Exhibit 10.17
THIRD AMENDMENT TO SECURED CREDIT AGREEMENT
This Third Amendment to Secured Credit Agreement (this "AGREEMENT") is
dated as of April 14, 1999, and is between Platinum Entertainment, Inc., a
Delaware corporation (the "BORROWER"), and First Source Financial LLP, an
Illinois limited liability partnership, as Agent for Lenders party to the
Secured Credit Agreement (as defined below) (the "AGENT").
RECITALS
WHEREAS, the parties hereto are parties to that certain Secured Credit
Agreement, dated as of July 31, 1998 (as amended by that certain First
Amendment to Credit Agreement, dated as of November 1, 1998, and that certain
Second Amendment to Credit Agreement, dated as of January ___, 1999, and as
from time to time further amended, restated, supplemented or otherwise
modified and in effect, the "SECURED CREDIT AGREEMENT"); and
WHEREAS, Borrower and Lenders desire to amend the Secured Credit
Agreement to make certain changes thereto and to correct certain matters, all
as set forth below.
NOW THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
AGREEMENT
1. DEFINITIONS. Capitalized terms used but not otherwise defined
herein shall have the meanings as set forth in the Secured Credit Agreement.
2. WAIVERS.
(a) AUDIT OPINION. Lenders and Agent hereby waive any Unmatured Event
of Default or Event of Default caused by Borrower's breach of Section 11.1(a)
of the Secured Credit Agreement arising from the qualification by Ernst &
Young, LLP of Borrower's 1998 annual audit report relating to Borrower's
failure to comply with the Net Worth and Interest Coverage Ratio covenants
set forth in Sections 11.33(a) and 11.33(b) of the Secured Credit Agreement.
(b) MONTHLY FINANCIAL STATEMENTS. Lenders and Agent hereby waive any
Unmatured Event of Default or Event of Default caused by Borrower's failure
to deliver the financial statements required by Section 11.1(c) for the
months of January 1999 and February 1999, on a timely basis;
PROVIDED, that such financial statements shall be delivered to Agent no later
than April 20, 1999 and April 30, 1999, respectively.
(c) FINANCIAL COVENANTS. Lenders and Agent hereby waive any Unmatured
Event of Default or Event of Default caused by Borrower's failure to comply
with the Net Worth and Interest Coverage Ratio covenants set forth in
Sections 11.33(a) and 11.33(b) of the Secured Credit Agreement through
December 31, 1998.
3. AMENDMENTS TO SECURED CREDIT AGREEMENT. The Secured Credit
Agreement is hereby amended as follows:
(a) Section 4.1 of the Secured Credit Agreement is hereby amended by
deleting it in its entirety and replacing it with the following:
SECTION 4.1 INTEREST RATES. Subject to SECTION 4.3, Borrower
hereby promises to pay interest on the outstanding principal amount of each
Loan for the period commencing on the date thereof until such Loan is
paid in full, at a rate per annum determined by reference to the Prime Rate
or the LIBOR Rate, respectively. The applicable basis for determining the
rate of interest shall be selected by Borrower at the time a borrowing is
requested pursuant to SECTION 2.3 or at the time a Notice of LIBOR Activity
is given pursuant to SECTION 4.3, as the case may be. If on any day any
portion of any Loan is outstanding with respect to which notice has not
been given to Agent in accordance with the terms of this Agreement
specifying the basis for determining the rate of interest thereon, then
for that day, such portion of such Loan shall be a Prime Rate Loan and
shall bear interest at a rate determined by reference to the Prime Rate.
Subject to SECTION 4.3, each Prime Rate Revolving Loan and LIBOR Rate
Revolving Loan shall bear interest at a rate per annum determined as
follows: (a) if it is a Prime Rate Revolving Loan, then at the sum of
the Prime Rate in effect from time to time PLUS the Prime Revolver Margin;
or (b) if it is a LIBOR Rate Revolving Loan, then at the sum of the LIBOR
Rate for the applicable Interest Period PLUS the LIBOR Revolving Margin.
From and after March 25, 1999, the Prime Revolver Margin and LIBOR
Revolving Margin will be 1.50% and 3.00% per annum, respectively.
Notwithstanding anything contained in this SECTION 4.1, in
SECTION 4.3 or any other provision of this Agreement to the contrary, from
and after March 25, 1999 (the "PRIME RATE EFFECTIVE DATE"), Borrower may
not borrow or continue any Loan at the LIBOR Rate or convert any Loan to
the LIBOR Rate. Upon the expiration of the Interest Period with respect
to each LIBOR Rate Loan in effect on the Prime Rate Effective Date, such
LIBOR Rate Loan shall automatically be converted into a Prime Rate Loan.
If Borrowing Availability is equal to or greater
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than $2,500,000 for thirty (30) consecutive days occurring on or after the
Prime Rate Effective Date, then Borrower's option to borrower, continue
and convert Loans at the LIBOR Rate in accordance with the terms of
this Agreement shall be reinstated; PROVIDED, HOWEVER, that if Borrowing
Availability is less than $2,500,000 at any time thereafter, then Borrower
may not borrow or continue any Loan at the LIBOR Rate or convert any Loan
to the LIBOR Rate until such time as Borrowing Availability is equal to or
greater than $2,500,000 for thirty (30) consecutive days.
(b) Section 5.6 of the Secured Credit Agreement is hereby amended by
deleting it in its entirety and replacing it with the following:
SECTION 5.6 APPRAISAL FEES. Borrower shall pay to Agent all
appraisal costs and expenses related to the following appraisals of
Borrower's music catalog prepared after the Closing Date at the request
of Agent: (i) any appraisals conducted during the occurrence and
continuance of a Default or Event of Default; (ii) the appraisal
requested by Agent on April 9, 1999, and (iii) in addition to any
appraisal referenced in clauses (i) and (ii) above, one appraisal
conducted after the second anniversary of the Closing Date.
(c) Section 11.33(a) of the Secured Credit Agreement is hereby amended by
deleting it in its entirety and replacing it with the following:
(a) NET WORTH. Maintain Net Worth at all times during each period
listed below of at least the amounts set forth opposite such period:
Period Minimum
Net Worth
Fiscal Quarter ending March 31, 1999 $6,000,000
Fiscal Quarter ending June 30, 1999 $5,000,000
Fiscal Quarter ending September 30, 1999 $7,800,000
Fiscal Quarter ending December 31, 1999 $9,200,000
Fiscal Quarter ending March 31, 2000 $22,000,000
Fiscal Quarter ending June 30, 2000 $22,000,000
Fiscal Quarter ending September 30, 2000 $22,000,000
Fiscal Quarter ending December 31, 2000 $24,500,000
Fiscal Quarter ending March 31, 2000 and
each Fiscal Quarter thereafter $24,500,000 plus fifty
percent (50%) of
cumulative quarterly Net
Income (without
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giving effect to any
quarterly net losses in
determining Net Income)
(d) Section 11.33(b) of the Secured Credit Agreement is hereby amended by
deleting it in its entirety and replacing it with the following:
(b) INTEREST COVERAGE RATIO. Not permit the Interest Coverage Ratio
measured on the last day of a Fiscal Quarter for the twelve (12) month period
ending on the last day of such Fiscal Quarter to be less than the ratio listed
below opposite such period:
PERIODS RATIO
Fiscal Quarter ending December 31, 1999 2.3 to 1.0
Fiscal Quarter ending March 31, 2000
and each Fiscal Quarter thereafter 3.0 to 1.0
(e) Section 11.33 of the Secured Credit Agreement is hereby amended by
adding the following new Section 11.33(d) immediately following Section
11.33(c):
(d) EBITDA. Not permit EBITDA measured on the last day of a Fiscal
Quarter for the twelve (12) month period (or, in the case of the Fiscal
Quarters ending before December 31, 1999, for the period from and
including January 1, 1999, to and including the last day of such Fiscal
Quarter) ending on the last day of such Fiscal Quarter to be less than
the amount listed below opposite such period:
PERIODS MINIMUM EBITDA
Fiscal Quarter ending March 31, 1999 ($315,000)
Fiscal Quarter ending June 30, 1999 $170,000
Fiscal Quarter ending September 30, 1999 $4,300,000
Fiscal Quarter ending December 31, 1999 $7,000,000
(f) The Secured Credit Agreement is hereby amended by adding the following
new Section 11.34 immediately following Section 11.33:
SECTION 11.34 STOCK ISSUANCE. In consideration for the execution by
Agent and Lenders of that certain Third Amendment to Credit
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Agreement, dated as of April 14, 1999, among Borrower, Agent and Lenders,
Borrower agrees to issue Agent, or Agent's designated Affiliate ("FS
AFFILIATE"), for the benefit of Lenders, Eight Thousand Seven Hundred
Fifty-One (8,751) shares of common stock of Borrower, par value $.001 per
share (the "SHARES"), subject to the terms and conditions hereinafter set
forth.
(a) DELIVERY OF SHARES. A stock certificate for the Shares shall be
delivered to FS Affiliate within ten (10) days after the execution of this
Agreement by the parties hereto.
(b) PAYMENT OF TAXES. The issuance of certificates for the Shares
shall be made without charge to Agent, any Lender or FS Affiliate for any
stock transfer or other issuance tax in respect thereof; PROVIDED, HOWEVER,
that FS Affiliate shall be required to pay any and all taxes that may be
payable in respect of any transfer involved in the issuance and delivery of
any certificate in a name other than that of the then FS Affiliate as
reflected upon the books of Borrower.
(c) PUT RIGHT. FS Affiliate shall have the following Put Right:
(i) FS Affiliate shall have the right to cause Borrower to
repurchase all (but not less than all) of the Shares (the "PUT RIGHT")
at a price equal to $60,000.00 (the "REPURCHASE PRICE"); PROVIDED,
HOWEVER, that (1) no Put Closing (as hereinafter defined) shall occur
prior to December 31, 1999 (the "EXERCISE DATE"), and (2) the Put
Right shall expire if, at any time from April 14, 1999 until the
Exercise Date, the closing price per share of the Common Stock is
greater than or equal to $8.00 per share for 15 consecutive trading
days as quoted by NASDAQ or a similar service.
(ii) If FS Affiliate desires to exercise the Put Right, FS
Affiliate shall provide notice in writing (the "PUT NOTICE") by first
class mail, postage prepaid, to Borrower, on or prior to the Exercise
Date. The Put Right shall be exercised, if at all, on or before the
Exercise Date.
(iii) If Borrower receives a Put Notice pursuant to
CLAUSE (C)(II) above, it shall deliver to FS Affiliate, by first class
mail, postage prepaid, mailed as soon as practicable and if possible
within ten (10) days of the receipt by Borrower of the Put Notice, a
notice stating: (A) the date as of which such repurchase shall occur
(which
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date (the "PUT CLOSING") shall not be more than ten (10) days
following the Exercise Date); and (B) the place where the certificate
or certificates representing the Shares are to be surrendered for
payment.
(iv) At the Put Closing, FS Affiliate shall deliver to Borrower
the certificate or certificates representing the Shares and Borrower
shall deliver to FS Affiliate an amount equal to the "Repurchase
Price" by wire transfer of immediately available funds to an account
designated by FS Affiliate.
(v) Borrower shall not (and shall not permit any Affiliate of
Borrower to) enter into any contract or other consensual arrangement
that by its terms restricts Borrower's ability to honor the Put Right.
(vi) No Person other than FS Affiliate (for the benefit of Agent
and Lenders) is intended to be a beneficiary of the Put Right. FS
Affiliate may not assign the Put Right without the written consent of
Borrower.
(d) REGISTERED SHARES. The Shares shall have been registered under
the Securities Act of 1933, as amended, and each of the Shares is duly
authorized, validly issued, fully paid and non-assessable.
(e) LEGEND. Each certificate representing the Shares shall be
stamped or otherwise imprinted with a legend in the following form:
"The reoffer and resale of the securities represented by this certificate
have been registered under the Securities Act of 1933, as amended (the
"ACT"), pursuant to a Registration Statement on Form S-3, and may not be
offered or sold except (i) pursuant to a current prospectus under the
Registration Statement, (ii) pursuant to a separate effective registration
statement under the Act, (iii) to the extent applicable, pursuant to
Rule 144 under the Act (or similar rule under such Act relating to the
disposition of securities), or (iv) upon the delivery by the holder to the
issuer of an opinion of counsel, reasonably satisfactory to counsel for the
issuer, stating that an exemption from registration under such Act is
unavailable."
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(f) REMOVAL OF LEGEND. Notwithstanding the foregoing, FS Affiliate
may require Borrower to issue a stock certificate for the Shares without a
legend if the Shares are sold pursuant to any of clauses (e)(i) through
(e)(iv) above.
4. REPRESENTATIONS AND WARRANTIES. To induce Agent to enter into this
Agreement and to make all future Loans under the Secured Credit Agreement,
Borrower represents and warrants to Agent that:
(a) DUE AUTHORIZATION, ETC. The execution, delivery and performance by
Borrower of this Agreement are within its corporate powers, have been duly
authorized by all necessary corporate action, have received all necessary
governmental approval (if any shall be required), and do not and will not
contravene or conflict with any Requirement of Law or Contractual Obligation
binding upon such entity. This Agreement is the legal, valid, and binding
obligation of Borrower enforceable against Borrower in accordance with its
respective terms.
(b) CERTAIN AGREEMENTS. To the best of Borrower's knowledge, on the date
hereof all warranties of the Borrower thereto set forth in the Secured Credit
Agreement are true and correct in all material respects, without any waiver or
modification thereof and no default of any party exists under the Secured Credit
Agreement or any Related Document.
(c) FINANCIAL INFORMATION. All balance sheets, all statement of
operations, of shareholders' equity and of changes in financial position, and
other financial data which have been or shall hereafter be furnished to Agent
for the purposes of or in connection with this Agreement have been and will be
prepared in accordance with GAAP consistently applied throughout the periods
involved and do and will, present fairly the financial condition of the entities
involved as of the dates thereof and the results of their operations for the
periods covered thereby.
(d) LITIGATION. No material litigation (including, without limitation,
derivative actions), arbitrations, governmental investigation or proceeding or
inquiry shall, on the date hereof, be pending which was not previously disclosed
in writing to Agent and no material adverse development shall have occurred in
any litigation (including, without limitation, derivative actions), arbitration,
government investigations, or proceeding or inquiry previously disclosed to
Agent in writing.
5. CONDITIONS TO EFFECTIVENESS. This Agreement shall be effective as of
(a) October 1, 1998 with respect to SECTION 2 hereof and (b) the date hereof
with respect to all other Sections of this Agreement, upon the satisfaction of
the conditions set forth in this SECTION 5 and delivery of the following
documents to Agent on or prior to the date hereof (unless another date is
specified), in form and substance satisfactory to Agent:
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(a) AMENDMENT. Borrower shall have delivered to Agent executed
originals of this Agreement.
(b) CONSENTS AND ACKNOWLEDGMENTS. Borrower shall have obtained all
consents, approvals and acknowledgments which may be required with respect to
the execution, delivery and performance of this Agreement.
(c) NO DEFAULT. As of the date hereof after giving effect to this
Agreement and the waiver set forth in SECTION 2 hereof, no Unmatured Event of
Default or Event of Default under any Related Document shall have occurred and
be continuing.
6. AFFIRMATION OF GUARANTIES.
Each Guarantor (i) consents to and approves the execution and delivery of
this Agreement by Borrower and Agent, (ii) agrees that this Agreement does not
nor shall it limit or diminish in any manner its obligations under its Guaranty
or under any of the other Related Documents to which it is a party, (iii) agrees
that this Agreement shall not be construed as requiring the consent of any
Guarantor in any other circumstance, (iv) reaffirms its obligations under its
Guaranty and all of the other Related Documents to which it is a party, and (v)
agrees that its Guaranty and such other Related Documents remain in full force
and effect and are each hereby ratified and confirmed.
7. MISCELLANEOUS.
(a) CAPTIONS. Section captions used in this Agreement are for convenience
only, and shall not affect the construction of this Agreement.
(b) GOVERNING LAW. This Agreement shall be a contract made under and
governed by the laws of the State of Illinois, without regard to conflict of
laws principles. Wherever possible each provision of this Agreement shall be
interpreted in such manner to be effective and valid under applicable law, but
if any provision of this Agreement shall be prohibited by or invalid under such
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provisions or the
remaining provision of this Agreement.
(c) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original, but all such counterparts
shall together constitute one and the same Agreement. Delivery of an executed
counterpart of a signature page to this Agreement by telecopy shall be effective
as delivery of a manually executed counterpart of this Agreement.
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(d) SUCCESSORS AND ASSIGNEES. This Agreement shall be binding upon
Borrower, the Lenders and Agent and their respective successors and assignees,
and shall inure to the sole benefit of Borrower, Agent and each Lender and their
successors and assignees.
(e) REFERENCES. Any reference to the Secured Credit Agreement contained
in any notice, request, certificate, or other document executed concurrently
with or after the execution and delivery of this Agreement shall be deemed to
include this Agreement unless the context shall otherwise require.
(f) CONTINUED EFFECTIVENESS. Notwithstanding anything contained herein,
the terms of this Agreement are not intended to and do not serve to effect a
novation as to the Secured Credit Agreement, any Note or any of the Collateral
Documents provided to furnish security therefor. The parties hereto expressly
do not intend to extinguish the Secured Credit Agreement, any Note or the
Collateral Documents. Instead, it is the express intention of the parties
hereto to reaffirm the existence of the indebtedness created under the Secured
Credit Agreement which is evidenced by Notes and secured by the various
Collateral Documents. The Secured Credit Agreement and each of the Related
Documents as amended hereby remain in full force and effect. The execution,
delivery and effectiveness of this Agreement shall not operate as a waiver of
any right, power or remedy of the Lenders or Agent under the Secured Credit
Agreement or any Related Document to which the Lenders and Agent are a party
nor, except as set forth in SECTION 2 hereof, constitute a waiver of any
provision in or Event of Default or Unmatured Event of Default (now or hereafter
existing) under the terms of the Secured Credit Agreement or any Related
Document.
(g) FEES AND EXPENSES. In accordance with Section 14.4 of the Secured
Credit Agreement, Borrower agrees to pay on demand all fees, costs and expenses
incurred by Agent and the Lenders in connection with the preparation, execution
and delivery of this Agreement.
(h) AMENDMENT FEE. Borrower agrees to issue to FS Affiliate the Shares
described in SECTION 3(F) hereof.
[signature pages follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their duly authorized officers on the date first
above written.
PLATINUM ENTERTAINMENT, INC.,
as Borrower:
By: /s/Xxxxxxx X. Xxxx
-----------------------------------
Name Printed: Xxxxxxx X. Xxxx
------------------------
Title: Chief Financial Officer
--------------------------------
FIRST SOURCE FINANCIAL LLP,
as a Lender and as Agent
By: First Source Financial, Inc.,
Its: Manager
By: /s/Xxxxxxx X. Xxxxxx
------------------------------
Name Printed: Xxxxxxx X. Xxxxxx
--------------------
Title: Senior Vice President
---------------------------
LEXICON MUSIC, INC., as Guarantor
By: /s/Xxxxxxx X. Xxxx
-----------------------------------
Name Printed: Xxxxxxx X. Xxxx
------------------------
Title: Chief Financial Officer
--------------------------------
PEG PUBLISHING, INC., as Guarantor
By: /s/Xxxxxxx X. Xxxx
-----------------------------------
Name Printed: Xxxxxxx X. Xxxx
------------------------
Title: Chief Financial Officer
--------------------------------
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[TO THIRD AMENDMENT TO SECURED CREDTI AGREEMENT]
ROYCE PUBLISHING, INC., as Guarantor
By: /s/Xxxxxxx X. Xxxx
-----------------------------------
Name Printed: Xxxxxxx X. Xxxx
------------------------
Title: Chief Financial Officer
--------------------------------
JUSTMIKE MUSIC, INC., as Guarantor
By: /s/Xxxxxxx X. Xxxx
-----------------------------------
Name Printed: Xxxxxxx X. Xxxx
------------------------
Title: Chief Financial Officer
--------------------------------
By: /s/Xxxxxxx X. Xxxx
-----------------------------------
Name Printed: Xxxxxxx X. Xxxx
------------------------
Title: Chief Financial Officer
--------------------------------
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[TO THIRD AMENDMENT TO SECURED CREDTI AGREEMENT]