EXHIBIT 10.43.1
HILCO CAPITAL LP
September 8, 2004
Source Interlink Companies, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Reference is made to that certain Loan Agreement, dated as of October
30, 2003 (the "Loan Agreement"), among Source Interlink Companies, Inc., a
Missouri corporation ("Parent"), each of Parent's Subsidiaries identified on the
signature pages thereof as a "Borrower" (such Subsidiaries, together with
Parent, are referred to hereinafter, each individually as a "Borrower", and
individually and collectively, jointly and severally, as the "Borrowers"), each
of Parent's Subsidiaries identified on the signature pages thereof as a
"Guarantor" (such Subsidiaries are referred to hereinafter, each individually as
a "Guarantor", and individually and collectively, jointly and severally, as the
"Guarantors"), the lenders signatory thereto (the "Lenders"), and Hilco Capital
LP, a Delaware limited partnership, as the agent for the Lenders ("Agent").
Capitalized terms that are defined in the Loan Agreement and used without
definition herein shall have the meanings given to them therein.
The Agent and the Lenders have been informed that, on the Payoff Date
(as hereinafter defined), the Borrowers will repay in full all of the
Obligations of the Borrowers to the Agent and the Lenders other than the
Surviving Obligations (as defined below) under or in respect of the Loan
Agreement (all Obligations other than the Surviving Obligations collectively,
the "Lender Obligations").
1) This letter will confirm that all of the Lender Obligations, other
than those obligations and liabilities of any Borrowers which survive
termination of the Loan Agreement as provided in the Loan Agreement and those
obligations in connection with the Common Stock Purchase Warrant, No. 2B, issued
in favor of Hilco Capital LP (the "Hilco Warrant"), the Warrantholders Rights
Agreement and the Warrant Valuation Letter as modified by this Agreement
(collectively, the "Surviving Obligations"), shall be deemed satisfied and paid
in full
upon receipt by the Agent of the following (the date on which all of the
conditions shall first be satisfied is herein referred to as the "Payoff Date"):
a) no later than 1:00 p.m., Chicago, Illinois time, on
September 9, 2004, a wire transfer of immediately available funds to the Agent
in the aggregate amount of $576,085.45, subject to adjustment as set forth in
Paragraph 2 below (as so adjusted, the "Payout Amount"), consisting of:
(i) $1,000.00 in respect of unpaid principal
outstanding under the Loan Agreement (assuming no further loans or
repayments are made);
(ii) $108,346.97 in respect of deferred interest and
accrued and unpaid interest on such unpaid principal amount, assuming
no changes in applicable interest rates and no changes in the
outstanding principal amount (the per diem accrual of such interest
being $6.42 per day);
(iii) $440,000 representing a non-refundable
monitoring fee in respect of the Monitoring Services payable for the
sole account of Agent (described below);
(iv) $6,738.48 representing expenses of the Agent
and/or the Lenders payable pursuant to the Loan Agreement; and
(v) $20,000.00 representing a security deposit (the
"Security Deposit") for fees and expenses of the Agent and/or the
Lenders payable pursuant to the Loan Agreement or the other Loan
Documents not included above; it being agreed and understood that any
amount of the Security Deposit remaining unapplied 180 days from the
Payoff Date shall be remitted to the Borrowers.
b) a fully executed counterpart of this letter agreement
signed by the Borrowers; and
c) an acknowledgment and consent executed by the Revolver
Agent and the Revolver Lenders and in form and substance acceptable to the Agent
which consents to the Borrowers' payoff of the Lender Obligations.
2) If the assumptions set forth above with respect to the calculation
of the principal, interest, fee, and expense components of the Payout Amount are
not correct, the Agent will so advise the Parent in writing on or before the
Payoff Date of the adjusted figure for the Payout Amount, reflecting the
appropriate changes in the amounts of principal, interest, fees, and expenses.
Without limiting the foregoing, for each day after September 9, 2004 that the
Payoff Amount is not received by 1:00 p.m., Chicago, Illinois time, the Payoff
Amount shall be increased by $6.42.
3) The Payout Amount is to be transferred to the Agent's account at
LaSalle Bank NA in Chicago, Illinois, ABA No. ▇▇▇▇▇▇▇▇▇, Account No. 5800248477,
Reference: Source
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Interlink, Attention: ▇▇▇▇ ▇▇▇▇▇, by wire transfer of immediately available
funds, for receipt no later than 1:00 p.m., Chicago, Illinois time, on the
Payoff Date.
4) The Borrowers hereby confirm that any commitments of the Agent and
the Lenders to make any loans under the Loan Agreement are terminated as of the
Payoff Date, and, as of the Payoff Date, the Agent and the Lenders have no
further obligation to make any loans to the Borrowers. Notwithstanding such
termination, the Surviving Obligations shall continue in full force and effect.
In furtherance thereof, the Borrowers acknowledge and agree that their
obligations and liabilities under the Loan Agreement and the other Loan
Documents shall be reinstated with full force and effect if, at any time on or
after the Payoff Date, all or any portion of the Payout Amount or any other
amounts applied by the Agent or any Lender to the Lender Obligations is voided
or rescinded or must otherwise be returned by the Agent or any Lender to the
Borrowers upon the Borrowers' insolvency, bankruptcy or reorganization or
otherwise.
5) The Borrowers acknowledge that the amounts referred to in Paragraph
1 above are due and owing pursuant to the provisions of the Loan Agreement and
confirms their agreement to the terms and provisions of this letter by returning
to the Agent a signed counterpart of this letter. This letter may be executed in
several counterparts (and by each party on a separate counterpart), each of
which when so executed and delivered shall be an original, but all of which
together shall constitute one agreement.
6) The Borrowers hereby release and forever discharge the Agent and
each of the Lenders and their respective representatives, predecessors, assigns,
officers, directors, agents, employees and attorneys from any and all claims,
demands, debts, liabilities, actions, and causes of action of every kind and
character based upon or arising out of the Loan Agreement and the other Loan
Documents.
7) In consideration of the payment of the non-refundable monitoring fee
for the sole account of the Agent described in Paragraph 1(iii) above, Hilco
Capital LP ("Hilco") agrees, for a period commencing on the 91st day following
the Payoff Date and ending on the first anniversary of the Payoff Date, at the
request of Parent, to review the financial statements of Borrowers furnished by
Parent to Hilco as and when such financial statements are publicly available in
connection with any proposed transactions regarding Borrowers which Borrowers
desire Hilco, in its sole and absolute discretion, to consider financing (the
"Monitoring Services"). However, nothing contained herein shall create any
obligation or commitment of any kind on the part of Hilco to provide any
financing for any such proposed transaction or restrict Hilco from requiring
payment of additional fees and expenses as a condition to assessing the
desirability of providing any such financing. Borrowers acknowledge and agree
that Hilco may, in its sole and absolute discretion, elect to decline to provide
any such financing and that if Hilco, in is sole and absolute discretion, elects
to provide any such financing, the terms and conditions of such financing
arrangement will be set forth in a separate written agreement between Hilco and
Borrowers. Borrowers also acknowledge and agree that no part of the monitoring
fee described in Paragraph 1(iii) hereof shall be deemed applicable to or
credited against any amounts which may be owing by any Borrower in connection
with any proposed financing and that the monitoring fee described in Paragraph
1(iii) shall be deemed earned in full as of the Payoff Date and non-refundable.
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8) Effective on the Payoff Date, (i) Hilco hereby waives each of its
rights under Section 15 (Put Rights) of the Hilco Warrant and agrees that Hilco
and its successors and assigns will not thereafter be entitled to exercise such
put rights under the Hilco Warrant and (ii) Parent herby waives each of its
rights under Section 16 (Call Rights) of each of (a) the Hilco Warrant, (b) the
Common Stock Purchase Warrant No. 3B issued in favor of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. (the
"Goldman Warrant") and (c) the Common Stock Purchase Warrant No. 4B issued in
favor of Highbridge/▇▇▇▇▇ Special Opportunities Fund, LP (the "Highbridge
Warrant", and together with the Hilco Warrant and the Goldman Warrant,
collectively, the "Warrants") and agrees that Parent and its successors and
assigns shall not be entitled thereafter to exercise such call rights under the
Warrants. In addition, Hilco agrees to either (a) cause the Highbridge Warrant
and the Goldman Warrant to be amended so as to waive the terms of Section 15
(Put Rights) of each of the Highbridge Warrant and Goldman Warrant or (b) use
reasonable efforts under its participation agreements with ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co.
("Goldman") and Highbridge/▇▇▇▇▇ Special Opportunities Fund, LP ("Highbridge")
to cause each of Goldman and Highbridge to sell all of the common stock of
Parent issuable under the Goldman Warrant and the Highbridge Warrant within 90
days of the Payoff Date so long as Parent (i) timely complies with each of its
obligations under the Warrants to issue the common stock of Parent ("Common
Stock") issuable pursuant to the Warrants as and when requested in accordance
with the Warrants, (ii) maintains an effective Registration Statement (as
defined in the Warrantholders Rights Agreement) covering the public resale of
the Common Stock issuable pursuant to the Warrants and (iii) complies with each
of obligations and duties of Parent contained in Article III of the
Warrantholders Rights Agreement.
9) The Agent and the Lenders agree to execute and deliver at Borrowers'
sole expense such other documents as the may be reasonably requested and
furnished by Borrowers for the purpose of effectuating the terms of this letter
agreement
10) THIS LETTER AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE
OF ILLINOIS WITHOUT REGARD TO CHOICE OF LAW RULES. EACH OF THE PARTIES HERETO
HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS
SITTING IN THE CITY OF CHICAGO, ILLINOIS, FOR PURPOSES OF ALL LEGAL PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS LETTER AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH SUCH PARTY MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH
A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE PARTIES HERETO IRREVOCABLY
CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN THE LOAN
AGREEMENT. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS
LETTER AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
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11) This letter agreement shall terminate and be of no further force
and effect if the Payout Amount is not received by September 14, 2004.
[Signature Page Follows]
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Very truly yours,
HILCO CAPITAL LP,
as the Agent and a Lender
By: /s/▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇
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Title: Senior Vice President
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FORTRESS CREDIT OPPORTUNITIES I LP,
as a Lender
By: FORTRESS CREDIT OPPORTUNITIES I GP
LLC, its general partner
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Title: Chief Credit Officer
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FORTRESS CREDIT OPPORTUNITIES II LP,
as a Lender
By: FORTRESS CREDIT OPPORTUNITIES II GP
LLC, its general partner
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Title: Chief Credit Officer
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Agreed to by the undersigned:
SOURCE INTERLINK COMPANIES, INC.
a Missouri corporation
SOURCE-U.S. MARKETING SERVICES, INC.
a Delaware corporation
BRAND MANUFACTURING CORP.
a New York corporation
SOURCE-MYCO, INC.
a Delaware corporation
SOURCE-▇▇▇▇▇▇ INDUSTRIES, INC.
a Delaware corporation
SOURCE-HUCK STORE FIXTURE COMPANY
a Delaware corporation
HUCK STORE FIXTURE COMPANY OF NORTH CAROLINA
a North Carolina corporation
INTERNATIONAL PERIODICAL DISTRIBUTORS, INC.
a Nevada corporation
▇▇▇▇▇ ▇. ▇▇▇▇▇, INC.
a New York corporation
SOURCE INTERLINK INTERNATIONAL, INC.
a Delaware corporation
By: /s/▇▇▇▇ ▇▇▇▇▇▇▇
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Title: Chief Financial Officer
