FOURTH AMENDMENT AND WAIVER TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT AND WAIVER TO CREDIT AGREEMENT dated as of June
16, 1997 (this "Fourth Amendment") amends the Credit Agreement dated as of
October 7, 1994 (as heretofore amended, the "Credit Agreement") among THE
MUSICLAND GROUP, INC. (the "Borrower"), MUSICLAND STORES CORPORATION ("MSC"),
various financial institutions (the "Banks") and XXXXXX GUARANTY TRUST COMPANY
OF NEW YORK, as Agent (in such capacity, the "Agent"). Terms defined in the
Credit Agreement are, unless otherwise defined herein or the context otherwise
requires, used herein as defined therein.
WHEREAS, the Borrower, MSC, the Banks and the Agent have entered into
the Credit Agreement;
WHEREAS, the parties hereto desire to amend the Credit Agreement as
hereinafter set forth; and
WHEREAS, concurrently herewith the Borrower, MSC and certain lenders
are entering into a term loan agreement (the "Term Loan Agreement") that will
provide for such lenders to make up to $50,000,000 of term loans to the Borrower
upon the satisfaction of certain conditions;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1 Amendments. Effective on (and subject to the occurrence of)
the Fourth Amendment Effective Date (as defined below), the Credit Agreement
shall be amended as set forth below:
.1.1 Amendments to Definitions. Section 1.1 shall be amended by:
(a) Amending the definitions of "Aggregate Available Commitment",
"Collateral", "Consolidated Net Worth", "Debt", "Eligible Inventory", "Eligible
Inventory Limit", "Fixed Charge Coverage Ratio", "Interest Expense", "Loan
Documents", "Permitted Liens", "Rent Expense" and "Senior Subordinated
Indenture" in their entireties to read as follows:
"Aggregate Available Commitment" means at any time the least
of (i) the aggregate amount of the Commitments of all Banks, (ii) the
Eligible Inventory Limit and (iii)(x) with respect to the period
prior to December 12, 1997, $275,000,000, (y) with respect to the
period from and including December 12, 1997 to and including February
15, 1998, $255,000,000 and (z) on and after February 16, 1998,
$245,000,000.
"Collateral" means all collateral on which the Agent or the
Collateral Agent has a Lien pursuant to the Loan Documents.
"Consolidated Net Worth" means, at any time, the consolidated
stockholder's equity of MSC and its Consolidated Subsidiaries
(calculated without giving effect to (i) Restructuring Charges, (ii)
the valuation allowance resulting from GAAP treatment of deferred
taxes, (iii) the impact of changes, under GAAP, with respect to the
reclassification as Debt of any lease which as of December 31, 1996
was classified as an Operating Lease and (iv) in the case of any
calculation of consolidated stockholder's equity as of December 31,
1997 and December 31, 1998, any potential future tax benefit from net
operating losses which would increase stockholders' equity) plus
Preferred Stock (excluding any Preferred Stock which is required to
be redeemed, in whole or in part, at any time prior to the date which
is 91 days after the Termination Date).
"Debt" of any Person means at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments, (iii) all obligations of such Person to
pay the deferred purchase price of property or services, other than
(x) trade accounts payable arising in the ordinary course of business
(provided that (A) trade accounts payable which bear interest shall
constitute Debt if, and to the extent that, the outstanding amount of
all trade accounts payable of MSC and its Subsidiaries which bear
interest exceeds $100,000,000 and (B) if at any time a Specified
Event (as defined below) exists, then all trade accounts payable of
MSC and its Subsidiaries which bear interest shall constitute Debt
until a Specified Event no longer exists) and (y) trade accounts
payable of such Person which are subject to a bona fide dispute
between such Person and the Person claiming payment, (iv) all
obligations of such Person as lessee under Capital Leases, (v) all
Debt of others secured by a Lien on any asset of such Person, whether
or not such Debt is assumed by such Person and (vi) all Debt of
others Guaranteed by such Person. For purposes of part (B) of the
proviso to clause (iii)(x) above, a Specified Event shall exist at
any time that the aggregate amount of all interest paid on trade
accounts payable of MSC and its Subsidiaries (calculated for the
period ending on the last day of the most recent month for which such
information is available) exceeds either (I) $5,000,000 for the
period of 12 consecutive months ending on the date of calculation or
(II) $2,000,000 for the period of three consecutive months ending on
the date of calculation.
"Eligible Inventory" means, as of any date, the value
(determined at the lower of cost or market on a first-in, first-out
basis) of all inventory owned by (and in the possession or under the
control of) the Borrower or any of its Subsidiaries to the extent
constituting readily marketable assets of a type sold by the Borrower
or such Subsidiary in the ordinary course of business
(excluding any such inventory which is subject to any Lien other than
the Lien in favor of the Collateral Agent arising under the Security
Agreement for the benefit of the Banks and the "Banks" under and as
defined in the Term Loan Agreement), provided that the Required Banks
(through the Agent) may at any time exclude from Eligible Inventory
any type of inventory that the Required Banks reasonably determine not
to be readily marketable or returnable to the vendor as set forth,
from time to time, in one or more notices from the Agent to the
Borrower.
"Eligible Inventory Limit" means, as of any date, the lesser
of (a) the amount of Debt (as defined in the Senior Subordinated
Indenture) permitted to be incurred by the Borrower and its
Subsidiaries pursuant to Section 3.8(a)(i) (and, to the extent
applicable, Section 3.8(a)(vii)) of the Senior Subordinated Indenture
and (b) an amount equal to 60% of Eligible Inventory as of the last
day of the most recent fiscal month for which the Borrower has
delivered to the Agent an Eligible Inventory Certificate.
"Fixed Charge Coverage Ratio" means, for any period of four
consecutive fiscal quarters of MSC ending on the last day of a fiscal
quarter, the ratio of (a) the sum of EBITDA for such period
(calculated without giving effect to (i) the valuation allowance
resulting from GAAP treatment of deferred taxes and (ii) the impact
of changes, under GAAP, with respect to the reclassification as Debt
of any lease which as of December 31, 1996 was classified as an
Operating Lease) plus Rent Expense for such period to (b) Fixed
Charges for such period plus Restricted Payments made in such period.
"Interest Expense" means, for any period, the interest expense
of MSC and its Consolidated Subsidiaries determined on a consolidated
basis for such period. Notwithstanding the foregoing, Interest
Expense shall not include any amount payable in respect of any lease
which was classified as an Operating Lease as of December 31, 1996
if, and to the extent that, such amount is included in Rent Expense.
"Loan Documents" means this Agreement, the Notes, the
Subsidiary Guaranty, the Musicland Pledge Agreement, the Security
Agreement and each Subsidiary Pledge Agreement, in each case as
amended or otherwise modified from time to time.
"Permitted Liens" means Liens permitted by Section 5.14.
"Rent Expense" means, for any period, the aggregate amount
payable during such period by a lessee with respect to and pursuant
to the terms of all Operating Leases as would be required to be
reported in the financial statements of MSC and its Consolidated
Subsidiaries for such period as the total rent expense in accordance
with generally accepted accounting principles
as in effect on the date of this Agreement; provided, however, that
any lease which was classified as an Operating Lease as of December
31, 1996 shall be treated as an Operating Lease for purposes of this
definition notwithstanding the reclassification under GAAP of such
lease as Debt after such date (and "Rent Expense" shall not include
the portion of any payment under such lease attributable to the
principal of the Debt under such lease as so reclassified).
"Senior Subordinated Indenture" means the Indenture dated as
of June 17, 1993 between MSC, the Borrower and Bank One, N.A.,
formerly known as Bank One, Columbus, N.A. (as successor to Xxxxxx
Trust and Savings Bank), as Trustee, pursuant to which the Senior
Subordinated Notes were issued, as amended or otherwise modified from
time to time.
(b) Adding the following definitions, each in the appropriate
alphabetical position:
"Base Rate Margin" means a per annum rate equal to (x) for the
period prior to April 30, 1998, 0.25% and (y) thereafter, 0.50%.
"Collateral Agent" means Xxxxxx Guaranty Trust Company of New
York in its capacity as collateral agent for the Banks hereunder and
the lenders under the Term Loan Agreement, and its successors in such
capacity.
"Restructuring Charges" means (x) up to $75,000,000 of
liabilities recorded on the books of MSC in 1996 in connection with
facility closing decisions, termination of employees and costs
related to the foregoing, (y) up to $20,000,000 of liabilities (not
more than $10,000,000 of which may be cash charges) recorded on the
books of MSC after December 31, 1996 in connection with facility
closing decisions, termination of employees and costs related to the
foregoing and (z) up to $3,000,000 of non-recurring professional fees
recorded on the books of MSC in any fiscal quarter beginning with the
fiscal quarter ended March 31, 1997.
"Security Agreement" means a Security Agreement among the
Borrower, various Subsidiaries and the Collateral Agent substantially
in the form of Attachment 3 to the Fourth Amendment to this
Agreement, as amended or otherwise modified from time to time.
"Term Loan Agreement" means the Term Loan Agreement dated as
of June 16, 1997 among MSC, the Borrower, certain lenders and Xxxxxx
Guaranty Trust Company of New York, as agent, as amended or otherwise
modified from time to time.
(c) Deleting the definitions of "Debt and Trade Payables to
Eligible Inventory Ratio", "Excess Amount" and "1996 Restructuring Charge".
(d) Deleting clause (F) from the definition of "Net Income" and
inserting in lieu thereof "(F) Restructuring Charges and, if applicable,
non-recurring professional fees recorded on the books of MSC in the third and
fourth fiscal quarters of 1996".
(e) Deleting the words "one, two, three or six months" where they
appear in clause (1) of the definition of "Interest Period" and inserting in
lieu thereof "one, two or three months."
(f) Deleting the text of clauses (1)(c), (2)(b), (4)(c) and (5)(b) in
the definition of "Interest Period" and inserting in lieu thereof the following
new text in each of such clauses:
"the Borrower may not select any Interest Period which would
end after the Termination Date or which would result in the
aggregate principal amount of all Fixed Rate Loans having
Interest Periods ending after any date on which the
Commitments are to be reduced pursuant to clause (iii) of
the definition of Aggregate Available Commitment being in
excess of the amount of the maximum amount of the Aggregate
Available Commitment as so reduced on the applicable date."
.1.2 Amendments to Interest Rate Provisions. Section 2.8 shall be
amended by (i) adding the words "plus the Base Rate Margin" at the end of the
first sentence of Section 2.8(a), (ii) deleting the number "2%" where it appears
in the third sentence of Section 2.8(a) and inserting in lieu thereof "2.25%
(or, on and after April 30, 1998, 2.5%)", (iii) deleting the second sentence of
Section 2.8(c) and inserting in lieu thereof the following:
Such interest shall be payable for each Interest Period on
the last day thereof and, if such Interest Period is longer
than one month, at intervals of one month after the first
day thereof.
and (iv) deleting the definition of "Euro-Dollar Margin" in Section 2.8(c) and
inserting in lieu thereof the following:
"Euro-Dollar Margin" means a rate per annum equal to (x) for
the period prior to April 30, 1998, 1.75% and (y)
thereafter, 2.00%.
.1.3 Amendments to Conditions Precedent to Credit Extensions.
Section 3.2 shall be amended by deleting clause (g) and inserting in lieu
thereof the following:
(g) in the case of any Credit Extension (other than a
Refunding Borrowing), the fact that, as of the most recent date
reported on by the Borrower, the aggregate amount of all trade
accounts payable of MSC and its
Subsidiaries arising out of the purchase of inventory is not less than
the aggregate amount of all Outstanding Credit Extensions;
.1.4 Amendment to Material Adverse Change Representation. Section
4.4 shall be amended by deletingclause (c) and inserting in lieu thereof the
following:
"(c) Except as disclosed in MSC's Form 10-Q for the quarter
ended March 31, 1997 as filed with the Securities and
Exchange Commission, since December 31, 1996 there has been
no material adverse change in the business, financial
position or results of operations of MSC and its
Consolidated Subsidiaries, taken as a whole."
.1.5 Amendments to Reporting Covenants. Section 5.1 shall be
amended by deleting clauses (j) through (o) thereof and substituting the
following therefor.
(j) within 90 days after the end of each fiscal year of MSC,
(a) a consolidated financial forecast of the revenues, earnings and
cash flow of MSC and its Consolidated Subsidiaries for the following
fiscal year, with such forecast to be accompanied by supporting
schedules setting forth the material assumptions employed, all
prepared in reasonable detail, and (b) a monthly cash flow budget for
the following 12 months, substantially in the form of Exhibit N
hereto;
(k) bi-weekly not later than the Friday following the week
ended the previous Saturday, commencing June 27, 1997 and continuing
every two weeks thereafter, a certificate of the chief financial
officer or the Treasurer (or, in the absence of both of the
foregoing, an Assistant Treasurer) of MSC with respect to inventory
and trade accounts payable, available cash balances of MSC and its
Subsidiaries detailed by account, and receipts/disbursements cash
flow, all substantially in the form of Exhibit O hereto;
(l) monthly not later than 20 days after the end of each
month, a certificate of the chief financial officer or the Treasurer
(or, in the absence of both of the foregoing, an Assistant Treasurer)
of MSC with respect to cash flows for such month, substantially in
the form of Exhibit P hereto;
(m) monthly not later than 30 days (or (i) in the case of
January, 60 days, (ii) in the case of March, June and September, 45
days and (iii) in the case of December, 90 days) after the end of
each month, a monthly statement of operations of MSC and its
Subsidiaries substantially in the form delivered to the Banks prior
to the date of the Fourth Amendment to this Agreement; and
(n) from time to time such additional information regarding
the financial position, results of operations or business of MSC or
any of its Subsidiaries as the Agent, at the request of any Bank, may
reasonably request.
1.6 Amendment of Fixed Charge Coverage Covenant.Section 5.7 shall be
amended and restated to read in its entirety as follows:
SECTION 5.7. Fixed Charge Coverage Ratio. MSC will not permit
the Fixed Charge Coverage Ratio as of the last day of any fiscal
quarter ending during any period set forth below to be less than the
ratio set forth for such period:
(a) 0.75 to 1.0 for the period from March 31, 1997 to December
30, 1997;
(b) 0.95 to 1.0 for the period from December 31, 1997 to March
30, 1998;
(c) 1.0 to 1.0 for the period from March 31, 1998 to June 29,
1998;
(d) 1.05 to 1.0 for the period from June 30, 1998 to September
29, 1998;
(e) 1.13 to 1.0 for the period from September 30, 1998 to
December 30, 1998; and
(f) 1.20 to 1.0 for the period on and after December 31, 1998.
.1.7 Amendment of Net Worth Covenant. Section 5.8 shall be amended
and restated to read in its entirety as follows:
SECTION 5.8. Consolidated Tangible Net Worth. MSC will not
permit Consolidated Tangible Net Worth at any time to be less than
the sum of
(a) with respect to any period set forth below, the amount set
forth across from such period
Period Amount
------ ------
3/31/97 - 6/29/97 ($10,000,000)
6/30/97 - 9/29/97 ($30,000,000)
9/30/97 - 12/30/97 ($50,000,000)
12/31/97 - 3/30/98 ($ 5,000,000)
3/31/98 - 6/29/98 ($15,000,000)
6/30/98 - 9/29/98 ($30,000,000)
9/30/98 - 12/30/98 ($40,000,000)
12/31/98 - 3/30/99 ($10,000,000)
3/31/99 - 6/29/99 ($25,000,000)
6/30/99 and thereafter ($35,000,000)
plus (b) 50 percent of the Net Securities Proceeds received by MSC on
or after December 31, 1995 from issuance of its Capital Stock or any
rights in respect thereof plus (c) 50 percent of any excess of (x) the
Net Securities Proceeds received by the Borrower or any Wholly-Owned
Subsidiary of the Borrower from the sale or other disposition of the
Capital Stock of any Subsidiary over (y) the book value of such Capital
Stock, without giving effect to any write-up or writedown of such book
value after March 29, 1996.
For purposes of computing changes in MSC's Consolidated
Tangible Net Worth resulting from any consolidated after-tax net income
or loss for any period other than a full fiscal year, MSC's tax
liability or tax benefit for such period shall be computed using an
effective combined federal, state and local income tax rate of 42% on
the consolidated net income or loss of MSC through such date in lieu of
the tax liability or tax benefit prescribed by GAAP.
1.8 Amendment of Debt to Capitalization Covenant. Section 5.9
shall be amended and restated to read in its entirety as follows:
SECTION 5.9. Debt to Total Capitalization Ratio. MSC will not
permit the ratio of (a) the consolidated Debt of MSC and its
Consolidated Subsidiaries to (b) the sum of (i) the consolidated Debt
of MSC and its Consolidated Subsidiaries plus (ii) Consolidated Net
Worth (without giving effect to any writedown of goodwill after
December 31, 1996) as of the last day of any fiscal quarter ending
during any of the periods set forth below to be greater than the ratio
set forth for such period:
(a) .70 to 1.0 for the period from March 31, 1997 to June 29
1997;
(b) .75 to 1.0 for the period from June 30, 1997 to September
29, 1997;
(c) .80 to 1.0 for the period from September 30, 1997 to
December 30, 1997;
(d) .70 to 1.0 for the period from December 31, 1997 to June
29, 1998;
(e) .72 to 1.0 for the period from June 30, 1998 to September
29, 1998;
(f) .75 to 1.0 for the period from September 30, 1998 to
December 30, 1998;
(g) .70 to 1.0 for the period from December 31, 1998 to March
30, 1999; and
(h) .75 to 1.0 thereafter.
.1.9 Amendments to Debt Covenant. Section 5.11 shall be amended by (i)
deleting the words "Intentionally deleted" after the designation (e) and
inserting in lieu thereof "Debt under the Term Loan Agreement in an aggregate
principal amount not exceeding $50,000,000", (ii) deleting the word "and"
following clause (g) thereof, (iii) changing the designation of clause (h) from
"(h)" to "(j)" and, within such new clause (j), substituting the words "clause
(j)" for the reference to "clause (h)" and (iv) inserting the following clauses
(h) and (i):
(h) intercompany debt up to $10,000,000 resulting solely from
the non-cash impact of accounting for stock contributions related to
the Borrower's existing KSOP; and
(i) Debt resulting from any reclassification, under GAAP, as
Debt of any lease which at any time prior to January 1, 1997 was a
Synthetic Lease or an Operating Lease and any refinancings of such Debt
(provided that the amount of Debt so refinanced shall not be greater
than the original amount of Debt under the applicable lease as so
reclassified); and
1.10 Amendments to Synthetic Lease Covenant. Section 5.12 shall be
amended by (i) deleting each reference in clause (a) thereof to "clause (h)" and
inserting in lieu of each thereof the words "clause (j)" and (ii) inserting the
following clause (c) at the end thereof:
(c) MSC will not, and will not permit any Subsidiary to, enter
into any amendment to or other modification of any document relating to
any Synthetic Lease Transaction (as defined in Section 2 of the Fourth
Amendment to this Agreement) which would (i) permit any additional Lien
to secure any obligation thereunder, (ii) provide for any payment of
fees, increase in interest rates or other material benefit which is
more favorable than corresponding terms included in the Third and
Fourth Amendments (or any subsequent amendment) to this Agreement or
(iii) provide for any payment of any Synthetic Lease Obligation which
would result in the lenders thereunder having received payment of a
greater percentage of the original amount of the Synthetic Lease
Obligations thereunder than the percentage in the reductions in the
amount of the original Commitments hereunder which have been made since
December 1, 1996.
.1.11 Amendments to Lien Covenant. Section 5.14 shall be amended by (i)
deleting the word "and" following clause (f) thereof; (ii) changing the
designation of clause (g) from "(g)" to "(i)"; (iii) inserting the following
clauses (g) and (h) therein:
(g) Liens securing the obligations under the Term Loan
Agreement and any guaranty thereof;
(h) Liens securing Debt permitted by Section 5.11(i);
(iv) deleting the words "clauses (a) through (g)" in the final paragraph of such
Section and inserting in lieu thereof the words "clauses (a) through (i)"; and
(v) deleting clause (ii) of the final paragraph of such Section and inserting in
lieu thereof the following:
(ii) the Borrower will not at any time permit the aggregate
amount of all obligations secured by Liens on inventory of the Borrower
and its Subsidiaries (other than Liens described in clauses (a) and (g)
above) to exceed $5,000,000.
.1.12 Amendments to Capital Expenditure Covenant. (a) Clause (a) of
Section 5.16 shall be amended and restated to read in its entirety as follows:
(a) MSC will not, and will not permit any of its Subsidiaries
(other than the Borrower and its Subsidiaries) to, make any Capital
Expenditure. The Borrower will not, and will not permit any of its
Subsidiaries to, make any Capital Expenditure in any fiscal year of MSC
in excess, in the aggregate for the Borrower and its Subsidiaries, of
the amount set forth below for such fiscal year (provided that the
amount permitted, for the 1998 fiscal year shall be increased by the
amount, if any, by which $20,000,000 exceeds the actual Capital
Expenditures made by the Borrower and its Subsidiaries in the 1997
fiscal year).
Fiscal year ended Amount
12/31/97 $20,000,000
12/31/98 $22,000,000.
For purposes of calculating the amount of Capital Expenditures in any
year, the reclassification, under GAAP, as Debt of any lease which at
any time prior to January 1, 1997 was a Synthetic Lease or an Operating
Lease shall be disregarded, except that any increase in the amount of
the annual payments under any lease which is so reclassified or is
refinanced shall constitute a Capital Expenditure; and
(b) Section 5.16 is further amended by deleting the
definitions of "Excess Amount" and "Carryover Amount" therein.
.1.13 Amendments to Guarantee Covenant. Section 5.18 shall be
amended by deleting clause (d) and inserting in lieu thereof the following:
(d) Guarantees by MSC and Subsidiaries of the Borrower of the
obligations of the Borrower under the Term Loan Agreement.
.1.14 Revision of Certain Covenants. Sections 5.23 and 5.24 shall
be amended and restated to read in their entireties as follows:
SECTION 5.23. Security Agreement. So long as the combined
Commitments of all Banks, or the Outstanding Credit Extensions, exceed
$245,000,000, the Borrower will, and will cause each Subsidiary to,
take such actions as are necessary or as the Agent (acting at the
request of any Bank) may reasonably request from time to time to ensure
that the Collateral Agent has, pursuant to the Security Agreement, a
perfected, first-priority Lien (subject only to Permitted Liens) on
substantially all inventory of the Borrower and its Subsidiaries
(excluding inventory of TMG U.K.-Delaware located outside the United
States) securing any portion of the Outstanding Credit Extensions in
excess of $245,000,000.
SECTION 5.24. [Intentionally Deleted.]
.1.15 Amendment to Default Provisions. Clause (a) of Section 6.1 shall
be amended by adding a comma and the following language before the semicolon at
the end thereof: "and, solely in the case of any mandatory prepayment due on
December 12, 1997 as a result of the scheduled reduction in the Aggregate
Available Commitment on such date, such failure shall continue for one Domestic
Business Day."
.1.16 Amendment of Trade Payable Defaults. Clauses (o) and (p)
of Section 6.1 shall be amended in their entirety to read as follows:
(o) the aggregate amount of all trade accounts payable of MSC
and its Subsidiaries arising out of the purchase of inventory shall be
less than 85% of the Outstanding Credit Extensions as of any date for
which trade accounts payable are reported pursuant to Section 5.1(k);
or
(p) the aggregate amount of all trade accounts payable of MSC
and its Subsidiaries arising out of the purchase of inventory shall be
less than the Outstanding Credit Extensions as of any two consecutive
dates for which trade payables are reported pursuant to Section 5.1(k);
1.17 Pricing Schedule. The Pricing Schedule shall be amended by
deleting all references therein to "Euro-Dollar Margin" and "CD Margin".
.1.18 Amendments of Exhibits. Exhibits M, N, O, P and Q shall be
deleted and replaced by Exhibits M, N, O and P hereto, respectively.
SECTION 2 Waiver. Effective on (and subject to the occurrence of) the
Fourth Amendment Effective Date, the Required Lenders waive any Event of Default
arising under Section 6.1(f) of the Credit Agreement with respect to any
Synthetic Lease Transaction; provided that (i) such waiver shall only be
effective until the date of the initial loans under the Term Loan Agreement and
(ii) notwithstanding such waiver, an Event of Default shall exist immediately if
any event or condition shall occur which results in the acceleration of any
Synthetic Lease Obligations in excess of the maximum amount permitted to be paid
pursuant to Section 5.12(c) of the Credit Agreement. For purposes of the
foregoing, "Synthetic Lease Transaction" means each of (a) the Participation
Agreement dated as of May 12, 1995 among NatWest Leasing Corporation, Media Play
Trust, Yasuda Bank and Trust Company, National Westminster Bank Plc, various
other lenders and Media Play, Inc., and the Master Lease and other documents
referred to therein and (b) the Participation Agreement dated as of March 31,
1994 among Musicland Retail, Inc., Shawmut Bank Connecticut, National
Association, Kleinwort Xxxxxx Limited, The Long-Term Credit Bank of Japan, Ltd.,
Chicago Branch, Credit Lyonnais Cayman Island Branch and The Fuji Bank, Limited,
and the Master Lease and other documents referred to therein.
SECTION 3 Representations and Warranties. The Borrower and MSC represent
and warrant to the Agent and the Banks that (a) except to the extent disclosed
in annual and quarterly filings filed by MSC or the Borrower with the Securities
and Exchange Commission since October 7, 1994, each representation and warranty
set forth in Section 4 of the Credit Agreement, as amended hereby (as so
amended, the "Amended Credit Agreement"), is true and correct as of the date of
the execution and delivery of this Fourth Amendment by the Borrower and MSC (and
assuming the effectiveness hereof), with the same effect as if made on such
date; (b) the execution and delivery by the Borrower and MSC of this Fourth
Amendment, the execution and delivery by the Borrower and each applicable
Subsidiary of the Security Agreement (as defined below) and the execution and
delivery by the Borrower, MSC and each applicable Subsidiary of the other
documents to be executed by such entity pursuant hereto, the performance by the
Borrower and MSC of their respective obligations under the Amended Credit
Agreement and the performance by the Borrower and each applicable Subsidiary of
their respective obligations under the Security Agreement (i) are within the
corporate powers of the Borrower, MSC and each applicable Subsidiary, (ii) have
been duly authorized by all necessary corporate action on the part of the
Borrower, MSC and each applicable Subsidiary, (iii) have received all necessary
governmental and regulatory approval and (iv) do not and will not contravene or
conflict with, or result in or require the creation or imposition of any Lien
(other than Liens arising under the Security Agreement) under, any provision of
Applicable Law or of the respective certificate of incorporation or by-laws of
the Borrower, MSC or any applicable Subsidiary or of any agreement, instrument,
order or decree which is binding upon the Borrower, MSC or any applicable
Subsidiary; (c) the Amended Credit
Agreement is the legal, valid and binding obligation of each of the
Borrower and MSC, enforceable against the Borrower and MSC in accordance with
its terms; and (d) when duly executed and delivered, the Security Agreement will
be the legal, valid and binding obligation of the Borrower and each applicable
Subsidiary, enforceable against each such entity in accordance with its terms.
SECTION 4 Effectiveness. The amendments set forth in Section 1 and the waiver
set forth in Section 2 above shall become effective on the date (the "Fourth
Amendment Effective Date") when (a) the Agent shall have received
(i) counterparts of this Fourth Amendment executed by the
Borrower, MSC and the Required Banks (it being understood that, in the
case of any Bank, the Agent may rely upon facsimile confirmation of the
execution of a counterpart hereof by such Bank for purposes of
determining the effectiveness hereof);
(ii) for the account of each Bank, an amendment fee equal to
0.375% of such Bank's Commitment (it being understood that the Agent
shall distribute the applicable fee to each Bank promptly upon receipt
thereof);
(iii) opinions of Xxxxx Xxxxx Xxxxxx, Assistant General
Counsel of the Borrower, substantially in the form of Attachment 1
hereto, and Xxxxxx & Xxxxxxx, substantially in the form of Attachment 2
hereto;
(iv) counterparts of a Security Agreement in substantially the
form of Attachment 3 hereto (the "Security Agreement") executed by the
Borrower, each Subsidiary of the Borrower and Xxxxxx Guaranty Trust
Company of New York, in its capacity as collateral agent for the Banks
and the lenders under the Term Loan Agreement (the "Collateral Agent");
(v) evidence that the Borrower and its Subsidiaries have
executed and delivered to the Collateral Agent such UCC-1 Financing
Statements and such other documents, instruments and certificates as
the Collateral Agent may deem necessary or desirable to perfect the
Collateral Agent's Lien in the property subjected to a security
interest by the Security Agreement, together with evidence of the due
filing of such financing statements in all jurisdictions deemed
necessary or desirable by the Collateral Agent;
(vi) evidence satisfactory to the Agent that the required
majority of the holders of the Senior Subordinated Notes have waived
all provisions of the Senior Subordinated Indenture that would prohibit
the incurrence of the Debt contemplated under the Term Loan Agreement
or would prohibit, or require that an equal and ratable Lien be granted
in
connection with, the Liens in favor of the Collateral Agent under
the Security Agreement; and
(vii) all documents the Agent may reasonably request relating
to the existence of the Borrower and the other Loan Parties, the
corporate authority for and the validity of this Agreement and the
other Loan Documents, and any other matters relevant hereto, all in
form and substance satisfactory to the Agent; and
(b) the Borrower shall have received amendments to existing synthetic
leases acceptable to the Borrower, it being understood that the Borrower may, in
its sole discretion, waive this clause (b).
SECTION 5 Miscellaneous.
5.1 Continuing Effectiveness, etc. As herein amended, the Credit
Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects. After the Fourth Amendment Effective Date, all
references in the Credit Agreement and the other Loan Documents to "Credit
Agreement", "Agreement" or similar terms shall refer to the Amended Credit
Agreement.
5.2 Counterparts. This Fourth Amendment 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 Fourth Amendment.
5.3 Governing Law. This Fourth Amendment shall be a contract made under
and governed by the internal laws of the State of New York applicable to
contracts made and to be performed entirely within such State.
5.4 Successors and Assigns. This Fourth Amendment shall be binding upon
the Borrower, MSC, the Banks and the Agent and their respective successors and
assigns, and shall inure to the benefit of the Borrower, MSC, the Banks and the
Agent and the respective successors and assigns of the Banks and the Agent.
5.5 Limitation on CD Loans. Notwithstanding anything to the contrary in
the Credit Agreement or in any other Loan Document, the Borrower may no longer
borrow CD Loans or maintain or convert any Borrowing into CD Loans.
5.6 Collateral Agent. (a) The Required Banks hereby authorize the Agent
to act as Collateral Agent under the Security Agreement. The Required Banks, the
Company and the Agent hereby agree that (i) in so acting, the Collateral Agent
shall be entitled to all rights, exculpations, immunities, benefits and
privileges accorded to the "Agent" under the Credit Agreement and (ii) each
reference in Article VII and Sections 10.3 and 10.8 of the Credit Agreement to
the "Agent" shall be deemed to include the Agent acting in its capacity as the
Collateral Agent.
(b) Without limiting clause (a) above, the Collateral Agent is
authorized on behalf of all Banks, without the necessity of any notice to or
further consent from the Banks, from time to time to take any action with
respect to the Security Agreement and any collateral thereunder which may be
necessary to perfect and maintain perfected the Liens upon the collateral
granted pursuant to the Security Agreement.
5.7 Costs and Expenses. Without limiting the provisions of Section 10.3
of the Credit Agreement, the Borrower agrees to pay (i) the reasonable fees and
charges of Xxxxx, Xxxxx & Platt, Zalkin, Rodin & Xxxxxxx LLP and Ernst & Young
LLP, professional advisors to the Agent and the Banks, in connection with the
Credit Agreement, this Fourth Amendment and matters relating thereto (including
the monitoring and administration of the provisions hereof and thereof), and any
additional amendments to or waivers under the Credit Agreement (such fees and
charges to be billed monthly and paid, without application of any deposit, not
later than 20 days after receipt by the Borrower) and (ii) the reasonable
out-of-pocket expenses of the Banks (excluding professional fees other than (x)
those described above and (y) those provided for in Section 10.3 of the Credit
Agreement; it being understood and agreed that the Banks are not entitled to
payment of any professional fees under Section 10.3(a)(ii) of the Credit
Agreement based on any Event of Default occurring prior to the Fourth Amendment
Effective Date) in connection with the Credit Agreement.
5.8 Going Concern Qualification. The Required Banks hereby agree that a
"going concern" qualification shall be an acceptable qualification in MSC's
audit reports for the years ending December 31, 1996 and December 31, 1997
delivered pursuant to Section 5.1(a) of the Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Amendment to be duly executed by their respective authorized officers as of the
day and year first above written.
THE MUSICLAND GROUP, INC.
By
--------------------------
Title:
MUSICLAND STORES CORPORATION
By
--------------------------
Title:
XXXXXX GUARANTY TRUST COMPANY
OF NEW YORK
By
--------------------------
Title:
FIRST BANK NATIONAL ASSOCIATION
By
--------------------------
Title:
THE BANK OF TOKYO-MITSUBISHI,
LTD.
By
--------------------------
Title:
THE BANK OF NOVA SCOTIA
By
-------------------------
Title:
CITIBANK, N.A.
By
-------------------------
Title:
CREDIT AGRICOLE
By
-------------------------
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By
-------------------------
Title:
XXXXX FARGO BANK
By
-------------------------
Title:
THE FUJI BANK, LIMITED
By
------------------------
Title:
THE HOKKAIDO TAKUSHOKU BANK,
LTD., NEW YORK BRANCH
By
------------------------
Title:
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD., CHICAGO BRANCH
By
------------------------
Title:
NBD BANK, N.A.
By
------------------------
Title:
PNC BANK, NATIONAL ASSOCIATION
By
------------------------
Title:
SOCIETE GENERALE
By
------------------------
Title:
BEAR, XXXXXXX INVESTMENT
PRODUCTS INC.
By
------------------------
Title:
XXXXXXX LYNCH, PIERCE, XXXXXX
& XXXXX INCORPORATION
By
------------------------
Title:
BANK OF AMERICA ILLINOIS
By
------------------------
Title:
DLJ CAPITAL FUNDING, INC.
By
------------------------
Title:
MORGENS WATERFALL DOMESTIC
PARTNERS, L.L.C.
By
------------------------
Title:
NATIONSBANK, N.A.
By
------------------------
Title:
FERNWOOD RESTRUCTURINGS LTD.
By
------------------------
Title:
HALCYON DISTRESSED SECURITIES,
L.P.
By
------------------------
Title:
XXXXXX GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By
------------------------
Title:
EXHIBIT M
---------
NOTICE OF COMMITTED BORROWING1
Date: , 199
------ --
To: Xxxxxx Guaranty Trust Company of New York, as Agent for the
Banks under the Credit Agreement dated as of October 7, 1994
(as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement") among The Musicland Group, Inc.,
Musicland Stores Corporation, the Banks party thereto and
Xxxxxx Guaranty Trust Company of New York, as Agent.
Ladies/Gentlemen:
Please refer to the Credit Agreement. Capitalized terms used herein
have the meanings ascribed to such terms in the Credit Agreement.
The Borrower hereby gives you notice irrevocably, pursuant to Section
2.2 of the Credit Agreement, of the Borrowing specified below:
() The date of the proposed Borrowing is , 199 .
-------- --
() The aggregate amount of the proposed Borrowing is $ .
-------
() The Borrowing is to be comprised of $------- of [Base Rate
Loans][Euro-Dollar Loans] having an Interest Period of -------
[days/months].
The Borrower hereby certifies that the following statements will be
true on the date of the proposed Borrowing, before and after giving effect
thereto and to the application of the proceeds thereof:
() The representations and warranties of the Borrower
contained in the Credit Agreement will be true on as of such date
(except (i) in the case of a Refunding Borrowing, the representations
and warranties set forth in Section 4.4(c) and 4.6 as to any matter
which has theretofore been disclosed in writing by the Borrower or MSC
to the Banks, and (ii) in the case of any Borrowing before March 31,
1997, the representation and warranty set forth in Section 4.4(c)).
-----------
1 Revise appropriately for other types of Credit Extensions.
() No Default (or, in the case of a Refunding Borrowing, no
Event of Default) has occurred and is continuing, or would result from
such proposed Borrowing.
() The proposed Borrowing will not cause the aggregate
Outstanding Credit Extensions to exceed the Aggregate Available
Commitment.
() Not more than ten separate Borrowings will be outstanding
after giving effect to such Borrowing.
[(e) As of the most recent reporting date pursuant to Section
--- of the Credit Agreement, the aggregate amount of all trade payables
of MSC and its Subsidiaries arising out of the purchase of inventory is
not less than the aggregate amount of all Credit Extensions.]2
THE MUSICLAND GROUP, INC.
By:
------------------------
Title:
---------------------
-----------
2 Clause (e) is not required in the case of a Refunding Borrowing.
