NationsBank
XX Xxx 00000
Xxxxx, Xxxxxxx 00000-0000
November 2, 1995
Spec's Music, Inc.
0000 X.X. 00xx Xxxxxx
Xxxxx, XX 00000
Attention: Xxxx Xxxxxxx Xxxxx, President
Re: Credit Agreement by and between Spec's Music, Inc.
("Borrower") and NationsBank of Florida, N.A. ("Lender"),
dated as of September 20, 1994, as amended by letter
agreement dated July 27, 1995 (the "Credit Agreement")
Ladies & Gentlemen:
Borrower has requested that the Credit Agreement be amended or modified
in several respects. In consideration for the Lender agreeing to the
modifications and amendments described herein, and for other good and valuable
consideration, Borrower and Lender agree as follows:
1. DEFINITIONS. Unless otherwise defined herein, all capitalized
terms used herein shall have the same meaning given to such terms in the Credit
Agreement.
2. EXISTING INDEBTEDNESS.
(a) The outstanding aggregate principal amount of all Advances
under the Revolving Credit is $11,800,000.00. As of the date hereof, accrued
interest under the Revolving Credit is $64,071.92.
(b) The amount of all standby letters of credit issued by Lender,
on behalf of and for the account of Borrower under the Standby L/C Line is
$881,375.00.
(c) Borrower acknowledges that it is indebted to Lender under the
Revolving Credit and the Standby L/C Line, as described above, that there are no
defenses or offsets claimed or existing thereon, and that no claims or
counterclaims exist against Lender with respect to the Loan Documents or
Borrower's obligations thereunder. Borrower further expressly waives and
releases in full any claim, counterclaim, defense or setoff (whether or not now
known to it) which it may have with respect to any of its indebtedness or
obligations under the Loan Documents. Borrower understands that this section
2(c) is a material inducement to Lender's agreement to enter into the
modification described herein.
November 2, 1995
Page 2
3. TANGIBLE NET WORTH. Effective as of July 31, 1995, Section 7.12
of the Credit Agreement is hereby deleted in its entirety and replaced with the
following:
"7.12 TANGIBLE NET WORTH. At all times, achieve and maintain
a Tangible Net Worth of not less than Sixteen Million Dollars ($16,000,000)."
4. FIXED CHARGE COVERAGE RATIO. Effective as of July 31, 1995,
Section 7.14 of the Credit Agreement is hereby deleted in its entirety and
replaced with the following:
"7.14 FIXED CHARGE COVERAGE RATIO. From and after November
30, 1995, achieve and maintain a Fixed Charge Coverage Ratio of not
less than 1.2 to 1.0. As used herein the Fixed Charge Coverage
Ratio shall be defined as follows: [net profit before interest
expense, taxes, and lease expense] divided by [the sum of interest
expense plus lease expense]. The Fixed Charge Coverage Ratio shall
be computed each month on a rolling twelve (12) month basis,
utilizing Borrower's financial results for the immediately
preceding twelve (12) months."
5. AMOUNTS OUTSTANDING. Section 2.1(a) of the Credit Agreement is
hereby amended and modified, so that the second paragraph thereof is deleted in
its entirety and replaced with the following:
"PERIOD AMOUNT OF REVOLVING CREDIT
Commencing the Closing Date Fifteen Million Dollars
through October 31, 1995 ($15,000,000)
October 31, 1995 through Fourteen Million Five
September 20, 1998 Hundred Thousand Dollars
($14,500,000)
September 20, 1998 through Thirteen Million Five Hundred
September 20, 1999 Thousand Dollars ($13,500,000)
September 20, 1999 through Twelve Million Dollars
September 20, 2000 ($12,000,000)
September 20, 2000 through Ten Million Dollars
September 20, 2001 ($10,000,000)
September 20, 2001 through Nine Million Dollars
September 20, 2002 ($9,000,000)
November 2, 1995
Page 3
September 20, 2002 through Seven Million Five Hundred
September 20, 2003 Thousand Dollars ($7,500,000)
September 20, 2003 through Six Million Dollars
September 20, 2004 ($6,000,000)"
6. MONTHLY REPORTING. Subsection 7.4(b) is hereby deleted in its
entirety and replaced with the following:
"(b) as soon as available, but in any event not later than thirty
(30) days after the end of each calendar month, unaudited financial
statements of the Borrower, including a balance sheet of the
Borrower as at the end of each month, and related statements of
income and retained earnings and all schedules thereto, all for the
period from the beginning of the then current fiscal year to the
end of such calendar month, the financial statements of the
Borrower setting forth in each case corresponding figures for the
like period of the preceding fiscal year; all in reasonable detail,
prepared in accordance with generally accepted accounting
principles applied on a basis consistently maintained throughout
the period involved and with prior periods."
7. DEFAULTS. Subsection 9.1(c) of the Credit Agreement is hereby
deleted it in its entirety and replaced with the following:
"(c) any default shall occur on the part of the Borrower in the due
observance or performance of any covenant, agreement or other
provision of this Agreement or any of the Loan Documents, other
than for the payment of money, which default remains uncured for a
period of thirty (30) consecutive days; PROVIDED, HOWEVER, that in
the case of defaults under or pursuant to Sections 7.11, 7.12,
7.13, 7.14, or 7.15, the default shall be allowed to remain uncured
only for a period of five (5) consecutive days."
8. NO NOVATION; RATIFICATION. This agreement is a modification
agreement and it is not a novation of the existing Loan Documents. The parties
agree that except as modified herein, all terms, conditions, rights and
obligations under the Loan Documents (as amended by the July 27, 1995, letter
agreement) are hereby reaffirmed and shall otherwise remain in full force and
effect as originally written and agreed. The Loan Documents, this agreement and
any document entered into in connection herewith, shall be construed to give
Lender the greatest possible cumulative rights and remedies; should there be any
apparent conflict between the Loan Documents, this agreement or any other
agreement, this principle of construction shall be applied. In addition, in the
event of any apparent conflict or ambiguity between the Loan Documents and this
agreement, the terms and provisions and intent of this agreement shall govern.
November 2, 1995
Page 4
9. COUNTERPARTS. This agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute one instrument.
If the foregoing accurately reflects our understanding, please sign below
indicating your acceptance thereof, which shall then constitute a modification
to the Credit Agreement.
Very truly yours,
NATIONSBANK OF FLORIDA, N.A.
By: /s/ XXXXXXXXX X. XXXX
-----------------------------
Xxxxxxxxx X. Xxxx
Vice President
Agreed and Accepted this
6 day of November, 1995.
SPEC'S MUSIC, INC.
By: /s/ XXXX XXXXXXX LIEFF
----------------------
Xxxx Xxxxxxx Xxxxx
President
