor. Section 5.08...... Environmental Compliance. (a) Lessee's Representations. As a material inducement for Lessor to enter into this Lease, Lessee represents and warrants that (i) except as may be permitted by applicable law, throughout the Lease Term (A) all parts of the Premises will be kept free (by Lessee and others) of Hazardous Materials (as defined below) and (B) no part of the Premises will be used by Lessee or others to generate, manufacture, refine, transport, treat, store, handle, dispose of, transfer, produce or process Hazardous Materials and (ii) Lessee will not suffer or permit any activity in, at or from all or any part of the Premises that will cause or contribute to pollution (by petroleum or petroleum products, or otherwise) of the Premises in whole or in part or any other property. "Hazardous Materials" shall mean all materials which because of their quantity, concentration or physical, chemical or infectious characteristics may cause or pose a present or potential hazard to human health or the environment when improperly handled, treated, stored, transported, disposed of or otherwise managed. The term shall include (without limitation) all petroleum, petroleum products, explosives, radioactive materials, hazardous wastes, hazardous or toxic substances, asbestos or any other substance or material now or hereafter defined as a "hazardous" or "toxic" substance, material or product by the U.S. Environmental Protection Agency or the state in which the Premises is located under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), the Resource Conservation and Recovery Act (RCRA), the Toxic Substances Control Act (TSCA), the Federal Water Pollution Control Act (FWPCA) or comparable state statutes and other Environmental Requirements (as defined below). Lessee shall comply fully with all Environmental Requirements. "Environmental Requirements" shall mean all applicable laws (including without limitation statutes, regulations and common law) pertaining to the protection of human health and the environment, including (without limitation) employee and community right-to-know laws and all laws regarding the use, generation, storage, transportation, treatment, disposal or other handling of Hazardous Materials. The only Hazardous Materials permitted on the Premises are cleaning products and other materials in ordinary quantities which are used in the ordinary course of business and necessary for the conduct of the Permitted Uses and which Lessee uses in strict compliance with all applicable Environmental Requirements. (b) Lessee's Remediation. If during the Lease Term any Hazardous Materials are dumped, released, discharged, spilled or leaked onto or into the Premises or found to be contaminating the Premises (or if a party has reasonable cause to believe that such dumping, releasing, discharge, spilling or leak may have occurred or that such Hazardous Materials may be contaminating the Premises), the party will notify the other party in writing (except in cases of an emergency as described in Section 5.05 in which event the party shall have the right to take action without such notice as provided therein) as to the matter in question. In such event or at any other time as may be requested by Lessor, the parties will cooperate in having reasonable examinations, tests or investigations performed at Lessee's expense to determine the extent of the problem and nature of appropriate corrective action (or if Lessee fails to cause such examinations or investigations to be performed after notice of the required action Lessor will have the right to perform them on Lessee's behalf and at Lessee's expense). If such examinations demonstrate that the Premises is contaminated by Hazardous Materials at levels requiring remedial action under applicable laws, Lessee will have 30 days (or such longer time as may be reasonably necessary under the circumstances or such lesser time as may be required by emergency conditions, by law, regulation or judicial order, or by any governmental entity, whichever is sooner) after written notice from Lessor to eliminate same and (to the extent necessary) to restore the Premises to prior condition but with new non-Hazardous Materials, failing which Lessor may either terminate this Lease on written notice to Lessee or take all action deemed desirable by Lessor to effect such elimination and (to the extent necessary) restoration. If Lessor elects the latter, upon request and as Additional Rent, and without limiting the indemnification set forth in subparagraph (c) below, Lessor will be entitled to receive from Lessee all reasonable costs and expenses in any way associated therewith, plus interest at the rate provided in Section 7.02(k) hereof. (c) Lessee's Indemnity. Lessee, for itself, its successors and assigns, hereby agrees to defend, indemnify, hold harmless and reimburse Lessor, its successors and assigns, and any Fee Mortgagee from, against and for any and all damages, claims, demands, liabilities, losses, penalties and expenses (including, without limitation, any and all clean-up costs, remediation costs, court costs, reasonable attorneys' fees and diminution in the value of the Premises) which are in any manner caused in whole or in part by the presence of any Hazardous Materials on or about the Premises or the failure of Lessee or any subtenant, agent, employee or contractor of Lessee or the Premises to comply with any Environmental Requirements, whether or not the same are known to or caused by Lessee and whether the same occur during the term of this Lease, any time prior to the term of this Lease or, with respect to any occurrence or condition on or about the Premises which is caused by any condition, act or omission prior to the expiration of this Lease, after the term of the Lease. Claims which are the subject of this indemnification include without limitation remedial actions, violations of law and claims for personal injury, wrongful death, property damage or natural resource damages. This indemnity shall survive the termination, expiration or forfeiture of this Lease. (d) Lessor's Cooperation. Unless an Event of Default shall exist hereunder or Lessee shall not be diligently performing its obligations under subsections (b) and (c) above, Lessor agrees to cooperate with Lessee in connection with (i) any claim Lessor and/or Lessee may have against any third party for the cost of any remediation conducted or to be conducted on, in and under the Premises or with respect to any damage caused to the Premises, and (ii) any insurance covering such remediation and/or damage to the Premises. Lessor hereby assigns to Lessee any and all rights, claims or causes of action Lessor may have with against such third party or in connection with such insurance to the extent of any sums paid by Lessee in fulfillment of its obligations under subsections (b) and (c) above except to the extent that such rights, claims, causes of action or insurance proceeds are necessary to fully compensate Lessor with respect to any such remediation or damage to the Premises. Lessee agrees to pay all Lessor's out-of-pocket costs incurred by Lessor in connection with such cooperation. Article VI........ Section 6.01...... Compensation. Except as provided in Subsection 6.02(a)(i), Lessee hereby irrevocably assigns to Lessor any award, compensation or insurance payment to which Lessee may become entitled by reason of Lessee's interest in the Premises (a) if the use, occupancy or title of the Premises or any part thereof is taken, requisitioned or sold in, by or on account of any actual or threatened eminent domain proceeding or other action by any person having the power of eminent domain ("Condemnation") or (b) if the Premises or any part thereof is damaged or destroyed by fire, flood or other casualty, including (without limitation) vandalism ("Casualty"). All awards, compensations, damages and insurance payments on account of any Condemnation or Casualty are herein collectively called "Compensation." Lessor may appear in any such proceeding or action to negotiate, prosecute and adjust any claim for any Compensation, and Lessor shall collect any such Compensation. Lessee shall pay all of Lessor's reasonable costs and expenses in connection with each such proceeding, action, negotiation, prosecution and adjustment. Lessee shall be entitled to participate in any such proceeding, action, negotiation, prosecution, appeal or adjustment as contemplated herein. Notwithstanding anything to the contrary contained in this Article VI, if permissible under applicable law, any separate Compensation made to Lessee for its moving and relocation expenses, anticipated loss of business profits, loss of goodwill or fixtures and equipment paid for by Lessee and which are not part of the Premises (including, without limitation, Lessee's Equipment) shall be paid directly to and shall be retained by Lessee (and shall not be deemed to be Compensation). All Compensation shall be applied pursuant to this Article VI, and all such Compensation (less the expense of collecting such Compensation) may be called the "Net Proceeds." Section 6.02...... Casualty. (a) Payment of Proceeds. (i) In case of any Casualty to the Premises or any part thereof where the insurance proceeds to be collected are less than $75,000, the proceeds of any such insurance shall be paid to, and may be adjusted by, Lessee alone. (ii) In case of any Casualty to the Premises or any part thereof where the insurance proceeds to be collected are $75,000 or more, the proceeds of any such insurance shall be paid to a depository (the "Depository") chosen by Lessor or, if there is a Fee Mortgagee, by the Fee Mortgagee, to be disbursed in accordance with Section 6.02(e) below, and will be adjusted by Lessee with the reasonable approval of Lessor or, if there is a Fee Mortgagee, the Fee Mortgagee. Lessor or the Fee Mortgagee may be the Depository. (b) Restoration of Premises. In case of any Casualty to the Premises or any part thereof, Lessee will, at Lessee's expense, whether or not there are insurance proceeds available or sufficient for the purpose, promptly commence and complete with due diligence the restoration of the Premises to as nearly as possible its value, condition and character immediately prior to such Casualty. (c) Prompt Performance. Restoration of the Premises under this Section 6.02 shall be performed in accordance with Section 2.04(b) hereof. If the work of repairing, replacing or rebuilding said damaged or destroyed Premises or portion thereof shall not have been commenced promptly following the receipt of all required approvals of Lessee's plans and specifications, or having been commenced, shall not be expeditiously proceeding, Lessor shall have all rights under this Lease in respect of a default by Lessee. (d) No Abatement. Regardless of any Casualty to the Premises or any part thereof, Lessee shall not be entitled to any abatement of Basic Rent, Additional Rent, or any other payment Lessee is required to make pursuant to this Lease except as set forth in Sections 6.3(b), 6.3(d)(i) and 6.04(c) hereof, (e) Substantial Casualty; Proceeds Held by Depository. If the insurance proceeds to be collected following a Casualty exceed $75,000 (a "Substantial Casualty"), then Lessee shall promptly notify Lessor and the Fee Mortgagee in writing of such Casualty. In case of any Substantial Casualty, the proceeds of insurance (excluding, however, proceeds payable or on account of Lessee's Equipment) will be paid directly to the Depository and remitted by the Depository to Lessee or to the persons designated by Lessee for the costs of labor and materials as the work of repair, replacement and/or restoration progresses upon Lessee's request and against: (i) a certificate by Lessee dated not more than 15 days prior to the request, setting forth the following: (A) that the sum then requested either has been paid by Lessee or is justly due to contractors, subcontractors, materialmen, engineers, architects or other persons who have rendered services or furnished materials for the work therein specified, and giving a brief description of such services and materials and the several amounts so paid or due to each of said persons in respect thereto and (B) that the cost, as estimated by the person signing such certificate, of the work required to be done subsequent to the date of such certificate in order to complete it does not exceed the funds remaining in the hands of the Depository after payment of the sum requested in such certificate; and (ii) lien waivers or other evidence reasonably satisfactory to the Depository and Lessor, to the effect that there has not been or may not be filed with respect to the Premises or any part thereof any construction, mechanics', laborers', materialmen's or other like lien which has not been discharged of record except such as will be discharged by payment of the amount requested or contested by appropriate legal action by Lessee in accordance with Section 5.06. In the event the insurance proceeds exceed the cost of restoration work, such excess shall be paid equally to the Lessee and the Lessor or the Fee Mortgagee, as applicable. Any structural work required to be performed by Lessee under the provisions of Section 6.02(b) which involves a cost of $25,000 or more (as estimated by a licensed architect selected by Lessee and reasonably acceptable to Lessor and the Fee Mortgagee) shall be performed under the supervision of an architect selected by Lessee and reasonably satisfactory to Lessor and the holder of the first Fee Mortgage, and the aforesaid certificate shall also be signed by such architect as to the matters in paragraph (e)(i) above. Any nonstructural work required to be performed by Lessee under the provisions of Section 6.02(b) which involves a cost of $50,000 or more (as estimated by a licensed architect selected by Lessee and reasonably acceptable to Lessor and the Fee Mortgagee) shall be performed under the supervision of an architect selected by Lessee and reasonably satisfactory to Lessor and the holder of the first Fee Mortgage, and the aforesaid certificate shall also be signed by such architect as to the matters in paragraph (e)(i) above. (f) Requirements of Fee Mortgagee. Subject to Section 9.06 hereof, in the event the Fee Mortgagee requires changes to this Lease with respect to the amounts or types of insurance coverages, the duties for repair or restoration, the handling of proceeds, the application of casualty or condemnation proceeds to the restoration of the Premises or to the indebtedness secured by the Fee Mortgage or other matters, Lessee will cooperate in executing any clarification or amendment of this Lease required by the Fee Mortgagee as a condition to providing financing to Lessor. Section 6.03...... Condemnation. (a) Notice of Condemnation. In the event of a Condemnation of any or all of the Premises, Lessee shall provide notice of such Condemnation to Lessor. (b) Substantial Condemnation. In the event of any Condemnation of all of the Premises or so much thereof that the remainder is insufficient to permit the continued operation of Lessee's business thereon, even if restored to an architectural unit under the provisions of this Lease (any such event being a "Substantial Condemnation"), then this Lease and the term hereby granted shall cease and expire on the date when possession of the Premises or such portion thereof shall be taken, and all rents, taxes and other charges shall be prorated and paid to such date. (c) Award on Substantial Condemnation. In the event of a termination of this Lease by reason of a Substantial Condemnation, the whole of any Compensation shall be paid solely to Lessor, who shall be entitled to keep said award, including consequential and other damages and compensation of any sort for such Substantial Condemnation, with deduction therefrom only for any award specifically made to Lessee for its moving and relocation expenses, anticipated loss of business profits, loss of goodwill or fixtures and equipment paid for by Lessee and which are not part of the Premises (including, without limitation, Lessee's Equipment) which amount, if any, shall be remitted by Lessor to Lessee, and in no event (except in the event Lessee shall purchase the Premises pursuant to subsection (b) above) shall Lessee be entitled to any other part of an award for Substantial Condemnation. Lessee agrees to execute any documents that may be required to facilitate collection by Lessor of any Compensation. (d) Continuance of Lease on Less Than Substantial Condemnation. In the event of a Condemnation of any part of the Premises and if the part not taken is sufficient to permit the reasonable operation of Lessee's business if restored as an architectural unit, this Lease shall remain in full force and effect, except: (i) The annual Basic Rent under this Lease, commencing on the date that title shall vest by reason of such taking (the "Vesting Date"), shall be reduced by an amount which bears the same proportion to the Basic Rent payable immediately prior to such taking as the then fair market rental value of the part of the Premises so taken shall bear to the then fair market rental value of the whole of the Premises immediately prior to such taking. (ii) Lessor shall be entitled to and shall receive and retain the Compensation payable in respect of the portion of the Premises so taken, subject to the provisions of subdivision (iii) below. (iii) Promptly after such taking Lessee shall at Lessee's expense, whether or not there are condemnation proceeds available or sufficient for the purpose, restore that part of the Premises which remains to as nearly its former condition as circumstances will permit. The award with respect to any Improvements shall be payable to the Depository for disbursement subject to the provisions of Section 6.02(e). Subject to the same provisions and limitations set forth for payments in Section 6.02(e), Lessee shall receive advances from said award for the payment of the costs of labor and materials as the restoration and construction progresses. Any balance remaining after payment of all such costs of labor and materials shall be paid to Lessor. (e) Cooperation of Parties. Nothing herein contained shall be construed or deemed to vest in Lessee any ownership or title of or to the Premises. Lessor and Lessee shall cooperate with each other and Lessor shall have the right to designate counsel to represent Lessor and Lessee to represent the parties in any proceeding relating to a Condemnation. (f) Temporary Condemnation. In the event of a Condemnation of all or any portion of the Premises for temporary use, the foregoing provisions of this Section shall be inapplicable thereto, this Lease shall continue in full force and effect without reduction or abatement of Basic Rent or Additional Rent. In such event, Lessee alone shall be entitled to make claim for, recover and retain any Compensation recoverable in respect of such temporary use whether in the form of rental or otherwise; provided, that any Compensation paid for any period beyond the term of this Lease shall be paid to Lessor. Section 6.04...... Required Insurance Coverage. During the Lease Term, Lessee shall, at Lessee's sole cost and expense, secure and keep the following insurance (the "Insurance Requirements") in full force and effect: (a) "All-risk" of physical damage coverage insurance, including earthquake damage coverage, covering the Improvements, Lessor's Fixtures and Lessor's Equipment on a replacement cost basis, in an amount sufficient to avoid application of any co-insurance clause and with an "agreed amount" endorsement voiding co-insurance, including a full "replacement cost" endorsement together with appropriate "demolition and increased costs of construction" endorsements. Lessee shall be responsible for determining the applicability of "demolition and increased costs of construction" endorsements. Lessor reserves the right to reasonably disapprove any exclusions from the "all-risk" coverage furnished hereunder. If Lessee elects to provide blanket "all-risk" coverage over locations in addition to the Premises, Lessor reserves the right to require a specific endorsement or endorsements from the insurance companies affording such coverage evidencing coverage over the Premises in a sufficient amount to provide recovery on a replacement cost basis. Lessee's coverage may provide for reasonable self-insured retentions. (b) Commercial general liability insurance for the benefit of Lessor, Lessee and the Fee Mortgagee, fully protecting Lessor, Lessee and the Fee Mortgagee in respect of personal injuries and death to persons and property damage, with a combined single limit of not less than $5,000,000 for personal injuries and death to persons and property damage. In the event Lessee maintains blanket liability coverage, the total limits of liability required hereunder must be available to the Premises. (c) Business interruption/loss of rents insurance covering all risks referenced in Section 6.04(a) for the benefit of Lessor, Lessee and, if Lessor so directs, for the benefit of the Fee Mortgagee, as their interests may appear, covering risk of loss during the lesser of the first 12 months of reconstruction or the actual reconstruction period necessitated by the occurrence of any of the covered hazards, in such amounts as may be customary for comparable properties in the area and in an amount sufficient to prevent Lessor or Lessee from becoming a co-insurer. Lessee's obligation for payment of rent shall be reduced dollar for dollar by the amount of rent insurance received by Lessor or Fee Mortgagee. (d) Boiler and machinery coverage covering loss or damage, on a replacement cost basis, from explosion of any steam and pressure boilers, hot water heaters, and similar apparatus located in, on or about the Premises with limits of not less than the replacement cost of the Improvements. In the event coverage hereunder is afforded by more than one insurance company, all such companies shall furnish a joint loss endorsement to the policies covering the risk set forth in this Section. (e) Flood (if the Premises is located in whole or in part within any flood plain area as designated by any department or agency of the United States Government having jurisdiction) and such other hazards and in such amounts as may be customary for comparable properties in the area, provided the same is available at rates which are economically practical in relation to the risks covered, as determined by Lessee and reasonably approved by Lessor. (f) Workers' compensation insurance coverage for all persons employed by Lessee on the Premises with statutory limits and otherwise with limits of and provisions in accordance with the requirements of applicable local, state and federal law. (g) During the course of any construction or reconstruction in connection with any addition, renovation or any Casualty or Condemnation, "builder's risk" coverage for the Premises written on an "all risk" basis with privilege granted to occupy in an amount not less than the full amount of the construction or reconstruction cost, during the period of any Major Alteration, which shall include the value of building materials on the Premises, covering loss or damage by fire, lightning, windstorm, hail, explosion, riot, riot attending a strike, civil commotion, aircraft vehicles, smoke, earthquakes, vandalism and malicious mischief, and flood insurance (if the Premises is in a flood hazard area), and such other hazards as may be included in broad form of extended coverage from time to time available. (h) Without limiting the generality of the foregoing, during the Lease Term, Lessee shall, at Lessee's sole cost and expense, secure and keep the insurance coverages as required in Schedule D hereto in full force and effect. Section 6.05...... Separate Insurance Coverages. Without the prior written consent of Lessor, Lessee shall not obtain or carry separate insurance concurrent in form or contributing in the event of loss with that required by Section 6.04 to be furnished by Lessee unless Lessor and Lessee are included therein as additional named insureds, with loss payable as in this Lease. Lessee shall immediately notify Lessor whenever any such separate insurance is obtained and shall deliver to Lessor certificates evidencing the same. Section 6.06...... Compliance With Insurance Requirements. Lessee shall not violate or permit to be violated any of the conditions or provisions of any of the insurance policies, and Lessee shall so perform and satisfy the requirements of the companies writing such policies. Lessee further agrees to reasonably cooperate with Lessor as and when requested to comply with loss prevention programs. Section 6.07...... Additional Coverages. On reasonable demand of Lessor or the Fee Mortgagee, Lessee shall provide such other forms of insurance in such amounts, and/or the foregoing insurance in such additional amounts as the parties may from time to time approve, as are customarily furnished by Lessees under comparable leases in the case of property similar in use to the Premises and located in the area in which the Premises is situated, provided the same is available at rates which are economically practical in relation to the risk covered. Without limiting the generality of the foregoing, if Lessor is or becomes the Fee Mortgagee with respect to the Premises, then Lessee shall be required to maintain insurance meeting the requirements specified in Schedule E hereto and such other requirements as Lessor may specify. Section 6.08...... Policy Provisions. All insurance policies maintained by Lessee pursuant to Section 6.04 shall name Lessee as insured, and Lessor and the Fee Mortgagee as additional insureds and shall provide (a) that losses shall be payable notwithstanding any act or negligence of Lessee and (b) that no cancellation, nonrenewal, or material alteration in the terms and conditions of coverage thereof shall be effective until at least 30 days after written notice thereof delivered by certified mail, return-receipt requested, is given to Lessor and to the Fee Mortgagee. Section 6.09...... Companies and Form of Policies. All policies of insurance procured by Lessee shall be issued by insurance companies licensed to do business in the State in which the Premises are located and authorized to issue such policy or policies. All policies shall be in a form and with companies reasonably acceptable to Lessor and may be part of blanket coverage relating to various properties operated by Lessee. Section 6.10...... Handling of Proceeds by Lessee. Insurance proceeds which are payable to Lessee alone in accordance with the provisions of Section 6.02(a)(i) shall be held by Lessee and used solely by Lessee to pay for the cost of making repairs, alterations and improvements to the Premises and doing such work as may be necessary to protect the Premises against further damage and for no other purpose. If the proceeds of insurance payable to Lessee alone under Section 6.02(a)(i) shall exceed such costs, one-half of such excess shall be promptly paid by Lessee to Lessor. Section 6.11...... Handling of Proceeds by Depository. The Compensation payable to the Depository in accordance with the provisions of this Lease shall be held in trust for the purpose of paying for the cost of the work required to be performed by Lessee under Sections 6.02 and 6.03 and the cost of making repairs, alterations and improvements to the Premises and doing such work as may be necessary to protect the Premises against further injury and shall be disbursed as provided in Section 6.02(e). The Depository shall be entitled to reasonable compensation payable out of such funds. If the insurance proceeds held by the Depository shall exceed such cost, such excess shall belong to and be paid over to the Lessor upon the completion of and payment for such work. Section 6.12...... Certificates of Coverage. Upon the execution of this Lease, Lessee shall deliver to Lessor and to the Fee Mortgagee a certificate of insurance coverage as to the policies required by this Lease evidencing compliance with the terms of this Lease and bearing evidence of payment of all premiums therefor. Thereafter, as to policy renewals, Lessee will provide Lessor and the Fee Mortgagee with certificates or assurances of continued coverage within 15 days prior to expiration of such policies. Section 6.13...... Procurement by Lessor. If premiums on any insurance policy shall not be paid or if the memoranda of policies or certificates or evidence of payment of the premiums thereon shall not be so delivered to Lessor as required herein, or if Lessor learns of any cancellation of any policy required hereunder, Lessor may procure and/or pay for any such insurance for Lessor's benefit only and not for the benefit of Lessee, with or without notice to Lessee. Lessee may restore such coverage effective one year after the effective date of the insurance procured by Lessor provided Lessee furnishes evidence of such coverage and payment therefor at least 60 days prior to the expiration of said one-year policy in the form required by Section 6.04. The amount so paid by Lessor with interest thereon at the interest rate specified in Section 7.02(k) hereof from the date of payment shall become due and payable by Lessee as Additional Rent with the next or any subsequent installment of Basic Rent which shall become due after such payment by Lessor; it being expressly covenanted that payment by Lessor of any such premium shall not be deemed to waive or release the default in the payment thereof by Lessee, or the right of Lessor to take such action as may be permissible hereunder as in the case of default in the payment of Basic Rent. Article VII....... Section 7.01...... Events of Default. Lessee shall be in default under this Lease if any one or more of the following events (referred to herein as "Events of Default" or "Event of Default") shall occur: (a) if default shall be made in the procurement or maintenance of any insurance required under this Lease; or (b) if default shall be made in the payment when due of any Basic Rent or Additional Rent and such default shall continue for ten days after written notice from Lessor to Lessee of such nonpayment becomes effective as provided in Section 14.02 hereof; or (c) if default shall be made in the payment of any other sum payable under this Lease and such default shall continue for 10 days after written notice from Lessor to Lessee of nonpayment becomes effective as provided in Section 14.02 hereof; or (d) if default shall be made by Lessee in the performance of or compliance with any of the terms of this Lease other than those referred to in any of the other subparagraphs in this Section, and such default shall continue for a period of 60 days after written notice thereof from Lessor to Lessee becomes effective as provided in Section 14.02 hereof; or (e) if Lessee or any guarantor of Lessee's obligations under this Lease (each, if any, a "Guarantor") shall file a voluntary petition in bankruptcy or shall be adjudicated a bankrupt or insolvent, or shall file any petition or answer seeking any reorganization, arrangement, composition or readjustment, or similar relief for itself under any present or future federal, state or other statute, law or regulation, or shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of itself or of all or any substantial part of its or of the property, or shall take any general assignment for the benefit of creditors or shall admit in writing its inability to pay debts generally as they become due; or (f) if a petition shall be filed against Lessee or any Guarantor seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future federal, state or other statute, law or regulation, and shall remain undismissed or unstayed for a period of 60 days, or if in connection with any such event any trustee, receiver or liquidator of Lessee or such Guarantor, or of all or any substantial part of any of its property, shall be appointed without its consent or acquiescence and such appointment shall remain unvacated or unstayed for a period of 30 days; or (g) if Lessee shall vacate or abandon the Property; or (h) if this Lease or the estate of Lessee hereunder shall be transferred to or shall pass to or devolve upon any other person except in a manner expressly permitted herein. Section 7.02...... Remedies Upon Lessee's Default. (a) Repossession, Reletting, etc., by Lessor. At any time after any Event of Default, Lessor, without further notice except as required by applicable law and with no liability to Lessee for any action in accordance with applicable law, may repossess the Property by any means provided by law, including (without limitation) summary or eviction proceedings, ejectment or otherwise, and may remove Lessee and all other persons and any and all property from the same. Unless otherwise required by case law or statutory law, at any time or from time to time thereafter, Lessor may (but shall be under no obligation to) relet the Property or any part thereof for the account of Lessee, in the name of Lessee or Lessor or otherwise, without notice to Lessee, for such term or terms (which may be greater or less than the period which would otherwise have constituted the balance of the term of this Lease) and on such conditions (which may include concessions or free rent) and for such purposes as Lessor in its discretion may determine, and may collect and receive the rents therefor. Lessor shall not be liable for any failure to collect any rent due upon any such reletting. (b) Payment of Damages. No such expiration or sooner termination of this Lease or of Lessee's right of possession shall relieve Lessee of its liability and obligations under this Lease, all of which shall survive any such expiration or sooner termination. In the event of any such expiration or sooner termination, Lessee will pay to Lessor the Basic Rent and all Additional Rent and other sums required to be paid by Lessee up to the time of such expiration or sooner termination, and thereafter Lessee, until the end of what would have been the term of this Lease in the absence of such expiration or sooner termination, and whether or not the Property or any part thereof shall have been relet, shall be liable to Lessor for, and shall pay to Lessor, as and for liquidated and agreed current damages for Lessee's default, the Basic Rent and all Additional Rent and other sums which would be payable thereafter under this Lease by Lessee, less the net proceeds, if any, of any reletting effected for the account of Lessee pursuant to Section 7.02(a) during the period which would otherwise have constituted the balance of the term of this Lease, after deducting all of Lessor's reasonable expenses in connection with such reletting, including (without limitation) all repossession costs, brokerage commissions, attorneys' fees, expenses of employees, costs incurred in alterations to the Improvements required in connection with the reletting of the Property for use by another lessee and expenses of preparation for such reletting. Lessee will pay such amounts to Lessor monthly on the days on which such Basic Rent, Additional Rent and all other sums would have been payable under this Lease, and Lessor shall be entitled to recover the same from Lessee on each such day. (c) Lump-sum Damage Payment. At any time after such expiration or sooner termination of this Lease as provided herein or pursuant to law, whether or not Lessor shall have recovered any amounts under Section 7.02(b), Lessor shall be entitled to recover from Lessee and Lessee shall pay to Lessor, on demand, as and for liquidated and agreed final damages for Lessee's default, an amount equal to the sum of the following, as of the date of such payment by Lessee: (i) the worth of the unpaid Basic Rent and Additional Rent and other sums due and payable which had been earned at the time of such expiration or sooner termination; plus (ii) the worth of the unpaid Basic Rent and Additional Rent and other sums due and payable after such expiration or sooner termination and on or before the time of Lessee's lump-sum payment pursuant hereto, after deducting from such unpaid amounts any (if any) portion thereof that Lessee proves could have been reasonably avoided; plus (iii) the worth of the unpaid Basic Rent and Additional Rent and other sums due and payable for the balance of the Lease Term or, if termination occurs during an Extension Period, such Extension Period, after deducting from such unpaid amounts any (if any) portion thereof that Lessee proves can be reasonably avoided; plus (iv) any other amount which is necessary to compensate Lessor for all the detriment proximately caused by Lessee's failure to perform Lessee's obligations under this Lease or which would be likely to result therefrom, including (without limitation) any costs or expense incurred by Lessor: (A) in retaking possession of the Premises; (B) in maintaining, repairing, preserving, restoring, replacing, cleaning, altering or rehabilitating the Premises or any portion thereof, including such acts for reletting to a new tenant or tenants; (C) for leasing commissions; or (D) for any other costs necessary or appropriate to relet the Premises. The "worth" of the amounts referred to in subparagraphs (i) and (ii) of this Section is computed by accruing interest at the Default Rate on the unpaid rent and other sums due and payable from the respective due dates for such amounts until Lessee's lump-sum payment pursuant hereto. The "worth" of the amount referred to in subparagraph (iii) of this Section is computed by discounting such amount at a rate equal to the weekly average yield 10-year U.S. Treasury Constant Maturities (as published in Federal Reserve Statistical Release H-15 [519]) on or nearest to the Friday immediately preceding the date of Lessee's lump-sum payment pursuant hereto. (d) Receiver. Lessor may have a receiver appointed for Lessee to take possession of the Premises and to apply any rent collected from the Premises and to exercise all other rights and remedies granted to Lessor as an attorney-in-fact for Lessee. (e) Lessee's Equipment. At any time after the occurrence of an Event of Default, Lessor may send written notice to Lessee to remove all of Lessee's Equipment and property from the Premises. If Lessee shall fail to remove such Equipment and property within five business days after receipt of such notice from Lessor, then Lessor may remove such Equipment and property from the Premises and arrange for storage of such Equipment and property at another location, all at the sole cost and expense of Lessee. In the event of any such removal of Lessee's Equipment and other property from the Premises by Lessor, Lessee waives any and all claims against Lessor regarding the removal and storage of its Equipment and property including, without limitation, the manner of removal, cost of removal, location of storage, cost of storage and damage to or missing Equipment and property. (f) Bankruptcy or Insolvency. (i) If Lessee shall become a debtor in a case filed under Chapter 7 or Chapter 11 of the Bankruptcy Code and Lessee or Lessee's trustee shall fail to elect to assume this Lease within 60 days after the filing of such petition or such additional time as provided by the court, this Lease shall be deemed to have been rejected. Immediately thereupon, Lessor shall be entitled to possession of the Premises without further obligation to Lessee or Lessee's trustee, and this Lease, upon the election of Lessor, shall terminate, but Lessor's right to be compensated for damages (including, without limitation, liquidated damages pursuant to any provision hereof) or the exercise of any other remedies in any such proceeding shall survive, whether or not this Lease shall be terminated. (ii) An assumption of this Lease in accordance with Section 7.02(f)(i) shall not limit Lessor's right to declare an Event of Default hereunder and exercise any and all remedies available to it if, at any time after such assumption, Lessee is liquidated or files or has filed against it a subsequent petition under Chapter 7 or Chapter 11 of the Bankruptcy Code. (iii) When, pursuant to the Bankruptcy Code, Lessee's trustee or the debtor-in-possession shall be obligated to pay reasonable use and occupancy charges for the use of the Premises, such charges shall not be less than the Basic Rent, Additional Rent and other sums payable by Lessee under this Lease. (iv) Neither the whole nor any portion of Lessee's interest in this Lease or its estate in the Premises shall pass to any trustee, receiver, assignee for the benefit of creditors or any other person or entity, by operation of law or otherwise under the laws of any state having jurisdiction of the person or property of Lessee, unless Lessor shall have consented to such transfer. No acceptance by Lessor of rent or any other payments from any such trustee, receiver, assignee, person or other entity shall be deemed to constitute such consent by Lessor nor shall it be deemed a waiver of Lessor's right to terminate this Lease for any transfer of Lessee's interest under this Lease without such consent. (v) In the event of an assignment of Lessee's interests pursuant to this Section, the right of any assignee to extend the Lease Term shall be extinguished. (g) Limitation by Law. If any statute or rule of law governing a proceeding in which liquidated final damages provided for in Section 7.02 are to be proved shall validly limit the amount thereof to an amount less than the amount above agreed upon, Lessor shall be entitled to the maximum amount allowable under such statute or rule of law. (h) Remedies Cumulative, Etc. Each right, power and remedy provided for in this Lease or now or hereafter existing at law or in equity or by statute or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Lease or now or hereafter existing at law or in equity or by statute or otherwise, and the exercise or beginning of the exercise of any one or more of the rights, powers or remedies provided for in this Lease or now or hereafter existing in law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise of any or all other such rights, powers or remedies. The collection of any late payment charge or any interest at the Default Rate shall not be deemed an election of remedies or in lieu of any other remedies or damages. Lessor shall have the right to specifically enforce this Lease and to enjoin any default or prospective or anticipated default hereunder. (i) Statutory Rights. Lessee retains any rights of notice or rights of redemption, if any, as may be required by applicable State law. "State" shall mean the State where the Premises are located. However, any such notice required by law may be given by Lessor in (or, at Lessor's option, separate from) any notice required to be given by Lessor under this Lease, and the time periods provided in this Lease and required under applicable law will not be "tacked" onto each other but will commence running from the original date of delivery of such notices. (j) Application of Funds. Any payments received by Lessor under any of the provisions of this Lease during the existence or continuance of any Event of Default (and any payment made to Lessor rather than Lessee due to the existence of an Event of Default) shall be applied to Lessee's obligations in such order as Lessor may determine or, if prescribed by the laws of the State, in accordance with such laws. (k) Late Interest. If Lessee shall fail to make any payment of any sums required by this Lease within ten days after Lessor gives notice of nonpayment, Lessee shall pay to Lessor, in addition to such sums, interest thereon at the rate of 5% per annum higher than and varying daily with the highest prime rate then being quoted from time to time by Chase Manhattan Bank, New York, New York, as an interest index for loans to its commercial customers (the "Default Rate"), computed from the date such payment was due to and including the date of payment in full. If Chase Manhattan Bank ceases to do business or quote such rate, Lessor shall have the right to substitute a reasonably comparable index for such prime rate. (l) No Usury. The intention of the parties being to conform strictly to the usury laws now in force, whenever any provision in this Lease provides for payment by Lessee to Lessor of interest at a rate in excess of the legal rate permitted to be charged, such rate herein provided to be paid shall be deemed reduced to such legal rate. Article VIII...... Section 8.01...... Lessee's Notices and Remedies. In the event Lessor fails to perform its responsibilities pursuant to this Lease, Lessee's notice as to Lessor's nonperformance will be sent simultaneously to Lessor and the Fee Mortgagee. Lessor will be in default under this Lease if Lessor fails to cause such responsibilities to be fully performed within 30 days after written notice by Lessee to Lessor specifying the nature of the default with reasonable particularity. If the default is of such a nature that it cannot be remedied fully within the 30-day period, this requirement shall be satisfied if Lessor begins correction of the default within the 30-day period and thereafter proceeds with reasonable diligence and in good faith to effect the remedy as soon as reasonably practicable. Lessee shall not have the right to terminate this Lease as a result of Lessor's default. In the event of such default, Lessee shall have all remedies available under law for breach of contract, including (without limitation) the right of specific performance. In addition, Lessee may elect in its discretion to perform the required action or take corrective action reasonably required to cure the default if it pertains to the Premises, in which event Lessor shall reimburse Lessee for the reasonable out-of-pocket costs of such action, together with reasonable and necessary costs and disbursements and interest, and such amounts may be deducted from the rent thereafter to become due under this Lease, after at least 20 days' written notice to Lessor (and the Fee Mortgagee) as to the costs so incurred. Section 8.02...... Fee Mortgagee's Right To Cure. The Fee Mortgagee that has notified Lessee of its address in the manner provided for notices in this Lease will have the right to cure any default by Lessor. The cure period will commence on delivery of notice to such Fee Mortgagee of the default and extend for a period ending 30 days after the end of the time period for Lessor to cure a default. In this connection, any representative of the Fee Mortgagee shall have the right to enter upon the Premises for the purpose of curing Lessor's default. Article IX........ Section 9.01...... Subordination and Nondisturbance. This Lease and all rights of Lessee under this Lease are, and shall at the option of Lessor remain, subject and subordinate in all respects to the Fee Mortgage and to all advances made or hereafter to be made under any such mortgage, and to all renewals, modifications, consolidations, correlations, replacements and extensions of, and substitutions for, the Fee Mortgage, provided that the Fee Mortgagee shall execute and deliver to Lessee a nondisturbance and attornment agreement in form and substance approved by the Fee Mortgagee and reasonably acceptable to Lessee which provides in substance that (a) if Lessor defaults under its mortgage, the Fee Mortgagee will not disturb the occupancy of Lessee and this Lease shall remain in full force and effect in accordance with its terms, provided that no Event of Default has occurred and is continuing (in the event of any such Event of Default, the Fee Mortgagee shall have such rights and remedies with respect to such default as are provided herein) and (b) Lessee shall, at the Fee Mortgagee's option, attorn to such Fee Mortgagee and the Lease shall continue as a direct lease between such Fee Mortgagee and Lessee. The provisions of this Section shall be self-operative. Lessee shall also provide to the Fee Mortgagee any and all other assurances or instruments the Fee Mortgagee may reasonably request to evidence and confirm such provisions. All such agreements shall be in form suitable for recording. Section 9.02...... Election Not To Subordinate. Notwithstanding the provisions of Section 9.01, the holder of any mortgage to which this Lease is subject and subordinate, as provided in said Section 9.01, shall have the right, at its sole option, at any time, to subordinate and subject its mortgage, in whole or in part, to this Lease by recording a unilateral declaration to such effect. Section 9.03...... Attornment. At any time prior to the expiration of the Lease Term, Lessee agrees, at the election and upon demand of any owner of the Premises, or of the Fee Mortgagee, to attorn, from time to time, to any such owner or holder, upon the then executors' terms and conditions of this Lease, for the remainder of the term originally demised in this Lease and for any renewal term, provided that such owner or holder, as the case may be, shall then be entitled to possession of the Premises subject to the provisions of this Lease. The provisions of this Section shall inure to the benefit of any such owner or holder, shall apply notwithstanding that, as a matter of law, this Lease may terminate upon the foreclosure of any such mortgage, shall be self-operative upon any such demand, and no further instrument shall be required to give effect to said provisions. Lessee, however, upon demand of any such owner or holder agrees to execute, from time to time, instruments in confirmation of the foregoing provisions of this Section, satisfactory to any such owner or holder acknowledging such attornment and setting forth the terms and conditions of its tenancy. Nothing contained in this Section shall be construed to impair any right otherwise exercisable by any such owner or holder. Section 9.04...... Limitations on Lessee. Lessee agrees that, if requested by Lessor or the Fee Mortgagee, Lessee shall enter into an agreement with the Fee Mortgagee whereby Lessee shall agree for the benefit of such Fee Mortgagee that Lessee will not, without in each case the prior written consent of such Fee Mortgagee, (a) amend, modify, cancel or surrender the term of this Lease except as expressly permitted by the provisions of this Lease, or enter into any agreement with Lessor so to do or (b) pay any installment of Basic Rent more than one month in advance of the due date thereof or otherwise than in the manner provided for in this Lease. Section 9.05...... No Merger of Fee and Leasehold Estates. There shall be no merger of this Lease nor of the leasehold estate created by this Lease with the fee estate in the Premises or any part thereof by reason of the fact that the same person, firm or corporation or other entity may acquire or own such estates directly or indirectly; and no such merger shall occur until all persons, firms, corporations and other entitled, including the Fee Mortgagee, having any interest in this Lease and the leasehold estate created hereby and the fee estate in the Premises or any party thereof shall join in a written instrument effecting such merger and shall duly record it. Section 9.06...... Changes to Lease Required by Fee Mortgagee. In the event the Fee Mortgagee shall require reasonable modifications of this Lease which do not materially increase the obligation of Lessee hereunder or interfere with or diminish Lessee's rights, Lessee agrees to execute such modification(s) upon request of Lessor. Article X......... Section 10.01..... Estoppel Certificate. Upon request, either party will, without charge, execute, acknowledge and deliver to the other party, within 15 days after request therefor, a certificate certifying (a) that this Lease is unmodified and in full force and effect (or, if there have been modifications, that this Lease is in full force and effect as modified and stating the modifications), (b) the date, if any, to which the Basic Rent has been paid, (c) whether or not there are, to the knowledge of the party, then existing any defaults under this Lease (if so, specifying the same) and (d) such other matters as may be reasonably required. Any such certificate may be relied upon as to the facts stated therein by any actual or prospective mortgagee or purchaser of the Premises from Lessor or any actual or prospective sublessee or assignee of Lessee's interest in this Lease in connection with one of the transactions permitted or approved under Article IV. Section 10.02..... Financial Information. Upon reasonable request in writing by Lessor, Lessee will deliver to Lessor within 10 days (except as set forth below) of filing, sending or otherwise making public, copies of all periodic reports filed by Lessee with the Securities and Exchange Commission ("SEC") (including, without limitation, all 8-K, 10-K and 10-Q reports pursuant to Section 13(a) of the Securities Act of 1934, as amended (the "1934 Act")), and all proxy statements of Lessee to its stockholders; provided, however, that, if such statements and reports are not required to be filed or do not include the following information, Lessee will deliver to Lessor with respect to Lessee the following: (a) Within 10 days after filing with the SEC but in no event more than 105 days after the end of each fiscal year of Lessee, (i) a balance sheet of Lessee and its consolidated subsidiaries as of the end of such year, (ii) a statement of profits and losses of Lessee and its consolidated subsidiaries for such year and (iii) a statement of cash flows of Lessee and its consolidated subsidiaries for such year, setting forth in each of (i), (ii) and (iii) above, in comparative form, the corresponding figures for the preceding fiscal year in reasonable detail and scope audited by independent certified public accountants of recognized national standing selected by Lessee, and within 90 days after the end of each fiscal quarter of Lessee a balance sheet of Lessee and its consolidated subsidiaries as of the end of such quarter and statements of profits and losses of Lessee and its consolidated subsidiaries for such quarter, setting forth in each case, in comparative form, the corresponding figures for the similar quarter of the preceding year, in reasonable detail and scope, and certified by an officer of Lessee, all of the foregoing financial statements being prepared in accordance with generally accepted accounting principles, consistently applied, except as otherwise indicated in such statements; and (b) Upon request of Lessor, with reasonable promptness, such additional, public financial statements and information (including, without limitation, copies of public reports filed by Lessee or financial statements and information delivered by Lessee to its shareholders or lenders and, if Lessee is part of a consolidated group, its financial statement consolidating entries in reasonable detail) regarding the business affairs and financial condition of Lessee as Lessor may reasonably request, for so long as same do not violate any federal or state laws limiting the dissemination of information by publicly-held companies. Article XI........ Section 11.01..... Quiet Enjoyment. Lessor covenants that Lessee, upon paying the Basic Rent and all Additional Rent and other sums payable hereunder and performing and complying with all the terms hereof, shall, subject to the terms of this Lease, lawfully, peaceably and quietly hold, occupy, possess and enjoy the Premises during the term of this Lease, without hindrance or molestation by Lessor or others claiming through Lessor, subject, however, to the terms of this Lease. Article XII....... Section 12.01..... Lessor's Reversionary Interest; Surrender of Premises. Upon expiration or termination of this Lease, Lessor shall, at no charge to Lessor, become the owner of, and have the reversionary interest in, all of the Improvements. Lessee shall surrender the Premises to Lessor in good repair, operating condition, working order and appearance, subject to reasonable wear and tear and (to the extent provided herein for termination after casualty) damage by fire and other casualty. All repairs for which Lessee is responsible will be completed to the latest practical date prior to such surrender. If this Lease is terminated in connection with a Casualty, Lessee will assign to Lessor the entire insurance proceeds pertaining to the Premises that revert to Lessor. Lessee shall promptly remove all of its own signs, inventory, Lessee's Equipment and other personal property that remain the property of Lessee and will restore any physical damage caused by such removal. Section 12.02..... Delivery of Rents and Records. Upon surrendering the Premises to Lessor, Lessee will pay to Lessor all deposits or other security and all prepaid rents received from subtenants and other occupants whose tenancies may continue beyond the last day of the Lease Term or the sooner termination thereof and will deliver to Lessor all original subleases and modifications thereof, lease files, plans, records, registers and all other papers and documents which may be required for the proper operation and management of the Premises and are then in Lessee's possession or under its control. Lessee shall have access to any records, papers and documents so delivered to such extent and at such times as the same may be reasonably required after the last day of the term of this Lease Term or such sooner termination thereof. Nothing herein shall require Lessor to recognize any such existing sublease as continuing in effect after such last day or sooner termination. The provisions of this Section shall survive the expiration or sooner termination of this Lease. Section 12.03..... Acceptance of Surrender. No surrender to Lessor of this Lease or of the Premises or any part thereof, or of any interest therein, prior to the expiration of the Lease Term, shall be valid or effective unless agreed to and accepted in writing by Lessor, and no act by Lessor or any representative or agent of Lessor, other than such a written acceptance by Lessor, shall constitute an acceptance of any such surrender. Section 12.04..... Holding Over. If Lessee remains in possession of the Premises or any part thereof after the expiration or sooner termination of the term of this Lease (or any renewal term hereof) without the execution of a new lease, such holding over, in the absence of a written agreement to the contrary, shall be deemed, if Lessor so elects, to have created a tenancy from month-to-month terminable on 30 days' notice by either party to the other. Such month-to-month tenancy will be at a monthly rental equal to 125% of the sum of the monthly installment of Basic Rent payable during the last year of the Lease Term, and Lessee will otherwise continue to pay Additional Rent as provided in this Lease and perform its other obligations hereunder. Article XIII...... Section 13.01..... Definition of "Lessor. The term "Lessor," as used in this Lease so far as covenants or obligations on the part of Lessor are concerned, shall be limited to mean and include only the owner or owners of the Premises or holder of the Fee Mortgage in possession at the time in question of the Premises. In the event of any transfer or transfers of the title of the Premises, Lessor herein named (and in case of any subsequent transfers or conveyances, the then grantor) shall be automatically freed and relieved of its liabilities accruing from and after the date of such transfer and conveyance of all liability as respects the performance of any covenants or obligations on the part of Lessor contained in this Lease thereafter to be performed. Section 13.02..... Exculpation of Lessor. Notwithstanding anything contained in the preceding paragraph or in any other provision hereof, Lessee shall look solely to the estate and interest of Lessor, its successors and assigns in the Premises (and any condemnation, insurance or other proceeds thereof) for the collection of any judgment recovered against Lessor based upon the breach by Lessor of any of the terms, conditions or covenants of this Lease on the part of Lessor to be performed, and no other property or assets of Lessor shall be subject to levy, execution or other enforcement procedures for the satisfaction of Lessee's remedies under or with respect to either this Lease, the relationship of Lessor and Lessee hereunder or Lessee's use and occupancy of the Premises. Article XIV....... Section 14.01..... No Waiver, etc., by Parties. No failure by a party to insist upon the strict performance of any term of this Lease or to exercise any right, power or remedy consequent upon a breach thereof, and no acceptance of full or partial rent by Lessor during the continuance of any such breach, shall constitute a waiver of any such breach or of any such term. Section 14.02..... Notices, Etc. All notices and demands which are required or permitted to be given by either party on the other hereunder shall be in writing. All notices and demands shall be sent by United States Mail, certified or registered mail, return-receipt requested, or by recognized overnight courier service (such as Federal Express), or by facsimile or other telecommunication device capable of transmitting and creating a written record. Notices shall be effective two business days following the date they are deposited in the United States Mail, one business day after delivery to an overnight courier and on the day they are telefaxed (if a confirmation report results). Unless a party designates another address for notices (by notice given pursuant to this Section, notices shall be sent to the following address: If to Lessor: General Electric Capital Business Asset Funding Corporation Suite 500 10900 NE 4th Street Bellevue, WA 98004 Attention: Vice President/Manager, Real Estate If to Lessee: Point.360 7803 Hollywood Blvd. Hollywood, CA 90028 Attention: Vice President, Finance Any notices to be provided to the Fee Mortgagee shall be to such address as shall be provided to the parties in writing by the Fee Mortgagee. Section 14.03..... Separability. Each and every covenant and agreement contained in this Lease is, and shall be construed to be, a separate and independent covenant and agreement, and the breach of any such covenant or agreement by Lessor shall not discharge or relieve Lessee from its obligation to perform the same. If any term or provision of this Lease or the application thereof to any person or circumstance shall to any extent be invalid and unenforceable, the remainder of this Lease, or the application of the term or provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and shall be enforced to the extent permitted by law. Section 14.04..... Headings. The headings to the various Sections of this Lease have been inserted for convenience of reference only and shall not limit or otherwise affect the meaning thereof. Section 14.05..... Relationship of Parties; Disclaimer. The relationship of the parties to this Lease is landlord and tenant. Lessor is not a partner, joint venturer, joint employer, principal or agent of or with or a lender to Lessee in any respect or for any purpose in the conduct of Lessee's business or otherwise. No provision of this Lease or previous (or subsequent) conduct or activities of Lessee or Lessor will be construed: (a) as making either party a partner, joint venturer, joint employer, principal or agent of or with each other or (b) as making Lessee or Lessor responsible for payment or reimbursement of any costs incurred by each other (except as may be expressly set forth herein or as expressly set forth in other written agreements executed by the parties). Section 14.06..... Operating Lease. This Lease is specifically intended by the parties to be a true lease. Lessor holds fee simple absolute title to the Premises, and such title was not acquired or intended to be held as any type of mortgage or security interest. This Lease is intended by Lessor and Lessee to be an operating lease under generally accepted accounting principles. Section 14.07..... Joint Obligation. If there be more than one Lessee or assignee of Lessee, the obligations imposed upon Lessee hereunder shall be joint and several. Section 14.08..... Prior Agreements. This Lease (including attached Exhibits) is the entire, final and complete agreement of the parties only with respect to the specific matters set forth in this Lease and supersedes and replaces all written and oral agreements previously or contemporaneously made or existing by and between the parties or their representatives with respect to such specific matters. Section 14.09..... Recording. This Lease shall not be recorded, but, upon the request of either party, the parties shall execute and acknowledge a memorandum of this Lease in recordable form which may be recorded by Lessor or Lessee. Section 14.10..... Proration of Rent. If this Lease starts or ends during a rental period, Rent and Additional Rent shall be prorated as of such date using a 30-day month and a 360-day year. Upon termination other than for default, prepaid rent shall be refunded, if applicable. Section 14.11..... Authorization of Lease. Each of Lessee and Lessor hereby covenants and warrants to the other that (a) it is duly qualified to do business in the state in which the Premises is located, (b) it has full right and authority to enter into this Lease and to perform all of its obligations hereunder and (c) each person (and all of the persons if more than one signs) signing this on its behalf is duly and validly authorized to do so. Section 14.12..... Applicable Law. This Lease shall be governed by and construed and enforced in accordance with the laws of the State (as defined in Section 7.02(i)). Section 14.13..... United States Funds. All sums herein mentioned shall be conclusively deemed to refer to and shall be measured by and payable in the lawful currency of the United States. Section 14.14..... Time of Performance. Time is of the essence of this Lease and each and all of its provisions in which performance is a factor. Section 14.15..... "Force Majeure" Delays. In the event that either party hereto shall be delayed or hindered in or prevented from the performance of any act required hereunder by reason of strikes, lockouts, labor troubles, inability to procure materials, failure of power, restrictive governmental laws or regulations, riots, insurrection, war or other reason of like nature not the fault of the party delayed in performing work of doing acts required under the terms of this Lease (a delay resulting from financial inability to perform, excepted) (collectively, "force majeure" events), then performance of such work or act shall be excused for the period of the delay, and the period for the performance of any such work or act shall be extended for a period equivalent to the period of such delay. This provision shall not operate to excuse Lessee from prompt payment of Basic Rent, Additional Rent or any other payments required by the terms of this Lease, unless the commencement date or periods permitting Lessee to abatement of rent are postponed or extended by such delays. Section 14.16..... Waiver of Jury Trial. LESSOR AND LESSEE HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS LEASE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS AMONG LESSEE OR LESSOR RELATING TO THE SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED BY THIS LEASE OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED AMONG LESSOR AND LESSEE. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS). THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LEASE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTIONS CONTEMPLATED BY THIS LEASE OR ANY RELATED TRANSACTIONS. IN THE EVENT OF LITIGATION, THIS LEASE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. Section 14.17..... Attorneys' Fees. In the event of any action or proceeding by either party against the other under this Lease, the prevailing party shall be entitled to recover for the fees of its attorneys in such action or proceeding, including costs of appeal, if any, in such amount as the court may adjudge reasonable as attorneys' fees. Section 14.18..... Amendments. Neither this Lease nor any term hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against whom the enforcement of the change, waiver, discharge or termination is sought. Section 14.19..... Successors and Assigns. This Lease shall bind and inure to the benefit of Lessor and its successors and assigns and Lessee and its successors and, without limiting Article IV hereof, its assigns. Any assignment of this Lease by Lessor shall not terminate such Lessor's rights under the environmental and other indemnities provided by Lessee in this Lease. In furtherance of any proposed assignment by Lessor, Lessor may share with the proposed assignee Lessee's financial information and Property information, provided such proposed assignee is directed to treat such information confidentially (Lessor hereby agreeing to be responsible for any failure of any such proposed assignee to so treat any such information). Section 14.20..... Brokers. Lessee shall indemnify Lessor, and its successors, assigns and employees, from and against any and all claims, commissions, fees, costs (including attorneys' fees and disbursements) incurred or suffered by it in connection with any claim by Mr. Lee Black and/or Newmark of Southern California, Inc. (or any affiliate, successor, assignee, agent or employee thereof) for a commission or fee with regard to Lessor's purchase of the Premises or this Lease. Section 14.21..... Construction. Each party to this Lease has had the opportunity to consult with its legal counsel, and this Lease shall not be construed against either party. All pronouns or any variation thereof in this Lease shall be deemed to refer to masculine, feminine, neuter, singular or plural as the identity of the person or persons may require. All of the provisions of this Lease shall be deemed and construed to be "conditions" as well as "covenants" as though the words specifically expressing or importing covenants and conditions be used in each separate provision hereof. Section 14.22..... Execution in Counterparts. This Lease may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. Section 14.23..... Exhibits and Riders. All Exhibits, schedules, plats, riders and addenda, if any, and other attachments to this Lease are a part hereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; EXECUTION PAGE FOLLOWS.] EXECUTION PAGE OF LEASE AGREEMENT IN WITNESS WHEREOF, the parties hereto have caused this Lease to be executed as of the date first above written. Lessor: GENERAL ELECTRIC CAPITAL BUSINESS ASSET FUNDING CORPORATION, a Delaware corporation By: /s/ Linda K. Bracken -------------------- Print: Linda K. Bracken Its: Vice President Lessee: POINT.360, a California corporation By: /s/ Alan R. Steel Print: Alan R. Steel Its: Executive Vice President, Finance and Administration, and Chief Financial Officer [EXECUTION PAGE OF LEASE AGREEMENT] SCHEDULE A LEGAL DESCRIPTION PARCEL A: LOT 3 OF TRACT NO. 53696-01, IN THE CITY OF LOS ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 1282, PAGES 41 TO 43 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. PARCEL B: NONEXCLUSIVE COMMUNITY DRIVEWAY EASEMENT FOR INGRESS AND EGRESS APPURTENANT AND FOR THE BENEFIT OF LOT 3 DESCRIBED ABOVE AS SAID EASEMENT IS MORE PARTICULARLY DESCRIBED AS THE "NORTH DRIVEWAY EASEMENT" IN THAT CERTAIN "COVENANT AND AGREEMENT FOR COMMUNITY DRIVEWAY" RECORDED AS INSTRUMENT NO. 03-2894319. NONEXCLUSIVE COMMUNITY DRIVEWAY EASEMENT FOR INGRESS AND EGRESS APPURTENANT AND FOR THE BENEFIT OF LOT 3 DESCRIBED ABOVE AS SAID EASEMENT IS MORE PARTICULARLY DESCRIBED AS THE "SOUTH DRIVEWAY EASEMENT" IN THAT CERTAIN "CONVENANT AND AGREEMENT FOR COMMUNITY DRIVEWAY" RECORDED SEPTEMBER 30, 2003 AS INSTRUMENT NO. 03-2894318. PARCEL C: WATER LINE AND EMERGENCY ACCESS EASEMENTS APPURTENANT AND FOR THE BENEFIT OF LOT 3 DESCRIBE ABOVE, AS SAID EASEMENTS ARE MORE PARTICULARY DESCRIBED AND DEPICTED IN THAT CERTAIN RECIPROCAL EASEMENT AGREEMENT DATED SEPTEMBER 26, 2003 AND RECORDED 9/30/03 AS INSTRUMENT NUMBER 03-2894321 AND RERECORDED AS INSTRUMENT NUMBER IN THE OFFICE OF THE COUNTY RECORDER OF LOS ANGELES COUNTY. PARCEL D: THOSE CERTAIN EASEMENTS APPURTENANT AND FOR THE BENEFIT OF LOT 3 DESCRIBED ABOVE, AS SAID EASEMENTS ARE MORE PARTICULARLY DESCRIBED AND DEPICTED IN THAT CERTAIN DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS DATED SEPTEMBER 26, 2003 AND RECORDED OCTOBER 1, 2003 AS INSTRUMENT NUMBER 03-2894320 IN THE OFFICE OF THE COUNTY RECORDER OF LOS ANGELES COUNTY. SCHEDULE B CONTRACTUAL REQUIREMENTS 1. A covenant and agreement upon and subject to the terms and conditions therein Executed by: Southern Pacific Transportation Company In Favor of: The City of Los Angeles Recorded: October 18, 1990 as Instrument No. 90-1770557 Reference is made to said document for full particulars. 2. An easement for the purpose shown below and rights incidental thereto as set forth in a document Granted to: Union Pacific Railroad Company Purpose: Communications Recorded: December 30, 1998 as Instrument No. 98-2364968 Affects: A portion of said land Among other things, said document provides: That Union Pacific Railroad Company shall have the right to grant subeasements, licenses or other interests within the easement area. 3. An easement for the purpose shown below and rights incidental thereto as set forth in a document Granted to: Los Angeles County Flood Control District Purpose: Ditch or Channel Recorded: June 15, 1939 in Book 16673 Page 244, official records Affects: A portion of said land 4. Covenants, conditions and restrictions (but omitting therefrom any covenant or restriction based on race, color, religion, sex, handicap, familial status or national origin, if any, unless and only to the extent that said covenant (a) is exempt under Chapter 42, Section 3607 of the United States Code or (b) relates to handicap but does not discriminate against handicapped persons) as set forth in the document. Recorded: In Book 8171 Page 117, official records Said covenants, conditions and restrictions provide that a violation thereof shall not defeat the lien of any mortgage or deed of trust made in good faith and for value. 5. Covenants, conditions and restrictions (but omitting therefrom any covenant or restriction based on race, color religion, sex, handicap, familial status or national origin, if any, unless and only to the extent that said covenant (a) is exempt under Chapter 42, Section 3607 of the United States Code or (b) relates to handicap but does not discriminate against handicapped persons) as set forth in the document. Recorded: In Book 8147 Page 113, official records Said covenants, conditions and restrictions provide that a violation thereof shall not defeat the lien of any mortgage or deed of trust made in good faith and for value. 6. A document entitled "Affidavit Regarding Maintenance of Automatic Duplex Sump Pump", dated January 31,1995 executed by Hughes Markets, Inc.; Norb Parsoneault; V.P. Eng. Const. And City of Los Angeles, subject to all the terms, provisions and conditions therein contained, recorded February 1, 1995 as Instrument No. 95-170741. 7. An easement for the purpose shown below and rights incidental thereto as set forth in a document Granted to: Southern California Gas Company, a California corporation Purpose: Transportation of gas, petroleum products and other substances Recorded: August 2, 2000 as Instrument No. 00-1206218 Affects: A portion of said land 8. An easement for the purpose shown below and rights incidental thereto as set forth in a document Granted to: McMahon/Oliphant-Glendale, a California Corporation Purpose: Storm water drainage Recorded: September 30, 1997 as Instrument No. 97-1512343 Affects: A portion of said land 9. A covenant and agreement upon and subject to the terms and conditions therein Executed by: Los Angeles Media Tech Center, LLC In Favor of: The City of Los Angeles Recorded: July 9, 1999 as Instrument No. 99-1259747 Reference is made to said document for full particulars. 10. A covenant and agreement upon and subject to the terms and conditions therein Executed by: Los Angeles Media Tech Center, LLC In Favor of: City of Los Angeles Recorded: April 11, 2000 as Instrument No. 00-0541357 Reference is made to said document for full particulars. 11. A covenant and agreement upon and subject to the terms and conditions therein Executed by: Los Angeles Media Tech Center, LLC In Favor of: City of Los Angeles Recorded: May 3, 2000 as Instrument No. 00-0669795 Reference is made to said document for full particulars. 12. An easement for the purpose shown below and rights incidental thereto as set forth in a document Granted to: City of Los Angeles, a municipal corporation Purpose: Public street and public storm drain Recorded: July 19, 2001 as Instrument No. 01-1267598 Affects: Said land as more particularly described therein 13. A covenant and agreement upon and subject to the terms and conditions therein Executed by: Los Angeles Media Tech Center In Favor of: The City of Los Angeles Recorded: November 27, 2001 as Instrument No. 01-2245204 Reference is made to said document for full particulars. 14. A covenant and agreement upon and subject to the terms and conditions therein Executed by: LA Media Tech Center In Favor of: The City of Los Angeles Recorded: April 17, 2002 as Instrument No. 02-0898358 Reference is made to said document for full particulars. 15. A covenant and agreement upon and subject to the terms and conditions therein Executed by: Los Angeles Media Tech Center, LLC, a Delaware Limited Liability Company In Favor of: The City of Los Angeles Recorded: May 2, 2002 as Instrument No. 02-1014727 Reference is made to said document for full particulars. 16. A covenant and agreement upon and subject to the terms and conditions therein Executed by: Los Angeles Media Tech Center, LLC By: Legacy Partners 2361, L.P. In Favor of: The City of Los Angeles Recorded: October 1, 2003 as Instrument No. 03-2894319 Reference is made to said document for full particulars. 17. Covenants, Conditions and Restrictions as set forth in the document recorded February 25. 1873, in Book 24 Page 15 of Deeds. 18. An easement affecting the portion of said land and for the purposes stated therein, and incidental purposes, condemned by final decree: Purpose: Electric light, heat and power lines Case No.: 43195 of the Superior Court Recorded: In Book 2185 Page 65 of Deeds Affects: A portion of said land 19. An easement for the purpose shown below and rights incidental thereto as set forth in a document Granted to: L.A. Media Center Purpose: Emergency Access, waterline, public utilities Recorded: October 1, 2003 as Instrument No. 03-2894320 Affects: Lots 1-7 20. Covenants, conditions and restrictions (but omitting therefrom any covenant or restriction based on race, color, religion, sex, handicap, familial status or national origin, if any, unless and only to the extent that said covenant (A) is exempt under Chapter 42, Section 3607 of the United States Code or (B) relates to handicap but does not discriminate against handicapped persons) as set forth in the document referred to in item 19 above. 21. A covenant and agreement upon and subject to the terms and conditions therein: Executed by: Los Angeles Media Tech Center, LLC By: Legacy Partners 2361, L.P. In Favor of: The City of Los Angeles Recorded: August 11, 2003 as Instrument No. 03-2313041 Reference is made to said document for full particulars 22. A document entitled "Reciprocal Easement Agreement Water Line and Emergency Access," dated September 26, 2003 executed by Los Angeles Media Tech Center, LLC a California Limited Liability Company ("LAMTC"), and UCV Media Tech Center, LLC, a Delaware Limited Liability Company, subject to all the terms, provisions and conditions therein contained, recorded November ___, 2003 as Instrument No. 03-______________. SCHEDULE C PERMITTED EXCEPTIONS 1. A covenant and agreement upon and subject to the terms and conditions therein Executed by: Southern Pacific Transportation Company In Favor of: The City of Los Angeles Recorded: October 18, 1990 as Instrument No. 90-1770557 Reference is made to said document for full particulars. 2. An easement for the purpose shown below and rights incidental thereto as set forth in a document Granted to: Union Pacific Railroad Company Purpose: Communications Recorded: December 30, 1998 as Instrument No. 98-2364968 Affects: A portion of said land Among other things, said document provides: That Union Pacific Railroad Company shall have the right to grant subeasements, licenses or other interests within the easement area. 3. An easement for the purpose shown below and rights incidental thereto as set forth in a document Granted to: Los Angeles County Flood Control District Purpose: Ditch or Channel Recorded: June 15, 1939 in Book 16673 Page 244, official records Affects: A portion of said land 4. Covenants, conditions and restrictions (but omitting therefrom any covenant or restriction based on race, color, religion, sex, handicap, familial status or national origin, if any, unless and only to the extent that said covenant (a) is exempt under Chapter 42, Section 3607 of the United States Code or (b) relates to handicap but does not discriminate against handicapped persons) as set forth in the document. Recorded: In Book 8171 Page 117, official records Said covenants, conditions and restrictions provide that a violation thereof shall not defeat the lien of any mortgage or deed of trust made in good faith and for value. 5. Covenants, conditions and restrictions (but omitting therefrom any covenant or restriction based on race, color religion, sex, handicap, familial status or national origin, if any, unless and only to the extent that said covenant (a) is exempt under Chapter 42, Section 3607 of the United States Code or (b) relates to handicap but does not discriminate against handicapped persons) as set forth in the document. Recorded: In Book 8147 Page 113, official records Said covenants, conditions and restrictions provide that a violation thereof shall not defeat the lien of any mortgage or deed of trust made in good faith and for value. 6. A document entitled "Affidavit Regarding Maintenance of Automatic Duplex Sump Pump", dated January 31,1995 executed by Hughes Markets, Inc.; Norb Parsoneault; V.P. Eng. Const. And City of Los Angeles, subject to all the terms, provisions and conditions therein contained, recorded February 1, 1995 as Instrument No. 95-170741. 7. An easement for the purpose shown below and rights incidental thereto as set forth in a document Granted to: Southern California Gas Company, a California corporation Purpose: Transportation of gas, petroleum products and other substances Recorded: August 2, 2000 as Instrument No. 00-1206218 Affects: A portion of said land 8. An easement for the purpose shown below and rights incidental thereto as set forth in a document Granted to: McMahon/Oliphant-Glendale, a California Corporation Purpose: Storm water drainage Recorded: September 30, 1997 as Instrument No. 97-1512343 Affects: A portion of said land 9. A covenant and agreement upon and subject to the terms and conditions therein Executed by: Los Angeles Media Tech Center, LLC In Favor of: The City of Los Angeles Recorded: July 9, 1999 as Instrument No. 99-1259747 Reference is made to said document for full particulars. 10. A covenant and agreement upon and subject to the terms and conditions therein Executed by: Los Angeles Media Tech Center, LLC In Favor of: City of Los Angeles Recorded: April 11, 2000 as Instrument No. 00-0541357 Reference is made to said document for full particulars. 11. A covenant and agreement upon and subject to the terms and conditions therein Executed by: Los Angeles Media Tech Center, LLC In Favor of: City of Los Angeles Recorded: May 3, 2000 as Instrument No. 00-0669795 Reference is made to said document for full particulars. 12. An easement for the purpose shown below and rights incidental thereto as set forth in a document Granted to: City of Los Angeles, a municipal corporation Purpose: Public street and public storm drain Recorded: July 19, 2001 as Instrument No. 01-1267598 Affects: Said land as more particularly described therein 13. A covenant and agreement upon and subject to the terms and conditions therein Executed by: Los Angeles Media Tech Center In Favor of: The City of Los Angeles Recorded: November 27, 2001 as Instrument No. 01-2245204 Reference is made to said document for full particulars. 14. A covenant and agreement upon and subject to the terms and conditions therein Executed by: LA Media Tech Center In Favor of: The City of Los Angeles Recorded: April 17, 2002 as Instrument No. 02-0898358 Reference is made to said document for full particulars. 15. A covenant and agreement upon and subject to the terms and conditions therein Executed by: Los Angeles Media Tech Center, LLC, a Delaware Limited Liability Company In Favor of: The City of Los Angeles Recorded: May 2, 2002 as Instrument No. 02-1014727 Reference is made to said document for full particulars. 16. A covenant and agreement upon and subject to the terms and conditions therein Executed by: Los Angeles Media Tech Center, LLC By: Legacy Partners 2361, L.P. In Favor of: The City of Los Angeles Recorded: October 1, 2003 as Instrument No. 03-2894319 Reference is made to said document for full particulars. 17. Covenants, Conditions and Restrictions as set forth in the document recorded February 25, 1873, in Book 24 Page 15 of Deeds. 18. An easement affecting the portion of said land and for the purposes stated therein, and incidental purposes, condemned by final decree: Purpose: Electric light, heat and power lines Case No.: 43195 of the Superior Court Recorded: In Book 2185 Page 65 of Deeds Affects: A portion of said land 19. An easement for the purpose shown below and rights incidental thereto as set forth in a document Granted to: L.A. Media Center Purpose: Emergency Access, waterline, public utilities Recorded: October 1, 2003 as Instrument No. 03-2894320 Affects: Lots 1-7 20. Covenants, conditions and restrictions (but omitting therefrom any covenant or restriction based on race, color, religion, sex, handicap, familial status or national origin, if any, unless and only to the extent that said covenant (A) is exempt under Chapter 42, Section 3607 of the United States Code or (B) relates to handicap but does not discriminate against handicapped persons) as set forth in the document referred to in item 19 above. 21. A covenant and agreement upon and subject to the terms and conditions therein: Executed by: Los Angeles Media Tech Center, LLC By: Legacy Partners 2361, L.P. In Favor of: The City of Los Angeles Recorded: August 11, 2003 as Instrument No. 03-2313041 Reference is made to said document for full particulars 22. A document entitled "Reciprocal Easement Agreement Water Line and Emergency Access," dated September 26, 2003 executed by Los Angeles Media Tech Center, LLC a California Limited Liability Company ("LAMTC"), and UCV Media Tech Center, LLC, a Delaware Limited Liability Company, subject to all the terms, provisions and conditions therein contained, recorded November ___, 2003 as Instrument No. 03-______________. SCHEDULE D LESSEE INSURANCE REQUIREMENTS NAME OF INSURED: (Tenant's name to appear here) INSURED MAILING ADDRESS: (Tenant's mailing address s/b inserted) PROPERTY ADDRESS(s): ADDITIONAL INSURED: General Electric Capital Business Asset Funding Corporation ("GE Capital"), a Delaware Corporation, its successors and assigns 10900 NE 4th Street, Suite 500 Bellevue, WA 98004 LEASE NO.: INSURANCE REQUIREMENTS: HAZARD INSURANCE: Evidenced on Form Acord 27 - Evidence of Insurance, naming General Electric Capital Business Asset Funding Corporation, its successors and/or assigns, as Additional Insured as respects the subject property. Perils: Fire and Extended coverage, vandalism and malicious mischief, Boiler and Machinery, and if applicable, Flood and Earthquake Insurance. Values: 100% Replacement cost value of property/Limit of $10,000 deductible Endorsements Required: o Inflation Guard, and Agreed Amount and Replacement Cost endorsements o List of Locations and Schedule of Values, if Blanket Policy o 30 Days Notice of Cancellation o Agreed Amount endorsement Co-insurance should not be a condition of any insurance provided. Loss of Rents/Business Interruption for 12 months (or in an amount equivalent to at least 12 months rent) is required. Boiler and Machinery Coverage will be required. LIABILITY: Coverage to be On Occurrence basis only. Evidence of Insurance, showing comprehensive general liability on an Occurrence Basis, in an amount not less than $5,000,000 (per occurrence) to include: Bodily injury and property damage liability (primary and excess umbrella acceptable to satisfy limits). General Electric Capital Business Asset Funding Corporation is to be named Additional Insured as respects this property and the Additional Insured endorsement should be attached to the certificate. SPECIAL INSTRUCTIONS General Electric Capital Business Asset Funding Corporation is to be provided with an Evidence of Insurance and a Certificate of Insurance from an insurance company having a Best's Rating of A/X or better for, respectively, hazard and liability coverage and must be executed by the insurance company or its authorized agent. The evidence and certificate must itemize the above coverage and endorsements. WITHIN 90 DAYS OF ISSUANCE OF THE EVIDENCE OF INSURANCE, THE INSURANCE COMPANY IS TO PROVIDE A CERTIFIED COPY OF THE INSURANCE POLICY INCLUDING ALL ENDORSEMENTS AND AMENDMENTS. SCHEDULE E PERMANENT LOAN INSURANCE REQUIREMENTS NAME OF INSURED: INSURED MAILING ADDRESS: PROPERTY ADDRESS(s): MORTGAGEE/LOSS PAYEE: General Electric Capital Business Asset Funding Corporation, a Delaware Corporation, its successors and assigns 10900 NE 4th Street, Suite 500 Bellevue, WA 98004 LOAN NO.: INSURANCE REQUIREMENTS: HAZARD INSURANCE: Evidenced on Form Acord 27 - Evidence of Property Insurance, naming General Electric Capital Business Asset Funding Corporation, its successors and/or assigns, as Loss Payee and Mortgagee as respects the subject property. If the credit tenant is to provide the insurance coverage, the Borrower must be named as Additional Insured. Perils: Fire and Extended coverage, vandalism and malicious mischief, Boiler and Machinery, and if applicable, Flood and Earthquake Insurance. Values: l00% Replacement cost value of property/Limit of $5,000 deductible Endorsements Required: o Inflation Guard, and Agreed Amount and Replacement Cost endorsements o List of Locations and Schedule of Values, if Blanket Policy o 438BFU (Loss Payee Endorsement - see copy attached, with enlargement of same for easier reading), in favor of General Electric Capital Business Asset Funding Corporation amended to 30 days notice of change, cancellation or non-renewal. o 30 Days Notice of Cancellation Waiver of Subrogation endorsement is required, unless property is owner occupied. Co-insurance should not be a condition of any insurance provided. Loss of Rents/Business Interruption for 12 months (or in an amount equivalent to at least 12 months rent) is required. Boiler and Machinery coverage is required. If the insurance carrier for the Boiler & Machinery coverage is different from that of the Property Coverage, a Joint Loss Agreement endorsement must be reflected on the evidences of insurance for both Property coverage and Boiler & Machinery coverage. If the 438BFU Lender's Loss Payable Endorsement is not available, please submit another Loss Payable endorsement for review by General Electric Capital Business Asset Funding Corporation. LIABILITY: Evidenced on Form Acord 25 - Certificate of Liability Insurance Coverage to be On Occurrence basis only. Evidence of Insurance, showing comprehensive general liability on an Occurrence Basis, in an amount not less than $2,000,000 (per occurrence) to include; Bodily injury and property damage liability (primary and excess umbrella acceptable to satisfy limits). General Electric Capital Business Asset Funding Corporation is to be named Additional Insured as respects this property only and the Additional Insured endorsement should be attached to the certificate. If the credit tenant is to provide the insurance coverage, the Borrower must be named as Additional Insured as well. SPECIAL INSTRUCTIONS General Electric Capital Business Asset Funding Corporation is to be provided with an Evidence of Property Insurance and a Certificate of Liability Insurance from an insurance company having a Best's Rating of A/X or better for both hazard and liability coverage and must be executed by the insurance company or its authorized agent. The evidence and certificate must itemize all the above endorsements and the evidence must include a copy of the completed and signed 438BFU endorsement (a copy of which is attached). WITHIN 90 DAYS OF ISSUANCE OF THE EVIDENCE OF INSURANCE, THE INSURANCE COMPANY IS TO PROVIDE A CERTIFIED COPY OF THE INSURANCE POLICY INCLUDING ALL ENDORSEMENTS AND AMENDMENTS. LENDER'S LOSS PAYABLE ENDORSEMENT - 438 BFU 1. Loss or damage, if any, under this policy shall be paid to General Electric Capital Business Asset Funding Corporation, its successors and assigns, hereinafter referred to as the "Lender," in whatever form or capacity its interests may appear and whether said interest be vested in said Lender in its individual or in its disclosed or undisclosed fiduciary or representative capacity, or otherwise, or vested in a nominee or trustee of said Lender. 2. The insurance under this policy, or any rider or endorsement attached thereto, as to the interest only of the Lender, its successors and assigns, shall not be invalidated nor suspended: (a) by any error, omission or change respecting the ownership, description, possession or location of the subject of the insurance or the interest therein, or the title thereto; (b) by the commencement of foreclosure proceedings or the giving of notice of sale of any of the property covered by this policy by virtue of any mortgage or trust deed; (c) by any breach of warranty, act, omission, neglect or noncompliance with any of the provisions of this policy, including any and all riders now or hereafter attached thereto, by the named insured, the borrower, mortgagor, trustor, vendee, owner, tenant, warehouseman, custodian, occupant, or by the agents of either of any of them or by the happening of any event permitted by them or either of them, or their agents, or which they failed to prevent, whether occurring before or after the attachment of this endorsement, or whether before or after a loss, which under the provisions of this policy of insurance or of any rider or endorsement attached thereto would invalidate or suspend the insurance as to the named insured, excluding herefrom, however, any acts or omissions of the Lender while exercising active control and management of the property. 3. In the event of failure of the insured to pay any premium or additional premium which shall be or become due under the terms of this policy or on account of any change in occupancy or increase in hazard not permitted by this policy, this Company agrees to give written notice to the Lender of such nonpayment of premium after sixty (60) days from and within one hundred and twenty (120) days after due date of such premium and it is a condition of the continuance of the rights of the Lender hereunder that the Lender when so notified in writing by this Company of failure of the insured to pay such premium shall pay or cause to be paid the premium due within ten (10) days following receipt of the Company's demand in writing therefor. If the Lender shall decline to pay said premium or additional premium, the rights of the Lender under this Lender's Loss Payable Endorsement shall not be terminated before ten (10) days after receipt of said written notice by the Lender. 4. Whenever this Company shall pay to the Lender any sum for loss or damage under this policy and shall claim that as to the insured no liability therefor exists, this Company, at its option, may pay to the Lender the whole principal sum and interest and other indebtedness due or to become due from the insured, whether secured or unsecured (with refund of all interest not accrued), and this Company, to the extent of such payment, shall thereupon receive a full assignment and transfer, without recourse, of the debt and all rights and securities held as collateral thereto. 5. If there be any other insurance upon the within described property, this Company shall be liable under this policy as to the Lender for the proportion of such loss or damage that the sum hereby insured bears to the entire insurance of similar character on said property under policies held by, payable to and expressly consented to by the Lender. Any Contribution Clause included in any Fallen Building Clause Waiver or any Extended Coverage Endorsement attached to this contract of insurance is hereby nullified, and also any Contribution Clause in any other endorsement or rider attached to this contract of insurance is hereby nullified except Contribution Clauses for the compliance with which the insured has received reduction in the rate charged or has received extension of the coverage to include hazards other than fire and compliance with such Contribution Clause is made a part of the consideration for insuring such other hazards. The Lender upon the payment to if of the full amount of its claim will subrogate this Company (pro rata with all other insurers contributing to said payment) to all of the Lender's rights of contribution under said other insurance. 6. This Company reserves the right to cancel this policy at any time, as provided by its terms, but in such case this policy shall continue in force for the benefit of the Lender for thirty (30) days after written notice of such cancellation is received by the Lender and shall then cease. 7. This policy shall remain in full force and effect as to the interest of the Lender for a period of ten (10) days after its expiration unless an acceptable policy in renewal therefor with loss thereunder payable to the Lender in accordance with the terms of this Lender's Loss Payable Endorsement shall have been issued by some insurance company accepted by the Lender. 8. Should legal title to and beneficial ownership of any of the property covered under this policy become vested in the Lender or its agents, insurance under this policy shall continue for the term thereof for the benefit of the Lender, but, in such event, any privileges granted by this Lender's Loss Payable Endorsement which are not also granted the insured under the terms and conditions of this policy and/or under other riders or endorsements attached thereto shall not apply to the insurance hereunder as respects such property. 9. All notices herein provided to be given by the Company to the Lender in connection with this policy and this Lender's Loss Payable Endorsement shall be mailed to or be delivered to the Lender at its office or branch at: Suite 500, 10900 NE 4th Street, Bellevue, WA 98004. Attached to Policy No. Of: Issued to: Agency at: Date: EX-10 3 bkterm031204.txt EXHIBIT 10.2 ================================================================ CREDIT AGREEMENT among POINT.360 as Borrower THE LENDERS PARTIES HERETO, and UNION BANK OF CALIFORNIA, N.A. as Agent Dated as of March 12, 2004 ================================================================ TABLE OF CONTENTS Page SECTION 1. DEFINITIONS.................................................1 1.1 Defined Terms...............................................1 1.2 Other Definitional Provisions..............................19 SECTION 2. AMOUNT AND TERMS OF LOANS AND LETTERS OF CREDIT; COMMITMENT AMOUNTS.........................................20 2.1 Revolving Loans and Letters of Credit; Loan Commitment Amounts....................................20 2.2 Term Loans; Term Loan Commitment Amounts...................23 2.3 Letters of Credit..........................................25 2.4 Optional Prepayments.......................................28 2.5 Mandatory Prepayments......................................29 2.6 Conversion and Continuation Options........................30 2.7 Minimum Amounts of Tranches; Minimum Borrowings............31 2.8 Interest Rates and Payment Dates...........................31 2.9 Computation of Interest and Fees...........................31 2.10 Inability to Determine Interest Rate.......................32 2.11 Pro Rata Treatment and Payments............................32 2.12 Illegality.................................................32 2.13 Increased Costs............................................33 2.14 Taxes......................................................34 2.15 Indemnity..................................................35 2.16 Mitigation of Costs........................................35 2.17 Unused Commitment Fee......................................35 SECTION 3. REPRESENTATIONS AND WARRANTIES.............................36 3.1 Organization and Good Standing.............................36 3.2 Power and Authority........................................36 3.3 Validity and Legal Effect..................................36 3.4 No Violation of Laws or Agreements.........................36 3.5 Title to Assets; Existing Encumbrances; Legal Names........36 3.6 Capital Structure; Equity Ownership........................37 3.7 Subsidiaries and Affiliates................................37 3.8 Material Contracts.........................................37 3.9 Taxes and Assessments......................................37 3.10 Litigation and Legal Proceedings...........................38 3.11 Accuracy of Financial Information..........................38 3.12 Accuracy of Other Information..............................38 3.13 Compliance with Laws Generally.............................39 3.14 ERISA Compliance...........................................39 3.15 Environmental Compliance...................................39 3.16 Federal Regulations........................................40 3.17 Fees and Commissions.......................................40 3.18 Solvency...................................................40 3.19 Investment Company Act; Public Utility Holding Company Act.40 3.20 Nature of Business.........................................41 3.21 Use of Proceeds............................................41 3.22 Ranking of Loans...........................................41 SECTION 4. CONDITIONS PRECEDENT.......................................41 4.1 Conditions to Closing Date.................................41 4.2 Conditions to Each Loan or Letter of Credit................43 SECTION 5. AFFIRMATIVE COVENANTS......................................44 5.1 Financial Statements.......................................44 5.2 Certificates; Other Information............................45 5.3 Payment of Obligations.....................................46 5.4 Conduct of Business and Maintenance of Existence...........46 5.5 Maintenance of Property....................................47 5.6 Insurance..................................................47 5.7 Inspection of Property; Books and Records; Discussions.....47 5.8 Environmental Laws.........................................47 5.9 Use of Proceeds............................................48 5.10 Compliance With Laws, Etc..................................48 5.11 Certain Obligations Respecting Subsidiaries; Prohibitions on Certain Agreements.........................48 5.12 Reviews and Appraisals.....................................48 5.13 Bank Accounts..............................................49 5.14 Landlord Consents..........................................49 SECTION 6. NEGATIVE COVENANTS.........................................49 6.1 Financial Condition Covenants..............................49 6.2 Limitation on Indebtedness.................................50 6.3 Limitation on Liens........................................51 6.4 Limitation on Fundamental Changes..........................52 6.5 Limitation on Sale of Assets...............................52 6.6 Limitation on Dividends....................................52 6.7 Limitation on Investments, Loans and Advances..............52 6.8 Transactions with Affiliates...............................53 6.9 Fiscal Year................................................53 6.10 Sale-Leaseback Transactions................................53 6.11 Lines of Business..........................................53 SECTION 7. EVENTS OF DEFAULT..........................................54 SECTION 8. THE AGENT..................................................56 8.1 Appointment................................................56 8.2 Delegation of Duties.......................................56 8.3 Exculpatory Provisions.....................................57 8.4 Reliance by the Agent......................................57 8.5 Notice of Default..........................................57 8.6 Non-Reliance on the Agent and Other Lenders................58 8.7 Indemnification............................................58 8.8 The Agent in Its Individual Capacity.......................58 8.9 Successor Agent............................................59 8.10 Collateral Documents.......................................59 SECTION 9. MISCELLANEOUS..............................................59 9.1 Amendments and Waivers.....................................59 9.2 Notices....................................................60 9.3 No Waiver; Cumulative Remedies.............................60 9.4 Survival of Representations and Warranties.................61 9.5 Payment of Expenses and Taxes..............................61 9.6 Successors and Assigns; Participations; Purchasing Lenders.........................................62 9.7 Adjustments; Set-Off.......................................64 9.8 Counterparts...............................................65 9.9 Severability...............................................65 9.10 Integration................................................65 9.11 GOVERNING LAW..............................................65 9.12 Acknowledgements...........................................65 9.13 Headings...................................................65 9.14 Copies of Certificates, Etc................................65 9.15 Treatment of Certain Information; Confidentiality..........65 9.16 Consent to Jurisdiction; Waiver of Jury Trial..............66 9.17 Release....................................................67 9.18 Effect of Agreement on Financing Statements and Landlord Consents..........................................71 Exhibits A-1 Form of Revolving Note A-2 Form of Term Note B Form of Assignment and Acceptance C Form of Borrowing Base Certificate D Form of Borrowing Notice E Form of Continuation Notice F Form of Officer's Certificate G Form of Covenant Compliance Certificate H-1 Form of Letter of Credit Request (Standby Letters of Credit) H-2 Form of Letter of Credit Request (Commercial Letters of Credit) Schedules 3.1 Business Qualification Jurisdictions 3.5 Legal and Trade Names 3.6 Capital Structure; Equity Ownership 3.7 Subsidiaries and Affiliates 3.8 Material Contracts 3.9 Certain Tax Matters 3.10 Litigation 5.14 Certain Leased Properties CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of March 12, 2004, among (1) POINT.360, a California corporation (the "Borrower"), (2) the several banks and other financial institutions parties to this Agreement (the "Lenders"), and (3) UNION BANK OF CALIFORNIA, N.A., as Agent for the Lenders hereunder ("UBOC"; in its capacity as agent, the "Agent"). RECITALS The Borrower has requested that the Lenders make available to it a revolving facility and a term loan facility for its use in refinancing certain existing debt, financing equipment purchases and other uses as more fully set forth below. The Lenders are willing to make available such facilities on the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto hereby agree as follows: SECTION 1. DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "Accounts Receivable": all of the Borrower's or any Domestic Subsidiary's now owned or hereafter acquired (a) accounts receivable for the sale of inventory or the performance of services, book debts and other forms of obligations, whether arising out of goods sold or services rendered or from any other transaction; (b) rights in, to and under all purchase orders or receipts for goods or services; (c) rights to any goods represented or purported to be represented by any of the foregoing (including unpaid sellers' rights of rescission, replevin, reclamation and stoppage in transit and rights to returned, reclaimed or repossessed goods); (d) moneys due or to become due to the Borrower or any Domestic Subsidiary under all purchase orders and contracts for the sale of goods or the performance of services or both by the Borrower or any Domestic Subsidiary (whether or not yet earned by performance on the part of the Borrower or such Domestic Subsidiary), including the proceeds of the foregoing; (e) any notes, drafts, letters of credit, insurance proceeds or other instruments, documents and writings evidencing or supporting the foregoing; and (f) all collateral security and guarantees of any kind given by any other Person with respect to any of the foregoing. "Accounts Receivable Value": at the date of determination thereof, the aggregate face amount of Eligible Accounts Receivable less discounts, credits, allowances and retainages. "Accountants": such firm of independent certified public accountants of recognized regional or national standing as shall be selected by the Borrower and acceptable to the Majority Lenders (such acceptance by the Majority Lenders not to be unreasonably withheld, and to be in writing). "Acquisition": the acquisition by the Borrower or any Subsidiary of any equity interest in (including any warrants, options and other rights to acquire such interests), or any or all of the assets of, any other Person. "Affiliate": as to any Person, (a) any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person or (b) any Person who is a director, officer or partner (i) of such Person or (ii) of any Subsidiary of such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "Agent": as defined in the preamble hereto. "Aggregate Available Term Loan Commitment": the sum of the Available Term Loan Commitments of each Term Loan Lender. "Aggregate Revolving Loan Commitment": the sum of the Revolving Loan Commitments set forth on the signature pages hereof. "Aggregate Term Loan Commitment": the sum of the Term Loan Commitments set forth on the signature pages hereof. "Aggregate Total Commitment": the sum of the Aggregate Revolving Loan Commitment and the Aggregate Term Loan Commitment. "Aggregate Total Commitment Percentage": with respect to each Lender, the percentage equivalent of the ratio which such Lender's Commitments bears to the Aggregate Total Commitment. "Agreement": this Credit Agreement, as amended, waived, supplemented or otherwise modified from time to time. "Alliance Atlantis Warrant": that certain Warrant dated July 2002 providing for the purchase of 500,000 shares of the Borrower's common stock at $2.00 per share. "Applicable Lending Office": for any Lender, its office for Loans specified below its signature on the signature pages hereof or in the Assignment and Acceptance pursuant to which it became a party hereto, any of which offices may, upon 10 days' prior written notice to the Agent and the Borrower, be changed by such Lender. "Asset Disposition": the sale, sale and leaseback, transfer, conveyance, exchange, long-term lease accorded sales treatment under GAAP or similar disposition (including by means of a merger, consolidation, amalgamation, joint venture or other substantive combination) of any of the Properties, business or assets (other than marketable securities, including "margin stock" within the meaning of Regulation U, liquid investments and other financial instruments but, including, without limitation, the assignment of any lease, license or permit relating to the Properties) of the Borrower or any of its Subsidiaries to any Person or Persons other than to the Borrower or any Guarantor; provided that Asset Disposition shall not include the sale of inventory in the ordinary course of business. "Assignment and Acceptance": an Assignment and Acceptance substantially in the form of Exhibit B to this Agreement. "Available Revolving Loan Commitment": with respect to each Revolving Loan Lender on the date of determination thereof, the amount by which (a) the Revolving Loan Commitment of such Lender on such date exceeds (b) the principal sum of such Lender's (i) Revolving Loans outstanding, (ii) Revolving Loan Commitment Percentage of the aggregate Letter of Credit Amount of all Letters of Credit outstanding and (iii) Revolving Loan Commitment Percentage of the aggregate amount of unreimbursed drawings under all Letters of Credit on such date. "Available Term Loan Commitment": with respect to each Term Loan Lender on the date of determination thereof, the amount by which the Term Loan Commitment of such Lender on such date exceeds the principal sum of such Lender's Term Loans outstanding on such date. "Benefitted Lender": as defined in Section 9.7. "Borrower": as defined in the preamble hereto. "Borrowing Base": 80% of the Accounts Receivable Value. "Borrowing Base Review": a review, performed by the Agent or a designee of the Agent reasonably acceptable to the Borrower, which evaluates the Borrower's compliance with the reporting requirements under this Agreement applicable to the Borrowing Base, including, but not limited to, an examination of the Borrower's books and records relating to the Borrower's Accounts Receivable Value. "Borrowing Base Certificate": a certificate, duly executed by a Responsible Officer, substantially in the form of Exhibit C. "Borrowing Notice": a notice from the Borrower to the Agent requesting a borrowing of Loans, substantially in the form of Exhibit D. "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in the State of California are authorized or required by law to close and which, in the case of a LIBOR Loan, is a Eurodollar Business Day. "Capital Expenditures": for any period, expenditures (including, without limitation, the aggregate amount of Capitalized Lease Obligations incurred during such period) made by the Borrower or any of its Subsidiaries to acquire or construct fixed assets, plant and equipment (including renewals, improvements and replacements, but excluding repairs) during such period computed in accordance with GAAP. "Capitalized Lease Obligations": obligations for the payment of rent for any real or personal property under leases or agreements to lease that, in accordance with GAAP, have been or should be capitalized on the books of the lessee and, for purposes hereof, the amount of any such obligation shall be the capitalized amount thereof determined in accordance with GAAP. "Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation), any and all warrants, options or rights to purchase any of the foregoing or any other securities convertible into any of the foregoing. "Cash Collateral Deposit": cash deposits made by the Borrower to the Agent, to be held by the Agent as Collateral pursuant to the Security Agreement, for the reimbursement of drawings under Letters of Credit. "Cash Income Taxes": for any period, cash income taxes paid by the Borrower and its Subsidiaries. "Closing Date": the date on which the conditions precedent set forth in Section 4.1 have been satisfied. "Code": the Internal Revenue Code of 1986, as amended from time to time. "Collateral": all of the property (tangible or intangible) purported to be subject to the lien or security interest purported to be created by any mortgage, deed of trust, security agreement, pledge agreement, assignment or other security document heretofore or hereafter executed by the Borrower as security for all or part of the Obligations. "Collateral Documents": the Security Agreement, any Control Agreements executed pursuant to the Security Agreement, all Form UCC-1 Financing Statements and amendments thereto and any other document encumbering the Collateral or evidencing or perfecting a security interest therein for the benefit of the Lenders executed by the Borrower. "Commitment": a Revolving Loan Commitment or a Term Loan Commitment, as applicable. "Commitment Percentage": a Revolving Loan Commitment Percentage or a Term Loan Commitment Percentage, as applicable. "Commonly Controlled Entity": as to any Person, an entity, whether or not incorporated, which is under common control with such Person within the meaning of Section 4001 of ERISA or is part of a group which includes such Person and which is treated as a single employer under Section 414 of the Code. "Continuation Notice": a request for continuation or conversion of a Loan as set forth in Section 2.6, substantially in the form of Exhibit E. "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Control Agreement": a control agreement, restricted account agreement or similar agreement or document, in each case in form and substance satisfactory to the Agent and entered into for the purpose of perfecting a security interest in one or more deposit accounts or securities accounts of the Obligors. "Covenant Compliance Certificate": a certificate of a senior financial officer of the Borrower, substantially in the form of Exhibit G hereto, with regard to (and setting forth the calculations for) each of the covenants set forth in this Agreement. "Debt Service": for any period, the sum, for the Borrower and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of the following: (a) all regularly scheduled payments or regularly scheduled prepayments of principal of Indebtedness (including, without limitation, the principal component of any payments in respect of Capitalized Lease Obligations) made during such period; provided that, (i) with respect to the four quarter periods ending December 31, 2003 and March 31, 2004, such amount shall be deemed to be $1,600,000, (ii) with respect to the four quarter period ending June 30, 2004, such amount shall be deemed to be sum of (x) all such regularly scheduled payments or prepayments for the quarter ending June 30, 2004 plus (y) $1,200,000, (iii) with respect to the four quarter period ending September 30, 2004, such amount shall be deemed to be sum of (x) all such regularly scheduled payments or prepayments for the two-quarter period ending September 30, 2004 plus (y) $800,000 and (iv) with respect to the four quarter period ending December 31, 2004, such amount shall be deemed to be sum of (x) all such regularly scheduled payments or prepayments for the three-quarter period ending December 31, 2004 plus (y) $400,000, plus (b) all Interest Expense for such period; provided that, (i) with respect to the four quarter period ending December 31, 2003, Interest Expense shall be deemed to be $603,000, (ii) with respect to the four quarter period ending March 31, 2004, such amount shall be deemed to be $460,000, (iii) with respect to the four quarter period ending June 30, 2004, such amount shall be deemed to be (x) Interest Expense for the quarter ending June 30, 2004 plus (y) $ 293,000, (iv) with respect to the four quarter period ending September 30, 2004, such amount shall be deemed to be sum of (x) Interest Expense for the two-quarter period ending September 30, 2004 plus (y) $173,000 and (v) with respect to the four quarter period ending December 31, 2004, such amount shall be deemed to be sum of (x) Interest Expense for the three-quarter period ending December 31, 2004 plus (y) $79,000. "Default": any of the events specified in Section 7, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Dollars" and "$": dollars in lawful currency of the United States. "Domestic Subsidiary": each Subsidiary organized under the laws of the United States or any state thereof. "Earn-out Payments": cash payments required to be made by the Borrower pursuant to earn-out provisions of any acquisition agreement entered into by the Borrower subsequent to the Closing Date for the purpose of acquiring a business. "EBITDA": for any period, Net Income after eliminating extraordinary gains and losses, plus (i) provisions for income taxes, (ii) depreciation and amortization, (iii) Interest Expense, (iv) any non-cash charge taken by the Borrower in connection with FASB Rule 142, provided that such charges shall not exceed $5,000,000 during the term of this Agreement, (v) up to $100,000 of fees and expenses paid by the Borrower in connection with the execution of this Agreement and (vi) up to $620,000 for any charge resulting from the repurchase and cancellation of the Alliance Atlantis Warrant. "Eligible Accounts Receivable": an Account Receivable which is reasonably acceptable to the Agent, but in no event shall Eligible Accounts Receivable include any Account Receivable: (a) that does not arise from the sale of finished goods or the rendition of services in the ordinary course of the Borrower's or a Domestic Subsidiary's business; (b) that is not subject to a valid, perfected first priority Lien in favor of the Agent; (c) as to which any covenant, representation or warranty contained in the Loan Documents with respect to such Account Receivable has been breached; (d) that is not owned by the Borrower or any Domestic Subsidiary or is subject to any right, claim or interest of another Person other than the Lien in favor of the Agent; (e) with respect to which an invoice has not been sent; (f) that is due and payable from a buyer located outside of the United States or Canada; (g) that is not paid within 90 days from the date of the invoice; (h) that arises from a sale of goods to or performance of services for an Affiliate of the Borrower, or an employee of the Borrower or an Affiliate of the Borrower; (i) that the Agent, in its reasonable judgment, deems uncollectible for any reason; (j) that is due and payable in a currency other than Dollars or Canadian Dollars; (k) that is due and payable from a buyer who (i) applies for, suffers, or consents to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property or calls a meeting of its creditors, (ii) admits in writing its inability, or is generally unable, to pay its debts as they become due or ceases operations of its present business, (iii) makes a general assignment for the benefit of creditors, (iv) commences a voluntary case under any state or federal bankruptcy laws (as now or hereafter in effect), (v) is adjudicated as bankrupt or insolvent, (vi) files a petition seeking to take advantage of any other law providing for the relief of debtors, (vii) acquiesces to, or fails to have dismissed, any petition which is filed against it in any involuntary case under such bankruptcy laws, or (viii) takes any action for the purpose of effecting any of the foregoing; (l) that arises from a bill-and-hold, guaranteed sale, sale-and-return, sale on approval, consignment or any other repurchase or return basis or is evidenced by chattel paper; (m) for which the goods giving rise to such Account Receivable have not been shipped and delivered to and accepted by the buyer or the services giving rise to such Account Receivable have not been performed by the Borrower or any Domestic Subsidiary and accepted by the buyer or the Account Receivable otherwise does not represent a final sale; (n) that is subject to any offset, deduction, defense, dispute, or counterclaim; or, except for Sony Corporation of America and its subsidiaries, the buyer is also a creditor or supplier of the Borrower or any Domestic Subsidiary; or the Account Receivable is contingent in any respect or for any reason; (o) for which the Borrower or any Domestic Subsidiary has made any agreement with the buyer for any deduction therefrom, except for (i) discounts or allowances made in the ordinary course of business for prompt payment and (ii) cooperative advertising discounts; (p) for which any of the goods giving rise to such Account Receivable have been returned, rejected or repossessed, or for which any part of the payment due from buyer is overdue; (q) that arises from or out of any contract or other agreement involving the United States of America, any agency or instrumentality of the United States of America, or any entity entitled to full of partial immunity under the laws applicable in any domestic or foreign jurisdiction or any entity to which an assignment of claims is subject to consent; (r) that is an obligation of an account debtor with respect to which more than 25% of all Accounts Receivable due to the Borrower from such account debtor are either overdue or not paid within 90 days from the date of the invoice, unless the Majority Lenders have given their written consent thereto; or (s) that, when added together with all other Accounts Receivable due to the Borrower from the applicable account debtor, exceeds 15% (or, with respect to Sony Pictures Entertainment, Metro Goldwyn Mayer Studios, Inc. and Zenith Media Services, 20%) of all Accounts Receivable of the Borrower. "Environmental Control Statutes": as defined in Section 3.15. "EPA": as defined in Section 3.15. "Equity Offering": the sale or issuance (or reissuance) by the Borrower or any Subsidiary of any equity interest (common stock, preferred stock, partnership interests, member interests or otherwise) or any options, warrants, convertible securities or other rights to purchase such beneficial or equity interests, other than as the result of the exercise of an option or other right to purchase beneficial or equity interests in the Borrower pursuant to the Borrower's 1996 Stock Incentive Plan or 2000 Non-Qualified Stock Option Plan. "Equity Rights": with respect to any Person, any subscriptions, options, warrants, commitments, preemptive rights or agreements of any kind (including, without limitation, any stockholders' or voting trust agreements) for the issuance, sale, registration or voting of, or securities convertible into, any additional shares of capital stock of any class, or partnership or other ownership interests of any type in, such Person. "Equityholder Agreements": each shareholder agreement, limited liability company agreement, partnership agreement, voting agreement, buy-sell agreement, option, warrant, put, call, or right of first refusal, and any other agreement or instrument with conversion rights into equity of the Borrower or any Subsidiary either (a) between the Borrower or any Subsidiary and any holder or prospective holder of any equity interest of the Borrower or any Subsidiary (including interests convertible into such equity) or (b) otherwise between any two or more such holders of equity interests. "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate": as to any Person, each trade or business including such Person, whether or not incorporated, which together with such Person would be treated as a single employer under Section 4001(a)(14) of ERISA. "Eurodollar Business Day": any day on which commercial banks are open for dealings in Dollar deposits in the London Interbank Market. "Event of Default": any of the events specified in Section 7, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Excluded Taxes": all taxes imposed on or by reference to the net income of the Agent or any Lender or its Applicable Lending Office by any Governmental Authority and all franchise taxes, taxes on doing business or taxes measured by capital or net worth imposed on the Agent or on any Lender or its Applicable Lending Office by any Governmental Authority and any taxes imposed by any Governmental Authority arising as a consequence of the failure of any Lender to provide accurate documentation required to be provided by such Lender pursuant to Section 2.14(b). "Existing Letter of Credit": that certain letter of credit issued by UBOC on January 30, 1998 to O.D.S. Technologies, LP in the face amount of $92,239.20 and bearing letter of credit no. 306S230996. "Federal Funds Effective Rate": for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Agent from three federal funds brokers of recognized standing selected by it. "Final Term Loan Maturity Date": March 12, 2011, or such earlier date as the Term Notes shall become due and payable in full in accordance with the terms hereof (whether by acceleration or otherwise). "Fixed Charge Ratio": as at any date of determination, with respect to any period, determined on a consolidated basis for the Borrower and its Subsidiaries, the ratio of EBITDA less Capital Expenditures (excluding up to $8,571,500 for the purchase of the New Premises) divided by Fixed Charges for such period. "Fixed Charges": for any period, the sum, for the Borrower and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of the following: (i) Debt Service for such period, (ii) Cash Income Taxes for such period and (iii) Earn-out Payments for such period. "Funded Debt": the sum of the outstanding principal balance of all Indebtedness (including, but not limited to, Indebtedness to the Lenders and Capitalized Lease Obligations) of Borrower and its Subsidiaries on a consolidated basis, excluding the outstanding principal balance of the Mortgage Debt provided such amount does not exceed $6,428,625, as reduced from time to time by the repayment thereof. "GAAP": generally accepted accounting principles in the United States in effect from time to time. "General Account": as defined in Section 2.1(h). "Governmental Authority": any nation or government, any federal, state or other political subdivision thereof and any federal, state or local entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantee Obligation": as to any Person (the "guaranteeing person"), any obligation (without duplication) of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds for the purchase or payment of any such primary obligation or to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lesser of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith. "Guarantees": collectively, guarantees executed by any Subsidiary of the Borrower pursuant to Section 5.11, as the same may be amended, modified or restated from time to time in accordance with the terms hereof. "Guarantor Collateral": all of the property (tangible or intangible) purported to be subject to the lien or security interest purported to be created by any mortgage, deed of trust, security agreement, pledge agreement, assignment or other security document heretofore or hereafter executed by any Guarantor as security for all or part of the Obligations or the Guarantees. "Guarantor Collateral Documents": the Guarantor Security Agreements, any Control Agreements executed pursuant to any Guarantor Security Agreement, all Form UCC-1 Financing Statements and amendments thereto and any other document encumbering the Guarantor Collateral or evidencing or perfecting a security interest therein for the benefit of the Lenders executed by any Guarantor. "Guarantor Security Agreements": collectively, security agreements made by any Subsidiary of the Borrower pursuant to Section 5.11, as the same may be amended, modified or restated from time to time in accordance with the terms hereof. "Guarantors": each Subsidiary. "Hazardous Material": collectively, (a) any petroleum or petroleum products, flammable materials, explosives, radioactive materials, asbestos, urea formaldehyde foam insulation, and transformers or other equipment that contain polychlorinated biphenyls ("PCB's"), (b) any chemicals or other materials or substances that are now or hereafter become defined as or included in the definition of "hazardous substances", "hazardous wastes", "hazardous materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic substances", "toxic pollutants", "contaminants", "pollutants" or words of similar import under any Environmental Control Statute and (c) any other chemical or other material or substance, exposure to which is now or hereafter prohibited, limited or regulated under any Environmental Control Statute. "Indebtedness": of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than trade liabilities (other than for borrowed money) incurred in the ordinary course of business so long as such trade liabilities are payable within 90 days of the date the respective goods are delivered or the respective services are rendered) or which is evidenced by a note, bond, debenture or similar instrument, (b) all obligations of such Person under Capitalized Lease Obligations, (c) all obligations of such Person in respect of acceptances issued or created for the account of such Person, (d) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof, (e) all obligations of such Person, whether absolute or contingent, in respect of letters of credit opened for the account of such Person, (f) all obligations of such Person under Non-Compete Agreements, (g) all obligations of such Person under agreements for interest rate or currency hedging, (h) all mandatory redemption, repurchase or dividend obligations of such Person with respect to Capital Stock, and (i) all Guarantee Obligations of such Person in respect of any indebtedness, obligations or liabilities of any other Person of the type referred to in clauses (a) through (h) of this definition. "Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. "Interest Expense": for any period, the sum, for the Borrower and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of the following: (i) all interest on Funded Debt (including, without limitation, the interest component of any payments in respect of Capitalized Lease Obligations) which was paid, payable and/or accrued for such period and (ii) all commitment, letter of credit or line of credit fees paid, payable and/or accrued for such period (without duplication of previous amounts) to any lender in exchange for such lender's commitment to lend. "Interest Payment Date": (a) as to any Reference Rate Loan, the first day of each month, (b) as to any LIBOR Loan having an Interest Period of three months or less, the last day of such Interest Period, (c) as to any LIBOR Loan having an Interest Period longer than three months, each day which is at the end of each three month-period within such Interest Period after the first day of such Interest Period and the last day of such Interest Period and (d) for each of (a), (b) and (c) above, on the day on which the Term Loans and the Revolving Loans become due and payable in full and are paid or prepaid in full. "Interest Period": with respect to any LIBOR Loan: (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such LIBOR Loan and ending one, three or six months thereafter, as selected by the Borrower in its Borrowing Notice or Continuation Notice, as the case may be, given with respect thereto; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such LIBOR Loan and ending one, three or six months thereafter, as selected by the Borrower by irrevocable notice to the Agent not less than three Eurodollar Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following: (i) if any Interest Period pertaining to a LIBOR Loan would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (ii) any Interest Period that would otherwise extend beyond the date final payment is due on the Revolving Loans, as applicable, shall end on the date of such final payment; and (iii) any Interest Period pertaining to a LIBOR Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month. "Interest Rate Protection Agreement": shall mean any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, or interest rate hedging agreement or other similar agreement or arrangement. "Investment": as defined in Section 6.7. "Letter of Credit": as defined in Section 2.1(a). "Letter of Credit Amount": the stated maximum amount available to be drawn under a particular Letter of Credit, as such amount may be reduced or reinstated from time to time in accordance with the terms of such Letter of Credit. "Letter of Credit Request": a request by the Borrower for the issuance of a standby or commercial Letter of Credit, on the Agent's standard form of standby letter of credit application and agreement or commercial letter of credit application and agreement, as applicable, the current forms of which are attached hereto as Exhibits H-1 and H-2, respectively. "Letter of Credit Sublimit": as defined in Section 2.1(a). "Landlord Consent": a waiver and consent, in form and substance reasonably satisfactory to the Agent, of each Person who is the owner of real property leased to the Borrower or any Guarantor. "Lenders": as defined in the preamble hereto and Section 8.8. "LIBOR": with respect to each day during each Interest Period pertaining to a LIBOR Loan, the rate of interest determined by the Agent to be the rate per annum at which deposits in dollars would be offered to the Agent by leading banks in the London Interbank Market at or about 9:00 a.m., Los Angeles time, two Eurodollar Business Days prior to the beginning of such Interest Period, for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of its LIBOR Loan to be outstanding during such Interest Period. "LIBOR Adjusted Rate": with respect to each day during each Interest Period pertaining to a LIBOR Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%): LIBOR 1.00 - LIBOR Reserve Requirements "LIBOR Loans": Loans the rate of interest applicable to which is based upon LIBOR. "LIBOR Reserve Requirements": for any day as applied to a LIBOR Loan, the aggregate (without duplication) of the maximum rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a member bank of such Federal Reserve System. "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any Capitalized Lease Obligation having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction in respect of any of the foregoing). "Loan": a Revolving Loan or a Term Loan, as applicable; and "Loans" means the aggregate of all Revolving Loans and all Term Loans, as applicable, outstanding at any given time. "Loan Documents": this Agreement, the Notes, the Collateral Documents, the Landlord Consents, the Guarantor Collateral Documents, any Loan Sweep Agreement and the Guarantees and any other agreement executed by an Obligor in connection therewith and herewith including, but not limited to, the fee sideletter executed on the Closing Date, UCC-1 Financing Statements and amendments thereto, and each Letter of Credit Request, as such agreements and documents may be amended, supplemented and otherwise modified from time to time in accordance with the terms hereof. "Loan Sweep Agreement": any future account sweep or similar agreement entered into between UBOC and the Borrower with respect to the Borrower's cash management. "Majority Lenders": Lenders having at least 51% of the aggregate outstanding principal amount of the Loans, provided that during any such time as UBOC alone would otherwise constitute the Majority Lender under the definition set forth above, "Majority Lenders" shall be deemed to refer to UBOC and at least one other Lender. "Margin Stock": as defined in Regulation U. "Material Adverse Effect": a material adverse effect on (a) the business, operations, property, financial condition, prospects or liabilities of the Borrower and its Subsidiaries taken as a whole, (b) the ability of any Obligor to perform its respective obligations under the Loan Documents, (c) the validity or enforceability of any of the Loan Documents or the rights or remedies of the Agent and the Lenders hereunder or thereunder or (d) the timely payment of the principal of or interest on the Loans or other amounts payable in connection therewith. "Material Contracts": each contract and agreement, including, but not limited to, site leases and licenses, material to the financial condition or operation of the Borrower or any Subsidiary. "Mortgage Debt": mortgage Indebtedness in a principal amount not exceeding $8,571,500, as reduced from time to time in accordance with the terms thereof, incurred by the Borrower to a mortgage lender for the purchase of the New Premises. "Multiemployer Plan": a plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Income": net income as determined in accordance with GAAP. "Net Proceeds": (A) with respect to any Asset Disposition, the net amount equal to the aggregate amount received in cash (including any cash received by way of deferred payment pursuant to a note receivable, other non-cash consideration or otherwise, but only as and when such cash is so received) in connection with such Asset Disposition minus the sum of (a) the reasonable fees, commissions and other out-of-pocket expenses incurred by the Borrower or any of its Subsidiaries in connection with such Asset Disposition (other than amounts payable to Affiliates of the Person making such disposition), (b) Indebtedness, other than the Loans, required to be paid as a result of such Asset Disposition and (c) federal, state and local taxes incurred and to be paid in connection with such Asset Disposition; and (B) with respect to any Equity Offering, the net amount equal to the aggregate amount received in cash (including any cash received by way of deferred payment pursuant to a note receivable, other non-cash consideration or otherwise, but only as and when such cash is so received) in connection with such Equity Offering minus the reasonable fees, commissions and other out-of-pocket expenses incurred by the Borrower in connection with such Equity Offering (other than amounts payable to Affiliates of the Person making such Equity Offering). "Net Worth": net worth as determined in accordance with GAAP. "Net Worth Requirement": $31,100,000 as of the Closing Date, as shall subsequently be automatically increased (i) as of the end of each fiscal year of the Borrower, commencing with the fiscal year ending December 31, 2004, by an amount equal to 50% of the Borrower's positive annual net profit for such year and (ii) upon the issuance thereof, by an amount equal to 90% of the Net Proceeds of any Equity Offering made on or after the Closing Date. "New Premises": that certain building located at 2701 Media Center Drive, Los Angeles, California, which building is, as of the Closing Date, leased by the Borrower but with respect to which the Borrower is in negotiations to purchase. "Non-Compete Agreements": all agreements pursuant to which the Borrower or any Subsidiary has agreed to make payments (whether in cash or in kind) to another Person for the agreement of such Person not to compete with the Borrower or such Subsidiary in a given area. "Note": a Revolving Note or a Term Note; and "Notes" means the aggregate of all Revolving Notes and all Term Notes. "Obligations": the unpaid principal of and interest on (including, without limitation, interest accruing after the maturity the Loans and interest accruing on or after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding and whether or not at a default rate) the Notes, and all other obligations and liabilities of the Obligors to the Agent and the Lenders, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, the Notes, any other Loan Document and any other document made, delivered or given in connection herewith or therewith, including, but not limited to, any Interest Rate Protection Agreement to which the Agent or any Lender is party, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all reasonable fees and disbursements of counsel (including the allocated reasonable cost of internal counsel) to the Agent or the Lenders that are required to be paid by the Borrower pursuant to the terms of this Agreement) or otherwise. "Obligor": the Borrower, each Guarantor and any other Person (other than the Agent or a Lender) obligated under any Loan Document. "Organic Documents": relative to any entity, its certificate or articles of incorporation or organization, its by-laws or operating agreement, any Equityholder Agreements, its partnership agreement, and any other agreements or documents relating to the control or management of any such entity (whether existing as corporation, a partnership, a limited liability company or otherwise). "Original Reduction Date": as defined in Section 2.2(d). "Original Term Loan Amortization Schedule": as defined in Section 2.2(d). "Overadvance Borrowings": as defined in Section 2.1(a). "Overadvance Notice": as defined in Section 2.1(a). "Participant": as defined in Section 9.6(b). "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA or any successor thereto. "Permitted Acquisition": an Acquisition where (a) the Person whose assets or equity interest is being acquired has positive pro forma EBITDA during the twelve month period immediately prior to the closing of such Acquisition, (b) the Borrower and each Subsidiary shall be in full compliance with each financial covenant contained in this Agreement immediately prior to and upon the closing of the Acquisition, (c) the Agent and the Lenders shall have received at least 30 Business Days' prior written notice of such Acquisition, accompanied by a Covenant Compliance Certificate showing the Borrower's compliance with covenants both prior to such Acquisition and on a pro forma basis assuming consummation of such Acquisition, neither of which shall indicate a Default, (d) with respect to an Acquisition involving a public company, such Acquisition shall not have been opposed by the board of directors of the target entity or otherwise be deemed by the Agent, in the exercise of the Agent's reasonable discretion, to be a hostile Acquisition and (e) the consideration for such Acquisition, together with the consideration for all Acquisitions consummated on or after the Closing Date, shall not exceed $9,000,000 less the sum of all Earn-out Payments actually made on and after the Closing Date. "Person": any individual, firm, partnership, joint venture, corporation, association, limited liability company, business enterprise trust, unincorporated organization, government or department or agency thereof or other entity, whether acting in an individual, fiduciary or other capacity. "Plan": as to any Person, any plan (other than a Multiemployer Plan) subject to Title IV of ERISA maintained for employees of such Person or any ERISA Affiliate of such Person (and any such plan no longer maintained by such Person or any of such Person's ERISA Affiliates to which such Person or any of such Person's ERISA Affiliates has made or was required to make any contributions within any of the five preceding years). "Prior Agreement": that certain Third Amended and Restated Credit Agreement dated as of May 2, 2002 among the Borrower, the lenders referred to therein, and UBOC, as administrative agent for such lenders, as amended. "Prohibited Transaction": with respect to any Plan, a prohibited transaction (as defined in Section 406 of ERISA) with respect to such Plan. "Properties": the collective reference to the real and personal (tangible and intangible) property owned, leased, used, occupied or operated, under license or permit by the Obligors. "Purchasing Lenders": as defined in Section 9.6(c). "Reference Rate": the rate of interest per annum publicly announced from time to time by Union Bank of California, N.A. as its "reference rate" in effect at its office in Los Angeles, California. Any change in the Reference Rate shall be effective on the effective date specified in the public announcement of such change. The Reference Rate is an index rate determined by UBOC from time to time as a means of pricing certain extensions of credit and is neither directly tied to any external rate of interest or index nor necessarily the lowest rate of interest charged by UBOC at any given time. "Reference Rate Loans": Loans the rate of interest applicable to which is based upon the Reference Rate. "Register": as defined in Section 9.6(d). "Regulation D": Regulation D of the Board of Governors of the Federal Reserve System, as the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof and any successor regulation thereto. "Regulation U": Regulation U of the Board of Governors of the Federal Reserve System, as the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof and any successor regulation thereto. "Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Reportable Event": any of the events set forth in Section 4043(b) of ERISA, other than those events as to which the thirty day notice period is waived under PBGC regulations. "Requirement of Law": as to any Person, the Organic Documents of such Person, and any law, treaty, rule or regulation, determination or policy statement or interpretation of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer": with respect to the Borrower or any Subsidiary, the chief executive officer or the president, or, with respect to financial matters, the chief financial officer, treasurer or controller of such entity. "Restricted Payments": as defined in Section 6.6. "Revolving Loan": as defined in Section 2.1(a). "Revolving Loan Commitment": the commitment of a Lender listed on the signature pages hereof to make Revolving Loans and participate in Letters of Credit hereunder through its Applicable Lending Office as set forth on the signature pages hereof, as the same may be adjusted pursuant to the provisions hereof. "Revolving Loan Commitment Expiration Date": March 12, 2006, or such earlier date as the Revolving Loan Commitments shall expire in accordance with the terms hereof (whether by acceleration or otherwise). "Revolving Loan Commitment Percentage": with respect to each Revolving Loan Lender, the percentage equivalent of the ratio which such Lender's Revolving Loan Commitment bears to the Aggregate Revolving Loan Commitment. "Revolving Loan Lender": each Lender having a Revolving Loan Commitment and/or which shall have (i) Revolving Loans outstanding and/or (ii) participations in Letters of Credit which are outstanding. "Revolving Note": as defined in Section 2.1(c). "Security Agreement": the Security Agreement made by the Borrower in favor of the Agent, for the benefit of the Lenders, in form and substance satisfactory to the Agent, in respect of the tangible and intangible personal property of the Borrower described therein, as the same may be amended, modified or restated from time to time in accordance with the terms hereof. "Single Employer Plan": any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan. "Solvent": when used with respect to any Person, that: (iv) the present fair salable value of such Person's assets is in excess of the total amount of the probable liability on such Person's liabilities; (v) such Person is able to pay its debts as they become due; (vi) such Person does not have unreasonably small capital to carry on such Person's business as theretofore operated and all businesses in which such Person is about to engage; and (vii) such Person is not otherwise insolvent as defined in Section 3439.02 of the California Civil Code and as defined in 11 U.S.C. Section 101 (32) of the Bankruptcy Code. "Subsequent Borrowing Date": as defined in Section 2.2(d). "Subsequent Reduction Date": as defined in Section 2.2(d). "Subsequent Term Loan Amortization Schedule": as defined in Section 2.2(d). "Subsequent Term Loans": as defined in Section 2.2(a). "Subsidiary": as to any Person at any time of determination, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries or Subsidiaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "Sweep Service": a cash management service which UBOC may provide to the Borrower, at the election of UBOC and the Borrower, pursuant to which UBOC will automatically credit Revolving Loans to the General Account and automatically debit repayment of Revolving Loans to such General Account in accordance with the provision of a Loan Sweep Agreement. "Taxes": as defined in Section 2.14. "Term Loan": as defined in Section 2.2(a). "Term Loan Commitment": the commitment of a Term Loan Lender to make a Term Loan hereunder through its Applicable Lending Office as set forth on the signature pages hereof, as the same may be adjusted pursuant to the provisions hereof. "Term Loan Commitment Expiration Date": March 12, 2006, or such earlier date as the Term Loan Commitments shall expire in accordance with the terms hereof (whether by acceleration or otherwise). "Term Loan Commitment Percentage": with respect to each Term Loan Lender, the percentage equivalent of the ratio which such Lender's Term Loan Commitment bears to the Aggregate Term Loan Commitment. "Term Loan Lender": each Lender having a Term Loan Commitment or Term Loans outstanding. "Term Note": as defined in Section 2.2(c). "Termination Event": (i) a Reportable Event, (ii) the institution of proceedings to terminate a Single Employer Plan by the PBGC under Section 4042 of ERISA, (iii) the appointment by the PBGC of a trustee to administer any Single Employer Plan or (iv) the existence of any other event or condition that would reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment by the PBGC of a trustee to administer, any Single Employer Plan. "Tranche": the collective reference to LIBOR Loans the Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such LIBOR Loans shall originally have been made on the same day). "Transferee": as defined in Section 9.6(f). "Type": as to any Loan, its nature as a Reference Rate Loan or a LIBOR Loan. "UBOC": as defined in the Recitals hereto. "UCC": the Uniform Commercial Code as the same may be in effect from time to time in the State of California. "Wholly Owned Subsidiary": with respect to any Person, any corporation, partnership or other entity of which all of the equity securities or other ownership interests (other than, in the case of a corporation, directors' qualifying shares) are directly or indirectly owned or controlled by such Person or one or more Wholly Owned Subsidiaries of such Person. 1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have such defined meanings when used in the Notes, any other Loan Document or any certificate or other document made or delivered pursuant hereto or thereto. (b) As used herein, in the Notes, in any other Loan Document, and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) 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. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. (e) For the purpose of determining financial covenant compliance hereunder for any period, divestitures and asset sales occurring during such period will be included in the calculations for such period on a pro forma basis, and will be deemed to have occurred on the first day of such period. SECTION 2. AMOUNT AND TERMS OF LOANS AND LETTERS OF CREDIT; COMMITMENT AMOUNTS 2.1 REVOLVING LOANS AND LETTERS OF CREDIT; LOAN COMMITMENT AMOUNTS. (a) Subject to the terms and conditions hereof, each Lender having a Revolving Loan Commitment severally agrees to (i) make loans on a revolving credit basis through its Applicable Lending Office to the Borrower from time to time from and including the Closing Date to but excluding the Revolving Loan Commitment Expiration Date (each a "Revolving Loan", and collectively, the "Revolving Loans") in accordance with the provisions of this Agreement and (ii) participate through its Applicable Lending Office in letters of credit issued for the account of the Borrower pursuant to Section 2.3 from time to time from and including the Closing Date to but excluding the Revolving Loan Commitment Expiration Date (each a "Letter of Credit", and collectively, the "Letters of Credit"); provided, however, that the sum of (A) the aggregate principal amount of all Revolving Loans outstanding, (B) the aggregate Letter of Credit Amount of all Letters of Credit outstanding and (C) the aggregate amount of unreimbursed drawings under all Letters of Credit shall not exceed the lesser of the Aggregate Revolving Loan Commitment and the Borrowing Base at any time; and provided further, that the sum of (x) the aggregate Letter of Credit Amount of all Letters of Credit outstanding and (y) the aggregate amount of unreimbursed drawings under all Letters of Credit shall not exceed $500,000 (the "Letter of Credit Sublimit") at any time; and provided further, that the Borrower may from time to time borrow up to an aggregate $2,000,000 in excess of the Borrowing Base as then in effect ("Overadvance Borrowings") so long as (i) the Agent has received at least 10 Business Days prior written notice (an "Overadvance Notice") of the Borrower's intention to request Overadvance Borrowings, (ii) the ratio of Funded Debt to EBITDA during the period any Overadvance Borrowings are to be outstanding is less than or equal to 1.50:1.00 (in each case as of the most recently ended fiscal quarter), and no Default shall have occurred and be continuing or would result therefrom, and the Agent shall have received a Covenant Compliance Certificate to such effect, (iii) no Overadvance Borrowing shall cause the Aggregate Revolving Loan Commitment to be exceeded, (iv) within 180 days following the making of the first Overadvance Borrowing requested in any Overadvance Notice, the Borrower shall repay all Overadvance Borrowings such that the Borrowing Base shall not be exceeded and (v) the Borrower may not send a new Overadvance Notice until it has complied with the preceding clause (iv). Within the limits of each Revolving Loan Lender's Revolving Loan Commitment, the Borrower may borrow, have Letters of Credit issued for the Borrower's account, prepay Revolving Loans, reborrow Revolving Loans, and have additional Letters of Credit issued for the Borrower's account after the expiration of previously issued Letters of Credit. Notwithstanding any provision in this Agreement to the contrary, the Borrower may not request Revolving Loans or Letters of Credit which would cause the sum of (i) Revolving Loans outstanding and (ii) the aggregate Letter of Credit Amount of outstanding Letters of Credit (including the Existing Letter of Credit) to exceed the lesser of (x) the Borrowing Base and (y) $3,000,000 on the Closing Date. The principal amount of each Revolving Loan Lender's (A) Revolving Loan and (B) participation in a Letter of Credit shall be in an amount equal to the product of (i) such Revolving Loan Lender's Revolving Loan Commitment Percentage and (ii) the total amount of the Revolving Loan or Revolving Loans, or the Letter of Credit or Letters of Credit, requested; provided that in no event shall any Revolving Loan Lender be obligated to make a Revolving Loan or participate in a Letter of Credit if after giving effect to such Revolving Loan or such participation the sum of such Revolving Loan Lender's (x) Revolving Loans outstanding, (y) Revolving Loan Commitment Percentage of the aggregate Letter of Credit Amount of all Letters of Credit outstanding and (z) Revolving Loan Commitment Percentage of the aggregate amount of unreimbursed drawings under all Letters of Credit would exceed its Revolving Loan Commitment or if the amount of such requested Revolving Loan or such Revolving Loan Lender's Revolving Loan Commitment Percentage of such Letter of Credit is in excess of such Revolving Loan Lender's Available Revolving Loan Commitment. (b) Subject to Sections 2.10 and 2.12, the Revolving Loans may from time to time be (i) LIBOR Loans, (ii) Reference Rate Loans or (iii) a combination thereof, as determined by the Borrower and notified to the Agent in accordance with either Section 2.1(e) or 2.6. Each Revolving Loan Lender may make or maintain its Revolving Loans or participate in Letters of Credit to or for the account of the Borrower by or through any Applicable Lending Office. (c) The Revolving Loans made by each Revolving Loan Lender to the Borrower shall be evidenced by a promissory note of the Borrower, substantially in the form of Exhibit A-1 (a "Revolving Note"), with appropriate insertions therein as to payee, date and principal amount, payable to the order of such Revolving Loan Lender and representing the obligations of the Borrower to pay the aggregate unpaid principal amount of all Revolving Loans made by such Revolving Loan Lender to the Borrower pursuant to Section 2.1(a) or 2.3(c), with interest thereon as prescribed herein. Each Revolving Loan Lender is hereby authorized (but not required) to record the date and amount of each payment or prepayment of principal of its Revolving Loans made to the Borrower, each continuation thereof, each conversion of all or a portion thereof to another Type and, in the case of LIBOR Loans, the length of each Interest Period with respect thereto, in the books and records of such Revolving Loan Lender, and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded. The failure of any Revolving Loan Lender to make any such recordation or notation in the books and records of the Revolving Loan Lender (or any error in such recordation or notation) shall not affect the obligations of the Borrower hereunder or under the Notes. Each Note shall (i) be dated the Closing Date, (ii) provide for the payment of interest in accordance with this Agreement and (iii) be stated to be payable in full on the Revolving Loan Commitment Expiration Date. (d) All outstanding Revolving Loans shall be due and payable, to the extent not previously paid in accordance with the terms hereof, on the Revolving Loan Commitment Expiration Date. (e) The Borrower shall give the Agent irrevocable written notice, substantially in the form of a Borrowing Notice (which Borrowing Notice must be received by the Agent prior to 10:00 A.M., Los Angeles time, one Business Day prior to each proposed borrowing date or, if all or any part of the Revolving Loans are requested to be made as LIBOR Loans, three Eurodollar Business Days prior to each proposed borrowing date) requesting that the Revolving Loan Lenders make the Revolving Loans on the proposed borrowing date and specifying (i) the aggregate amount of Revolving Loans requested to be made, (ii) whether the Revolving Loans are to be LIBOR Loans, Reference Rate Loans or a combination thereof and (iii) if the Revolving Loans are to be entirely or partly LIBOR Loans, the respective amounts of each such Type of Revolving Loan and the respective lengths of the initial Interest Periods therefor. The Agent shall promptly notify each Revolving Loan Lender (i) of such Borrowing Notice received by it and (ii) of each borrowing made in connection with the Sweep Service. On the proposed borrowing date, or on the date such Lender is advised by the Agent that a borrowing occurred in connection with the Sweep Service, not later than 10:00 A.M., Los Angeles time, each Revolving Loan Lender shall make available to the Agent at its office specified in Section 9.2 the amount of such Revolving Loan Lender's Revolving Loan Commitment Percentage of the aggregate borrowing amount (as determined in accordance with the second paragraph of Section 2.1(a)) in immediately available funds, it being agreed by the Lenders that no Revolving Loan made for the purpose of reimbursing the Agent for a Sweep Service borrowing shall be subject to Section 4.2. The Agent may, in the absence of notification from any Revolving Loan Lender that such Revolving Loan Lender has not made its Revolving Loan Commitment Percentage available to the Agent on such date, credit the account of the Borrower on the books of such office of the Agent (or, in the case of a borrowing made in connection with the Sweep Service, reimburse the Agent for such advance made by it) with the aggregate amount of Revolving Loans. If and to the extent any Lender shall not have made available to the Agent on such date such Lender's Revolving Loan Commitment Percentage of such borrowing, such Lender and the Borrower severally agree to repay to the Agent forthwith, on demand, such corresponding amount, together with interest thereon for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at an interest rate equal to, in the case of the Borrower, the applicable interest rate set forth in Section 2.8 and, in the case of a Lender, the Federal Funds Effective Rate. If such Lender shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Lender's Revolving Loan with respect to such borrowing for purposes of this Agreement. (f) Neither the Agent nor any Revolving Loan Lender shall be responsible for the obligations or Available Revolving Loan Commitment of any other Revolving Loan Lender hereunder, nor will the failure of any Revolving Loan Lender to comply with the terms of this Agreement relieve any other Revolving Loan Lender or the Borrower of their obligations under this Agreement and the Notes. Nothing herein shall be deemed to relieve any Revolving Loan Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights which the Borrower may have against any Revolving Loan Lender as a result of any default by such Revolving Loan Lender hereunder. (g) The Revolving Loan Commitment of each Revolving Loan Lender and the Aggregate Commitment shall terminate on the Revolving Loan Commitment Expiration Date. (h) Notwithstanding the foregoing and subject to the provisions of Section 2.1(a), the Borrower authorizes and directs the Agent from time to time to make Revolving Loans into the Borrower's general operating account (the "General Account") with the Agent at such times as are contemplated by, and otherwise in accordance with, the provisions of the Loan Sweep Agreement. Notwithstanding any other provision of this Agreement to the contrary, each Revolving Loan made as part of the Sweep Service shall be a Reference Rate Loan so long as it is held by the Agent. With respect to borrowings made in connection with the Sweep Service, no Borrowing Notice shall be required, and the minimum amounts set forth in Section 2.7 shall be inapplicable. All fees collected by the Agent pursuant to the Loan Sweep Agreement shall be for its own account. In the event of a conflict between the provisions of this Agreement and the Loan Sweep Agreement, the provisions of this Agreement shall control. The Agent and the Borrower are authorized from time to time to supplement or otherwise modify any Loan Sweep Agreement and the Sweep Service as such parties in their sole discretion deem appropriate. 2.2 TERM LOANS; TERM LOAN COMMITMENT AMOUNTS. (a) Subject to the terms and conditions hereof, each Lender having a Term Loan Commitment severally agrees (i) on the Closing Date, to make a term loan through its Applicable Lending Office to the Borrower in an amount equal to its Term Loan Commitment and (ii) thereafter, from time to time prior to the Term Loan Commitment Expiration Date, to the extent of any Aggregate Available Term Loan Commitment, to make term loans through its Applicable Lending Office to the Borrower for its use in financing up to 80% of the purchase price of capital equipment for its use and the use of its Subsidiaries, in each case in accordance with the provisions of this Agreement (each of loans referred to in clauses (i) and (ii), a "Term Loan", and collectively, the "Term Loans"); provided, however, that the aggregate principal amount of all Term Loans outstanding shall not exceed the Aggregate Term Loan Commitment at any time. The aggregate principal amount of Term Loans borrowed pursuant to clause (ii) above on a given date shall be considered a single term loan borrowed on such date (a "Subsequent Term Loan"), having a separate amortization schedule as set forth in Section 2.2(d). Prior to the Term Loan Commitment Expiration Date, within the limits of each Term Loan Lender's Term Loan Commitment, the Borrower may prepay Term Loans (including Subsequent Term Loans, if any shall be outstanding) and reborrow such amounts (including amounts repaid pursuant to Section 2.2(d)) in the form of Subsequent Term Loans. Prior to the Term Loan Commitment Expiration Date, no such prepayments or repayments shall reduce the Aggregate Term Loan Commitment. On the Term Loan Commitment Expiration Date each Term Loan Commitment shall expire. Thereafter, no further borrowing of Subsequent Term Loans shall be permitted, and no prepayments or repayments of Term Loans (including Subsequent Term Loans) shall be available for borrowing. The principal amount of each Term Loan made by a Term Loan Lender shall be in an amount equal to the product of (i) such Lender's Term Loan Commitment Percentage and (ii) the total amount of Term Loans requested; provided that in no event shall any Term Loan Lender be obligated to make a Term Loan if after giving effect to such Loan the aggregate amount of such Lender's Term Loans outstanding would exceed its Term Loan Commitment or if the amount of such requested Term Loan is in excess of such Lender's Available Term Loan Commitment. (b) Subject to Sections 2.10 and 2.12, the Term Loans may from time to time be (i) LIBOR Loans, (ii) Reference Rate Loans or (iii) a combination thereof, as determined by the Borrower and notified to the Agent in accordance with either Section 2.2(e) or 2.6. Each Term Loan Lender may make or maintain its Term Loans or participate in Letters of Credit to or for the account of the Borrower by or through any Applicable Lending Office. (c) The Term Loans made by each Term Loan Lender to the Borrower shall be evidenced by a promissory note of the Borrower, substantially in the form of Exhibit A-2 (a "Term Note"), with appropriate insertions therein as to payee, date and principal amount, payable to the order of such Term Loan Lender and representing the obligations of the Borrower to pay the aggregate unpaid principal amount of all Term Loans made by such Term Loan Lender to the Borrower pursuant to Section 2.2(d), with interest thereon as prescribed herein. Each Term Loan Lender is hereby authorized (but not required) to record the date and amount of each payment or prepayment of principal of its Term Loans made to the Borrower, each continuation thereof, each conversion of all or a portion thereof to another Type and, in the case of LIBOR Loans, the length of each Interest Period with respect thereto, in the books and records of such Term Loan Lender, and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded. The failure of any Term Loan Lender to make any such recordation or notation in the books and records of the Term Loan Lender (or any error in such recordation or notation) shall not affect the obligations of the Borrower hereunder or under the Notes. Each Note shall (i) be dated the Closing Date, (ii) provide for the payment of interest in accordance with this Agreement and (iii) be stated to be payable in full in accordance with Section 2.2(d) on or prior to the Final Term Loan Maturity Date. (d) (i) With respect to the Term Loans borrowed on the Closing Date, the Borrower shall repay the principal of such Term Loans in equal monthly installments on the last day of each month (each such date, an "Original Reduction Date"), commencing with the month after the month in which the Closing Date occurs, each such installment to be equal to the amount necessary to cause such Term Loans to fully amortize on March 12, 2009. The foregoing amortization schedule (the "Original Term Loan Amortization Schedule") shall be deemed established on the Closing Date, and no prepayment of Term Loans pursuant to Section 2.4 or 2.5, and no borrowing of Subsequent Terms Loans, shall alter such schedule, provided that prepayments of Term Loans shall be applied to the Original Reduction Dates in inverse order of maturity, as contemplated by Section 2.4 or 2.5, as applicable. (ii) With respect each Subsequent Term Loan borrowed on any date (a "Subsequent Borrowing Date"), the Borrower shall repay the principal of such Subsequent Term Loan in equal monthly installments on the last day of each month (each such date, a "Subsequent Reduction Date"), commencing with the month after the month in which the Subsequent Borrowing Date occurs, each such installment to be equal to the amount necessary to cause such Subsequent Term Loan to fully amortize on the fifth anniversary of the Subsequent Borrowing Date. The foregoing amortization schedule (a "Subsequent Term Loan Amortization Schedule") shall be deemed established for each Subsequent Term Loan on its respective Subsequent Borrowing Date, and no prepayment of Term Loans pursuant to Section 2.4 or 2.5, and no borrowing of other Subsequent Terms Loans, shall alter such schedule, provided that prepayments of Term Loans (including Subsequent Term Loans) shall be applied to Subsequent Reduction Dates for each Subsequent Term Loan in inverse order of maturity, as contemplated by Section 2.4 or 2.5, as applicable. The aggregate amount payable to each Term Lender on each Original Reduction Date or Subsequent Reduction Date shall be determined in accordance with the provisions of Section 2.11. (e) The Borrower shall give the Agent irrevocable written notice, substantially in the form of a Borrowing Notice (which Borrowing Notice must be received by the Agent prior to 10:00 A.M., Los Angeles time, one Business Day prior to each proposed borrowing date or, if all or any part of the Term Loans are requested to be made as LIBOR Loans, three Eurodollar Business Days prior to each proposed borrowing date) requesting that the Term Loan Lenders make the Term Loans on the proposed borrowing date and specifying (i) the aggregate amount of Term Loans requested to be made (which, with regard to the borrowing made on the Closing Date, shall be equal to the full amount of the Aggregate Term Loan Commitment), (ii) whether the Term Loans are to be LIBOR Loans, Reference Rate Loans or a combination thereof, (iii) if the Term Loans are to be entirely or partly LIBOR Loans, the respective amounts of each such Type of Term Loan and the respective lengths of the initial Interest Periods therefor and (iv) with respect to each borrowing of Subsequent Term Loans, a schedule describing the equipment to be purchased with such borrowing (which must be capital equipment, and not software), including the type and age of the equipment (which shall be not more than twelve months old) and the purchase price therefor (including calculations showing that not more than 80% of such purchase price will be funded with Loans), all in form and detail satisfactory to the Agent, and including such attachments (including copies of invoices for such equipment), as the Agent shall request. On receipt of such Borrowing Notice, the Agent shall promptly notify each Term Loan Lender thereof. On the proposed borrowing date, not later than 10:00 A.M., Los Angeles time, each Term Loan Lender shall make available to the Agent at its office specified in Section 9.2 the amount of such Term Loan Lender's Term Loan Commitment Percentage of the aggregate borrowing amount (as determined in accordance with the second paragraph of Section 2.2(a)) in immediately available funds. The Agent may, in the absence of notification from any Term Loan Lender that such Term Loan Lender has not made its Term Loan Commitment Percentage available to the Agent on such date, credit the account of the Borrower on the books of such office of the Agent with the aggregate amount of Term Loans. (f) Neither the Agent nor any Term Loan Lender shall be responsible for the obligations or Available Term Loan Commitment of any other Term Loan Lender hereunder, nor will the failure of any Term Loan Lender to comply with the terms of this Agreement relieve any other Term Loan Lender or the Borrower of their obligations under this Agreement and the Notes. Nothing herein shall be deemed to relieve any Term Loan Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights which the Borrower may have against any Term Loan Lender as a result of any default by such Term Loan Lender hereunder. 2.3 LETTERS OF CREDIT(a) . (a) The Borrower shall be entitled to request the issuance of Letters of Credit from time to time from and including the Closing Date to but excluding the date which is two Business Days prior to the Revolving Loan Commitment Expiration Date, by giving the Agent a Letter of Credit Request at least three Business Days before the requested date of issuance of such Letter of Credit (which shall be a Business Day). Any Letter of Credit Request received by the Agent later than 10:00 a.m., Los Angeles time, shall be deemed to have been received on the next Business Day. Each Letter of Credit Request shall be made in writing, shall be signed by a Responsible Officer, shall be irrevocable and shall be effective upon receipt by the Agent. Provided that a valid Letter of Credit Request has been received by the Agent and upon fulfillment of the other applicable conditions set forth in Section 4.2, the Agent will issue the requested Letter of Credit from its office specified in Section 9.2. No Letter of Credit shall have an expiration date later than two Business Days prior to the Revolving Loan Commitment Expiration Date. On and following the Closing Date, the Existing Letter of Credit shall be deemed to be a Letter of Credit issued by the Agent hereunder. In furtherance and not in limitation thereof, effective as of the Closing Date, (i) each Revolving Loan Lender shall be deemed to have acquired from the Agent an undivided interest and participation in such Letter of Credit, each drawing thereunder and the obligations of the Borrower under this Agreement in respect thereof in accordance with Section 2.3(b) and (ii) the Letter of Credit Sublimit shall be deemed reduced by an amount equal to the Letter of Credit Amount of such Letter of Credit existing from time to time. (b) Immediately upon the issuance of each Letter of Credit, the Agent shall be deemed to have sold and transferred to each Revolving Loan Lender, and each Revolving Loan Lender shall be deemed to have purchased and received from the Agent, in each case irrevocably and without any further action by any party, an undivided interest and participation in such Letter of Credit, each drawing thereunder and the obligations of the Borrower under this Agreement in respect thereof in an amount equal to the product of (i) such Revolving Loan Lender's Revolving Loan Commitment Percentage and (ii) the maximum amount available to be drawn under such Letter of Credit (assuming compliance with all conditions to drawing). The Agent shall promptly advise each Revolving Loan Lender of the issuance of each Letter of Credit, the Letter of Credit Amount of such Letter of Credit, any change in the face amount or expiration date of such Letter of Credit, the cancellation or other termination of such Letter of Credit and any drawing under such Letter of Credit. (c) The payment by the Agent of a draft drawn under any Letter of Credit shall first be made from any Cash Collateral Deposit held by the Agent with respect to such Letter of Credit. After any such Cash Collateral Deposit has been applied, the payment by the Agent of a draft drawn under any Letter of Credit shall constitute for all purposes of this Agreement the making by the Agent in its individual capacity as a Lender hereunder (in such capacity, the "Drawing Lender") of a Reference Rate Loan in the amount of such payment (but without any requirement of compliance with the conditions set forth in Section 4.2). In the event that any such Loan by the Drawing Lender resulting from a drawing under any Letter of Credit is not repaid by the Borrower by 12:00 noon, Los Angeles time, on the day of payment of such drawing, the Agent shall promptly notify each other Revolving Loan Lender. Each Revolving Loan Lender shall, on the day of such notification (or if such notification is not given by 2:00 p.m., Los Angeles time, on such day, then on the next succeeding Business Day), make a Reference Rate Loan, which shall be used to repay the applicable portion of the Reference Rate Loan of the Drawing Lender with respect to such Letter of Credit drawing, in an amount equal to the amount of such Revolving Loan Lender's participation in such drawing for application to repay the Drawing Lender (but without any requirement of compliance with the applicable conditions set forth in Section 4.2) and shall deliver to the Agent for the account of the Drawing Lender, on the day of such notification (or if such notification is not given by 2:00 p.m., Los Angeles time, on such day, then on the next succeeding Business Day) and in immediately available funds, the amount of such Reference Rate Loan. In the event that any Revolving Loan Lender fails to make available to the Agent for the account of the Drawing Lender the amount of such Reference Rate Loan, the Drawing Lender shall be entitled to recover such amount on demand from such Revolving Loan Lender together with interest thereon at the Federal Funds Effective Rate for each day such amount remains outstanding. (d) The obligations of the Borrower with respect to any Letter of Credit, the Letter of Credit Request with respect thereto, and any other agreement or instrument relating to such Letter of Credit shall be absolute, unconditional and irrevocable and shall be paid strictly in accordance with the terms of the aforementioned documents under all circumstances, including the following: (i) any lack of validity or enforceability of such Letter of Credit, this Agreement or any other Loan Document; (ii) the existence of any claim, setoff, defense or other right that the Borrower may have at any time against any beneficiary or transferee of such Letter of Credit (or any Person for whom any such beneficiary or transferee may be acting), the Agent, any Lender (other than the defense of payment to a Lender in accordance with the terms of this Agreement) or any other Person, whether in connection with this Agreement, any other Loan Document, the transactions contemplated hereby or thereby or any unrelated transaction; (iii) any statement or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect, or any statement therein being untrue or inaccurate in any respect whatsoever; provided that payment by the Agent under such Letter of Credit shall not have constituted gross negligence or willful misconduct of the Agent under the circumstances in question, as determined by a final judgment of the highest applicable court; and (iv) any exchange, release or nonperfection of any Collateral or other collateral, or any release, amendment or waiver of or consent to departure from any Guarantee, other Loan Document or other guaranty, for any of the Obligations of the Borrower. (e) The Borrower shall pay to the Agent for the account of the Revolving Loan Lenders with respect to each Letter of Credit issued hereunder, for the period from and including the day such Letter of Credit is issued to but excluding the day such Letter of Credit expires, a letter of credit fee equal to the product of (i) 2.25% per annum and (ii) the Letter of Credit Amount of such Letter of Credit from time to time, such letter of credit fee to be payable quarterly in arrears on the last day of each March, June, September and December and on the expiration date of such Letter of Credit. (f) The Borrower shall pay to the Agent for its own account, with respect to each Letter of Credit issued hereunder, (i) for the period from and including the day such Letter of Credit is issued to but excluding the day such Letter of Credit expires, a fronting fee in respect of each Letter of Credit in an amount equal to 1/4 of 1% per annum of the Letter of Credit Amount of such Letter of Credit from time to time, such fronting fee to be payable quarterly in arrears on the last day of each March, June, September and December and on the expiration date of such Letter of Credit and (ii) from time to time such additional fees and charges (including cable charges) as are generally associated with letters of credit, in accordance with the Agent's standard internal charge guidelines and the related Letter of Credit Request. (g) The Borrower agrees to the provisions in the Letter of Credit Request form; provided, however, that the terms of the Loan Documents shall take precedence if there is any inconsistency between the terms of the Loan Documents and the terms of said form. (h) The Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of such Letter of Credit with respect to its use of such Letter of Credit. Neither the Agent nor any Lender nor any of their respective officers or directors shall be liable or responsible for (i) the use that may be made of such Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; or (ii) the validity, sufficiency or genuineness of documents, or of any endorsement thereof, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; provided that, with respect to the foregoing clause (ii), the Borrower shall retain any and all rights it may have against the Agent for any liability arising out of the gross negligence or willful misconduct of the Agent, as determined by a final judgment of the highest applicable court, it being agreed, however, that the Agent may accept any document that appears on its face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. (i) The Borrower hereby indemnifies and holds harmless each Lender and the Agent from and against any and all claims and damages, losses, liabilities, costs or expenses that such Lender or the Agent may incur (or that may be claimed against such Lender or the Agent by any Person whatsoever) by reason of or in connection with the execution and delivery or transfer of or payment or refusal to pay by the Agent, as issuer of such Letter of Credit; provided that the Borrower shall not be required to indemnify any Lender or the Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (x) the willful misconduct or gross negligence of the Agent, as issuer of such Letter of Credit, in determining whether a request presented under such Letter of Credit complied with the terms of such Letter of Credit or (y) in the case of the Agent, as issuer of such Letter of Credit, the Agent's failure to pay under such Letter of Credit after the presentation to it of a request strictly complying with the terms and conditions of such Letter of Credit. Nothing in this Section 2.3 is intended to limit the other obligations of the Borrower, any Lender, or the Agent under this Agreement. 2.4 OPTIONAL PREPAYMENTS. The Borrower may at any time and from time to time, prepay the Loans, in whole or in part, without premium or penalty, upon at least three Business Days' irrevocable written notice, in the case of LIBOR Loans, and upon at least one Business Day's irrevocable written notice, in the case of Reference Rate Loans, from the Borrower to the Agent, specifying the date and amount of prepayment and whether the prepayment is of LIBOR Loans, Reference Rate Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each. Upon receipt of any such notice from the Borrower, the Agent shall promptly notify each Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable by the Borrower on the date specified therein, together with accrued interest to such date on the amount prepaid and any amounts payable pursuant to Section 2.15. Partial prepayments of the Revolving Loans shall be in an aggregate principal amount of $250,000 and integral multiples of $100,000 in excess thereof. Partial prepayments of the Term Loans shall be in an aggregate principal amount of $500,000 and integral multiples of $100,000 in excess thereof. Each prepayment of Term Loans shall be applied to the Original Term Loan Amortization Schedule and each Subsequent Term Loan Amortization Schedule on a pro rata basis, in each case in inverse order of maturity. The provisions of this Section 2.4 shall not be applicable to prepayments of Revolving Loans made pursuant to the Loan Sweep Agreement; provided that any such prepayments shall be subject to Section 2.15. 2.5 MANDATORY PREPAYMENTS. (a) If the Borrower or any of its Subsidiaries receives insurance proceeds or condemnation proceeds with respect to any of their Properties which are not fully applied (or contractually committed pursuant to contract(s) approved by the Agent in its reasonable discretion) toward the repair or replacement of such damaged or condemned Property within 30 days of the receipt thereof, the Borrower shall, on such 30th day prepay the Loans and/or make a Cash Collateral Deposit (as set forth in Section 2.5(e)) in an amount equal to the amount of such proceeds not so applied. (b) In the event that the Borrower or any of its Subsidiaries makes an Equity Offering, the Borrower shall immediately prepay the Loans and/or make a Cash Collateral Deposit (as set forth in Section 2.5(e)) in an amount equal to 100% of the Net Proceeds of such Equity Offering; provided that, so long as no Default has occurred and is continuing or would result therefrom, no prepayment shall be required with respect to an Equity Offering (i) to the extent that such Net Proceeds are applied to the purchase price of a Permitted Acquisition within ten Business Days after receipt thereof or (ii) resulting from the exercise of the Alliance Atlantis Warrant. No such prepayment shall limit or restrict the rights and remedies of the Lenders under the Loan Documents upon the occurrence and during the continuance of a Default. (c) On the day of receipt by the Borrower or any of its Subsidiaries of any Net Proceeds with respect to an Asset Disposition, the Borrower shall prepay the Loans and/or make a Cash Collateral Deposit (as set forth in Section 2.5(e)) in an amount equal to 100% of such Net Proceeds; provided that, so long as no Default has occurred and is continuing or would result therefrom, no prepayment shall be required with respect to an Asset Disposition to the extent that the Net Proceeds of such Asset Disposition, together with the Net Proceeds of all other Asset Dispositions consummated during such fiscal year, do not exceed $250,000 in the aggregate. On or prior to the date of any Asset Disposition, the Borrower agrees to provide the Agent with calculations used by the Borrower in determining the amount of any such prepayment (or in determining that a prepayment is not required) under this Section 2.5(c). (d) If at any time the aggregate principal amount of all Revolving Loans and Letters of Credit outstanding exceeds (i) the Borrowing Base (plus any Overadvance Borrowings permitted at such time pursuant to Section 2.1(a)) or (ii) the Aggregate Revolving Loan Commitment, the Borrower shall immediately, without notice or request by the Agent, prepay the Revolving Loans (together with accrued interest to the date of prepayment on the principal amount prepaid and any payments required pursuant to Section 2.15) in an aggregate amount equal to such excess. If at any time prior to the Term Loan Commitment Expiration Date the aggregate principal amount of all Term Loans outstanding exceeds the Aggregate Term Loan Commitment, the Borrower shall immediately, without notice or request by the Agent, prepay the Term Loans (together with accrued interest to the date of prepayment on the principal amount prepaid and any payments required pursuant to Section 2.15) in an aggregate amount equal to such excess. (e) Each prepayment of the Loans pursuant to this Section 2.5 shall be applied first, to the outstanding principal balance of the Term Loans, by applying such amount to the Original Term Loan Amortization Schedule and each Subsequent Term Loan Amortization Schedule on a pro rata basis, in each case in inverse order of maturity, second, to the outstanding principal balance of Revolving Loans (with no reduction in the Aggregate Revolving Loan Commitment) and third, to make a Cash Collateral Deposit with respect to outstanding Letters of Credit. Each prepayment of the Loans pursuant to this Section 2.5 shall be accompanied by payment in full of all accrued interest thereon to and including the date of such prepayment and any amount required by Section 2.15. The Borrower agrees to give the Agent at least five Business Days' irrevocable written notice of any prepayment under this Section 2.5. 2.6 CONVERSION AND CONTINUATION OPTIONS. (a) The Borrower may elect from time to time to convert LIBOR Loans to Reference Rate Loans, by the Borrower giving the Agent at least two Business Days' prior irrevocable written notice of such election pursuant to a Continuation Notice. The Borrower may elect from time to time to convert Reference Rate Loans to LIBOR Loans by the Borrower giving the Agent at least three Eurodollar Business Days' prior irrevocable written notice of such election pursuant to a Continuation Notice. Any such notice of conversion to LIBOR Loans shall specify the length of the initial Interest Period or Interest Periods therefor. Upon receipt of any such notice the Agent shall promptly notify each Lender thereof. All or any part of outstanding LIBOR Loans and Reference Rate Loans may be converted as provided herein, provided that (i) any such conversion may only be made if, after giving effect thereto, Section 2.7 shall not have been contravened, (ii) no Reference Rate Loan may be converted into a LIBOR Loan after the date that is one month prior to the Revolving Loan Commitment Expiration Date or the Final Term Loan Maturity Date, as applicable, and (iii) the Borrower shall not have the right to elect to continue at the end of the applicable Interest Period, or to convert to, a LIBOR Loan if a Default shall have occurred and be continuing. (b) Any LIBOR Loan may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving notice to the Agent, in accordance with the applicable provisions of the term "Interest Period" set forth in Section 1.1, of the length of the next Interest Period to be applicable to such LIBOR Loan, provided that no LIBOR Loan may be continued as such (i) if, after giving effect thereto, Section 2.7 would be contravened, or (ii) if a Default shall have occurred and be continuing and provided, further, that if the Borrower shall fail to give any required notice as described above in this Section or if such continuation is not permitted pursuant to the preceding proviso, such Loans shall be automatically converted to Reference Rate Loans on the last day of such then-expiring Interest Period. 2.7 MINIMUM AMOUNTS OF TRANCHES; MINIMUM BORROWINGS. All borrowings, conversions and continuations of Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of the Loans comprising each Tranche (except Loans made pursuant to Section 2.3(c)) shall be equal to (a) $250,000 or a whole multiple of $100,000 in excess thereof with respect to Reference Rate Loans, and (b) $500,000 or a whole multiple of $100,000 in excess thereof with respect to LIBOR Loans; provided that, in any case, there shall not be more than 8 Tranches. Except as set forth in Section 2.3(c), all borrowings of Reference Rate Loans shall be in a minimum amount of $250,000 or a whole multiple of $100,000 in excess thereof. Notwithstanding the foregoing, all borrowings of Term Loans shall be in a minimum amount of $1,000,000. 2.8 INTEREST RATES AND PAYMENT DATES. (a) Each Revolving Loan shall (i) if a LIBOR Loan, bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the LIBOR Adjusted Rate plus 2.25% and (ii) if a Reference Rate Loan, bear interest at a rate per annum equal to the Reference Rate. (b) Each Term Loan shall (i) if a LIBOR Loan, bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the LIBOR Adjusted Rate plus 2.50% and (ii) if a Reference Rate Loan, bear interest at a rate per annum equal to the Reference Rate plus 0.25%. (c) If any Default shall have occurred and be continuing, all amounts outstanding shall bear interest at a rate per annum which is the rate described in paragraphs (a) and (b) of this Section plus 2% from the date of the occurrence of such Default until such Default is no longer continuing (after as well as before judgment). (d) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (c) of this Section shall be payable on demand. 2.9 COMPUTATION OF INTEREST AND FEES. (a) Interest on the Reference Rate Loans shall be calculated on the basis of a 365- (or 366-, as the case may be), day year for the actual days elapsed, and interest on all other Obligations of the Borrower shall be calculated on the basis of a 360-day year for the actual days elapsed. Any change in the interest rate on a Loan resulting from a change in the Reference Rate or the LIBOR Reserve Requirements shall become effective as of the opening of business on the day on which such change in the Reference Rate is announced or such change in the LIBOR Reserve Requirements becomes effective, as the case may be. The Agent shall as soon as practicable notify the Borrower and the Lenders of the effective date and the amount of each such change in interest rate. (b) Each determination of an interest rate by the Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. 2.10 INABILITY TO DETERMINE INTEREST RATE. In the event that prior to the first day of any Interest Period: (a) the Agent shall have determined (which determination shall be conclusive and binding upon the Borrower absent manifest error) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the LIBOR Adjusted Rate for such Interest Period, or (b) the Agent shall have received notice from the Majority Lenders acting in good faith that the LIBOR Adjusted Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, the Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given (x) any LIBOR Loans requested to be made on the first day of such Interest Period shall accrue interest at the Reference Rate, (y) Loans that were to have been converted on the first day of such Interest Period to LIBOR Loans shall be continued as Reference Rate Loans and (z) any outstanding LIBOR Loans shall be converted, on the first day of such Interest Period, to Reference Rate Loans. Until such notice has been withdrawn by the Agent, no further LIBOR Loans shall be made or continued as such, nor shall the Borrower have the right to convert Reference Rate Loans to LIBOR Loans. 2.11 PRO RATA TREATMENT AND PAYMENTS. Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Loans shall be made pro rata according to the respective outstanding principal and interest amounts of the Loans then held by the Lenders. All payments (including prepayments) to be made by the Borrower hereunder and under the Notes, whether on account of principal, interest, fees or otherwise, shall be made without set off or counterclaim and shall be made prior to 12:00 Noon, Los Angeles time, on the due date thereof to the Agent, for the account of the applicable Lenders, at the Agent's office specified in Section 9.2, in Dollars and in immediately available funds. The Agent shall distribute such payments to the applicable Lenders promptly upon receipt in like funds as received. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. If any payment on a LIBOR Loan becomes due and payable on a day other than a Eurodollar Business Day, the maturity thereof shall be extended to the next succeeding Eurodollar Business Day (and interest shall continue to accrue thereon at the applicable rate) unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Eurodollar Business Day. 2.12 ILLEGALITY. Notwithstanding any other provision herein, if any change after the Closing Date in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender or Applicable Lending Office to make or maintain LIBOR Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make LIBOR Loans, continue LIBOR Loans as such and convert Reference Rate Loans to LIBOR Loans shall forthwith be suspended during such period of illegality and (b) the Loans of such Lender or Applicable Lending Office then outstanding as LIBOR Loans, if any, shall be converted automatically to Reference Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a LIBOR Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to Section 2.15. To the extent that a Lender's LIBOR Loans have been converted to Reference Rate Loans pursuant to this Section, all payments and prepayments of principal that otherwise would be applied to such Lender's LIBOR Loans shall be applied instead to its Reference Rate Loans. 2.13 Increased Costs. (a) In the event that any change after the Closing Date in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law but, if not having the force of law, generally applicable to and complied with by banks and financial institutions of the same general type as such Lender in the relevant jurisdiction) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirements against assets held by, letters of credit or guarantees issued by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender or Applicable Lending Office which is not otherwise included in the determination of the LIBOR Adjusted Rate hereunder; or (ii) shall impose on such Lender or Applicable Lending Office any other condition; and the result of any of the foregoing is to increase the cost to the Agent of issuing or maintaining any Letter of Credit by an amount which the Agent deems to be material, or to such Lender or Applicable Lending Office, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining LIBOR Loans, or purchasing or maintaining any participation in a Letter of Credit, or to reduce any amount receivable hereunder in respect thereof then, in any such case, the Borrower shall immediately pay to the Agent, for its own account or on behalf of such Lender or Applicable Lending Office, as applicable, upon the demand of the Agent for itself or at the request of such Lender, as applicable, any additional amounts necessary to compensate such Lender or the Agent, as applicable, for such increased cost or reduced amount receivable. If the Agent, any Lender or any Applicable Lending Office becomes entitled to claim any additional amounts pursuant to this Section, it shall promptly notify the Borrower, through the Agent, of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this Section submitted by the Agent or such Lender or Applicable Lending Office, through the Agent, to the Borrower shall be in such detail as provided by such Lender to borrowers subject to payment of the same or similar type of amounts, and shall be conclusive evidence of the accuracy of the information so recorded, absent manifest error. This covenant shall survive the termination of this Agreement, expiration of the Commitments and the Letters of Credit and the payment of the Notes and all other amounts payable hereunder. (b) If, after the Closing Date, the introduction of or any change in any applicable law, rule, regulation or guideline regarding capital adequacy, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or the National Association of Insurance Commissioners or comparable agency charged with the interpretation or administration thereof, affects the amount of capital required or expected to be maintained by any Lender or any corporation controlling any Lender, and such Lender (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) determines that the amount of capital maintained by such Lender or such corporation which is attributable to or based upon the Loans, the Letters of Credit, the Commitments or this Agreement must be increased as a consequence of such introduction or change by an amount deemed by such Lender to be material, then, upon demand of the Agent at the request of such Lender, the Borrower shall immediately pay to the Agent on behalf of such Lender, additional amounts sufficient to compensate such Lender or such corporation for the increased costs to such Lender or corporation of such increased capital. Any such demand shall be accompanied by a certificate of such Lender setting forth in reasonable detail the computation of any such increased costs, which certificate shall be conclusive, absent manifest error. This covenant shall survive the termination of this Agreement, expiration of the Commitments and the Letters of Credit and the payment of the Notes and all other amounts payable hereunder. 2.14 TAXES. (a) All payments made by the Borrower in respect of the Obligations shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority or any political subdivision or taxing authority thereof or therein, other than Excluded Taxes (all such non-Excluded Taxes being hereinafter called "Taxes"). If any Taxes are required to be withheld from any amounts payable to the Agent or any Lender in respect of the Obligations, the amounts so payable to the Agent or such Lender shall be increased to the extent necessary to yield to the Agent or such Lender (after payment of all Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement and the Notes. The Agent or a Lender, as the case may be, shall deliver to the Borrower a certificate in good faith setting forth the amount of such Taxes, the calculation of such Taxes and an explanation of the requirement therefor, all in reasonable detail and such certificate shall be conclusive, absent manifest error. Whenever any Taxes are payable by the Borrower, as promptly as possible thereafter, the Borrower shall send to the Agent, for its own account or for the account of such Lender, as the case may be, a copy of an original official receipt received by the Borrower showing payment thereof or such other evidence of payment reasonably satisfactory to the Agent. If the Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Agent and the Lenders for any incremental taxes, interest or penalties (and related reasonable fees and expenses of counsel) that may become payable by the Agent or any Lender as a result of any such failure. The agreements in this Section shall survive the termination of this Agreement, expiration of the Commitments and the Letters of Credit and the payment of the Notes and all other amounts payable hereunder. (b) Each Lender that is not organized under the laws of the United States of America or a state thereof agrees that it will deliver to the Borrower and the Agent two duly completed copies of United States Internal Revenue Service Form W-9, W-8BEN and/or W-8ECI (as applicable to it), or successor applicable form(s), as the case may be. Each such Lender also agrees to deliver to the Borrower and the Agent two further copies of Form W-9, W-8BEN and/or W-8ECI (as applicable to it), or successor applicable form(s) or other manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower and the Agent, and such extensions or renewals thereof as may reasonably be requested by the Borrower or the Agent, unless in any such case an event beyond the control of such Lender (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advised the Borrower and the Agent. Each such Lender shall certify pursuant to such form(s) that it is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, or that it is entitled to an exemption from United States backup withholding tax, as applicable. 2.15 INDEMNITY. The Borrower agrees to indemnify each Lender and to hold each Lender harmless from and to pay each Lender within 5 Business Days of such Lender's demand the amount of any liability, loss or expense arising from the reemployment of funds obtained by it or from fees payable to terminate the deposits from which such funds were obtained (including reasonable fees and expenses of counsel) which such Lender may sustain or incur as a consequence of (a) default by the Borrower in payment when due of the principal amount of or interest on any LIBOR Loan, (b) default by the Borrower in making a borrowing of, conversion into or continuation of LIBOR Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (c) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (d) the making by the Borrower of a prepayment or conversion of LIBOR Loans on a day which is not the last day of an Interest Period with respect thereto (including any prepayment required as a result of acceleration of the Loans under Article 7). A Lender's certificate as to such liability, loss or expense shall set forth in reasonable detail the calculation thereof and shall be deemed conclusive, absent manifest error. This covenant shall survive the termination of this Agreement, expiration of the Commitments and the Letters of Credit and the payment of the Notes and all other amounts payable hereunder. 2.16 MITIGATION OF COSTS. If any Lender, by changing its Applicable Lending Office or taking any other reasonable action, so long as making such change or taking such other action is not disadvantageous to it in any financial, regulatory or other respect, can mitigate any adverse effect on the Borrower under Section 2.13 or 2.14, such Lender shall take such action. 2.17 UNUSED COMMITMENT FEE. The Borrower agrees to pay to the Agent, for the account of the Revolving Loan Lenders, an unused commitment fee to be shared pro rata among the Revolving Loan Lenders for the period from and including the Closing Date to but excluding the Revolving Loan Commitment Expiration Date, based on the average aggregate amount, for each day during such period, of the Available Revolving Loan Commitments, and computed at a rate equal to 0.25% per annum. Such unused commitment fee shall be payable in installments quarterly in arrears on the last Business Day of each March, June, September and December and on the Revolving Loan Commitment Expiration Date. SECTION 3. REPRESENTATIONS AND WARRANTIES To induce the Lenders to enter into this Agreement, the Borrower hereby represents and warrants to the Agent and each Lender that: 3.1 ORGANIZATION AND GOOD STANDING. The Borrower and each Subsidiary (a) is duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation as indicated on Schedule 3.1, (b) has all requisite corporate power and authority to own its properties and to conduct its business as now conducted and as currently proposed to be conducted and (c) is duly qualified to conduct business as a foreign corporation and is currently in good standing in each state and jurisdiction in which it conducts business except, in each case referred to in clause (c), to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect. Each state and jurisdiction in which the Borrower or any Subsidiary is or should be qualified to conduct business is listed on Schedule 3.1. 3.2 POWER AND AUTHORITY. The Borrower and each Subsidiary has all requisite power and authority under applicable law and under its Organic Documents to execute, deliver and perform its respective obligations under the Loan Documents to which it is a party. All actions, waivers and consents (corporate, regulatory and otherwise) necessary or appropriate for the Borrower and each Subsidiary to execute, deliver and perform the Loan Documents to which it is a party have been taken and/or received. 3.3 VALIDITY AND LEGAL EFFECT. This Agreement constitutes, and the other Loan Documents to which the Borrower or any Subsidiary is a party constitute (or will constitute when executed and delivered), the legal, valid and binding obligations of the Borrower or such Subsidiary, as applicable, enforceable against it in accordance with the terms thereof, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors' rights and (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 3.4 NO VIOLATION OF LAWS OR AGREEMENTS. The execution, delivery and performance of the Loan Documents (a) will not violate or contravene any Requirement of Law, (b) will not result in any material breach or violation of, or constitute a material default under, any agreement or instrument by which the Borrower or any Subsidiary, or any of its property, may be bound, and (c) will not result in or require the creation of any Lien upon or with respect to any property of the Borrower or any Subsidiary, whether such property is now owned or hereafter acquired. 3.5 TITLE TO ASSETS; EXISTING ENCUMBRANCES; LEGAL NAMES. The Borrower and each Subsidiary has good and marketable title to all of its real and personal properties and assets, free and clear of any Liens (other than those permitted by Section 6.3). Neither the Borrower nor any Subsidiary has used (or permitted the filing of any financing statement under) any legal or operating name at any time during the twelve consecutive calendar months immediately preceding the execution of this Agreement, except as identified on Schedule 3.5. 3.6 CAPITAL STRUCTURE; EQUITY OWNERSHIP. The authorized capital stock of the Borrower consists of an aggregate of 50,000,000 shares of common stock, without par value, 9,155,748 shares of which were issued and outstanding as of February 29, 2004, and 5,000,000 shares of preferred stock, without par value, no shares of which are issued and outstanding. All of the issued and outstanding shares of common stock of the Borrower are duly and validly issued and outstanding, and each of such shares is fully paid and nonassessable. Except as set forth on Schedule 3.6, there are no outstanding Equity Rights with respect to the Borrower or any Subsidiary and there are no outstanding obligations of the Borrower or any of its Subsidiaries to repurchase, redeem, or otherwise acquire any shares of capital stock of the Borrower, nor are there any outstanding obligations of the Borrower or any of its Subsidiaries to make payments to any Person, such as "phantom stock" payments, where the amount thereof is calculated with reference to the fair market value or equity value of Borrower or any of its Subsidiaries. 3.7 SUBSIDIARIES AND AFFILIATES. Schedule 3.7 accurately and completely discloses (i) each Subsidiary and Affiliate of the Borrower (other than its officers and directors), (ii) each Person holding ownership interests in such Subsidiary and (iii) the nature of the ownership interests held by each such Person and the percentage of ownership of such Subsidiary represented by such ownership interests. 3.8 MATERIAL CONTRACTS. Schedule 3.8 attached hereto sets forth a description of the Material Contracts of the Borrower and the Subsidiaries as of the Closing Date. Neither the Borrower nor any Subsidiary has committed any unwaived breach or default under any Material Contract, and the Borrower has no knowledge or reason to believe that any other party to any Material Contract has committed any unwaived breach or default thereof. Each of the Material Contracts is a legal, valid and binding obligation of the Borrower or the Subsidiaries party thereto, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. The Borrower has made available to the Lenders and the Agent a complete and correct copy of each Material Contract (including in each case all exhibits, schedules and disclosure letters referred to therein or delivered pursuant thereto, if any) and all amendments thereto and other side letters or agreements affecting the terms thereof. Neither the Borrower nor any of its Subsidiaries is party to any current agreements or letters of intent providing for the acquisition or disposition of any assets. 3.9 TAXES AND ASSESSMENTS. The Borrower and each Subsidiary has timely filed all required tax returns and reports (federal, state and local) or has properly filed for extensions of the time for the filing thereof. Except as set forth on Schedule 3.9, the Borrower has no knowledge of any deficiency, penalty or additional assessment due or appropriate in connection with any such taxes. All taxes (federal, state and local) imposed upon the Borrower or any Subsidiary or any of its properties, operations or income have been paid and discharged prior to the date when any interest or penalty would accrue for the nonpayment thereof, except for those taxes being contested in good faith by appropriate proceedings diligently prosecuted and with adequate reserves reflected on the financial statements in accordance with GAAP. There are no taxes imposed on the Borrower or its Subsidiaries by any political subdivision or taxing authority due or payable either on or by virtue of the execution and delivery by the Borrower, the Subsidiaries, the Agent, or the Lenders of this Agreement or any other Loan Document to which the Borrower or the Subsidiaries are party, or on any payment to be made by the Borrower pursuant hereto or thereto. 3.10 LITIGATION AND LEGAL PROCEEDINGS. Except as disclosed on Schedule 3.10, there is no litigation, claim, investigation, administrative proceeding, labor controversy or similar action that is pending or, to the knowledge of the Borrower, threatened (i) against the Borrower, any Subsidiary or any Property which, if determined adversely to the Borrower or any Subsidiary, would reasonably be expected to have a Material Adverse Effect or (ii) with respect to any Loan Document or the transactions contemplated thereby. 3.11 ACCURACY OF FINANCIAL INFORMATION. (a) All information previously furnished to the Agent and the Lenders that was prepared by or on behalf of the Borrower concerning the financial condition and operations of the Borrower or any Subsidiary, including (i) the audited consolidated financial statements of the Borrower and its Subsidiaries for the fiscal year ended December 31, 2002 and (ii) the unaudited consolidated financial statements of the Borrower and its Subsidiaries for the fiscal quarter ended September 30, 2003 (including, separately stated, statements of income, retained earnings and cash flows for each division of the Borrower), (A) have been prepared in accordance with GAAP consistently applied, (B) are true, accurate and complete in all material respects, (C) fairly present the financial condition of the Borrower and its Subsidiaries as of the dates and for the periods covered thereby and (D) disclose all material liabilities (contingent and otherwise) of the Borrower and the Subsidiaries. (b) Since December 31, 2002 there has been no event or condition resulting in a Material Adverse Effect. 3.12 ACCURACY OF OTHER INFORMATION. All information contained in any application, schedule, report, certificate, or any other document given to the Agent or any Lender by the Borrower or any agent of the Borrower in connection with the Loan Documents is in all material respects true, accurate and complete, and no such Person has omitted to state therein (or failed to include in any such document) any material fact or any fact necessary to make such information not misleading. All projections given to the Agent, or any Lender by the Borrower or any other Person have been prepared with a reasonable basis and in good faith making use of such information as was available at the date such projection was made. The projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptions believed by the Borrower to be reasonable at the time made and as of the Closing Date, it being recognized that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results. 3.13 COMPLIANCE WITH LAWS GENERALLY. The Borrower and each Subsidiary is in compliance in all material respects with all Requirements of Law applicable to it, its operations and its properties. 3.14 ERISA COMPLIANCE. (a) The Borrower and each Subsidiary is in compliance in all material respects with all applicable provisions of ERISA, and all rules, regulations and orders implementing ERISA. (b) Neither the Borrower nor any Subsidiary, or any ERISA Affiliate thereof, maintains or contributes to (or has maintained or contributed to) any Multiemployer Plan under which the Borrower, any Subsidiary or any ERISA Affiliate thereof could have any withdrawal liability. (c) Neither the Borrower nor any Subsidiary, or any ERISA Affiliate thereof, sponsors or maintains any defined benefit pension plan under which there is an accumulated funding deficiency within the meaning of Section 412 of the Code, whether or not waived. (d) The liability for accrued benefits under each defined benefit pension plan that will be sponsored or maintained by the Borrower, any Subsidiary or any ERISA Affiliate thereof (determined on the basis of the actuarial assumptions utilized by the PBGC) does not exceed the aggregate fair market value of the assets under each such defined benefit pension plan. (e) The aggregate liability of the Borrower, each Subsidiary and each ERISA Affiliate thereof arising out of or relating to a failure of any employee benefit plan within the meaning of Section 3(2) of ERISA to comply with provisions of ERISA or the Code will not have a Material Adverse Effect. (f) There does not exist any unfunded liability (determined on the basis of actuarial assumptions utilized by the actuary for the plan in preparing the most recent annual report) of the Borrower, any Subsidiary or any ERISA Affiliate thereof under any plan, program or arrangement providing post-retirement, life or health benefits. (g) No Reportable Event and no Prohibited Transaction (as defined in ERISA) has occurred or is occurring with respect to any plan with which the Borrower or any Subsidiary is associated. 3.15 ENVIRONMENTAL COMPLIANCE. (a) The Borrower and each Subsidiary has received all permits and filed all notifications necessary under and is otherwise in compliance in all material respects with all federal, state and local laws, rules and regulations governing the control, removal, storage, transportation, spill, release or discharge of Hazardous Materials, including, without limitation, as provided in the provisions of and the regulations under (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendment and Reauthorization Act of 1986, (ii) the Solid Waste Disposal Act, (iii) the Clean Water Act and the Clean Air Act, (iv) the Hazardous Materials Transportation Act, (v) the Resource Conservation and Recovery Act of 1976 and (vi) the Federal Water Pollution Control Act Amendments of 1972 (all of the foregoing enumerated and nonenumerated statutes, including without limitation any applicable state or local statutes, all as amended, collectively, the "Environmental Control Statutes"). (b) Neither the Borrower nor any Subsidiary has given any written or oral notice to the Environmental Protection Agency ("EPA") or any state or local agency with regard to any actual or imminently threatened removal, storage, transportation, spill, release or discharge of Hazardous Wastes either (i) on properties owned or leased by the Borrower or such Subsidiary or (ii) otherwise in connection with the conduct of its business and operations. (c) Neither the Borrower nor any Subsidiary has received notice that it is potentially responsible for costs of clean-up of any actual or imminently threatened spill, release or discharge of Hazardous Wastes pursuant to any Environmental Control Statute. (d) No judicial proceedings or governmental or administrative action is pending, or, to the knowledge of the Borrower, threatened, under any Environmental Control Statute to which the Borrower or any of its Subsidiaries is named as a party with respect to the Properties or the business conducted at the Properties, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Control Statute with respect to the Properties or such business. 3.16 FEDERAL REGULATIONS. No Loan, no Letter of Credit, and no part of the proceeds thereof are intended to be or will be used, directly or indirectly, for "purchasing" or "carrying" any Margin Stock within the respective meanings of each of the quoted terms under Regulation U or for any purpose which violates the provisions of the Regulations of the Board of Governors of the Federal Reserve System. If requested by the Agent, the Borrower will furnish to the Agent a statement to the foregoing effect in conformity with the requirements of Form U-1 referred to in Regulation U. 3.17 FEES AND COMMISSIONS. Except for the fees referred to in Sections 2.17 and 4.1(e), neither the Borrower nor any Subsidiary owes or will owe any fees or commissions of any kind in connection with this Agreement or the transactions contemplated hereby or thereby, and the Borrower does not know of any claim (or any basis for any claim) for any fees or commissions in connection with this Agreement or the transactions contemplated hereby or thereby. 3.18 SOLVENCY. Immediately prior to and upon the execution of this Agreement, the Borrower and each Guarantor was, is and will be Solvent. 3.19 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT. (a) Neither the Borrower nor any Subsidiary is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. (b) Neither the Borrower nor any Subsidiary is a "holding company," or an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. 3.20 NATURE OF BUSINESS. Neither the Borrower nor any of its Subsidiaries is engaged in any material business other than as described in Section 6.11. 3.21 USE OF PROCEEDS(a). (a) All proceeds of the Revolving Loans shall be used by the Borrower for the purposes of (i) repaying unpaid principal and interest outstanding under the Prior Agreement, (ii) funding working capital and capital expenditures, (iii) funding general corporate purposes and (iv) funding Permitted Acquisitions. (b) All proceeds of the Term Loans shall be used by the Borrower for the purposes of (i) repaying unpaid principal and interest outstanding under the Prior Agreement and (ii) funding equipment purchases subject to Section 2.2(e)(iv). (c) The Letters of Credit shall be used for general corporate purposes of the Borrower. 3.22 RANKING OF LOANS. This Agreement and the other Loan Documents to which the Borrower is party, when executed, and the Loans, are and will be the direct and general obligations of the Borrower. The Borrower's obligations hereunder and thereunder rank and will rank at least pari passu in priority of payment to all other Indebtedness. SECTION 4. CONDITIONS PRECEDENT 4.1 CONDITIONS TO CLOSING DATE. The agreement of each Lender to make the Loans requested to be made by it on the Closing Date and participate in any Letters of Credit issued on the Closing Date and the agreement of the Agent to issue any Letters of Credit requested to be issued on the Closing Date are subject to the satisfaction, immediately prior to or concurrently with the making of such Loans and/or the issuance of and participation in such Letters of Credit on the Closing Date, of the following conditions precedent: (a) Credit Agreement. The Agent shall have received this Agreement, executed and delivered by an officer of the Borrower and each Lender as of the Closing Date. (b) Other Loan Documents. The Agent shall have received the Notes, the Security Agreement, the fee sideletter executed between the Borrower and the Agent, and all other agreements or instruments required to create or perfect a security interest in the Collateral and the Guarantor Collateral, including any Control Agreements requested by the Lenders, executed in connection herewith, in each case executed and delivered by an officer of the relevant Obligor. (c) Corporate Documents. The Agent shall have received certified copies of the charter and by-laws of each Obligor and of all corporate authority for each Obligor (including, without limitation, board of director resolutions and evidence of the incumbency, including specimen signatures, of officers) with respect to the execution, delivery and performance of such of the Loan Documents to which such Obligor is intended to be a party and each other document to be delivered by such Obligor from time to time in connection herewith and the extensions of credit hereunder, in each case certified by a Responsible Officer of such Obligor to be true and correct and in full force and effect. (d) Material Contracts, Etc. The Agent shall have received (i) each Material Contract for which a copy has been requested by the Agent or any Lender and (ii) whether or not such contracts constitute Material Contracts, a copy of each employment agreement with a senior officer of the Borrower, in each case certified by a Responsible Officer of the Borrower to be true and correct and in full force and effect. (e) Fees and Costs. The Agent shall have received payment of (i) fees, costs and expenses, including legal fees and reimbursement of due diligence expenses, owing pursuant to Section 9.5 and (ii) those fees referred to in the fee letter executed in connection herewith due and owing on the Closing Date. (f) Lien Searches. The Agent shall have received such lien searches as it shall request, none of which shall evidence Liens (except for Liens permitted by Section 6.3) covering any of the Collateral or the Guarantor Collateral. (g) Covenant Compliance Certificate. The Agent shall have received a Covenant Compliance Certificate prepared on a pro forma basis as of the Closing Date assuming the funding of any Loans to be made, and the issuance of any Letters of Credit to be issued, on the Closing Date, and repayment of all outstanding amounts under the Prior Agreement. (h) Borrowing Base. The Agent shall have received a Borrowing Base Certificate with respect to any borrowings of Revolving Loans to be made on the Closing Date. (i) Good Standing Certificates. With respect to each Obligor, the Agent shall have received a certificate, dated a recent date, of the Secretary of State of the state of formation of such Obligor and each other jurisdiction where such Obligor is required to be qualified to do business under such jurisdiction's law (each as respectively set forth on Schedule 3.1), certifying as to the existence and good standing of, and, if generally available in such state, the payment of taxes by, each such Obligor in such state. (j) Officer's Certificate. A certificate of a senior officer of the Borrower substantially in the form of Exhibit F, dated the Closing Date. (k) Repayment and Termination of Prior Agreement. The Agent shall have received evidence satisfactory to it that all principal, interest and other amounts owning under the Prior Agreement have been repaid in full, and that such agreement has been terminated. (l) Financial Statements. The Agent shall have received the Borrower's (i) financial statements referred to in Section 3.11 and (ii) operating and balance sheet projections, in each case in form and substance satisfactory to the Agent. (m) Due Diligence. The Agent shall have completed a due diligence review of the Borrower, which review shall include, but shall not be limited to, an updated third party valuation of the Borrower's fixed assets and a field examination of the Borrower's Accounts Receivable, inventory, payables, controls and systems. (n) Insurance Policies. The Agent shall have received evidence in form and substance reasonably satisfactory to the Agent that the insurance required by Section 5.6 is in full force and effect. (o) Legal Opinions. The Agent shall have received, with a counterpart for each Lender, the following executed legal opinions: (i) the executed legal opinion of Troy & Gould Professional Corporation, counsel to the Borrower, in form and substance satisfactory to the Agent; and (ii) such other legal opinions as the Agent may reasonably request. (p) Additional Proceedings. The Agent shall have received such other approvals, opinions and documents as the Agent may reasonably request. 4.2 CONDITIONS TO EACH LOAN OR LETTER OF CREDIT. The agreement of each Lender to make each Loan and to participate in each Letter of Credit, and the agreement of the Agent to issue each Letter of Credit, requested to be made, issued or participated in by it is subject to the satisfaction, immediately prior to or concurrently with the making of such Loan or the issuance or participation in such Letter of Credit, of the following conditions precedent: (a) Representations and Warranties; No Default. The following statements shall be true and the Borrower's acceptance of the proceeds of such Loan or its delivery of an executed Letter of Credit Request shall be deemed to be a representation and warranty of the Borrower on the date of such Loan or as of the date of issuance of such Letter of Credit, as applicable, that: (i) The representations and warranties contained in this Agreement and in each other Loan Document and certificate or other writing delivered to the Lenders prior to, on or after the Closing Date pursuant hereto and on or prior to the date for such Loan or the issuance of such Letter of Credit are correct on and as of such date in all material respects as though made on and as of such date except to the extent that such representations and warranties expressly relate to an earlier date; and (ii) No Default has occurred and is continuing or would result from the making of the Loan to be made on such date or the issuance of such Letter of Credit as of such date. (b) Legality. The making of such Loan or the issuance of such Letter of Credit, as applicable, shall not contravene any law, rule or regulation applicable to any Lender or any Obligor. (c) Borrowing Notice/Letter of Credit Request. The Agent shall have received a Borrowing Notice or Letter of Credit Request, as applicable, pursuant to the provisions of this Agreement from the Borrower. SECTION 5. AFFIRMATIVE COVENANTS The Borrower hereby agrees that from and after the Closing Date, so long as any Commitment remains in effect, any Note remains outstanding and unpaid or any other amount is owing to any Lender or the Agent hereunder, or any Letter of Credit remains outstanding: 5.1 FINANCIAL STATEMENTS. (a) As soon as available and in any event within 45 days after the end of the first three quarterly fiscal periods of each fiscal year of the Borrower, the Borrower shall deliver to the Agent, with sufficient copies for each Lender, consolidated statements of income, retained earnings and cash flows of the Borrower and its Subsidiaries for such period, and the related consolidated balance sheets of the Borrower and its Subsidiaries as at the end of such period, setting forth in each case in comparative form (A) the consolidated figures for the corresponding periods in the preceding fiscal year (except that, in the case of the balance sheets, such comparison shall be to the last day of the prior fiscal year) and (B) the consolidated figures for the corresponding period in the budget referred to in Section 5.2(e), accompanied by a certificate of a senior financial officer of the Borrower, which certificate shall state that such consolidated financial statements fairly present the consolidated financial condition and results of operations of the Borrower and its Subsidiaries, in each case in accordance with GAAP consistently applied, as at the end of, and for, such period (subject to normal year-end audit adjustments and the absence of footnotes). (b) As soon as available and in any event within 90 days after the end of each fiscal year of the Borrower, the Borrower shall deliver to the Agent, with sufficient copies for each Lender, audited consolidated statements of income, retained earnings and cash flows of the Borrower and its Subsidiaries for such fiscal year and the related consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year, reported on without qualification or exception by the Accountants and setting forth in comparative form the corresponding consolidated figures for the preceding fiscal year, and accompanied by (i) all management letters relating thereto and (ii) an opinion thereon of the Accountants, which opinion shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations of the Borrower and its Subsidiaries as at the end of, and for, such fiscal year in accordance with GAAP, and a statement of the Accountants to the effect that, in making the examination necessary for their opinion, nothing came to their attention that caused them to believe that the Borrower was not in compliance with Section 6.1, insofar as such Section relates to accounting matters. (c) As soon as available and in any event within 60 days after the end of each fiscal year of the Borrower, the Borrower shall deliver to the Agent, with sufficient copies for each Lender, unaudited consolidated and consolidating statements of income, consolidated statements of retained earnings and cash flows of the Borrower and its Subsidiaries for such fiscal year and the related consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year (and setting forth separately stated statements of income, retained earnings and cash flows for each division of the Borrower), setting forth in comparative form the corresponding consolidated figures for the preceding fiscal year, and accompanied by a certificate of a senior financial officer of the Borrower, which certificate shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations of the Borrower and its Subsidiaries, in each case in accordance with GAAP consistently applied, as at the end of, and for, such period (subject to normal year-end audit adjustments and the absence of footnotes). (d) As soon as available and in any event within 30 days after the end of each of the first eleven months of each fiscal year of the Borrower, the Borrower shall deliver to the Agent, with sufficient copies for each Lender, (i) consolidated and consolidating statements of income, consolidated statements of retained earnings and cash flows of the Borrower and its Subsidiaries for such month, and the related consolidated balance sheets of the Borrower and its Subsidiaries as at the end of such month, accompanied by a certificate of a senior financial officer of the Borrower, which certificate shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations of the Borrower and its Subsidiaries, in each case in accordance with GAAP consistently applied, as at the end of, and for, such period (subject to normal year-end audit adjustments and the absence of footnotes), (ii) a comparison of such results with the consolidated figures for the corresponding period in the budget referred to in Section 5.2(e) and (iii) the consolidated and consolidating figures for the corresponding periods in the preceding fiscal year (except that, in the case of the balance sheets, such comparison shall be to the last day of the prior fiscal year). (e) The Borrower will promptly furnish to the Agent such other information (including information pertaining to the Borrower's financial condition, operations and otherwise) as the Agent may reasonably request. 5.2 CERTIFICATES; OTHER INFORMATION. THE BORROWER SHALL DELIVER TO THE AGENT: (a) within 45 days after the end of each fiscal quarter, a Covenant Compliance Certificate as of the end of such quarter; (b) within 30 days after the end of each month (i) an Accounts Receivable agings report as of the end of such month, in form satisfactory to the Agent and (ii) a Borrowing Base Certificate as of the end of such month; (c) within five Business Days after the same are filed, copies of all financial statements and reports which the Borrower or any Subsidiary may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority; (d) promptly but, in any event, within five Business Days after receipt thereof, copies of all financial reports (including, without limitation, management letters), if any, submitted to the Borrower or any Subsidiary by the Accountants in connection with any annual or interim audit of the books thereof; (e) as soon as available and in any event within 30 days after December 31 of each fiscal year, a budget for the next following fiscal year setting forth anticipated income, expense and capital expenditure items for each month during such fiscal year; (f) as soon as possible and in any event within five Business Days after the occurrence of a Default or, in the good faith determination of a Responsible Officer of the Borrower, a Material Adverse Effect, the written statement by a Responsible Officer of the Borrower, setting forth the details of such Default or Material Adverse Effect and the action which the Borrower proposes to take with respect thereto; (g) (A) as soon as possible and in any event within 30 days after the Borrower knows or has reason to know that any Termination Event with respect to any Plan has occurred, a statement of a Responsible Officer of the Borrower describing such Termination Event and the action, if any, which the Borrower proposes to take with respect thereto, (B) promptly and in any event within ten days after receipt thereof by the Borrower or any ERISA Affiliate of the Borrower from the PBGC, copies of each notice received by the Borrower or such ERISA Affiliate of the PBGC's intention to terminate any Plan or to have a trustee appointed to administer any Plan, (C) promptly and in any event within 30 days after the filing thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Single Employer Plan maintained for or covering employees of the Borrower or any Subsidiary if the present value of the accrued benefits under the Plan exceeds its assets by an amount in excess of $500,000 and (D) promptly and in any event within ten days after receipt thereof by the Borrower or any ERISA Affiliate of the Borrower from a sponsor of a Multiemployer Plan or from the PBGC, a copy of each notice received by the Borrower or such ERISA Affiliates concerning the imposition or amount of withdrawal liability under Section 4202 of ERISA or indicating that such Multiemployer Plan may enter reorganization status under Section 4241 of ERISA; (h) promptly after the commencement thereof, but in any event not later than five Business Days after service of process with respect thereto on, or the obtaining of knowledge by, the Borrower or any Subsidiary, notice of each material action, suit or proceeding against the Borrower or any Subsidiary before any Governmental Authority; (i) within five days following receipt by the Borrower or any Subsidiary, copies of all notices received by the Borrower or such Subsidiary from the Internal Revenue Service or other taxing authority relating to any material dispute regarding deductions, audits or any other material matter; and (j) promptly, such additional financial and other information as any Lender, through the Agent, may from time to time reasonably request. 5.3 PAYMENT OF OBLIGATIONS. The Borrower shall, and shall cause each of its Subsidiaries to, pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its obligations of whatever nature, subject to Section 5.10, except where the failure to so satisfy such obligations would not have a Material Adverse Effect or except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower or its Subsidiaries, as the case may be. 5.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The Borrower shall, and shall cause each of its Subsidiaries to, (i) continue to engage in business of the type referred to in Section 6.11, (ii) preserve, renew and keep in full force and effect its corporate existence, (iii) take all reasonable action to maintain all rights, registrations, licenses, privileges and franchises necessary or desirable in the normal conduct of its business, and (iv) comply with all Contractual Obligations and Requirements of Law except to the extent, in the case of this clause (iv), that failure to comply therewith would not, in the aggregate, have a Material Adverse Effect. 5.5 MAINTENANCE OF PROPERTY. The Borrower shall, and shall cause each of its Subsidiaries to, keep all property useful or necessary in its business in good working order and condition (ordinary wear and tear excepted). 5.6 INSURANCE. The Borrower will, and will cause each of its Subsidiaries to, maintain insurance with financially sound and reputable insurance companies, and with respect to Property and risks of a character usually maintained by Persons engaged in the same or similar business similarly situated, against loss, damage and liability of the kinds and in the amounts customarily maintained by such Persons. The Borrower shall designate the Agent as loss payee or additional insured, as appropriate, with respect to such insurance and cause such insurance to provide for 30 days' prior written notice to Agent of any modification or cancellation of such insurance. 5.7 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. The Borrower shall, and shall cause each of its Subsidiaries to, keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all material dealings and transactions in relation to its business and activities; and upon reasonable notice and at such reasonable times during usual business hours, permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Borrower and its Subsidiaries with officers and employees of the Borrower and its Subsidiaries and with its Accountants. 5.8 ENVIRONMENTAL LAWS. THE BORROWER SHALL, AND SHALL CAUSE EACH OF ITS SUBSIDIARIES TO: (a) Comply in all material respects with, and ensure compliance by all tenants and subtenants, if any, with, all applicable Environmental Control Statutes and obtain and comply in all material respects with any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Control Statutes; (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Control Statutes and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Control Statutes except to the extent that the same are being contested in good faith by appropriate proceedings; and (c) Defend, indemnify and hold harmless the Agent and the Lenders, and their respective employees, agents, officers and directors, from and against any and all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the violation of, noncompliance with or liability under any Environmental Control Statutes applicable to the operations of the Borrower or any of its Subsidiaries, or the Borrower's or any of such Subsidiaries' interest in Properties, or any orders, requirements or demands of Governmental Authorities related thereto, including, without limitation, attorneys' and consultants' fees, investigation and laboratory fees, response costs, court costs and litigation expenses, except to the extent that any of the foregoing arise out of the gross negligence or willful misconduct of the party seeking indemnification therefor. This indemnity shall continue in full force and effect regardless of the termination of this Agreement. 5.9 USE OF PROCEEDS. The Borrower will use the proceeds of the Loans, and any Letters of Credit issued hereunder, as set forth in Section 3.21, and not for the purchasing or carrying of any Margin Stock. 5.10 COMPLIANCE WITH LAWS, ETC. The Borrower shall comply, and shall cause each of its Subsidiaries to comply, in all material respects with all applicable Requirements of Law, such compliance to include, without limitation (i) paying before the same become delinquent all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or upon any of its Properties and (ii) paying all lawful claims which if unpaid might become a Lien upon any of its Properties; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to pay and discharge or to cause to be paid and discharged any such tax, assessment, charge, levy or claim so long as (A) the validity or applicability thereof is being contested in good faith by appropriate proceedings, (B) the Borrower or such Subsidiary shall, to the extent required by GAAP, have set aside on its books adequate reserves with respect thereto and (C) the failure to pay or discharge such tax, assessment, charge, levy or claim would not have a Material Adverse Effect or. 5.11 CERTAIN OBLIGATIONS RESPECTING SUBSIDIARIES; PROHIBITIONS ON CERTAIN AGREEMENTS. (a) The Borrower will cause each of its Subsidiaries hereafter formed or acquired to execute and deliver to the Agent promptly upon the formation or acquisition thereof (i) a Guarantee in form and substance satisfactory to the Agent, guaranteeing the Obligations, (ii) a Guarantor Security Agreement, in form and substance satisfactory to the Agent, granting to the Agent, for the benefit of the Lenders, a security interest in the tangible and intangible personal property of such Subsidiary, together with appropriate Lien searches requested by the Agent indicating the Lenders' first priority Lien on such personal property, (iii) such UCC-1 Financing Statements as the Agent shall request and (iv) such charter and authorization documents as the Agent shall request. (b) The Borrower will not, and will not permit any of its Subsidiaries to, enter into any indenture, agreement, instrument or other arrangement that, directly or indirectly, prohibits or restrains, or has the effect of prohibiting or restraining, or imposes materially adverse conditions upon, the incurrence or payment of indebtedness, the granting of Liens, the declaration or payment of dividends, the making of loans, advances or investments or the sale, assignment, transfer or other disposition of Property, or which imposes any financial covenants on the Borrower or any of its Subsidiaries. 5.12 REVIEWS AND APPRAISALS. The Agent shall be entitled to conduct, with respect to the Borrower and the Subsidiaries and at the Borrower's expense, (i) semi-annual field audits, including reviews of the books and records of, such entities and (ii) annual appraisals of their assets. Such reviews and appraisals shall be in scope, and by a review firm or appraisal firm (as applicable) satisfactory to the Majority Lenders. The Agent and the Lenders shall be entitled to conduct more frequent reviews and appraisals, at the expense of the Borrower, if a Default exists. 5.13 BANK ACCOUNTS. The Borrower shall maintain, and shall cause each of its Subsidiaries to maintain, its primary operating bank account(s) with UBOC. 5.14 LANDLORD CONSENTS. With respect to each Property leased by the Borrower or any Subsidiary, the Borrower shall cause a Landlord Consent to be executed and notarized by the landlord thereof, and delivered to the Agent and, if requested by the Agent, recorded against such Property in the relevant real property records; provided that, with respect to those leased Properties in existence as of the Closing Date for which the Borrower was unable to obtain Landlord Consents in connection with the Prior Agreement, each of which is set forth on Schedule 5.14 attached hereto, the Borrower shall be obligated to use best efforts to obtain such Landlord Consents. SECTION 6. NEGATIVE COVENANTS The Borrower hereby agrees that from and after the Closing Date, so long as any Commitments remain in effect, any Note remains outstanding and unpaid or any other amount is owing to any Lender or the Agent hereunder, or any Letter of Credit remains outstanding: 6.1 FINANCIAL CONDITION COVENANTS. The Borrower shall not violate any of the following covenants (compliance with which shall be measured for the Borrower on a consolidated basis): (a) Maximum Funded Debt to EBITDA. As of the last day of any quarter, permit the ratio of Funded Debt to EBITDA, calculated on a cumulative four quarter rolling basis for such fiscal quarter and the three immediately preceding fiscal quarters, to exceed the following levels for the periods indicated: QUARTER ENDING RATIO October 1, 2003 to and including 1.75:1 December 31, 2005 January 1, 2006 and thereafter 1.50:1 (b) Fixed Charge Ratio. As of the last day of any quarter, permit the Fixed Charge Ratio, calculated on a cumulative four quarter rolling basis for such fiscal quarter and the three immediately preceding fiscal quarters, to be less than 1.20:1.00. (c) Minimum Net Worth. Permit Net Worth at any time to be less than the Net Worth Requirement. (d) Minimum Quarterly EBITDA. Permit EBITDA, for the fiscal quarter most recently ended, to be less than $2,000,000; provided that, with respect to not more than one fiscal quarter during any fiscal year of the Borrower, EBITDA for such quarter may be less than $2,000,000, but not less than $1,000,000. (e) Capital Expenditures. Permit Capital Expenditures (excluding (i) in the fiscal year of such purchase, up to $8,571,500 for the purchase of the New Premises and (ii) any Permitted Acquisition, to the extent the consummation thereof would result in a Capital Expenditure) to exceed $5,000,000 in any fiscal year of the Borrower. 6.2 LIMITATION ON INDEBTEDNESS. The Borrower shall not create, incur, assume or suffer to exist any Indebtedness, and shall not permit any of its Subsidiaries to create, incur, assume or suffer to exist any Indebtedness, except for: (a) Indebtedness created hereunder and under the Notes and the other Loan Documents; (b) Indebtedness (i) evidenced by performance bonds issued in the ordinary course of business or reimbursement obligations in respect thereof, (ii) evidenced by a letter of credit facility related to insurance associated with claims for work-related injuries, (iii) for bank overdrafts incurred in the ordinary course of business that are promptly repaid or (iv) for obligations under agreements entered into to hedge interest rate or foreign currency risk in the ordinary course of business, in an aggregate amount (under clauses (i), (ii), (iii) and (iv)) not to exceed $100,000 at any one time outstanding; (c) Indebtedness secured by Liens permitted by Section 6.3(g); (d) Capitalized Lease Obligations in an aggregate principal amount not exceeding, when added together with the principal amount of Indebtedness outstanding pursuant to Section 6.2(i), the following amounts for the periods indicated: (i) from the Closing Date to and including March 31, 2006, not more than $1,000,000 outstanding and (ii) thereafter, not more than $1,500,000 outstanding; (e) Indebtedness of Wholly Owned Subsidiaries of the Borrower to the Borrower or to other Wholly Owned Subsidiaries of the Borrower; (f) Guarantee Obligations of the Borrower incurred in the ordinary course of business in respect of Indebtedness of any Subsidiary; provided that such Indebtedness is otherwise permitted by this Section 6.2; (g) the Mortgage Debt, provided that (i) the terms of such debt are no less favorable to the Borrower than those outlined in the current lease of the New Premises, (ii) the Borrower has provided to the Agent, at least 10 Business Days prior to the incurrence thereof, copies of final drafts of the loan documents that will evidence such debt and (iii) such debt shall be secured solely by the real property purchased with the proceeds thereof, and in no event shall the Collateral or Guarantor Collateral be encumbered thereby; (h) Earn-out Payments; and (i) Indebtedness for borrowed money assumed by the Borrower or any Subsidiary as a result of a Permitted Acquisition; provided that (i) such Indebtedness was not created in contemplation of such Acquisition, (ii) such Indebtedness is unsecured, (iii) the Borrower delivers to the Agent, at least 20 days prior to such Acquisition, copies of all documents governing such Indebtedness and (iv) the principal amount of such Indebtedness, when added together with the principal amount of Capitalized Lease Obligations outstanding under Section 6.2(d), will not exceed $1,000,000 or $1,500,000 (as applicable under Section 6.2(d)). 6.3 LIMITATION ON LIENS. The Borrower shall not, and shall not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for: (a) Liens created hereunder or under any of the other Loan Documents; (b) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP; (c) Liens created by operation of law not securing the payment of Indebtedness for money borrowed or guaranteed, including carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or which are being contested in good faith by appropriate proceedings; (d) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation; (e) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (f) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, would not cause a Material Adverse Effect; (g) Liens securing Capitalized Lease Obligations with respect to equipment used by the Borrower or its Subsidiaries in the ordinary course of its business; provided that any such Lien attaches solely to the equipment financed by such Capitalized Lease Obligation; and (h) Liens securing the Mortgage Debt, subject to the limitations set forth in Section 6.2(g). 6.4 LIMITATION ON FUNDAMENTAL CHANGES. The Borrower shall not, and shall not permit any of its Subsidiaries to, (i) enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or (ii) convey, sell, lease, assign, transfer or otherwise dispose of all or substantially all of its property, business or assets, or (iii) acquire any business or Property from, or capital stock of, or be a party to any acquisition of, any Person except that, so long as no Default has occurred and is continuing or would result therefrom: (a) any Subsidiary of the Borrower may be merged or consolidated with or into: (i) the Borrower, if the Borrower shall be the continuing or surviving corporation or (ii) any other Subsidiary; provided that if any such transaction shall be between a Subsidiary and a Wholly Owned Subsidiary, the Wholly Owned Subsidiary shall be the continuing or surviving corporation; (b) any Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its Property (upon voluntary liquidation or otherwise) to the Borrower or a Wholly Owned Subsidiary of the Borrower; and (c) the Borrower may consummate Permitted Acquisitions. 6.5 LIMITATION ON SALE OF ASSETS. The Borrower will not, nor will it permit any of its Subsidiaries to, make any Asset Disposition except Asset Dispositions of obsolete or worn-out Property, tools or equipment no longer used or useful in its business so long as the aggregate amount thereof sold in any single fiscal year by the Borrower and its Subsidiaries shall not have a fair market value in excess of $250,000; provided that in each case, no Default has occurred and is continuing or would result from such Asset Disposition. 6.6 LIMITATION ON DIVIDENDS. The Borrower shall not, and shall not permit any of its Subsidiaries to (a) if a corporation, declare or pay any dividend (other than dividends payable solely in common stock of the Borrower or its Subsidiaries, or rights to acquire preferred stock of the Borrower issued to shareholders in connection with a shareholder rights plan) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of Capital Stock of the Borrower or its Subsidiaries or any warrants or options to purchase any such Capital Stock, whether now or hereafter outstanding, and (b) if a partnership or a limited liability company, make any distribution with respect to the ownership interests therein, or, in either case, make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any Subsidiary (such declarations, payments, setting apart, purchases, redemptions, defeasance, retirements, acquisitions and distributions being herein called "Restricted Payments"), except that any Subsidiary may make Restricted Payments to the Borrower or to any other Wholly Owned Subsidiary of the Borrower. Notwithstanding any provision herein to the contrary, neither the Borrower nor any Subsidiary shall repurchase any of its Capital Stock without the prior written approval of each Lender. 6.7 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. The Borrower will not, and will not permit any of its Subsidiaries to, make any advance, loan, extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of or any assets constituting a business unit of, or make any other investment in (any of the foregoing, an "Investment"), any Person, except for: (a) investments in marketable securities, liquid investments and other financial instruments that are acquired for investment purposes and may be readily sold or otherwise liquidated, that have a value which may be readily established and which are investment grade; (b) operating deposit accounts with banks; (c) investments by the Borrower and its Subsidiaries in the Borrower and its Subsidiaries; (d) extensions of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or services in the ordinary course of business; and (e) Permitted Acquisitions. 6.8 TRANSACTIONS WITH AFFILIATES. The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property, employee compensation arrangements, or the rendering of any service, with any Affiliate or any Subsidiary not a Wholly Owned Subsidiary unless such transaction is in the ordinary course of the Borrower's or such Subsidiary's business and is upon terms no less favorable to the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm's length transaction with a Person not an Affiliate; provided that, if any such transaction has a value in excess of $100,000 the Majority Lenders shall have consented thereto; and provided, further, that none of (i) the Borrower's employment arrangements with its senior officers or (ii) the Borrower's arrangements with Holthouse Carlin & Van Trigt (with which Greg Hutchins, a director of the Borrower, is associated) regarding preparation of the Borrower's taxes shall be prohibited by this Section 6.8. 6.9 FISCAL YEAR. Borrower shall not permit its fiscal year or the fiscal year of any of its Subsidiaries to end on a day other than December 31. 6.10 SALE-LEASEBACK TRANSACTIONS. The Borrower shall not, and shall not permit any of its Subsidiaries to, sell, assign or otherwise transfer any of its Properties, rights or assets (whether now owned or hereafter acquired) to any Person and thereafter directly or indirectly lease back the same or similar property. 6.11 LINES OF BUSINESS. The Borrower will not, nor will it permit any of its Subsidiaries to, engage to any substantial extent in any line or lines of business activity other than the business of video duplication, post-production, audio sweetening, the distribution of national television spot advertising, trailers and electronic press kits for the motion picture and television industries, and the ownership and rental of limited amounts of niche programming and media buying. SECTION 7. EVENTS OF DEFAULT If any of the following events shall occur and be continuing: (a) The Borrower shall default in the payment when due (whether at stated maturity or upon mandatory or optional prepayment or otherwise) of any principal of or interest on any Loan, or any fee payable by it hereunder or under any Loan Document; or the Borrower shall fail to pay any other amount payable hereunder or under any Loan Document within three Business Days after any such other amount becomes due; or (b) Any representation or warranty made or deemed made by any Obligor herein or in any other Loan Document or which is contained in any certificate, document or financial or other statement furnished at any time under or in connection with this Agreement or any other Loan Document shall prove to have been incorrect in any material respect when made or deemed made; or (c) The Borrower shall default in the observance or performance of any agreement contained in Section 5.4(ii), 5.9, 5.11(a), 5.12, 5.13 or 5.14, or any provision of Section 6; or (d) Any Obligor shall default in the observance or performance of any other agreement or obligation contained in this Agreement or the other Loan Documents (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days after the earlier of (i) notice thereof from the Agent to the Borrower and (ii) actual knowledge thereof by a Responsible Officer of such Obligor; or (e) Any Guarantee shall cease, for any reason, to be in full force and effect; or (f) The Borrower or any other Obligor shall default in the payment when due of principal of or interest on any Indebtedness (other than the Notes) issued under the same indenture or other agreement, if the original principal amount of Indebtedness covered by such indenture or agreement is $100,000 or more; or any event specified in any note, agreement, indenture or other document evidencing or relating to any such Indebtedness shall occur if the effect of such event is to cause, or (with the giving of any notice or the lapse of time or both) to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause, such Indebtedness to become due, or to be prepaid in full (whether by redemption, purchase, offer to purchase or otherwise), prior to its stated maturity; or (g) (i) The Borrower or any other Obligor shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or the Borrower or any other Obligor shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Borrower or any other Obligor any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged, unstayed or unbonded for a period of 60 days; or (iii) there shall be commenced against the Borrower or any other Obligor any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Borrower or any other Obligor shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any other Obligor shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due or there shall be a general assignment for the benefit of creditors; or (h) (i) The Borrower or any Commonly Controlled Entity shall engage in any non-exempt "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee would reasonably be expected to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA (other than a standard termination) or (v) the Borrower or any Commonly Controlled Entity would reasonably be expected to incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan; and in each case regarding clauses (i) through (v) above, such event or condition, together with all other such events or conditions, if any, would reasonably be expected to result in a Material Adverse Effect; or (i) One or more judgments or decrees shall be entered against the Borrower or any Subsidiary involving in the aggregate a liability (not paid or fully covered by insurance where the insurer has admitted liability in respect of such judgment) of $250,000 or more, or involving in the aggregate a liability (regardless of insurance coverage) of $500,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof or in any event five days before the date of any sale pursuant to such judgment or decree; or (j) The Liens created by the Collateral Documents and/or the Guarantor Collateral Documents shall at any time not constitute valid and perfected Liens on the collateral intended to be covered thereby in favor of the Agent, free and clear of all other Liens (other than Liens permitted under Section 6.3), or, except for expiration in accordance with its terms, any of the Collateral Documents and/or the Guarantor Collateral Documents shall for whatever reason be terminated or cease to be in full force and effect, or the enforceability thereof shall be contested by any Obligor; or (k) (i) Haig S. Bagerdjian shall cease to be the Chief Executive Officer of the Borrower and 60 days shall have elapsed without a successor thereto satisfactory to the Majority Lenders having been appointed, (ii) Haig S. Bagerdjian shall cease to beneficially own Capital Stock representing at least 15% of the votes that may be cast in an election of directors of the Borrower (provided that such amount may be less than 15% (but not less than 7.5%) if such reduction is due to the issuance of stock of the Borrower as consideration for a Permitted Acquisition), or (iii) individuals who constituted the Borrower's Board of Directors as of the Closing Date (the "Closing Date Directors") shall cease for any reason to constitute a majority of the directors then in office (provided that the Closing Date Directors may constitute less than a majority if such reduction is due to the appointment of additional directors in connection with a Permitted Acquisition); then, and in any such event, (A) if such event is an Event of Default specified in paragraph (g) above, automatically the Commitments to the Borrower and the commitment to issue Letters of Credit shall immediately terminate and the Loans made to the Borrower hereunder (with accrued interest thereon) and all other Obligations shall immediately become due and payable, and (B) if such event is any other Event of Default, with the consent of the Majority Lenders, the Agent may, or upon the request of the Majority Lenders, the Agent shall, take any or all of the following actions: (i) by notice to the Borrower declare the Commitments to the Borrower and the commitment to issue Letters of Credit to be terminated forthwith, whereupon such Commitments and the commitment to issue Letters of Credit shall immediately terminate; and (ii) by notice of default to the Borrower, declare the Loans (with accrued interest thereon) and all other Obligations under this Agreement and the Notes to be due and payable forthwith, whereupon (x) the same shall immediately become due and payable and (y) to the extent any Letters of Credit are then outstanding, the Borrower shall make a Cash Collateral Deposit in an amount equal to the aggregate Letter of Credit Amount. In all cases, with the consent of the Majority Lenders, the Agent may enforce any or all of the Liens and security interests and other rights and remedies created pursuant to any Loan Document or available at law or in equity. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived by the Borrower. SECTION 8. THE AGENT 8.1 APPOINTMENT. Each Lender hereby irrevocably designates and appoints Union Bank of California, N.A., as Agent for such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes Union Bank of California, N.A., as the Agent for such Lender, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Agent shall have no duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. 8.2 DELEGATION OF DUTIES. The Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. 8.3 EXCULPATORY PROVISIONS. Neither the Agent, nor any of the Agent's officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower, any Subsidiary or any other Obligor or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or the Notes or any other Loan Document or for any failure of the Borrower, any Subsidiary or any other Obligor to perform its obligations hereunder or thereunder. The Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Borrower, any Subsidiary or any other Obligor. 8.4 RELIANCE BY THE AGENT. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), the Accountants and independent accountants and other experts selected by the Agent. The Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Lenders or all Lenders, as it deems appropriate, or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense (except those incurred solely as a result of the Agent's gross negligence or willful misconduct) which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the Notes and the other Loan Documents in accordance with a request of the Majority Lenders or all Lenders, as may be required, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Notes. 8.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default hereunder unless the Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall give notice thereof to the Lenders. The Agent shall take such action with respect to such Default as shall be reasonably directed by the Majority Lenders or all Lenders as appropriate; provided that unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interests of the Lenders or as the Agent shall believe necessary to protect the Lenders' interests in the Collateral or the Guarantor Collateral. 8.6 NON-RELIANCE ON THE AGENT AND OTHER LENDERS. Each Lender expressly acknowledges that neither the Agent, nor any of the Agent's officers, directors, partners, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Agent hereafter taken, including any review of the affairs of the Borrower, any Subsidiary or any other Obligor, shall be deemed to constitute any representation or warranty by the Agent to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrower, any Subsidiary and the other Obligors and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower, its Subsidiaries and the other Obligors. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall have no duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Borrower, any Subsidiary or any other Obligor which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 8.7 INDEMNIFICATION. The Lenders agree to indemnify the Agent in its capacity as such (to the extent not reimbursed by the Borrower, its Subsidiaries or the other Obligors and without limiting the obligation of such Persons to do so), ratably according to the respective amounts of their Aggregate Total Commitment Percentages, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs (including, without limitation, the allocated cost of internal counsel), expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Notes) be imposed on, incurred by or asserted against the Agent, in its capacity as Agent, but not as a Lender hereunder, in any way relating to or arising out of this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent they arise from the gross negligence or willful misconduct of the party to be indemnified. The agreements in this Section shall survive the payment of the Notes and all other amounts payable hereunder, and the expiration of the Commitments and the Letters of Credit. 8.8 THE AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower, any Subsidiary and the other Obligors as though the Agent were not the Agent hereunder and under the other Loan Documents. The Loans made or renewed by the Agent, and any Note issued to the Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and the Agent may exercise the same as though it were not the Agent, and the terms "Lender" and "Lenders" shall include the Agent in its individual capacity. 8.9 SUCCESSOR AGENT. The Agent may resign as Agent upon 30 days' notice to the Lenders. If the Agent shall resign as Agent under this Agreement and the other Loan Documents, then the Majority Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent (so long as no Default has occurred and is continuing) shall be approved by the Borrower (which consent shall not be unreasonably withheld), whereupon such successor agent shall succeed to the rights, powers and duties of the Agent and the term "Agent" shall mean such successor agent, effective upon its appointment, and the former Agent's rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement or any holders of the Notes. After any retiring Agent's resignation as Agent, the provisions of this Section shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement and the other Loan Documents. Further, if the Agent no longer has any Loans hereunder, the Agent shall immediately resign and shall be replaced, and have the benefits, as set forth in this Section 8.9. 8.10 COLLATERAL DOCUMENTS. Anything contained in any of the Loan Documents to the contrary notwithstanding, the Borrower, the Agent and each Lender hereby agree that (a) no Lender shall have any right individually to realize upon any of the Collateral or Guarantor Collateral under any Loan Document or to enforce any Guarantee, it being understood and agreed that all powers, rights and remedies under the Collateral Documents and Guarantor Collateral Documents and the Guarantees may be exercised solely by the Agent for the benefit of the Lenders in accordance with the terms thereof, and (b) in the event of a foreclosure by the Agent on any of the Collateral or Guarantor Collateral pursuant to a public or private sale, the Agent or any Lender may be the purchaser of any or all of such Collateral or Guarantor Collateral at any such sale and the Agent, as agent for and representative of the Lenders (but not any Lender or Lenders in its or their respective individual capacities unless the Majority Lenders shall otherwise agree in writing) shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral or Guarantor Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any such collateral payable by the Agent at such sale. SECTION 9. MISCELLANEOUS 9.1 AMENDMENTS AND WAIVERS. Except as otherwise expressly provided in this Agreement, any provision of the Loan Documents may be modified or supplemented only by an instrument in writing signed by the Borrower, the Agent and the Majority Lenders, or by the Borrower and the Agent acting with the consent of the Majority Lenders, and any provision of any Loan Document may be waived by the Majority Lenders or by the Agent acting with the consent of the Majority Lenders; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) (a) reduce the amount or extend the maturity of any Note or any installment due thereon, or reduce the rate or extend the time of payment of interest thereon, or reduce the amount or extend the time of payment of any fee, indemnity or reimbursement payable to any Lender hereunder, without the written consent of the Lender affected thereby; or (b) increase the Aggregate Revolving Loan Commitment or the Aggregate Term Loan Commitment; or (c) amend, modify or waive any provision of this Section 9.1 or reduce the percentage specified in or otherwise modify the definition of Majority Lenders, or consent to the assignment or transfer by any Obligor of any of its rights and obligations under this Agreement and the other Loan Documents (except as permitted under Section 6.4); or (d) release any Obligor from any liability under its respective Loan Documents; or (e) release any material portion of the Collateral or any material portion of the Guarantor Collateral, except for any Asset Disposition or release of Lien permitted by this Agreement or any other Loan Document; or (f) amend, modify or waive, directly or indirectly, the first sentence of Section 2.11; or (g) amend, modify or waive any provision of this Agreement requiring the consent or approval of all Lenders, in each case set forth in clauses (i)(b) through (i)(g) above without the written consent of all the Lenders; or (ii) amend, modify or waive any provision of Section 8 without the written consent of the Agent. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrower, the other Obligors, the Lenders, the Agent and all future holders of the Notes. In the case of any waiver, the Borrower, the other Obligors, the Lenders, and the Agent shall be restored to their former position and rights hereunder and under the outstanding Notes and any other Loan Documents, and any Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default, or impair any right consequent thereon. 9.2 NOTICES. All notices, requests and demands or other communications to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or 3 days after being deposited in the United States mail, certified and postage prepaid and return receipt requested, or, in the case of telecopy notice, when received, in each case addressed as follows in the case of the Borrower, and as set forth on the signature pages hereto, or in the Assignment and Acceptance pursuant to which a Person becomes a party hereto, as applicable, in the case of Agent and the Lenders, or to such other address as may be hereafter notified by the respective parties hereto and any future holders of the Notes: The Borrower: Point.360 7083 Hollywood Boulevard Hollywood, California 90028 Attention: Alan Steel Telecopy: (323) 957-2297 provided that any notice, request or demand to or upon the Agent or the Lenders pursuant to Section 2.1, 2.2, 2.3, 2.4, 2.5 or 2.6 shall not be effective until received. 9.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of the Agent or any Lender, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the Notes. 9.5 PAYMENT OF EXPENSES AND TAXES. The Borrower agrees (a) to pay or reimburse the Agent and each Lender for all its reasonable costs and out-of-pocket expenses (including travel and other expenses incurred by it or its agents in connection with performing due diligence with regard hereto) incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, syndication efforts (whether completed before or after the Closing Date) in connection with this Agreement and the reasonable fees and disbursements of counsel to the Agent, (b) after the occurrence and during the continuance of a Default, to pay or reimburse the Agent and each Lender for all its reasonable costs and out-of-pocket expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the Notes, the other Loan Documents and any such other documents or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a "work-out" or of any insolvency or bankruptcy proceeding, including, without limitation, reasonable legal fees and disbursements of counsel to the Agent and each Lender (including the allocated costs of internal counsel to the Agent and the Lenders which costs are not in duplication of any costs of outside counsel to the Agent and each Lender), (c) to pay, and indemnify and hold harmless each Lender and the Agent from any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the Notes, the other Loan Documents and any such other documents and (d) to pay, and indemnify and hold harmless each Lender and the Agent and the officers, partners, directors, employees, agents and affiliates of the Agent or any Lender (collectively "Indemnitees") from and against, any and all Indemnified Liabilities, provided that the Borrower shall have no obligation hereunder to the Agent or any Lender with respect to Indemnified Liabilities arising from the gross negligence or willful misconduct of the Agent or any Lender. As used herein, "Indemnified Liabilities" means, collectively, any and all liabilities, obligations, losses, damages (including natural resource damages), penalties, actions, judgments, suits, claims (including environmental claims), costs (including the costs of any investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other response action necessary to remove, remediate, clean up or abate any activities relating to Hazardous Materials), expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened by any Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto, and any fees or expenses incurred by Indemnitees in enforcing this indemnity), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and environmental laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby (including Lenders' making of the Loans under the Existing Credit Agreement, agreement to maintain the Loans hereunder, or the use of the proceeds thereof, or any enforcement of any of the Loan Documents (including any sale of, collection from, or other realization upon any of the Collateral or the Guarantor Collateral or the enforcement of the Guarantees)). (To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in this Section 9.5 may be unenforceable in whole or in part because they are violative of any law or public policy, the Borrower shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of them.) The agreements in this Section shall survive repayment of the Notes and all other amounts payable hereunder, and expiration of the Commitments and Letters of Credit. 9.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; PURCHASING LENDERS. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Agent, all future holders of the Notes and their respective successors and assigns, except that the Borrower may not assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of each Lender. (b) Any Lender may, in the ordinary course of its commercial banking or finance business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender, any Note held by such Lender, or any other interest of such Lender hereunder and under the other Loan Documents; provided that the holder of any such participation, other than an Affiliate of such Lender, shall not be entitled to require such Lender to take or omit to take any action hereunder except action directly affecting the extension of the maturity of any portion of the principal amount of a Loan, or any portion of interest or fees related thereto allocated to such participation or a reduction of the principal amount or principal payment amount of or the rate of interest payable on the Loans or any fees related thereto, or a release of any Obligor or any substantial portion of the Collateral or the Guarantor Collateral or any increase in participation amounts. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Note for all purposes under this Agreement and the other Loan Documents, and the Borrower and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. The Borrower agrees that if amounts outstanding under this Agreement and the Notes are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement and any Note to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement or any Note, provided that such Participant shall only be entitled to such right of setoff if it shall have agreed in the agreement pursuant to which it shall have acquired its participating interest to share with the Lenders the proceeds thereof as provided in Section 9.7. The Borrower also agrees that each Participant shall be entitled to the benefits of Sections 2.13 and 2.15 with respect to its participation in the Loans outstanding from time to time; provided that no Participant shall be entitled to receive any greater amount pursuant to such Sections than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (c) Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell to any of its Affiliates or to any Lender, any Affiliate thereof or to one or more additional banks or other entities, which additional banks or other entities shall be subject to the consent of the Agent (which consent will not be unreasonably withheld) ("Purchasing Lenders") all or any part of its rights and obligations under this Agreement, the Notes and the other Loan Documents pursuant to an Assignment and Acceptance executed by such Purchasing Lender and such transferor Lender and delivered to the Agent for its acceptance and recording in the Register (as defined in (d) below), provided that any such sale must result in the Purchasing Lender having at least $5,000,000 in aggregate amount of obligations under this Agreement, the Notes and the other Loan Documents. Upon such execution, delivery, acceptance and recording, from and after the transfer effective date determined pursuant to such Assignment and Acceptance, (x) the Purchasing Lender thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder having outstanding Loans as set forth therein, and (y) the transferor Lender thereunder shall, to the extent of such assigned portion and as provided in such Assignment and Acceptance, be released from its obligations under this Agreement and the other Loan Documents (and, in the case of an Assignment and Acceptance covering all or the remaining portion of a transferor Lender's rights and obligations under this Agreement, such transferor Lender shall cease to be a party hereto). Such Assignment and Acceptance shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Lender and the resulting adjustment of Commitment Percentages arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such transferor Lender under this Agreement, the Notes and the other Loan Documents. On or prior to the transfer effective date determined pursuant to such Assignment and Acceptance, the Borrower, at its own expense, shall execute and deliver to the Agent in exchange for the surrendered Note(s) a new Note or Notes, as applicable, to the order of such Purchasing Lender in an amount equal to the Loans assumed by it pursuant to such Assignment and Acceptance, and if the transferor Lender has retained Loans hereunder, a new Note or Notes, as applicable, to the order of the transferor Lender in an amount equal to the Loans retained by it hereunder. Such new Note(s) shall be dated the Closing Date and shall otherwise be in the form of the Notes replaced thereby. The Note(s) surrendered by the transferor Lender shall be returned by the Agent to the Borrower marked "canceled." (d) The Agent shall maintain at its address referred to in Section 9.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the principal amount of the Loans owing to each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register as the owner of the Loans recorded therein for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment and Acceptance executed in accordance with the terms hereof, together with payment to the Agent by the Purchasing Lender of a registration and processing fee of $3,500, the Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register. (f) The Borrower authorizes each Lender to disclose to any Participant or Purchasing Lender (each, a "Transferee") and any prospective Transferee any and all information in such Lender's possession concerning the Borrower, its Subsidiaries, and their Affiliates which has been delivered to such Lender by or on behalf of the Borrower pursuant to this Agreement or any other Loan Document or which has been delivered to such Lender by or on behalf of the Borrower in connection with such Lender's credit evaluation of the Borrower, its Subsidiaries, and their Affiliates prior to becoming a party to this Agreement. (g) Nothing herein shall prohibit any Lender from pledging or assigning any of its rights under its Notes to any Federal Reserve Bank in accordance with applicable law. 9.7 ADJUSTMENTS; SET-OFF. (a) If any Lender (a "Benefitted Lender") shall at any time receive any payment of all or part of its Loans, or interest thereon, or fees, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 7(g), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Loans, or interest thereon, or fees, such Benefitted Lender shall purchase for cash from the other Lenders such portion of each such other Lender's Loans, or fees, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such Benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. The Borrower agrees that each Lender so purchasing a portion of another Lender's Loan may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Lender were the direct holder of such portion. (b) In addition to any rights and remedies of the Lenders provided by law, with the prior consent of the Majority Lenders, each Lender shall have the right, exercisable upon the occurrence and during the continuance of an Event of Default and acceleration of the Obligations pursuant to Section 7, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, to set-off and appropriate and apply against any such Obligations any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof or bank controlling such Lender to or for the credit or the account of the Borrower. Each Lender agrees promptly to notify the Borrower after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. 9.8 COUNTERPARTS. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery by telecopier of an executed counterpart of a signature page to this Agreement shall be effective as delivery of an originally executed counterpart of this Agreement. 9.9 SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 9.10 INTEGRATION. This Agreement represents the entire agreement of the Borrower, the Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Agent or any Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents. 9.11 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. 9.12 ACKNOWLEDGEMENTS. The Borrower hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the Notes and the other Loan Documents; (b) neither the Agent nor any Lender has any fiduciary relationship to the Borrower solely by virtue of any of the Loan Documents, and the relationship pursuant to the Loan Documents between the Agent and the Lenders, on one hand, and the Borrower on the other hand, is solely that of creditor and debtor; and (c) no joint venture exists among the Lenders or among the Borrower, on one hand and the Lenders, on the other hand. 9.13 HEADINGS. Section headings herein are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. 9.14 COPIES OF CERTIFICATES, ETC. Whenever the Borrower is required to deliver notices, certificates, opinions, statements or other information hereunder to the Agent for delivery to any Lender, it shall do so in such number of copies as the Agent shall reasonably specify. 9.15 TREATMENT OF CERTAIN INFORMATION; CONFIDENTIALITY. (a) The Borrower acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to the Borrower or one or more of its Subsidiaries (in connection with this Agreement or otherwise) by any Lender, or by one or more Subsidiaries or affiliates of such Lender and the Borrower hereby authorizes each Lender to share any information delivered to such Lender by the Borrower and its Subsidiaries pursuant to this Agreement, or in connection with the decision of such Lender to enter into this Agreement, to any such Subsidiary or affiliate, it being understood that any such Subsidiary or affiliate receiving such information shall be bound by the provisions of clause (b) below as if it were a Lender hereunder. Such authorization shall survive the repayment of the Loans, the termination of this Agreement, and the expiration of the Commitments and the Letters of Credit. (b) Each Lender and the Agent agrees (on behalf of itself and each of its affiliates, directors, officers, employees and representatives) to use reasonable precautions to keep confidential, in accordance with their customary procedures for handling confidential information of the same nature and in accordance with safe and sound banking practices, any non-public information supplied to it by the Borrower pursuant to this Agreement that is identified by the Borrower as being confidential at the time the same is delivered to the Lenders or the Agent, provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for any of the Lenders or the Agent, (iii) to bank examiners or other regulatory authorities, auditors or accountants, (iv) to the Agent or any other Lender, (v) in connection with any litigation to which any one or more of the Lenders or the Agent is a party, (vi) to a Subsidiary or affiliate of such Lender as provided in clause (a) above or (vii) to any assignee or participant (or prospective assignee or participant), and provided further that in no event shall any Lender or the Agent be obligated or required to return any materials furnished by the Borrower. 9.16 CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. (a) Each party hereto hereby irrevocably and unconditionally (i) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of California, the courts of the United States of America for the Central District of California, and appellate courts from any thereof; (ii) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient forum and agrees not to plead or claim the same; (iii) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to any party at its address set forth in Section 9.2; (iv) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (v) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this subsection any punitive damages. (b) WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND THE LENDERS HEREBY EXPRESSLY, INTENTIONALLY AND DELIBERATELY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING, WHETHER BROUGHT IN STATE OR FEDERAL COURT, RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH AND FOR ANY COUNTERCLAIM THEREIN SUCH WAIVER SHALL BE IRREVOCABLE AND UNCONDITIONAL. 9.17 RELEASE. For the avoidance of doubt, the Borrower, for itself, its heirs, executors, administrators, general partners, limited partners, employees, representatives, shareholders, predecessors, subsidiaries and/or affiliates, parents, successors-in-interest, transferees, assigns, officers, directors, managers, servants, insurers, trustors, trustees, underwriters, successors, attorneys, and agents, now and in the future, and all persons acting by, through, under or in concert with them, and each of them, hereby releases and discharges the Lenders and the Agent (each of which capitalized terms shall be, for the purposes of this Section 9.17, as defined in this Agreement and as defined in the Prior Agreement), and each of their past, present and future administrators, affiliates, agents, assigns, attorneys, consultants and other professionals, directors, employees, executors, heirs, officers, parents, partners, predecessors, representatives, shareholders, subsidiaries and successors, and each of them; and each of their respective administrators, affiliates, agents, assigns, attorneys, directors, employees, executors, heirs, officers, parents, partners, predecessors, representatives, shareholders, subsidiaries and successors, and each of them; and all persons acting by, through, under or in concert with one or more of them, from any liabilities or claims arising out of, related to or in any way connected with all claims, causes of action or other disputes that the Borrower may have against any Lender or the Agent arising out of, related to or in any way connected with the Prior Agreement and any document, instrument or agreement executed in connection therewith, and the Borrower's business relationships with any Lender or the Agent from the beginning of time through and including the Closing Date (the foregoing are hereinafter referred to collectively as the "Released Matters"). The Borrower understands and has been advised by its legal counsel of the provisions of Section 1542 of the California Civil Code, which provides as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." The Borrower understands and hereby waives the provisions of Civil Code Section 1542 and declares that it realizes that it may have damages it presently knows nothing about and that, as to them, they have been released pursuant to this Section 9.17. The Borrower understands that the Lenders and the Agent would not agree to enter into this Agreement if this Section 9.17 were not included. The Borrower represents and warrants that it alone is the owner of the claims hereby compromised and that it has not heretofore assigned or transferred, nor purported to assign or transfer, to any Person any of the Released Matters. The Borrower further agrees to indemnify and hold harmless the Lenders and the Agent from all liabilities, claims, demands, damages, costs, expenses, and attorneys' fees incurred by any Lender or the Agent as the result of any Person asserting any such assignment or transfer of any rights or claims. The Borrower represents and warrants that none of the Released Matters is subject to any purported or actual lien, security interest, encumbrance or contractual or other right of any third party, and the Borrower agrees to indemnify and hold harmless the Lenders and the Agent from all liabilities, claims, demands, damages, costs, expenses and attorneys' fees incurred by any Lender or the Agent as the result of any Person asserting the existence of any of the foregoing. S-3 Credit Agreement S-1 Credit Agreement 9.18 EFFECT OF AGREEMENT ON FINANCING STATEMENTS AND LANDLORD CONSENTS. In connection with the Prior Agreement, and with the credit agreements and loan agreements theretofore executed by the Borrower that were, in turn, amended and restated by the Prior Agreement, the Borrower and/or its Subsidiaries (including the Borrower, as formerly known as VDI Multimedia), executed and delivered to UBOC, and/or, in the case of UCC Financing Statements, authorized the filing of, certain UCC Financing Statements and Landlord Consents in favor of UBOC. The Borrower hereby acknowledges such UCC Financing Statements and Landlord Consents, agrees that they are intended to be and shall secure, support and relate to this Agreement and the Obligations, and shall be considered Loan Documents hereunder, and that, for such purposes, this Agreement shall be deemed to be an amendment and restatement of the Prior Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. BORROWER POINT.360 By: /s/ Alan R. Steel ---------------------------------------------------- Name: Alan R. Steel ---------------------------------------------------- Title: Chief Financial Officer ---------------------------------------------------- AGENT UNION BANK OF CALIFORNIA, N.A., as Agent By: /s/ Gina West ---------------------------------------------------- Name: Gina West ---------------------------------------------------- Title: Vice President ---------------------------------------------------- LENDERS UNION BANK OF CALIFORNIA, N.A., as a Lender By: /s/ Gina West ----------------------------------------------------- Name: Gina West ----------------------------------------------------- Title: Vice President ----------------------------------------------------- Revolving Loan Commitment: $5,555,555.56 Term Loan Commitment: $4,444,444.44 Address for Notices (i) for credit matters: 445 South Figueroa Street, 10th Floor Los Angeles, California 90071 Attention: Gina West Telephone: (213) 236-6530 Facsimile: (213) 236-7637 (ii) for operational matters: 601 Potrero Grande Drive Monterey Park, California 91754 Mail Code: 4-957-161 Attention: Theodora Smith Commercial Loan Agency Services Telephone: (323) 720-2644 Facsimile: (323) 720-2780 Applicable Lending Office 445 South Figueroa Street Los Angeles, California 90071 U.S. BANK NATIONAL ASSOCIATION, as a Lender By: /s/ Sam Kunianski ------------------------------------------------------ Name: Sam Kunianski ------------------------------------------------------ Title: Senior Vice President ------------------------------------------------------ Revolving Loan Commitment: $4,444,444.44 Term Loan Commitment: $3,555,555.56 Address for Notices (i) for credit matters 15910 Ventura Boulevard Suite 1712 Mail Sort LM-CA-CL17 Encino, California 91436 Attention: Richard J. Hernandez Telephone: (818) 817-7257 Facsimile: (818) 789-3041 (ii) for operational matters: 555 SW Oak Street, PL-7 Portland, Oregon 97204 Attention: Marcy Marlow Telephone: (503) 275-5005 Facsimile: (503) 275-8181 Applicable Lending Office 15910 Ventura Boulevard Suite 1712 Encino, California 91436 -----END PRIVACY-ENHANCED MESSAGE-----