EXHIBIT (b)(3)
AMENDED AND RESTATED CREDIT AGREEMENT
Among
LASALLE BANK NATIONAL ASSOCIATION,
as Lender,
and
INTEGRITY MEDIA, INC.,
INTEGRITY PUBLISHERS, INC.,
INO RECORDS, LLC,
INTEGRITY DIRECT, LLC, AND
KONA ACQUISITION CORP.
as Borrower.
Closing Date: July 8, 2004
Table of Contents
Page
1. DEFINITIONS................................................................................ 3
1.1 Defined Terms......................................................... 3
1.2 Accounting Terms...................................................... 22
1.3 Other Terms Defined in UCC............................................ 22
1.4 Other Interpretive Provisions......................................... 22
2. COMMITMENT OF THE BANK..................................................................... 23
2.1 Revolving Loans....................................................... 23
2.2 Term Loans............................................................ 25
2.3 Reserved.............................................................. 28
2.4 Additional LIBOR Loan Provisions...................................... 28
2.5 Interest and Fee Computation; Collection of Funds..................... 29
2.6 Letter of Credit Provisions........................................... 29
2.7 Taxes................................................................. 30
2.8 All Loans to Constitute Single Obligation............................. 31
3. CONDITIONS OF BORROWING.................................................................... 31
3.1 Loan Documents........................................................ 31
3.2 Event of Default...................................................... 33
3.3 Material Adverse Effect............................................... 33
3.4 Litigation............................................................ 33
3.5 Representations and Warranties........................................ 33
3.6 Commitment Fee........................................................ 33
3.7 Subordinated ▇▇▇...................................................... 33
3.8 Consummation of Merger................................................ 33
3.9 Merger Consideration and Expenses..................................... 33
3.10 Post Merger Ownership and Availability................................ 33
3.11 Litigation............................................................ 33
3.12 Officer's Certificate................................................. 33
3.13 Fees and Expenses..................................................... 33
4. NOTES EVIDENCING LOANS..................................................................... 34
4.1 Revolving Note........................................................ 34
4.2 Term Notes............................................................ 34
4.3 [RESERVED]............................................................ 34
5. MANNER OF BORROWING........................................................................ 34
5.1 Borrowing Procedures.................................................. 34
5.2 Conversion and Continuation Procedures................................ 35
5.3 Letters of Credit..................................................... 35
5.4 Certain Conditions.................................................... 35
5.5 Automatic Debit....................................................... 36
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5.6 Discretionary Disbursements........................................... 36
5.7 Credit Termination Date; Continuance of Obligations, Etc.............. 36
6. SECURITY FOR THE OBLIGATIONS............................................................... 36
6.1 Security for Obligations.............................................. 36
6.2 Other Collateral...................................................... 37
6.3 Possession and Transfer of Collateral................................. 37
6.4 Financing Statements.................................................. 37
6.5 [RESERVED]............................................................ 38
6.6 Preservation of the Collateral........................................ 38
6.7 Other Actions as to any and all Collateral............................ 38
6.8 Collateral in the Possession of a Warehouseman or Bailee.............. 39
6.9 [RESERVED]............................................................ 39
6.10 Letter-of-Credit Rights............................................... 39
6.11 Commercial Tort Claims................................................ 39
6.12 Electronic Chattel Paper and Transferable Records..................... 39
7. REPRESENTATIONS AND WARRANTIES............................................................. 40
7.1 Borrower Organization and Name........................................ 40
7.2 Authorization......................................................... 40
7.3 Validity and Binding Nature........................................... 40
7.4 Consent; Absence of Breach............................................ 40
7.5 Ownership of Properties; Liens........................................ 41
7.6 Equity Ownership...................................................... 41
7.7 Intellectual Property................................................. 41
7.8 Financial Statements.................................................. 41
7.9 Litigation and Contingent Liabilities................................. 41
7.10 Event of Default...................................................... 41
7.11 Adverse Circumstances................................................. 42
7.12 Environmental Laws and Hazardous Substances........................... 42
7.13 Solvency, Etc......................................................... 42
7.14 ERISA Obligations..................................................... 43
7.15 Labor Relations....................................................... 43
7.16 Security Interest..................................................... 43
7.17 Lending Relationship.................................................. 43
7.18 Business Loan......................................................... 43
7.19 Taxes................................................................. 43
7.20 Compliance with Regulation U.......................................... 44
7.21 Governmental Regulation............................................... 44
7.22 [RESERVED]............................................................ 44
7.23 Place of Business..................................................... 44
7.24 Complete Information.................................................. 44
7.26 [RESERVED]............................................................ 44
7.27 Material Contracts.................................................... 44
7.28 Licenses and Authorizations........................................... 45
8. AFFIRMATIVE COVENANTS...................................................................... 45
8.1 Compliance with Bank Regulatory Requirements; Increased Costs......... 45
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8.2 Borrower Existence.................................................... 46
8.3 Compliance With Laws.................................................. 46
8.4 Payment of Taxes and Liabilities...................................... 46
8.5 Maintain Property..................................................... 46
8.7 ERISA Liabilities; Employee Plans..................................... 47
8.8 Financial Statements.................................................. 48
8.9 [RESERVED]............................................................ 48
8.10 Supplemental Financial Statements..................................... 48
8.11 Borrowing Base Certificate............................................ 48
8.12 Aged Accounts Schedule................................................ 48
8.13 Inventory Reports..................................................... 49
8.14 Covenant Compliance Certificate....................................... 49
8.15 Field Audits.......................................................... 49
8.16 Other Reports......................................................... 49
8.17 Collateral Records.................................................... 49
8.18 Intellectual Property................................................. 49
8.19 Notice of Proceedings................................................. 49
8.20 Notice of Event of Default or Material Adverse Effect................. 49
8.21 Environmental Matters................................................. 49
8.22 Further Assurances.................................................... 50
8.23 Banking Relationship.................................................. 50
8.24 Non-Utilization Fee................................................... 50
8.25 [RESERVED]............................................................ 50
8.27.1 Annual Projections.................................................... 50
8.27.2 Additional Material Contracts, Licenses and Authorizations............ 50
8.27.3 Tax Returns........................................................... 51
8.27.4 SEC Filings and Press Releases........................................ 51
8.27.5 Soundscan Rating...................................................... 51
8.27.6 Celebration........................................................... 51
8.28 Fiscal Year....................................................................... 51
8.29 Books and Records; Maintenance of Properties...................................... 51
9. NEGATIVE COVENANTS......................................................................... 51
9.1 Debt.................................................................. 51
9.2 Encumbrances.......................................................... 52
9.3 Investment............................................................ 52
9.4 Transfer; Merger; Sales............................................... 53
9.5 Compensation.......................................................... 54
9.6 Restricted Payments................................................... 54
9.7 Transactions with Affiliates.......................................... 55
9.8 Unconditional Purchase Obligations.................................... 55
9.9 [RESERVED]............................................................ 55
9.10 Inconsistent Agreements............................................... 55
9.11 Use of Proceeds....................................................... 56
9.12 [RESERVED]............................................................ 56
9.13 Business Activities; Change of Legal Status and Organizational
Documents.......................................................... 56
9.14 Restriction of Amendments to Certain Documents........................ 56
9.15 Integrity Media Ownership............................................. 56
9.16 Guaranties............................................................ 56
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9.17 Integrity Music....................................................... 56
9.18 Removal of Assets..................................................... 56
9.19 Terms of and Modifications to Material Relationships.................. 56
9.20 Margin Stock Restrictions............................................. 57
10. FINANCIAL COVENANTS........................................................................ 57
10.1 Minimum Net Worth..................................................... 57
10.2 Total Funded Debt to EBITDA........................................... 57
10.3 Fixed Charge Coverage................................................. 57
10.4 Senior Funded Debt to EBITDA.......................................... 57
10.5 Capital Expenditures.................................................. 58
11. EVENTS OF DEFAULT.......................................................................... 58
11.1 Nonpayment of Obligations............................................. 58
11.2 Misrepresentation..................................................... 58
11.3 Nonperformance........................................................ 58
11.4 Default under Loan Documents.......................................... 58
11.5 Default under Other Debt.............................................. 58
11.6 Other Material Obligations............................................ 58
11.7 Bankruptcy, Insolvency, etc........................................... 59
11.8 Judgments............................................................. 59
11.9 Change in Control..................................................... 59
11.10 Collateral Impairment............................................. 59
11.11 Chief Executive Officer........................................... 59
11.12 Subordinated Debt................................................. 59
12. REMEDIES .................................................................................. 59
12.1 Possession and Assembly of Collateral................................. 60
12.2 Sale of Collateral.................................................... 60
12.3 Standards for Exercising Remedies..................................... 60
12.4 UCC and Offset Rights................................................. 61
12.5 Additional Remedies................................................... 61
12.6 Attorney-in-Fact...................................................... 62
12.7 No Marshaling......................................................... 63
12.8 Application of Proceeds............................................... 63
12.9 No Waiver............................................................. 63
12.10 Letters of Credit................................................. 63
13. MISCELLANEOUS.............................................................................. 64
13.1 Obligations Absolute.................................................. 64
13.2 Entire Agreement...................................................... 64
13.3 Amendments; Waivers................................................... 64
13.4 WAIVER OF DEFENSES.................................................... 64
13.5 FORUM SELECTION AND CONSENT TO JURISDICTION........................... 65
13.6 WAIVER OF JURY TRIAL.................................................. 65
13.7 Assignability......................................................... 65
13.8 Confirmations......................................................... 66
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13.9 Confidentiality.............................................................. 66
13.10 Binding Effect........................................................ 66
13.11 Governing Law......................................................... 66
13.12 Enforceability........................................................ 66
13.13 Survival of Borrower Representations.................................. 66
13.14 Extensions of Bank's Commitment and Notes............................. 67
13.15 Time of Essence....................................................... 67
13.16 Counterparts; Facsimile Signatures.................................... 67
13.17 Notices............................................................... 67
13.18 Release of Claims Against Bank........................................ 67
13.19 Costs, Fees and Expenses.............................................. 68
13.20 INDEMNIFICATION....................................................... 68
13.21 Revival and Reinstatement of Obligations.............................. 69
13.22 Fees.................................................................. 69
13.23 Recitals.............................................................. 69
13.24 Amendment and Restatement............................................. 69
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AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT dated as of July 8, 2004 (the
"Agreement"), is executed by and among INTEGRITY MEDIA, INC., a Delaware
corporation (f/k/a Integrity Incorporated, "Integrity Media"), which has its
chief executive office located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇,
INTEGRITY PUBLISHERS, INC., a Delaware corporation ("Integrity Publishers")
which has its chief executive office at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇,
INTEGRITY DIRECT, LLC, a Delaware limited liability company ("Integrity Direct")
which has its chief executive office located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, INO RECORDS, LLC, a Tennessee limited liability company (f/k/a M2
Communications, L.L.C., "INO Records"), which has its chief executive office
located at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇. ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and KONA
ACQUISITION CORP., a Delaware corporation ("Kona"), which has its chief
executive office located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (Integrity
Media, Integrity Publishers, Integrity Direct, INO Records, and Kona are
hereinafter referred to individually and collectively, as the "Borrower") and
LASALLE BANK NATIONAL ASSOCIATION, a national banking association (the "Bank"),
whose address is ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
R E C I T A L S:
A. Pursuant to that certain Credit Agreement, dated as of April 25,
2001, by and between Borrower and Bank, as amended by that certain First
Amendment to Credit Agreement dated as of June 15, 2001, that certain Second
Amendment to Credit Agreement dated as of March 30, 2002, that certain Third
Amendment to Credit Agreement dated as of June 28, 2002, that certain Fourth
Amendment to Credit Agreement dated as of December 31, 2002, that certain Fifth
Amendment to Credit Agreement dated as of March 26, 2003, that certain Sixth
Amendment to Credit Agreement dated as of March 31, 2003, that certain Seventh
Amendment to Credit Agreement dated as of August 28, 2003, and that certain
Eighth Amendment to Credit Agreement dated as of January 29, 2004 (collectively,
the "Existing Credit Agreement"), Bank made the Loans available to Borrower as
more particularly described in the Existing Credit Agreement. In connection with
the Existing Credit Agreement, Borrower executed and delivered a (a) Term Note A
dated April 25, 2001 (the "Existing Term Note A "), (b) Term Note B dated April
25, 2001 (the "Existing Term Note B"), and (c) Revolving Note dated April 25,
2001 (the "Existing Revolving Note," and together with Existing Term Note A and
Existing Term Note B, and the from time to time restatements and replacements
thereof, the "Existing Notes").
B. The parties hereto wish to amend and restate the Existing Credit
Agreement in its entirety and amend certain of the provisions thereof, it being
the intention of the parties hereto that the loans outstanding under the
Existing Credit Agreement and the Existing Notes as of the date hereof shall
continue and remain outstanding and not be deemed to have been repaid on the
Restatement Date.
C. Borrower has requested Bank to increase the amount and extend the
term of the existing term loans and the existing revolving loan facility, and to
make certain other changes to the Existing Loan Agreement, and the Bank is
willing to extend such financial accommodations to Borrower under the terms and
conditions set forth herein.
NOW THEREFORE, in consideration of the premises, the mutual covenants and
agreements set forth herein, Borrower agrees to borrow from the Bank, and the
Bank agrees to lend to Borrower, subject to and upon the following terms and
conditions:
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A G R E E M E N T S:
1. DEFINITIONS.
1.1 Defined Terms. For the purposes of this Agreement, the following
capitalized words and phrases shall have the meanings set forth below.
"Acquiring Company" shall mean the Person obligated to pay or
provide the consideration payable in connection with a Permitted Acquisition
upon the consummation thereof.
"Acquisition" shall mean any acquisition, whether by stock purchase,
asset purchase, merger, consolidation or otherwise of a Person or a business
line of a Person.
"Additional Salary Amount" shall mean an amount equal to the
difference of (a) $50,000 minus (b) the amount by which the aggregate amount of
salary paid to P. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ since the RestatementDate exceeds that amount
permitted to be paid pursuant to clause (i)(a) of Section 9.5 since the
Restatement Date.
"Affiliate" of any Person shall mean (a) any other Person which,
directly or indirectly, controls or is controlled by or is under common control
with such Person, (b) any officer or director of such Person, and (c) with
respect to the Bank, any entity administered or managed by the Bank, or an
Affiliate or investment advisor thereof and which is engaged in making,
purchasing, holding or otherwise investing in commercial loans. A Person shall
be deemed to be "controlled by" any other Person if such Person possesses,
directly or indirectly, power to vote ten percent (10.00%) or more of the
securities (on a fully diluted basis) having ordinary voting power for the
election of directors or managers or power to direct or cause the direction of
the management and policies of such Person whether by contract or otherwise.
"Applicable LIBOR Margin" shall mean the applicable percentage set
forth in the table below based upon Borrower's ratio of Senior Funded Debt to
EBITDA and depending upon whether the Loan is related to a Revolving Loan, Term
Loan A or Term Loan B:
Senior
Funded Debt Revolving
to Loan Term Loan
EBITDA LIBOR Margin LIBOR Margin
> or = 2.00 - 2.50x 300 bps 325 bps
> or = 1.50x - < 2.00x 275 bps 300 bps
> or = 1.00x - < 1.50x 250 bps 275 bps
< 1.00 225 bps 250 bps
"Applicable Non-utilization Percentage" shall mean the applicable
percentage set forth in the table below based upon Borrower's ratio of Senior
Funded Debt to EBITDA:
3
Senior
Funded Debt
to
EBITDA Non-Utilization Fee
> or = 2.00 - 2.50x 50 bps
> or = 1.50x - < 2.00x 37.5 bps
> or = 1.00x - < 1.50x 25 bps
< 1.00 25 bps
"Applicable Prime Margin" shall mean the applicable percentage set
forth in the table below based upon Borrower's ratio of Senior Funded Debt to
EBITDA:
Senior
Funded Debt
to
EBITDA Prime
> or = 2.00 - 2.50x 75 bps
> or = 1.50x - < 2.00x 50 bps
> or = 1.00x - < 1.50x 25 bps
< 1.00 25 bps
"Asset Disposition" shall mean the sale, lease, assignment or other
transfer for value (each a "Disposition") by Borrower or any Subsidiary to any
Person (other than Borrower or any Wholly-Owned Subsidiary) of any asset or
right of Borrower or any Subsidiary (including, the loss, destruction or damage
of any thereof or any actual or threatened (in writing to Borrower or such
Subsidiary) condemnation, confiscation, requisition, seizure or taking thereof),
other than (a) the Disposition of any asset which is to be replaced, and is in
fact replaced, within sixty (60) days (or 270 days in the case of any casualty,
condemnation, confiscation, requisition, seizure to taking thereof) with another
asset performing the same or a similar function, (b) the sale or lease of
inventory in the ordinary course of business, and (c) other Dispositions in any
fiscal year the net proceeds of which do not in the aggregate exceed $60,000.
"Authorization" shall mean any License or other governmental permit,
certificate and/or approval issued by any Official Body.
"Authorized Officer" shall mean any officer, employee or
representative of such organization who is expressly designated as such or is
otherwise authorized to request the borrowing of funds hereunder or, as
appropriate, to sign loan documents and/or deliver certificates on behalf of
such organization pursuant to the provisions of such organization's most recent
resolution on file with the Bank.
"Bank Product Agreements" shall mean those certain cash management
service agreements entered into from time to time by Borrower or any Subsidiary
with the Bank or any Affiliate of the Bank.
4
"Bank Product Obligations" shall mean all obligations, liabilities,
contingent reimbursement obligations, fees, and expenses owing by Borrower or
any Subsidiary to the Bank or any Affiliate of the Bank pursuant to or evidenced
by the Bank Product Agreements and irrespective of whether for the payment of
money, whether direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising.
"Bank Products" shall mean any service or facility extended to
Borrower or any Subsidiary by the Bank or any Affiliate of the Bank, including:
(a) ACH Transactions, (b) cash management, including controlled disbursement,
accounts or services, or (c) Hedging Agreements.
"Bankruptcy Code" shall mean the United States Bankruptcy Code, as
now existing or hereafter amended.
"Borrowing Base Amount" shall mean (a) the sum of (i) eighty percent
(80%) of the net amount of Borrower's Eligible Accounts plus (ii) fifty percent
(50%) of the value, calculated at the lower of cost or market, with cost
determined on an average cost basis, of Borrower's Eligible Inventory less (iii)
such reserves as the Bank in its reasonable judgment deems necessary or
appropriate from time to time.
"Borrowing Base Certificate" shall mean a certificate to be signed
by Borrower certifying to the accuracy of the Borrowing Base Amounts,
substantially in the form attached hereto as Exhibit A.
"Business Day" shall mean any day other than a Saturday, Sunday or a
legal holiday on which banks are authorized or required to be closed for the
conduct of commercial banking business in Chicago, Illinois.
"Capital Expenditures" shall mean all expenditures (including
Capitalized Lease Obligations) which, in accordance with GAAP, would be required
to be capitalized and shown on the consolidated balance sheet of Borrower, but
excluding expenditures made in connection with the replacement, substitution or
restoration of assets to the extent financed (i) from insurance proceeds (or
other similar recoveries) paid on account of the loss of or damage to the assets
being replaced or restored, (ii) with awards of compensation arising from the
taking by eminent domain or condemnation of the assets being replaced, or (iii)
with proceeds from the sale of fixed assets permitted by Section 9.4(b).
"Capital Lease" shall mean, as to any Person, a lease of any
interest in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, by such Person, as lessee, that is, or should be, in
accordance with Financial Accounting Standards Board Statement No. 13, as
amended from time to time, or, if such statement is not then in effect, such
statement of GAAP as may be applicable, recorded as a "capital lease" on the
financial statements of such Person prepared in accordance with GAAP.
"Capital Securities" shall mean, with respect to any Person, all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's capital, whether now outstanding
or issued or acquired after the date hereof, including common shares, preferred
shares, membership interests in a limited liability company, limited or general
partnership interests in a partnership or any other equivalent of such ownership
interest.
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"Capitalized Lease Obligations" shall mean, as to any Person, all
rental obligations of such Person, as lessee under a Capital Lease which are or
will be required to be capitalized on the books of such Person.
"Cash Equivalent Investment" shall mean, at any time, (a) any
evidence of Debt, maturing not more than one year after such time, issued or
guaranteed by the United States government or any agency thereof, (b) commercial
paper, maturing not more than one year from the date of issue, or corporate
demand notes, in each case (unless issued by the Bank or its holding company)
rated at least A-l by Standard & Poor's Ratings Services, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. or P-l by ▇▇▇▇▇'▇ Investors Service, Inc., (c) any
certificate of deposit, time deposit or banker's acceptance, maturing not more
than one year after such time, or any overnight Federal Funds transaction that
is issued or sold by the Bank or its holding company (or by a commercial banking
institution that is a member of the Federal Reserve System and has a combined
capital and surplus and undivided profits of not less than $500,000,000), (d)
any repurchase agreement entered into with the Bank, or other commercial banking
institution of the nature referred to in clause (c), which (i) is secured by a
fully perfected security interest in any obligation of the type described in any
of clauses (a) through (c) above, and (ii) has a market value at the time such
repurchase agreement is entered into of not less than 100% of the repurchase
obligation of the Bank, or other commercial banking institution, thereunder, (e)
money market accounts or mutual funds which invest exclusively in assets
satisfying the foregoing requirements and (f) other short term liquid
investments approved in writing by the Bank.
"Celebration" shall mean Celebration Hymnal, LLP, a Tennessee
limited liability partnership.
"Change in Control" shall mean the occurrence of any of the
following events: (a) P. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall cease to own and control,
directly or indirectly, at least 50% of the outstanding Capital Securities of
Integrity Media; (b) Integrity Media shall cease to, directly or indirectly, own
and control 100% of each class of the outstanding Capital Securities of each
Subsidiary and each Wholly-Owned Subsidiary acquired after the Restatement Date
pursuant to a Permitted Acquisition (except that, for purposes hereof, the
applicable percentage of ownership with respect to Celebration shall be 50% and
the applicable percentage of ownership with respect to Integrity Music Europe
Limited shall be 65%); or (c) the granting by P. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, directly or
indirectly, of a security interest in his ownership interest in Borrower, which
could result in a change in the identity of the individuals or entities in
control of Integrity Media. For the purpose hereof, the terms "control" or
"controlling" shall mean the possession of the power to direct, or cause the
direction of, the management and policies of Borrower by contract or voting of
securities or ownership interests.
"Collateral" shall have the meaning set forth in Section 6.1 hereof.
"Collateral Access Agreement" shall mean an agreement in form and
substance reasonably satisfactory to the Bank pursuant to which a mortgagee or
lessor of real property on which collateral is stored or otherwise located, or a
warehouseman, processor or other bailee of Inventory or other property owned by
Borrower or any Subsidiary, acknowledges the Liens of the Bank and waives any
Liens held by such Person on such property, and, in the case of any such
agreement with a mortgagee or lessor, permits the Bank reasonable access to and
use of such real property following the occurrence and during the continuance of
an Event of Default to assemble, complete and sell any collateral stored or
otherwise located thereon.
"Contingent Liability" and "Contingent Liabilities" shall mean,
respectively, each obligation and liability of Borrower and all such obligations
and liabilities of Borrower incurred pursuant
6
to any agreement, undertaking or arrangement by which Borrower: (a) guarantees,
endorses or otherwise becomes or is contingently liable upon (by direct or
indirect agreement, contingent or otherwise, to provide funds for payment, to
supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a
creditor against loss) the indebtedness, dividend, obligation or other liability
of any other Person in any manner (other than by endorsement of instruments in
the course of collection), including without limitation, any indebtedness,
dividend or other obligation which may be issued or incurred at some future
time; (b) guarantees the payment of dividends or other distributions upon the
shares or ownership interest of any other Person; (c) undertakes or agrees
(whether contingently or otherwise): (i) to purchase, repurchase, or otherwise
acquire any indebtedness, obligation or liability of any other Person or any
property or assets constituting security therefor, (ii) to advance or provide
funds for the payment or discharge of any indebtedness, obligation or liability
of any other Person (whether in the form of loans, advances, stock purchases,
capital contributions or otherwise), or to maintain solvency, assets, level of
income, working capital or other financial condition of any other Person, or
(iii) to make payment to any other Person other than for value received; (d)
agrees to lease property or to purchase securities, property or services from
such other Person with the purpose or intent of assuring the owner of such
indebtedness or obligation of the ability of such other Person to make payment
of the indebtedness or obligation; (e) to induce the issuance of, or in
connection with the issuance of, any letter of credit for the benefit of such
other Person; or (f) undertakes or agrees otherwise to assure a creditor against
loss. The amount of any Contingent Liability shall (subject to any limitation
set forth herein) be deemed to be the outstanding principal amount (or maximum
permitted principal amount, if larger) of the indebtedness, obligation or other
liability guaranteed or supported thereby.
"Debt" shall mean, as to any Person, without duplication, (a) all
borrowed money of such Person (including principal, interest, fees and charges),
whether or not evidenced by bonds, debentures, notes or similar instruments; (b)
all obligations to pay the deferred purchase price of property or services; (c)
all obligations, contingent or otherwise, with respect to the maximum face
amount of all letters of credit (whether or not drawn), bankers' acceptances and
similar obligations issued for the account of such Person (including the Letters
of Credit), and all unpaid drawings in respect of such Letters of Credit,
bankers' acceptances and similar obligations; (d) all indebtedness secured by
any Lien on any property owned by such Person, whether or not such indebtedness
has been assumed by such Person; (e) the aggregate amount of all Capitalized
Lease Obligations of such Person; (f) all Contingent Obligations of such Person,
whether or not reflected on its balance sheet; (g) all Hedging Obligations of
such Person; (h) all Debt of any partnership of which such Person is a general
partner; and (i) all monetary obligations of Borrower under (i) a so-called
synthetic, off-balance sheet or tax retention lease, or (ii) an agreement for
the use or possession of property creating obligations that do not appear on the
balance sheet of Borrower but which, upon the insolvency or bankruptcy of
Borrower, would be characterized as the indebtedness of Borrower (without regard
to accounting treatment). Notwithstanding the foregoing, Debt shall not include
trade payables and accrued expenses incurred by Borrower in accordance with
customary practices and in the ordinary course of business of Borrower.
"Default Rate" shall mean a per annum rate of interest equal to the
Prime Rate plus the Applicable Prime Margin, plus two percent (2%).
"Depreciation" shall mean the total amounts added to depreciation,
amortization, obsolescence, valuation and other proper reserves, as reflected on
Borrower's financial statements and determined in accordance with GAAP.
"Domestic Subsidiary" means a Subsidiary organized under the laws of
the United States or any political subdivision or instrumentality thereof.
7
"EBITDA" shall mean, for any period the sum for such period of: (i)
Net Income of Borrower and its Subsidiaries, plus (ii) Interest Charges, plus
(iii) federal and state income taxes (including the Illinois replacement tax),
plus (iv) Depreciation, plus (v) non-cash management compensation expense, plus
(vi) all other non-cash charges incurred in the ordinary course of business,
plus (vii) amortization of goodwill and other intangible assets, plus (viii) any
extraordinary loss in such period whether incurred or accrued for, without
duplication, minus (ix) any extraordinary income/gain in such period whether
incurred or accrued for, without duplication, plus (x) costs and expenses of up
to $2,000,000.00 incurred by the Borrower in connection with the transactions
contemplated by the Merger Agreement that are financed under the Loans or the
Subordinated Debt, plus (xi) up to $750,000 in management bonus compensation
incurred by Borrower in connection with the transactions contemplated by the
terms of the Merger Agreement and financed with the proceeds of a Revolving
Loan.
"Eligible Account" and "Eligible Accounts" shall mean each Account
and all such Accounts (exclusive of sales, excise or other similar taxes) owing
to Borrower or any Subsidiary which meets each of the following requirements:
(a) it is genuine in all respects and has arisen in the ordinary
course of Borrower's business from (i) the performance of services by Borrower
or the applicable Subsidiary, which services have been fully performed,
acknowledged and accepted by the Account Debtor or (ii) the sale, license,
assignment or lease of Goods or Software by Borrower, including C.O.D. sales,
which Goods have been completed in accordance with the Account Debtor's
specifications (if any) and delivered to and accepted by the Account Debtor;
(b) it is subject to a perfected, first priority Lien in favor of
the Bank and is not subject to any other assignment, claim or Lien and, where
applicable, the Bank has the copyright registration with respect to the work
which gave rise to the Account on file in the Federal Office of Patent and
Trademark;
(c) it is the valid, legally enforceable and unconditional
obligation of the Account Debtor with respect thereto, and is not subject to the
fulfillment of any condition whatsoever or any counterclaim, credit, trade or
volume discount, allowance, discount, rebate or adjustment by the Account Debtor
with respect thereto, or to any claim by such Account Debtor denying liability
thereunder in whole or in part and the Account Debtor has not refused to accept
and/or has not returned or offered to return any of the Goods or services which
are the subject of such Account; provided, however, that the Accounts of such
Account Debtor shall only be ineligible to the extent of such offset or
potential offset;
(d) the Account Debtor with respect thereto is a resident or
citizen of, and is located within, the United States, unless the sale of goods
or services giving rise to such Account is on letter of credit, banker's
acceptance or other credit support terms reasonably satisfactory to the Bank;
(e) it is not an Account arising from a "sale on approval", "sale
or return", "consignment", "guaranteed sale" or "▇▇▇▇ and hold", or are subject
to any other repurchase or return agreement;
(f) it is not an Account with respect to which possession and/or
control of the goods sold giving rise thereto is held, maintained or retained by
Borrower or any Subsidiary (or by any agent or custodian of Borrower or any
Subsidiary) for the account of, or subject to, further and/or future direction
from the Account Debtor with respect thereto;
8
(g) it has not arisen out of contracts with the United States or
any department, agency or instrumentality thereof, unless Borrower has assigned
its right to payment of such Account to the Bank pursuant to the Assignment of
Claims Act of 1940, and evidence (satisfactory to the Bank) of such assignment
has been delivered to the Bank, or any state, county, city or other governmental
body, or any department, agency or instrumentality thereof;
(h) if Borrower maintains a credit limit for an Account Debtor,
the aggregate dollar amount of Accounts due from such Account Debtor, including
such Account, does not exceed such credit limit (and if it does exceed such
amount, the excess only shall be considered ineligible);
(i) if the Account is evidenced by chattel paper or an instrument,
the originals of such chattel paper or instrument shall have been endorsed
and/or assigned and delivered to the Bank or, in the case of electronic chattel
paper, shall be in the control of the Bank, in each case in a manner
satisfactory to the Bank;
(j) such Account is evidenced by an invoice delivered to the
related Account Debtor and is not more than (i) sixty (60) days past the due
date thereof, or (ii) ninety (90) days (or, in the case of Accounts owing to
Integrity Publishers, one-hundred fifty (150) days) past the original invoice
date thereof, in each case according to the original terms of sale;
(k) it is not an Account with respect to an Account Debtor that is
located in any jurisdiction which has adopted a statute or other requirement
with respect to which any Person that obtains business from within such
jurisdiction must file a notice of business activities report or make any other
required filings in a timely manner in order to enforce its claims in such
jurisdiction's courts unless (i) such notice of business activities report has
been duly and timely filed or Borrower or the applicable Subsidiary is exempt
from filing such report and has provided the Bank with satisfactory evidence of
such exemption or (ii) the failure to make such filings may be cured
retroactively by Borrower or the applicable Subsidiary for a nominal fee;
(l) the Account Debtor with respect thereto is not Borrower or an
Affiliate of Borrower;
(m) there is no bankruptcy, insolvency or liquidation proceeding
pending by or against the Account Debtor with respect thereto, nor has the
Account Debtor suspended business, made a general assignment for the benefit of
creditors or failed to pay its debts generally as they come due, and/or no
condition or event has occurred having a Material Adverse Effect on the Account
Debtor which would require the Accounts of such Account Debtor to be deemed
uncollectible in accordance with GAAP;
(n) it is not owed by an Account Debtor with respect to which
twenty five percent (25.00%) or more of the aggregate amount of outstanding
Accounts owed at such time by such Account Debtor is classified as ineligible
under clause (j) of this definition (exclusive of Accounts arising from direct
to consumer sales);
(o) if the aggregate amount of all Accounts owed by the Account
Debtor thereon exceeds 50% of the aggregate amount of all Accounts at such time,
then all Accounts owed by such Account Debtor in excess of such amount shall be
deemed ineligible; and
(p) it does not violate the negative covenants and does satisfy
the affirmative covenants of Borrower contained in this Agreement
9
An Account which is at any time an Eligible Account, but which subsequently
fails to meet any of the foregoing requirements, shall forthwith cease to be an
Eligible Account. Further, with respect to any Account, if the Bank at any time
hereafter determines in its reasonable credit judgment that the prospect of
payment or performance by the Account Debtor with respect thereto is materially
impaired for any reason whatsoever, such Account shall cease to be an Eligible
Account after notice of such determination is given to Borrower.
"Eligible Inventory" shall mean all Inventory of Borrower or any
Subsidiary which meets each of the following requirements:
(a) it is subject to a perfected, first priority Lien in favor of
the Bank and is not subject to any other assignment, claim or Lien;
(b) it is salable and not slow-moving, obsolete or discontinued,
as determined in the reasonable credit judgment of the Bank;
(c) it is in the possession and control of Borrower or any
Subsidiary and it is stored and held in facilities owned by Borrower or any
Subsidiary or, if such facilities are not so owned, the Bank is in possession of
a Collateral Access Agreement with respect thereto;
(d) it is not Inventory produced in violation of the Fair Labor
Standards Act and subject to the "hot goods" provisions contained in Title 29
U.S.C. Section 215;
(e) it is not subject to any agreement or license which would
unduly restrict the Bank's ability to sell or otherwise dispose of such
Inventory;
(f) it is located in the United States or in any territory or
possession of the United States that has adopted Article 9 of the Uniform
Commercial Code;
(g) it is not "in transit" to Borrower or any Subsidiary or held
by Borrower or any Subsidiary on consignment;
(h) it is not "work-in-progress" Inventory;
(i) it is not supply items, packaging or any other similar
materials;
(j) it does not breach any of the representations, warranties or
covenants pertaining to Inventory set forth in the Loan Documents; and
(k) the Bank shall not have determined in its reasonable credit
judgment that it is unacceptable due to age, type, category, quality, quantity
and/or any other reason whatsoever.
Inventory which is at any time Eligible Inventory but which subsequently fails
to meet any of the foregoing requirements shall forthwith cease to be Eligible
Inventory.
"Employee Plan" includes any pension, stock bonus, employee stock
ownership plan, retirement, profit sharing, deferred compensation, stock option,
bonus or other incentive plan, whether qualified or nonqualified, or any
disability, medical, dental or other health plan, life insurance or other death
benefit plan, vacation benefit plan, severance plan or other employee benefit
plan or arrangement,
10
including, without limitation, those pension, profit-sharing and retirement
plans of Borrower described from time to time in the financial statements of
Borrower and any pension plan, welfare plan, Defined Benefit Pension Plans (as
defined in ERISA) or any multi-employer plan, maintained or administered by
Borrower or to which Borrower is a party or may have any liability or by which
Borrower is bound.
"Enlight" shall mean Enlight, Inc., a Tennessee corporation.
"Environmental Laws" shall mean all present or future federal, state
or local laws, statutes, common law duties, rules, regulations, ordinances and
codes, together with all administrative or judicial orders, consent agreements,
directed duties, requests, licenses, authorizations and permits of, and
agreements with, any governmental authority, in each case relating to any matter
arising out of or relating to public health and safety, or pollution or
protection of the environment or workplace, including any of the foregoing
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, discharge, emission, release,
threatened release, control or cleanup of any Hazardous Substance.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Event of Default" shall mean any of the events or conditions which
are set forth in Section 11 hereof.
"Federal Funds Rate" shall mean, for any day, a fluctuating interest
rate equal for each day during such period to 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 for such day (or, if such
day is not a Business Day, for the next preceding 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 such day on such
transactions received by the Bank from three Federal funds brokers of recognized
standing selected by the Bank. The Bank's determination of such rate shall be
binding and conclusive absent manifest error.
"Fixed Charges" shall mean, at the time of any determination, the
sum of the following items (without duplication) for Borrower during the
relevant four consecutive fiscal quarter period:
(a) The amount of scheduled principal payments paid or required to
be paid under this Agreement during such period, plus
(b) The amount of scheduled principal payments paid or required to
be paid on other Funded Debt (i.e., Funded Debt other than under this Agreement)
during such period, plus
(c) The amount of cash interest and other finance charges of
Borrower (on a consolidated basis) required to be charged as an expense under
GAAP during the immediately preceding four (4) consecutive fiscal quarter during
such period, plus
(d) The distributions permitted under Section 9.6 (ee) and (ff)
hereof paid or accrued for, without duplication, plus
(e) cash taxes, plus
(f) cash charitable contributions.
11
For purposes of this calculation, interest includes interest accrued under
Capital Leases, and principal includes principal obligations under Capital
Leases.
"Funded Debt" shall mean, at the time of any determination, the
aggregate principal amount of indebtedness of Borrower and its Subsidiaries on a
consolidated basis for the following (without duplication): (a) borrowed money
(including the indebtedness under the Loan Documents, but not including trade
indebtedness permitted hereunder); and (b) Capital Leases; and (c) deferred
purchase price or installment purchases of real property, personal property,
and/or services (including any deferred purchase price and/or non-compete
obligations in connection with acquisitions) but excluding any trade
indebtedness incurred in the ordinary course of business; and (d) reimbursement
obligations under letters of credit; and (e) any indebtedness or contractual
payment obligation that is not paid within 60 calendar days of the due date
therefor exclusive of any such obligations that are being disputed by the
Borrower in good faith (exclusive of Hedging Obligations at any time that there
does not exist an Event of Default or an Unmatured Event of Default); and (f)
any indebtedness evidenced by a promissory note; and (g) guaranties of
indebtedness and obligations that would constitute Funded Debt hereunder if the
primary obligor thereof was Borrower.
"GAAP" shall mean generally accepted accounting principles set forth
from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of the
date of determination, provided, however, that interim financial statements or
reports shall be deemed in compliance with GAAP despite the absence of footnotes
and fiscal year-end adjustments as required by GAAP.
"Hazardous Substances" shall mean (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, dielectric fluid containing levels
of polychlorinated biphenyls, radon gas and mold; (b) any chemicals, materials,
pollutant or substances defined as or included in the definition of "hazardous
substances", "hazardous waste", "hazardous materials", "extremely hazardous
substances", "restricted hazardous waste", "toxic substances", "toxic
pollutants", "contaminants", "pollutants" or words of similar import, under any
applicable Environmental Law; and (c) any other chemical, material or substance,
the exposure to, or release of which is prohibited, limited or regulated by any
governmental authority or for which any duty or standard of care is imposed
pursuant to, any Environmental Law.
"Hedging Agreement" shall mean any interest rate, currency or
commodity swap agreement, cap agreement or collar agreement, and any other
agreement or arrangement designed to protect a Person against fluctuations in
interest rates, currency exchange rates or commodity prices.
"Hedging Obligation" shall mean, with respect to any Person, any
liability of such Person under any Hedging Agreement.
"Indemnified Party" and "Indemnified Parties" shall mean,
respectively, each of the Bank and any parent corporation, Affiliate or
Subsidiary of the Bank, and each of their respective officers, directors,
employees, attorneys and agents, and all of such parties and entities.
"Integrity International Subsidiaries" shall mean Integrity Music
Europe, Integrity Media Asia, Integrity Media Australia, and Sarepta.
12
"Integrity Media Asia" shall mean Integrity Media Asia Pte. Ltd., a
company organized under the laws of Singapore.
"Integrity Media Australia" shall mean Integrity Media Australasia
Pty. Ltd., a company organized under the laws of Australia.
"Integrity Music Europe" shall mean Integrity Music Europe, Ltd., a
company organized under the laws of England.
"Integrity Stockholders Agreement" shall mean that certain Executive
Shareholders Agreement of even date herewith by and among Integrity Media, P.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and the holders of Capital Securities of Integrity Media from
time to time a party hereto.
"Intellectual Property" shall mean the collective reference to all
rights, priorities and privileges relating to intellectual property, whether
arising under United States, multinational or foreign laws or otherwise,
including copyrights, patents, service marks and trademarks, and all
registrations and applications for registration therefor and all licensees
thereof, trade names, domain names, technology, know-how and processes, and all
rights to ▇▇▇ at law or in equity for any infringement or other impairment
thereof, including the right to receive all proceeds and damages therefrom.
"Intercreditor Agreement" shall mean that certain Subordination and
Intercreditor Agreement of even date herewith by and among Borrower, the Bank
and the Subordinated Lender.
"Interest Charges" shall mean, for any period, the sum of: (a) all
interest, charges and related expenses payable with respect to that fiscal
period to a Bank in connection with borrowed money or the deferred purchase
price of assets that are treated as interest in accordance with GAAP, plus (b)
the portion of Capitalized Lease Obligations with respect to that fiscal period
that should be treated as interest in accordance with GAAP, plus (c) all charges
paid or payable (without duplication) during that period with respect to any
Hedging Agreements.
"Interest Period" shall mean, with regard to any LIBOR Loan,
successive one, two, three or six month periods as selected from time to time by
Borrower by notice given to the Bank not less than three Business Days prior to
the first day of each respective Interest Period; provided, however, that: (i)
each such Interest Period occurring after the initial Interest Period of any
LIBOR Loan shall commence on the day on which the preceding Interest Period for
such LIBOR Loan expires, (ii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding Business Day,
provided, however, that if such extension would cause the last day of such
Interest Period to occur in the next following calendar month, then the last day
of such Interest Period shall occur on the immediately preceding Business Day;
(iii) whenever the first day of any Interest Period occurs on a day of a month
for which there is no numerically corresponding day in the calendar month in
which such Interest Period terminates, such Interest Period shall end on the
last Business Day of such calendar month; and (iv) Borrower shall select an
Interest Periods so as not to require a payment or prepayment of any LIBOR Loan
during an Interest Period for such Loan, and (v) the final Interest Period for
any Loan must be such that its expiration occurs on or before the Maturity Date.
"Investment" shall mean, with respect to any Person, any investment
in another Person, whether by acquisition of any debt or equity security, by
making any loan or advance, by becoming obligated with respect to a Contingent
Liability in respect of obligations of such other Person (other than travel and
similar advances to employees in the ordinary course of business).
13
"Letter of Credit" and "Letters of Credit" shall mean, respectively,
a letter of credit and all such letters of credit issued by the Bank, in its
sole discretion, upon the execution and delivery by Borrower and the acceptance
by the Bank of a Master Letter of Credit Agreement and a Letter of Credit
Application, as set forth in Section 2.6 of this Agreement.
"Letter of Credit Application" shall mean, with respect to any
request for the issuance of a Letter of Credit, a letter of credit application
in the form being used by the Bank at the time of such request for the type of
Letter of Credit requested.
"Letter of Credit Commitment" shall mean, at any time, an amount
equal One Million Dollars ($1,000,000.00).
"Letter of Credit Maturity Date" shall mean 25 days prior to the
Maturity Date.
"Letter of Credit Obligations" shall mean, at any time, an amount
equal to the aggregate of the original face amounts of all Letters of Credit
minus the sum of (i) the amount of any reductions in the original face amount of
any Letter of Credit which did not result from a draw thereunder, (ii) the
amount of any payments made by the Bank with respect to any draws made under a
Letter of Credit for which Borrower has reimbursed the Bank, (iii) the amount of
any payments made by the Bank with respect to any draws made under a Letter of
Credit which have been converted to a Revolving Loan as set forth in Section
2.6, and (iv) the portion of any issued but expired Letter of Credit which has
not been drawn by the beneficiary thereunder. For purposes of determining the
outstanding Letter of Credit Obligations at any time, the Bank's acceptance of a
draft drawn on the Bank pursuant to a Letter of Credit shall constitute a draw
on the applicable Letter of Credit at the time of such acceptance.
"Liabilities" shall mean at all times all liabilities of Borrower
that would be shown as such on a balance sheet of Borrower prepared in
accordance with GAAP.
"LIBOR" shall mean a rate of interest equal to (a) the per annum
rate of interest at which United States dollar deposits in an amount comparable
to the amount of the relevant LIBOR Loan and for a period equal to the relevant
Interest Period are offered in the London Interbank Eurodollar market at 11:00
a.m. (London time) two Business Days prior to the commencement of such Interest
Period (or three Business Days prior to the commencement of such Interest Period
if banks in London, England were not open and dealing in offshore United States
dollars on such second preceding Business Day), as displayed in the Bloomberg
Financial Markets system (or other authoritative source selected by the Bank in
its sole discretion), divided by (b) a number determined by subtracting from
1.00 the then stated maximum reserve percentage for determining reserves to be
maintained by member banks of the Federal Reserve System for Eurocurrency
funding or liabilities as defined in Regulation D (or any successor category of
liabilities under Regulation D), such rate to remain fixed for such Interest
Period, or as LIBOR is otherwise determined by the Bank in its sole and absolute
discretion. The Bank's determination of LIBOR shall be conclusive, absent
manifest error.
"LIBOR Loan" or "LIBOR Loans" shall mean that portion, and
collectively those portions, of the aggregate outstanding principal balance of
the Loans that will bear interest at the LIBOR Rate, of which at any time,
Borrower may identify no more than five (5) advances of the Loans which will
bear interest at the LIBOR Rate.
"LIBOR Rate" shall mean a per annum rate of interest equal to LIBOR
for the relevant Interest Period, plus the Applicable LIBOR Margin.
14
"License" shall mean any authorization, construction or other
permit, consent, franchise, ordinance, registration, certificate, license, call
sign, frequency designation, agreement or other right filed with, granted by,
issued by or entered into with any Official Body.
"Lien" shall mean, with respect to any Person, any interest granted
by such Person in any real or personal property, asset or other right owned or
being purchased or acquired by such Person (including, without limitation, an
interest in respect of a Capital Lease) which secures payment or performance of
any obligation and shall include any mortgage, lien, encumbrance, title
retention lien, charge or other security interest of any kind, whether arising
by contract, as a matter of law, by judicial process or otherwise.
"Loans" shall mean, collectively, all Revolving Loans, and the Term
Loans made by the Bank to Borrower and all Letter of Credit Obligations, under
and pursuant to this Agreement.
"Loan Documents" shall mean each of the agreements, documents,
instruments and certificates set forth in Section 3.1 hereof, and any and all
such other instruments, documents, certificates and agreements from time to time
executed and delivered by Borrower, or any of its Subsidiaries for the benefit
of the Bank pursuant to any of the foregoing, and all amendments, restatements,
supplements and other modifications thereto.
"Mandatory Prepayment" shall have the meaning set forth in Section
2.1(c) and Section 2.2(d) hereof.
"Master Letter of Credit Agreement" shall mean, at any time, with
respect to the issuance of Letters of Credit, a Master Letter of Credit
Agreement in the form being used by the Bank at such time.
"Material Adverse Effect" shall mean (a) a material adverse change
in, or a material adverse effect upon, the assets, business, properties,
financial condition or results of operations of Borrower and its Subsidiaries
taken as a whole, (b) a material impairment of the ability of Borrower and its
Subsidiaries to perform any of the Obligations under any of the Loan Documents,
or (c) a material adverse effect on (i) the legality, validity, binding effect
or enforceability against Borrower and its Subsidiaries of any of the Loan
Documents, or (ii) the perfection or priority of any Lien granted to the Bank
under any Loan Document with respect to the Collateral viewed as a whole or
(iii) the rights or remedies of the Bank under any Loan Document.
"Material Contract" shall have the meaning set forth in Section
7.27.
"Maturity Date" shall mean July 8, 2009, unless extended by the Bank
pursuant to any modification, extension or renewal note executed by Borrower and
accepted by the Bank in its sole and absolute discretion in substitution for the
Notes.
"Merger Agreement" shall mean that certain Agreement and Plan of
Merger by and between Integrity Media and Kona dated as of March 1, 2004.
"Net Cash Proceeds" shall mean:
(a) with respect to any Asset Disposition, the aggregate cash
proceeds (including cash proceeds received pursuant to policies of insurance or
by way of deferred payment of principal
15
pursuant to a note, installment receivable or otherwise, but only as and when
received) received by Borrower pursuant to such Asset Disposition net of (i) the
direct costs relating to such sale, transfer or other disposition (including
sales commissions and legal, accounting and investment banking fees), (ii) taxes
paid or reasonably estimated by Borrower to be payable as a result thereof
(after taking into account any available tax credits or deductions and any tax
sharing arrangements), and (iii) amounts required to be applied to the repayment
of any Debt secured by a Lien on the asset subject to such Asset Disposition
(other than the Loans);
(b) with respect to any issuance of Capital Securities, the
aggregate cash proceeds received by Borrower pursuant to such issuance, net of
the direct costs relating to such issuance (including professional fees, sales
and underwriters' commissions; and
(c) with respect to any issuance of Debt, the aggregate cash
proceeds received by Borrower pursuant to such issuance, net of the direct costs
of such issuance (including professional fees, up-front, underwriters' and
placement fees).
"Net Income" shall mean, with respect to Borrower and its
Subsidiaries for any period, the consolidated net income (or loss) of Borrower
and its Subsidiaries for such period as determined in accordance with GAAP
(including any net income of a Person (or assets of a Person) acquired pursuant
to any Permitted Acquisition prior to the time such Person (or its assets) were
acquired by the Borrower or a Subsidiary), excluding any gains from Asset
Dispositions, any extraordinary gains or losses, and any gains or losses from
discontinued operations.
"Net Worth" shall mean, on a consolidated basis, the net worth of
the Borrower and its Subsidiaries as determined by GAAP consistently applied.
"Non-Excluded Taxes" shall have the meaning set forth in Section
2.7(a) hereof.
"Non-Financed Capital Expenditures" shall mean, for any period,
Capital Expenditures minus (but in no event by an amount that is less than zero)
the sum of Capital Expenditures funded out of (i) the proceeds of any of the
Loans, and (ii) other Debt permitted by the terms of Section 9.1.
"Note" and "Notes" shall mean, respectively, each of and
collectively, the Revolving Note, the Term Note A and the Term Note B.
"Obligations" shall mean the Loans, as evidenced by the Notes, all
interest accrued thereon (including interest which would be payable as
post-petition in connection with any bankruptcy or similar proceeding, whether
or not permitted as a claim thereunder), any fees due the Bank hereunder, any
expenses incurred by the Bank hereunder and any and all other liabilities and
obligations of Borrower to the Bank under this Agreement and any other Loan
Document, including any reimbursement obligations of Borrower in respect of
Letters of Credit and surety bonds, all Hedging Obligations which are owed to
the Bank or any Affiliate of the Bank, and all Bank Products Obligations, all in
each case howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent, now or hereafter existing, or due or to become due,
together with any and all renewals or extensions thereof.
"Obligor" shall mean Borrower, any guarantor, accommodation
endorser, third party pledgor, or any other party liable with respect to the
Obligations.
16
"Official Body" means any federal, state, local, or other government
(or any political subdivision, agency, authority, bureau, commission, department
or instrumentality thereof) and any court, tribunal, grand jury or arbitrator,
in each instance whether foreign or domestic.
"Organizational Document" shall mean, relative to any entity, its
certificate and articles of incorporation or organization, its by-laws or
operating agreements, and all equityholder agreements, voting agreements and
similar arrangements applicable to any of its authorized shares of capital
stock, its partnership interests or its member interests, and any other
arrangements relating to the control or management of any such entity.
"Organizational Identification Number" means, with respect to
Borrower, the organizational identification number assigned to each Borrower by
the applicable governmental unit or agency of the jurisdiction of organization
of each Borrower.
"Other Taxes" shall mean any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies which
arise from the execution, delivery, enforcement or registration of, or otherwise
with respect to, this Agreement or any of the other Loan Documents.
"Pension Plan" shall mean a "pension plan", as such term is defined
in Section 3(2) of ERISA, which is subject to Title IV of ERISA or the minimum
funding standards of ERISA (other than a Multiemployer Pension Plan), and as to
which Borrower or any member of the Controlled Group may have any liability,
including any liability by reason of having been a substantial employer within
the meaning of Section 4063 of ERISA at any time during the preceding five
years, or by reason of being deemed to be a contributing sponsor under Section
4069 of ERISA.
"Permitted Acquisitions" shall mean an Acquisition by Integrity
Media of the stock, membership interest, or any other equity interest in a
Person organized under the laws of the United States or any political
subdivision or instrumentality thereof, or the acquisition of all or
substantially all of the assets of any such Person (including without limitation
assets comprising all or substantially all of an unincorporated business unit or
division of any Person), which satisfies each of the following conditions: (i)
Integrity Media, or a Person which shall become a Borrower upon consummation of
such Acquisition and shall be a direct or indirect domestic Wholly-Owned
Subsidiary of Integrity Media, is the Acquiring Company, (ii) if the Acquisition
is structured as a merger, and Borrower is the Surviving Company, (iii) Target
Company is in a substantially similar line of business as Borrower, (iv) Target
Company has an EBITDA (provided, however, that with respect to the purchase of
assets of less than an entire Target Company, EBITDA will be calculated on a
proforma basis prepared in good faith based on reasonable assumptions) in excess
of zero for the twelve month period ended on the date such Acquisition is
consummated, (v) no Event of Default has occurred during the sixty (60) day
period preceding the date on which such Acquisition is consummated, and no
Unmatured Event of Default or Event of Default will occur or is reasonably
likely to occur as a result of or due to such Acquisition, (vi) the purchase
price (including without limitation any deferred purchase price, seller notes,
assumed indebtedness, or similar items) together with all expenses incurred in
connection with such Acquisition does not exceed $2,000,000 (including all
transaction costs and all Debt, liabilities and contingent obligations incurred
or assumed in connection therewith) for any single Acquisition, (vii)
simultaneously with the closing of such Acquisition, the Target Company (if such
Permitted Acquisition is structured as a purchase of equity) or the Surviving
Company (if such Permitted Acquisition is structured as a purchase of assets or
a merger) executes and delivers to Bank (a) such documents necessary to grant to
the Bank a first priority Lien in all of the assets of such Target Company or
Surviving Company, each in form and substance satisfactory to Bank (and if the
Target Company becomes a Subsidiary of Borrower, Borrower executes and delivers
to Bank a security agreement granting to Bank a first priority security
17
interest in 100% of the capital stock or other equity interest of such Target
Company, along with the original stock certificates, if any, and stock powers
executed in blank, each in form and substance satisfactory to Bank), and (b) a
joinder agreement satisfactory to Bank in which such Target Company or Surviving
Company becomes the Borrower under this Agreement and assumes primary, joint and
several liability of the Obligations, (viii) prior to the closing of such
Acquisition, an Authorized Officer of Borrower delivers to Bank a certificate on
behalf of Borrower certifying that such Acquisition is a Permitted Acquisition,
(ix) such Acquisition is friendly, rather than hostile, in nature, (x) Borrower
has, no less than thirty (30) days prior to making such Acquisition, prepared
and furnished to the Bank the proforma financial statements described below for
the Target Company (if such Acquisition is structured as a purchase of equity)
or the Surviving Company (if such Acquisition is structured as a purchase of
assets or a merger), demonstrating to the satisfaction of Bank that the Target
Company, all Surviving Companies, and Borrower, as the case may be, will be
solvent upon consummation of such Acquisition and, upon the passage of time
thereafter, that none of the covenants under this Agreement will be violated as
a consequence of such Acquisition or with the passage of time thereafter, (xi)
Borrower has, no less than thirty (30) days prior to making such Acquisition,
prepared and furnished to the Bank a Borrowing Base Certificate demonstrating
that, upon consummation of such Acquisition, Revolving Loan Availability shall
be not less than $2,000,000, and (xii) Borrower has also provided to Bank, no
less than thirty (30) days prior to making such Acquisition, copies of the
audited financial statements (if available, or unaudited financial statements if
no audited financial statements exist) for the Target Company for the three
fiscal years most recently ended and for each of the completed fiscal quarters
in the then current fiscal year. The proforma financial statements referred to
in clause (xii) shall contain consolidated and consolidating balance sheets,
income statements, statements of cash flows and such other reports and
disclosures of Borrower as well as the Target Company (if such Permitted
Acquisition is structured as a purchase of equity) or the Surviving Company (if
such Permitted Acquisition is structured as a purchase of assets or a merger)
and shall cover such forecast periods, as the Bank may in its reasonable credit
judgment require.
"Permitted Liens" shall mean (a) Liens for Taxes, assessments or
other governmental charges not at the time delinquent or thereafter payable
without penalty or being contested in good faith by appropriate proceedings and,
in each case, for which it maintains adequate reserves in accordance with GAAP
and in respect of which no Lien has been filed; (b) Liens arising in the
ordinary course of business (such as (i) Liens of carriers, warehousemen,
mechanics and materialmen and other similar Liens imposed by law, and (ii) Liens
in the form of deposits or pledges incurred in connection with worker's
compensation, unemployment compensation and other types of social security
(excluding Liens arising under ERISA) or in connection with surety bonds, bids,
performance bonds and similar obligations) for sums not overdue or being
contested in good faith by appropriate proceedings and not involving any
advances or borrowed money or the deferred purchase price of property or
services, which do not in the aggregate materially detract from the value of the
property or assets of Borrower or materially impair the use thereof in the
operation of Borrower's business and, in each case, for which it maintains
adequate reserves in accordance with GAAP and in respect of which no Lien has
been filed; (c) Liens described on Schedule 9.2 as of the Restatement Date and
the replacement, extension or renewal of any such Lien upon or in the same
property subject thereto arising out of the extension, renewal or replacement of
the Debt secured thereby (without increase in the amount thereof); (d)
easements, rights of way, restrictions, minor defects or irregularities in title
and other similar Liens not interfering in any material respect with the
ordinary conduct of the business of Borrower or any of its Subsidiaries; (e)
subject to the limitation set forth in Section 9.1(g), Liens arising in
connection with Capitalized Lease Obligations (and attaching only to the
property being leased); (f) Liens securing Debt of any Person which becomes a
Subsidiary after the date of this Agreement pursuant to a Permitted Acquisition;
provided, that such Lien exists at the time that such Person (or its assets)
becomes a Subsidiary and is not created in contemplation of or in connection
with such Permitted Acquisition; (g)
18
subject to the limitation set forth in Section 9.1(h), Liens that constitute
purchase money security interests on any property securing Debt incurred for the
purpose of financing all or any part of the cost of acquiring such property,
provided that any such Lien attaches to such property within twenty (20) days of
the acquisition thereof and attaches solely to the property so acquired; and (h)
Liens granted to the Bank hereunder and under the Loan Documents.
"Permitted Sales Percentage" shall mean, at the time of any
determination, a percentage equal to (a) seven percent (7%) minus (b) the sum of
the percentages of Capital Securities of Integrity Media sold by P. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, determined as of the date of each applicable sale, since the
Restatement Date.
"Permitted Subordinated Debt Refinancing" means any extension,
refinancing, renewal, replacement or refunding (each a "refinancing") of the
Subordinated Debt consistent with the terms of Section 13 of the Intercreditor
Agreement, provided that in connection with any such refinancing, (i) the
aggregate outstanding principal amount of the Subordinated Debt shall not be
increased, (ii) no Liens or security interests will be granted by any Borrower
to secure such refinancing of the Subordinated Debt, (iii) there shall be no
increase in any pre-default or post-default interest rate or interest rate
margin prescribed in the Subordinated Debt Documents, (iv) no Borrower shall
become subject to covenants that are more materially restrictive or more onerous
than analogous provisions in the Subordinated Debt Documents as in effect on the
date hereof, (v) all the terms of the refinanced Subordinated Debt shall be
reasonably acceptable to Bank (provided that subordination terms that are
substantially similar to the current Subordination Agreement shall be deemed to
be reasonable).
"Person" shall mean any natural person, partnership, limited
liability company, corporation, trust, joint venture, joint stock company,
association, unincorporated organization, government or agency or political
subdivision thereof, or other entity, whether acting in an individual, fiduciary
or other capacity.
"Prime Loan" or "Prime Loans" shall mean that portion, and
collectively, those portions of the aggregate outstanding principal balance of
the Loans that will bear interest at the Prime Rate plus the Applicable Prime
Margin.
"Prime Rate" shall mean the floating per annum rate of interest
which at any time, and from time to time, shall be most recently announced by
the Bank as its Prime Rate, which is not intended to be the Bank's lowest or
most favorable rate of interest at any one time. The effective date of any
change in the Prime Rate shall for purposes hereof be the date the Prime Rate is
changed by the Bank. The Bank shall not be obligated to give notice of any
change in the Prime Rate.
"Regulatory Change" shall mean the introduction of, or any change in
any applicable law, treaty, rule, regulation or guideline or in the
interpretation or administration thereof by any governmental authority or any
central bank or other fiscal, monetary or other authority having jurisdiction
over the Bank or its lending office.
"Restatement Date" shall mean the date on which all of the
conditions to borrowing set forth in Section 3 hereof are satisfied to Bank's
satisfaction.
"Revolving Interest Rate" shall mean Borrower's from time to time
option of (i) a floating per annum rate of interest equal to the Prime Rate plus
the Applicable Prime Margin, or (ii) the LIBOR Rate plus the Applicable LIBOR
Margin.
19
"Revolving Loan" and "Revolving Loans" shall mean, respectively,
each direct advance and the aggregate of all such direct advances, from time to
time in the form of either Prime Loans and/or LIBOR Loans, made by the Bank to
Borrower under and pursuant to this Agreement, as set forth in Section 2.1 of
this Agreement.
"Revolving Loan Availability" shall mean, at any time, an amount
equal to the lesser of (a) the Revolving Loan Commitment minus the Letter of
Credit Obligations, or (b) the Borrowing Base Amount minus the Letter of Credit
Obligations
"Revolving Loan Commitment" shall mean Twelve Million and 00/100
Dollars ($12,000,000.00).
"Revolving Note" shall have the meanings set forth in Section 4.1
hereof.
"Sarepta" shall mean Sarepta Music (Pty) Ltd., a private company
organized and existing under the laws of the Republic of South Africa.
"Senior Funded Debt" shall mean all Funded Debt of Borrower other
than Subordinated Debt.
"Subordinated Debt" shall mean the Debt of Borrower owing to
Subordinated Lender in an original principal amount of $15,000,000 (together
with capitalized interest, fees, costs and other amounts) incurred pursuant to
the terms of the Subordinated Debt Documents, including, without duplication,
the refinanced Debt incurred in connection with a Permitted Subordinated Debt
Refinancing.
"Subordinated Debt Documents" means (i) the Securities Purchase
Agreement of even date herewith between Borrower and Subordinated Lender (the
"SPA"), (ii) the Senior Subordinated Notes made by Borrower payable to
Subordinated Lender and dated as of the Restatement Date, (iii) the
Intercreditor Agreement, (iv) the Warrants and the Warrant Agreement (as defined
in the Intercreditor Agreement), (v) all documents and instruments executed by
the parties in connection therewith including, without limitation, the
Subsidiary Guaranty, the Shareholder's Agreement, the Registration Rights
Agreement, the Assumption Agreement and the Integrity Guaranty, each dated as of
the Restatement Date and as defined in the SPA, and (vi) all documents and
agreements in connection with a Permitted Subordinated Debt Refinancing.
"Subordinated Lender" means each of Key Principal Partners, LLC and
KPP Investors II, L.P., and any other Person that is now or hereafter a holder
of the Subordinated Debt in accordance with the terms of the Subordination
Agreement.
"Subsidiary" and "Subsidiaries" shall mean, respectively, with
respect to any Person, each and all such corporations, partnerships, limited
partnerships, limited liability companies, limited liability partnerships, joint
ventures or other entities of which or in which such Person owns, directly or
indirectly, such number of outstanding Capital Securities as have more than
fifty percent (50.00%) of the ordinary voting power for the election of
directors or other managers of such corporation, partnership, limited liability
company or other entity. Unless the context otherwise requires, each reference
to Subsidiaries herein shall be a reference to Subsidiaries of Borrower.
"Surviving Company" means as applicable, either (i) the Person that
will own the assets to be acquired from a Target Company in a Permitted
Acquisition upon the consummation thereof, or (ii)
20
the survivor of the merger of an Acquiring Company with the Target Company in a
Permitted Acquisition upon the consummation thereof.
"Target Company" means the Person whose assets or stock, membership
interests, or other equity interest will be acquired in a Permitted Acquisition
upon the consummation thereof, or if applicable, with which an Acquiring Company
will merge in a Permitted Acquisition upon the consummation thereof, which in
either case shall be an entity organized under the laws of the United States or
any political subdivision or instrumentality thereof.
"Taxes" shall mean any and all present and future taxes, duties,
levies, imposts, deductions, assessments, charges or withholdings, and any and
all liabilities (including interest and penalties and other additions to taxes)
with respect to the foregoing.
"Term Interest Rate" shall mean Borrower's from time to time option
of (i) a floating per annum rate of interest equal to the Prime Rate plus the
Applicable Prime Margin, or (ii) the LIBOR Rate plus the Applicable LIBOR
Margin.
"Term Loan A" shall mean the direct advance, in the form of either a
Prime Loan and/or LIBOR Loan, made by the Bank to Borrower as Term Loan A under
and pursuant to this Agreement, as set forth in Section 2.2 of this Agreement.
"Term Loan B" shall mean the direct advance, in the form of either a
Prime Loan and/or LIBOR Loan, made by the Bank to Borrower as Term Loan B under
and pursuant to this Agreement, as set forth in Section 2.2 of this Agreement.
"Term Loans" shall mean Term Loan A, together with Term Loan B.
"Term Loan A Commitment" shall mean Five Million Six Hundred Twelve
Thousand Five Hundred and 00/100 Dollars ($5,612,500.00).
"Term Loan B Commitment" shall mean Four Million Three Hundred
Fifty-One Thousand Six Hundred Sixty Six and 66/100 Dollars ($4,351,666.66).
"Term Note A" shall have the meaning set forth in Section 4.2
hereof.
"Term Note B" shall have the meaning set forth in Section 4.2
hereof.
"Term Notes" shall mean Term Note A, together with Term Note B.
"Total Funded Debt" shall mean all Funded Debt of Borrower,
determined on a consolidated basis, excluding (i) Contingent Liabilities (except
to the extent constituting Contingent Liabilities in respect of the Debt of a
Person other than Borrower or any Subsidiaries), (ii) Hedging Obligations, and
(iii) Debt of Borrower to Subsidiaries and Debt of Subsidiaries to Borrower or
to other Subsidiaries, and (iv) contingent obligations in respect of undrawn
Letters of Credit.
"UCC" shall mean the Uniform Commercial Code in effect on the date
hereof and as amended from time to time, and as enacted in the State of Illinois
or in any state or states which, pursuant to the Uniform Commercial Code as
enacted in the State of Illinois, has jurisdiction with respect to all, or any
portion of, the Collateral or this Agreement, from time to time. It is the
intent of the parties that the definitions set forth herein should be construed
in their broadest sense so that the Collateral will be
21
construed in its broadest sense. Accordingly if there are, from time to time,
proposed changes to defined terms in the Uniform Commercial Code that broaden
definitions, they are incorporated herein and the existing definitions in the
Uniform Commercial Code are broader than the amended definitions, the existing
ones will be controlling. Similarly, where the phrase "as defined in the Uniform
Commercial Code, but in any event shall include by way of example and not of
limitation" is used herein, it means as defined in the Uniform Commercial Code
except that if any of the enumerated classifications of items specified
thereafter would not fall within the Uniform Commercial Code definition such
items shall nonetheless be included in the applicable definition for purposes of
this Agreement.
"United States Treasury Securities" means actively traded United
States Treasury bonds, bills and notes
"Unmatured Event of Default" shall mean any event which, with the
giving of notice, the passage of time or both, would constitute an Event of
Default.
"Voidable Transfer" shall have the meaning set forth in Section
13.21 hereof.
"Wholly-Owned Subsidiary" shall mean any Subsidiary of which or in
which Borrower owns, directly or indirectly, one hundred percent (100%) of the
Capital Securities of such Subsidiary.
"Work" shall mean each music composition, including all lyrics,
music, and titles thereof.
1.2 Accounting Terms. Any accounting terms used in this Agreement which
are not specifically defined herein shall have the meanings customarily given
them in accordance with GAAP. Calculations and determinations of financial and
accounting terms used and not otherwise specifically defined hereunder and the
preparation of financial statements to be furnished to the Bank pursuant hereto
shall be made and prepared, both as to classification of items and as to amount,
in accordance with sound accounting practices and GAAP as used in the
preparation of the financial statements of Borrower on the date of this
Agreement. If any changes in accounting principles or practices from those used
in the preparation of the financial statements are hereafter occasioned by the
promulgation of rules, regulations, pronouncements and opinions by or required
by the Financial Accounting Standards Board or the American Institute of
Certified Public Accountants (or any successor thereto or agencies with similar
functions), which results in a material change in the method of accounting in
the financial statements required to be furnished to the Bank hereunder or in
the calculation of financial covenants, standards or terms contained in this
Agreement, the parties hereto agree to enter into good faith negotiations to
amend such provisions so as equitably to reflect such changes to the end that
the criteria for evaluating the financial condition and performance of Borrower
will be the same after such changes as they were before such changes; and if the
parties fail to agree on the amendment of such provisions, Borrower will furnish
financial statements in accordance with such changes but shall provide
calculations for all financial covenants, perform all financial covenants and
otherwise observe all financial standards and terms in accordance with
applicable accounting principles and practices in effect immediately prior to
such changes. Calculations with respect to financial covenants required to be
stated in accordance with applicable accounting principles and practices in
effect immediately prior to such changes shall be reviewed and certified by
Borrower's accountants.
1.3 Other Terms Defined in UCC. All other capitalized words and phrases
used herein and not otherwise specifically defined herein shall have the
respective meanings assigned to such terms in the UCC, to the extent the same
are used or defined therein.
1.4 Other Interpretive Provisions.
22
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms. Whenever the context so
requires, the neuter gender includes the masculine and feminine, the single
number includes the plural, and vice versa, and in particular the word
"Borrower" shall be so construed.
(b) Section and Schedule references are to this Agreement unless
otherwise specified. 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
(c) The term "including" is not limiting, and means "including,
without limitation".
(d) In the computation of periods of time from a specified date to
a later specified date, the word "from" means "from and including"; the words
"to" and "until" each mean "to but excluding", and the word "through" means "to
and including".
(e) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement and the other Loan Documents) and other
contractual instruments shall be deemed to include all subsequent amendments,
restatements, supplements and other modifications thereto, but only to the
extent such amendments, restatements, supplements and other modifications are
not prohibited by the terms of any Loan Document, and (ii) references to any
statute or regulation shall be construed as including all statutory and
regulatory provisions amending, replacing, supplementing or interpreting such
statute or regulation.
(f) To the extent any of the provisions of the other Loan
Documents are inconsistent with the terms of this Loan Agreement, the provisions
of this Loan Agreement shall govern.
(g) This Agreement and the other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and each
shall be performed in accordance with its terms.
(h) This Agreement and the other Loan Documents are the result of
negotiations between, and have been reviewed by, counsel to Borrower and the
Bank and the other parties thereto and are the products of all parties.
Accordingly, this Agreement and the other Loan Documents shall not be construed
more strictly against the Bank than against Borrower merely because of the
Bank's involvement in their preparation.
(i) The use in this Agreement, or any other Loan Document of the
term "reasonable attorney's fees" or any comparable term shall not,
notwithstanding any contrary provision of applicable law, be deemed to require
the payment of attorneys' fees equaling a stated percentage of the Obligations
but shall mean reasonable attorneys' fees actually incurred.
2. COMMITMENT OF THE BANK.
2.1 Revolving Loans.
(a) Revolving Loan Commitment. Subject to the terms and conditions
of this Agreement and the other Loan Documents, and in reliance upon the
representations and warranties of Borrower set forth herein and in the other
Loan Documents, the Bank agrees to make such Revolving Loans at such times as
Borrower may from time to time request until, but not including, the Maturity
23
Date, and in such amounts as Borrower may from time to time request, provided,
however, that the aggregate principal balance of all Revolving Loans outstanding
at any time shall not exceed the Revolving Loan Availability. Revolving Loans
made by the Bank may be repaid and, subject to the terms and conditions hereof,
borrowed again up to, but not including the Maturity Date unless the Revolving
Loans are otherwise accelerated, terminated or extended as provided in this
Agreement. The Revolving Loans shall be used by Borrower for the purpose of
financing working capital, general corporate purposes, to refinance existing
senior indebtedness and to fund a portion of the transaction costs associated
with the transactions contemplated by the terms of the Merger Agreement.
(b) Revolving Loan Interest and Payments. Except as otherwise
provided in this Section 2.1(b), the principal amount of the Revolving Loans
outstanding from time to time shall bear interest at the applicable Revolving
Interest Rate. Accrued and unpaid interest on the unpaid principal balance of
all Revolving Loans outstanding from time to time which are Prime Loans, shall
be due and payable quarterly, in arrears, commencing on September 30, 2004 and
continuing on the last day of each calendar quarter thereafter, and on the
Maturity Date. Accrued and unpaid interest on the unpaid principal balance of
all Revolving Loans outstanding from time to time which are LIBOR Loans shall be
due and payable on the last Business Day of each Interest Period, commencing on
the first such date to occur after the date hereof, on the date of any principal
repayment of a LIBOR Loan and on the Maturity Date; provided, however, that with
respect to any LIBOR Loan with an Interest Period of greater than ninety (90)
days, accrued and unpaid interest also shall be due and payable on the last day
of each calendar quarter occurring during such Interest Period. Any amount of
principal or interest on the Revolving Loans which is not paid when due, whether
at stated maturity, by acceleration or otherwise, shall bear interest payable on
demand at the Default Rate.
(c) Revolving Loan Principal Payments.
(i) Revolving Loan Mandatory Prepayments. All Revolving
Loans hereunder shall be repaid by Borrower on the Maturity Date, unless
payable sooner pursuant to the provisions of this Agreement. In the event
the aggregate outstanding principal balance of all Revolving Loans and
Letter of Credit Obligations hereunder exceeds the Revolving Loan
Availability, Borrower shall, without notice or demand of any kind,
immediately make such repayments of the Revolving Loans or take such other
actions as are satisfactory to the Bank as shall be necessary to eliminate
such excess. Also, if Borrower chooses not to convert any Revolving Loans
which are LIBOR Loans to a Prime Loan as provided in Section 2.4(b) and
Section 2.4(c), then such Revolving Loan shall immediately be due and
payable on the last Business Day of the then existing Interest Period or
on such earlier date as required by law, all without further demand,
presentment, protest or notice of any kind, all of which are hereby waived
by Borrower.
In addition to the foregoing, if the aggregate amount of all
outstanding Revolving Loans at any time exceeds the Revolving Credit
Availability, then such excess amount outstanding must be re-paid to the
Bank in its entirety immediately upon demand by the Bank for payment
thereof.
In addition, if (a) Borrower issues any equity securities (other
than (i) in connection with the exercise of the Warrants provided to the
Subordinated Lender pursuant to the Subordinated Debt Documents or (ii) to
key officers and employees of the Borrower that represent no more than ten
percent (10%) of the equity of Integrity Media) or (b) sells, leases,
licenses, transfers or otherwise disposes of any assets (other than
inventory sold in the ordinary course of business, the disposition of
obsolete or worn out equipment, or the licensing of copyrights and
trademarks in the ordinary course of business), or (c) Borrower is
required to pay dividend income to the Bank
24
pursuant to the terms of Section 9.6(bb), then a prepayment in an amount
equal to the cash proceeds of any such equity issuance, asset disposition
or dividend (net of (1) reasonable commissions and expenses actually paid
to unrelated third parties in connection with such transactions and (2)
taxes actually due as a direct result of such transactions) must be made
within two (2) Business Days after actual receipt thereof on the
outstanding Revolving Loans, unless a balance then exists under the Term
Loans; provided, however, that the foregoing prepayment obligation shall
not apply to an individual asset disposition which yields less than
$30,000 in cash proceeds to the extent that such proceeds, when aggregated
with the cash proceeds of all previous asset dispositions (not otherwise
excepted under the first parenthetical hereunder) during the period during
which Borrower is permitted to request Revolving Loans, equals or is less
than $60,000; provided, further, if at the time of any required prepayment
hereunder, any portion of such prepayment would by necessity require the
"breakage" of a LIBOR Loan, then only to the extent necessary to avoid
such "breakage," Borrower may make such portion of such prepayment upon
termination of the relevant Interest Period(s).
(ii) Optional Prepayments. In addition to the Mandatory
Prepayment, Borrower may from time to time prepay the Revolving Loans
which are Prime Loans, in whole or in part, without any prepayment penalty
whatsoever, subject to the following conditions: (i) each partial
prepayment shall be in an amount equal to Ten Thousand and 00/100 Dollars
($10,000.00), or a higher integral multiple of Five Thousand and 00/100
Dollars ($5,000.00); and (ii) any prepayment of the entire principal
balance of the Prime Loans shall include accrued interest on such Prime
Loans to the date of such prepayment and payment in full in cash of all
other Obligations (other than the LIBOR Loans), then due and payable.
2.2 Term Loans.
(a) Term Loan Commitments.
(i) Term Loan A Commitment. Subject to the terms and
conditions of this Agreement and the other Loan Documents, and in reliance
upon the representations and warranties of Borrower set forth herein and
in the other Loan Documents, the Bank agrees to make a Term Loan A equal
to the Term Loan A Commitment. The undrawn balance of the Term Loan A
Commitment shall be available to Borrower in a single principal advance on
such date as the conditions set forth in Section 3 shall have been
satisfied. Term Loan A shall be used by Borrower to refinance existing
senior indebtedness and to fund a portion of the transaction costs
associated with the transactions contemplated by the terms of the Merger
Agreement. Term Loan A may be prepaid in whole or in part at any time
without penalty, but shall be due in full on the Maturity Date, unless the
credit extended under the Term Loan A is otherwise accelerated, terminated
or extended as provided in this Agreement.
(ii) Term Loan B Commitment. In reliance upon the
representations and warranties of Borrower set forth herein and in the
other Loan Documents, the Bank has advanced a Term Loan B equal to the
Term Loan B Commitment. Term Loan B shall be used by Borrower to refinance
existing indebtedness. Term Loan B may be prepaid in whole or in part at
any time without penalty, but shall be due in full on the Maturity Date,
unless the credit extended under the Term Loan B is otherwise accelerated,
terminated or extended as provided in this Agreement.
25
(b) Term Loan Interest Payments.
(i) Term Loan A Interest Payments. Except as otherwise
provided in this Section 2.2(b)(i), the principal amount of Term Loan A
outstanding from time to time shall bear interest at the applicable Term
Interest Rate. Accrued and unpaid interest on that portion of the
principal balance of Term Loan A outstanding from time to time which is a
Prime Loan, shall be due and payable quarterly, in arrears, commencing on
September 30, 2004 and continuing on the last day of the last month of
each calendar quarter thereafter, and on the Maturity Date. Accrued and
unpaid interest on those portions of the principal balance of Term Loan A
outstanding from time to time which is a LIBOR Loan shall be payable on
the last Business Day of each Interest Period, commencing on the first
such date to occur after the date hereof, on the date of any principal
repayment of a LIBOR Loan and on the Maturity Date; provided, however,
that with respect to any LIBOR Loan with an Interest Period of greater
than ninety (90) days, accrued and unpaid interest also shall be due and
payable on the last day of each calendar quarter occurring during such
Interest Period. Any amount of principal or interest on Term Loan A which
is not paid when due, whether at stated maturity, by acceleration or
otherwise, shall bear interest payable on demand at the Default Rate.
(ii) Term Loan B Interest Payments. Except as otherwise
provided in this Section 2.2(b)(ii), the principal amount of Term Loan B
outstanding from time to time shall bear interest at the applicable Term
Interest Rate. Accrued and unpaid interest on that portion of the
principal balance of Term Loan B outstanding from time to time which is a
Prime Loan, shall be due and payable quarterly, in arrears, commencing on
September 30, 2004 and continuing on the last day of the last month of
each calendar quarter thereafter, and on the Maturity Date. Accrued and
unpaid interest on those portions of the principal balance of Term Loan B
outstanding from time to time which is a LIBOR Loan shall be payable on
the last Business Day of each Interest Period, commencing on the first
such date to occur after the date hereof, on the date of any principal
repayment of a LIBOR Loan and on the Maturity Date; provided, however,
that with respect to any LIBOR Loan with an Interest Period of greater
than ninety (90) days, accrued and unpaid interest also shall be due and
payable on the last day of each calendar quarter occurring during such
Interest Period. Any amount of principal or interest on Term Loan B which
is not paid when due, whether at stated maturity, by acceleration or
otherwise, shall bear interest payable on demand at the Default Rate.
(c) Term Loan Interest and Principal Payments.
(i) Term Loan A Interest and Principal Payments. The
outstanding principal balance of Term Loan A shall be repaid in equal
principal installments each in the amount of Two Hundred Thirty-Three
Thousand Eight Hundred Fifty-Four and 17/100 Dollars ($233,854.17),
together with an additional amount representing accrued and unpaid
interest on the principal amount of Term Loan A outstanding as set forth
above beginning on September 30, 2004, and continuing on the last day of
the last month of each calendar quarter thereafter, with a final payment
of all outstanding principal and accrued interest due on the Maturity
Date. Principal amounts repaid on Term Note A may not be borrowed again.
Also, if Borrower chooses not to convert any portion of Term Loan A which
is a LIBOR Loan to a Prime Loan as provided in Section 2.4(b) and Section
2.4(c), then such portion of Term Loan A shall immediately be due and
payable on the last Business Day of the then existing Interest Period or
on such earlier date as required by law, all without further demand,
presentment, protest or notice of any kind, all of which are hereby waived
by Borrower.
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(ii) Term Loan B Interest and Principal Payments. The
outstanding principal balance of Term Loan B shall be repaid in equal
principal installments each in the amount of Seventy Two Thousand Five
Hundred Twenty-Seven and 78/100 Dollars ($72,527.78), together with an
additional amount representing accrued and unpaid interest on the
principal amount of Term Loan B outstanding as set forth above, beginning
on September 30, 2004, and continuing on the last day of the last month of
each calendar quarter thereafter, with a final payment of all outstanding
principal and accrued interest due on the Maturity Date. Principal amounts
repaid on Term Note B may not be borrowed again. Also, if Borrower chooses
not to convert any portion of Term Loan B which is a LIBOR Loan to a Prime
Loan as provided in Section 2.4(b) and Section 2.4(c), then such portion
of Term Loan B shall immediately be due and payable on the last Business
Day of the then existing Interest Period or on such earlier date as
required by law, all without further demand, presentment, protest or
notice of any kind, all of which are hereby waived by Borrower.
(d) Term Loan Mandatory Prepayment. If (a) Borrower issues any
equity securities (other than (i) in connection with the exercise of the
Warrants provided to the Subordinated Lender pursuant to the Subordinated
Debt Documents (ii) to key officers and employees of the Borrower that
represent no more than ten percent (10%) of the equity of Integrity Media)
or (b) sells, leases, licenses, transfers or otherwise disposes of any
assets (other than inventory sold in the ordinary course of business, the
disposition of obsolete or worn out equipment, or the licensing of
copyrights and/or trademarks in the ordinary course of business), or (c)
Borrower is required to pay dividend income to Bank pursuant to Section
9.6(bb), then a prepayment in an amount equal to the cash proceeds of any
such equity issuance, asset disposition or dividend (net of (1) reasonable
commissions and expenses actually paid to unrelated third parties in
connection with such transactions and (2) taxes actually due as a direct
result of such transactions) must be made within two (2) Business Days
after actual receipt thereof on the outstanding indebtedness under the
Term Loan Facilities; provided, however, that the foregoing prepayment
obligation shall not apply to an individual asset disposition which yields
less than $30,000 in cash proceeds to the extent that such proceeds, when
aggregated with the cash proceeds of all previous asset dispositions (not
otherwise excepted under the first parenthetical hereunder) during the
term of the Facility, equals or is less than $60,000; provided, further,
if at the time of any required prepayment hereunder, any portion of such
prepayment would by necessity require the "breakage" of a LIBOR Loan, then
only to the extent necessary to avoid such "breakage," Borrower may make
such portion of such prepayment upon termination of the relevant Interest
Period(s). Any such prepayment shall be applied first to the then
principal balance outstanding under the Term Loan A Facility in inverse
order of maturity until there are no amounts outstanding under the Term
Loan A Facility, then such prepayment shall be applied to the then
principal balance outstanding under the Term Loan B Facility in inverse
order of maturity.
(e) Term Loan Optional Prepayments.
(i) Provided that no Event of Default then exists under this
Agreement or the Loans, Borrower may voluntarily prepay the principal
balance of the Term Loans, in whole or in part, at any time on or after
the date hereof, subject to the following conditions:
(A) Not less than three (3) days prior to the date
upon which Borrower desires to make such prepayment, Borrower shall
deliver to the Bank written notice of its intention to prepay the
Term Loans, which notice shall be irrevocable and state the
prepayment amount and the prepayment date (the "Term Loan Prepayment
Date"); and
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(B) Any such prepayment shall be in an amount of not
less than $100,000 or in multiples of $10,000 in excess thereof; and
(C) Borrower shall pay to the Bank all accrued and
unpaid interest on the Term Loans through the date of such
prepayment on the principal balance being prepaid. Each prepayment
of the Term Loans shall be applied to the scheduled installments of
the applicable Term Loan being prepaid in inverse order of maturity.
2.3 Reserved.
2.4 Additional LIBOR Loan Provisions.
(a) LIBOR Loan Prepayments. Notwithstanding anything to the
contrary contained herein, the principal balance of any LIBOR Loan may not be
prepaid in whole or in part at any time. If, for any reason, a LIBOR Loan is
paid prior to the last Business Day of any Interest Period, whether voluntary,
involuntary, by reason of acceleration or otherwise, each such prepayment of a
LIBOR Loan will be accompanied by the amount of accrued interest on the amount
prepaid and any and all costs, expenses, penalties and charges incurred by the
Bank as a result of the early termination or breakage of a LIBOR Loan, plus the
amount, if any, by which (i) the additional interest which would have been
payable during the Interest Period on the LIBOR Loan prepaid had it not been
prepaid, exceeds (ii) the interest which would have been recoverable by the Bank
by placing the amount prepaid on deposit in the domestic certificate of deposit
market, the eurodollar deposit market, or other appropriate money market
selected by the Bank, for a period starting on the date on which it was prepaid
and ending on the last day of the Interest Period for such LIBOR Loan. The
amount of any such loss or expense payable by Borrower to the Bank under this
section shall be determined in the Bank's sole discretion based upon the
assumption that the Bank funded its loan commitment for LIBOR Loans in the
London Interbank Eurodollar market and using any reasonable attribution or
averaging methods which the Bank deems appropriate and practical, provided,
however, that the Bank is not obligated to accept a deposit in the London
Interbank Eurodollar market in order to charge interest on a LIBOR Loan at the
LIBOR Rate.
(b) LIBOR Unavailability. If the Bank determines in good faith
(which determination shall be conclusive, absent manifest error) prior to the
commencement of any Interest Period that (i) the making or maintenance of any
LIBOR Loan would violate any applicable law, rule, regulation or directive,
whether or not having the force of law, (ii) United States dollar deposits in
the principal amount, and for periods equal to the Interest Period for funding
any LIBOR Loan are not available in the London Interbank Eurodollar market in
the ordinary course of business, (iii) by reason of circumstances affecting the
London Interbank Eurodollar market, adequate and fair means do not exist for
ascertaining the LIBOR Rate to be applicable to the relevant LIBOR Loan, or (iv)
the LIBOR Rate does not accurately reflect the cost to the Bank of a LIBOR Loan,
the Bank shall promptly notify Borrower thereof and, so long as the foregoing
conditions continue, Loans may not be advanced as a LIBOR Loan thereafter. In
addition, at Borrower's option, each existing LIBOR Loan shall be immediately
(i) converted to a Prime Loan on the last Business Day of the then existing
Interest Period, or (ii) due and payable on the last Business Day of the then
existing Interest Period, without further demand, presentment, protest or notice
of any kind, all of which are hereby waived by Borrower.
(c) Regulatory Change. In addition, if, after the date hereof, a
Regulatory Change shall, in the reasonable determination of the Bank, make it
unlawful for the Bank to make or maintain the LIBOR Loans, then the Bank shall
promptly notify Borrower and the Loans may not be advanced as a LIBOR Loan
thereafter. In addition, at Borrower's option, each existing LIBOR Loan shall be
immediately (i) converted to a Prime Loan on the last Business Day of the then
existing Interest Period or on such earlier date as required by law, or (ii) due
and payable on the last Business Day of the then existing Interest Period or
28
on such earlier date as required by law, all without further demand,
presentment, protest or notice of any kind, all of which are hereby waived by
Borrower.
(d) LIBOR Loan Indemnity. If any Regulatory Change (whether or not
having the force of law) shall (a) impose, modify or deem applicable any
assessment, reserve, special deposit or similar requirement against assets held
by, or deposits in or for the account of or loans by, or any other acquisition
of funds or disbursements by, the Bank; (b) subject the Bank or any LIBOR Loan
to any tax, duty, charge, stamp tax or fee or change the basis of taxation of
payments to the Bank of principal or interest due from Borrower to the Bank
hereunder (other than a change in the taxation of the overall net income of the
Bank); or (c) impose on the Bank any other condition regarding such LIBOR Loan
or the Bank's funding thereof, and the Bank shall determine (which determination
shall be conclusive, absent manifest error) that the result of the foregoing is
to increase the cost to the Bank of making or maintaining such LIBOR Loan or to
reduce the amount of principal or interest received by the Bank hereunder, then
Borrower shall pay to the Bank, on demand, such additional amounts as the Bank
shall, from time to time, determine are sufficient to compensate and indemnify
the Bank for such increased cost or reduced amount.
2.5 Interest and Fee Computation; Collection of Funds. Except as
otherwise set forth herein, all interest and fees shall be calculated on the
basis of a year consisting of 360 days and shall be paid for the actual number
of days elapsed. Principal payments submitted in funds not immediately available
shall continue to bear interest until collected. If any payment to be made by
Borrower hereunder or under the Notes shall become due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall be included in computing any interest in respect of
such payment. Notwithstanding anything to the contrary contained herein, the
final payment due under any of the Loans must be made by wire transfer or other
immediately available funds. All payments made by Borrower hereunder or under
any of the Loan Documents shall be made without setoff, counterclaim, or other
defense. To the extent permitted by applicable law, all payments hereunder or
under any of the Loan Documents (including any payment of principal, interest,
or fees) to, or for the benefit, of any Person shall be made by Borrower free
and clear of, and without deduction or withholding for, or account of, any taxes
now or hereinafter imposed by any taxing authority.
2.6 Letter of Credit Provisions.
(a) Issuance of Letters of Credit. Subject to the terms and
conditions of this Agreement and upon (i) the execution by Borrower and the Bank
of a Master Letter of Credit Agreement in form and substance acceptable to the
Bank (together with all amendments, modifications and restatements thereof, the
"Master Letter of Credit Agreement") and, (ii) upon the execution and delivery
by Borrower, and the acceptance by the Bank, in its sole and absolute
discretion, of a Letter of Credit Application, the Bank agrees to issue for the
account of Borrower such Letters of Credit in the standard form of the Bank and
otherwise in form and substance acceptable to the Bank, from time to time during
the term of this Agreement, provided that the Letter of Credit Obligations may
not at any time exceed the Letter of Credit Commitment and provided further,
that no Letter of Credit shall have an expiration date later than the Letter of
Credit Maturity Date. The amount of any payments made by the Bank with respect
to draws made by a beneficiary under a Letter of Credit for which Borrower has
failed to reimburse the Bank upon the earlier of (i) the Bank's demand for
repayment, or (ii) five (5) days from the date of such payment to such
beneficiary by the Bank, shall be deemed to have been converted to a Revolving
Loan as of the date such payment was made by the Bank to such beneficiary. Upon
the occurrence of an Event of a Default and at the option of the Bank, all
Letter of Credit Obligations shall be converted to Revolving Prime Loans, all
without demand, presentment, protest or notice of any kind,
29
all of which are hereby waived by Borrower. To the extent the provisions of the
Master Letter of Credit Agreement differ from, or are inconsistent with, the
terms of this Agreement, the provisions of this Agreement shall govern.
(b) Letter of Credit Fees. Borrower shall pay to Bank a
non-refundable recurring Letter of Credit Fee for each Letter of Credit Issued
by Bank. The Letter of Credit Fee for any Letter of Credit shall be an amount
equal to the aggregate undrawn amount of such Letter of Credit multiplied by a
per annum rate equal to the Applicable LIBOR Margin for Revolving Loans in
effect on the date such Letter of Credit is issued. The Letter of Credit Fee for
each Letter of Credit shall be payable in advance for the remaining portion of
the quarter when issued and quarterly thereafter on the last day of each full
calendar quarter thereafter while such Letter of Credit is outstanding and upon
maturity or termination thereof pro-rata for the remaining portion of the
quarter in which such maturity or termination occurs.
(c) Other Letter of Credit Fees. Borrower shall pay to Bank its
other customary fees for issuance, amendment, or renewal of a Letter of Credit.
2.7 Taxes.
(a) All payments made by Borrower under this Agreement 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, excluding net
income taxes and franchise taxes (imposed in lieu of net income taxes) imposed
on the Bank as a result of a present or former connection between the Bank and
the jurisdiction of the governmental authority imposing such tax or any
political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from the Bank having executed, delivered or
performed its obligations or received a payment under, or enforced, this
Agreement or any other Loan Document). If any such non-excluded taxes, levies,
imposts, duties, charges, fees, deductions or withholdings (collectively,
"Non-Excluded Taxes") or Other Taxes are required to be withheld from any
amounts payable to the Bank hereunder, the amounts so payable to the Bank shall
be increased to the extent necessary to yield to the Bank (after payment of all
Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement, provided,
however, that Borrower shall not be required to increase any such amounts
payable to the Bank with respect to any Non-Excluded Taxes that are attributable
to the Bank's failure to comply with the requirements of subsection 2.7(d).
(b) Borrower shall pay any Other Taxes to the relevant
governmental authority in accordance with applicable law.
(c) At the request of Borrower and at Borrower's sole cost, the
Bank shall take reasonable steps to (i) contest its liability for any
Non-Excluded Taxes or Other Taxes that have not been paid, or (ii) seek a refund
of any Non-Excluded Taxes or Other Taxes that have been paid.
(d) Whenever any Non-Excluded Taxes or Other Taxes are payable by
Borrower, as promptly as possible thereafter Borrower shall send to the Bank a
certified copy of an original official receipt received by Borrower showing
payment thereof. If Borrower fails to pay any Non-Excluded Taxes or Other Taxes
when due to the appropriate taxing authority or fails to remit to the Bank the
required receipts or other required documentary evidence or if any governmental
authority seeks to collect a Non-Excluded Tax or Other Tax directly from the
Bank for any other reason, Borrower shall
30
indemnify the Bank on an after-tax basis for any incremental taxes, interest or
penalties that may become payable by the Bank.
(e) The agreements in this Section shall survive the satisfaction
and payment of the Obligations and the termination of this Agreement.
2.8 All Loans to Constitute Single Obligation.
The Loans shall constitute one general obligation of Borrower, and
shall be secured by Bank's priority security interest in and Lien upon all of
the Collateral and by all other security interests, Liens, claims and
encumbrances heretofore, now or at any time or times hereafter granted by
Borrower and/or any Subsidiary to Bank.
3. CONDITIONS OF BORROWING.
Notwithstanding any other provision of this Agreement, the Bank shall not
be required to disburse or make all or any portion of the Loans, and this
Agreement shall not take effect (the "Restatement Date"), if any of the
following conditions shall have occurred.
3.1 Loan Documents. Borrower shall have failed to execute and deliver to
the Bank any of the following Loan Documents, all of which must be satisfactory
to the Bank and the Bank's counsel in form, substance and execution:
(a) Loan Agreement. Two copies of this Agreement duly executed by
Borrower.
(b) Revolving Note. A Replacement Revolving Note duly executed by
Borrower, in the form prepared by and acceptable to the Bank.
(c) Term Note A. A Replacement Term Note A duly executed by
Borrower, in the form prepared by and acceptable to the Bank.
(d) Term Note B. A Replacement Term Note B duly executed by
Borrower, in the form prepared by and acceptable to the Bank.
(e) Master Letter of Credit Agreement. A Master Letter of Credit
Agreement prepared by and acceptable to the Bank, duly executed by Borrower in
favor of the Bank.
(f) Amendment and Reaffirmation of Security and Pledge Agreements.
An Amendment and Reaffirmation of Security and Pledge Agreements, dated as of
the date of this Agreement, duly executed by the Borrower, in the form prepared
by and acceptable to the Bank.
(g) Amendment and Reaffirmation of Intellectual Property Security
Agreements. An Amendment and Reaffirmation of Intellectual Property Security
Agreements, dated as of the date of this Agreement, duly executed by Integrity
Media and INO Records, in the form prepared by and acceptable to the Bank.
(h) Deed of Amendment to Legal Charge Over Shares. A Deed of
Amendment to Legal Charge Over Shares, dated as of the date of this Agreement,
duly executed by Integrity Media, in the form prepared by and acceptable to the
Bank.
31
(i) Security and Pledge Agreements. A Security and Pledge
Agreement from each of Enlight and Kona, each dated as of the date of this
Agreement, in the form prepared by and acceptable to the Bank.
(j) Intercreditor Agreement. Intercreditor Agreement dated as of
the date of this Agreement, from each holder of Subordinated Debt, in the form
prepared by and acceptable to the Bank.
(k) Real Estate Documents. With respect to each parcel of real
property owned or leased by Borrower, which is the subject of a Mortgage and/or
Leasehold Mortgage, as appropriate, Amendments thereto, together with title
insurance endorsements, in form and substance reasonably acceptable to the Bank.
(l) Borrowing Base Certificate. A Borrowing Base Certificate,
certified as accurate by Borrower and reasonably acceptable to the Bank.
(m) Search Results; Lien Terminations. Copies of UCC search
reports dated such a date as is reasonably acceptable to the Bank, listing all
effective financing statements which name Borrower and any of its Subsidiaries,
under their present names and any previous names, as debtors, together with (i)
copies of such financing statements, (ii) payoff letters evidencing repayment in
full of all existing Debt to be repaid with the Loans, the termination of all
agreements relating thereto and the release of all Liens granted in connection
therewith, with UCC or other appropriate termination statements and documents
effective to evidence the foregoing (other than Permitted Liens), and (iii) such
other UCC termination statements as the Bank may reasonably request.
(o) Organizational and Authorization Document. Copies of (i) the
Articles of Incorporation and Bylaws of Borrower; (ii) resolutions of the
shareholders, board of directors of Borrower and each of its Subsidiaries
approving and authorizing such Person's execution, delivery and performance of
the Loan Documents to which it is party and the transactions contemplated
thereby and the transactions contemplated by the Merger Agreement; (iii)
signature and incumbency certificates of the officers, members and managers of
Borrower, as applicable, and each of its Subsidiaries, executing any of the Loan
Documents, each of which Borrower hereby certifies to be true and complete, and
in full force and effect without modification, it being understood that the Bank
may conclusively rely on each such document and certificate until formally
advised by Borrower of any changes therein; and (iv) good standing certificates
in the state of incorporation and formation of Borrower and each of its
Subsidiaries and in each other state requested by the Bank.
(p) [Reserved]
(q) Opinions of Counsel. One or more written opinions from legal
counsel to Borrower addressed to the Bank and dated as of the date hereof
opining as to such matters as the Bank may request including, without
limitations, matters pertaining to the transactions contemplated by the Merger
Agreement.
(r) Additional Documents. Such other certificates, financial
statements, schedules, resolutions, opinions of counsel, notes and other
documents which are provided for hereunder or which the Bank shall require.
(s) Restatement Date Balance Sheet. A pro forma consolidated
balance sheet of Borrower and its Subsidiaries as of May 30, 2004 after giving
effect to the transactions contemplated by the Merger Agreement.
32
3.2 Event of Default. Any Event of Default, or any event which, with
notice or lapse of time, or both would constitute an Event of Default, shall
have occurred and be continuing.
3.3 Material Adverse Effect. The occurrence of any event having a
Material Adverse Effect.
3.4 Litigation. Any litigation or governmental proceeding shall have
been instituted against any of the Borrowers or any of its officers or
shareholders having a Materially Adverse Effect upon such Borrower.
3.5 Representations and Warranties. Any representation or warranty of
Borrower contained herein or in any Loan Document shall be untrue or incorrect
as of the date of any Loan as though made on such date, except to the extent
such representation or warranty expressly relates to an earlier date.
3.6 Commitment Fee. Borrower shall have failed to pay to the Bank a
commitment fee (a) in the amount of Fifteen Thousand and 00/100 Dollars
($15,000.00) with respect to the Revolving Loan Commitment, and (b) in the
amount of Fifteen Thousand and 00/100 Dollars ($15,000.00), with respect to the
Term Loan A Commitment.
3.7 Subordinated Debt. Borrower shall not have received Fifteen Million
and 00/100 Dollars ($15,000,000) in unsecured Subordinated Debt, the terms and
conditions of which shall be acceptable to the Bank, in its sole discretion.
3.8 Consummation of Merger. All conditions to the Merger set forth in
the Merger Agreement shall not have been satisfied or the fulfillment of any
such conditions shall not have been waived with the written consent of the Bank.
3.9 Merger Consideration and Expenses. The aggregate consideration to be
paid in respect of the transactions contemplated by the Merger Agreement shall
exceed $15,000,000, or the costs and expenses incurred by the Borrower in
connection with the transactions contemplated by the Merger Agreement shall
exceed $2,000,000.
3.10 Post Merger Ownership and Availability. Upon consummation of the
transactions contemplated by the Merger Agreement, P. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall own
less than 51% of the outstanding Capital Securities of the Borrower on a fully
diluted basis, and the Borrower shall not have at least $3,000,000 in Revolving
Loan Availability.
3.11 Litigation. There shall be any litigation, demand, charge claim,
petition or governmental proceeding pending, or to the best knowledge of
Borrower, threatened, with respect to the transactions contemplated by the
Merger Agreement.
3.12 Officer's Certificate. The Bank shall not have received an Officer's
Certificate of Integrity Media with respect to the matters set forth in Sections
3.8 and 3.11 and an Officer's Certificate of Kona stating that Kona will proceed
to consummate the transactions contemplated under the Merger Agreement
immediately upon the making of the initial Loans.
3.13 Fees and Expenses. Borrower shall not have paid all fees and
expenses due and payable hereunder, including without limitation all fees and
expenses related to real estate appraisals, field audits and environmental
reports, and the reasonable fees and expenses of the Bank's attorneys with
respect to the preparation, negotiation and execution of the Loan Documents.
33
4. NOTES EVIDENCING LOANS.
4.1 Revolving Note. The Revolving Loans and the Letter of Credit
Obligations shall be evidenced by a single Revolving Note (together with any and
all renewal, extension, modification or replacement notes executed by Borrower
and delivered to the Bank and given in substitution therefor, the "Revolving
Note") in the form prepared by and acceptable to the Bank, duly executed by
Borrower and payable to the order of the Bank. At the time of the initial
disbursement of a Revolving Loan and at each time any additional Revolving Loan
shall be requested hereunder or a repayment made in whole or in part thereon, a
notation thereof shall be made on the books and records of the Bank. All amounts
recorded shall be, absent manifest error, conclusive and binding evidence of (i)
the principal amount of the Revolving Loans advanced hereunder and the amount of
all Letter of Credit Obligations, (ii) any accrued and unpaid interest owing on
the Revolving Loans, and (iii) all amounts repaid on the Revolving Loans or the
Letter of Credit Obligations. The failure to record any such amount or any error
in recording such amounts shall not, however, limit or otherwise affect the
obligations of Borrower under the Revolving Note to repay the principal amount
of the Revolving Loans, together with all interest accruing thereon.
4.2 Term Notes. The Term Loans shall be evidenced by:
(a) a Term Note A (together with any and all renewal, extension,
modification, substitute or replacement notes executed by Borrower and given in
substitution therefor, the "Term Note A") in the form prepared by and acceptable
to the Bank, duly executed by Borrower and payable to the order of the Bank. At
the time of the disbursement of Term Loan A or a repayment made in whole or in
part thereon, a notation thereof shall be made on the books and records of the
Bank. All amounts recorded shall be, absent demonstrable error, conclusive and
binding evidence of (i) the principal amount of Term Loan A advanced hereunder,
(ii) any accrued and unpaid interest owing on Term Loan A and (iii) all amounts
repaid on Term Loan A. The failure to record any such amount or any error in
recording such amounts shall not, however, limit or otherwise affect the
obligations of Borrower under Term Note A to repay the principal amount of Term
Loan A, together with all interest accruing thereon.
(b) a Term Note B (together with any and all renewal, extension,
modification, substitute or replacement notes executed by Borrower and given in
substitution therefor, the "Term Note B") in the form prepared by and acceptable
to the Bank, duly executed by Borrower and payable to the order of the Bank. At
the time of the disbursement of Term Loan B or a repayment made in whole or in
part thereon, a notation thereof shall be made on the books and records of the
Bank. All amounts recorded shall be, absent demonstrable error, conclusive and
binding evidence of (i) the principal amount of Term Loan B advanced hereunder,
(ii) any accrued and unpaid interest owing on Term Loan B and (iii) all amounts
repaid on Term Loan B. The failure to record any such amount or any error in
recording such amounts shall not, however, limit or otherwise affect the
obligations of Borrower under Term Note B to repay the principal amount of Term
Loan B, together with all interest accruing thereon.
4.3 [RESERVED]
5. MANNER OF BORROWING.
5.1 Borrowing Procedures. Each Revolving Loan may be advanced either as
a Prime Loan or a LIBOR Loan, provided, however, that at any time, Borrower may
identify no more than five (5) Revolving Loans which may be LIBOR Loans. Each
Loan shall be made available to Borrower upon any written, verbal, electronic,
telephonic or telecopy loan request which the Bank in good faith believes to
34
emanate from a properly authorized representative of Borrower, whether or not
that is in fact the case. Each such notice shall be effective upon receipt by
the Bank, shall be irrevocable, and shall specify the date, amount and type of
borrowing and, in the case of a LIBOR Loan, the initial Interest Period
therefor. A request for a Prime Loan must be received by the Bank no later than
11:00 a.m. Chicago, Illinois time, on the day it is to be funded. A request for
a LIBOR Loan must be (i) received by the Bank no later than 11:00 a.m. Chicago,
Illinois time, three (3) days before the day it is to be funded, and (ii) in an
amount equal to One Hundred Thousand and 00/100 Dollars ($100,000.00) or a
higher integral multiple of One Hundred Thousand and 00/100 Dollars
($100,000.00). If for any reason Borrower shall fail to select timely an
Interest Period for an existing LIBOR Loan, then such LIBOR Loan shall be
immediately converted to a Prime Loan on the last Business Day of the then
existing Interest Period, all without demand, presentment, protest or notice of
any kind, all of which are hereby waived by Borrower. The proceeds of each Loan
shall be made available at the office of the Bank by credit to the account of
Borrower or by other means requested by Borrower and acceptable to the Bank.
Borrower does hereby irrevocably confirm, ratify and approve all such advances
by the Bank and does hereby indemnify the Bank against losses and expenses
(including court costs, attorneys' and paralegals' fees) and shall hold the Bank
harmless with respect thereto.
5.2 Conversion and Continuation Procedures. Upon notice to the Bank as
set forth above, Borrower may, subject to the terms and conditions of this
Agreement, (a) elect, as of any Business Day, to convert any Prime Loan into a
LIBOR Loan; or (b) elect, as of the last day of the applicable Interest Period,
to continue any LIBOR Loans having Interest Periods expiring on such day for a
new Interest Period, or to convert any such LIBOR Loan into a Prime Loan. Such
notice shall, in the case of a conversion into a Prime Loan, be given before
11:00 a.m., Chicago time, on the proposed date of such conversion, and in the
case of conversion into, or continuation of, LIBOR Loans, be given before 11:00
a.m., Chicago time, at least three (3) Business Days prior to the proposed date
of such conversion or continuation, specifying in each case: (i) the proposed
date of conversion or continuation; (ii) the aggregate amount of Loans to be
converted or continued; (iii) the type of Loans resulting from the proposed
conversion or continuation; and (iv) in the case of conversion into, or
continuation of, LIBOR Loans, the duration of the requested Interest Period
therefor. If upon the expiration of any Interest Period applicable to LIBOR
Loans, Borrower has failed to select timely a new Interest Period to be
applicable to such LIBOR Loans, Borrower shall be deemed to have elected to
convert such LIBOR Loans into Prime Loans effective on the last day of such
Interest Period. Any conversion of a LIBOR Loan on a day other than the last day
of an Interest Period therefor shall be subject to Section 2.4(a).
5.3 Letters of Credit. Each Letter of Credit shall be issued by the Bank
upon the execution of a Master Letter of Credit Agreement by Borrower and the
Bank, and the execution and delivery by Borrower and the acceptance by the Bank,
in its sole discretion, of a Letter of Credit Application. All Letters of Credit
shall bear such application, issuance, renewal, negotiation and other fees and
charges, and bear such interest as charged by the Bank or otherwise payable
pursuant to the Master Letter of Credit Agreement. In addition to the foregoing,
all Letters of Credit issued under and pursuant to this Agreement shall bear an
annual issuance fee equal to the aggregate undrawn amount of such Letter of
Credit multiplied by a per annum rate equal to the LIBOR Rate applicable to
Revolving Loans in effect on the date such Letter of Credit is issued, payable
by Borrower quarterly, in arrears, until (i) such Letter of Credit has expired
or has been returned to the Bank, or (ii) the Bank has paid the beneficiary
thereunder the full face amount of such Letter of Credit.
5.4 Certain Conditions. Notwithstanding any other provision of this
Agreement, the Bank shall have no obligation to make any Loan, or to permit the
continuation of, or any conversion into, any LIBOR Loan, and the Bank shall not
have any obligation to issue any Letter of Credit, if an Event of
35
Default or Unmatured Event of Default exists or if any of the conditions set
forth in Section 3 shall have occurred.
5.5 Automatic Debit. In order to effectuate the timely payment of any of
the Obligations when due, Borrower hereby authorizes and directs the Bank, at
the Bank's option, to debit the amount of the Obligations to any ordinary
deposit account of Borrower.
5.6 Discretionary Disbursements. The Bank, in its sole and absolute
discretion, may immediately upon notice to Borrower, disburse any or all
proceeds of the Loans made or available to Borrower pursuant to this Agreement
to pay any fees, costs, expenses or other amounts required to be paid by
Borrower hereunder and not so paid. All monies so disbursed shall be a part of
the Obligations, payable by Borrower on demand from the Bank.
5.7 Credit Termination Date; Continuance of Obligations, Etc. This
Agreement, the Bank's obligation to loan monies to Borrower, and Borrower's
ability to borrow monies from the Bank shall be in effect until the Maturity
Date. Notwithstanding the foregoing and until such date as the Obligations shall
be paid in full, the Obligations hereunder and under the other Loan Documents
shall continue, interest shall continue to be paid in accordance with the terms
of this Agreement, the Bank shall be entitled to retain its security interest in
the Collateral and the Bank shall retain all of its rights and remedies under
this Agreement and under the other Loan Documents.
6. SECURITY FOR THE OBLIGATIONS.
6.1 Security for Obligations. As security for the payment and
performance of the Obligations, Borrower does hereby pledge, assign, transfer
and deliver to the Bank and does hereby grant to the Bank a continuing and
unconditional first priority security interest in and to any and all property of
Borrower, of any kind or description, tangible or intangible, wheresoever
located and whether now existing or hereafter arising or acquired, including,
but not limited to, the following (all of which property, along with the
products and proceeds therefrom, are individually and collectively referred to
as the "Collateral"):
(a) all property of, or for the account of, Borrower now or
hereafter coming into the possession, control or custody of, or in transit to,
the Bank or any agent or bailee for the Bank or any parent, Affiliate or
Subsidiary of the Bank or any participant with the Bank in the Loans (whether
for safekeeping, deposit, collection, custody, pledge, transmission or
otherwise), including all earnings, dividends, interest, or other rights in
connection therewith and the products and proceeds therefrom, including the
proceeds of insurance thereon; and
(b) the additional property of Borrower, whether now existing or
hereafter arising or acquired, and wherever now or hereafter located, together
with all additions and accessions thereto, substitutions, betterments and
replacements therefor, products and Proceeds therefrom, and all of Borrower's
books and records and recorded data relating thereto (regardless of the medium
of recording or storage), together with all of Borrower's right, title and
interest in and to all computer software required to utilize, create, maintain
and process any such records or data on electronic media, identified and set
forth as follows:
(i) All Accounts and all Goods whose sale, lease or other
disposition by Borrower has given rise to Accounts and have been returned
to, or repossessed or stopped in transit by, Borrower, or rejected or
refused by an Account Debtor;
36
(ii) All Inventory, including, without limitation, raw
materials, work-in-process and finished goods;
(iii) All Goods (other than Inventory), including, without
limitation, embedded software, Equipment, vehicles, furniture and
Fixtures;
(iv) All Software and computer programs;
(v) All Securities, Investment Property, Financial Assets and
Deposit Accounts;
(vi) 65% of the issued and outstanding stock of each of
Sarepta and Integrity Music Europe, Ltd.;
(vii) All Chattel Paper, Electronic Chattel Paper,
Instruments, Documents, Letter of Credit Rights, all proceeds of
letters of credit, Health-Care-Insurance Receivables, Supporting
Obligations, notes secured by real estate, Commercial Tort Claims
identified on Schedule 6.1 b(vii) attached hereto and General
Intangibles, including Payment Intangibles; and
(viii) All Proceeds (whether Cash Proceeds or Noncash
Proceeds) of the foregoing property, including, without limitation, all
insurance policies and proceeds of insurance payable by reason of loss
or damage to the foregoing property, including unearned premiums, and
of eminent domain or condemnation awards.
6.2 Other Collateral. In addition, the Obligations are also secured by
those certain Security and Pledge Agreements (as amended and reaffirmed),
Intellectual Property Security Agreements (as amended and reaffirmed), executed
by Borrower to and for the benefit of the Bank. In addition to the foregoing,
the Obligations arising from Term Loan A and Term Loan B are also secured by
that certain Mortgage With Assignment of Rents, Security Agreement and Fixture
Filing, encumbering certain real and personal property located in Mobile County,
Alabama, dated as of even date herewith.
6.3 Possession and Transfer of Collateral. Until notice by the Bank
after the occurrence and continuation of an Event of Default hereunder, Borrower
shall be entitled to possession or use of the Collateral (other than Instruments
or Documents (including Tangible Chattel Paper and Investment Property
consisting of certificated securities) and other Collateral required to be
delivered to the Bank pursuant to this Section 6. The cancellation or surrender
of the Notes, upon payment or otherwise, shall not affect the right of the Bank
to retain the Collateral for any other of the Obligations. Borrower shall not
sell, assign (by operation of law or otherwise), license, lease or otherwise
dispose of, or grant any option with respect to any of the Collateral, except
that Borrower may sell Inventory in the ordinary course of business.
6.4 Financing Statements. Borrower shall, at the Bank's request, at any
time and from time to time, execute and deliver to the Bank such financing
statements, amendments and other documents and do such acts as the Bank deems
necessary in order to establish and maintain valid, attached and perfected first
priority security interests in the Collateral in favor of the Bank, free and
clear of all Liens and claims and rights of third parties whatsoever, except
Permitted Liens. Borrower hereby irrevocably authorizes the Bank at any time,
and from time to time, to file in any jurisdiction any initial financing
statements and amendments thereto without the signature of Borrower that (a)
indicate the Collateral (i) is comprised of all assets of Borrower or words of
similar effect, regardless of whether any particular asset comprising a part of
the Collateral falls within the scope of Article 9 of the Uniform Commercial
Code of
37
the jurisdiction wherein such financing statement or amendment is filed, or (ii)
as being of an equal or lesser scope or within greater detail as the grant of
the security interest set forth herein, and (b) contain any other information
required by Section 5 of Article 9 of the Uniform Commercial Code of the
jurisdiction wherein such financing statement or amendment is filed regarding
the sufficiency or filing office acceptance of any financing statement or
amendment, including (i) whether Borrower is an organization, the type of
organization and any Organizational Identification Number issued to Borrower,
and (ii) in the case of a financing statement filed as a fixture filing or
indicating Collateral as as-extracted collateral or timber to be cut, a
sufficient description of the real property to which the Collateral relates.
Borrower hereby agrees that a photographic or other reproduction of this
Agreement is sufficient for filing as a financing statement and Borrower
authorizes the Bank to file this Agreement as a financing statement in any
jurisdiction. Borrower agrees to furnish any such information to the Bank
promptly upon request. Borrower further ratifies and affirms its authorization
for any financing statements and/or amendments thereto, executed and filed by
the Bank in any jurisdiction prior to the date of this Agreement. In addition,
Borrower shall make appropriate entries on its books and records disclosing the
Bank's security interests in the Collateral.
6.5 [RESERVED]
6.6 Preservation of the Collateral. The Bank may, but is not required,
to take such actions from time to time as the Bank deems appropriate to maintain
or protect the Collateral. The Bank shall have exercised reasonable care in the
custody and preservation of the Collateral if the Bank takes such action as
Borrower shall reasonably request in writing which is not inconsistent with the
Bank's status as a secured party, but the failure of the Bank to comply with any
such request shall not be deemed a failure to exercise reasonable care;
provided, however, the Bank's responsibility for the safekeeping of the
Collateral shall (i) be deemed reasonable if such Collateral is accorded
treatment substantially equal to that which the Bank accords its own property,
and (ii) not extend to matters beyond the control of the Bank, including,
without limitation, acts of God, war, insurrection, riot or governmental
actions. In addition, any failure of the Bank to preserve or protect any rights
with respect to the Collateral against prior or third parties, or to do any act
with respect to preservation of the Collateral, not so requested by Borrower,
shall not be deemed a failure to exercise reasonable care in the custody or
preservation of the Collateral. Borrower shall have the sole responsibility for
taking such action as may be necessary, from time to time, to preserve all
rights of Borrower and the Bank in the Collateral against prior or third
parties. Without limiting the generality of the foregoing, where Collateral
consists in whole or in part of securities, Borrower represents to, and
covenants with, the Bank that Borrower has made arrangements for keeping
informed of changes or potential changes affecting the securities (including,
but not limited to, rights to convert or subscribe, payment of dividends,
reorganization or other exchanges, tender offers and voting rights), and
Borrower agrees that the Bank shall have no responsibility or liability for
informing Borrower of any such or other changes or potential changes or for
taking any action or omitting to take any action with respect thereto.
6.7 Other Actions as to any and all Collateral. Borrower further agrees
to take any other action reasonably requested by the Bank to ensure the
attachment, perfection and first priority of, and the ability of the Bank to
enforce, the Bank's security interest in any and all of the Collateral
including, without limitation, (a) executing, delivering and, where appropriate,
filing financing statements, continuations thereof and amendments relating
thereto under the UCC, to the extent, if any, that Borrower's signature thereon
is required therefor, (b) causing the Bank's name to be noted as secured party
on any certificate of title for a titled good if such notation is a condition to
attachment, perfection or priority of, or ability of the bank to enforce, the
Bank's security interest in such Collateral, (c) complying with any provision of
any statute, regulation or treaty of the United States as to any Collateral if
compliance with such provision is a condition to attachment, perfection or
priority of, or ability of the
38
Bank to enforce, the Bank's security interest in such Collateral, (d) obtaining
governmental and other third party consents and approvals, including without
limitation any consent of any licensor, lessor or other Person obligated on
Collateral, (e) obtaining waivers from mortgagees and landlords in form and
substance satisfactory to the Bank, and (f) taking all actions required by the
UCC in effect from time to time or by other law, as applicable in any relevant
UCC jurisdiction, or by other law as applicable in any foreign jurisdiction.
Borrower further agrees to indemnify and hold the Bank harmless against claims
of any Persons not a party to this Agreement concerning disputes arising over
the Collateral.
6.8 Collateral in the Possession of a Warehouseman or Bailee. If any of
the Collateral at any time is in the possession of a warehouseman or bailee,
Borrower shall promptly notify the Bank thereof, and shall promptly use its
reasonable best efforts to obtain a Collateral Access Agreement. The Bank agrees
with Borrower that the Bank shall not give any such instructions unless an Event
of Default has occurred and is continuing or would occur after taking into
account any action by Borrower with respect to the warehouseman or bailee.
6.9 [RESERVED]
6.10 Letter-of-Credit Rights. If Borrower at any time is a beneficiary
under a letter of credit now or hereafter issued in favor of Borrower, Borrower
shall promptly notify the Bank thereof and, at the request and option of the
Bank, Borrower shall, pursuant to an agreement in form and substance
satisfactory to the Bank, either (i) arrange for the issuer and any confirmer of
such letter of credit to consent to an assignment to the Bank of the proceeds of
any drawing under the letter of credit, or (ii) arrange for the Bank to become
the transferee beneficiary of the letter of credit, with the Bank agreeing, in
each case, that the proceeds of any drawing under the letter to credit are to be
applied as provided in this Agreement.
6.11 Commercial Tort Claims. If Borrower shall at any time hold or
acquire a Commercial Tort Claim, Borrower shall immediately notify the Bank in
writing signed by Borrower of the details thereof and grant to the Bank in such
writing a security interest therein and in the proceeds thereof, all upon the
terms of this Agreement, in each case in form and substance satisfactory to the
Bank, and shall execute any amendments hereto deemed reasonably necessary by the
Bank to perfect its security interest in such Commercial Tort Claim.
6.12 Electronic Chattel Paper and Transferable Records. If Borrower at
any time holds or acquires an interest in any electronic chattel paper or any
"transferable record", as that term is defined in Section 201 of the federal
Electronic Signatures in Global and National Commerce Act, or in Section 16 of
the Uniform Electronic Transactions Act as in effect in any relevant
jurisdiction, Borrower shall promptly notify the Bank thereof and, at the
request of the Bank, shall take such action as the Bank may reasonably request
to vest in the Bank control under Section 9-105 of the UCC of such electronic
chattel paper or control under Section 201 of the federal Electronic Signatures
in Global and National Commerce Act or, as the case may be, Section 16 of the
Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of
such transferable record. The Bank agrees with Borrower that the Bank will
arrange, pursuant to procedures satisfactory to the Bank and so long as such
procedures will not result in the Bank's loss of control, for Borrower to make
alterations to the electronic chattel paper or transferable record permitted
under Section 9-105 of the UCC or, as the case may be, Section 201 of the
federal Electronic Signatures in Global and National Commerce Act or Section 16
of the Uniform Electronic Transactions Act for a party in control to make
without loss of control.
39
7. REPRESENTATIONS AND WARRANTIES.
To induce the Bank to make the Loans, Borrower makes the following
representations and warranties to the Bank, each of which shall survive the
execution and delivery of this Agreement:
7.1 Borrower Organization and Name. Borrower, as applicable, is a
corporation or limited liability company duly organized, existing and in good
standing under the laws of the States of Delaware and Tennessee with full and
adequate power to carry on and conduct its business as presently conducted and
each Subsidiary is validly existing and in good standing under the laws of the
jurisdiction of its organization. Borrower and each Subsidiary, as applicable,
is duly licensed or qualified in all foreign jurisdictions wherein the nature of
its activities require such qualification or licensing, except for such
jurisdictions where the failure to so qualify would not have a Material Adverse
Effect. Borrower's Organizational Identification Numbers are as follows:
Borrower State Identification Number
-------- ----- ---------------------
Integrity Media DE ▇▇-▇▇▇▇▇▇▇;
Integrity Publishers DE ▇▇-▇▇▇▇▇▇▇;
Integrity Direct DE ▇▇-▇▇▇▇▇▇▇;
INO Records TN ▇▇-▇▇▇▇▇▇▇; and
Kona DE ▇▇-▇▇▇▇▇▇▇.
The exact legal name of Borrower is as set forth in the first paragraph of this
Agreement. Other than Integrity Media, which was formerly known as Integrity
Incorporated, and INO Records, which was formerly known as M2 Communications,
L.L.C., the exact legal name of Borrower is as set forth in the first paragraph
of this Agreement, and Borrower currently does not conduct, nor has it during
the last five (5) years conducted, business under any other name or trade name
other than Integrity Music and Hosanna Music.
7.2 Authorization. Borrower has full right, power and authority to
enter into this Agreement, to make the borrowings and execute and deliver the
Loan Documents as provided herein and to perform all of its duties and
obligations under this Agreement and the other Loan Documents. The execution and
delivery of this Agreement and the other Loan Documents will not, nor will the
observance or performance of any of the matters and things herein or therein set
forth, violate or contravene any provision of law or of the certificate of
incorporation or bylaws and articles of organization, as applicable, of
Borrower. All necessary and appropriate action has been taken on the part of
Borrower to authorize the execution and delivery of this Agreement and the Loan
Documents.
7.3 Validity and Binding Nature. This Agreement and the other Loan
Documents are the legal, valid and binding obligations of Borrower, enforceable
against Borrower in accordance with their terms, subject to bankruptcy,
insolvency and similar laws affecting the enforceability of creditors' rights
generally and to general principles of equity.
7.4 Consent; Absence of Breach. The execution, delivery and performance
of this Agreement, the other Loan Documents and any other documents or
instruments to be executed and delivered by Borrower in connection with the
Loans, and the borrowings by Borrower hereunder, do not and will not (a) require
any consent, approval, authorization of, or filings with, notice to or other act
by or in respect of, any governmental authority or any other Person (other than
any consent or approval which has been obtained and is in full force and
effect); (b) conflict with (i) any provision of law or any
40
applicable regulation, order, writ, injunction or decree of any court or
governmental authority, (ii) the certificate of incorporation or bylaws and
articles of organization of Borrower or any of its Subsidiaries, or (iii) any
agreement, indenture, instrument or other document, or any judgment, order or
decree, which is binding upon Borrower or any of its Subsidiaries or any of
their respective properties or assets; or (c) require, or result in, the
creation or imposition of any Lien on any asset of Borrowers or any of its
Subsidiaries, other than Liens in favor of the Bank created pursuant to this
Agreement.
7.5 Ownership of Properties; Liens. Borrower is the sole owner or has
other rights in all of its properties and assets, real and personal, tangible
and intangible, of any nature whatsoever (including patents, trademarks, trade
names, service marks and copyrights), free and clear of all Liens, charges and
claims (including infringement claims with respect to patents, trademarks,
service marks, copyrights and the like), other than Permitted Liens.
7.6 Equity Ownership. All issued and outstanding Capital Securities of
Borrower and each of its Subsidiaries are duly authorized and validly issued,
fully paid, non-assessable, and free and clear of all Liens other than those in
favor of the Bank, if any, and such securities were issued in compliance with
all applicable state and federal laws concerning the issuance of securities. As
of the Restatement Date, other than the Warrants issued pursuant to the
Subordinated Debt Documents and as set forth on Schedule 7.6, there are no
pre-emptive or other outstanding rights, options, warrants, conversion rights or
other similar agreements or understandings for the purchase or acquisition of
any Capital Securities of Borrower and each of its Subsidiaries.
7.7 Intellectual Property. Borrower owns and possesses or has a license
or other right to use all Intellectual Property, as are necessary for the
conduct of the businesses of Borrower, without any infringement upon rights of
others which could reasonably be expected to have a Material Adverse Effect upon
Borrower, and no material claim has been asserted and is pending by any Person
challenging or questioning the use of any Intellectual Property or the validity
or effectiveness of any Intellectual Property nor does Borrower know of any
valid basis for any such claim.
7.8 Financial Statements. All financial statements submitted to the
Bank have been prepared in accordance with sound accounting practices and GAAP
on a basis, except as otherwise noted therein, consistent with the previous
fiscal year and present fairly the financial condition of Borrower and the
results of the operations for Borrower as of such date and for the periods
indicated. Since the date of the most recent financial statement submitted by
Borrower to the Bank, there has been no change in the financial condition or in
the assets or liabilities of Borrower having a Material Adverse Effect on
Borrower.
7.9 Litigation and Contingent Liabilities. There is no litigation,
arbitration proceeding, demand, charge, claim, petition or governmental
investigation or proceeding pending, or to the best knowledge of Borrower,
threatened, against Borrower, which, might reasonably be expected to have a
Material Adverse Effect upon Borrower. Borrower has no material guarantee
obligations, contingent liabilities, liabilities for taxes, or any long-term
leases or unusual forward or long-term commitments, including any interest rate
or foreign currency swap or exchange transaction or other obligation in respect
of derivatives, that are not fully-reflected or fully reserved for in the most
recent audited financial statements delivered pursuant to subsection 8.8(a) or
fully-reflected or fully reserved for in the most recent quarterly financial
statements delivered pursuant to subsection 8.8(b) and not permitted by Section
9.1.
7.10 Event of Default. No Event of Default or Unmatured Event of
Default exists or would result from the incurrence by Borrower of any of the
Obligations hereunder or under any of the other
41
Loan Documents, and Borrower is not in default (without regard to grace or cure
periods) under any other contract or agreement to which it is a party, the
effect of which would have a Material Adverse Effect upon Borrower.
7.11 Adverse Circumstances. No condition, circumstance, event,
agreement, document, instrument, restriction, litigation or proceeding (or
threatened litigation or proceeding or basis therefor) exists which (a) would
have a Material Adverse Effect upon Borrower, or (b) would constitute an Event
of Default or an Unmatured Event of Default.
7.12 Environmental Laws and Hazardous Substances. Except for those
matters which are not reasonably likely to have a Material Adverse Effect,
Borrower represents, warrants and agrees with the Bank that (i) Borrower has not
generated, used, stored, treated, transported, manufactured, handled, produced
or disposed of any Hazardous Substances, on or off any of the premises of
Borrower (whether or not owned by it) in any manner which at any time violates
any Environmental Law or any license, permit, certificate, approval or similar
authorization thereunder, (ii) the operations of Borrower comply in all material
respects with all Environmental Laws and all licenses, permits, certificates,
approvals and similar authorizations thereunder, (iii) there has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other Person, nor is any pending or,
to the best of Borrower's knowledge, threatened, and Borrower shall immediately
notify the Bank upon becoming aware of any such investigation, proceeding,
complaint, order, directive, claim, citation or notice, and shall take prompt
and appropriate actions to respond thereto, with respect to any non-compliance
with, or violation of, the requirements of any Environmental Law by Borrower or
the release, spill or discharge, threatened or actual, of any Hazardous Material
or the generation, use, storage, treatment, transportation, manufacture,
handling, production or disposal of any Hazardous Material or any other
environmental, health or safety matter, which affects Borrower or its business,
operations or assets or any properties at which Borrower has transported, stored
or disposed of any Hazardous Substances, and (iv) Borrower has no material
liability, contingent or otherwise, in connection with a release, spill or
discharge, threatened or actual, of any Hazardous Substances or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Material. Borrower further agrees to allow the Bank or
its agent access to the properties of Borrower and its Subsidiaries to confirm
compliance with all Environmental Laws, and Borrower shall, following
determination by the Bank that there is non-compliance, or any condition which
requires any action by or on behalf of Borrower in order to avoid any
non-compliance, with any Environmental Law, at Borrower's sole expense, cause an
independent environmental engineer acceptable to the Bank to conduct such tests
of the relevant site as are appropriate, and prepare and deliver a report
setting forth the result of such tests, a proposed plan for remediation and an
estimate of the costs thereof.
7.13 Solvency, Etc. As of the date hereof, and immediately prior to and
after giving effect to the issuance of each Letter of Credit and each Loan
hereunder and the use of the proceeds thereof, (a) the fair value of Borrower's
assets taken as a whole is greater than the amount of its liabilities (including
disputed, contingent and unliquidated liabilities calculated at the amount
which, in light of all the facts and circumstances existing at the time,
represent the amounts which can be reasonably expected to become an actual or
matured liability) as such value is established and liabilities evaluated, (b)
the present fair saleable value of Borrower's assets taken as a whole is not
less than the amount that will be required to pay the probable liability on its
debts as they become absolute and matured, (c) Borrower is able to realize upon
its assets taken as a whole and pay its debts and other liabilities (including
disputed, contingent and unliquidated liabilities) as they mature in the normal
course of business, (d) Borrower does not intend to, and does not believe that
it will, incur debts or liabilities beyond its ability to pay as such debts and
liabilities mature, and (e) Borrower is not engaged in business or a
transaction, and is not
42
about to engage in business or a transaction, for which its property would
constitute unreasonably small capital.
7.14 ERISA Obligations. All Employee Plans of Borrower meet the minimum
funding standards of Section 302 of ERISA and 412 of the Internal Revenue Code
where applicable, and each such Employee Plan that is intended to be qualified
within the meaning of Section 401 of the Internal Revenue Code of 1986 is
qualified. No withdrawal liability has been incurred under any such Employee
Plans and no "Reportable Event" or "Prohibited Transaction" (as such terms are
defined in ERISA), has occurred with respect to any such Employee Plans, unless
approved by the appropriate governmental agencies. Borrower has promptly paid
and discharged all obligations and liabilities arising under the Employee
Retirement Income Security Act of 1974 ("ERISA") of a character which if unpaid
or unperformed might result in the imposition of a Lien against any of its
properties or assets.
7.15 Labor Relations. Except as could not reasonably be expected to
have a Material Adverse Effect, (i) there are no strikes, lockouts or other
labor disputes against Borrower or, to the best knowledge of Borrower,
threatened, (ii) hours worked by and payment made to employees of Borrower have
not been in violation of the Fair Labor Standards Act or any other applicable
law, and (iii) no unfair labor practice complaint is pending against Borrower
or, to the best knowledge of Borrower, threatened before any governmental
authority.
7.16 Security Interest. This Agreement creates a valid security
interest in favor of the Bank in the Collateral and, when properly perfected by
filing in the appropriate jurisdictions, or by possession or Control of such
Collateral by the Bank or delivery of such Collateral to the Bank, shall
constitute a valid, perfected, first-priority security interest in such
Collateral.
7.17 Lending Relationship. Borrower acknowledges and agrees that the
relationship hereby created with the Bank is and has been conducted on an open
and arm's length basis in which no fiduciary relationship exists and that
Borrower has not relied and is not relying on any such fiduciary relationship in
executing this Agreement and in consummating the Loans. The Bank represents that
it will receive the Notes payable to its order as evidence of a bank loan.
7.18 Business Loan. The Loans, including interest rate, fees and
charges as contemplated hereby, (i) are business loans within the purview of 815
ILCS 205/4(1)(c), as amended from time to time, (ii) are an exempted transaction
under the Truth In Lending Act, 12 U.S.C. 1601 et seq., as amended from time to
time, and (iii) do not, and when disbursed shall not, violate the provisions of
the Illinois usury laws, any consumer credit laws or the usury laws of any state
which may have jurisdiction over this transaction, Borrower or any property
securing the Loans.
7.19 Taxes. Borrower has timely filed all tax returns and reports
required by law to have been filed by it and has paid all taxes, governmental
charges and assessments due and payable with respect to such returns, except any
such taxes or charges which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books, are insured against or bonded over to
the satisfaction of the Bank and the contesting of such payment does not create
a Lien on the Collateral which is not a Permitted Lien. There is no controversy
or objection pending, or to the knowledge of Borrower, threatened in respect of
any tax returns of Borrower. Borrower has made adequate reserves on its books
and records in accordance with GAAP for all taxes that have accrued but which
are not yet due and payable. Borrower has not participated in any transaction
that relates to a year of the taxpayer (which is still open under the applicable
statute of limitations) which is a "reportable transaction" within the meaning
of Treasury Regulation Section 1.6011-4(b)(2) (irrespective of the date when the
transaction was entered into).
43
7.20 Compliance with Regulation U. No portion of the proceeds of the
Loans shall be used by Borrower, or any Affiliate of Borrower, either directly
or indirectly, for the purpose of purchasing or carrying any margin stock,
within the meaning of Regulation U as adopted by the Board of Governors of the
Federal Reserve System or any successor thereto.
7.21 Governmental Regulation. Borrower and its Subsidiaries are not, or
after giving effect to any loan, will not be, subject to regulation under the
Public Utility Holding Company Act of 1935, the Federal Power Act, the ICC
Termination Act of 1995 or the Investment Company Act of 1940 or to any federal
or state statute or regulation limiting its ability to incur indebtedness for
borrowed money.
7.22 [RESERVED]
7.23 Place of Business. The principal place of business and books and
records of Borrower is set forth in the preamble to this Agreement, and the
location of all Collateral, if other than at such principal place of business,
is as set forth on Schedule 7.23 attached hereto and made a part hereof, and
Borrower shall promptly notify the Bank of any change in such locations.
Borrower will not remove or permit the Collateral to be removed from such
locations without the prior written consent of the Bank, except for Inventory
sold in the usual and ordinary course of Borrower's business.
7.24 Complete Information. This Agreement and all financial statements,
schedules, certificates, confirmations, agreements, contracts, and other
materials and information heretofore or contemporaneously herewith furnished in
writing by Borrower to the Bank for purposes of, or in connection with, this
Agreement and the transactions contemplated hereby is, and all written
information hereafter furnished by or on behalf of Borrower to the Bank pursuant
hereto or in connection herewith will be, true and accurate in every material
respect on the date as of which such information is dated or certified, and none
of such information is or will be incomplete by omitting to state any material
fact necessary to make such information not misleading in light of the
circumstances under which made (it being recognized by the Bank that any
projections and forecasts provided by Borrower are based on good faith estimates
and assumptions believed by Borrower to be reasonable as of the date of the
applicable projections or assumptions and that actual results during the period
or periods covered by any such projections and forecasts may differ from
projected or forecasted results).
7.25 Subordinated Debt. The subordination provisions of the
Subordinated Debt are enforceable against the holders of the Subordinated Debt
by the Bank. The Obligations constitute Senior Funded Debt entitled to the
benefits of the subordination provisions contained in the Subordinated Debt.
Borrower acknowledges that the Bank is entering into this Agreement and is
making the Loans in reliance upon the subordination provisions of the
Subordinated Debt and this Section 7.22.
7.26 [RESERVED]
7.27 Material Contracts. Schedule 7.27 accurately and completely
discloses each Material Contract as of the Restatement Date of Borrower, and (b)
also indicates the following information with respect to each such contract: (1)
the contract parties thereunder, and (2) the contract term and any options or
renewals thereto, and (3) the monthly payment required thereunder, and (4) any
restrictions on assignments, and (5) any restrictions on disclosure of the terms
thereof, and (6) the existence of any breaches or defaults thereunder. Borrower
has not committed any unwaived breach or default under any Material Contract,
and after due inquiry and investigation, Borrower has no knowledge or reason to
believe that any other party to any such Material Contract has or might have
committed any unwaived breach or default thereof. For purposes of this Section
7.27, a "Material Contract" of Borrower includes
44
the following agreements to which Borrower is a party: (1) any contract or
advance with annual compensation, consideration or payments in excess of
$600,000 and (2) any other agreement or contract the loss or breach of which
could reasonably be expected to have or cause a Material Adverse Effect.
7.28 Licenses and Authorizations. Borrower and each of its Subsidiaries
possesses all Licenses and other Authorizations necessary or required in the
conduct of its businesses and/or the operation of its properties of which the
failure to possess could reasonably be expected to result in a Material Adverse
Effect. Each Authorization is valid, binding and enforceable on, against and by
Borrower. Each Authorization is subsisting without any defaults thereunder or
enforceable adverse limitations thereon, and no Authorization is subject to any
proceedings or claims opposing the issuance, continuance, renewal, development
or use thereof or contesting the validity or seeking the revocation thereof.
Schedule 7.28 accurately and completely lists each License and Authorization
(exclusive of copyrights) of Borrower of which the failure to possess could
reasonably result in a Material Adverse Effect, together with relevant
identifying information describing such Authorizations.
8. AFFIRMATIVE COVENANTS.
8.1 Compliance with Bank Regulatory Requirements; Increased Costs. If,
after the date hereof, the adoption of, or any change in, any applicable law,
rule or regulation, or any change in the interpretation or administration of any
applicable law, rule or regulation by any governmental authority, central bank
or comparable agency charged with the interpretation or administration thereof,
or compliance by the Bank with any request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency: (a)
shall impose, modify or deem applicable any reserve (including any reserve
imposed by the Board of Governors of the Federal Reserve System, or any
successor thereto, but excluding any reserve included in the determination of
the LIBOR Rate), special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by the Bank; or (b)
shall impose on the Bank any other condition affecting its LIBOR Loans, the
Notes or its obligation to make LIBOR Loans; and the result of anything
described in subsections (a) and (b) above is to increase the cost to (or to
impose a cost on) the Bank of making or maintaining any LIBOR Loan, or to reduce
the amount of any sum received or receivable by the Bank under this Agreement or
under the Notes with respect thereto, then upon demand by the Bank (which demand
shall be accompanied by a statement setting forth the basis for such demand and
a calculation of the amount thereof in reasonable detail), Borrower shall pay
directly to the Bank such additional amount as will compensate the Bank for such
increased cost or such reduction, so long as such amounts have accrued on or
after the day which is one hundred eighty days (180) days prior to the date on
which the Bank first made demand therefor.
If the Bank shall reasonably determine that any change in, or the
adoption or phase-in of, any applicable law, rule or regulation regarding
capital adequacy, or any change in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or the compliance by the Bank or
any Person controlling the Bank with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on the Bank's or such controlling Person's capital as a consequence of
the Bank's obligations hereunder or under any Letter of Credit to a level below
that which the Bank or such controlling Person could have achieved but for such
change, adoption, phase-in or compliance (taking into consideration the Bank's
or such controlling Person's policies with respect to capital adequacy) by an
amount deemed by the Bank or such controlling Person to be material, then from
time to time, upon demand by the Bank (which demand shall be accompanied by a
statement setting forth the basis for such demand and a calculation of the
amount thereof in reasonable detail), Borrower shall pay to the Bank such
additional amount as will compensate the Bank or such controlling Person for
such reduction so long as such
45
amounts have accrued on or after the day which is one hundred eighty (180) days
prior to the date on which the Bank first made demand therefor.
8.2 Borrower Existence. Borrower shall at all times preserve and
maintain (a) its existence and good standing in the jurisdiction of its
organization, and (b) its qualification to do business and good standing in each
jurisdiction where the nature of its business makes such qualification necessary
(other than such jurisdictions in which the failure to be qualified or in good
standing could not reasonably be expected to have a Material Adverse Effect),
and shall at all times continue as a going concern in the business which
Borrower is presently conducting. If Borrower does not have an Organizational
Identification Number and later obtains one, Borrower shall promptly notify the
Bank of such Organizational Identification Number.
8.3 Compliance With Laws. Borrower shall use the proceeds of the Loans
for working capital and other general corporate or business purposes not in
contravention of any requirements of law and not in violation of this Agreement,
and shall comply, and cause each Subsidiary to comply, in all respects,
including the conduct of its business and operations and the use of its
properties and assets, with all applicable laws, rules, regulations, decrees,
orders, judgments, licenses and permits, except where failure to comply could
not reasonably be expected to have a Material Adverse Effect. In addition, and
without limiting the foregoing sentence, Borrower shall (a) ensure, and cause
each Subsidiary to ensure, that no person who owns a controlling interest in or
otherwise controls Borrower or any Subsidiary is or shall be listed on the
Specially Designated Nationals and Blocked Person List or other similar lists
maintained by the Office of Foreign Assets Control ("OFAC"), the Department of
the Treasury or included in any Executive Orders, (b) not use or permit the use
of the proceeds of the Loans to violate any of the foreign asset control
regulations of OFAC or any enabling statute or Executive Order relating thereto,
and (c) comply, and cause each Subsidiary to comply, with all applicable Bank
Secrecy Act ("BSA") laws and regulations, as amended.
8.4 Payment of Taxes and Liabilities. Borrower shall pay, and cause
each Subsidiary to pay, and discharge, prior to delinquency and before penalties
accrue thereon, all property and other taxes, and all governmental charges or
levies against it or any of the Collateral, as well as claims of any kind which,
if unpaid, could become a Lien on any of its property; provided that the
foregoing shall not require Borrower or any Subsidiary to pay any such tax or
charge so long as it shall contest the validity thereof in good faith by
appropriate proceedings and shall set aside on its books adequate reserves with
respect thereto in accordance with GAAP and, in the case of a claim which could
become a Lien on any of the Collateral, such contest proceedings stay the
foreclosure of such Lien or the sale of any portion of the Collateral to satisfy
such claim.
8.5 Maintain Property. Borrower shall at all times maintain, preserve
and keep its plant, properties and Equipment, including, but not limited to, any
Collateral, in good repair, working order and condition, normal wear and tear
excepted, and shall from time to time make all needful and proper repairs,
renewals, replacements, and additions thereto so that at all times the
efficiency thereof shall be fully preserved and maintained. Borrower shall
permit the Bank to examine and inspect such plant, properties and Equipment,
including, but not limited to, any Collateral, at all reasonable times.
8.6 Maintain Insurance. Borrower shall at all times maintain, and cause
each Subsidiary to maintain, with insurance companies reasonably acceptable to
the Bank, such insurance coverage as may be required by any law or governmental
regulation or court decree or order applicable to it and such other insurance,
to such extent and against such hazards and liabilities, including employers',
public and professional liability risks, as is customarily maintained by
companies similarly situated, and shall have insured amounts no less than, and
deductibles no higher than, are reasonably acceptable to the Bank.
46
Borrower shall furnish to the Bank a certificate setting forth in reasonable
detail the nature and extent of all insurance maintained by Borrower, which
shall be reasonably acceptable in all respects to the Bank. Borrower shall cause
each issuer of an insurance policy to provide the Bank with an endorsement (i)
showing the Bank as loss payee with respect to each policy of property or
casualty insurance, and naming the Bank as an additional insured with respect to
each policy of liability insurance; and (ii) providing that thirty (30) days
notice will be given to the Bank prior to any cancellation of, material
reduction or change in coverage provided by or other material modification to
such policy. Borrower shall execute and deliver to the Bank a collateral
assignment, in form and substance satisfactory to the Bank, of each business
interruption insurance policy maintained by Borrower. The Bank agrees that the
coverage in effect as of the Restatement Date is acceptable.
IN THE EVENT BORROWER EITHER FAILS TO PROVIDE THE BANK WITH EVIDENCE OF
THE INSURANCE COVERAGE REQUIRED BY THIS SECTION OR AT ANY TIME HEREAFTER SHALL
FAIL TO OBTAIN OR MAINTAIN ANY OF THE POLICIES OF INSURANCE REQUIRED ABOVE, OR
TO PAY ANY PREMIUM IN WHOLE OR IN PART RELATING THERETO, THEN THE BANK, WITHOUT
WAIVING OR RELEASING ANY OBLIGATION OR DEFAULT BY BORROWER HEREUNDER, MAY AT ANY
TIME (BUT SHALL BE UNDER NO OBLIGATION TO SO ACT), OBTAIN AND MAINTAIN SUCH
POLICIES OF INSURANCE AND PAY SUCH PREMIUMS AND TAKE ANY OTHER ACTION WITH
RESPECT THERETO, WHICH THE BANK DEEMS ADVISABLE. THIS INSURANCE COVERAGE (A)
MAY, BUT NEED NOT, PROTECT BORROWER'S INTERESTS IN SUCH PROPERTY, INCLUDING, BUT
NOT LIMITED TO, THE COLLATERAL, AND (B) MAY NOT PAY ANY CLAIM MADE BY, OR
AGAINST, BORROWER IN CONNECTION WITH SUCH PROPERTY, INCLUDING, BUT NOT LIMITED
TO, THE COLLATERAL. BORROWER MAY LATER CANCEL ANY SUCH INSURANCE PURCHASED BY
THE BANK, BUT ONLY AFTER PROVIDING THE BANK WITH EVIDENCE THAT BORROWER HAS
OBTAINED THE INSURANCE COVERAGE REQUIRED BY THIS SECTION. IF THE BANK PURCHASES
INSURANCE FOR THE COLLATERAL, BORROWER WILL BE RESPONSIBLE FOR THE COSTS OF THAT
INSURANCE, INCLUDING INTEREST AND ANY OTHER CHARGES THAT MAY BE IMPOSED WITH THE
PLACEMENT OF THE INSURANCE, UNTIL THE EFFECTIVE DATE OF THE CANCELLATION OR
EXPIRATION OF THE INSURANCE. THE COSTS OF THE INSURANCE MAY BE ADDED TO THE
PRINCIPAL AMOUNT OF THE LOANS OWING HEREUNDER. THE COSTS OF THE INSURANCE MAY BE
MORE THAN THE COST OF THE INSURANCE BORROWER MAY BE ABLE TO OBTAIN ON ITS OWN.
8.7 ERISA Liabilities; Employee Plans. Borrower shall (i) keep in full
force and effect any and all Employee Plans which are presently in existence or
may, from time to time, come into existence under ERISA, and not withdraw from
any such Employee Plans, unless such withdrawal can be effected or such Employee
Plans can be terminated without liability to Borrower; (ii) make contributions
to all of such Employee Plans in a timely manner and in a sufficient amount to
comply with the standards of ERISA; including the minimum funding standards of
ERISA; (iii) comply with all material requirements of ERISA which relate to such
Employee Plans; (iv) notify the Bank immediately upon receipt by Borrower of any
notice concerning the imposition of any withdrawal liability or of the
institution of any proceeding or other action which may result in the
termination of any such Employee Plans or the appointment of a trustee to
administer such Employee Plans; (v) promptly advise the Bank of the occurrence
of any "Reportable Event" or "Prohibited Transaction" (as such terms are defined
in ERISA), with respect to any such Employee Plans; and (vi) amend any Employee
Plan that is intended to be qualified within the meaning of Section 401 of the
Internal Revenue Code of 1986 to the extent necessary to keep the Employee Plan
qualified, and to cause the Employee Plan to be administered and operated in a
manner that does not cause the Employee Plan to lose its qualified status.
47
8.8 Financial Statements. Borrower shall at all times maintain a
standard and modern system of accounting, on the accrual basis of accounting and
in all respects in accordance with GAAP, and shall furnish to the Bank or its
authorized representatives such information regarding the business affairs,
operations and financial condition of Borrower, including, but not limited to:
(a) promptly when available, and in any event, within one
hundred twenty (120) days after the close of each of its fiscal years, a copy of
the annual audited financial statements of Borrower and its Subsidiaries,
including consolidated balance sheet, statement of income and retained earnings,
statement of cash flows for the fiscal year then ended and such other
information (including nonfinancial information) as the Bank may reasonably
request, in reasonable detail, prepared and certified by an independent auditor
of recognized standing, selected by Borrower and reasonably acceptable to the
Bank; and
(b) promptly when available, and in any event, within
thirty (30) days following the end of each month, a copy of the consolidated and
consolidating financial statements of Borrower and its Subsidiaries regarding
such month, including balance sheet, statement of income and retained earnings,
statement of cash flows for the month then ended and such other information
(including nonfinancial information) as the Bank may request, in reasonable
detail, prepared and certified as true and correct by Borrower's treasurer or
chief financial officer; provided, however, that with respect to the last month
of each calendar quarter, such financial statements and information shall be
delivered within forty-five (45) days following the end of such month; and
(c) within ten (10) days after the filing due date (as
such date may be extended in accordance with properly granted extensions) each
year, a signed copy of the complete income tax returns filed with the Internal
Revenue Service by Borrower.
No change with respect to such accounting principles shall be made by
Borrower without giving prior notification to the Bank. Borrower represents and
warrants to the Bank that the financial statements delivered to the Bank at or
prior to the execution and delivery of this Agreement and to be delivered at all
times thereafter accurately reflect and will accurately reflect the financial
condition of Borrower. The Bank shall have the right at all times during
business hours to inspect the books and records of Borrower and make extracts
therefrom. Borrower agrees to advise the Bank immediately of any material and
adverse change in the financial condition, the operations or any other status of
Borrower.
8.9 [RESERVED]
8.10 Supplemental Financial Statements. Borrower shall immediately upon
receipt thereof, provide to the Bank copies of interim and supplemental reports
if any, submitted to Borrower by independent accountants in connection with any
interim audit or review of the books of Borrower.
8.11 Borrowing Base Certificate. Borrower shall, (a) within twenty (20)
Business Days after the end of each month, and (b) at any time Borrower shall
request a Loan hereunder, deliver to the Bank a Borrowing Base Certificate dated
as of the last Business Day of such month, certified as true and correct by an
authorized representative of Borrower, provided, however, at any time an Event
of Default exists, the Bank may require Borrower to deliver Borrowing Base
Certificates more frequently.
8.12 Aged Accounts Schedule. Borrower shall, within twenty (20)
Business Days after the end of each month, deliver to the Bank an aged schedule
of the Accounts of Borrower, listing the name and amount due from each Account
Debtor and showing the aggregate amounts due from (a) 0-30 days,
48
(b) 31-60 days, (c) 61-90 days and (d) more than 90 days, and certified as
accurate by Borrower's treasurer or chief financial officer.
8.13 Inventory Reports. Borrower shall, within twenty (20) Business
Days after the end of each month, deliver to the Bank an inventory report,
certified as accurate by Borrower's treasurer or chief financial officer, and
within such time as the Bank may specify, such other schedules and reports as
the Bank may require.
8.14 Covenant Compliance Certificate. Borrower shall, within forty-five
(45) days after the end of each fiscal quarter, deliver to the Bank a duly
completed compliance certificate, certified as true and correct by an
appropriate officer of Borrower, containing a computation of each of the
financial covenants set forth in Section 10 and stating that Borrower has not
become aware of any Event of Default or Unmatured Event of Default that has
occurred and is continuing or, if there is any such Event of Default or
Unmatured Event of Default describing it and the steps, if any, being taken to
cure it.
8.15 Field Audits. Borrower shall permit the Bank to inspect the
Inventory, other tangible assets and/or other business operations of Borrower,
to perform appraisals of the Equipment of Borrower, and to inspect, audit, check
and make copies of, and extracts from, the books, records, computer data,
computer programs, journals, orders, receipts, correspondence and other data
relating to Inventory, Accounts and any other Collateral, the results of which
must be satisfactory to the Bank in the Bank's sole and absolute discretion. All
such inspections or audits by the Bank shall be at Borrower's sole expense,
provided, however, that so long as no Event of Default or Unmatured Event of
Default exists, Borrower shall not be required to reimburse the Bank for
inspections or audits more frequently than once each fiscal year.
8.16 Other Reports. Borrower shall, within such period of time as the
Bank may reasonably specify, deliver to the Bank such other schedules and
reports as the Bank may reasonably require.
8.17 Collateral Records. Borrower shall keep full and accurate books
and records relating to the Collateral and shall ▇▇▇▇ such books and records to
indicate the Bank's Lien in the Collateral, including, without limitation,
placing a legend, in form and content acceptable to the Bank, on all Chattel
Paper created by Borrower indicating that the Bank has a Lien in such Chattel
Paper.
8.18 Intellectual Property. Borrower shall maintain, preserve and renew
all Intellectual Property necessary for the conduct of its business as and where
the same is currently located as heretofore conducted by it or as hereafter
conducted by it.
8.19 Notice of Proceedings. Borrower, promptly upon becoming aware,
shall give written notice to the Bank of any litigation, arbitration or
governmental investigation or proceeding not previously disclosed by Borrower to
the Bank which has been instituted or, to the knowledge of Borrower, is
threatened against Borrower or any of its Subsidiaries or to which any of their
respective properties is subject which might reasonably be expected to have a
Material Adverse Effect.
8.20 Notice of Event of Default or Material Adverse Effect. Borrower
shall, immediately after the commencement thereof, give notice to the Bank in
writing of the occurrence of any Event of Default or any Unmatured Event of
Default, or the occurrence of any condition or event having a Material Adverse
Effect.
8.21 Environmental Matters. If any material release or threatened
release or other disposal of Hazardous Substances shall occur or shall have
occurred on any real property or any other assets of
49
Borrower or any of its Subsidiaries, Borrower shall, or shall cause the
applicable Subsidiary to, cause the prompt containment and removal of such
Hazardous Substances and the remediation of such real property or other assets
as necessary to comply with all Environmental Laws and to preserve the value of
such real property or other assets. Without limiting the generality of the
foregoing, Borrower shall, and shall cause each Subsidiary to, comply with any
Federal or state judicial or administrative order requiring the performance at
any real property of Borrower or any Subsidiary of activities in response to the
release or threatened release of a Hazardous Substance unless the Borrower is
actively pursuing in good faith an appeal against such an order. To the extent
that the transportation of Hazardous Substances is permitted by this Agreement,
Borrower shall, and shall cause its Subsidiaries to, dispose of such Hazardous
Substances, or of any other wastes, only at licensed disposal facilities
operating in compliance with Environmental Laws.
8.22 Further Assurances. Borrower shall take, and cause each Subsidiary
to take, such actions as are necessary or as the Bank may reasonably request
from time to time to ensure that the Obligations under the Loan Documents are
secured by substantially all of the assets of Borrower and its Subsidiaries, in
each case as the Bank may determine, including (a) the execution and delivery of
security agreements, pledge agreements, mortgages, deeds of trust, financing
statements and other documents, and the filing or recording of any of the
foregoing, and (b) the delivery of certificated securities and other collateral
with respect to which perfection is obtained by possession.
8.23 Banking Relationship. Borrower covenants and agrees, at all times
during the term of this Agreement, to maintain its primary deposit accounts with
the Bank.
8.24 Non-Utilization Fee. Borrower agrees to pay to the Bank a
non-utilization fee equal to the Applicable Non-Utilization Percentage times the
total of (a) the Revolving Loan Commitment, minus (b) the sum of (i) the daily
average of the aggregate principal amount of all Revolving Loans outstanding,
plus (ii) the daily average of the aggregate amount of the Letter of Credit
Obligations, which non-utilization fee shall be (A) calculated on the basis of a
year consisting of 360 days, (B) paid for the actual number of days elapsed, and
(C) payable quarterly in arrears on the last day of each March, June, September
and December, commencing on September 30, 2004, and on the Maturity Date.
8.25 [RESERVED]
8.26 Other Financial and Specialized Reports.
8.27.1 Annual Projections. Within thirty (30) days after the close of
each fiscal year of Borrower, Borrower shall deliver to the Bank projected
balance sheets, statements of income and expense, and statements of cash flows
for Borrower and its Subsidiaries as of the end of and for each fiscal month of
the then current fiscal year and on an annual basis for each succeeding fiscal
year all or any portion of which occurs prior to the Maturity Date in such
detail as the Bank may reasonably require.
8.27.2 Additional Material Contracts, Licenses and Authorizations.
Borrower (a) will notify the Bank in writing within ninety (90) calendar days of
acquiring, executing or becoming bound by any Material Contract, material
License or other material Authorization that would have been listed on Schedule
7.27 or Schedule 7.28 if it had existed as of the Restatement Date, and (b) will
concurrently update Schedule 7.27 or Schedule 7.28 (as appropriate).
50
8.27.3 Tax Returns. Upon the Bank's request, within ten (10) Business
Days after the date that Borrower or any Subsidiary makes any filing with the
Internal Revenue Service relating to its liability for income taxes, Borrower
shall deliver a complete copy thereof to the Bank.
8.27.4 SEC Filings and Press Releases. Within ten (10) Business Days
after the date that Borrower or any organization that owns or controls at least
50% of any class of equity interests of Borrower makes any filing with the
Securities Exchange Commission (whether as a registration statement or a filing
on Form 8-K, Form 10-K, Form 10-Q, or otherwise, but excluding the exhibits
thereto and any registration statements on Form S-8 or its equivalent) or issues
any press release, Borrower shall deliver a complete copy thereof to the Bank.
8.27.5 Soundscan Rating. Within forty-five (45) days after the close of
each fiscal quarter, Borrower shall deliver to the Bank the most recently
published Soundscan ratings as they relate to the Christian music market.
8.27.6 Celebration. Within thirty (30) days after the close of the
fiscal quarter during which Celebration acquires assets of an aggregate fair
market value in excess of $2,500,000, Borrower shall provide the Bank notice of
same.
8.28 Fiscal Year. Borrower and each of its Subsidiaries will maintain a
fiscal year that has a December 31st year end.
8.29 Books and Records; Maintenance of Properties. Borrower and each of
its Subsidiaries will keep and maintain satisfactory and adequate books and
records of account in accordance with GAAP. Borrower and each of its
Subsidiaries will also keep, maintain and preserve all of its property and
assets in good order and repair (ordinary wear and tear excepted).
9. NEGATIVE COVENANTS.
9.1 Debt. Borrower shall not, either directly or indirectly, create,
assume, incur or have outstanding any Debt (including purchase money
indebtedness), or become liable, whether as endorser, guarantor, surety or
otherwise, for any debt or obligation of any other Person, except:
(a) the Obligations under this Agreement and the other Loan
Documents;
(b) obligations of Borrower for Taxes, assessments, municipal
or other governmental charges;
(c) obligations of Borrower for accounts payable, other than
for money borrowed, incurred in the ordinary course of business if and to the
extent such Debt is less than sixty (60) days past due, except with respect to
any such Debt that is being disputed by the Borrower in good faith;
(d) Debt of a Borrower owing to another Borrower; provided
that such Debt shall be evidenced by a note in form and substance reasonably
satisfactory to the Bank and pledged and delivered to the Bank pursuant to the
Loan Documents as additional collateral security for the Obligations, and the
obligations under such note shall be expressly subordinate to the Obligations in
both form and substance satisfactory to the Bank;
(e) Subordinated Debt;
51
(f) Hedging Obligations incurred in favor of the Bank or an
Affiliate thereof for bona fide hedging purposes and not for speculation;
(g) Capitalized Lease Obligations, provided that the aggregate
amount of all such Debt outstanding at any time, together with the aggregate
amount of Debt incurred in connection with Capital Expenditures, shall not
exceed Five Hundred Thousand and 00/100 Dollars ($500,000.00) in the aggregate,
and such Debt must be immediately included in the calculation of Funded Debt;
(h) Debt for Capital Expenditures incurred after the date of
this Agreement, provided that the aggregate amount of all such Debt, together
with the aggregate amount of Capital Lease Obligations, shall not exceed Five
Hundred Thousand and 00/100 Dollars ($500,000.00) in the aggregate, and such
Debt must be immediately included in the calculation of Funded Debt;
(i) Debt of any Person which becomes a Subsidiary after
the date of this Agreement pursuant to a Permitted Acquisition; provided, that
such Debt exists at the time that such Person (or its assets) becomes a
Subsidiary and is not created in contemplation of or in connection with such
Permitted Acquisition;
(j) Debt described on Schedule 9.1 and any extension,
renewal or refinancing thereof so long as the principal amount thereof is not
increased;
(k) Promissory notes issued by Integrity Media in
connection with the repurchase of its Capital Securities to the extent permitted
by the terms of Section 9.6(ff), provided that such promissory notes are made
expressly subordinate to the Obligations in both form and substance satisfactory
to the Bank;
(l) Permitted Guaranties pursuant to Section 9.16; and
(m) other Debt in an aggregate amount not to exceed One
Million and 00/100 Dollars ($1,000,000.00).
9.2 Encumbrances. Borrower shall not, either directly or indirectly,
create, assume, incur or suffer or permit to exist any Lien or charge of any
kind or character upon any asset of Borrower, whether owned at the date hereof
or hereafter acquired, except for Permitted Liens.
9.3 Investments. Borrower shall not, either directly or indirectly,
make or have outstanding any Investment, except:
(a) contributions by Borrower to the capital of any
Wholly-Owned Subsidiary which have granted a first perfected security interest
in all of its/their assets in favor of the Bank, or by any Subsidiary to the
capital of any other domestic Wholly-Owned Subsidiary;
(b) Investments constituting Debt permitted by Section 9.1;
(c) Contingent Liabilities constituting Debt permitted by
Section 9.1 or Liens permitted by Section 9.2;
(d) Cash Equivalent Investments;
(e) bank deposits in the ordinary course of business;
52
(f) Investments in securities of Account Debtors received
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such account debtors;
(g) Investments listed on Schedule 9.3 as of the Restatement
Date;
(h) Permitted Acquisitions;
(i) Advances by Borrower to any recording artist, songwriter,
producer, arranger, record label, book author, contract writer, or distributor
in the ordinary course of business;
(j) Loans to Integrity International Subsidiaries not to
exceed $275,000.00 in the aggregate outstanding at any time that are
appropriately reflected on Integrity Media's financial records;
(k) (i) Loans or advances made to Borrower's employees in the
ordinary course of business not to exceed $50,000 in the aggregate at any time
plus (ii) $750,000 in the aggregate in employee loans or advances made on or
within one (1) year of the Restatement Date, provided, however, no such loan or
advance shall be made at any time an Event of Default or Unmatured Event of
Default then exists or would result therefrom, plus (iii) travel advances to
employees in the ordinary course of business plus (iv) promissory notes received
by the Borrower in connection with the issuance of stock or stock options to key
officers and employees in the ordinary course of business; and
(l) Investments by Borrower in joint ventures in substantially
similar lines of business as Borrower and with respect to which Borrower carries
no general partner liability, and further with respect to which the related
ownership interest has been pledged on a first priority basis to the Bank
pursuant to documentation acceptable to the Bank in its reasonable discretion,
provided the aggregate amount of such Investments after the Restatement Date
shall not exceed $1,000,000.
provided, however, that (i) any Investment which when made complies with the
requirements of the definition of the term "Cash Equivalent Investment" may
continue to be held notwithstanding that such Investment if made thereafter
would not comply with such requirements; and (ii) no Investment otherwise
permitted by subsections (b) or (c) shall be permitted to be made if,
immediately before or after giving effect thereto, any Event of Default or
Unmatured Event of Default exists. No Borrower nor any of its Subsidiaries will
establish or maintain any "securities account" with any "securities
intermediary" (as such terms are defined in Article 8 of the UCC), unless a
control agreement acceptable in form and substance to the Bank is first executed
by such "securities intermediary" securing the Bank's first priority interest
and rights in and to all "financial assets" and "security entitlements"
associated with such "securities account."
9.4 Transfer; Merger; Sales. Borrower shall not and not permit any
Subsidiary to, whether in one transaction or a series of related transactions,
(a) except for Permitted Acquisitions and the transactions contemplated by the
Merger Agreement, be a party to any merger or consolidation, or purchase or
otherwise acquire all or substantially all of the assets or any Capital
Securities of any class of, or any partnership or joint venture interest in, any
other Person, except for (i) any such merger, consolidation, sale, transfer,
conveyance, lease or assignment of or by any Wholly-Owned Subsidiary into
Borrower or into any other domestic Wholly-Owned Subsidiary; (ii) any such
purchase or other acquisition by Borrower or any domestic Wholly-Owned
Subsidiary of the assets or equity interests of any Wholly-Owned Subsidiary, (b)
sell, transfer, convey or lease all or any substantial part of its assets or
Capital Securities (including the sale of Capital Securities of any Subsidiary),
except for (1) sales of inventory in the ordinary course of business, or (2)
with respect to obsolete or replaced equipment no
53
longer useful in the operation of Borrower's business, pursuant to a reasonable
and customary transaction with an unrelated third party and otherwise in
accordance with the terms hereof, or (3) pursuant to a reasonable and customary
transaction with another Borrower that is appropriately reflected on Borrower's
financial records or (4) certain inventory owned by Integrity Media that may be
shipped to customers of Integrity Direct in satisfaction of the from time to
time purchase order obligations of Integrity Direct, or (5) obsolete or excess
inventory transferred as a charitable contribution; or (c) sell or assign, with
or without recourse, any receivables, or (d) enter into any new business
activities or ventures not directly involved in the Christian media
communications field, or (e) make cash charitable contributions in excess of
$250,000 for any fiscal year; provided, however, that Borrower shall make no
cash charitable contribution if there shall then exist an Event of Default or an
Unmatured Event of Default or, based on reasonable projections, an Event of
Default may result therefrom.
9.5 Compensation. The Borrower shall not pay, or commit or agree to
pay, (i) salary to P. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ in any fiscal year of the Borrower in an
aggregate amount which exceeds the sum of (a) one hundred and five percent
(105%) of the salary paid to P. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ in the immediately prior fiscal
year of the Borrower plus, (b) the then Additional Salary Amount approved by the
Borrower's executive compensation committee, (ii) any bonuses to P. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ that are not approved by the Borrower's executive compensation committee
or (iii) any deferred compensation to P. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ in an aggregate amount
which exceeds the amount of deferred compensation approved by the Borrower's
executive compensation committee.
9.6 Restricted Payments. Borrower shall not and shall not permit any
Subsidiary to, (a) make any distribution or dividend (other than stock
dividends), whether in cash or otherwise, to any of its equityholders, (b)
purchase or redeem any of its equity interests or any warrants, options or other
rights in respect thereof, (c) pay any management fees or similar fees to any of
its equityholders or any Affiliate thereof, (d) fund payments with respect to
payment in kind interest, deferred interest or other form of capitalized
interest, or prepay the principal of, premium, if any, or cause any redemption,
conversion, exchange, purchase, retirement, defeasance, sinking fund or any
other payment in respect of the Subordinated Debt or any other subordinated debt
of the Borrower, or (e) set aside funds for any of the foregoing.
Notwithstanding the foregoing, (aa) Subsidiaries of the Borrower may make
dividends or other distributions to any Borrower, and (bb) so long as no Event
of Default or Unmatured Event of Default exists or would result therefrom, non
Wholly-Owned Subsidiaries of the Borrower may make dividends or such other
distributions to the Borrower and any other holder of equity interests in such
Subsidiary so long as such dividends or other distributions are made to the
Borrower and such other holder(s) of such equity interest pro rata based upon
the Borrower's and such other holder(s) percentage ownership interest in such
Subsidiary, provided, however, that if for any consecutive twelve (12) month
period such dividends or other distributions received by Borrower exceed
$400,000 in the aggregate, then any such dividend income in excess of $400,000
shall be paid to the Bank and applied to the Loans pursuant to Sections 2.1(c)
and 2.2(d), (cc) Borrower may make regularly scheduled payments of principal and
cash interest in respect of the Subordinated Debt to the extent permitted by the
terms of the Intercreditor Agreement, (dd) Borrower may fund the payment of
payment in kind interest, deferred interest or other form of capitalized
interest owing under the terms of the Subordinated Debt Documents as in effect
as of the Restatement Date, provided that (x) any such payments shall be limited
to not more than the interest accrued and owing for the immediately preceding
four (4) fiscal quarters of Borrower and (y) no Event of Default or Unmatured
Event of Default shall then exist or otherwise be caused as a result of any such
payment, (ee) so long as no Event of Default or Unmatured Event of Default
exists or would result therefrom, Integrity Media may declare and pay dividends
to, or fund the redemption of its Capital Securities in an amount not to exceed
$3,000,000 in the aggregate during the term of this Agreement, provided that,
(i) after giving effect to any such dividend or redemption, Revolving Loan
54
Availability shall not be less than $2,000,000, and (ii) $1,500,000 in the
aggregate of such dividends and redemptions shall not be declared or paid on or
before January 8, 2006, and (ff) so long as no Event of Default or Unmatured
Event of Default shall then exist or otherwise be caused as a result therefrom,
on or after July 8, 2008, Integrity Media may repurchase its Capital Securities
from any of its officers and directors, or their assigns, estates or heirs upon
the death, disability, retirement or termination of employment of such Persons,
provided that (i) the aggregate amount of consideration paid in cash for such
repurchases shall not exceed $1,000,000, (ii) after giving effect to any such
repurchase, Revolving Loan Availability shall not be less than $2,000,000, (iii)
any non-cash consideration paid with respect to such repurchases shall be
subordinated to the Obligations in both form and substance satisfactory to the
Bank, and (iv) the repurchase price per share for any such repurchases shall not
exceed the per share redemption price set forth in the Integrity Stockholder
Agreement (as in effect on the Restatement Date).
9.7 Transactions with Affiliates. Borrower shall not, directly or
indirectly, enter into or permit to exist any transaction with any of its
Affiliates or with any director, officer or employee of Borrower other than (a)
transactions in the ordinary course of, and pursuant to the reasonable
requirements of, the business of Borrower and upon fair and reasonable terms and
are no less favorable to Borrower than would be obtained in a comparable arm's
length transaction with a Person that is not an Affiliate of Borrower, (b)
reasonable and customary asset transfers between one Borrower to another as
permitted under Sections 9.4 and 9.15, (c) reasonable dividends and
distributions (if any) to the extent permitted by Section 9.6, (d) transactions
conducted by Borrower on an arms-length basis with its foreign Affiliates upon
fair and reasonable terms which are no less favorable to Borrower than those
which would prevail in a comparable arm's-length transaction with a Person not
an Affiliate, (e) loans to employees of the Borrower permitted by Section 9.3(k)
hereof, (f) charitable contributions permitted by Section 9.4 hereof, and (g)
Integrity Publishers use of the office space leased by Integrity Media and
located in Brentwood, Tennessee.
9.8 Unconditional Purchase Obligations. Borrower shall not and shall
not permit any Subsidiary to enter into or be a party to any contract for the
purchase of materials, supplies or other property or services if such contract
requires that payment be made by it regardless of whether delivery is ever made
of such materials, supplies or other property or services.
9.9 [RESERVED].
9.10 Inconsistent Agreements. Borrower shall not and shall not permit
any Subsidiary to enter into any agreement containing any provision which would
(a) be violated or breached by any borrowing by Borrower hereunder or by the
performance by Borrower or any Subsidiary of any of its Obligations hereunder or
under any other Loan Document, (b) prohibit Borrower or any Subsidiary from
granting to the Bank a Lien on any of its assets or (c) create or permit to
exist or become effective any encumbrance or restriction on the ability of any
Subsidiary to (i) pay dividends or make other distributions to Borrower or any
other Subsidiary, or pay any Debt owed to Borrower or any other Subsidiary, (ii)
make loans or advances to Borrower or any other Subsidiary, or (iii) transfer
any of its assets or properties to Borrower or any other Subsidiary, other than
(A) customary restrictions and conditions contained in agreements relating to
the sale of all or a substantial part of the assets of any Subsidiary pending
such sale, provided that such restrictions and conditions apply only to the
Subsidiary to be sold and such sale is permitted hereunder, (B) restrictions or
conditions imposed by any agreement relating to purchase money Debt, Capital
Leases and other secured Debt permitted by this Agreement if such restrictions
or conditions apply only to the property or assets securing such Debt, and (C)
customary provisions in leases and other contracts restricting the assignment
thereof.
55
9.11 Use of Proceeds. Neither Borrower nor any of its Subsidiaries or
Affiliates shall use any portion of the proceeds of the Loans, either directly
or indirectly, for the purpose of purchasing any securities underwritten by ABN
AMRO Incorporated, an Affiliate of the Bank.
9.12 [RESERVED]
9.13 Business Activities; Change of Legal Status and Organizational
Documents. Borrower shall not and shall not permit any Subsidiary to (a) engage
in any line of business other than the businesses engaged in on the date hereof
and businesses reasonably related thereto, (b) change its name, its
Organizational Identification Number, if it has one, its type of organization,
its jurisdiction of organization or other legal structure without the prior
written consent of the Bank, or (c) permit any of its Organizational Documents
to be amended or modified in any way which could reasonably be expected to
materially adversely affect the interests of the Bank.
9.14 Restriction of Amendments to Certain Documents. Borrower shall not
amend or otherwise modify, or waive any rights under the Merger Agreement or,
except as otherwise expressly permitted by the terms of the Intercreditor
Agreement, the Subordinated Debt Documents.
9.15 Integrity Media Ownership. Integrity Media shall not sell,
transfer or otherwise dispose of any of the equity of Integrity Publishers, INO
Records, Integrity Direct, Integrity Music Europe, Integrity Media Asia,
Integrity Media Australia, Sarepta or Enlight, nor permit its total investment,
directly or indirectly, in Integrity Publishers, INO Records, Sarepta or
Enlight, whether in the form of equity, loans, advances or otherwise, to at any
time exceed $10,000,000 with respect to Integrity Publishers, $4,000,000 with
respect to INO Records, $400,000 with respect to Sarepta, and $250,000 with
respect to Enlight.
9.16 Guaranties. No Borrower nor any of its Subsidiaries will
guarantee, assume or otherwise be or agree to become liable in any way, either
directly or indirectly, for any additional indebtedness or liability of any
other Person, except as follows (collectively, the "Permitted Guaranties"): (a)
in favor of the Bank, or (b) to endorse checks, drafts and negotiable
instruments for collection in the ordinary course of business, or (c) as listed
on Schedule 9.16, or (d) the Borrower may guarantee the Debt of a Subsidiary if
the primary Debt is permitted under Section 9.1 or (e) any Subsidiary of the
Borrower may guarantee Debt of the Borrower or other Subsidiary if the primary
Debt is permitted under Section 9.1, or (f) in favor of the Subordinated Debt.
9.17 Integrity Music. Integrity Music shall not conduct any business
operations nor shall it own any assets or incur any liabilities.
9.18 Removal of Assets. No Borrower nor any of its Subsidiaries will
remove or permit the removal of any asset or group of assets (with a collective
fair market value exceeding $10,000) to a jurisdiction in which no valid and
effective financing statement on Form UCC-1 has been filed naming the Bank as
"secured party" with respect to such assets without giving the Bank prior
written notice. In addition, neither Borrower nor any of its Subsidiaries will
move the location of its chief executive office (or change its official mailing
address) without providing the Bank with prior written notice thereof.
9.19 Terms of and Modifications to Material Relationships. Neither
Borrower nor any of its Subsidiaries will (and will not permit any other party
to) cancel, terminate, amend, modify or otherwise alter any Material Contract
listed on Schedule 7.27 if such amendment or modification could reasonably be
expected to materially and adversely affect the rights of the Bank hereunder.
56
9.20 Margin Stock Restrictions. Borrower will not use any of the
proceeds hereunder, (a) directly or indirectly, to purchase or carry, or to
reduce or retire any indebtedness that was originally incurred to purchase or
carry, any Margin Stock within the meaning of the following Margin Regulations
of the FRB: Regulation T at 12 C.F.R. Pt. 220, and Regulation U at 12 C.F.R. Pt.
221, and Regulation X at 12 C.F.R. Pt. 224, or (b) or for any other purpose that
might constitute the transactions contemplated hereby as a "Purpose Credit"
within the meaning of the FRB's Margin Regulations.
10. FINANCIAL COVENANTS.
10.1 Minimum Net Worth. As of the end of each of its fiscal quarters,
commencing September 30, 2004, Borrower shall maintain consolidated Net Worth in
an amount not less than 80% of the Borrower's Net Worth measured as of July 31,
2004, plus (i) an aggregate amount equal to 85% of quarterly Net Income (but
only if a positive number, with no reduction for losses) for each fiscal quarter
of Borrower, minus (ii) charges up to $25,000.00 per fiscal quarter of the
Borrower related to the amortization of certain of the costs incurred by the
Borrower in connection with the transactions contemplated by the terms of the
Merger Agreement, minus (iii) up to $3,000,000 in the aggregate in dividends and
redemptions permitted and paid pursuant to the terms of Section 9.6(ee);
provided, however, that for the quarter ending September 30, 2004, only Net
Income for the months of August and September 2004 shall be included in such
calculation.
10.2 Total Funded Debt to EBITDA. As of the end of each of its fiscal
quarters, commencing September 30, 2004, Borrower and its Subsidiaries shall
maintain a ratio of consolidated Total Funded Debt to consolidated EBITDA of not
greater than the following:
Quarter Ending Total Funded Debt to EBITDA
June 30, 2004 to September 29, 2004 4.0 : 1.00
September 30, 2004 to December 30, 2004 3.75 : 1.00
December 31, 2004 to Maturity Date 3.50 : 1.00
10.3 Fixed Charge Coverage. As of the end of each of its fiscal
quarters, commencing September 30, 2004, Borrower and its Subsidiaries shall
maintain a ratio of EBITDA minus Non-Financed Capital Expenditures for the most
recently ended four (4) fiscal quarters to Fixed Charges for the most recently
ended four (4) fiscal quarters, calculated as of the last day of such fiscal
quarter, of not less than the following:
Quarter Ending Fixed Charge Coverage
Restatement Date through December 31, 2006 1.15 : 1.0
March 31, 2007 through Maturity Date 1.20 : 1.00
provided, however, that, for purposes of this Section 10.3, up to $3,000,000 in
the aggregate in dividends and redemptions permitted and paid pursuant to the
terms of Section 9.6(ee) shall not be included in the calculation of Fixed
Charges as and only to extent such dividends and redemptions are financed with
the proceeds of Revolving Loans.
10.4 Senior Funded Debt to EBITDA. As of the end of each of its fiscal
quarters, commencing September 30, 2004, Borrower and its Subsidiaries shall
maintain a ratio of consolidated Senior Funded Debt to consolidated EBITDA for
such fiscal quarter, of not greater than 2.50 to 1.00.
57
10.5 Capital Expenditures. Borrower and its Subsidiaries shall not
incur Capital Expenditures in an amount greater than the following amounts for
the following periods:
Period Amount
------ ------
2004 $6,000,000
2005 $6,000,000
2006 $6,000,000
2007 $6,250,000
2008 $6,500,000
11. EVENTS OF DEFAULT.
Borrower, without notice or demand of any kind, shall be in default under this
Agreement upon the occurrence of any of the following events (each an "Event of
Default").
11.1 Nonpayment of Obligations. Any amount due and owing on any of the
Notes or any of the Obligations, whether by its terms or as otherwise provided
herein, is not paid when due, subject to, as regards Bank Product Obligations,
the passage of any applicable cure periods, if any.
11.2 Misrepresentation. Any written warranty, representation,
certificate or statement of any Obligor in this Agreement, the other Loan
Documents or any other agreement with the Bank shall be false in any material
respect when made or at any time thereafter, or if any financial data or any
other information now or hereafter furnished to the Bank by or on behalf of any
Obligor shall prove to be false, inaccurate or misleading in any material
respect.
11.3 Nonperformance. (a) The Borrower shall fail to observe or perform
any covenant or agreement contained in Articles 6, 9, or 10 or Sections 8.3,
8.6, 8.8, 8.11, 8.12, 8.13, 8.20, or (b) the Borrower shall fail to observe or
perform any covenant or agreement contained in this Agreement (other than those
referred to in clause (a) above), and such failure shall remain unremedied for
twenty (20) Business Days after the earlier of (i) any officer of the Borrower
becomes aware of such failure, or (ii) notice thereof shall have been given to
the Borrower by the Bank.
11.4 Default under Loan Documents. A default under any of the other
Loan Documents, all of which covenants, conditions and agreements contained
therein are hereby incorporated in this Agreement by express reference, shall be
and constitute an Event of Default under this Agreement and any other of the
Obligations.
11.5 Default under Other Debt. Any default by any Obligor in the
payment of any Debt the principal amount of which exceeds $350,000 beyond any
period of grace provided with respect thereto or in the performance of any other
term, condition or covenant contained in any agreement (including, but not
limited to any capital or operating lease or any agreement in connection with
the deferred purchase price of property) under which any such obligation is
created, the effect of which default is to cause or permit the holder of such
obligation (or the other party to such other agreement) to cause such obligation
to become due prior to its stated maturity or terminate such other agreement.
11.6 Other Material Obligations. Any default in the payment when due,
or in the performance or observance of, any material obligation of, or condition
agreed to by, any Obligor with respect to any material purchase or lease of
goods or services where such default, singly or in the aggregate with all other
such defaults, might reasonably be expected to have a Material Adverse Effect.
58
11.7 Bankruptcy, Insolvency, etc. Any Obligor becomes insolvent or
generally fails to pay, or admits in writing its inability or refusal to pay,
debts as they become due; or any Obligor applies for, consents to, or acquiesces
in the appointment of a trustee, receiver or other custodian for such Obligor or
any property thereof, or makes a general assignment for the benefit of
creditors; or, in the absence of such application, consent or acquiescence, a
trustee, receiver or other custodian is appointed for any Obligor or for a
substantial part of the property of any thereof and is not discharged within
sixty (60) days; or any bankruptcy, reorganization, debt arrangement, or other
case or proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding, is commenced in respect of any Obligor, and if such case
or proceeding is not commenced by such Obligor, it is consented to or acquiesced
in by such Obligor, or remains undismissed for sixty (60) days; or any Obligor
takes any action to authorize, or in furtherance of, any of the foregoing.
11.8 Judgments. The entry of any final judgment, decree, levy,
attachment, garnishment or other process, or the filing of any Lien against any
Obligor that calls for payment or presents liability in excess of $300,000
($1,000,000 with respect only to the claims of ▇▇▇▇▇▇ ▇▇▇▇▇▇ known and pending
as of the Restatement Date) over the applicable insurance coverage and such
judgment or other process shall not have been, within thirty (30) days from the
entry thereof, (i) bonded over to the satisfaction of the Bank and appealed,
(ii) vacated, or (iii) discharged.
11.9 Change in Control. The occurrence of any Change in Control.
11.10 Collateral Impairment. The entry of any judgment, decree, levy,
attachment, garnishment or other process, or the filing of any Lien in excess of
$100,000 against, any of the Collateral or any collateral under a separate
security agreement securing any of the Obligations and such judgment or other
process shall not have been, within thirty (30) days from the entry thereof, (i)
bonded over to the satisfaction of the Bank and appealed, (ii) vacated, or (iii)
discharged.
11.11 Chief Executive Officer. P. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ceases to be the
Chief Executive Officer of Integrity Media and the vacancy so created is not
filled by the Board of Directors within a reasonable period of time.
11.12 Subordinated Debt. The subordination provisions of any
Subordinated Debt shall for any reason be revoked or invalid. Borrower shall
contest in any manner, or any other holder thereof shall contest in any judicial
proceeding, the validity or enforceability of the Subordinated Debt or deny that
it has any further liability or obligation thereunder, or the Obligations shall
for any reason not have the priority contemplated by the subordination
provisions of the Subordinated Debt.
11.13 Negative Pledge. Except in connection with repurchases from
shareholders of Integrity Media permitted by the terms of Section 9.6 (ee) or
(ff), P. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall pledge, mortgage, collaterally assign, encumber
or otherwise transfer any of the Capital Securities of Integrity Media owned by
him as of the Restatement Date after consummation of the transactions
contemplated by the Merger Agreement; provided, however, that P. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
may from time to time sell up to the then applicable Permitted Sales Percentage
of the outstanding Capital Securities of Integrity Media.
12. REMEDIES.
Upon the occurrence of an Event of Default, the Bank shall have all
rights, powers and remedies set forth in the Loan Documents, in any written
agreement or instrument (other than this Agreement or the Loan Documents)
relating to any of the Obligations or any security therefor, as a secured party
under the UCC or as otherwise provided at law or in equity. Without limiting the
generality of the foregoing,
59
the Bank may, at its option upon the occurrence of an Event of Default, declare
its commitments to Borrower to be terminated and all Obligations to be
immediately due and payable, provided, however, that upon the occurrence of an
Event of Default under Section 11.7, all commitments of the Bank to Borrower
shall immediately terminate and all Obligations shall be automatically due and
payable, all without demand, notice or further action of any kind required on
the part of the Bank. Borrower hereby waives any and all presentment, demand,
notice of dishonor, protest, and all other notices and demands in connection
with the enforcement of Bank's rights under the Loan Documents, and hereby
consents to, and waives notice of release, with or without consideration, of any
Collateral, notwithstanding anything contained herein or in the Loan Documents
to the contrary. In addition to the foregoing, upon the occurrence and
continuation of an Event of Default:
12.1 Possession and Assembly of Collateral. The Bank may, without
notice, demand or legal process of any kind, take possession of any or all of
the Collateral (in addition to Collateral of which the Bank already has
possession), wherever it may be found, and for that purpose may pursue the same
wherever it may be found, and may at any time enter into any of Borrower's
premises where any of the Collateral may be or is supposed to be, and search
for, take possession of, remove, keep and store any of the Collateral until the
same shall be sold or otherwise disposed of and the Bank shall have the right to
store and conduct a sale of the same in any of Borrower's premises without cost
to the Bank. At the Bank's request, Borrower will, at Borrower's sole expense,
assemble the Collateral and make it available to the Bank at a place or places
to be designated by the Bank which is reasonably convenient to the Bank and
Borrower.
12.2 Sale of Collateral. The Bank may sell any or all of the Collateral
at public or private sale, upon such terms and conditions as the Bank may deem
proper, and the Bank may purchase any or all of the Collateral at any such sale.
Borrower acknowledges that the Bank may be unable to effect a public sale of all
or any portion of the Collateral because of certain legal and/or practical
restrictions and provisions which may be applicable to the Collateral and,
therefore, may be compelled to resort to one or more private sales to a
restricted group of offerees and purchasers. Borrower consents to any such
private sale so made even though at places and upon terms less favorable than if
the Collateral were sold at public sale. The Bank shall have no obligation to
clean-up or otherwise prepare the Collateral for sale. The Bank may apply the
net proceeds, after deducting all costs, expenses, attorneys' and paralegals'
fees incurred or paid at any time in the collection, protection and sale of the
Collateral and the Obligations, to the payment of the Notes and/or any of the
other Obligations, returning the excess proceeds, if any, to Borrower. Borrower
shall remain liable for any amount remaining unpaid after such application, with
interest at the Default Rate. Any notification of intended disposition of the
Collateral required by law shall be conclusively deemed reasonably and properly
given if given by the Bank at least ten (10) calendar days before the date of
such disposition. Borrower hereby confirms, approves and ratifies all acts and
deeds of the Bank relating to the foregoing, and each part thereof, and
expressly waives any and all claims of any nature, kind or description which it
has or may hereafter have against the Bank or its representatives, by reason of
taking, selling or collecting any portion of the Collateral. Borrower consents
to releases of the Collateral at any time (including prior to default) and to
sales of the Collateral in groups, parcels or portions, or as an entirety, as
the Bank shall deem appropriate. Borrower expressly absolves the Bank from any
loss or decline in market value of any Collateral by reason of delay in the
enforcement or assertion or nonenforcement of any rights or remedies under this
Agreement.
12.3 Standards for Exercising Remedies. To the extent that applicable
law imposes duties on the Bank to exercise remedies in a commercially reasonable
manner, Borrower acknowledges and agrees that it is not commercially
unreasonable for the Bank (a) to fail to incur expenses reasonably deemed
significant by the Bank to prepare Collateral for disposition or otherwise to
complete raw material or work-in-process into finished goods or other finished
products for disposition, (b) to fail to obtain third
60
party consents for access to Collateral to be disposed of, or to obtain or, if
not required by other law, to fail to obtain governmental or third party
consents for the collection or disposition of Collateral to be collected or
disposed of, (c) to fail to exercise collection remedies against Account Debtors
or other Persons obligated on Collateral or to remove liens or encumbrances on
or any adverse claims against Collateral, (d) to exercise collection remedies
against Account Debtors and other Persons obligated on Collateral directly or
through the use of collection agencies and other collection specialists, (e) to
advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (f) to
contact other Persons, whether or not in the same business as Borrower, for
expressions of interest in acquiring all or any portion of the Collateral, (g)
to hire one or more professional auctioneers to assist in the disposition of
Collateral, whether or not the collateral is of a specialized nature, (h) to
dispose of Collateral by utilizing internet sites that provide for the auction
of assets of the types included in the Collateral or that have the reasonable
capability of doing so, or that match buyers and sellers of assets, (i) to
dispose of assets in wholesale rather than retail markets, (j) to disclaim
disposition warranties, including, without limitation, any warranties of title,
(k) to purchase insurance or credit enhancements to insure the Bank against
risks of loss, collection or disposition of Collateral or to provide to the Bank
a guaranteed return from the collection or disposition of Collateral, or (l) to
the extent deemed appropriate by the Bank, to obtain the services of other
brokers, investment bankers, consultants and other professionals to assist the
Bank in the collection or disposition of any of the Collateral. Borrower
acknowledges that the purpose of this section is to provide non-exhaustive
indications of what actions or omissions by the Bank would not be commercially
unreasonable in the Bank's exercise of remedies against the Collateral and that
other actions or omissions by the Bank shall not be deemed commercially
unreasonable solely on account of not being indicated in this section. Without
limitation upon the foregoing, nothing contained in this section shall be
construed to grant any rights to Borrower or to impose any duties on the Bank
that would not have been granted or imposed by this Agreement or by applicable
law in the absence of this section.
12.4 UCC and Offset Rights. The Bank may exercise, from time to time,
any and all rights and remedies available to it under the UCC or under any other
applicable law in addition to, and not in lieu of, any rights and remedies
expressly granted in this Agreement or in any other agreements between any
Obligor and the Bank, and may, without demand or notice of any kind, appropriate
and apply toward the payment of such of the Obligations, whether matured or
unmatured, including costs of collection and attorneys' and paralegals' fees,
and in such order of application as the Bank may, from time to time, elect, any
indebtedness of the Bank to any Obligor, however created or arising, including,
but not limited to, balances, credits, deposits, accounts or moneys of such
Obligor in the possession, control or custody of, or in transit to the Bank.
Borrower, on behalf of itself and each Obligor, hereby waives the benefit of any
law that would otherwise restrict or limit the Bank in the exercise of its
right, which is hereby acknowledged, to appropriate at any time hereafter any
such indebtedness owing from the Bank to any Obligor.
12.5 Additional Remedies. The Bank shall have the right and power to:
(a) instruct Borrower, at its own expense, to notify any
parties obligated on any of the Collateral, including, but not limited to, any
Account Debtors, to make payment directly to the Bank of any amounts due or to
become due thereunder, or the Bank may directly notify such obligors of the
security interest of the Bank, and/or of the assignment to the Bank of the
Collateral and direct such obligors to make payment to the Bank of any amounts
due or to become due with respect thereto, and thereafter, collect any such
amounts due on the Collateral directly from such Persons obligated thereon;
(b) enforce collection of any of the Collateral, including,
but not limited to, any Accounts, by suit or otherwise, or make any compromise
or settlement with respect to any of the
61
Collateral, or surrender, release or exchange all or any part thereof, or
compromise, extend or renew for any period (whether or not longer than the
original period) any indebtedness thereunder;
(c) take possession or control of any proceeds and products of
any of the Collateral, including the proceeds of insurance thereon;
(d) extend, renew or modify for one or more periods (whether
or not longer than the original period) the Notes, any other of the Obligations,
any obligation of any nature of any other obligor with respect to the Notes or
any of the Obligations;
(e) grant releases, compromises or indulgences with respect to
the Notes, any of the Obligations, any extension or renewal of any of the
Obligations, any security therefor, or to any other obligor with respect to the
Notes or any of the Obligations;
(f) transfer the whole or any part of securities which may
constitute Collateral into the name of the Bank or the Bank's nominee without
disclosing, if the Bank so desires, that such securities so transferred are
subject to the security interest of the Bank, and any corporation, association,
or any of the managers or trustees of any trust issuing any of said securities,
or any transfer agent, shall not be bound to inquire, in the event that the Bank
or said nominee makes any further transfer of said securities, or any portion
thereof, as to whether the Bank or such nominee has the right to make such
further transfer, and shall not be liable for transferring the same;
(g) vote the Collateral;
(h) make an election with respect to the Collateral under
Section 1111 of the Bankruptcy Code or take action under Section 364 or any
other section of the Bankruptcy Code; provided, however, that any such action of
the Bank as set forth herein shall not, in any manner whatsoever, impair or
affect the liability of Borrower hereunder, nor prejudice, waive, nor be
construed to impair, affect, prejudice or waive the Bank's rights and remedies
at law, in equity or by statute, nor release, discharge, nor be construed to
release or discharge, Borrower, any guarantor or other Person liable to the Bank
for the Obligations; and
(i) at any time, and from time to time, accept additions to,
releases, reductions, exchanges or substitution of the Collateral, without in
any way altering, impairing, diminishing or affecting the provisions of this
Agreement, the Loan Documents, or any of the other Obligations, or the Bank's
rights hereunder, under the Notes or under any of the other Obligations.
Borrower hereby ratifies and confirms whatever the Bank may do with
respect to the Collateral and agrees that the Bank shall not be liable for any
error of judgment or mistakes of fact or law with respect to actions taken in
connection with the Collateral.
12.6 Attorney-in-Fact. Borrower hereby irrevocably makes, constitutes
and appoints the Bank (and any officer of the Bank or any Person designated by
the Bank for that purpose) as Borrower's true and lawful proxy and
attorney-in-fact (and agent-in-fact) in Borrower's name, place and stead, with
full power of substitution, to (i) take such actions as are permitted in this
Agreement, (ii) execute such financing statements and other documents and to do
such other acts as the Bank may require to perfect and preserve the Bank's
security interest in, and to enforce such interests in the Collateral, and (iii)
carry out any remedy provided for in this Agreement, including, without
limitation, endorsing Borrower's name to checks, drafts, instruments and other
items of payment, and proceeds of the Collateral, executing change of address
forms with the postmaster of the United States Post Office serving the address
of
62
Borrower, changing the address of Borrower to that of the Bank, opening all
envelopes addressed to Borrower and applying any payments contained therein to
the Obligations. Borrower hereby acknowledges that the constitution and
appointment of such proxy and attorney-in-fact are coupled with an interest and
are irrevocable. Borrower hereby ratifies and confirms all that said
attorney-in-fact may do or cause to be done by virtue of any provision of this
Agreement.
12.7 No Marshaling. The Bank shall not be required to marshal any
present or future collateral security (including but not limited to this
Agreement and the Collateral) for, or other assurances of payment of, the
Obligations or any of them or to resort to such collateral security or other
assurances of payment in any particular order. To the extent that it lawfully
may, Borrower hereby agrees that it will not invoke any law relating to the
marshaling of collateral which might cause delay in or impede the enforcement of
the Bank's rights under this Agreement or under any other instrument creating or
evidencing any of the Obligations or under which any of the Obligations is
outstanding or by which any of the Obligations is secured or payment thereof is
otherwise assured, and, to the extent that it lawfully may, Borrower hereby
irrevocably waives the benefits of all such laws.
12.8 Application of Proceeds. The Bank will within three (3) Business
Days after receipt of cash or solvent credits from collection of items of
payment, proceeds of Collateral or any other source, apply the whole or any part
thereof against the Obligations secured hereby. The Bank shall further have the
exclusive right to determine how, when and what application of such payments and
such credits shall be made on the Obligations, and such determination shall be
conclusive upon Borrower. Any proceeds of any disposition by the Bank of all or
any part of the Collateral may be first applied by the Bank to the payment of
expenses incurred by the Bank in connection with the Collateral, including
attorneys' fees and legal expenses as provided for in Section 13 hereof.
12.9 No Waiver. No Event of Default shall be waived by the Bank except
in writing. No failure or delay on the part of the Bank in exercising any right,
power or remedy hereunder shall operate as a waiver of the exercise of the same
or any other right at any other time; nor shall any single or partial exercise
of any such right, power or remedy preclude any other or further exercise
thereof or the exercise of any other right, power or remedy hereunder. There
shall be no obligation on the part of the Bank to exercise any remedy available
to the Bank in any order. The remedies provided for herein are cumulative and
not exclusive of any remedies provided at law or in equity. Borrower agrees that
in the event that Borrower fails to perform, observe or discharge any of its
Obligations or liabilities under this Agreement or any other agreements with the
Bank, no remedy of law will provide adequate relief to the Bank, and further
agrees that the Bank shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
12.10 Letters of Credit. With respect to all Letters of Credit for
which presentment for honor shall not have occurred at the time of an
acceleration pursuant to this Section 12, Borrower shall at such time deposit in
a cash collateral account opened by the Bank an amount equal to the Letter of
Credit Obligations then outstanding. Amounts held in such cash collateral
account shall be applied by the Bank to the payment of drafts drawn under such
Letters of Credit, and the unused portion thereof after all such Letters of
Credit shall have expired or been fully drawn upon, if any, shall be applied to
repay the Obligations, in such order of application as the Bank may, in its sole
discretion, from time to time elect. After all such Letters of Credit shall have
expired or been fully drawn upon, all commitments to make Loans hereunder have
terminated and all other Obligations have been indefeasibly satisfied and paid
in full in cash, the balance, if any, in such cash collateral account shall be
returned to Borrower or such other Person as may be lawfully entitled thereto.
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13. MISCELLANEOUS.
13.1 Obligations Absolute. None of the following shall affect the
Obligations of Borrower to the Bank under this Agreement or the Bank's rights
with respect to the Collateral:
(a) acceptance or retention by the Bank of other property or
any interest in property as security for the Obligations;
(b) release by the Bank of all or any part of the Collateral
or of any party liable with respect to the Obligations;
(c) release, extension, renewal, modification or substitution
by the Bank of the Notes, or any note evidencing any of the Obligations, or the
compromise of the liability of the Obligations; or
(d) failure of the Bank to resort to any other security or to
pursue Borrower or any other obligor liable for any of the Obligations before
resorting to remedies against the Collateral.
13.2 Entire Agreement. This Agreement and the other Loan Documents (i)
are valid, binding and enforceable against Borrower and the Bank in accordance
with their respective provisions and no conditions exist as to their legal
effectiveness; (ii) constitute the entire agreement between the parties with
respect to the subject matter hereof and thereof; and (iii) are the final
expression of the intentions of Borrower and the Bank. No promises, either
expressed or implied, exist between Borrower and the Bank, unless contained
herein or therein. This Agreement, together with the other Loan Documents,
supersedes all negotiations, representations, warranties, commitments, term
sheets, discussions, negotiations, offers or contracts (of any kind or nature,
whether oral or written) prior to or contemporaneous with the execution hereof
with respect to any matter, directly or indirectly related to the terms of this
Agreement and the other Loan Documents. This Agreement and the other Loan
Documents are the result of negotiations among the Bank, Borrower and the other
parties thereto, and have been reviewed (or have had the opportunity to be
reviewed) by counsel to all such parties, and are the products of all parties.
Accordingly, this Agreement and the other Loan Documents shall not be construed
more strictly against the Bank merely because of the Bank's involvement in their
preparation.
13.3 Amendments; Waivers. No delay on the part of the Bank in the
exercise of any right, power or remedy shall operate as a waiver thereof, nor
shall any single or partial exercise by the Bank of any right, power or remedy
preclude other or further exercise thereof, or the exercise of any other right,
power or remedy. No amendment, modification or waiver of, or consent with
respect to, any provision of this Agreement or the other Loan Documents shall in
any event be effective unless the same shall be in writing and acknowledged by
the Bank, and then any such amendment, modification, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
13.4 WAIVER OF DEFENSES. BORROWER, ON BEHALF OF ITSELF AND ANY
GUARANTOR OF ANY OF THE OBLIGATIONS, WAIVES EVERY PRESENT AND FUTURE DEFENSE,
CAUSE OF ACTION, COUNTERCLAIM OR SETOFF WHICH BORROWER MAY NOW HAVE OR HEREAFTER
MAY HAVE TO ANY ACTION BY THE BANK IN ENFORCING THIS AGREEMENT. PROVIDED THE
BANK ACTS IN GOOD FAITH, BORROWER RATIFIES AND CONFIRMS WHATEVER THE BANK MAY DO
PURSUANT TO THE TERMS OF THIS AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT
FOR THE BANK GRANTING ANY FINANCIAL ACCOMMODATION TO BORROWER.
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13.5 FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS
OF THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS; PROVIDED THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR
OPERATE TO PRECLUDE THE BANK FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN
ANY OTHER JURISDICTION. BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE. BORROWER FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE
WITHIN OR WITHOUT THE STATE OF ILLINOIS. BORROWER HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
13.6 WAIVER OF JURY TRIAL. THE BANK AND BORROWER, AFTER CONSULTING OR
HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE IRREVOCABLY, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE,
ANY OTHER LOAN DOCUMENT, ANY OF THE OTHER OBLIGATIONS, THE COLLATERAL, OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, OR ANY
COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH THE BANK AND BORROWER ARE
ADVERSE PARTIES, AND EACH AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE BANK GRANTING ANY FINANCIAL ACCOMMODATION TO BORROWER.
13.7 Assignability. The Bank may at any time assign the Bank's rights
in this Agreement, the other Loan Documents, the Obligations, or any part
thereof and transfer the Bank's rights in any or all of the Collateral, and the
Bank thereafter shall be relieved from all liability with respect to such
Collateral; provided, however, that in the absence of an Event of Default or an
Unmatured Event of Default, any such assignment shall require Borrower's
consent, such consent to not unreasonably be withheld or delayed. In the event
the Bank assigns less than all of its interest in the Loans to another Person in
accordance with this Section 13.7, the Borrower and the Bank agree to negotiate
in good faith to amend this Agreement to provide for customary administrative
agency provisions prior to such assignment. In addition, the Bank may at any
time sell one or more participations in the Loans. Borrower may not sell or
assign this Agreement, or any other agreement with the Bank or any portion
thereof, either voluntarily or by operation of law, without the prior written
consent of the Bank. This Agreement shall be binding upon the Bank and Borrower
and their respective legal representatives and successors. All references herein
to Borrower shall be deemed to include any successors, whether immediate or
remote.
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13.8 Confirmations. Borrower and the Bank agree from time to time, upon
written request received by it from the other, to confirm to the other in
writing the aggregate unpaid principal amount of the Loans then outstanding.
13.9 Confidentiality. As required by federal law and the Bank's
policies and practices, the Bank may need to obtain, verify and record certain
customer identification information and documentation in connection with opening
or maintaining accounts, or establishing or continuing to provide services. The
Bank agrees to use commercially reasonable efforts (equivalent to the efforts
the Bank applies to maintain the confidentiality of its own confidential
information) to maintain as confidential all information provided to them by
Borrower and designated as confidential, except that the Bank may disclose such
information (a) to Persons employed or engaged by the Bank in evaluating,
approving, structuring or administering the Loans; (b) to any assignee or
participant or potential assignee or participant that has agreed to comply with
the covenant contained in this Section 13.9 (and any such assignee or
participant or potential assignee or participant may disclose such information
to Persons employed or engaged by them as described in clause (a) above); (c) as
required or requested by any federal or state regulatory authority or examiner,
or any insurance industry association, or as reasonably believed by the Bank to
be compelled by any court decree, subpoena or legal or administrative order or
process; (d) as, on the advice of the Bank's counsel, is required by law; (e) in
connection with the exercise of any right or remedy under the Loan Documents or
in connection with any litigation to which the Bank is a party; (f) to any
nationally recognized rating agency that requires access to information about
the Bank's investment portfolio in connection with ratings issued with respect
to the Bank; (g) to any Affiliate of the Bank who may provide Bank Products to
Borrower or any Subsidiary, or (h) that ceases to be confidential through no
fault of the Bank.
13.10 Binding Effect. This Agreement shall become effective upon
execution by Borrower and the Bank. If this Agreement is not dated or contains
any blanks when executed by Borrower, the Bank is hereby authorized, without
notice to Borrower, to date this Agreement as of the date when it was executed
by Borrower, and to complete any such blanks according to the terms upon which
this Agreement is executed.
13.11 Governing Law. This Agreement, the Loan Documents and the Notes
shall be delivered and accepted in and shall be deemed to be contracts made
under and governed by the internal laws of the State of Illinois (but giving
effect to federal laws applicable to national banks) applicable to contracts
made and to be performed entirely within such state, without regard to conflict
of laws principles.
13.12 Enforceability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by,
unenforceable or invalid under any jurisdiction, such provision shall as to such
jurisdiction, be severable and be ineffective to the extent of such prohibition
or invalidity, without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
13.13 Survival of Borrower Representations. All covenants, agreements,
representations and warranties made by Borrower herein shall, notwithstanding
any investigation by the Bank, be deemed material and relied upon by the Bank
and shall survive the making and execution of this Agreement and the Loan
Documents and the issuance of the Notes, and shall be deemed to be continuing
representations and warranties until such time as Borrower has fulfilled all of
its Obligations to the Bank, and the Bank has been indefeasibly paid in full in
cash. The Bank, in extending financial accommodations to Borrower, is expressly
acting and relying on the aforesaid representations and warranties.
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13.14 Extensions of Bank's Commitment and Notes. This Agreement shall
secure and govern the terms of any extensions or renewals of the Bank's
commitment hereunder and the Notes pursuant to the execution of any
modification, extension or renewal note executed by Borrower and accepted by the
Bank in its sole and absolute discretion in substitution for the Notes.
13.15 Time of Essence. Time is of the essence in making payments of all
amounts due the Bank under this Agreement and in the performance and observance
by Borrower of each covenant, agreement, provision and term of this Agreement.
13.16 Counterparts; Facsimile Signatures. This Agreement may be
executed in any number of counterparts and by the different parties hereto on
separate counterparts and each such counterpart shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same Agreement. Receipt of an executed signature page to this Agreement by
facsimile or other electronic transmission shall constitute effective delivery
thereof. Electronic records of executed Loan Documents maintained by the Bank
shall deemed to be originals thereof.
13.17 Notices. Except as otherwise provided herein, Borrower waives all
notices and demands in connection with the enforcement of the Bank's rights
hereunder. All notices, requests, demands and other communications provided for
hereunder shall be in writing and addressed as follows:
If to Borrower: Integrity Media, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Bank: LaSalle Bank National Association
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party complying as to delivery with the terms
of this subsection. All notices addressed as above shall be deemed to have been
properly given (i) if served in person, upon acceptance or refusal of delivery;
(ii) if mailed by certified or registered mail, return receipt requested,
postage prepaid, on the third (3rd) day following the day such notice is
deposited in any post office station or letter box; or (iii) if sent by
recognized overnight courier, on the first (1st) day following the day such
notice is delivered to such carrier. No notice to or demand on Borrower in any
case shall entitle Borrower to any other or further notice or demand in similar
or other circumstances.
13.18 Release of Claims Against Bank. In consideration of the Bank
making the Loans, Borrower and all other Obligors do each hereby release and
discharge the Bank of and from any and all claims, harm, injury, and damage of
any and every kind, known or unknown, legal or equitable, which any Obligor may
have against the Bank from the date of their respective first contact with the
Bank until the date of this Loan Agreement including, but not limited to, any
claim arising from any reports (environmental reports, surveys, appraisals,
etc.) prepared by any parties hired or recommended by the Bank. Borrower and all
other Obligors confirm to Bank that they have reviewed the effect of this
release
67
with competent legal counsel of their choice, or have been afforded the
opportunity to do so, prior to execution of this Agreement and the Loan
Documents and do each acknowledge and agree that the Bank is relying upon this
release in extending the Loans to Borrower.
13.19 Costs, Fees and Expenses. Borrower shall pay or reimburse the
Bank for all reasonable costs, fees and expenses incurred by the Bank or for
which the Bank becomes obligated in connection with the negotiation,
preparation, consummation, collection of the Obligations or enforcement of this
Agreement, the other Loan Documents and all other documents provided for herein
or delivered or to be delivered hereunder or in connection herewith (including
any amendment, supplement or waiver to any Loan Document), or during any
workout, restructuring or negotiations in respect thereof, including, without
limitation, reasonable consultants' fees and attorneys' fees and time charges of
counsel to the Bank, which shall also include attorneys' fees and time charges
of attorneys who may be employees of the Bank or any Affiliate of the Bank, plus
costs and expenses of such attorneys or of the Bank; search fees, costs and
expenses; and all taxes payable in connection with this Agreement or the other
Loan Documents, whether or not the transaction contemplated hereby shall be
consummated. In furtherance of the foregoing, Borrower shall pay any and all
stamp and other taxes, UCC search fees, filing fees and other costs and expenses
in connection with the execution and delivery of this Agreement, the Notes and
the other Loan Documents to be delivered hereunder, and agrees to save and hold
the Bank harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such costs and expenses.
That portion of the Obligations consisting of costs, expenses or advances to be
reimbursed by Borrower to the Bank pursuant to this Agreement or the other Loan
Documents which are not paid on or prior to the date hereof shall be payable by
Borrower to the Bank on demand. If at any time or times hereafter the Bank: (a)
employs counsel for advice or other representation (i) with respect to this
Agreement or the other Loan Documents, (ii) to represent the Bank in any
litigation, contest, dispute, suit or proceeding or to commence, defend, or
intervene or to take any other action in or with respect to any litigation,
contest, dispute, suit, or proceeding (whether instituted by the Bank, Borrower,
or any other Person) in any way or respect relating to this Agreement, the other
Loan Documents or Borrower's business or affairs, or (iii) to enforce any rights
of the Bank against Borrower or any other Person that may be obligated to the
Bank by virtue of this Agreement or the other Loan Documents; (b) takes any
action to protect, collect, sell, liquidate, or otherwise dispose of any of the
Collateral; and/or (c) attempts to or enforces any of the Bank's rights or
remedies under the Agreement or the other Loan Documents, the costs and expenses
incurred by the Bank in any manner or way with respect to the foregoing, shall
be part of the Obligations, payable by Borrower to the Bank on demand.
13.20 INDEMNIFICATION. BORROWER AGREES TO DEFEND (WITH COUNSEL
SATISFACTORY TO THE BANK), PROTECT, INDEMNIFY, EXONERATE AND HOLD HARMLESS EACH
INDEMNIFIED PARTY FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, CLAIMS, COSTS, EXPENSES AND
DISTRIBUTIONS OF ANY KIND OR NATURE (INCLUDING, WITHOUT LIMITATION, THE
DISBURSEMENTS AND THE REASONABLE FEES OF COUNSEL FOR EACH INDEMNIFIED PARTY
THERETO, WHICH SHALL ALSO INCLUDE, WITHOUT LIMITATION, ATTORNEYS' FEES AND TIME
CHARGES OF ATTORNEYS WHO MAY BE EMPLOYEES OF ANY INDEMNIFIED PARTY), WHICH MAY
BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST, ANY INDEMNIFIED PARTY (WHETHER
DIRECT, INDIRECT OR CONSEQUENTIAL AND WHETHER BASED ON ANY FEDERAL, STATE OR
LOCAL LAWS OR REGULATIONS, INCLUDING, WITHOUT LIMITATION, SECURITIES,
ENVIRONMENTAL LAWS AND COMMERCIAL LAWS AND REGULATIONS, UNDER COMMON LAW OR IN
EQUITY, OR BASED ON CONTRACT OR OTHERWISE) IN ANY MANNER RELATING TO OR ARISING
OUT OF THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS, OR ANY ACT, EVENT OR
TRANSACTION RELATED OR ATTENDANT THERETO, THE PREPARATION,
68
EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE LOAN DOCUMENTS, INCLUDING, BUT
NOT LIMITED TO, THE MAKING OR ISSUANCE AND MANAGEMENT OF THE LOANS, THE USE OR
INTENDED USE OF THE PROCEEDS OF THE LOANS, THE ENFORCEMENT OF THE BANK'S RIGHTS
AND REMEDIES UNDER THIS AGREEMENT, THE LOAN DOCUMENTS, THE NOTES, ANY OTHER
INSTRUMENTS AND DOCUMENTS DELIVERED HEREUNDER, OR UNDER ANY OTHER AGREEMENT
BETWEEN BORROWER AND THE BANK; PROVIDED, HOWEVER, THAT BORROWER SHALL NOT HAVE
ANY OBLIGATIONS HEREUNDER TO ANY INDEMNIFIED PARTY WITH RESPECT TO MATTERS
DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE
JUDGMENT TO HAVE BEEN CAUSED BY OR RESULTING FROM THE WILLFUL MISCONDUCT OR
GROSS NEGLIGENCE OF SUCH INDEMNIFIED PARTY. TO THE EXTENT THAT THE UNDERTAKING
TO INDEMNIFY SET FORTH IN THE PRECEDING SENTENCE MAY BE UNENFORCEABLE BECAUSE IT
VIOLATES ANY LAW OR PUBLIC POLICY, BORROWER SHALL SATISFY SUCH UNDERTAKING TO
THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW. ANY LIABILITY, OBLIGATION, LOSS,
DAMAGE, PENALTY, COST OR EXPENSE COVERED BY THIS INDEMNITY SHALL BE PAID TO EACH
INDEMNIFIED PARTY ON DEMAND, AND FAILING PROMPT PAYMENT, TOGETHER WITH INTEREST
THEREON AT THE DEFAULT RATE FROM THE DATE INCURRED BY EACH INDEMNIFIED PARTY
UNTIL PAID BY BORROWER, SHALL BE ADDED TO THE OBLIGATIONS OF BORROWER AND BE
SECURED BY THE COLLATERAL. THE PROVISIONS OF THIS SECTION SHALL SURVIVE THE
SATISFACTION AND PAYMENT OF THE OTHER OBLIGATIONS AND THE TERMINATION OF THIS
AGREEMENT.
13.21 Revival and Reinstatement of Obligations. If the incurrence or
payment of the Obligations by any Obligor or the transfer to the Bank of any
property should for any reason subsequently be declared to be void or voidable
under any state or federal law relating to creditors' rights, including
provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers of
property (collectively, a "Voidable Transfer"), and if the Bank is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that the Bank is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of the
Bank, the Obligations shall automatically shall be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been made.
13.22 Fees. All fees described herein shall be fully earned by the Bank
when due and payable and, except as otherwise set forth herein, shall not be
subject to refund or rebate. All fees are for compensation for services and are
not, and shall not be deemed to be, interest or a charge for the use of money.
13.23 Recitals. The recitals to this Agreement are hereby incorporated
into this Agreement, the truth and accuracy of which are evidenced by each
party's execution hereof.
13.24 Amendment and Restatement. This Agreement amends and restates,
and Borrower expressly states that it does not constitute an extinguishment or
novation of, the Existing Credit Agreement, or any of the documents executed in
connection therewith (the "Existing Loan Documents"), or constitute a release or
relinquishment of the Liens granted to Bank in the Existing Loan Agreement or
the Existing Loan Documents. This Agreement and each document executed in
connection herewith, does not evidence or effect a refinancing of the loans
under the Existing Loan Agreement or the Existing Loan Documents, or a waiver of
Borrower's obligation to reimburse Bank therefor, or as otherwise set
69
forth in the Existing Loan Agreement or the Existing Loan Documents, all as such
obligations are amended and restated by this Agreement and the other Loan
Documents.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Borrower and the Bank have executed this Loan and
Security Agreement as of the date first above written.
INTEGRITY MEDIA, INC.
(f/k/a Integrity Incorporated)
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Secretary
INTEGRITY PUBLISHERS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Secretary
INO RECORDS, LLC
(f/k/a M2 Communications, L.L.C.)
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------
MEMBER: INTEGRITY MEDIA, INC.
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Secretary
INTEGRITY DIRECT, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------
MEMBER: INTEGRITY MEDIA, INC.
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Secretary
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KONA ACQUISITION CORP.
By: /s/ P. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------
Name: P. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
Agreed and accepted:
LASALLE BANK NATIONAL
ASSOCIATION, a national banking
association
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
72
EXHIBIT A
Borrowing Base Certificate
INTEGRITY MEDIA, INC.
We refer to that certain Loan and Security Agreement, dated as of April
25, 2001 (as the same may be amended, restated, supplemented or otherwise
modified from time to time, the "Loan Agreement"), by and between Integrity
Media, Inc., a Delaware corporation (the "Borrower"), and LaSalle Bank National
Association, Inc. (the "Lender"). Each capitalized term contained herein and not
otherwise defined herein shall have the meaning given to such term in the Loan
Agreement.
The undersigned hereby represents and warrants (i) that he is the
Senior Vice President of Administration and Finance of the Borrower, and (ii)
that the following information is estimated as being correct and complete as of
the last day of ___________________ based on current information available as of
____________.
A. Eligible Accounts
1. Total Accounts $________
2. Less: Accounts due and unpaid more than
90 days after the invoice date $________
3. Less: Other Ineligible Accounts (International
and Celebration Hymnal) $________
4. Total Eligible Accounts $________
5. Advance Ratio _________
6. Total Availability $________
B. Eligible Inventory
1. Total Inventory $________
2. Less: Ineligible Inventory $________
3. Total Eligible Inventory $________
4. Advance Ratio _________
5. Total Availability $________
C. Borrowing Base
1. Total Borrowing Base (A.6 plus B.5) $________
2. Outstanding Borrowings under subject facility. $________
3. Outstanding Reserves $________
EXCESS AVAILABILITY $________
IN WITNESS WHEREOF, the undersigned has executed and delivered this
certificate as of the _____ day of _________.
_____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Integrity Media, Inc.
Senior Vice President of Finance and
Administration
73