Exhibit 10.5
THIRD AMENDMENT
TO
CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT ("Third Amendment")
is made and entered into as of this 28th day of June, 2002 by and between
INTEGRITY MEDIA, INC., a Delaware corporation (f/k/a Integrity Incorporated,
"Integrity Media"), INTEGRITY PUBLISHERS, INC., a Delaware corporation
(Integrity Publishers; Integrity Media and Integrity Publishers are sometimes
hereinafter referred to as "Existing Borrowers"), M2 COMMUNICATIONS, L.L.C., a
Tennessee limited liability company ("M2 Communications") and LASALLE BANK
NATIONAL ASSOCIATION (as "Administrative Agent" and "Lender").
WITNESSETH:
WHEREAS, pursuant to that certain Credit Agreement, dated as
of April 25, 2001, by and between the Existing Borrowers and Lender, as amended
by that certain First Amendment to Credit Agreement dated as of June 15, 2001
and that certain Second Amendment to Credit Agreement dated as of March 30, 2002
(collectively, the "Credit Agreement"), Lender established in favor of Existing
Borrowers (i) a line of credit in the amount of $6,000,000, (ii) a Term Loan A
Facility in the amount of $6,400,000; and (iii) a Term Loan B Facility in the
amount of $4,600,000; and
WHEREAS, Lender has agreed to the acquisition by Integrity of
100% of the ownership equity of M2 Communications as a wholly-owned Domestic
Subsidiary subject to the terms and conditions hereafter set forth; and
WHEREAS, the Lender has agreed to the modification of certain
additional provisions contained in the Credit Agreement upon the terms and
conditions hereafter set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements set forth herein and for other good and valuable
consideration, the mutuality, receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Definitions. All capitalized terms not otherwise defined herein
shall have the meanings given to such terms in the Credit Agreement.
2. Amendments to Credit Agreement. Effective as of the date hereof, M2
Communications shall, together with Existing Borrowers on a joint and several
basis, constitute for all purposes under the Credit Agreement the "Borrower".
The Credit Agreement is hereby further amended as follows:
(a) The first paragraph of the Credit Agreement is hereby amended and
restated to read as follows:
"This Credit Agreement (this "Agreement") is made and effective as of
April 25, 2001, by and among INTEGRITY MEDIA, INC. (F/K/A INTEGRITY
INCORPORATED), a Delaware
corporation ("Integrity Media"), INTEGRITY PUBLISHERS, INC., a Delaware
corporation ("Integrity Publishers"), M2 COMMUNICATIONS, L.L.C., a Tennessee
limited liability company ("M2 Communications;" M2 Communications, Integrity
Media and Integrity Publishers are sometimes collectively referred to herein as
"Borrower," jointly and severally) and each financial institution that from time
to time is a "Lender" hereunder (collectively the "Lenders,") and LASALLE BANK
NATIONAL ASSOCIATION ("Administrative Agent")."
(b) The first recital of the Credit Agreement is hereby
amended by substituting the figure "$9,400,000" for the figure "$6,400,000"
under subpart (b) thereof.
(c) Section 1.2.1 of the Credit Agreement is hereby amended by
deleting the proviso therein in its entirety and substituting in lieu thereof
the following:
"provided, further, that, contemporaneously with the
effectiveness of the Third Amendment, Borrower shall be permitted to
draw down the remaining undrawn $3,000,000 portion of the Term Loan A
Commitment."
(d) Section 1.2.2 of the Credit Agreement is hereby amended
and restated in its entirety to read as follows:
"Section 1.2.2. Use of Term Loan A Proceeds. The
funds advanced under this Term Loan A Facility shall be used
exclusively for (a) the refinancing of existing indebtedness of
Borrower, (b) the remodeling and improvement of Integrity Media's
headquarters in Mobile, Alabama and other ordinary and reasonable
expenditures for furniture, fixtures and equipment related thereto, and
(c) an aggregate amount not to exceed $3,000,000 may be used for
Integrity Media's acquisition of 100% of the ownership equity of M2
Communications."
(e) The table under Section 1.2.8.2 of the Credit Agreement is
hereby amended and restated in its entirety to read as follows:
" Required Amount
Payment Date of Principal Payment
------------ --------------------
6/30/01 through 12/31/01 $500,000.00
3/31/02 $376,470.59
6/30/02 through 3/31/06 $587,500.00"
(f) Section 3.8 of the Credit Agreement is hereby amended by
adding the following phrase to the end thereof:
"and (4) that certain LLC Interest Purchase Agreement dated as
of June 28, 2002 by and among Integrity Media, Xxxxxxx Xxxxxxx, Xxxxxx Xxxxxxx
and Xxxx and Xxxxxx Xxxxxxx Charitable Remainder Unitrust."
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(g) The table under Section 4.1.1 of the Credit Agreement is
hereby amended and restated in its entirety to read as follows:
"Fiscal Quarters Ending Ratio
----------------------- -----
6/30/01 through 03/31/02 1.00:1.00
9/30/02 through 12/31/02 1.00:1.00
3/31/03 through 12/31/03 1.05:1.00
3/31/04 through 12/31/04 1.10:1.00
3/31/05 and thereafter 1.15:1.00"
(h) Section 4.1.3 of the Credit Agreement is hereby amended
and restated in its entirety to read as follows:
"Section 4.1.3. Minimum Net Worth. Borrower shall
cause Net Worth to at no time be less than (a) for the period
ending June 30, 2002, $12,500,000, and (b) thereafter (i)
$12,500,000 plus (ii) an aggregate amount equal to 85% of
quarterly Net Income (but only if a positive number, with no
reduction for losses) for each fiscal quarter of Borrower
beginning with the fiscal quarter ending September 30, 2002."
(i) Section 5.1 of the Credit Agreement is hereby amended by
substituting the figure "$5,700,000" for the figure "$5,300,000" for fiscal year
2002, and by substituting the figure "5,400,000" for the figure "6,425,000" for
fiscal year 2005.
(j) Section 5.7(e) of the Credit Agreement is hereby amended
and restated in its entirety to read as follows:
"e. Equity interests of Integrity Media in Integrity
Publishers, M2 Communications, Enlight (such investment not to
exceed $250,000 in the aggregate), Integrity Music and
Celebration."
(k) Section 5.8(c) of the Credit Agreement is hereby amended
by inserting at its beginning the phrase "except for Enlight, M2 Communications,
and Integrity Publishers,"
(l) Section 5.9 of the Credit Agreement is hereby amended by
adding the following phrase to the end thereof:
"and (e) Integrity Publishers' use of the office
space leased by Integrity Media and located in Brentwood,
Tennessee."
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(m) Section 5.12 of the Credit Agreement is hereby amended and
restated to read as follows:
"5.12 Integrity Media Ownership. Integrity Media
shall not sell, transfer or otherwise dispose of any of the
equity of Integrity Publishers, M2 Communications or Enlight,
nor permit its total investment in Integrity Publishers, M2
Communications or Enlight, whether in the form of equity,
loans, advances or otherwise, to at any time exceed $5,000,000
with respect to Integrity Publishers, $4,000,000 with respect
to M2 Communications, and $250,000 with respect to Enlight."
(n) Section 9.1 of the Credit Agreement is hereby amended to
restate the definition of "Borrower" as follows:
"Borrower" means, collectively, Integrity Media, M2
Communications and Integrity Publishers, jointly and severally."
(o) Section 9.1 of the Credit Agreement is hereby amended by
adding the following proviso to the end of the definition of "Borrowing Base:"
"provided, however, that no more than $800,000 shall
be advanced under the Line of Credit on account of the
Eligible Accounts of M2 Communications and no more than
$100,000 shall be advanced under the Line of Credit on account
of the Eligible Inventory of M2 Communications."
(p) Section 9.1 of the Credit Agreement is hereby amended by
substituting the figure "$9,400,000" for the figure "$6,400,000" in the
definition of "Term Loan A Commitment".
(q) Section 9.1 of the Credit Agreement is hereby amended by
deleting clause (ii) of the definition of "Indebtedness" in its entirety and
replacing the same with the following:
"(ii) to pay the deferred purchase price of property
or services (other than any reasonable and customary
contractual compensation obligation entered into in the
ordinary course of business which calls for payment of
deferred compensation to employees in their capacities as
employees);"
(r) Section 9.1 of the Credit Agreement is hereby amended by
adding the following new definitions in appropriate alphabetical order:
"Integrity" or "Integrity Media" means Integrity Media, Inc.
(f/k/a Integrity Incorporated), a Delaware corporation.
"M2 Communications" means M2 Communications, L.L.C., a
Tennessee limited liability company.
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"Third Amendment" means that certain Third Amendment to Credit
Agreement, dated as of June 28, 2002, by and among Integrity Media, Integrity
Publishers, M2 Communications, the Lenders party thereto and the Administrative
Agent.
3. Amended and Restated Schedules. The Schedules attached to the Credit
Agreement are hereby amended and restated in the forms attached hereto.
4. Acknowledgment and Waiver of Defaults. Existing Borrowers
acknowledge that the following Defaults or Events of Default exist under the
Loan Agreement (collectively, the "Specified Defaults"): (a) breach of Section
5.7 of the Credit Agreement as a result of Integrity Media's indirect
acquisition of Magnificat Music, LLC (the "Acquisition Default"), and (b) breach
of Section 5.2 as a result of Integrity Media's entering into that certain
Employment Agreement, dated as of June 28, 2002, by and between Xxxxxxx Xxxxxxx
and Integrity Media wherein Integrity Media agrees to pay a certain retention
bonus to Xxxxxxx Xxxxxxx which is a deferred purchase of services. The Existing
Borrowers have requested that the Administrative Agent, on behalf of the
Lenders, waive the Specified Defaults. The Administrative Agent, on behalf of
the Lenders, hereby waives the Specified Defaults, provided, however, that such
waiver, with respect to the Acquisition Default, shall be for a period of ten
(10) days from the date hereof only. The waivers contained in this Section are
specific in intent and are valid only for the specific purposes for which given.
Nothing contained herein obligates any Lender to agree to any additional waivers
of any provisions of any of the Loan Documents, including but not limited to
Section 5. The waivers contained in this Section are waivers of the Specified
Defaults only, and shall not operate as a waiver of any Lender's right to
exercise remedies resulting from (i) existing and/or continuing Defaults or
Events of Default of which Lenders are not actually aware, (ii) other future
Defaults or Events of Default, whether or not of a similar nature and whether or
not known to any Lender, or (iii) existence of the Acquisition Default beyond
ten (10) days.
5. Conditions to Effectiveness. This Third Amendment shall become
effective as of June 28, 2002, when and only when the Lender shall have received
(i) this Third Amendment duly executed by the Borrower, (ii) payment of all
outstanding legal fees and costs of Administrative Agent and Lender, including
those incurred in connection with this Third Amendment, together with payment to
Lender of an amendment fee of $30,000.00, (iii) such of the Loan Documents
identified under Section 2.1.2 of the Credit Agreement as the Administrative
Agent may require as regards M2 Communications, (iv) First Amendment and Second
Supplement to Security and Pledge Agreement duly executed by Integrity Media,
(v) First Amendment to Security and Pledge Agreement duly executed by Integrity
Publishers, (vi) Modification of Mortgage duly executed by Integrity Media,
(vii) consummation of the acquisition by Integrity Media of 100% of the
ownership equity of M2 Communications upon terms and conditions satisfactory to
Administrative Agent in its sole reasonable discretion, and delivery to
Administrative Agent of a legal opinion on behalf of the Borrower confirming
that such acquisition has been consummated in accordance with applicable law,
and (viii) such other certificates, instruments, documents, agreements and
opinions of counsel as may be required by Lender or its counsel, each of which
shall be in form and substance satisfactory to Lender and its counsel.
6. Representations and Warranties. The Existing Borrower and Integrity
Publishers hereby represent and warrant as follows:
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(a) This Third Amendment and the Credit Agreement, as amended
hereby, have been duly authorized and constitute legal, valid and binding
obligations of the Existing Borrowers and M2 Communications and are enforceable
against the Existing Borrowers and M2 Communications in accordance with their
respective terms.
(b) Upon the effectiveness of this Third Amendment, the
Existing Borrowers and M2 Communications hereby reaffirm all covenants,
representations and warranties made in the Credit Agreement and agree that all
such covenants, representations and warranties shall be deemed to have been
remade as of the effective date of this Third Amendment.
(c) No Event of Default or Default has occurred and is
continuing or would exist after giving effect to this Third Amendment.
(d) The Existing Borrowers and M2 Communications have no
defense, counterclaim or offset with respect to the Credit Agreement or any of
the other Loan Documents.
7. Effect on the Credit Agreement.
(a) Upon the effectiveness of this Third Amendment, each
reference in the Credit Agreement to "this Agreement," "hereunder," "hereof,"
"herein" or words of like import shall mean and be a reference to the Credit
Agreement as amended hereby.
(b) Except as specifically amended herein, the Credit
Agreement, the Loan Documents, and all other documents, instruments and
agreements executed and/or delivered in connection therewith, shall remain in
full force and effect, and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Third
Amendment shall not operate as a waiver of any right, power or remedy of
Administrative Agent or Lender, nor constitute a waiver of any provision of the
Credit Agreement, the Loan Documents, or any other documents, instruments or
agreements executed and/or delivered under or in connection therewith.
8. Governing Law. This Third Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
and shall be governed by and construed in accordance with the laws of the State
of Illinois.
9. Headings. Section headings in this Third Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Third Amendment for any other purpose.
10. Counterparts. This Third Amendment may be executed by the parties
hereto in one or more counterparts, each of which taken together shall be deemed
to constitute one and the same instrument.
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IN WITNESS WHEREOF, this Third Amendment has been duly
executed as of the day and year first written above.
INTEGRITY MEDIA, INC.
(f/k/a Integrity Incorporated)
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Senior Vice President
INTEGRITY PUBLISHERS, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Secretary/Treasurer
M2 COMMUNICATIONS, L.L.C.
By: /s/ Xxxxxxx Xxxxxxx
-------------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Governor
LASALLE BANK NATIONAL ASSOCIATION
By: /s/ Xxxxxxxx X. Xxxxxxx
-------------------------------------------
Name: Xxxxxxxx X. Xxxxxxx
Title: Commercial Banking Officer
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