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Exhibit 10.14
FIRST AMENDMENT AND WAIVER
FIRST AMENDMENT AND WAIVER, dated as of June 12, 1998 (this
"AMENDMENT"), to the Revolving Credit Agreement dated as of January 27, 1998 (as
heretofore amended, supplemented or otherwise modified, the "CREDIT AGREEMENT"),
among Camelot Music, Inc., a Pennsylvania corporation (the "BORROWER"), the
several lenders from time to time parties to the Credit Agreement (the
"LENDERS") and The Chase Manhattan Bank, a New York banking corporation, as
agent for the Lenders (in such capacity, the "AGENT").
WITNESSETH:
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WHEREAS, the Borrower, the Lenders and the Agent are parties to the
Credit Agreement;
WHEREAS, the Borrower has advised the Agent and the Lenders that Camelot
Southeast Region, Inc., a wholly-owned Subsidiary of the Borrower ("CAMELOT
SOUTHEAST"), has formed a new wholly-owned Subsidiary, SM Acquisition, Inc., a
Florida corporation (the "NEW SUBSIDIARY"), to acquire all of the Capital Stock
of (a) Spec's Music, Inc., a Florida corporation ("SPEC'S"), (b) DS Latino Inc.,
a Florida corporation and wholly-owned Subsidiary of Spec's ("DS LATINO"), and
(c) Sobe Music Fest, Inc., a Florida corporation which is currently inactive,
has no assets and is a wholly-owned Subsidiary of Spec's ("SOBE MUSIC"), for an
aggregate cash purchase price of approximately $28,000,000 (including certain
Indebtedness of Spec's to be repaid in connection with such acquisition), in
accordance with the terms of an Agreement and Plan of Merger dated as of June 3,
1998 (as amended, the "SPEC'S MERGER AGREEMENT"), among Camelot Music Holdings,
Inc. ("HOLDINGS"), the New Subsidiary and Spec's;
WHEREAS, pursuant to the Spec's Merger Agreement, Spec's will be the
surviving corporation of a merger with the New Subsidiary, Spec's will become a
wholly-owned Subsidiary of Camelot Southeast and DS Latino and Sobe Music will
remain wholly-owned Subsidiaries of Spec's (the "SPEC'S TRANSACTION"), and the
Borrower has requested that the Lenders waive the applicable provisions of the
Credit Agreement to permit the consummation of the Spec's Transaction;
WHEREAS, in order to finance the Spec's Transaction, the Borrower has
requested that the Lenders agree to amend the Credit Agreement to, among other
things, provide a $25,000,000 term loan facility under the Credit Agreement;
WHEREAS, pursuant to subsection 6.7 of the Credit Agreement, in
connection with the formation of the New Subsidiary and the consummation of the
Spec's Transaction (a) Camelot Southeast would be obligated to pledge all of the
Capital Stock of the New
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Subsidiary (Spec's after giving effect to the Spec's Transaction) to secure
Camelot Southeast's obligations to the Agent and the Lenders under the
Subsidiaries Guarantee and the other Loan Documents to which Camelot Southeast
is a party and (b) the New Subsidiary (Spec's after giving effect to the Spec's
Transaction), DS Latino and Sobe Music would each become a Loan Party obligated
to (i) guarantee repayment of the Loans and all of the Borrower's other
obligations under the Credit Agreement and the other Loan Documents, (ii) grant
a security interest in substantially all of its personal property (including, in
the case of Spec's, all of the Capital Stock of DS Latino and Sobe Music) to
secure its obligations to the Agent and the Lenders under its guarantee and the
other Loan Documents to which it is a party and (iii) to the extent the New
Subsidiary (Spec's after giving effect to the Spec's Transaction), DS Latino or
Sobe Music has any interest in real property with a fair market value greater
than $500,000, grant a mortgage in such real property to secure such obligations
under its guarantee and the other Loan Documents to which it is a party;
WHEREAS, the Borrower has advised the Agent and the Lenders that Spec's
intends to sell certain real property currently owned by Spec's located at Xxxx
Xxxxxxxxxxxx Xxxxxxxxx, Xxxxx, Xxxxxxx 00000 and Xxxxxxx Xxxxxx, Xxxxx Xxxxx,
Xxxxxxx 00000 (collectively, the "SPEC'S PROPERTY"), and the Borrower has
requested that the Lenders waive compliance with subsection 6.7 of the Credit
Agreement so as not to require the execution and delivery of a mortgage with
respect to the Spec's Property;
WHEREAS, the Borrower has also requested that the Lenders agree to amend
subsection 7.7 (Capital Expenditures) of the Credit Agreement; and
WHEREAS, the Lenders are willing to agree to (a) amend the Credit
Agreement to provide for a term loan facility and modify subsection 7.7, (b)
waive certain provisions of the Credit Agreement to permit the consummation of
the Spec's Transaction and (c) waive compliance with subsection 6.7 of the
Credit Agreement with respect to the Spec's Property; but in each case only upon
the terms and subject to the conditions set forth herein.
NOW THEREFORE, in consideration of the premises, and for other good and
valuable consideration the receipt of which is hereby acknowledged, the
Borrower, the Lenders and the Agent hereby agree as follows:
1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms
which are defined in the Credit Agreement (including after giving effect to this
Amendment) are used herein as therein defined.
2. AMENDMENT TO SUBSECTION 1.1 (DEFINITIONS). Subsection 1.1 of the
Credit Agreement is hereby amended as follows:
(a) Deleting in their entirety the definition of the terms "AVAILABLE
COMMITMENT", "BORROWING BASE", "COMMITMENT", "COMMITMENT PERCENTAGE", "LOANS",
"NOTE" and "REQUIRED LENDERS" contained therein.
(b) Adding in their proper alphabetical order the following definitions:
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"AVAILABLE REVOLVING CREDIT COMMITMENT": as to any Revolving
Credit Lender, at a particular time, an amount equal to the excess, if
any, of (a) such Revolving Credit Lender's Revolving Credit Commitment
over (b) the sum of (i) the outstanding Revolving Credit Loans made by
such Revolving Credit Lender and (ii) such Revolving Credit Lender's
Commitment Percentage of the L/C Obligations then outstanding.
"BORROWING BASE": means, as at any date of determination, an
amount equal to sixty percent (60%) of Eligible Inventory MINUS the
amount shown as "gift certificate liabilities" on the books and records
of the Loan Parties determined in a manner consistent with the
Borrower's historic practices. The Borrowing Base shall be computed
using the Borrowing Base Certificate most recently provided by the
Borrower to the Agent pursuant to subsection 6.1(i); PROVIDED, HOWEVER,
the Agent shall have the right to review and adjust, in its reasonable
judgment, any computation of the Borrowing Base (but not the
percentages set forth above) to the extent such computation of the
Borrowing Base pursuant to such Borrowing Base Certificate is not in
accordance with this Agreement.
"COMMITMENT PERCENTAGE": at any time, as to any Revolving
Credit Lender, the percentage of the aggregate Revolving Credit
Commitments then constituted by such Revolving Credit Lender's
Revolving Credit Commitment, and as to any Term Loan Lender, the
percentage of the aggregate Term Loan Commitments then constituted by
such Term Loan Lender's Term Loan Commitment.
"COMMITMENTS": the collective reference to the Revolving
Credit Commitments and the Term Loan Commitments; individually as
applicable, a "COMMITMENT".
"FIRST AMENDMENT": the First Amendment and Waiver, dated as of
June 12, 1998, to this Agreement.
"FIRST AMENDMENT EFFECTIVE DATE": the date on which the
conditions precedent to the effectiveness of the First Amendment are
satisfied.
"LOANS": the collective reference to the Revolving Credit
Loans and the Term Loans; individually as applicable, a "LOAN".
"NOTES": the collective reference to the Revolving Credit
Notes and the Term Loan Notes; individually as applicable, a "NOTE".
"Required Lenders": Lenders holding in the aggregate at least
51% of the sum of (a) the aggregate Revolving Credit Commitments in
effect at such time (or, if the Revolving Credit Commitments have then
terminated or are no longer in effect, the sum of (i) the Revolving
Credit Loans outstanding at such time made by such Revolving Credit
Lender and (ii) such Revolving Credit Lender's Commitment Percentage of
the L/C Obligations outstanding at such time), plus (b) the aggregate
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Term Loan Commitments in effect at such time (or, after the making of
the Term Loans, the aggregate outstanding Term Loans at such time).
"REVOLVING CREDIT COMMITMENT": as to any Revolving Credit
Lender at any time, during the Non-Peak Period, its Non-Peak Period
Commitment, or during the Peak Period, its Peak Period Commitment, as
the case may be.
"REVOLVING CREDIT LENDERS": the collective reference to the
Lenders with Revolving Credit Commitments.
"REVOLVING CREDIT LOANS": as defined in subsection 2.1(a).
"REVOLVING CREDIT NOTES": as defined in subsection 2.2.
"SPEC'S": Spec's Music, Inc., a Florida corporation.
"SPEC'S MERGER AGREEMENT": the Agreement and Plan of Merger
dated as of June 3, 1998, by and among Holdings, SM Acquisition, Inc.
and Spec's, as the same may be amended, supplemented or otherwise
modified from time to time.
"SPEC'S TRANSACTION": the merger of SM Acquisition, Inc., a
wholly-owned Subsidiary of Camelot Southeast, Inc., into Spec's (which
will become a wholly-owned Subsidiary of Camelot Southeast, Inc.)
pursuant to the Spec's Merger Agreement and the other Spec's
Transaction Documents.
"SPEC'S TRANSACTION DOCUMENTS": the collective reference to
the Spec's Merger Agreement and any other instrument or agreement
executed and delivered in connection with the Spec's Merger Agreement,
as each of the foregoing may be amended, supplemented or otherwise
modified from time to time.
"TERM LOAN COMMITMENT": as to any Term Loan Lender, its
obligation to make a Term Loan to the Borrower pursuant to subsection
2A. 1 in an aggregate amount not to exceed the amount set forth under
such Term Loan Lender's name opposite the caption "Term Loan
Commitment" on Schedule I hereto or on Schedule 1 to the Assignment and
Acceptance by which such Term Loan Lender acquired its Term Loan
Commitment.
"TERM LOAN LENDERS": the collective reference to the Lenders
with Term Loan Commitments.
"TERM LOAN NOTES" as defined in subsection 2A.2.
"TERM LOANS": as defined in subsection 2A.1(a).
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(c) Adding the phrase "or subsection 2A.3, as the case may be,"
immediately after the reference to "subsection 2.5" contained in the definition
of the term "BORROWING DATE".
(d) Deleting the phrase "and (g) reserve for shrink" contained in the
definition of the term "ELIGIBLE INVENTORY" and by substituting in lieu thereof
the phrase "(g) reserve for shrink; and (h) reserve for non-defective Inventory
which is not returnable to the applicable vendors".
(e) Deleting the phrase "acquired its Commitment" in the definition of
the terms "NON-PEAK PERIOD COMMITMENT" and "PEAK PERIOD COMMITMENT" and by
substituting in lieu thereof the phrase "acquired its Revolving Credit
Commitment".
3. WAIVER.
(a) The Lenders hereby waive compliance with subsections 7.2
(Limitations on Liens), 7.4 (Prohibition on Fundamental Changes) and 7.6
(Limitations on Investments, Loans and Advances) of the Credit Agreement, but
solely to the extent necessary to permit the New Subsidiary to consummate the
Spec's Merger (it being understood that the investments made to consummate the
Spec's Merger shall not be included in the calculation of the maximum permitted
investments under subsection 7.6(g) of the Credit Agreement), PROVIDED that:
(i) the aggregate cash purchase price to be paid to consummate
the Spec's Merger, including the Indebtedness of Spec's described in
clause (iv) below to be repaid in connection with the Spec's Merger,
does not exceed $28,500,000;
(ii) the Agent is reasonably satisfied with the Spec's Merger
Agreement and the other Spec's Transaction Documents executed and
delivered by the Borrower, Holdings and the New Subsidiary in
connection with, and to implement, the Spec's Transaction, and no
material provision of any of the Spec's Transaction Documents shall
have been amended, supplemented, waived or otherwise modified without
the prior written consent of the Agent and the Lenders, which consent
shall not be unreasonably withheld;
(iii) the New Subsidiary consummates the Spec's Transaction on
or before August 31, 1998 in accordance with the terms of the Spec's
Merger Agreement and the other Spec's Transaction Documents;
(iv) the Indebtedness of Spec's to General Electric Capital
Corporation and Music Funding I, L.L.C. in the aggregate amount of
approximately $8,000,000 is repaid in full upon consummation of the
Spec's Transaction and any Liens granted to secure such Indebtedness
are released upon such repayment;
(v) the New Subsidiary has become a Loan Party and has complied
with all of the requirements of subsection 6.7 of the Credit Agreement,
and subject to
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clause (b) below, Spec's will timely comply with all of the
requirements of subsection 6.7 of the Credit Agreement, including
without limitation, within five Business Days after consummation of the
Spec's Transaction, the requirement to pledge all of the Capital Stock
of DS Latino and Sobe Music to secure the obligations of Spec's to the
Agent and the Lenders under the Subsidiaries Guarantee and the other
Loan Documents to which Spec's is a party;
(vi) unless DS Latino and Sobe Music have merged or otherwise
consolidated into a Loan Party, within 60 days after the consummation
of the Spec's Transaction DS Latino and Sobe Music become Loan Parties
and comply with all of the requirements of subsection 6.7 of the Credit
Agreement:
(vii) the waiver of subsection 7.2 (Limitations on Liens) of the
Credit Agreement is limited to the Liens set forth on Schedule 1 to
this Amendment; and
(viii) the Agent receives a written legal opinion of outside
counsel to the applicable Loan Parties, addressed to the Agent and the
Lenders, to the effect that the New Subsidiary has been duly organized
and the Spec's Transaction Documents, and the transactions contemplated
thereby, have been duly authorized by the applicable Loan Parties and
constitute the valid, binding and enforceable obligations of such Loan
Parties and covering such other matters as reasonably requested by the
Agent.
(b) The Lenders hereby waive compliance with the provision of
subsection 6.7 of the Credit Agreement which would require the execution and
delivery of a mortgage with respect to the Spec's Property, PROVIDED that if
either parcel of the Spec's Property has not been sold on or before the date
referenced in clause (i) or (ii) below (as applicable) Spec's shall comply with
subsection 6.7 of the Credit Agreement, including without limitation, by
executing a mortgage, substantially in the form of the Camelot Distribution
Mortgage, with respect to such parcel or parcels (as applicable) of the Spec's
Property within five Business Days after the earlier to occur of (i) the six
month anniversary of the consummation of the Spec's Transaction or (ii) upon the
request of the Agent or the Required Lenders after the occurrence of a Default
or an Event of Default under the Credit Agreement.
4. AMENDMENTS TO SECTION 2 (AMOUNT AND TERMS OF COMMITMENT) AND SECTION
3 (LETTERS OF CREDIT). Sections 2 and 3 of the Credit Agreement are hereby
amended as follows:
(a) Deleting all references in subsections 2.1(a), 2.1(c), 2.2, 2.3,
2.4, 2.5, 2.7, 2.8(b), 2.8(d), 2.18 and 3.1(a) to the terms "AVAILABLE
COMMITMENT", "COMMITMENT", "COMMITMENTS", "LENDER", "LENDERS", "LOAN", "LOANS"
and "NOTE" and by substituting in lieu thereof the terms "AVAILABLE REVOLVING
CREDIT COMMITMENT", "REVOLVING CREDIT COMMITMENT", "REVOLVING CREDIT
COMMITMENTS", "REVOLVING CREDIT LENDER", "REVOLVING CREDIT LENDERS", "REVOLVING
CREDIT LOAN", "REVOLVING CREDIT LOANS" AND "REVOLVING CREDIT NOTE",
respectively.
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(b) Amending subsection 2.8(a) by (i) adding the phrase "(i) of Term
Loans or Revolving Credit Loans, or a combination thereof, and (ii)" immediately
after the phrase "and whether the prepayment is" contained in the 14th line of
said subsection, (ii) adding the word "affected" immediately after the phrase
"shall promptly notify each" contained in the 17th line of said subsection,
(iii) adding the phrase "and, in the case of prepayments of the Term Loans only,
accrued interest to such date on the amount prepaid" immediately before the
period at the end of the third sentence of said subsection and (iv) adding the
following sentence at the end of said subsection: "Any prepayment of the Term
Loans pursuant to subsection 2.8(a) or (b) shall be applied FIRST, to prepay the
next succeeding installment of principal of the Term Loans until paid in full
and SECOND, to prepay the Term Loans PRO RATA based upon the remaining
installments of principal thereof set forth in subsection 2A.2(b) until paid in
full. Amounts prepaid on account of the Term Loans may not be reborrowed."
(c) Amending subsection 2.8(b) by (i) deleting the following from said
subsection: (A) the reference to "(i)", (B) the phrase '", or (ii) the Borrowing
Base" and (C) the phrase "in each such case" and (ii) adding the following
sentence at the end of said subsection: "To the extent the sum of the
outstanding Revolving Credit Loans, Term Loans and L/C Obligations on any
Business Day exceeds the Borrowing Base, the Borrower shall on the next Business
Day pay in frill an amount equal to such excess in accordance with clauses FIRST
SECOND and THIRD of the immediately preceding sentence and FOURTH, to payment in
frill of "all outstanding Term Loans."
(d) Deleting subsection 2.8(c) in its entirety and by substituting in
lieu thereof the following:
"(c) If any Loan Party shall receive in excess of $750,000 of
Net Proceeds from Asset Sales during any fiscal year then, unless Term
Loan Lenders holding a majority of the aggregate amount of Term Loans
then outstanding (or the Required Lenders if no Term Loans are then
outstanding) shall otherwise agree, within five Business Days of the
receipt by such Loan Party of such excess Net Proceeds the amount of
such Net Proceeds in excess of $750,000 shall be applied FIRST to
prepay the Term Loans PRO RATA based upon the remaining installments of
principal thereof set forth in subsection 2A.2(b) until paid in frill
and SECOND to reduce permanently the Revolving Credit Commitments."
(e) Amending subsection 2.11 by (i) deleting the reference to "$50,000"
contained therein and by substituting in lieu thereof a reference to "$75,000"
and (ii) deleting the phrase "be termination of the Commitments" contained
therein and by substituting in lieu thereof the phrase "the Termination Date".
(f) Amending subsection 2.13 by (i) deleting the word "respective"
contained in the 4th line of said subsection and by substituting in lieu thereof
the word "relevant" and (ii) deleting the second sentence of said subsection in
its entirety and by substituting in lieu thereof the following: "Each payment
(including each prepayment) by the Borrower on account of principal of and
interest on any Revolving Credit Loans shall be allocated by the Agent PRO RATA
according to the respective outstanding principal amounts of such Revolving
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Credit Loans then held by the Revolving Credit Lenders. Each payment (including
each prepayment) by the Borrower on account of principal of and interest on any
Term Loans shall be allocated by the Agent PRO RATA according to the respective
outstanding principal amounts of such Term Loans then held by the Term Loan
Lenders."
(g) Adding at the end of Section 2 a new Section 2A as follows:
"SECTION 2A. AMOUNT AND TERMS OF TERM LOAN
2A.1 TERM LOAN COMMITMENT. Subject to the terms and conditions
hereof, each Term Loan Lender severally agrees to make a single term
loan (a "TERM LOAN") to the Borrower after satisfaction or waiver of
the conditions precedent contained in subsections 5.2(a) through (e)
and (g) in an amount equal to the amount of the Term Loan Commitment of
such Term Loan Lender. The Term Loans may from time to time be (a)
Eurodollar Loans, (b) ABR Loans or (c) a combination thereof, as
determined by the Borrower and notified to the Agent in accordance with
subsections 2A.3 and 2.6.
2A.2 TERM NOTES. (a) The Term Loan made by each Term Loan
Lender shall be evidenced by a promissory note of the Borrower,
substantially in the form of Exhibit N hereto (each a "TERM LOAN
NOTE"), with appropriate insertions, payable to the order of such Term
Loan Lender and representing the obligations of the Borrower to pay the
principal amount equal to the Term Loan Commitment of such Term Loan
Lender, with interest thereon as prescribed in subsection 2.9. Each
Term Loan Lender is hereby authorized to record the date, the Type and
the amount of the Term Loan made by such Term Loan Lender, each
continuation thereof, each conversion of all or a portion thereof to
another Type, the date and amount of each payment or prepayment of
principal thereof, and, in the case of Eurodollar Loans, the length of
the Interest Period with respect thereto on the schedule annexed to and
constituting a part of its Term Loan Note, and any such recordation
shall constitute PRIMA FACIE evidence of the accuracy of the
information so recorded, PROVIDED that the failure of any Term Loan
Lender to make such recordation (or any error in such recordation)
shall not affect the obligations of the Borrower hereunder or under
such Term Loan Note. Each Term Loan Note shall (i) be dated the First
Amendment Effective Date, (ii) be payable as provided in subsection
2A.2(b) and (iii) provide for the payment of interest in accordance
with subsection 2.9.
(b) The aggregate Term Loans of all the Term Loan Lenders
shall be payable in six (6) consecutive semi-annual installments on the
dates and in the principal amounts set forth below (together with all
accrued interest thereon) opposite the applicable installment date (or,
if less, the aggregate amount of the Term Loans then outstanding):
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Dates Amount
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January 31, 1999 $3,000,000
July 31,1999 2,000,000
January 31, 2000 6,000,000
July 31, 2000 4,000,000
January 31, 2001 6,000,000
July 31, 2001 4,000,000
2A.3 PROCEDURE FOR TERM LOAN BORROWING. The Borrower may only
borrow under the Term Loan Commitments in a single drawing on a
Business Day after satisfaction or waiver of the conditions precedent
contained in subsections 5.2(a) through (e) and (g), PROVIDED that the
Borrower shall give the Agent a Borrowing Notice, which notice must be
received by the Agent prior to (a) 12:00 noon, New York City time,
three Business Days prior to the requested Borrowing Date if all or any
part of the Term Loans are to be Eurodollar Loans and (b) 10:00 a.m.,
New York City time, on the requested Borrowing Date if the borrowing is
solely of ABR Loans, and specifying (i) the amount of the borrowing,
(ii) whether such Term Loans are initially to be Eurodollar Loans or
ABR Loans or a combination thereof and (iii) if the borrowing is to be
entirely or partly Eurodollar Loans, the length of the Interest Period
-for such Eurodollar Loans. Not later than 1:00 p.m., New York City
time, on the Borrowing Date specified in such notice, each Term Loan
Lender shall make available to the Agent at the office of the Agent
specified in subsection 10.2 (or at such other location as the Agent
may direct) an amount in immediately available funds equal to the
amount of the Term Loan to be made by such Term Loan Lender. Term Loan
proceeds received by the Agent hereunder shall promptly be made
available to the Borrower by the Agent crediting the account of the
Borrower on the books of such office with the aggregate of the amounts
made available to the Agent by the Term Loan Lenders and in like funds
as received by the Agent.
2A.4 USE OF PROCEEDS OF TERM LOANS. The proceeds of the Term
Loans hereunder shall be used by the Borrower solely to finance the
Spec's Transaction."
5. AMENDMENT TO SECTION 4 (REPRESENTATIONS AND WARRANTIES).
Section 4 of the Credit Agreement is hereby amended as follows:
(a) Adding the phrase "and the Spec's Transaction Documents"
immediately after the phrase "the Wall Transaction Documents" each time such
phrase appears in subsections 4.5, 4.7 and 4.18.
(b) Adding the phrase "and each Spec's Transaction Document"
immediately after the phrase "each Wall Transaction Document" contained in
subsection 4.6.
(c) Adding the phrase "any Spec's Transaction Document"
immediately after the phrase "any Wall Transaction Document" contained in
subsection 4.7.
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(d) Adding the phrase "and the Spec's Transaction" immediately
after the phrase "the Wall Transaction" contained in subsection 4.13.
(e) Adding the following new subsection 4.20 at the end of said
Section 4:
"4.20 YEAR 2000 MATTERS. Any reprogramming required to permit the
proper functioning (but only to the extent that such proper
functioning would otherwise be impaired by the occurrence of the year
2000) in and following the year 2000 of computer Systems and other
equipment containing embedded microchips, in either case owned or
operated by any Loan Party or used or relied upon in the conduct of
its business (including any such Systems and other equipment supplied
by others or with which the computer systems of any Loan Party
interface), and the testing of all such systems and other equipment as
so reprogrammed, will be completed by February 27, 1999. The costs to
the Loan Parties that have not been incurred (as of any date on which
this representation and warranty is made) for such reprogramming and
testing and for the other reasonably foreseeable consequences to them
of any improper functioning of other computer systems and equipment
containing embedded microchips due to the occurrence of the year 2000
could not reasonably be expected to result in a Default or Event of
Default or to have a Material Adverse Effect. Except for any
reprogramming referred to above, the computer systems of the Loan
Parties are and, with ordinary course upgrading and maintenance, will
continue during the period prior to the Maturity Date to be,
sufficient for the conduct of their business as currently conducted."
6. AMENDMENT OF SUBSECTION 5.2 (CONDITIONS TO EACH LOAN AND LETTER
OF CREDIT). Subsection 5.2 of the Credit Agreement is hereby amended by adding
immediately after clause (f) thereof a new clause (g) as follows:
"(g) ADDITIONAL CONDITIONS PRECEDENT TO TERM LOANS. In the case
of such Lender's Term Loan only, in addition to the satisfaction of the
conditions precedent contained in subsections 5.2(a) through (e) above,
(i) The Agent shall have received for each Lender, a copy
of the Spec's Merger Agreement and any of the other Spec's
Transaction Documents reasonably requested by the Agent.
(ii) (A) The Spec's Transaction shall have been consummated
pursuant to the Spec's Transaction Documents on or before August
31, 1998 for an aggregate cash purchase price not to exceed
$28,500,000 (including the Indebtedness of Spec's to be repaid in
connection with the Spec's Transaction), (B) the Indebtedness of
Spec's to General Electric Capital Corporation and Music Funding
I, L.L.C. in the aggregate amount of approximately $8,000,000
shall have been repaid in full and any Liens granted to secure
such Indebtedness shall have been released upon such repayment,
(C) all of the conditions precedent set forth in the Spec's
Merger Agreement shall have been
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satisfied, and (D) no material provision of the Spec's
Transaction Documents shall have been amended, supplemented,
waived or otherwise modified without the prior written consent of
the Agent and the Lenders, which consent shall not be
unreasonably withheld. The Agent shall be reasonably satisfied
with the Spec's Transaction Documents in all respects.
(iii) The Agent shall have received the unaudited
consolidated balance sheet of Spec's and its consolidated
Subsidiaries as at the end of the most recent fiscal quarter
ended and the related unaudited consolidated statements of income
and cash flows of Spec's and its consolidated Subsidiaries for
such quarterly period, which, in each case, shall be in form and
substance reasonably satisfactory to the Agent.
(iv) The Agent shall have received, with a copy for each
Lender, (A) a new Schedule 4.12 (Fee and Leased Properties) and a
new Schedule 4.14 (Trademarks and Copyrights) to this Agreement
and (B) new Schedules to the Subsidiaries Security Agreement, in
each case, giving effect to the Spec's Transaction; upon
satisfaction of the conditions precedent contained in this
subsection 5.2(g) this Agreement and the Subsidiaries Security
Agreement shall each be deemed amended to substitute the
Schedules delivered pursuant to this paragraph (iv) for the
corresponding Schedules delivered on the Closing Date.
(v) The Agent shall have received evidence in form and
substance reasonably satisfactory to it that any farther filings,
recordings, registrations and any other actions, including
without limitation, the filing of duly executed financing
statements on form UCC-1, necessary or, in the reasonable opinion
of the Agent, desirable to perfect the Liens created by the
Security Documents, after giving effect to the Spec's
Transaction, shall have been completed.
(vi) The Agent shall have received (A) for each Loan Party,
a certificate executed by the President or any Vice President and
the Secretary or Assistant Secretary of such Loan Party dated the
Borrowing Date with respect to the Term Loans and certifying (x)
that the by-laws and the certificate of incorporation of such
Loan Party have not been amended since the Closing Date, (y) in
the case of the Borrower, that attached thereto is a true and
complete copy of the resolutions adopted by the Board of
Directors of the Borrower authorizing (1) the borrowing of the
Term Loans, (2) the execution, delivery and performance in
accordance with its terms of this Agreement, as amended by the
First Amendment, and the Term Loan Notes and (3) any other
matters as reasonably requested by the Agent and (z) as to the
incumbency and specimen signature of each officer of such Loan
Party executing the First Amendment and the Term Loan Notes and
(B) with a counterpart for each Lender, the executed legal
opinion of outside counsel to the Borrower to the effect that the
First Amendment and the Term Loan Notes have been duly authorized
by the Borrower and the First Amendment, this Agreement, as
amended by the First Amendment, and the Term Loan Notes
constitute the
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valid, binding and enforceable obligations of the Borrower, and covering such
other matters incident to the transactions contemplated by the First Amendment
as reasonably requested by the Agent.".
7. AMENDMENTS TO SECTION 7 (NEGATIVE COVENANTS). Section 7 of the
Credit Agreement is hereby amended as follows:
(a) Deleting the references to "$17,000,000", "$19,400,000",
"$21,400,000" and "$22,500,000" contained in clause (b) subsection 7.7 (Capital
Expenditures) and by substituting in lieu thereof "$20,000,000", "$25,000,000",
"$27,500,000" and "$30,000,000", respectively.
(b) Deleting the reference to "Available Commitments" contained
in clause (c) of subsection 7.9 (Limitation on Dividends) and by substituting in
lieu thereof a reference to the term "Available Revolving Credit Commitments".
8. AMENDMENTS TO SECTION 10 (MISCELLANEOUS). Section 10 of the
Credit Agreement is hereby amended as follows:
(a) Amending subsection 10.1 (Amendments and Waivers) by (i)
adding the phrase "or any scheduled installment thereof" after the phrase
"maturity date of any Note" in clause (a)(i) of said subsection and (ii) adding
at the end of clause (a) of said subsection the phrase "or (iii) amend, modify
or waive any provision of subsection 2.8(c) without the written consent of Term
Loan Lenders holding a majority of the aggregate amount of Term Loans then
outstanding; or (iv) amend, modify or waive any provision of subsection 2.8(d)
without the written consent of all of the Revolving Credit Lenders".
(b) Adding a reference to "2A.3 ," immediately before the
reference to "2.5" contained in subsection 10.2 (Notices).
(c) (i) Adding the phrase "or Term Loan Commitment, as
applicable," immediately after each reference to "Peak Period Commitment"
contained in the second sentence of clause (e) of subsection 10.6 (Successors
and Assigns; Participations and Assignments) and (ii) adding the phrase "(in the
case of Revolving Credit Notes) or the First Amendment Effective Date (in the
case of Term Loan Notes)" immediately after the reference to "Closing Date"
contained in the last sentence of clause (e) of said subsection of 10.6.
(d) Amending subsection 10.7 (Adjustments; Set-off) by deleting
all references in said subsection to "Loans" and by substituting in lieu thereof
the phrase "Revolving Credit Loans, Term Loans".
9. AMENDMENT TO SCHEDULE I AND ADDITION OF EXHIBIT N. The Credit
Agreement is hereby further amended by (a) deleting Schedule I attached thereto
in its entirety and by substituting in lieu thereof a new Schedule I in the form
attached hereto as Schedule 2 and (b) adding a new Exhibit N thereto in the form
attached hereto as Exhibit A.
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10. REPRESENTATIONS AND WARRANTIES. The Borrower hereby
represents and warrants that, after giving effect to the amendments and waivers
effected hereby, the representations and warranties contained in Section 4 of
the Credit Agreement are true and correct in all material respects as of the
date hereof.
11. LIMITED EFFECT. Except as expressly amended or waived hereby,
all the terms and provisions of the Credit Agreement are and shall remain in
full force and effect. The amendments and waivers provided for herein are
limited to the specific subsections of the Credit Agreement specified herein and
shall not constitute an amendment or waiver of, or an indication of the Agent's
or the Lenders' willingness to amend or waive, any other provisions of the
Credit Agreement or the same subsections for any other purpose, date or time
period.
12. CONDITIONS PRECEDENT TO EFFECTIVENESS. This Amendment shall
become effective on the date on which the following conditions precedent have
been satisfied: (a) receipt by the Agent of counterparts of (i) this Amendment,
duly executed and delivered by the Borrower and the Lenders, and (ii) the
attached Acknowledgement and Consent, duly executed and delivered by the
Guarantors, (b) receipt by the Agent, for the account of the Term Loan Lenders
allocated based upon their respective Term Loan Commitments, of a Term Loan
Commitment fee in immediately available funds equal to $125,000 and (c) receipt
by the Agent, for the account of each Term Loan Lender, of a Term Loan Note in
the form attached hereto as Exhibit A and executed by a duly authorized officer
of the Borrower.
13. MISCELLANEOUS. (a) This Amendment may be executed by the
parties hereto and delivered by facsimile transmission on any number of separate
counterparts and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
(b) The Borrower agrees to pay or reimburse the Agent for all of
its out-of-pocket costs and expenses incurred in connection with the
development, preparation and execution of this Amendment including, without
limitation, the fees and disbursements of counsel to the Agent.
(c) THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to be duly executed and delivered by its proper and duly authorized
officers as of the day and year first above written.
CAMELOT MUSIC, INC.
By: /s/ Xxxx X. Xxxxxx
-------------------------------
Name: Xxxx X. Xxxxxx
Title: Executive Vice President/COO
THE CHASE MANHATTAN BANK,
as Agent and as a Lender
By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ Xxxxxxx W. A. Xxxxx
-------------------------------
Name: Xxxxxxx W. A. Xxxxx
Title: Vice President
FIRST UNION NATIONAL BANK
By: /s/ X. X. Xxxxx
-------------------------------
Name: X. X. Xxxxx
Title: Senior Vice President
15
15
SOCIETE GENERALE
By: /s/ Xxxxxxx Xxxxxxxx
-------------------------------
Name: Xxxxxxx Xxxxxxxx
Title: Vice Presidnet
XXX XXXXXX AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Senior Vice President & Director
16
ACKNOWLEDGEMENT AND CONSENT
Dated as of June 12, 1998
Reference is made to the attached First Amendment and Waiver, dated as
of June 12, 1998 (the "AMENDMENT"), to the Credit Agreement dated as of January
27, 1998 (as heretofore amended, supplemented or otherwise modified, the "CREDIT
AGREEMENT"; unless otherwise defined herein, capitalized terms appearing herein
shall have the meanings specified in the Credit Agreement), among the Borrower,
the Lenders and the Agent. Each of the undersigned hereby (i) acknowledges and
consents to the terms and provisions of the Amendment, (ii) agrees, acknowledges
and affirms that each Guarantee executed by it and each other Loan Document to
which it is a party shall remain in full force and effect and shall apply to the
Credit Agreement as amended by the Amendment and (iii) agrees, acknowledges and
affirms that any reference to the Credit Agreement appearing in each Guarantee
executed by it and each other Loan Document to which it is a party shall be
deemed to include the Credit Agreement as amended by the Amendment.
IN WITNESS WHEREOF, each of the undersigned has caused this
Acknowledgement and Consent to be duly executed and delivered as of the date
first above written.
CAMELOT MUSIC HOLDINGS, INC.
CAMELOT DISTRIBUTION CO., INC
CAMELOT MIDWEST REGION, INC.
CAMELOT NORTHEAST REGION, INC.
CAMELOT SOUTHEAST REGION, INC.
CAMELOT WESTERN REGION, INC.
GRAPEVINE RECORDS AND TAPES, INC.
SM ACQUISITION, INC.
By: /s/ Xxxx X. Xxxxxx
-------------------------------
Name: Xxxx X. Xxxxxx
Title: Executive Vice President/COO
17
Schedule 1
to First Amendment
SPEC'S PROPERTY SUBJECT TO PERMITTED LIENS
------------------------------------------
1. AT&T Credit Corporation, secured party, to secure obligations under one
or more operating leases in respect of office equipment.
2. NCR Credit Corporation, secured party, to secure obligations under one
or more operating leases in respect of office equipment.
18
Schedule 2
to First Amendment
Schedule I
to Credit Agreement
LIST OF ADDRESSES FOR NOTICES TO LENDERS,
COMMITMENT AMOUNTS
THE CHASE MANHATTAN BANK
Address for Notice:
-------------------
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxx Xxxx
Telecopy: 000-000-0000
REVOLVING CREDIT COMMITMENT:
----------------------------
NON-PEAK PERIOD: $10,500,000.00
----------------
PEAK PERIOD: $15,000,000.00
------------
COMMITMENT PERCENTAGE: 30.00%
----------------------
TERM LOAN COMMITMENT: $7,500,000.00
---------------------
COMMITMENT PERCENTAGE: 30.00%
----------------------
19
2
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
Address for Notice:
-------------------
Bank of America
000 Xxxxx XxXxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx
Telecopy: 000-000-0000
REVOLVING CREDIT COMMITMENT:
----------------------------
NON-PEAK PERIOD: $7,000,000.00
----------------
PEAK PERIOD: $10,000,000.00
------------
COMMITMENT PERCENTAGE: 20.00%
----------------------
TERM LOAN COMMITMENT: $5,000,000.00
---------------------
COMMITMENT PERCENTAGE: 20.00%
----------------------
FIRST UNION NATIONAL BANK
Address for Notice:
-------------------
First Union National Bank
000 X. Xxxxxxx Xxxxxx XX-X
Xxxxxxxxx, XX 00000-0000
Attn: Xxxxx Xxxxxxxx
Telecopy: (000) 000-0000
REVOLVING CREDIT COMMITMENT:
----------------------------
NON-PEAK PERIOD: $7,000,000.00
----------------
PEAK PERIOD: $10,000,000.00
------------
COMMITMENT PERCENTAGE: 20.00%
----------------------
TERM LOAN COMMITMENT: $5,000,000.00
---------------------
COMMITMENT PERCENTAGE: 20.00%
----------------------
20
3
SOCIETE GENERALE
Address for Notice:
-------------------
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxxxxx
Telecopy: (000) 000-0000
REVOLVING CREDIT COMMITMENT:
----------------------------
NON-PEAK PERIOD: $7,000,000.00
----------------
PEAK PERIOD: $10,000,000.00
------------
COMMITMENT PERCENTAGE: 20.00%
----------------------
TERM LOAN COMMITMENT: $5,000,000.00
---------------------
COMMITMENT PERCENTAGE: 20.00%
----------------------
XXX XXXXXX AMERICAN CAPITAL
PRIME RATE INCOME TRUST
Address for Notice:
-------------------
Xxx Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx Xxxxxxx
Telecopy: (000) 000-0000
REVOLVING CREDIT COMMITMENT:
----------------------------
NON-PEAK PERIOD: $3,500,000.00
----------------
PEAK PERIOD: $5,000,000.00
------------
COMMITMENT PERCENTAGE: 10.00%
----------------------
TERM LOAN COMMITMENT: $2,500,000.00
---------------------
COMMITMENT PERCENTAGE: 10.00%
----------------------
21
Exhibit A
to First Amendment
Exhibit N
to Credit Agreement
FORM OF TERM LOAN NOTE
----------------------
$_______________ New York, New York
June __, 1998
FOR VALUE RECEIVED, the undersigned, Camelot Music, Inc., a
Pennsylvania corporation (the "BORROWER"), hereby unconditionally promises to
pay to the order of _____________________________________ (the "LENDER") at the
office of The Chase Manhattan Bank, located at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, in lawful money of the United States of America and in immediately
available funds, the principal amount of (a) _______________________________
($___________), or, if less, (b) the aggregate unpaid principal amount of all
Term Loans made by the Lender to the Borrower pursuant to subsection 2A. 1 of
the Credit Agreement, as hereinafter defined. The principal amount shall be paid
in the amounts and on the dates specified in subsection 2A.2(b) of the Credit
Agreement. The Borrower farther agrees to pay interest in like money at such
office on the unpaid principal amount hereof from time to time outstanding at
the rates and on the dates specified in subsection 2.9 of the Credit Agreement.
The holder of this Term Loan Note is authorized to endorse on the
schedules annexed hereto and made a part hereof or on a continuation thereof
which shall be attached hereto and made a part hereof the date, the Type and the
amount of each Term Loan made by such holder pursuant to the Credit Agreement
and the date and amount of each payment or prepayment of principal thereof, each
continuation thereof, each conversion of all or a portion thereof to another
Type and, in the case of Eurodollar Loans, the length of each Interest Period
with respect thereto. Each such endorsement shall constitute PRIMA FACIE
evidence of the accuracy of the information endorsed. The failure to make any
such endorsement or any error in any such endorsement shall not affect the
obligations of the Borrower in respect of any Term Loan.
This Term Loan Note (a) is one of the Term Loan Notes referred to in the
Revolving Credit Agreement, dated as of January 27, 1998 (as amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"),
among the Borrower, the several lenders from time to time parties thereto (the
"LENDERS") and The Chase Manhattan Bank, as agent for the Lenders (in such
capacity, the "AGENT"), (b) is subject to the provisions of the Credit Agreement
and (c) is subject to optional and mandatory prepayment in whole or in part as
provided in the Credit Agreement. This Term Loan Note is secured and guaranteed
as provided in the Loan Documents. Reference is hereby made to the Loan
Documents for a
22
2
description of the properties and assets in which a security interest has been
granted, the nature and extent of the security and guarantees, the terms and
conditions upon which the security interests and each guarantee were granted and
the rights of the holder of this Term Loan Note in respect thereof.
Upon the occurrence of any one or more Events of Default, all amounts
then remaining unpaid on this Term Loan Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Term Loan
Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, capitalized terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the Credit
Agreement.
THIS TERM LOAN NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
CAMELOT MUSIC, INC.
By:
-------------------------------
Xxxx X. Xxxxxx
Executive Vice President and
Chief Operating Officer
23
Schedule A
to Term Loan Note
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
Amount Amount of ABR Loans
Converted to Amount of Principal of Converted to Unpaid Principal Balance
Date Amount of ABR Loans ABR Loans ABR Loans Repaid Eurodollar Loans of ABR Loans Notation Made By
24
Schedule B
to Term Loan Note
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
Interest Period and Amount of Principal Amount of Eurodollar Unpaid Principal
Amount of Amount Converted Eurodollar Rate with of Eurodollar Loans Loans Converted to Balance of Notation
Date Eurodollar Loans to Eurodollar Loans Respect Thereto Repaid ABR Loans Eurodollar Loans Made By
