EXHIBIT (b)(4)
EXECUTION COPY
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INTEGRITY MEDIA, INC.
KONA ACQUISITION CORP.
$15,000,000 Senior Subordinated Notes due July 8, 2011
Warrants for 7.0% of the Shares of Common Stock,
$0.01 par value (subject to adjustment), of Integrity Media, Inc.
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SECURITIES PURCHASE AGREEMENT
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July 8, 2004
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TABLE OF CONTENTS
Page
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1. Authorization of Securities; Subsidiary Guarantees............................................................ 1
2. Sale and Purchase of Securities............................................................................... 2
3. Closing....................................................................................................... 2
4. Conditions to Closing......................................................................................... 3
4.1 Representations and Warranties Correct.............................................................. 3
4.2 Performance; No Default............................................................................. 3
4.3 Related Transactions................................................................................ 3
4.4 Compliance Certificate.............................................................................. 4
4.5 Proceedings and Documents........................................................................... 5
4.6 Opinions of Counsel................................................................................. 5
4.7 Legal Investment: Certificate....................................................................... 5
4.8 Sale and Purchase Not Forbidden by Law.............................................................. 5
4.9 Payment of Closing Fee and Transaction Costs........................................................ 5
5. Representations and Warranties.......................................................................... 5
5.1 Organization, Standing, etc......................................................................... 6
5.2 Names; Jurisdictions of Organization; Subsidiaries.................................................. 6
5.3 Qualification....................................................................................... 6
5.4 Business, etc....................................................................................... 6
5.5 Shares; Voting Provisions; Options; Warrant Shares, etc............................................. 6
5.6 Financial Statements................................................................................ 7
5.7 Changes; Solvency, etc.............................................................................. 8
5.8 Tax Returns and Payments............................................................................ 8
5.9 Debt, Liens, Investments, Transactions with Affiliates and Leases................................... 9
5.10 Title to Properties; Liens; Leases Real Property................................................... 9
5.11 Litigation. etc.................................................................................... 10
5.12 Valid and Binding Obligations; Compliance with Laws and Other Instruments;
Absence of Restrictions, etc................................................................... 10
5.13 ERISA.............................................................................................. 12
5.14 Consents, etc...................................................................................... 13
5.15 Proprietary Rights; Licenses....................................................................... 13
5.16 Offer of Securities; Investment Bankers............................................................ 14
5.17 Government Regulation.............................................................................. 14
5.18 Labor Relations; Suppliers, Distributors and Customers............................................. 14
5.19 Disclosure......................................................................................... 14
6. Use of Proceeds; Regulation U, etc............................................................................ 15
7. Financial Statements and Information.......................................................................... 15
8. Inspection; Board Visitation Rights; Confidentiality.......................................................... 18
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9. Prepayment of Notes........................................................................................... 20
9.1 Optional Prepayment With Premium of Notes........................................................... 20
9.2 Mandatory Prepayment upon a Change of Control or Any Public Offering................................ 20
9.3 Allocation of Partial Prepayments of Notes.......................................................... 21
9.4 Notice of Optional Prepayments of Notes............................................................. 21
9.5 Maturity; Accrued Interest; Surrender, etc. of Notes................................................ 21
9.6 Purchase of Notes................................................................................... 21
9.7 Payment on Non-Business Days........................................................................ 22
9.8 Application of Notes in Satisfaction of Exercise Price of Warrants.................................. 22
10. Subordination of Notes and Subsidiary Guarantees............................................................. 22
11. Reserved..................................................................................................... 22
12. Reserved..................................................................................................... 22
13. Reserved..................................................................................................... 22
14. Covenants of the Company..................................................................................... 22
14.1 Books of Record and Account;Reserves............................................................... 22
14.2 Payment of Taxes; Existence; Maintenance of Properties; Compliance with Laws;
Lines of Business; Proprietary Rights and Licenses............................................. 22
14.3 Insurance.......................................................................................... 23
14.4 Limitation on Discount or Sale of Receivables...................................................... 24
14.5 Limitation on Debt................................................................................. 24
14.6 Limitations on Restricted Payments................................................................. 26
14.7 Certain Financial Covenants........................................................................ 27
14.8 Limitation on Tax Consolidation.................................................................... 28
14.9 Limitation on Liens................................................................................ 28
14.10 Limitation on Transactions with Affiliates........................................................ 28
14.11 Limitation on Investments......................................................................... 28
14.12 Limitation on Issuance of Shares of Subsidiaries.................................................. 30
14.13 Limitation on Company's Consolidation, Merger and Purchases....................................... 30
14.14 Limitation on Disposition of Property............................................................. 30
14.15 Modification of Certain Documents, Agreements and Instruments, Fiscal Year........................ 31
14.16 Unconditional Purchase Obligations................................................................ 31
14.17 Merger............................................................................................ 32
14.18 Compensation...................................................................................... 32
14.19 Charitable Contributions.......................................................................... 32
14.20 Warrants.......................................................................................... 32
14.21 Integrity Music Europe............................................................................ 32
14.22 Further Assurances................................................................................ 33
15. Reserved..................................................................................................... 33
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16. Definitions.................................................................................................. 33
16.1 Definitions of Capitalized Terms................................................................... 33
16.2 Other Definitions.................................................................................. 48
16.3 Accounting Terms and Principles; Laws.............................................................. 48
17. Remedies..................................................................................................... 49
17.1 Events of Default Defined; Acceleration of Maturity................................................ 49
17.2 Suits for Enforcement, etc......................................................................... 52
17.3 No Election of Remedies............................................................................ 53
17.4 Remedies Not Waived................................................................................ 53
17.5 Application of Payments............................................................................ 53
18. Registration, Transfer and Exchange of Securities; Limitations on Transfers.................................. 53
19. Replacement of Securities.................................................................................... 54
20. Amendment and Waiver......................................................................................... 54
21. Method of Payment of Securities.............................................................................. 55
22. Expenses; Indemnity.......................................................................................... 55
23. Taxes........................................................................................................ 56
24. Communications............................................................................................... 56
25. Survival of Agreements, Representations and Warranties, etc; Reaffirmation of Company
Guarantee............................................................................................... 57
26. Successors and Assigns; Rights of Other Holders.............................................................. 57
27. Purchase for Investment; ERISA............................................................................... 57
28. Governing Law; Jurisdiction; Waiver of Jury Trial............................................................ 58
29. Other Business............................................................................................... 59
30. Purchaser Agent.............................................................................................. 59
31. Miscellaneous................................................................................................ 59
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Schedule I Schedule of Purchasers
Exhibit 1(a) Form of Note
Exhibit 1(c) Form of Warrant
Exhibit 1(e) Form of Subsidiary Guarantee
Exhibit 3 Wire Instructions
Exhibit 4.3(d) Form of Stockholders' Agreement
Exhibit 4.3(e) Form of Registration Rights Agreement
Exhibit 4.3(g) Form of Subordination Agreement
Exhibit 4.6(a) Opinion of Xxxxxx & Bird
Exhibit 5.2 Names; Jurisdictions of Incorporation; Subsidiaries
Exhibit 5.4 Disclosure Documents
Exhibit 5.5(a) Shares; Voting Provisions
Exhibit 5.5(b) Rights, Options, Warrants, etc.
Exhibit 5.6(a) Financial Statements
Exhibit 5.6(b) Projections and Pro Forma Unaudited Consolidated Balance Sheet
Exhibit 5.6(c) Proforma Balance Sheet
Exhibit 5.9 Debt, Liens, Investments, Transactions with Affiliates and Leases
Exhibit 5.10 Real Property
Exhibit 5.11 Litigation
Exhibit 5.12(b) Environmental Filings
Exhibit 5.12(d) Conflicts
Exhibit 5.14 Consents
Exhibit 6 Use of Proceeds
Exhibit 14.11 Investments
Exhibit 16 Competitors
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SECURITIES PURCHASE AGREEMENT
INTEGRITY MEDIA, INC., a Delaware corporation (the "Target") and KONA
ACQUISITION CORP., a Delaware corporation, which, upon the consummation of the
Merger referenced below, will be merged with and into the Target (as defined
below) with the Target being the surviving company (the "Company") agrees with
Key Principal Partners III LLC, a Delaware limited liability company ("KPP") and
KPP INVESTORS II L.P., a Delaware limited partnership ("KPP II" and together
with KPP, the "Purchasers" and each a "Purchaser") as follows. Certain
capitalized terms used herein are defined in Section 16.
1. Authorization of Securities; Subsidiary Guarantees.
(a) The Company has authorized the issue and sale of its
Senior Subordinated Notes due July 8, 2011 in the aggregate principal
amount of $15,000,000 (herein, together with any notes issued in
exchange therefor or replacement thereof, called the "Notes") to be
issued at the Closing to the Purchasers. The Notes are to be
substantially in the form of Exhibit 1(a) attached hereto.
(b) The Notes and the Warrants and, unless the context clearly
requires otherwise, the Warrant Shares (as defined in the Warrants),
are collectively referred to as the "Securities" and each as a
"Security".
(c) CURRENT INTEREST. The principal of the Notes (and accrued
but unpaid, past due interest outstanding from time to time hereafter)
shall bear interest currently ("Current Interest") from the date of
issuance at an annual rate of twelve and one half percent (12.5%).
Current Interest on the Notes is payable quarterly in arrears on the
last day of each calendar quarter, commencing September 30, 2004 and
continuing until the Notes are repaid in full.
DEFERRED INTEREST. In addition to Current Interest, the
principal of the Notes (and accrued but unpaid, past due interest
outstanding from time to time hereafter) shall bear deferred interest
("Deferred Interest") from the date of issuance at an annual rate of
two percent (2%). Once accrued and to the extent not paid in cash,
Deferred Interest shall continue to accrue and compound quarterly at an
annual rate of fourteen and one half percent (14.5%) until paid.
Subject to the following paragraph, the Company may pay the Deferred
Interest prior to maturity at the Company's option.
PAYMENTS OF DEFERRED INTEREST BEFORE MATURITY. If, on any
interest payment date following the fifth anniversary of the date of
issuance of the Notes, (A) the aggregate amount includible in gross
income with respect to the Notes for periods before the close of such
accrual period (determined in accordance with Section 163(i)(2)(A) of
the Code) would, but for this provision, exceed (B) the sum of (i) the
aggregate amount of interest to be paid under the Notes before the
close of such accrual period, and (ii) the product of the issue price
of the Notes (as defined in Sections 1273(b) and 1274(a) of the Code)
and their yield to maturity (determined in accordance with Section
163(i) of the Code) of the Notes, then the Company shall make a payment
of Deferred Interest on such interest payment date in an amount equal
to such excess.
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OTHER PROVISIONS. In no event shall the amount paid or agreed
to be paid by the Company or any guarantor of any Note as interest and
premium on any Note exceed the highest lawful rate permissible under
any law applicable thereto. Interest under the Notes shall be computed
on the basis of a 360-day year for the actual number of days elapsed.
(d) The principal of the Notes, including any Deferred
Interest which has been accrued but not paid, shall be payable as
follows: (i) an amount equal to fifty percent (50%) of the outstanding
amount of principal and interest shall be due on January 8, 2011; and
(ii) the remaining outstanding principal amount and any unpaid interest
shall be due on July 8, 2011.
(e) Each Domestic Subsidiary (except for Celebration,
Integrity Music, Inc., Enlight and Integrity Incorporated) and each
Person, if any, which hereafter becomes a Domestic Subsidiary of the
Company shall unconditionally guarantee the Notes and all other
obligations of the Company and its Subsidiaries, if any, under the
Operative Documents pursuant to a guarantee substantially in the form
of Exhibit 1(e) attached hereto as amended, modified and supplemented
from time to time (each a "Subsidiary Guarantee"; collectively, the
"Subsidiary Guarantees").
2. Sale and Purchase of Securities.
On the Closing Date, the Company will issue and sell to the Purchasers
and, subject to the terms and conditions hereof and in reliance upon the
representations and warranties of the Company contained herein and in the other
Operative Documents, each of the Purchasers will purchase from the Company, at
the Closing, as specified in Section 3, such Securities as are specified on that
portion of Schedule I attached hereto as is applicable to each Purchaser. The
aggregate purchase price of the Notes and the Warrants shall be $15,000,000
which shall be allocated (a) $14,500,000 to the Notes and (b) $500,000 to the
Warrants. The Company and each of the Purchasers agree that the values ascribed
to the Securities (which values shall be used by the Company and each of the
Purchasers, as well as any subsequent holder of any of the Securities, for the
preparation of tax returns) shall be determined in accordance with the
foregoing.
3. Closing.
The closing of the sale and purchase of the Notes and the Warrants (the
"Closing") shall take place at the office of Messrs. Xxxxxx, Halter & Xxxxxxxx
LLP, 1400 XxXxxxxx Investment Center, 000 Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxx,
00000 or by exchange via facsimile (with original documents to follow by
overnight courier) as of the date that each of the conditions in Section 4
hereof have been satisfied in the discretion of the Purchasers (the "Closing
Date"). At the Closing, the Company will deliver to each Purchaser the
Securities to be purchased by such Purchaser at the Closing against payment of
the purchase price thereof to (or for the benefit of) the Company in immediately
available funds in accordance with the wire instructions set forth on Exhibit 3
attached hereto. Delivery of the Securities to be purchased by each Purchaser at
the Closing shall be made in the form of one or more Notes and Warrants, in such
denominations and registered in such names as are specified on Schedule I
attached hereto and in each case dated, and in the case of the Notes, bearing
interest from the Closing Date. If, at the Closing, the
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Company shall fail to tender the Securities to be delivered to any Purchaser
thereat as provided herein, or if at the Closing any of the conditions specified
in Section 4 shall not have been fulfilled or waived in writing to any
Purchaser's satisfaction, each Purchaser shall, at its election, be relieved of
all further obligations under this Agreement, without thereby waiving any other
rights such Purchaser may have by reason of such failure or such
non-fulfillment.
4. Conditions to Closing.
Each Purchaser's obligation to purchase and pay for the Securities to
be purchased by such Purchaser hereunder at the Closing is subject to the
fulfillment to each Purchaser's satisfaction, prior to or at the Closing, of the
following conditions:
4.1 Representations and Warranties Correct.
The representations and warranties made by the Company herein and in
the other Operative Documents shall have been true and correct when made and
shall be true and correct in all material respects at and as of the time of the
Closing (after giving effect to the transactions consummated at the Closing).
4.2 Performance; No Default.
The Company shall have performed all agreements and complied with all
conditions contained herein and in the other Operative Documents required to be
performed or complied with by them prior to or at the Closing. At the time of
the Closing (after giving effect to the transactions consummated at the
Closing), no Default or Event of Default shall exist. Since December 31, 2003,
no event shall have occurred which could reasonably be expected to result in a
Material Adverse Change.
4.3 Related Transactions.
(a) The Company, the Target and P. Xxxxxxx Xxxxxxx ("Xxxxxxx")
shall have executed and delivered that certain Agreement and Plan of
Merger (the "Merger Agreement"), among the Company, the Target and
Xxxxxxx pursuant to which the Company shall merge with and into the
Target with the Target being the surviving corporation. All provisions
of relevant law and any applicable agreement with respect to the Merger
Agreement (other than the payment of the Per Share Cash Merger
Consideration (as defined in the Merger Agreement) and the filing of
the merger certificate with the Delaware Secretary of State) shall have
been complied with and all representations and warranties contained in
the Merger Agreement shall be true and correct in all material
respects. All filings necessary to effectuate the Merger shall have
been made (other than the filing of the Merger Certificate). No
material condition under the Merger Agreement for the benefit of the
Company or any of its Affiliates shall have been waived without the
prior written consent of the Purchasers. The aggregate transaction
price of the purchased stock in connection with the Merger Agreement
shall not exceed $15,000,000. The aggregate transaction fees and
expenses of the Company (and its Subsidiaries and shareholders)
incurred in connection with the Merger and all related transactions
shall not exceed $2,000,000. The terms of the Merger Agreement shall be
satisfactory to the Purchasers in all material respects.
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(b) After giving effect to the Merger, the debt and equity
capitalization of the Company and its Subsidiaries shall be in all
respects satisfactory to each of the Purchasers. After giving effect to
the Closing, neither the Company nor any of its Subsidiaries shall have
any Debt other than that evidenced by the Notes, the Credit Documents
and that which is specified on Exhibit 5.9 attached hereto.
(c) The Organizational Documents of the Company and each of
its Subsidiaries which is a Guarantor shall be in form and substance
satisfactory to each of the Purchasers in all material respects.
(d) Each of the Purchasers, the Company, and Xxxxxxx, Xxxx X.
Xxxxxxx and the Xxxxxxx Limited Partnership, a Delaware limited
partnership, shall have entered into a Stockholders' Agreement
substantially in the form of Exhibit 4.3(d) attached hereto, in form
and substance satisfactory to the Purchasers, of even date herewith
(the "Stockholders' Agreement"), and such agreement shall be in full
force and effect.
(e) Each of the Purchasers and the Company shall have entered
into a Registration Rights Agreement substantially in the form of
Exhibit 4.3(e) attached hereto of even date herewith (the "Registration
Rights Agreement"), and such agreement shall be in full force and
effect.
(f) The Credit Documents shall have been delivered and shall
be in full force and effect. The Company and the Subsidiaries of the
Company a party thereto shall have established pursuant thereto (a) a
$12,000,000 revolving credit facility, (b) a $ 5,612,500 term loan
facility, and (c) a $ 4,351,666.66 mortgage term loan facility. The
aggregate amount of the unused borrowing availability immediately
following the Closing and the closing of the financing contemplated
under the Credit Agreement under such revolving credit facility shall
be at least $3,000,000. Each of the Purchasers shall have been
furnished with a borrowing base certificate satisfactory in form and
substance to each Purchaser evidencing the same. The terms of the
Credit Documents shall be satisfactory to each of the Purchasers in all
material respects. After giving effect to the transactions contemplated
hereby, no default or event of default shall exist under the Credit
Agreement and the other Credit Documents.
(g) The Company, the Subsidiaries of the Company a party to
the Credit Documents, each of the Purchasers and LaSalle Bank National
Association shall have entered into a subordination agreement (the
"Subordination Agreement") substantially in the form of Exhibit 4.3(g)
attached hereto and such agreement shall be in full force and effect.
4.4 Compliance Certificate.
Each of the Purchasers shall have received an Officer's Certificate,
dated the Closing Date, certifying that the conditions specified in Sections
4.1, 4.2 and 4.3 have been fulfilled.
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4.5 Proceedings and Documents.
All proceedings in connection with the transactions contemplated by the
Operative Documents and all agreements, documents and instruments incident to
such transactions shall be satisfactory in substance and form to each of the
Purchasers and their special counsel, and each of the Purchasers and their
special counsel shall have received all such counterpart originals or copies
thereof as each of the Purchasers or they may reasonably request.
4.6 Opinions of Counsel.
At the Closing, each of the Purchasers shall have received an opinion,
dated the Closing Date, from Xxxxxx & Bird, LLP, counsel for the Company,
substantially in the form of Exhibit 4.6(a) attached hereto.
4.7 Legal Investment: Certificate.
At the time of the Closing, each Purchaser's purchase of the Securities
to be issued pursuant hereto shall be permitted under the laws and regulations
of any jurisdiction to which such Purchaser is subject (without resort to any
provision of any such law permitting limited investments by such Purchaser
without restriction as to the character of the particular investment), and each
Purchaser shall, if requested by such Purchaser, have received an Officer's
Certificate, dated the Closing Date, certifying as to such matters as such
Purchaser may request to enable such Purchaser to determine whether its purchase
is so permitted.
4.8 Sale and Purchase Not Forbidden by Law.
The offer, issue, sale and delivery by the Company of the Securities to
be issued pursuant hereto and each Purchaser's purchase of such securities at
the Closing shall not be prohibited by and shall not subject any Purchaser to
any tax (other than income taxes of the Purchasers resulting from income earned
on the Securities), penalty, liability or other onerous condition under or
pursuant to any law, statute, rule or regulation.
4.9 Payment of Closing Fee and Transaction Costs.
The Company shall have paid (a) the remaining $250,000 portion of the
$300,000 nonrefundable closing fee to the Purchasers, which fee (i) shall be
allocated among and paid to each of the Purchasers in proportion to the
aggregate principal amount of the Notes to be purchased by such Purchaser and
(ii) shall be paid by deducting such allocated amounts from the payments made by
such Purchaser for the Notes pursuant to Section 2, and (b) all reasonable fees,
expenses and disbursements actually incurred by each Purchaser at or prior to
the time of the Closing in connection with the transactions contemplated by the
Operative Documents, including, without limitation, the reasonable fees,
expenses and disbursements of legal counsel for the Purchasers.
5. Representations and Warranties.
On the Closing Date, the Company represents and warrants to each
Purchaser that as of the Closing Date (after giving effect to the transactions
consummated at the Closing):
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5.1 Organization, Standing, etc.
Each of the Company and each Subsidiary is a corporation or limited
liability company duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or formation and has all
requisite corporate or limited liability company power and authority to own,
lease and operate its properties, to carry on its business as now conducted, and
now proposed to be conducted as described in the Disclosure Documents referred
to in Section 5.4, and to execute, deliver and perform each of the Operative
Documents to which it is (or is to be) a party and to consummate the
transactions contemplated by the Operative Documents.
5.2 Names; Jurisdictions of Organization; Subsidiaries.
Exhibit 5.2 attached hereto correctly specifies as to the Company and
each of its Subsidiaries: (a) its legal name, (b) the jurisdiction of its
incorporation, (c) each jurisdiction (other than its jurisdiction of
incorporation or formation) in which it is qualified to do business and (d) the
address of its principal executive office. The Company does not have any
Subsidiary other than those Subsidiaries identified on Exhibit 5.2.
5.3 Qualification.
The Company and each of its Subsidiaries is duly qualified or licensed
to do business and is in good standing in each jurisdiction in which the
character of the properties owned or leased or the nature of the activities
conducted makes such qualification or licensing necessary, except for those
jurisdictions in which the failure to be so qualified or licensed or to be in
good standing has not resulted in, and could not reasonably be expected to
result in, a Material Adverse Change.
5.4 Business, etc.
The Company and its Subsidiaries are engaged in the production,
publishing and distribution of Christian content via media such as recorded
music, videos, film, television, radio, internet or books and other print media
and related products (the "Business"). The Company has furnished to each of the
Purchasers true, correct and complete copies of the documents listed on Exhibit
5.4 attached hereto (the "Disclosure Documents").
5.5 Shares; Voting Provisions; Options; Warrant Shares, etc.
(a) Exhibit 5.5(a) attached hereto correctly and fully
specifies (after giving effect to the transactions consummated at the
Closing) as to the Company and each of its Subsidiaries (i) its
authorized and outstanding Shares and (ii) the name of each record and
beneficial owner of such Shares, together with the number (and class,
if any) of such Shares held by each such Person. All of the outstanding
Shares of the Company and each of its Subsidiaries that are
corporations are, and all Warrant Shares issued upon exercise of the
Warrants in accordance with the terms thereof will be, duly authorized,
validly issued, fully paid and non-assessable and not subject to any
preemptive right, right of first refusal or similar right on the part
of the Company or any other Person (except (y) as provided in Section
18 and (z) as set forth on Exhibit 5.5(a)) and all of such Shares have
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been (or will have been) offered, issued and sold in all material
respects in accordance with all applicable laws. Except as set forth on
Exhibit 5.5(a) attached hereto, the owners of the Shares indicated on
Exhibit 5.5(a) attached hereto own the Shares indicated on such exhibit
free of any Lien, proxy, voting agreement, voting trust, stockholders
agreement or similar agreement or restriction (other than the
Stockholders' Agreement and the Integrity Stockholders' Agreement).
Except as set forth on Exhibit 5.5(a) attached hereto, neither the
Organizational Documents nor any other agreement, document or
instrument binding on or applicable to the Company or any of its
Subsidiaries or any of its stockholders contains any provision
requiring a higher voting requirement with respect to action taken
(and/or to be taken) by its board of directors or stockholders than
that which would apply in the absence of such provision. Xxxxxxx has
the right (by virtue of his ownership of the Shares of the Company as
shown on Exhibit 5.5(a) attached hereto) to elect or designate for
election a majority of the members of the board of directors of the
Company, and, except as set forth on Exhibit 5.5(a) attached hereto,
Xxxxxxx Xxxxxxx is not subject to any agreement or restriction that
affects his right to vote such Shares or to exercise any other incident
of ownership of such Shares.
(b) After giving effect to the consummation of the
transactions consummated at the Closing, except as provided in the
Stockholders Agreement and the Registration Rights Agreement, except
for the Warrants and except as set forth on Exhibit 5.5(b) attached
hereto, (i) there are no outstanding rights, options, warrants or
agreements for the purchase from, or sale or issuance by, the Company
or any of its Subsidiaries of any of its Shares or any securities
convertible into or exercisable or exchangeable for such Shares; (ii)
there are no agreements on the part of the Company or any of its
Subsidiaries to issue, sell or distribute any of its Shares, other
securities or assets; (iii) neither the Company nor any of its
Subsidiaries has any obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any of its Shares or any interest therein
or to pay any dividend or make any distribution in respect thereof; and
(iv) no Person is entitled to any rights with respect to the
registration of any Shares of the Company or any of its Subsidiaries
under the Securities Act (or the securities laws of any other
jurisdiction).
(c) The aggregate number of shares of Common Stock issuable
upon exercise in full of the Warrants immediately after the Closing is
306,186 (subject to adjustment pursuant to the terms of the Warrants),
which, if then issued, would constitute 7.0% of the Common Stock
(calculated on a fully-diluted basis assuming the conversion, exercise
and exchange of all outstanding securities convertible into and
exercisable or exchangeable for Common Stock, including, without
limitation, the Warrants). The Company has reserved 415,000 shares of
Common Stock solely for issuance upon exercise of the Warrants.
5.6 Financial Statements.
Each of the Purchasers has been furnished with:
(a) the financial statements referred to on Exhibit 5.6(a)
attached hereto, which financial statements have been prepared in
accordance with GAAP and present fairly in all material respects the
financial position and the results of operations and cash
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flows of the Person(s) purported to be covered thereby as at the
respective dates and for the respective periods indicated in conformity
with GAAP (subject, in the case of any unaudited financial statements,
to normal year end and audit adjustments of immaterial amounts and the
omission of footnote disclosure);
(b) the projections referred to on Exhibit 5.6(b) attached
hereto, which projections were prepared in good faith, are based upon
assumptions that the Company believes are reasonable and take into
account all material information regarding the matters set forth
therein. Such projections represent the Company's current estimate of
future financial performance of the Company and its Subsidiaries. The
Company does not currently anticipate any material deviation from such
projections; and
(c) the pro forma unaudited consolidated balance sheet
referred to on Exhibit 5.6(c) attached hereto, which balance sheet sets
forth the estimated financial position of the Company and its
Subsidiaries as of May 31, 2004, adjusted on a pro forma basis to give
effect to the consummation on the Closing Date of the transactions
contemplated by the Operative Documents, and reflects all known
material liabilities of the Persons purported to be covered thereby,
contingent or other, as of May 31, 2004.
5.7 Changes; Solvency, etc.
Since December 31, 2003: (a) there has been no change in the assets,
liabilities or financial condition of the Company and its Subsidiaries from that
set forth in the balance sheet as at such date referred to in Section 5.6(a),
other than changes which have not been, either in any case or in the aggregate,
materially adverse and (b) no condition or event has occurred which has resulted
in, or could reasonably be expected to result in, a Material Adverse Change. The
Company is, and the Company and its Subsidiaries taken as a whole are, (and,
after giving effect to the consummation of the transactions at Closing, the
Company and the Company and its Subsidiaries taken as a whole will be) Solvent.
5.8 Tax Returns and Payments.
The Company and each of its Subsidiaries have filed all material tax
returns required by law to be filed and have paid all material taxes and
assessments shown to be due and payable on such returns and all other material
governmental charges levied upon any of their respective properties, assets,
income, receipts, franchises or sales other than those not yet delinquent and
other than those which are being contested in good faith by appropriate
proceedings promptly initiated and diligently conducted and with respect to
which it shall have set aside on its books such reserves, if any, with respect
thereto as are required by GAAP. Neither the Company nor any of its Subsidiaries
has executed any waiver or waivers that would have the effect of extending the
applicable statute of limitations in respect of income tax liabilities. The
charges, accruals and reserves in the financial statements referred to in
Section 5.6(a) in respect of taxes for all fiscal periods are adequate, and
there are no known unpaid assessments for additional taxes for any fiscal period
or of any basis therefor.
8
5.9 Debt, Liens, Investments, Transactions with Affiliates and Leases.
(a) No default or Event of Default exists under any of its Debt or any
other Material Contract, including, but not limited to, under the Credit
Agreement or any of the other Credit Documents;
(b) Exhibit 5.9 attached hereto correctly describes as to the Company
and each of its Subsidiaries:
(i) all of its Debt to be outstanding immediately following
the Closing in an amount, either individually or in the aggregate, of
$250,000 or more (other than that evidenced by the Notes and the Credit
Documents);
(ii) all material Liens to which any of its properties and
assets will be subject immediately following the Closing (other than
those of the character described in subpart (b) of the definition of
Permitted Liens);
(iii) all of its Investments having a fair market value,
individually or in the aggregate, of $250,000 or more (and all
agreements and commitments to make Investments) to be owned or held
immediately following the Closing;
(iv) all of its Affiliates, and all material agreements
(including, without limitation, all material employment and management
consulting agreements) with such Affiliates and all material
transactions with such Subsidiaries which it is now obligated or now
intends to consummate at any time in the future;
(v) each deposit account and operating bank accounts of the
Company and its Subsidiaries; and
(v) each Material Contract of the Company and the name of the
parties thereto, the contract term and any options or renewals thereto,
the monthly payment required thereunder, any restrictions on
assignments, any restrictions on disclosure of the terms thereof, the
existence of any material breaches or defaults thereunder.
5.10 Title to Properties; Liens; Leases Real Property.
The Company and each of its Subsidiaries have good (in the
case of personalty) and good and marketable (in the case of real property) title
to all of their respective properties and assets (including, without limitation,
the properties and assets reflected in the balance sheet dated December 31,
2003, referred to in Section 5.6(a)), except properties and assets disposed of
since such date in the ordinary course of business, free and clear of all Liens
(other than Liens permitted under Section 14.9). The Company and each of its
Subsidiaries enjoys peaceful and undisturbed possession under all leases under
which it operates, and all of such leases are valid, subsisting and in full
force and effect and are on "arm's length" terms. The only leases of real
property to which the Company or any of its Subsidiaries is a party are listed
on Exhibit 5.10 attached hereto. Except as set forth on Exhibit 5.10, there are
no subtenants or licensees of any real property leased by the Company or any of
its Subsidiaries. The only real property owned by
9
the Company or any of its Subsidiaries is described on Exhibit 5.10 attached
hereto, and there are no tenants or licensees thereof or thereon.
5.11 Litigation. etc.
There is no action, proceeding or investigation pending or, to
the knowledge of the Company, threatened (or any basis therefor known to the
Company) against or affecting either the Company or any of its Subsidiaries
which, except as set forth on Exhibit 5.11 attached hereto (a) questions the
validity of any of the Operative Documents or any action taken or to be taken
pursuant thereto or (b) has resulted in, or could reasonably be expected to
result in, a Material Adverse Change. There is no outstanding judgment, decree
or order against or affecting either the Company or any of its Subsidiaries
which has resulted in, or could reasonably be expected to result in, a Material
Adverse Change.
5.12 Valid and Binding Obligations; Compliance with Laws and Other
Instruments; Absence of Restrictions, etc.
(a) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the valid and legally binding
obligation of the Company enforceable against the Company in accordance
with its terms, except that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer
or similar laws of general application now or hereafter in effect
affecting the rights and remedies of creditors and by general equity
principles (regardless of whether enforcement is sought in a proceeding
at law or in equity). Each of the other Operative Documents to which
the Company or any of its Subsidiaries is (or is to be) a party has
been duly authorized by the Company or such Subsidiary, as the case may
be, and, when executed and delivered, will constitute the valid and
legally binding obligation of the Company or such Subsidiary, as the
case may be, enforceable against it in accordance with the terms
thereof, except that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer
or similar laws of general application now or hereafter in effect
affecting the rights and remedies of creditors and by general equity
principles (regardless of whether enforcement is sought in a proceeding
at law or in equity).
(b) Neither the Company nor any of its Subsidiaries is or has
been in violation of or in default under any term of (x) its
Organizational Documents, or (y) any agreement, document, instrument,
judgment, decree, order, law, statute, rule or regulation applicable to
it or any of its properties and assets, in any way which, with respect
to subclause (y), has resulted in, or could reasonably be expected to
result in, a Material Adverse Change. Without limiting the generality
of the foregoing:
(i) the Company and each of its Subsidiaries
is, and has been, in compliance with (and none of them nor any
of their predecessors in interest has received any notice to
the contrary) and there is no reasonable possibility of any
liability of or any judgment, decree or order binding upon or
applicable to the Company and/or any of its Subsidiaries or
any of their properties or assets under or on account of, any
Environmental Laws, including, without limitation, legal
10
requirements relating to the use, storage, handling, transport and
disposal of Hazardous Materials, except where the same has not
resulted in, and could not reasonably be expected to result in, a
Material Adverse Change;
(ii) neither the Company nor any of its Subsidiaries nor any
other Person, has ever caused or permitted any Hazardous Materials
to be disposed of on or under any real property owned or leased by
the Company or any of its Subsidiaries in any manner not permitted
by all applicable laws, except for any disposals that have not
resulted in, and could not reasonably be expected to result in, a
Material Adverse Change;
(iii) no real property ever owned or leased by the Company or
any of its Subsidiaries has ever been used by the Company or any of
its Subsidiaries or any third party as (A) a disposal site or
permanent storage site for any Hazardous Materials or (B) a
temporary storage site for any Hazardous Materials, except in
compliance with applicable Environmental Laws, except where
non-compliance has not resulted in, and could not reasonably be
expected to result in, a Material Adverse Change. All Hazardous
Materials used or generated by the Company or any of its
Subsidiaries (including any business merged into or otherwise
acquired by the Company or any of its Subsidiaries) have been
generated, accumulated, stored, transported, treated, recycled and
disposed of in compliance with all applicable laws and regulations,
except for any non-compliance that has not resulted in, and could
not reasonably be expected to result in, a Material Adverse Change.
There are no underground storage tanks or underground petroleum
receptacles on any real property owned or leased by the Company or
any of its Subsidiaries where the existence of such tanks or
receptacles has resulted in, or could reasonably be expected to
result in, a Material Adverse Change. Neither this Agreement nor the
transactions contemplated hereby will result in any obligations for
site assessment or cleanup, or, except as noted on Exhibit 5.12(b)
attached hereto, notification to or consent of any governmental
agency or third party under any transaction-triggered Environmental
Law; and
(iv) the hours worked by and the payment made to employees of
the Company have not been in material violation of the Fair Labor
Standards Act or any other applicable law, and no material unfair
labor practice complaint is pending against the Company or, to the
best knowledge of the Company, threatened before any governmental
authority.
(c) The execution, delivery and performance of and the
consummation of the transactions contemplated by the Operative Documents
will not violate or constitute a default under, or permit any Person to
accelerate or to require the prepayment of any Indebtedness of the Company
or any of its Subsidiaries or to terminate any material lease or agreement
of the Company or any of its Subsidiaries pursuant to, or result in the
creation of any Lien (other than the Liens created by the Credit
Documents) upon any of the properties or assets of the Company or any of
its Subsidiaries pursuant to, any term of the Organizational Documents of
the Company or any of its Subsidiaries or of any material agreement,
material document, material instrument, judgment, decree, order,
11
law, statute, rule or regulation applicable to the Company or any of its
Subsidiaries or any of their respective properties and assets.
(d) Neither the Company nor any of its Subsidiaries is a party to
or bound by or subject to any Organizational Document, or, except as set
forth on Exhibit 5.12(d) attached hereto, any material agreement, material
document, material instrument, judgment, decree, order, law, statute, rule
or regulation (other than the Operative Documents and the Credit Documents
and laws, statutes, rules or regulations affecting businesses generally):
(i) which restricts its right or ability to incur Indebtedness, to issue
securities or to consummate the transactions contemplated hereby; (ii)
under the terms of or pursuant to which its obligation to pay all amounts
due from it and/or to perform all obligations imposed on it and/or to
comply with the terms applicable to it under any of the Operative
Documents is in any way restricted; or (iii) which restricts its right or
ability to pay dividends and/or to make any other distributions in respect
of its Shares, to mortgage or dispose of its properties, to consummate any
merger, consolidation or acquisition, to make Investments or capital
expenditures, to enter into and perform leases, to pay executive
compensation and/or to conduct its business as now conducted and now
proposed to be conducted.
5.13 ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except for
such instances of noncompliance which have not resulted in, and could not
reasonably be expected to result in, a Material Adverse Change. Neither
the Company nor any ERISA Affiliate has incurred any liability pursuant to
Title I of ERISA which is past due or pursuant to Title IV of ERISA or the
penalty or excise tax provisions of the Code relating to employee benefit
plans (as defined in Section 3 of ERISA), and no event, transaction or
condition has occurred or exists that could reasonably be expected to
result in the incurrence of any such liability by the Company or any ERISA
Affiliate, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate, in either case
which constitutes the failure to satisfy obligations under Title I of
ERISA or pursuant to Title IV of ERISA or to such penalty or excise tax
provisions or to Section 401(a)(29) or 412 of the Code, other than such
liabilities or Liens as would not individually or in the aggregate result
in a Material Adverse Change.
(b) The present value of the aggregate benefit liabilities under
each of the Plans (other than Multiemployer Plans), determined as of the
end of such Plan's most recently ended plan year on the basis of the
actuarial assumptions specified for funding purposes in such Plan's most
recent actuarial valuation report, did not exceed the aggregate current
value of the assets of such Plan allocable to such benefit liabilities by
more than $10,000 in the case of any single Plan and by more than $20,000
in the aggregate for all Plans. The term "benefit liabilities" has the
meaning specified in Section 4001 of ERISA and the terms "current value"
and "present value" have the meaning specified in Section 3 of ERISA.
12
(c) Neither the Company nor any of the ERISA Affiliates has
incurred withdrawal liabilities (or are subject to contingent withdrawal
liabilities) under Section 4201 or 4204 of ERISA in respect of
Multiemployer Plans that individually or in the aggregate could result in
a Material Adverse Change. The Company and each ERISA Affiliate have made
all required contributions to Multiemployer Plans. Neither the Company nor
any ERISA Affiliate has incurred, nor would reasonably expect to incur,
any Withdrawal Liability upon a complete or partial withdrawal from any
Multiemployer Plan that individually or in the aggregate could result in a
Material Adverse Change. No Multiemployer Plan is, or is reasonably
expected to be, insolvent, in reorganization or terminated within the
meaning of Title IV of ERISA.
(d) The expected post-retirement benefit obligation of the Company
and its Subsidiaries (determined in accordance with Financial Accounting
Standards Board Statement No. 106, without regard to liabilities
attributable to continuation coverage mandated by Section 4980B of the
Code) does not exceed $500,000.
(e) The consummation of the transactions contemplated by the
Operative Documents will not involve any transaction that is subject to
the prohibitions of Section 406 of ERISA or in connection with which a tax
could be imposed pursuant to Section 4975(c)(1)(A)-(D) of the Code. The
representation by the Company in the first sentence of this Section
5.13(e) is made in reliance upon and subject to the accuracy of each
Purchaser's representation in Section 27(b) as to the sources of the funds
used to pay the purchase price of the Securities to be purchased by each
of the Purchasers.
5.14 Consents, etc.
No consent, approval or authorization of, or declaration or filing
with, or other action by, any Person (including, without limitation, any
governmental authority) is required on the part of the Company or any of its
Subsidiaries as a condition precedent to the valid execution, delivery and
performance of and the consummation of the transactions contemplated by the
Operative Documents and/or the exercise by any holder of any Securities of any
of its rights in respect thereof, other than (a) which have been obtained and
are unconditional, in full force and effect and not subject to appeal or review,
and (b) consents required under software license agreements which, if not
obtained, could not reasonably be expected to result in a Material Adverse
Change. Exhibit 5.14 attached hereto sets forth all of the governmental
consents, approvals, authorizations, filings or actions required on the part of
the Company or any of its Subsidiaries as a condition precedent to the valid
execution, delivery and performance of and the consummation of the transactions
contemplated by the Operative Documents and/or the exercise by any holder of any
Securities of any of its rights in respect thereof.
5.15 Proprietary Rights; Licenses.
The Company and each of its Subsidiaries have all Proprietary Rights
and Licenses as are necessary for the conduct of their respective businesses as
now conducted and now proposed to be conducted, without any known conflict with
the rights of others, except where the failure to have any such Proprietary
Right and/or License has not resulted in, and could not reasonably be expected
to result in, a Material Adverse Change. Each such Proprietary
13
Right and License is in full force and effect, all material obligations with
respect thereto have been fulfilled and performed and there is no infringement
thereon by any other Person. No default in the performance or observance by the
Company or any of its Subsidiaries (or any of the predecessors in interest to
the Company or any of its Subsidiaries) of their respective obligations
thereunder has occurred which permits, or after notice of lapse of time or both
would permit, the revocation or termination of any Proprietary Right or License
which has resulted in, or could reasonably be expected to result in, a Material
Adverse Change.
5.16 Offer of Securities; Investment Bankers.
Neither the Company nor any Person acting on its behalf (a) has
directly or indirectly offered the Securities or any part thereof or any similar
securities for issue or sale to, or solicited any offer to buy any of the same
from, anyone other than the Purchasers and not more than 5 other institutional
investors, (b) has taken or will take any action which would bring the issuance
and sale of the Securities within the provisions of Section 5 of the Securities
Act or the registration or qualification provisions of any applicable blue sky
or other securities laws, (c) has dealt with any broker, finder, commission
agent or other similar Person in connection with the sale of the Securities and
the other transactions contemplated by the Operative Documents other than
LaSalle Corporate Finance or (d) is under any obligation to pay any broker's
fee, finder's fee or commission in connection with such transactions, other than
to LaSalle Corporate Finance in an amount not to exceed $250,000.
5.17 Government Regulation.
Neither the Company nor any of its Subsidiaries is, or will as a
result of the transactions contemplated hereby be, subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act or the
Investment Company Act of 1940, each as amended.
5.18 Labor Relations; Suppliers, Distributors and Customers.
No dispute involving employees of the Company or any of its
Subsidiaries or their respective relationships with any of their respective
employees (including, without limitation, strikes, lockouts or other labor
disputes) has resulted in, or could reasonably be expected to result in, any
Material Adverse Change. The relationships with each of the suppliers to and
distributors for and customers of the Company and its Subsidiaries are
satisfactory commercial working relationships and, during the 12-month period
ended on the Closing Date, no such supplier, distributor or customer has
canceled or otherwise terminated its relationship with or decreased its
services, supplies or materials to or its usage or purchase of the services or
products of the Company or any of its Subsidiaries in a manner which has
resulted in, or could reasonably be expected to result in, a Material Adverse
Change. The Company is not aware of any intention of any such supplier,
distributor or customer to take any such action.
5.19 Disclosure.
Neither this Agreement, nor any of the other Operative Documents nor
the Disclosure Documents, contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained herein and therein not
14
misleading in the light of the circumstances under which such statements were
made, it being understood that, except as set forth in Section 5.6, no
representation or warranty is made with respect to any projections or other
prospective financial information. There is no fact known to the Company or any
of its Subsidiaries (other than information concerning general economic
conditions known to the public generally) which has resulted in, or could
reasonably be expected to result in, a Material Adverse Change which has not
been set forth in this Agreement, the other Operative Documents and the
applicable schedules and exhibits hereto.
6. Use of Proceeds; Regulation U, etc.
(a) The Company and its Subsidiaries will use the proceeds of the
sale of the Securities on the Closing Date to make the payments to the
Persons and for the purposes specified on Exhibit 6 attached hereto, and
will use the remaining balance of such proceeds for the fees and expenses
in connection therewith and for working capital purposes of the Company in
accordance with the terms of the Operative Documents.
(b) The use of all funds advanced under the Agreement by the
Company and its Subsidiaries will not conflict with or contravene any of
Regulations T, U or X (12 CFR Part 221) promulgated by the Board of
Governors of the Federal Reserve System as the same may from time to time
be amended, supplemented or otherwise modified, or with any other
applicable law, statute, regulation, rule, order or restriction.
7. Financial Statements and Information.
So long as any of the Notes shall remain outstanding, the Company will
furnish to (a) a Purchaser Agent if one has been appointed pursuant to Section
30 hereof or (b) each of the Purchasers and to each other holder from time to
time of the Notes if a Purchaser Agent has not been so appointed:
(a) as soon as available, and in any event, within 30 days after
the end of each fiscal month of the Company other than any fiscal month
which is the final fiscal month in the fiscal quarter of the Company, and
within 45 days after the end of each fiscal month of the Company which is
the final month in the fiscal quarter of the Company, the consolidated and
consolidating balance sheets of the Company and its Subsidiaries as at the
end of such period and the related consolidated and consolidating
statements of income and cash flows for such period and for the portion of
such fiscal year ended on the last day of such period, in each case
setting forth in comparative form the corresponding figures for the same
period and portion of the immediately preceding fiscal year and the
corresponding figures from the budgets for such period and for the fiscal
year which includes such period;
(b) as soon as available, and in any event, within 120 days after
the end of each fiscal year of the Company, the consolidated balance
sheets of the Company and its Subsidiaries as at the end of such year and
the related consolidated and consolidating statements of income, changes
in stockholders' equity and cash flows for such year, in each case setting
forth in comparative form the corresponding figures for the immediately
preceding fiscal year and the corresponding unaudited figures from the
budget for such
15
fiscal year, all in reasonable detail and accompanied by the standard
unqualified report on such consolidated financial statements of the
Company and its Subsidiaries of PriceWaterhouseCoopers or other
accountants of recognized national standing acceptable to the Required
Purchasers, which report shall (i) state that the audit of such
accountants in connection with such consolidated financial statements has
been conducted in accordance with generally accepted auditing standards
and that such accountants believe that such audit provides a reasonable
basis for their opinion, (ii) contain the other statements required from
time to time by the American Institute of Certified Public Accountants for
an auditor's standard unqualified opinion (and shall not contain any
additional explanatory paragraph concerning uncertainties or other
matters) and (iii) include the opinion of such accountants that such
consolidated financial statements present fairly in all material respects
the consolidated financial position of the Company and its Subsidiaries as
at the end of such fiscal year and the consolidated results of operations
and cash flows for such fiscal year, in conformity with GAAP;
(c) together with each delivery of financial statements pursuant
to Section 7(b) and within 45 days after the end of each fiscal quarter of
the Company, an Officer's Certificate which shall:
(i) certify that such financial statements have been
prepared in accordance with GAAP applied on a consistent basis in
accordance with past practices throughout the periods covered
thereby and present fairly in all material respects the consolidated
financial position and the consolidated results of operations and
cash flows of the Company and its Subsidiaries as at the end of and
for the periods covered thereby in conformity with generally
accepted accounting principles as then in effect (subject, in the
case of any unaudited financial statements, to normal year end and
audit adjustments and the omission of footnotes and a statement of
changes in stockholders' equity);
(ii) state that, after due inquiry, the signers do not have
knowledge of the existence, during the fiscal period covered by such
financial statements or as at the date of such Officer's
Certificate, of (A) any "reportable condition" (as defined in
Statement on Auditing Standards No. 60 issued by the Auditing
Standards Board of the American Institute of Certified Public
Accountants) in internal control structure of the Company or any of
its Subsidiaries, (B) any Change of Control or (C) any Default or
Event of Default, or, if such is not the case, specifying in
reasonable detail the nature and period of existence thereof and
what action the Company or the applicable Subsidiary has taken, is
taking and proposes to take with respect thereto; and
(iii) show in reasonable detail all computations required to
demonstrate compliance, during and at the end of the fiscal period
covered by such financial statements, with the provisions of
Sections 14.5, 14.6, 14.7 and 14.14;
(d) as promptly as practicable (but in any event not later than
five Business Days) after receipt thereof, copies of all management
letters with respect to the Company or any of its Subsidiaries submitted
by independent accountants;
16
(e) within forty-five (45) days after the close of each fiscal
quarter of the Company, the Company shall deliver to the Purchasers the
most recently published Soundscan ratings as they relate to the Christian
music market;
(f) 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, the Company shall provide the Purchasers notice
of the same;
(g) at such time as any securities of the Company or any of its
Subsidiaries are publicly held, as promptly as practicable (but in any
event not later than five Business Days) after the same are available,
copies of (i) all material press releases issued by the Company or any of
its Subsidiaries, and all notices, proxy statements, financial statements,
reports and documents as the Company shall send or make available
generally to its stockholders or as any of its Subsidiaries shall send or
make available generally to its stockholders, other than its parent
corporation, and (ii) all periodic and special reports, documents and
registration statements (other than on Form S-8) which the Company or any
of its Subsidiaries furnishes or files, or any officer, director or
stockholder of the Company or any of its Subsidiaries furnishes or files
with respect to the Company or any of its Subsidiaries, with the
Commission (or any analogous foreign governmental authority) or any
securities exchange;
(h) as promptly as practicable (but in any event not later than
five Business Days) after any officer or senior management employee of the
Company or any of its Subsidiaries becomes aware of the occurrence of any
of the following conditions or events, an Officer's Certificate specifying
in reasonable detail the nature and period of existence thereof, what
action the Company or any of its Subsidiaries has taken, is taking and
proposes to take with respect thereto: (i) with respect to any Plan, any
reportable event, as defined in Section 4043(b) of ERISA and the
regulations thereunder, for which notice thereof has not been waived
pursuant to such regulations as in effect on the date hereof; (ii) the
taking by the PBGC of steps to institute, or the threatening by the PBGC
of the institution of, proceedings under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan,
or the receipt by the Company or any ERISA Affiliate of a notice from a
Multiemployer Plan that such action has been taken by the PBGC with
respect to such Multiemployer Plan; or (iii) any event, transaction or
condition which constitutes the failure to satisfy obligations under Title
I of ERISA or that could result in the incurrence of any liability by the
Company or any ERISA Affiliate pursuant to IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans, or
in the imposition of any Lien on any of the rights, properties or assets
of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA
or such penalty or excise tax provisions, if such liability or Lien, taken
together with any other such liabilities or Liens then existing, has
resulted in, or could reasonably be expected to result in, a Material
Adverse Change;
(i) not later than five Business Days after the Company obtains
knowledge of the occurrence of any Default or Event of Default, an
Officer's Certificate specifying in reasonable detail the nature and
period of existence thereof, what action the Company or
17
any of its Subsidiaries has taken, is taking and proposes to take with
respect thereto and the date, if any, on which it is estimated the same
will be remedied;
(j) no later than (30) days after the commencement of each fiscal
year of the Company, (1) a draft of the annual budget or business plan for
such fiscal year for the Company and its Subsidiaries, including a
projected consolidated and consolidating balance sheet, income statement,
and cash flow statement for such fiscal year, on a month by month basis,
and, (2) promptly during each fiscal year, all revisions thereto approved
by the Board of Directors of the Company;
(k) not later than five Business Days after the occurrence of any
condemnation, taking or destruction of or damage to (whether or not
covered by insurance) any properties or assets of the Company or any of
its Subsidiaries having a value in excess of $250,000, an Officer's
Certificate specifying in reasonable detail the nature of such event, what
action the Company or any of its Subsidiaries has taken, is taking and
proposes to take with respect thereto and the date, if any, on which it is
estimated the same will be remedied;
(l) such other material information relating to the Company or any
of its Subsidiaries as shall be furnished to any bank, financial
institution or other Person to which the Company or any of its
Subsidiaries is indebted for borrowed money or for any letters of credit
or similar instruments (other than information relating solely to
collateral therefor including, without limitation, borrowing base
certificates and financial statements otherwise delivered to the
Purchasers pursuant to the terms of Section 7 hereof); and
(m) such other information as from time to time may reasonably be
requested by the Required Holders of any of the Notes, the Warrants or the
Warrant Shares.
8. Inspection; Board Visitation Rights; Confidentiality.
(a) The Company will permit any Person designated by any of the
Purchasers on reasonable, prior written notice, during regular business
hours (unless a Default or Event of Default shall have occurred and be
continuing, in which case, at any time) and at the Company's expense, to
visit and inspect any of the properties of the Company and its
Subsidiaries, to, examine their books and records (and to make copies
thereof) and to discuss their affairs, finances and accounts with and to
be advised as to the same by, their directors, officers, consultants,
counsel and accountants, all at such intervals as the Purchasers may
desire (but not more frequently than twice in any fiscal year, unless a
Default or Event of Default shall have occurred and be continuing, in
which case, as frequently as the Purchasers may request). Representatives
of the Company may be present at any such meeting.
(b) The Required Holders of the Securities shall have the right to
appoint one representative from time to time who shall: (i) receive notice
of all meetings (both regular and special) of the board of directors of
the Company and each committee thereof (such notice to be delivered or
mailed as specified in Section 24 at the same time as notice is
18
given to the members of such board and/or committee), provided, that the
Company shall provide such appointee with notice of all regular meetings
not less than ten (10) business days in advance and all special meetings
as provided for in the by-laws of the Company, except that in each case
(A) if longer advance notice is given to the members of the board of
directors, the same advance notice will be given to such appointee, and
(B) if exceptional circumstances arise which make it prudent for a meeting
of the board of directors to be called on less than ten (10) business
days' notice, then such meeting may be called with such notice as may be
reasonable at the time and the same advance notice given to any other
members of the board of directors will be given to such appointee; (ii) be
entitled to attend as an observer (or, in the case of telephone meetings,
participate in) all such meetings; (iii) receive all notices, information
and reports which are furnished to the members of such board and/or
committee at the same time and in the same manner as the same is furnished
to any such member; (iv) be entitled to participate in all discussions
conducted at such meetings; and (v) receive as soon as available (but in
any event prior to the next succeeding meeting of such board and/or
committee) copies of the minutes of all such meetings which are furnished
to such board and/or committee. If any action is proposed to be taken
after the Closing by such board and/or committee by written consent in
lieu of a meeting, the Company will give written notice thereof to such
representative, which notice shall describe in reasonable detail the
nature and substance of such proposed action and shall be delivered or
mailed as specified in Section 24 at the same time as notice is given to
any of the members of such board and/or committee. The Company will
furnish such representative with a copy of each such written consent not
later than five days after it has been signed by its last signatory. Such
representative shall not constitute a member of such board and/or
committee and shall not be entitled to vote on any matters presented at
meetings of such board and/or committee or to consent to any matter as to
which the consent of any such board and/or committee shall have been
requested. The board of directors (or other governing board) of the
Company shall meet not less frequently than once during each fiscal
quarter of the Company. The Company shall pay all reasonable fees and
expenses, including travel and lodging, associated with the appointee's
attendance at the Company's board meetings.
(c) Each holder of any Securities agrees by its acceptance thereof
that any non-public propriety information concerning the Company and its
Subsidiaries which is furnished by the Company to such holder pursuant to
this Agreement or any of the other Operative Documents (collectively
"Confidential Information") shall be kept confidential by such holder in
accordance with procedures adopted by such holder in good faith to protect
confidential information of third parties. The term "Confidential
Information" shall not include, however, any information which (x) was
publicly known at the time of disclosure by the Company to any holder; (y)
subsequently becomes publicly known through no act or omission of any
holder or any agent of any holder or (z) becomes known to any holder
otherwise than through disclosure by the Company and the holder is not
aware of the confidential obligations attendant thereto. Notwithstanding
the foregoing, each holder of any Securities may disclose Confidential
Information: (i) with the prior written consent of the Company (which
shall not be unreasonably withheld or delayed); (ii) when required by law
or regulation; (iii) in any report, statement or testimony submitted by
such holder to any regulatory body having or claiming to have jurisdiction
over such holder; (iv) to the officers, directors, employees, agents,
19
representatives and professional consultants of such holder and of such
holder's Affiliates who have a need to know such information and who agree
to the confidentiality provisions herein; (v) in connection with the
preservation, exercise and/or enforcement of any of such holder's rights
or remedies under this Agreement and the other Operative Documents but
only to the extent necessary or advisable in connection with such
preservation, exercise or enforcement; (vi) in connection with any
contemplated transfer of any of the Securities held by such holder to any
proposed transferee (so long as the recipient of such information agrees
to keep such information confidential on terms substantially similar to
those set forth in this Section 8(c)); (vii) in a response to any summons,
subpoena or other legal process or in connection with any judicial or
administrative proceeding or inquiry; or (viii) to correct any false or
misleading information which may become public concerning the relationship
of such holder to the Company or any of its Subsidiaries and/or the
transactions contemplated hereby.
9. Prepayment of Notes.
9.1 Optional Prepayment With Premium of Notes.
At any time or from time to time, the Company may, at its option,
upon notice as set forth in Section 9.4, prepay all or any part (in an integral
multiple of $1,000,000 and a minimum of $1,000,000 or such lesser principal
amount thereof as shall then be outstanding) of the Notes, upon the concurrent
payment of a premium which is based on a percentage of the principal amount so
prepaid pursuant to this Section 9.1 (the "Applicable Premium"):
(a) with respect to the Notes such percentage to be that set forth
in the following table opposite the period in which the date fixed for such
prepayment occurs:
Period Applicable Premium
------ ------------------
Closing Date through first anniversary of Closing Date 5.0%
After first anniversary of Closing Date through second anniversary of Closing Date 4.0%
After second anniversary of Closing Date through third anniversary of Closing Date 3.0%
After third anniversary of Closing Date 0.0%
9.2 Mandatory Prepayment upon a Change of Control or Any Public
Offering.
If any Change of Control or any public offering of the Common Stock
pursuant to an effective registration statement filed by the Company with the
Commission ("Public Offering") is to occur, then not less than 30 days nor more
than 60 days prior to the earlier of (i) the occurrence of such Change of
Control or Public Offering, as applicable or (ii) the record date of such Change
of Control or Public Offering, as applicable, the Company will notify each
holder of any Notes and, for purposes of the put right in the Warrants, each
holder of any Warrants and/or Warrant Shares, of such pending Change of Control,
as applicable, all of the
20
material terms of such Change of Control or Public Offering, as applicable, and
the date upon which it is scheduled to occur. The Company shall prepay all of
the Notes (including all interest accrued thereon) then outstanding, together
with an amount equal to the Applicable Premium, on the date upon which the
Change of Control or Public Offering, as applicable, occurs, unless the Company
and the Required Holders of the Notes agree to a different date, and no
prepayment pursuant to this Section 9.2 shall be due unless the Change of
Control or Public Offering, as applicable, shall occur.
9.3 Allocation of Partial Prepayments of Notes.
In the case of each partial prepayment of the Notes under this
Section 9, the principal amount of the Notes to be prepaid shall be allocated
among all of the Notes at the time outstanding (excluding any Notes at the time
owned by the Company or any Affiliate of the Company) in proportion, as nearly
as practicable, to the respective unpaid principal amounts thereof, with
adjustments, to the extent practicable, to compensate for any prior prepayments
not made exactly in such proportion.
9.4 Notice of Optional Prepayments of Notes.
In the case of each prepayment under this Section 9, the Company
shall give written notice thereof to each holder of Notes being prepaid not less
than 30 nor more than 60 days prior to the date fixed for such prepayment (which
notice shall be revocable until five (5) days before the date fixed for such
prepayment in such notice). Each such notice shall set forth: (a) the date fixed
for prepayment; (b) the aggregate principal amount of Notes to be prepaid on
such date; and (c) the aggregate principal amount of Notes held by such holder
to be prepaid on such date and the amount of accrued interest and, in the case
of a prepayment of any Notes pursuant to Section 9.1 or 9.2, the Applicable
Premium to be paid to such holder on such date (together with the calculation of
such Applicable Premium which calculation shall be satisfactory to each holder
of the Notes to be so prepaid).
9.5 Maturity; Accrued Interest; Surrender, etc. of Notes.
In the case of each prepayment of all or any part of any Note, the
principal amount to be prepaid shall mature and become due and payable on the
date fixed for such prepayment, together with interest on such principal amount
accrued to such date and the premium, if any, due thereon. Any Note prepaid in
full shall be surrendered to the Company at the Company's principal place of
business promptly following prepayment and canceled and shall not be reissued,
and no Note shall be issued in lieu of any prepaid principal amount of any Note.
9.6 Purchase of Notes.
The Company will not, and will not permit any of its Affiliates to,
directly or indirectly, purchase or otherwise acquire, or offer to purchase or
otherwise acquire, any outstanding Notes except by way of payment or prepayment
in accordance with the provisions of the Notes and this Agreement.
21
9.7 Payment on Non-Business Days.
If any amount hereunder or under the Notes shall become due on a day
which is not a Business Day, such payment shall be due on the next succeeding
Business Day without including the additional day(s) elapsed in the computation
of the interest payable on such next succeeding Business Day.
9.8 Application of Notes in Satisfaction of Exercise Price of Warrants.
In the event that any holder of any Note shall apply all or any
portion of the principal amount of such Notes in satisfaction (in whole or in
part) of the payment of the Exercise Price (as defined in the Warrants), any
partial application of the principal amount of any such Note shall be applied to
the payment of installments of principal due thereunder in the inverse order of
maturity.
10. Subordination of Notes and Subsidiary Guarantees.
The payment of the Notes and the rights of the holders thereof are
subordinated to the payment of the Senior Indebtedness (as defined in the
Subordination Agreement) and the rights of the holders thereof upon the terms of
subordination set forth in the Subordination Agreement.
11. Reserved.
12. Reserved.
13. Reserved.
14. Covenants of the Company.
So long as any of the Notes shall remain outstanding, the Company will
duly perform and observe each and all of the covenants and agreements
hereinafter set forth:
14.1 Books of Record and Account; Reserves.
The Company will, and will cause each of its respective Subsidiaries
to, (a) at all times keep proper books of record and account in which full, true
and correct entries shall be made of its transactions in accordance with GAAP
and (b) set aside on its books from its earnings for each fiscal year all such
proper reserves as shall be required in accordance with GAAP in connection with
its business.
14.2 Payment of Taxes; Existence; Maintenance of Properties; Compliance
with Laws; Lines of Business; Proprietary Rights and Licenses.
The Company will, and will cause each of its respective Subsidiaries
to:
(a) pay and discharge promptly as they become due and payable all
taxes, assessments and other governmental charges or levies imposed upon
it or its income or upon any of its property, as well as all claims of any
kind (including claims for labor,
22
materials and supplies) which, if unpaid, might by law become a Lien upon
its property and could reasonably be expected to result in a Material
Adverse Change; provided that no such Person shall be required to pay any
such tax, assessment, charge, levy or claim if the amount, applicability
or validity thereof shall currently be contested in good faith by
appropriate proceedings promptly initiated and diligently conducted and if
it shall have set aside on its books such reserves, if any, with respect
thereto as are required by GAAP; provided, further, that the Company will,
and will cause each of its Subsidiaries to, pay any such tax, assessment,
charge, levy or claim prior to the commencement of any proceeding to
foreclose any Lien securing the same;
(b) do or cause to be done all things necessary to preserve and
keep in full force and effect its existence subject to the provisions of
Section 14.13 hereof;
(c) maintain and keep its material properties in good repair,
working order and condition (ordinary wear and tear and casualties
excepted);
(d) comply in all respects with all applicable laws, statutes,
rules, regulations and orders of, and all applicable restrictions imposed
by, all governmental authorities in respect of the conduct of its business
and the ownership of its property (including, without limitation, all
Environmental Laws), if the failure to do so could reasonably be expected
to result in a Material Adverse Change; provided that no such Person shall
be required by reason of this Section 14.2(d) to comply therewith at any
time while it shall be contesting its obligation to do so in good faith by
appropriate proceedings promptly initiated and diligently conducted, and
if it shall have set aside on its books such reserves, if any, with
respect thereto as are required by GAAP. In addition, and without limiting
the foregoing provision of this subsection (d), the Company shall (a)
ensure, and cause each Subsidiary to ensure, that no person who owns a
controlling interest in or otherwise controls the Company 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 Securities 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;
(e) engage only in the Business (and lines of business related to
the Business); and
(f) own or have a valid license for all material Proprietary
Rights and Licenses used by it in the conduct of its business.
14.3 Insurance.
The Company will, and will cause each of its Subsidiaries to,
maintain with financially sound and reputable insurers, insurance with respect
to its properties and businesses against loss or damage of the kinds customarily
insured against by Persons of established reputation engaged in the same or a
similar business and similarly situated, in such amounts and
23
by such methods (including deductibles, co-insurance and self-insurance, if
adequate reserves are maintained with respect thereto) as shall be customary for
such Persons and reasonably deemed adequate by the Company.
14.4 Limitation on Discount or Sale of Receivables.
The Company will not, nor will it permit any of its Subsidiaries to,
directly or indirectly, discount or sell any of its accounts receivable, except
that any such Person may settle doubtful accounts or may grant discounts (such
as quantity or prompt payment discounts) in the ordinary course of business.
14.5 Limitation on Debt.
The Company will not, and nor will it permit any of its Subsidiaries
to, be liable or create, assume, incur, guarantee, or in any manner become
liable, contingently or otherwise, in respect of any Debt other than (without
duplication):
(a) Debt evidenced by the Notes;
(b) Debt under the Credit Agreement, provided that the aggregate
outstanding principal amount thereof, including, without limitation, all
amounts due (contingently or otherwise) in respect of reimbursement
obligations under letters of credit (and all related reimbursement
agreements but excluding any Hedging Obligations) does not exceed the sum
of (a) $23,500,000 reduced by the sum of (without duplication): (i) the
amount of all regularly scheduled, mandatory or optional principal
payments on the Term Loans (as defined in the Credit Agreement) actually
made (other than in connection with a Permitted Refinancing), (ii) all
permanent reductions in the aggregate Revolving Commitment Amount (as
defined in the Credit Agreement) (other than in connection with a
Permitted Refinancing), and (iii) all other mandatory prepayments of the
Term Loans actually made (other than in connection with a Permitted
Refinancing); plus (b) $2,500,000; provided, however, at the time any
portion of such additional $2,500,000 purported to be Indebtedness
permitted under this subpart (b) is incurred, no Event of Default shall
have occurred;
(c) obligations of the Company for Taxes, assessments, municipal
or other governmental charges;
(d) obligations of the Company for accounts payable, other than
for money borrowed, incurred in the ordinary course of business if and to
the extent such Debt is paid on a current basis or is less than sixty (60)
days past due;
(e) Debt outstanding on the date hereof and referred to on Exhibit
5.9 attached hereto (but, in each case, no renewal, extension, refinancing
or refunding of any thereon except as expressly permitted in Section
14.5(g));
(f) Debt under Capital Leases and Debt for Capital Expenditures,
provided that the aggregate outstanding principal amount of such Debt
incurred pursuant to this
24
Section 14.5(f) shall at no time exceed $500,000 and (ii) any Liens
securing such Debt are permitted under subpart (e) of the definition of
Permitted Liens;
(g) Debt incurred to extend, refinance, refund or renew (the
"Refinancing Debt") any outstanding Debt permitted under this Section
14.5, other than under the Credit Agreement (the "Refinanced Debt"),
provided that:
(i) the aggregate outstanding principal amount of the
Refinancing Debt shall not at any time exceed that of the Refinanced
Debt immediately prior to such refinancing;
(ii) the scheduled final maturity date of the Refinancing
Debt is not earlier than that of the Refinanced Debt;
(iii) the Refinancing Debt has a ranking which is not senior
(as a result of any contractual or structural subordination, the
grant of any collateral security therefor, any change in the Persons
obligated with respect thereto or otherwise) to the ranking of the
Refinanced Debt; and
(iv) the Refinancing Debt bears interest at market rates
prevailing at its date of issuance;
(h) Debt of any Person which becomes a Subsidiary of the Company
after the date of this Agreement pursuant to a Permitted Acquisition;
provided that such Debt exists at the time that such Person (or assets)
becomes a Subsidiary and is not created in contemplation of or in
connection with such Permitted Acquisition;
(i) Debt of any Wholly-Owned Subsidiary of the Company owing to
the Company or to any other Wholly-Owned Subsidiary of the Company which
has executed a Subsidiary Guarantee (which is then in full force and
effect);
(j) Hedging Obligations with respect to any Hedging Agreement
consented to by the Purchasers in writing;
(k) Bank Products Obligations (as defined in the Credit Agreement
as in effect on the Closing Date) to the extent permitted under the Credit
Agreement (as in effect on the Closing Date);
(l) Debt incurred in connection with repurchases of shares
permitted under Section 14.6(f) to the extent such Debt is subordinated to
the obligations under the Operative Documents in form and substance
satisfactory to the Purchasers;
(m) Debt incurred under Permitted Guaranties; and
(n) other unsecured Debt in an aggregate amount not to exceed
$500,000 at any time outstanding.
25
For purposes of this Section 14.5, any Person becoming a Subsidiary of the
Company after the date hereof shall be deemed, at the time it becomes a
Subsidiary, to have incurred all of its then outstanding Debt.
14.6 Limitations on Restricted Payments.
The Company will not, nor will it permit any of its Subsidiaries to,
directly or indirectly, make or commit to make any Restricted Payment, provided
(a) any Subsidiary may pay dividends or make other distributions
to the Company or to a domestic Wholly Owned Subsidiary;
(b) that the Company may pay reasonable fees of outside directors
of the board of directors of the Company who are not employees or
Affiliates of the Company or any of its Affiliates and reasonable expenses
of such directors incurred in connection with attending the board meetings
of such Company which amount of fees and expenses shall not exceed in any
fiscal year of the Company (i) 105% of the aggregate amount of such fees
and expenses paid to directors with respect to the Company's prior fiscal
year plus (ii) the amount of such fees and expenses paid to KPP or its
representative on the board of directors of the Company plus (iii) the
then remaining Additional Board Expense Amount;
(c) the Company may exchange Shares of the Company for Shares of a
different type or deliver Shares for the exercise price of stock options
in lieu of cash;
(d) in addition to repurchases permitted under Section 14.6(f),
the Company may pay dividends to its stockholders or repurchase stock from
its stockholders in an amount not to exceed $3,000,000 in the aggregate
after the Closing Date so long as (i) Revolving Loan Availability (as
defined in the Credit Agreement as in effect on the Closing Date) after
giving effect to such dividends or repurchase is not less than $2,000,000,
(ii) no Event of Default then exists or would exist after giving effect to
such dividends or repurchase (as determined in respect of Section 14.7, on
a pro forma basis as of the last date as of which quarterly financial
statements or annual financial statements, as applicable, have been
delivered pursuant to Section 7(a) and (b) of this Agreement) and (iii)
the aggregate amount of such dividends and repurchases made before January
8, 2006 does not exceed $1,500,000;
(e) the Company may make payments to its stockholders to permit
such stockholders to pay taxes resulting from the Merger to the extent the
aggregate amount of such payments does not exceed $250,000; and
(f) the Company may repurchase shares of its common stock 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, however, that (1) the aggregate amount paid in cash
with respect to such repurchases from the Closing Date through the fifth
anniversary of the Closing Date shall not exceed $1,000,000, (2) the
aggregate amount paid in cash with respect to such repurchases from the
fifth anniversary of the Closing Date through the seventh anniversary of
the Closing Date shall not exceed
26
$1,000,000, (3) any remaining consideration paid with respect to such
repurchases shall be subordinated to the payment of all obligations under
the Operative Documents in form and substance satisfactory to the
Purchasers, (4) the repurchase price per share for any such repurchases
cannot exceed the per share redemption price set forth in the Integrity
Stockholder Agreement (as in effect on the Closing Date), (5) no Default
or Event of Default exists or would result therefrom (as determined in
respect of Section 14.7 on a pro forma basis as of the last date as of
which financial statements have been delivered pursuant hereto) and (6) no
such repurchases may be made prior to July 8, 2008.
14.7 Certain Financial Covenants.
(a) Minimum Net Worth. As of the end of each of its fiscal
quarters, commencing September 30, 2004 and each fiscal quarter ending
thereafter, the Company and its Subsidiaries shall maintain Net Worth in
an amount not less than seventy percent (70%) of the Net Worth of the
Company and its Subsidiaries measured on a consolidated as of July 31,
2004, plus (i) an aggregate amount equal to 75% of quarterly Net Income
(but only if a positive number, with no reduction for losses) for each
fiscal quarter of the Company and its Subsidiaries on a consolidated basis
minus (ii) the sum of (A) charges up to $25,000 per fiscal quarter of the
Company and its Subsidiaries on a consolidated basis related to the
amortization of certain of the costs incurred by the Company in connection
with the transactions contemplated by the terms of the Merger Agreement
plus (B) up to $3,000,000 in the aggregate in dividends and redemptions
permitted and paid pursuant to the terms of Section 14.6(d) hereof;
provided, however that for the quarter ending September 30, 2004, only Net
Income of the Company and its Subsidiaries for the months of August and
September 2004 on a consolidated basis shall be included in such
calculation.
(b) Total Funded Debt to EBITDA. As of the end of each of its
fiscal quarters, commencing September 30, 2004 and each fiscal quarter
ending thereafter, the Company and its Subsidiaries shall maintain a ratio
of consolidated Total Funded Debt to consolidated EBITDA of not greater
than the following for each applicable fiscal quarter:
Fiscal Quarter Ending: Total Funded Debt to EBITDA Ratio
---------------------- ---------------------------------
June 30, 2004 to September 29, 2004 4.50 to 1.0
September 30, 2004 to December 31, 2004 4.22 to 1.0
December 31, 2004 and any Fiscal Quarter
thereafter 3.94 to 1.0
(c) Fixed Charge Coverage. As of the end of each of its fiscal
quarters, commencing September 30, 2004 and each fiscal quarter ending
thereafter, the Company and its Subsidiaries shall maintain a ratio of (i)
EBITDA minus Non-Financed Capital Expenditures each for the most recently
ending four (4) consecutive fiscal quarters to (ii) Fixed Charges for the
most recently ended four (4) consecutive fiscal quarters, calculated as of
the last date of such fiscal quarter, of not less than the following:
27
Fiscal Quarter Ending: Fixed Charge Coverage Ratio
---------------------- ---------------------------
June 30, 2004 through December 31, 2006 1.29 to 1.00
March 31, 2007 and any Fiscal Quarter
thereafter 1.35 to 1.00
(d) Capital Expenditures. Company will not, nor will it permit any
of its Subsidiaries to, make any Capital Expenditures if, after giving
effect thereto, the aggregate amount of Capital Expenditures made by the
Company and its Subsidiaries during (i) 2004 exceeds $6,750,000, (ii) 2005
exceeds $6,750,000, (iii) 2006 exceeds $6,750,000, (iv) 2007 exceeds
$7,031,250 or (v) 2008 or any calendar year thereafter exceeds $7,312,500.
14.8 Limitation on Tax Consolidation.
The Company will not, nor will it permit any of its
Subsidiaries to, become a party to a consolidated or combined income tax return
with any Person other than the Company and its Subsidiaries.
14.9 Limitation on Liens.
The Company will not, nor will it permit any of its Subsidiaries to,
create or suffer to exist any Lien in respect of any property of any character
of the Company or any of their respective Subsidiaries (whether owned on the
date hereof or hereafter acquired) except for Permitted Liens.
14.10 Limitation on Transactions with Affiliates.
The Company will not, nor will it permit any of its Subsidiaries to,
engage in any transaction (including, without limitation, the purchase, sale or
exchange of any properties and assets or the rendering of any services or the
payment of compensation) with an Affiliate of the Company or any of its
respective Subsidiaries, other than transactions between a Wholly-Owned
Subsidiary of the Company and another Wholly-Owned Subsidiary of the Company (so
long as each such Wholly-Owned Subsidiary has executed and delivered a
Subsidiary Guarantee which is then in full force and effect), on terms less
favorable to such Company or any such Subsidiary in any material respect than
would be obtainable at the time in comparable transactions with a Person not
such an Affiliate; provided that nothing contained in this Section 14.10 shall
prohibit the payment of any amount permitted to be paid under Section 14.6 or
Section 14.18 or the payment to the Company by each Subsidiary of its "corporate
overhead allocation" of charitable contributions paid by the Company or any of
its Subsidiaries and permitted pursuant to Section 14.19.
14.11 Limitation on Investments.
The Company will not, nor will it permit any of its Subsidiaries to,
directly or indirectly, make or permit to exist any Investment in any other
Person except (without duplication) the following:
28
(a) contributions by the Company to the capital of any of its
Wholly-Owned Subsidiaries, or by any such Wholly-Owned Subsidiary to the
capital of any of its Wholly-Owned Subsidiaries in each case where such
Wholly-Owned Subsidiary has executed and delivered a Subsidiary Guarantee
(which is then in full force and effect) and is not a Foreign Subsidiary;
provided, however, that the Company's total investment, directly or
indirectly, in Integrity Publishers, Inc., a Delaware corporation
("Integrity Publishers"), INO Records, LLC, a Tennessee limited liability
company ("INO Records") or Enlight, whether in the form of equity, loans,
advances or otherwise, shall not exceed $10,000,000 with respect to
Integrity Publishers, $4,000,000 with respect to INO Records and $250,000
with respect to Enlight;
(b) in the ordinary course of business, Investments by the Company
in any Subsidiary or by any Subsidiary in the Company, by way of
intercompany loans, advances or guaranties, all to the extent permitted by
Section 14.5(i);
(c) Permitted Guaranties;
(d) Cash Equivalent Investments;
(e) bank deposits in the ordinary course of business;
(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) advances by the Company or any Subsidiary to any recording
artist, songwriter, producer, arranger, record label, book author,
contract writer or distributor in the ordinary course of business;
(h) loans by the Company to its stockholders which shall not at
any time exceed $350,000 made to such stockholders to permit such
stockholders to pay income taxes resulting from the Merger;
(i) Loans to any Integrity International Subsidiary not to exceed
$275,000 in the aggregate outstanding at any time that are appropriately
reflected on the Company's financial records;
(j) Permitted Acquisitions;
(k) Investments to consummate acquisitions permitted by Section
14.13;
(l) Investments listed on Exhibit 14.11; and
(m) Investments in joint ventures in substantially similar lines
of business as the Company made after the Closing Date not to exceed
$250,000 in the aggregate;
provided that (x) any Investment which when made complies with the
requirements of the definition of the term "Cash Equivalent Investment" may
continue to be held
29
notwithstanding that such Investment if made thereafter would not comply with
such requirements; (y) no Investment otherwise permitted by clause (b), (c), (g)
or (m) shall be permitted to be made if, immediately before or after giving
effect thereto, any Event of Default exists.
14.12 Limitation on Issuance of Shares of Subsidiaries.
The Company will not permit any of its Subsidiaries to (a) issue,
sell or otherwise dispose of any Shares (or any securities convertible into or
exercisable or exchangeable for Shares) of such Subsidiary except to the Company
or to a Wholly-Owned Subsidiary of the Company (which Wholly-Owned Subsidiary
has executed and delivered a Subsidiary Guarantee which is then in full force
and effect) or (b) sell, transfer or otherwise dispose of any Shares (or any
securities convertible into or exercisable or exchangeable for Shares) of any
other Subsidiary of the Company except to the Company or to a Wholly-Owned
Subsidiary of the Company (which Wholly-Owned Subsidiary has executed and
delivered a Subsidiary Guarantee which is then in full force and effect). The
Company will not, in any event, permit any Subsidiary of such Company to have
outstanding any Preferred Shares.
14.13 Limitation on Company's Consolidation, Merger and Purchases.
The Company will not, and will not permit any Subsidiary to,
consummate any merger or consolidation, or purchase or otherwise acquire all or
substantially all of the assets or any stock of any class of, or any partnership
or joint venture interest in, any other Person, provided that (i) any
Wholly-Owned Subsidiary of the Company may be merged into the Company or into
any other Wholly-Owned Subsidiary of the Company (which Wholly-Owned Subsidiary
has executed and delivered a Subsidiary Guarantee which is then in full force
and effect), if (a) in the case of a merger to which the Company is a party, the
Company is the surviving Person from such merger and is Solvent (both at the
time of and immediately after giving effect thereto), (b) the Company or the
surviving Wholly-Owned Subsidiary of the Company, as the case may be, shall have
delivered to each holder of a Security such opinions, confirmations and other
agreements and instruments as the Required Holders of each class of Securities
shall have reasonably requested and (c) both at the time of and immediately
after giving effect to such transaction, no Default or Event of Default shall
have occurred and be continuing, (ii) any existing Wholly-Owned Subsidiary
(which Wholly-Owned Subsidiary has executed and delivered a Subsidiary Guarantee
which is then in full force and effect) may purchase or otherwise acquire the
assets or stock of any other existing Wholly-Owned Subsidiary and (iii) the
Company or any Subsidiary may consummate a Permitted Acquisition. No transaction
permitted by this Section 14.13 shall have the effect of releasing the Company
or any other party to any of the Operative Documents from any liability or
obligation under any of the Operative Documents.
14.14 Limitation on Disposition of Property.
The Company will not, nor will it permit any of its Subsidiaries to,
directly or indirectly, sell, lease or otherwise dispose of any of their
respective properties and assets (or any right, title or interest therein),
whether real, personal or mixed, tangible or intangible, including, without
limitation, any Shares, securities or Indebtedness of any Subsidiary of the
Company,
30
except for, without duplication: (a) sales of inventory in the ordinary course
of business, (b) transfers of properties and assets from any Wholly-Owned
Subsidiary of the Company to any other Wholly-Owned Subsidiary of the Company
(which Wholly-Owned Subsidiary has executed and delivered a Subsidiary Guarantee
which is then in full force and effect), and (c) sales and disposition of assets
permitted pursuant to Section 9.4 of the Credit Agreement (as in effect as of
the Closing Date).
14.15 Modification of Certain Documents, Agreements and Instruments,
Fiscal Year.
The Company will not, and will not permit any of its Subsidiaries
to:
(a) file after the Closing any resolution of its board of
directors (or other governing body) with the Secretary of State of the
jurisdiction of its organization to establish or create a series of
Preferred Shares or a separate class of equity securities;
(b) have a fiscal year which ends on any date other than on or
about December 31;
(c) amend, modify, supplement or waive any term, condition or
provision of its Organizational Documents or any of the agreements,
documents or instruments referred to in Section 4.3 including (other than
the Credit Documents as to which the following Section 14.15(d) applies),
if the effect thereof is, or could reasonably be expected to be, to impose
restrictions or obligations upon the Company or any of its Subsidiaries
that are more restrictive in any material respect than those set forth in
its Organizational Documents or such other agreements, documents and
instruments as in effect on the Closing Date or if the effect thereof is,
or could reasonably be expected to be, adverse in any material respect to
the interests of any holder of any of the Securities; or
(d) amend, supplement, modify or waive any term of the Credit
Documents if the cumulative effect thereof is to (a) increase the
aggregate outstanding principal amount of the Indebtedness thereunder to
an amount in excess of that permitted under Section 14.5(b), (b) increase
the interest rate with respect to the Senior Indebtedness by more than
three hundred (300) basis points, except in connection with (i) the
imposition of a default rate of interest in accordance with the terms of
the Credit Documents or (ii) the imposition of market interest rates in
respect of any refinancing permitted pursuant to the terms of the
Subordination Agreement, (c) add restrictions on the ability of the
Company to repay the Indebtedness hereunder or other obligations under the
Securities in addition to those set forth in the Credit Documents or the
Subordination Agreement in effect on the date hereof or (d) shorten the
amortization of any portion of the Senior Indebtedness (as set forth in
the Credit Documents in effect on the date hereof).
14.16 Unconditional Purchase Obligations.
The Company shall not, nor shall it 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
31
materials, supplies or other property or services other than advances to artists
made by the Company and its Subsidiaries in the ordinary course of business.
14.17 Merger.
The Company and the Target will consummate the Merger on the Closing
Date. In connection with the Merger, the Target shall (a) execute and deliver to
the Purchasers an assumption agreement, in form and substance reasonably
satisfactory to the Purchasers (the "Assumption Agreement"), pursuant to which
the Target assumes all obligations of the Company under the Operative Documents
and (b) deliver to the Purchasers an opinion in form and substance reasonably
satisfactory to the Purchasers with respect to the consummation of the Merger
and the enforceability of the Assumption Agreement.
14.18 Compensation.
The Company shall not pay, or commit or agree to pay, (i) salary to
Xxxxxxx in any fiscal year of the Company in an aggregate amount which exceeds
the sum of (a) one hundred and five percent (105%) of the salary paid to Xxxxxxx
in the immediately prior fiscal year of the Company plus (b) the then Additional
Salary Amount approved by the Company's executive compensation committee, (ii)
any bonuses to Xxxxxxx that (a) are not approved by the Company's executive
compensation committee or (b) are in excess of the applicable Permitted Bonuses
Amount or (iii) any deferred compensation to Xxxxxxx in an aggregate amount
which exceeds the amount of deferred compensation approved by the Company's
executive compensation committee.
14.19 Charitable Contributions.
The Company shall not pay in any fiscal year, or commit or agree to
pay in any fiscal year, charitable contributions other than (i) charitable
contributions in an aggregate amount not to exceed (a) $150,000 plus (b) the
Permitted Charitable Contribution Amount and (ii) charitable contributions
permitted under Section 14.14.
14.20 Warrants.
The Company, after giving effect to the Merger, shall have
authorized the issue and sale of its warrants (herein, together with any
warrants issued in exchange therefor or replacement thereof, called the
"Warrants") evidencing rights to purchase shares of Common Stock representing in
the aggregate 7.0% of the fully diluted capital stock of the Company on the
Closing Date. The Warrants shall be immediately exercisable for nominal
consideration, shall expire on July 8, 2012 and shall be substantially in the
form of Exhibit 1(c) attached hereto.
14.21 Integrity Music, Inc.
The Company shall not permit Integrity Music, Inc. to conduct any
business operations or own any assets or incur any liabilities.
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14.22 Further Assurances.
(a) From time to time hereafter, the Company will execute and
deliver, or will cause to be executed and delivered, such additional
agreements, documents and instruments and will take all such other actions
as any holder or holders of the Notes may reasonably request for the
purpose of implementing or effectuating the provisions of the Operative
Documents.
(b) Without limiting the generality of the foregoing, in the event
that the Company at any time or from time to time shall organize or
acquire any direct or indirect Subsidiary, then and in each such case the
Company will (i) promptly (but in any event not later than 20 days prior
to consummating any such transaction) notify each holder of the Notes
(which notice shall become irrevocable five (5) days prior to the date
contained in such notice unless revoked prior to such date) and (ii) not
later than the date upon which such transaction is consummated cause such
Subsidiary to execute and deliver to each holder of any Notes a Subsidiary
Guarantee.
15. Reserved.
16. Definitions.
16.1 Definitions of Capitalized Terms.
The terms defined in this Section 16.1, whenever used in this
Agreement, shall, unless the context otherwise requires, have the following
respective meanings:
"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 Board Expense Amount" shall mean an amount equal to the
difference of (a) $20,000 minus (b) the amount by which the aggregate amount of
fees and expenses paid to outside directors of the Company since the Closing
Date exceeds those fees and expenses permitted to be paid pursuant to clauses
(i) and (ii) of Section 14.6(b) since the Closing Date.
"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 Xxxxxxx since the Closing Date exceeds that amount permitted to
be paid pursuant to clause (i)(a) of Section 14.18 since the Closing Date.
"Adjusted EBITDA" shall mean, for any fiscal year, (a) the sum of:
(i) EBITDA; for such fiscal year, plus (ii) charitable contributions in excess
of $150,000 permitted under Section 14.19 and paid during such fiscal year, plus
(iii) bonuses to Xxxxxxx permitted under Section 14.18 and paid during such
fiscal year.
"Affiliate" of any Person shall mean any other Person which,
directly or indirectly, through one or more intermediaries, controls or is
controlled by or is under common control with such first-mentioned Person;
provided, that in no event shall any Purchaser or any other institutional holder
of Securities be deemed to be an Affiliate of the Company or any of its
33
Subsidiaries. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of Voting Stock or
other Shares or by contract or otherwise.
"Applicable Premium" shall have the meaning specified in Section
9.1.
"Asset Disposition" shall mean the sale, lease, assignment or other
transfer for value (each a "Disposition") by the Company or any Subsidiary to
any Person (other than the Company or any Wholly-Owned Subsidiary which
Wholly-Owned Subsidiary has executed and delivered a Subsidiary Guarantee which
is then in full force and effect)) of any asset or right of the Company or any
Subsidiary (including, the loss, destruction or damage of any thereof or any
actual or threatened (in writing to the Company 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.
"Assumption Agreement" shall have the meaning specified in Section
14.17.
"Business" shall have the meaning specified in Section 5.4.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day which shall be in Cleveland, Ohio, a legal holiday or a day on which
banking institutions therein are authorized by law to close.
"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 the Company,
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 the proceeds of asset sales.
"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
34
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.
"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 a Bank or its holding company)
rated at least A-2 by Standard & Poor's Ratings Group or P-2 by Xxxxx'x
Investors Service, Inc., (c) any certificate of deposit (or time deposits
represented by such certificates of deposit) or banker's acceptance, maturing
not more than one year after such time, or overnight federal funds transactions
that are issued or sold by any Bank (as defined in the Credit Agreement) 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 $100,000,000 and (d) any repurchase agreement entered
into with any Bank (as defined in the Credit Agreement) (or other commercial
banking institution of the stature 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) 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 such Bank (or other commercial banking institution)
thereunder.
"Celebration" shall mean Celebration Hymnal, LLP, a Tennessee
limited liability partnership.
"Change of Control" shall mean the occurrence of any of the
following events: (a) Xxxxxxx shall cease to own and control, directly or
indirectly, more than 50% of the outstanding Capital Securities of the Company,
(b) Xxxxxxx shall sell more than the then applicable Permitted Sales Percentage
of the outstanding Capital Securities of the Company (other than in connection
with a repurchase permitted under Section 14.6(d)); (c) the Company shall cease
to, directly or indirectly, own and control 100% of each class of the
outstanding Capital Securities of each Subsidiary existing on the Closing Date
or of each Wholly-Owned Subsidiary acquired thereafter (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 shall be 65%); or (d) the granting by Xxxxxxx,
directly or indirectly, of a security interest in his ownership interest in the
Company, which could result in a change in the identity of the individuals or
entities in control of the Company. 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 the Company by contract or voting
of securities or ownership interests.
"Closing" and "Closing Date" shall have the respective meanings
specified in Section 3.
35
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Xxxxxxx" shall have the meaning specified in Section 4.3(a).
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency from time to time administering the Securities Act
and/or the Exchange Act.
"Common Stock" shall mean the Common Stock, $.01 par value, of the
Company as constituted on the Closing Date and any Shares into which such Common
Stock shall have been changed or any Shares resulting from any reclassification
of such Common Stock.
"Company" shall have the meaning specified at the beginning of this
Agreement and shall include the Target after the consummation of the Merger.
"Competitor" shall mean any Person whose primary business or a
material business line is to engage in the Business, including, without
limitation, those entities listed on Exhibit 16; provided that in no event shall
any bank, insurance company or other institutional investor be deemed to be a
competitor of the Company or its Subsidiaries.
"Confidential Information" shall have the meaning specified in
Section 8.
"Consolidated Net Income" shall mean, with respect to the Company
and its Subsidiaries for any period, the net income (or loss) of the Company and
its Subsidiaries for such period, excluding any gains (or losses) from Asset
Sales, any extraordinary gains (or losses) and any gains (or losses) from
discontinued operations.
"Contingent Liability" and "Contingent Liabilities" shall mean,
respectively, each obligation and liability of the Company and all such
obligations and liabilities of the Company incurred pursuant to any agreement,
undertaking or arrangement by which the Company: (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
36
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.
"Credit Agreement" shall mean the Amended and Restated Credit
Agreement, dated as of July 8, 2004, among the Company, various Subsidiaries of
the Company, various financial institutions a party thereto and LaSalle Bank
National Association, as agent, as the same may be amended, restated, refunded,
replaced, supplemented or otherwise modified from time to time as permitted
under the Subordination Agreement and Section 14.5(b) (unless the applicable
reference to Credit Agreement contained herein expressly indicates otherwise).
"Credit Documents" shall mean the Credit Agreement and the other
agreements, documents and instruments related thereto, including, without
limitation, the Loan Documents (as defined in the Credit Agreement).
"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 Liabilities 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 the Company 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 the Company but which, upon the insolvency or bankruptcy of the
Company, would be characterized as the indebtedness of the Company (without
regard to accounting treatment). Notwithstanding the foregoing, Debt shall not
include trade payables and accrued expenses incurred by the Company in
accordance with customary practices and in the ordinary course of business of
the Company.
"Default" shall mean any condition or event which constitutes or,
after notice or lapse of time or both, would constitute an Event of Default.
"Deferred Interest" shall have the meaning specified in Section
1(d).
"Depreciation" shall mean the total amounts added to depreciation,
amortization, obsolescence, valuation and other proper reserves, as reflected on
the Company's financial statements and determined in accordance with GAAP.
"Disclosure Documents" shall have the meaning specified in Section
5.4.
37
"Domestic Subsidiary" means a Subsidiary organized under the laws of
the United States or any political subdivision or instrumentality thereof.
"EBITDA" shall mean, for any period, (a) the sum for such period of:
(i) Net Income of the Company 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 Company in connection with the
transactions contemplated by the Merger Agreement that are financed under the
Loans (as defined in the Credit Agreement) or the Notes, plus (xi) up to
$750,000 in management bonus compensation incurred by the Company in connection
with the transactions contemplated by the terms of the Merger Agreement and
financed with the proceeds of a Revolving Loan (as defined in the Credit
Agreement), in each case as determined in accordance with GAAP.
"EBITDA Excess Amount" shall mean, for any fiscal year, the amount,
if any, by which Adjusted EBITDA exceeds the EBITDA Threshold.
"EBITDA Threshold" for any fiscal year of the Company and its
Subsidiaries is an amount equal to $9,762,000 for the fiscal year ending
December 31, 2004, $9,987,000 for the fiscal year ending December 31, 2005,
$10,417,000 for the fiscal year ending December 31, 2006, $10,702,000 for the
fiscal year ending December 31, 2007, $11,207,000 for the fiscal year ending
December 31, 2008, $11,326,000 for the fiscal year ending December 31, 2009,
$11,446,000 for the fiscal year ending December 31, 2010 and $11,568,000 for the
fiscal year ending December 31, 2011.
"Enlight" shall mean Enlight, Inc., a Tennessee corporation.
"Environmental Laws" shall mean any law, statute, rule, regulation
or other governmental standard or requirement relating or pertaining to (a) the
generation, manufacture, management; handling, use, sale, transportation,
treatment, storage, disposal, delivery, discharge, release or emission of any
waste, pollutant or toxic, hazardous or other substance (including, without
limitation, petroleum and petroleum-derived materials), or (b) any other act,
omission or condition affecting or involving pollution or contamination of the
environment.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations and rulings thereunder.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) that, together with the Company, would be treated as a single
employer under Section 4001(b) of ERISA, or that is a member of a group of which
the Company is a member and that is a controlled group within the meaning of
Section 4971(e)(2)(B) of the Code.
"Event of Default" shall have the meaning specified in Section 17.1.
38
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect from time
to time.
"Fixed Charges" shall mean, at the time of any determination, the
sum of the following items (without duplication) for the Company during the
relevant four consecutive fiscal quarter periods:
a. The amount of scheduled principal payments paid or required to
be paid under the Credit 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 the
Credit Agreement) during such period, plus
c. The amount of cash interest and other finance charges of the
Company (on a consolidated basis) required to be charged as an expense
under GAAP during the immediately preceding four (4) consecutive fiscal
quarters during such period, plus
d. The dividends and repurchases permitted under Sections 14.6(d)
and 14.6(f) hereof paid or accrued for, without duplication (other than
dividends and distributions permitted under Section 14.6(d) funded with
the proceeds of Revolving Loans (as defined in the Credit Agreement)),
plus
e. cash taxes, plus
f. cash charitable contributions.
For purposes of this calculation, interest includes interest accrued
under Capital Leases, and principal includes principal obligations under Capital
Leases.
"Foreign Subsidiary" shall mean a Subsidiary which is not organized
under the laws of one of the states in the United States or the District of
Columbia.
"Funded Debt" shall mean, at the time of any determination, the
aggregate principal amount of indebtedness of Company and its Subsidiaries on a
consolidated basis for the following (without duplication): (a) borrowed money
(including the indebtedness under the Credit Documents, but not including trade
indebtedness permitted hereunder); (b) Capital Leases; (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; (d) reimbursement obligations under letters
of credit; (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 Company in good faith to the extent
that the aggregate amount of such disputed obligations does not at any time
exceed $500,000; (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 the Company.
39
"GAAP" shall mean generally accepted accounting principles as in
effect in the United States from time to time, consistently applied.
"Guarantee" of any Person shall mean, at any date, any obligation of
such Person at such date guaranteeing, directly or indirectly, any Indebtedness,
liability or other obligation of any other Person in any manner, but in any
event including all endorsements (other than for collection or deposit in the
ordinary course of business), all discounts with recourse and all obligations
incurred through an agreement, contingent or otherwise (a) to purchase the
obligations of any other Person or any security therefor or to advance or supply
funds for the payment or purchase of such obligations, or (b) to purchase, sell
or lease (as lessee or lessor) property, products, materials or supplies or to
purchase or sell transportation or services, primarily for the purpose of
enabling the obligor to make payment of such obligations or to assure the owner
of such obligations against loss, regardless of the delivery or non-delivery of
the property, products, materials or supplies or the furnishing or nonfurnishing
of the transportation or services, or (c) to provide funds for the payment of,
or obligating such Person to make, any loan, advance, capital contribution or
other investment in the obligor for the purpose of assuring a minimum equity,
asset base, working capital or other balance sheet condition for any date or to
provide funds for the payment of any obligation, dividend or stock liquidation
payment, or otherwise to supply funds to or in any manner invest in the obligor.
The amount of any Guarantee shall be equal to the amount of all Indebtedness,
liabilities and other obligations directly or indirectly guaranteed thereby.
"Hazardous Material" means any and all pollutants, toxic or
hazardous wastes or any other substances that might pose a hazard to health or
safety, the removal of which may be required or the generation, manufacture,
refining, production, processing, treatment, storage, handling, transportation,
transfer, use, disposal, release, discharge, spillage, seepage, or filtration of
which is or shall be restricted, prohibited or penalized by any Environmental
Law or any other applicable law (including, without limitation, asbestos, urea
formaldehyde foam insulation and polychlorinated biphenyls).
"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 Costs" and "Indemnitee" shall have the respective
meanings specified in Section 22.
"Integrity International Subsidiaries" shall mean Integrity Music
Europe, Integrity Media Asia, Integrity Media Australia and Sarepta.
"Integrity Media Asia" shall mean Integrity Media Asia Pte. Ltd., a
company organized under the laws of Singapore.
40
"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 Stockholder Agreement" shall mean that certain Executive
Shareholders Agreement, dated as of July 8, 2004, by and among Target, Xxxxxxx
and the holders of capital stock of the Target from time to time a party
thereto.
"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 LaSalle Bank National Association 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.
"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).
"Licenses" shall mean certificates of public convenience and
necessity, franchises, licenses and other permits and authorizations from
governmental authorities.
"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.
"Material Adverse Change" shall mean a material adverse change in or
effect upon (a) the financial condition, operations, assets, business or
properties of the Company and its Subsidiaries taken as a whole, (b) the
legality, validity or enforceability of this Agreement, the Securities or any of
the other Operative Documents; (c) the rights and remedies of any holder of
Securities with respect thereto or (d) the ability of the Company or any of its
Subsidiaries to perform their obligations under any of the Operative Documents
and/or to comply with any of the terms thereof applicable to it.
"Material Contract" of the Company shall includes the following
agreements to which the Company 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.
"Merger" shall mean the merger of the Company with and into the
Target with the Target being the surviving entity.
41
"Multiemployer Plan" shall mean any Plan that is a "multiemployer
plan" as defined in Section 4001(a)(3) of ERISA.
"Net Income" shall mean, with respect to the Company and its
Subsidiaries for any period, the consolidated net income (or loss) of the
Company 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 Company 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 Company and its Subsidiaries as determined by GAAP consistently applied.
"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 (as defined in the Credit Agreement), and (ii) other Debt permitted by the
terms of Section 14.5.
"Notes" shall have the meaning specified in Section 1.
"Officer's Certificate" shall mean a certificate signed on behalf of
the Company by the Chairman, the President, the Chief Financial Officer, the
Treasurer, or one of the Vice Presidents of the Company.
"Operating Leases" shall mean means any lease of (or other agreement
conveying the right to use) any real or personal property by the Company or any
Subsidiary, as lessee, other than any Capital Lease.
"Operative Documents" shall mean this Agreement, the Securities, the
Subsidiary Guarantees, the Stockholders' Agreement, the Merger Agreement, the
Assumption Agreement and each of the other agreements, documents and instruments
executed in connection herewith and therewith, each as it may from time to time
be amended, modified or supplemented.
"Organizational Documents" of any Person shall mean such Person's
charter and by-laws, partnership agreement, operating agreement, members
agreement, trust agreement, as applicable, and/or any other similar agreement,
document or installment.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred
to and defined in ERISA or any successor thereto.
"Permitted Acquisitions" shall mean an Acquisition by the Company 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) the Company, or a Person
which shall become a Guarantor upon consummation of such Acquisition and shall
be a direct or indirect domestic
42
Wholly-Owned Subsidiary of the Company, is the Acquiring Company, (ii) if the
Acquisition is structured as a merger, and Company is the Surviving Company,
(iii) Target Company is in a substantially similar line of business as the
Company, (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 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) a joinder agreement satisfactory to
the Purchasers in which such Target Company or Surviving Company becomes the
Company 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 the Company delivers to Bank a certificate on behalf of the Company
certifying that such Acquisition is a Permitted Acquisition, (ix) such
Acquisition is friendly, rather than hostile, in nature, (x) the Company has, no
less than thirty (30) days prior to making such Acquisition, prepared and
furnished to the Purchasers 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 the
Purchasers that the Target Company, all Surviving Companies, and the Company, as
the case may be, will be solvent upon consummation of such Acquisitions and upon
the passage of time thereafter, and 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) the Company has, no less than thirty (30) days
prior to making such Acquisition, prepared and furnished to the Purchasers a
Borrowing Base Certificate (as defined in the Credit Agreement as of the Closing
Date) demonstrating that, upon consummation of such Acquisition, Loan
Availability shall be not less than $2,000,000, (xii) Company 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 and (xiii) after giving effect to such
Acquisition, the Company has not consummated more than three (3) Permitted
Acquisitions after the Closing Date. The proforma financial statements referred
to in clause (x) shall contain consolidated and consolidating balance sheets,
income statements, statements of cash flows and such other reports and
disclosures of Company 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 Purchasers may in their reasonable
credit judgment may require.
43
"Permitted Bonuses Amount" shall mean, with respect to any current
fiscal year of the Company and its Subsidiaries, an amount equal to (i) the
EBITDA Excess Amount, if any, for the immediately preceding fiscal year minus
(ii) that portion of the Permitted Charitable Contributions Amount, if any, paid
in charitable contributions in such current fiscal year.
"Permitted Charitable Contributions Amount" shall mean, with respect
to any current fiscal year of the Company and its Subsidiaries, an amount equal
to the lesser of (i) $100,000 or (ii) the difference of (a) the EBITDA Excess
Amount, if any, for the immediately preceding fiscal year minus (b) that portion
of the Permitted Bonuses Amount, if any, paid in bonuses in such current fiscal
year.
"Permitted Guaranties" shall mean (a) guarantees in favor of the
Purchasers, (b) guarantees of the Senior Indebtedness, (c) endorsements of
checks, drafts and negotiable instructions for collection in the ordinary course
of business, (d) guarantees listed on Exhibit 5.9, (e) guarantees of the Debt if
that primary Debt is permitted under Section 14.5 (other than pursuant to
Section 14.5(m)).
"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 the Company or materially impair the use thereof in the
operation of Company'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 Closing 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 the Company or any of its Subsidiaries; (e) subject to the
limitation set forth in Section 14.5(f), 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) subject to the limitation set forth in Section 14.5(f), 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 Senior Lender under the Credit
Documents.
44
"Permitted Sales Percentage" shall mean, at the time of any
determination, a percentage equal to (a) seven percent (7%) minus (b) sum of the
percentages of Capital Securities of the Company sold by Xxxxxxx, determined as
of the date of each applicable sale, since the Closing Date (other than in
connection with a repurchase permitted under Section 14.6(d)).
"Person" shall mean an individual, a corporation, a limited
liability company, an association, a joint-stock company, a business trust or
other similar organization, a partnership, a joint venture, a trust, an
unincorporated organization or a government or any agency, instrumentality or
political subdivision thereof.
"Plan" means an "employee benefit plan" (as defined in Section 3(3)
of ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"Preferred Shares" as applied to any Person, shall mean Shares of
such Person which shall be entitled to preference or priority over any other
Shares of such Person in respect of either the payment of dividends or the
distribution of assets upon liquidation.
"Proprietary Rights" shall mean any patents, registered and common
law trademarks, service marks, trade names, copyrights, licenses and other
similar rights (including, without limitation, know-how, trade secrets and other
confidential information) and applications for each of the foregoing, if any.
"Redeemable" shall mean, with respect to any Shares of any Person,
each Share of such Person that is (a) redeemable, payable or required to be
purchased or otherwise retired or extinguished, or convertible into Debt of such
Person, (i) at a fixed or determinable date, whether by operation of any sinking
fund or otherwise, (ii) at the option of any Person other than such Person or
(iii) upon the occurrence of a condition not solely within the control of such
Person or (b) convertible into other Redeemable Shares.
"Refinanced Debt" shall have the meaning specified in Section 14.5.
"Refinancing Debt" shall have the meaning specified in Section 14.5.
"Registration Rights Agreement" shall have the meaning specified in
Section 4.3.
"Required Holders" as applied to describe the requisite holder or
holders of any class of the Securities, shall mean, at any date, the holder or
holders of 51% or more in interest of such class of Securities (which, for
purposes of the Warrant Shares, shall include only securities issued or issuable
upon exercise of the Warrants) at the time outstanding (excluding all Securities
at the time owned by the Company or any Affiliate of the Company).
"Restricted Payment" as applied to any Person shall mean:
45
(a) any dividend or other distribution, direct or indirect, on
account of any Shares of such Person now or hereafter outstanding
(including, without limitation, Preferred Shares) or any securities
convertible into or exercisable or exchangeable for such Shares, except
any such dividend or distribution payable to the Company and/or any
Wholly-Owned Subsidiary of the Company (which Wholly-Owned Subsidiary has
executed and delivered a Subsidiary Guarantee which is then in full force
and effect);
(b) any redemption, retirement, purchase or other acquisition,
direct or indirect, of any Shares of such Person now or hereafter
outstanding (including, without limitation, Preferred Shares) or any
securities convertible into or exercisable or exchangeable for such
Shares; and
(c) any payment of any compensation, management fee or similar
amount, direct or indirect, to any director of the Company, any of its
Subsidiaries or any other Affiliate of any such Person other than
compensation to officers or employees;
provided that, notwithstanding the foregoing, the term "Restricted Payment"
shall not include any dividend or other distribution paid on, or any redemption,
retirement, purchase or other acquisition of, directly or indirectly, any
Warrants and/or Warrant Shares.
"Sarepta" shall mean Sarepta Music (Pty) Ltd., a private company
organized and existing under the laws of the Republic of South Africa.
"Securities" shall have the meaning specified in Section 1.
"Securities Act" shall mean the Securities Act of 1933 as amended or
any successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
"Senior Indebtedness" shall have the meaning specified in the
Subordination Agreement.
"Shares" of any Person shall include any and all Shares of capital
stock, partnership interests, limited liability company interests, membership
interests, or other Shares, interests, participations or other equivalents
(however designated and of any class) in the capital of, or other ownership
interests in, such Person, and, as applied to the Company, includes the Common
Stock and the Warrants.
"Solvent" as applied to any Person at any date shall mean that on
and as of such date (a) the fair value of the property of such Person is greater
than the total amount of liabilities, including, without limitation, contingent
liabilities, of such Person, (b) the present fair salable value of the assets of
such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature and (d) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person's property would constitute an unreasonably small capital. The
amount of contingent liabilities on and as of any date shall be computed as the
amount that, in the light of all the facts
46
and circumstances existing on and as of such date, represents the amount that
can reasonably be expected to become an actual or matured liability. For
purposes of this definition, "Person" shall mean, where so required by the
context in which the term "Solvent" appears, such Person and its Subsidiaries
taken as a whole.
"Source" shall have the meaning specified in Section 27.
"Stockholders' Agreement" shall have the meaning specified in
Section 4.3.
"Subordination Agreement" shall have the meaning specified in
Section 4.3.
"Subsidiary" of any Person at any date shall mean (a) any other
Person a majority (by number of votes) of the Voting Stock of which is owned by
such first-mentioned Person and/or by one or more other Subsidiaries of such
first-mentioned Person, (b) any Person of which the first-mentioned Person or
any of its other Subsidiaries is a general partner and (c) any other Person with
respect to which such first-mentioned Person and/or any one or more other
Subsidiaries of such first-mentioned Person (i) is entitled to more than 50% of
such Person's profits or losses or more than 50% of such Person's assets on
liquidation or (ii) holds an equity interest in such Person of more than 50%.
Unless the context clearly required otherwise, the term "Subsidiary" refers to a
Subsidiary of the Company.
"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) the survivor of the merger of
an Acquiring Company with the Target Company in a Permitted Acquisition upon the
consummation thereof.
"Target" shall have the meaning specified at the beginning of this
Agreement.
"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.
"Total Funded Debt" shall mean all Funded Debt of the Company,
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 the Company or any Subsidiaries), (ii) Debt of the Company to
Subsidiaries and Debt of Subsidiaries to the Company or to other Subsidiaries,
and (iii) contingent obligations in respect of undrawn Letters of Credit (as
defined in the Credit Agreement).
"Transfer" shall mean, with respect to any Person, any transaction
in which such Person sells, conveys, transfers or leases (as lessor) any of its
property or assets, including, without limitation, the capital stock of any
Subsidiary of such Person.
47
"Voting Stock" when used with reference to any Person, shall mean
Shares (however designated) of such Person having ordinary voting power for the
election of a majority of the members of the board of directors (or other
governing board) of such Person, other than Shares having such power only by
reason of the happening of a contingency.
"Warrant Shares" shall have the meaning specified in the Warrants.
"Warrants" shall have the meaning specified in Section 1.
"Wholly-Owned Subsidiary" of any Person at any date shall mean any
Subsidiary of such Person at such date all of the outstanding Shares of which,
other than directors' qualifying Shares and the like, shall at the time be owned
by such Person and/or by one or more other Wholly-Owned Subsidiaries of such
Person and the accounts of which are consolidated with those of such Person in
accordance with GAAP.
"Withdrawal Liability" shall have the meaning given such term under
Part 1 of Subtitle E of Title IV of ERISA.
16.2 Other Definitions.
The terms defined in this Section 16.2, whenever used in this
Agreement, shall, unless the context otherwise requires, have the respective
meanings hereinafter specified.
"this Agreement" (and similar references to any of the other
Operative Documents) shall mean, and the words "herein" (and "therein"),
"hereof" (and "thereof"), "hereunder" (and "thereunder") and words of similar
import shall refer to, such instruments as they may from time to time be
amended, modified or supplemented.
"beneficial" ownership of any Shares or other securities by any
Person shall be determined in the manner set forth in Rule 13d-3 of the
Commission under the Exchange Act.
a "class" of Securities shall refer to the Notes, the Warrants or
the Warrant Shares, as the case may be, each of which is a separate class.
"corporation" shall include an association, joint stock company,
business trust or other similar organization.
16.3 Accounting Terms and Principles; Laws.
(a) All accounting terms used herein which are not expressly
defined in this Agreement shall have the respective meanings given to them
in accordance with GAAP; all computations made pursuant to this Agreement
shall be made in accordance with GAAP and all financial statements shall
be prepared in accordance with GAAP. If there shall occur any change in
accounting principles from GAAP as in effect on the Closing Date, then the
Company and the Required Holders of the Notes shall make adjustments to
such financial covenants as are determined in good faith to be appropriate
to reflect such changes so that the criteria for evaluating the financial
condition and operations of the
48
Company and its Subsidiaries shall be the same after such changes as if
such changes had not been made.
(b) All references herein to laws, statutes, rules, regulations
and/or to other governmental restrictions, standards and/or requirements
shall, unless the context clearly requires otherwise, be deemed to refer
to those promulgated, issued and/or enforced by any domestic or foreign
federal, state or local government, governmental agency, authority, court,
instrumentality or regulatory body, including, without limitation, those
of the United States of America or any state thereof or the District of
Columbia.
17. Remedies.
17.1 Events of Default Defined; Acceleration of Maturity.
If any one or more of the following events ("Events of Default")
shall occur (whatever the reason for such Event of Default and whether it shall
be voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body), that is to say:
(a) if default shall be made in the due and punctual payment of
all or any part of the principal of or any premium (if any) on, any Note
when and as the same shall become due and payable, whether at the stated
maturity thereof, by notice of or demand for prepayment, or otherwise;
(b) if default shall be made in the due and punctual payment of
any interest on any Note or any fee or other amount due under the Notes
when and as the same shall become due and payable and such default shall
have continued for a period of five days;
(c) if default shall be made in the performance or observance of
any covenant, agreement or condition contained in Sections 7(a), 7(b),
7(c), 7(d), 8(a), 8(b), 9.6, 14.2(b), 14.2(d), or 14.2(e), or Sections
14.3 to 14.17, inclusive or Section 14.19;
(d) if default shall be made in the performance or observance of
any other of the covenants, agreements or conditions contained in this
Agreement or any of the other Operative Documents and such default shall
have continued for a period of 30 days after the occurrence of such
default;
(e) if the Company or any Subsidiary of the Company shall make a
general assignment for the benefit of creditors, or shall generally not
pay its debts as they become due, or shall admit in writing its inability
to pay its debts as they become due, or shall file a voluntary petition in
bankruptcy, or shall be adjudicated bankrupt or insolvent, or shall file
any petition or answer seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief
under any present or future statute, law or regulation, or shall file any
answer admitting or not contesting the material allegations of a petition
filed against it in any such proceeding, or shall seek or consent to or
acquiesce in the appointment of any trustee, custodian, receiver,
liquidator or fiscal agent for it or for all or any substantial part of
its properties, or shall (or its directors or stockholders shall) take any
action looking to its dissolution or liquidation;
49
(f) if, within 60 days after the commencement of an action against
the Company or any Subsidiary of the Company seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or
similar relief under any present or future statute, law or regulation,
such action shall not have been dismissed or all orders or proceedings
thereunder affecting the operations or the business of the Company or any
Subsidiary of the Company stayed, or if the stay of any such order or
proceeding shall thereafter be set aside, or if, within 45 days after the
appointment without the consent or acquiescence of the Company or any
Subsidiary of the Company of any trustee, custodian, receiver, liquidator
or fiscal agent for the Company or any Subsidiary of the Company or for
all or any substantial part of their respective properties, such
appointment shall not have been vacated;
(g) if, under the provisions of any law for the relief or aid of
debtors, any court or governmental agency of competent jurisdiction shall
assume custody or control of the Company or of any Subsidiary of the
Company or of all or any substantial part of their respective properties
and such custody or control shall not be terminated or stayed within 30
days from the date of assumption of such custody or control;
(h) if the Company or any Subsidiary of the Company shall fail to
(i) make any payment due on any Indebtedness (other than the Notes and the
Indebtedness under the Credit Documents) or other obligation (including
any in respect of any performance bond, bid bond or lease or any Shares
upon the exercise by any Person of any put or call option or other similar
right of redemption or repurchase with regard to such Shares), if the
amount thereof outstanding exceeds $250,000 (or the equivalents thereof,
as of any date of determination, in any other currency), or (ii) perform,
observe or discharge any covenant, condition or obligation in any
agreement, document or instrument evidencing, securing or relating to such
Indebtedness or other obligation, if the effect of any such failure of the
character described in this clause (h) is to cause, or any other Person
shall have the right to cause, any payment in respect thereof in an amount
of $250,000, (or the equivalents thereof, as of any date of determination,
in any other currency), or more to become due and payable;
(i) if any default shall occur under the Credit Documents and as a
result of such default, the maturity of the Senior Indebtedness is
accelerated (or the Company or any Subsidiary is required to purchase or
redeem such Indebtedness in respect thereof) prior to its expressed
maturity;
(j) if any judgment, decree, levy, attachment, garnishment or
other process is entered, or any Lien is filed against any Obligor that
calls for payment or presents liability in excess of $300,000 ($600,000
with respect only to the claims of Xxxxxx Xxxxxx known and pending as of
the Closing 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 Purchasers and
appealed, (ii) vacated, or (iii) discharged;
(k) if any representation or warranty made by or on behalf of the
Company or any Subsidiary of the Company in this Agreement or in any of
the other Operative
50
Documents or in any agreement, document or instrument delivered under or
pursuant to any provision hereof or thereof shall prove to have been false
or incorrect in any material respect on the date as of which made;
(l) if, at any time, this Agreement or any of the other Operative
Documents shall for any reason (other than the scheduled termination
thereof in accordance with its terms) expire, fail to be in full force and
effect or be disaffirmed, repudiated, canceled, terminated or declared to
be unenforceable, null and void; or
(m) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is sought
or granted under Section 412 of the Code, (ii) a notice of intent to
terminate any Plan shall have been or is reasonably expected to be filed
with the PBGC or the PBGC shall have instituted proceedings under Section
4042 of ERISA to terminate or appoint a trustee to administer any Plan or
the PBGC shall, have notified the Company or any ERISA Affiliate that a
Plan may become a subject of any such proceedings, (iii) the aggregate
"amount of unfunded benefit liabilities" (within the meaning of Section
4001(a)(18) of ERISA) under all Plans, determined in accordance with Title
IV of ERISA, shall reasonably be expected to result in a Material Adverse
Change, (iv) the Company or any ERISA Affiliate shall have incurred or is
reasonably expected to incur any liability pursuant to Title I of ERISA
which is past due or pursuant to Title IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans, (v)
the Company or any ERISA Affiliate withdraws from any Multiemployer Plan,
or (vi) the Company or any Subsidiary of the Company establishes or amends
any employee welfare benefit plan that provides post-employment welfare
benefits in a manner that would increase the liability of the Company or
any Subsidiary of the Company thereunder; and any such event or events
described in clauses (i) through (vi) above, either individually or
together with any other such event or events, has resulted in, or could
reasonably be expected to result in, a liability in excess of $250,000;
then, upon the occurrence and during the continuance of any Event of Default
(other than one of the character described in clauses (e), (f) or (g) of this
Section 17.1) and at the option of the Required Holders of the Notes at the time
outstanding (excluding any Notes at the time owned by Company or any Affiliate
of the Company), exercised by written notice to the Company, the principal of
all Notes shall forthwith become due and payable (including all Deferred
Interest), together with interest accrued thereon, without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived,
and the Company shall forthwith upon any such acceleration pay to the holder or
holders of all the Notes then outstanding (i) the entire principal of and
interest accrued on the Notes and (ii) in addition, to the extent permitted by
applicable law, an amount equal to the Applicable Premium, as liquidated damages
and not as a penalty; provided, that, in the case of an Event of Default of the
character described in clauses (e), (f) or (g) of this Section 17.1, the
principal of all Notes shall forthwith become due and payable (including all
Deferred Interest), together with interest accrued thereon (including any
interest accruing after the commencement of any action or proceeding under the
federal bankruptcy laws, as now or hereafter constituted, or any other
applicable domestic or foreign federal or state bankruptcy, insolvency or other
similar law, and any other interest that would
51
have accrued but for the commencement of such proceeding, whether or not any
such interest is allowed as an enforceable claim in such proceeding), without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived, and the Company shall forthwith upon any such
acceleration pay to the holder or holders of all the Notes then outstanding (i)
the entire principal of and interest accrued on the Notes, and (ii) in addition,
to the extent permitted by applicable law, an amount equal to the Applicable
Premium, as liquidated damages and not as a penalty.
Notwithstanding the foregoing provisions, at any time after the
occurrence of any Event of Default and of notice thereof, if any, by any holder
or holders of Notes and before any judgment, decree or order for payment of the
money due has been obtained by or on behalf of any holder or holders of the
Notes, the Required Holders of the Notes by written notice to the Company, may
waive, rescind and annul such Event of Default and/or notice of such Event of
Default and the consequences thereof with respect to all of the Notes (including
any Notes which were accelerated pursuant to the first proviso in the preceding
paragraph by any holder or holders on account of an Event of Default of the
character described in clause (a) or (b) of this Section 17.1) if:
(1) the Company has paid a sum sufficient to pay
(A) all overdue interest on all Notes;
(B) the principal of (and premium, if any, on and all
Deferred Interest on) any Notes which have become due otherwise than
by such Event of Default or notice thereof; and
(C) interest on such overdue principal (and premium, if any)
and, to the extent that payment of such interest is lawful, interest
upon overdue interest, all at the rate for overdue amounts specified
in such Notes; and
(2) all Defaults and Events of Default, other than the non-payment
of amounts which have become due solely by such acceleration, have been
cured or waived as provided in Section 20.
No such waiver, rescission or annulment shall affect any subsequent default or
impair any right consequent thereon.
17.2 Suits for Enforcement, etc.
In case any one or more of the Events of Default specified in
Section 17.1 shall have occurred and be continuing, and irrespective of whether
any Notes have become or have been declared immediately due and payable under
Section 17.1, the holder of any Security may proceed to protect and enforce its
rights either by suit in equity or by action at law, or both. The Company
stipulates that the remedies at law of the holder or holders of the Securities
in the event of any Event of Default by the Company in the performance of or
compliance with any covenant or agreement in this Agreement or any of the other
Operative Documents are not and will not be adequate and that, to the fullest
extent permitted by law, such terms may be specifically enforced by a decree for
the specific performance thereof, whether by an injunction against a violation
52
thereof or otherwise. Without limiting the generality of the foregoing (and
without derogating from any provision contained in this Agreement or any of the
other Operative Documents), upon the occurrence and during the continuance of an
Event of Default, the Required Holders of the Notes at the time outstanding
shall, as a group, have the right to apply for and have a receiver appointed for
the Company and its Subsidiaries, or any one or more of them, by a court of
competent jurisdiction in any action taken by any such holders to enforce their
respective rights and remedies hereunder and under the other Operative Documents
in order to manage, protect and preserve the assets of the Company and its
Subsidiaries and continue the operation of the business of the Company and its
Subsidiaries, or to sell or dispose of the assets of the Company and its
Subsidiaries, and to collect all revenues and profits thereof and apply the same
to the payment of all expenses and other charges of such receivership, including
the compensation of the receiver, and the Company hereby consents to such
appointment without regard to the presence or absence of any misfeasance or
malfeasance or any other fact or circumstance which otherwise would provide a
defense to such appointment.
17.3 No Election of Remedies.
No remedy conferred in this Agreement or in any of the other
Operative Documents upon the holder of any Security is intended to be exclusive
of any other remedy, and each and every such remedy shall be cumulative and
shall be in addition to every other remedy given hereunder or thereunder or now
or hereafter existing at law or in equity or by statute or otherwise.
17.4 Remedies Not Waived.
No course of dealing between the Company and any of its
Subsidiaries, on the one hand, and any holder of any Security, on the other
hand, and no delay by any such holder in exercising any rights hereunder or
under any of the other Operative Documents shall operate as a waiver of any
rights of any such holder.
17.5 Application of Payments.
In case any one or more of the Events of Default specified in
Section 17.1 shall have occurred and be continuing, all amounts to be applied to
the prepayment or payment of any Notes shall be applied, after the payment of
all related costs and expenses incurred by the holders of the Notes (including,
without limitation, compensation to any and all trustees, liquidators, receivers
or similar officials and fees, expenses and disbursements of counsel) in such
order of priority as is determined by the Required Holders of the Notes entitled
to such amounts.
18. Registration, Transfer and Exchange of Securities; Limitations on
Transfers.
Securities issued hereunder shall be issued in registered form. The
Company shall keep at its principal executive office (which is now located at
the address set forth on Exhibit 5.2), registers in which the Company shall
provide for the registration and transfer of the Securities. The name and
address of each holder of the Securities shall be registered in such registers.
The Company shall give to any institutional holder of any Security promptly (but
in any event within 10 days) following request therefor, a complete and correct
copy of the names and addresses of all registered holders of the Securities and
the amount and kind of Securities
53
held by each. Whenever any Security or Securities shall be surrendered for
transfer or exchange, the Company(ies) that issued such Security at its (or
their) expense will execute and deliver in exchange therefor a new Security or
Securities (in such denominations and registered in such name or names as may be
requested by the holder of the surrendered Security or Securities), in the same
aggregate unpaid principal amount (in the case of the Notes and, in such case,
dated so as not to result in any loss of interest and together with all
necessary Subsidiary Guarantees) or the same aggregate number of Shares (in the
case of the Warrants and Warrant Shares), as applicable, as that of the Security
or Securities so surrendered. The Company may treat the Person in whose name any
Security is registered as the owner of such Security for all purposes.
19. Replacement of Securities.
Upon receipt by the Company of reasonably satisfactory evidence of the
loss, theft, destruction or mutilation of any Security and (in the case of loss,
theft or destruction) of reasonably satisfactory indemnity, and (in the case of
mutilation) upon surrender of such Security, the Company(ies) that issued such
Security at its (their) expense will execute and deliver in lieu of such
Security a new Security of like tenor and, in the case of any new Note, dated so
as not to result in any loss of interest and accompanied by all necessary
Subsidiary Guarantees. Any Purchaser's unsecured agreement to indemnify and/or
affidavit and that of any other institutional holder shall constitute
satisfactory indemnity and/or satisfactory evidence of loss, theft or
destruction for the purpose of this Section 19.
20. Amendment and Waiver.
(a) Any term of this Agreement and, unless explicitly provided
otherwise therein, of any of the other Operative Documents may, with the
consent of the Company, be amended, or compliance therewith may be waived,
in writing only, by the Required Holders of each class of Securities
entitled to the benefits of such term, provided that (i) without the
consent of the holders of all of the Notes at the time outstanding, no
such amendment or waiver shall (A) change the amount of the principal of
or any rate of interest on or premium payable with respect to any of the
Notes or change the payment terms of any of the Notes or, except as
provided in the Subordination Agreement, subordinate the obligation of the
Company (or of any other Person primarily or secondarily liable therefor)
to pay any amount due on the Notes to any other obligation, or (B) change
the percentage of holders of Notes required to approve any such amendment,
effectuate any such waiver or accelerate payment of the Notes; (ii)
without the consent of the holders of all of the Warrants and Warrant
Shares at the time outstanding, no such amendment or waiver shall (A)
modify any of the provisions of Section 13 of the Warrant or Section 14(d)
of the Registration Rights Agreement, or (B) change the percentage of
holders of the Warrants and Warrant Shares required to approve any such
amendment or effect any such waiver; and (iii) no such amendment or waiver
shall extend to or affect any obligation not expressly amended or waived
or impair any right consequent thereon. Executed or true and correct
copies of any amendment, waiver or consent effected pursuant to this
Section 20 shall be delivered by the Company to each holder of Securities
forthwith (but in any event not later than five days) following the
effective date thereof.
54
(b) The Company will not, directly or indirectly, request or
negotiate for, or offer or pay any remuneration or grant any security as
an inducement for, any proposed amendment or waiver of any of the
provisions of this Agreement or any of the other Operative Documents
unless each holder of the Securities (irrespective of the kind and amount
of Securities then owned by it) shall be informed thereof by the Company
and, if such holder is entitled to the benefit of any such provision
proposed to be amended or waived, shall be afforded the opportunity of
considering the same, shall be supplied by the Company with sufficient
information to enable it to make an informed decision with respect thereto
and shall be offered and paid such remuneration and granted such security
on the same terms.
(c) In determining whether the requisite holders of Securities
have given any authorization, consent or waiver under this Section 20, any
Securities owned by the Company or any of its Affiliates shall be
disregarded and deemed not to be outstanding.
21. Method of Payment of Securities.
Irrespective of any provision hereof or of the other Operative Documents
to the contrary, so long as any Purchaser (or such Purchaser's nominee) or any
other institutional holder shall hold any Security, the Company(ies) that issued
such Security (and each other Person primarily or secondarily liable therefor)
will make all payments thereon to such Purchaser or such other institutional
holder by the method and at the address for such purpose specified in Schedule I
attached hereto or by such other method or at such other address as such
Purchaser or such institutional holder may designate in writing, without
requiring any presentation or surrender of such Security, except that if any
Security shall be paid, prepaid and/or repurchased in full, such Security shall
be surrendered to the Company(ies) that issued such Security promptly following
such payment, prepayment or repurchase and canceled.
22. Expenses; Indemnity.
Whether or not the transactions contemplated by any of the Operative
Documents shall be consummated, the Company will pay or cause to be paid (or
reimbursed, as the case may be) and will defend, indemnify and hold each
Purchaser (and each other holder of any of the Securities) and each Purchaser's
(and such other holder's) directors, officers, employees, agents, advisors and
Affiliates (each, an "Indemnitee") harmless (on an after tax basis) in respect
of all costs, losses, expenses (including, without limitation, the fees, costs,
expenses and disbursements of one counsel for all of the Indemnitees) and
damages (collectively, "Indemnified Costs") incurred by or asserted against any
Indemnitee in connection with the negotiation, execution, delivery, performance
and/or enforcement of this Agreement or any of the other Operative Documents
(including, without limitation, so-called work-outs and/or restructurings and
all amendments, waivers and consents hereunder and thereunder, whether or not
effected) and/or the consummation of the transactions contemplated hereby and
thereby or which may otherwise be related in any way to this Agreement or any
other Operative Documents or such transactions or such Indemnitee's relationship
to the Company or any of its Affiliates or any of its properties and assets,
including, without limitation, any and all Indemnified Costs related in any way
to the requirements of any Environmental Laws (as the same may be amended,
modified or supplemented from time to time) or to any environmental
investigation, assessment, site
55
monitoring, containment, clean up, remediation, removal, restoration, reporting
and sampling, whether or not consented to, or requested or approved by, any
Indemnitee, and whether or not such Indemnified Cost is attributable to an event
or condition originating from any properties or assets of the Company or any of
its Subsidiaries or any other, properties previously or hereafter owned, leased,
occupied or operated by the Company or any of its Subsidiaries. Notwithstanding
the foregoing, the Company shall not have any obligation to an Indemnitee under
this Section 22 with respect to any Indemnified Cost to the extent such
Indemnified Cost arises solely as a result of the gross negligence, willful
misconduct or bad faith of such Indemnitee. The reimbursement required by this
Section 21 shall be made by periodic payments during the course of the
investigation or defense, as and when bills are received or expenses incurred.
23. Taxes.
The Company will pay all taxes and fees (including interest and
penalties), including, without limitation, all recording and filing fees,
issuance and documentary stamp and similar taxes, which may be payable in
respect of the execution and delivery of this Agreement and each of the other
Operative Documents, including the issuance, sale and delivery of the Warrants
and the Warrant Shares.
24. Communications.
All communications provided for herein and, unless explicitly
provided otherwise therein, in any of the other Operative Documents shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such communication by a recognized overnight delivery service
(charges prepaid), (b) by a recognized overnight delivery service (charges
prepaid), or (c) by messenger. Any such communication must be sent (i) if to the
Company or to any of their respective Subsidiaries, to it at:
Integrity Media, Inc.
0000 Xxxx Xxxx
Xxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
Telecopy No.: (000) 000-0000
or at such other address (or telecopy number) as may be furnished in writing by
the Company to each holder of any Security and (ii) if to any Purchaser, at such
Purchaser's address for such purpose set forth in Schedule I attached hereto,
with a copy (which shall not constitute notice) to:
Xxxxxx, Halter & Xxxxxxxx LLP
1400 XxXxxxxx Investment Center
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxxx X. Xxxx, Esq.
Telecopy No.: (000) 000-0000
and if to any other holder of any Security, at the address of such holder as it
appears on the applicable register maintained pursuant to Section 18, or at such
other address as may be
56
furnished in writing by such Purchaser or by any other holder to the Company.
Communications under this Section 24 shall be deemed given only when actually
received.
25. Survival of Agreements, Representations and Warranties, etc; Reaffirmation
of Company Guarantee.
All agreements, representations and warranties contained herein and in the
other Operative Documents shall be deemed to have been relied upon by each of
the Purchasers and shall survive the execution and delivery of this Agreement
and each of the other Operative Documents, the issue, sale and delivery of the
Securities and payment therefor and any disposition of the Securities by any
Purchaser, whether or not any investigation at any time is made by such or on
its behalf. All indemnification provisions, including, without limitation, those
contained in Sections 22 and 23, shall survive the date upon which none of the
Securities shall be outstanding and the termination of this Agreement and each
of the other Operative Documents.
26. Successors and Assigns; Rights of Other Holders.
This Agreement and, unless explicitly provided otherwise therein, each of
the other Operative Documents shall bind and inure to the benefit of and be
enforceable by the Company and each of the Purchasers, successors to the Company
and each Purchaser's successors and assigns, and, in addition, shall inure to
the benefit of and be enforceable by each holder from time to time of any
Securities who, upon acceptance thereof, shall, without further action, be
entitled to enforce the applicable provisions and enjoy the applicable benefits
hereof and thereof. The Company may not assign any of its rights or obligations
hereunder or under any of the other Operative Documents without the written
consent of all of the holders of the Securities then outstanding. The Purchasers
and any holders of the Securities may assign their respective rights and
obligations under this Agreement and the other Operative Documents (a) if an
Event of Default does not then exist, with the consent of the Company which
consent may not be unreasonably withheld and (b) if an Event of Default then
exists, to any Person which is not a Competitor; provided, however, any
Purchaser or holder of the Securities may at any time (whether or not an Event
of Default then exists or consent from the Company has been obtained) assign its
rights and obligations under this Agreement and the other Operative Documents to
an Affiliate of such Purchaser or holder.
27. Purchase for Investment; ERISA.
(a) Each of the Purchasers severally represents and warrants (i)
that such Purchaser has been furnished with all information that such
Purchaser has requested for the purpose of evaluating such Purchaser's
proposed acquisition of the Securities to be issued to such Purchaser
pursuant hereto, (ii) that such Purchaser will acquire such Securities for
such Purchaser's own account for investment and not for distribution in
any manner that would violate applicable securities laws, but without
prejudice to such Purchaser's rights to dispose of such Securities or a
portion thereof to a transferee or transferees, in accordance with such
laws if at some future time such Purchaser deems it advisable to do so and
(iii) that such Purchaser is an "accredited investor" as such term is
defined in Regulation D of the Commission under the Securities Act. The
acquisition of
57
such Securities by each Purchaser at the Closing shall constitute such
Purchaser's several confirmation of the foregoing representations and
warranties. Each Purchaser understands that such Securities are being sold
to the Purchasers in a transaction which is exempt from the registration
requirements of the Securities Act, and that, in making the
representations and warranties contained in Section 5.16, the Company is
relying, to the extent applicable, on each Purchaser's several
representations and warranties contained herein.
(b) Each Purchaser represents that at least one of the following
statements is an accurate representation as to each source of funds (a
"Source") to be used by such Purchaser to pay the purchase price of the
Securities to be purchased by such Purchaser hereunder:
(i) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning
of Part V of the QPAM Exemption), no employee benefit plan's assets
that are included in such investment fund, when combined with the
assets of all other employee benefit plans established or maintained
by the same employer or by an affiliate (within the meaning of
Section V(c)(1) of the QPAM Exemption) of such employer or by the
same employee organization and managed by such QPAM, exceed 20% of
the total client assets managed by such QPAM, the conditions of Part
I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM
nor a person controlling or controlled by the QPAM (applying the
definition of "control" in Section V(e) of the QPAM Exemption) owns
a 5% or more interest in the Company and (A) the identity of such
QPAM and (B) the names of all employee benefit plans whose assets
are included in such investment fund have been disclosed to the
Company in writing pursuant to this Section (i); or
(ii) the Source is a governmental plan; or
(iii) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee
benefit plans, each of which has been identified to the Company in
writing pursuant to this Section (iii); or
(iv) the Source does not include assets of any employee
benefit plan, other than a plan exempt from the coverage of ERISA.
As used in this Section 26(b), the terms "employee benefit plan",
"governmental plan", "party in interest" and "separate account" shall have
the respective meanings assigned to such terms in Section 3 of ERISA, and
the term "QPAM Exemption" means PTE 84-14 (issued March 13, 1984).
28. Governing Law; Jurisdiction; Waiver of Jury Trial.
This Agreement and, unless explicitly provided otherwise therein, each of
the other Operative Documents, including the validity hereof and thereof and the
rights and obligations of
58
the parties hereunder and thereunder, and all amendments and supplements hereof
and thereof and all waivers and consents hereunder and thereunder, shall be
construed in accordance with and governed by the domestic substantive laws of
the State of Ohio without giving effect to any choice of law or conflicts of law
provision or rule that would cause the application of the domestic substantive
laws of any other jurisdiction. The Company, to the extent that it may lawfully
do so, hereby consents to service of process, and to be sued, in the State of
Ohio and consents to the jurisdiction of the courts of the State of Ohio and the
United States District Court for the Northern District of Ohio, as well as to
the jurisdiction of all courts to which an appeal may be taken from such courts,
for the purpose of any suit, action or other proceeding arising out of any of
its obligations hereunder or thereunder or with respect to the transactions
contemplated hereby or thereby, and expressly waives any and all objections it
may have as to venue in any such courts. The Company further agrees that a
summons and complaint commencing an action or proceeding in any of such courts
shall be properly served and shall confer personal jurisdiction if served
personally or by certified mail to it at its address referred to in Section 24
or as otherwise provided under the laws of the State of Ohio. Notwithstanding
the foregoing, the Company agrees that nothing contained in this Section 28
shall preclude the institution of any such suit, action or other proceeding in
any jurisdiction other than the State of Ohio. THE COMPANY IRREVOCABLY WAIVES
ALL RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION OR OTHER PROCEEDING INSTITUTED
BY OR AGAINST IT IN RESPECT OF ITS OBLIGATIONS HEREUNDER OR THEREUNDER OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
29. Other Business.
It is understood and accepted that the Purchasers and their Affiliates
have interests in other business ventures that may be in conflict with the
activities of the Company and that nothing in this Agreement will limit the
current or future business activities of such parties whether or not such
activities are competitive with those of the Company. The Company agrees that
all business opportunities in any field substantially related to the business of
the Company will be pursued exclusively through the Company.
30. Purchaser Agent.
If at any time, there are more than four (4) holders of the Notes, such
holders shall appoint an agent (the "Purchaser Agent") to receive copies of
financial disclosures pursuant to Section 7 hereof and any notices hereunder on
behalf of such holders.
31. Miscellaneous.
The headings in this Agreement and in each of the other Operative
Documents are for purposes of reference only and shall not limit or otherwise
affect the meaning hereof or thereof. This Agreement (together with the other
Operative Documents) embodies the entire agreement and understanding among the
Purchasers and the Company and supersedes all prior agreements and
understandings relating to the subject matter hereof. Each covenant contained
herein and in each of the other Operative Documents shall be construed (absent
an express provision to the contrary) as being independent of each other
covenant contained herein and therein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be
59
deemed to excuse compliance with any other covenant. If any provision in this
Agreement or in any of the other Operative Documents refers to any action taken
or to be taken by any Person, or which such Person is prohibited from taking,
such provision shall be applicable, whether such action is taken directly or
indirectly by such Person. In case any provision in this Agreement or any of the
other Operative Documents shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby. This Agreement and, unless explicitly
provided otherwise therein, each of the other Operative Documents, may be
executed in any number of counterparts and by the parties hereto or thereto, as
the case may be, on separate counterparts but all such counterparts shall
together constitute but one and the same instrument. Any party may execute and
deliver this Agreement by facsimile signature, which shall have the same binding
effect as an original ink signature.
[The remainder of this page is intentionally left blank.]
60
IN WITNESS WHEREOF, the Company and the Purchasers have caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized.
COMPANY:
KONA ACQUISITION CORP.
/s/ P. Xxxxxxx Xxxxxxx
------------------------------------
Name: P. Xxxxxxx Xxxxxxx
Title: President
TARGET:
INTEGRITY MEDIA, INC.
/s/ Xxxxxx X. Xxxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Treasurer and Secretary
1
PURCHASERS:
Key Principal Partners III LLC
/s/ Xxxxx Xxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President
KPP INVESTORS II LP
By: KPP II MANAGEMENT LLC,
its General Partner
By: /s/ Xxxxx Xxxxxx
------------------------------------
Xxxxx Xxxxxx, its Vice President
2
SCHEDULE I
SCHEDULE OF PURCHASERS
Name and Address of Purchaser
KEY PRINCIPAL PARTNERS III LLC
000 Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx Xxxx 00000
Securities To Be Purchased
(a) $12,750,000 Senior Subordinated Note (R-001)
(b) Warrant for ____ Shares of Common Stock (No. RW-001)
Payments
All payments on account of the Securities shall be made by crediting in the form
of bank wire transfer of Federal or other immediately available funds not later
than 12 noon, Cleveland, Ohio time, on the applicable due date (identifying each
payment as a payment of interest, principal, premium or other amount on the
[Integrity Media, Inc.] [specify applicable security]), to:
________________________
________________________
ABA No.: ___________
Account No.: __________
Account Name: Key Principal Partners III LLC
Re: Description of security; principal, interest, premium or other amount split
With concurrent telephone advice of payment to _______________, at (216)
__________.
Notices
All notices and communications to be addressed to:
Key Principal Partners III LLC
000 Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxx Xxxxxx and Xxxxxx Xxxxxx
Telecopy: (000) 000-0000
Securities to be
Registered in the Name: KEY PRINCIPAL PARTNERS III LLC
3
Name and Address of Purchaser
KPP INVESTORS II L.P.
000 Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx Xxxx 00000
Securities To Be Purchased
(a) $2,250,000 Senior Subordinated Note (R-002)
(b) Warrant for _____ Shares of Common Stock (No. RW-002)
Payments
All payments on account of the Securities shall be made by crediting in the form
of bank wire transfer of Federal or other immediately available funds not later
than 12 noon, Cleveland, Ohio time, on the applicable due date (identifying each
payment as a payment of interest, principal, premium or other amount on the
[Integrity Media, Inc.] [specify applicable security]), to:
________________________
________________________
ABA No.: _____________
Account No.: ___________
Account Name: KPP INVESTORS II L.P.
Re: Description of security; principal, interest, premium or other amount split
With concurrent telephone advice of payment to ________________, at (216)
____________.
Notices
All notices and communications to be addressed to:
KPP Investors II L.P.
000 Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxx Xxxxxx and Xxxxxx Xxxxxx
Telecopy: (000) 000-0000
Securities to be
Registered in the Name: KPP INVESTORS II L.P.
4
