AMENDMENT NO.1 AND WAIVER TO
PARTICIPATION AGREEMENT
AMENDMENT NO. 1 AND WAIVER TO PARTICIPATION AGREEMENT dated as
of June 16, 1997 (the "Amendment") , among MUSICLAND RETAIL, INC., a Delaware
corporation, as Lessee; FLEET NATIONAL , formerly known as SHAWMUT BANK
CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its
individual capacity except as expressly stated herein, but solely as owner
Trustee; KLEINWORT XXXXXX LIMITED, a corporation organized under the laws of
England, as Owner Participant, Lender and Agent; and THE LONG-TERM CREDIT BANK
OF JAPAN, LTD. CHICAGO BRANCH, CREDIT LYONNAIS NEW YORK BRANCH, as successor to
CREDIT LYONNAIS CAYMAN ISLAND BRANCH, and THE FUJI BANK, LIMITED, as Lenders.
WITNESSETH:
WHEREAS, Lessee, Owner Trustee, Owner Participant, Agent and Lenders are
parties to a certain Participation Agreement, dated as of March 31, 1994 (the
"Participation Agreement',);
WHEREAS, the parties hereto desire to consummate the transactions
contemplated hereby;
NOW, THEREFORE, in consideration of the mutual agreements herein contained
and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows;
Section 1. Definitions. Capitalized terms used herein, but not otherwise
defined herein, shall have the meanings assigned thereto in Appendix A to the
Participation Agreement for all purposes hereof.
Section 2. Waiver. Subject to the terms and conditions set forth in Section
6 of this Amendment, the Agent and Lenders hereby waive any Loan Event of
Default or Loan Default, and the Owner Trustee hereby waives any Lease Event of
Default or Lease Default, which may have arisen from a breach of Section 5.10 of
the Participation Agreement before the date hereof or from delivery of an audit
report containing a "going concern" qualification for Guarantor's fiscal year
ending December 31, 1996. On the Effective Date, the Owner Trustee shall release
any funds remaining in the trust escrow to be dispersed to Lessee.
Section 3. Amendments to Participation Agreement. Subject to the terms and
conditions set forth in Section 6 of this Amendment, the Participation Agreement
is hereby amended as follows:
(a) Section 5.10 of the Participation Agreement is hereby amended and
restated in its entirety as follows:
"SECTION 5.10. Total Liabilities to Shareholder Equity. The Lessee shall
not permit the ratio of Total Liabilities to Shareholder Equity of MSC as of the
end of each fiscal year of MSC to be greater than 2.75 to 1.0, without giving
effect to (a) Lessee's adoption of FASB 121 or (b) restructuring reserves for
Lessee's fiscal year ending December 31, 1996 not to exceed $75 million and for
Lessee's fiscal year ending December 31, 1997 not to exceed $20 million (but not
more than $10 million of cash charges for Lessee's fiscal year ending December
31, 1997)."
(b) The following text is inserted as Section 5.15 of the Participation
Agreement:
"SECTION 5.15. Other Information. The Lessee shall deliver to the Agent and
the Lenders all information as and when provided to the Agent and Banks under
the Credit Agreement."
(c) Section 5.8(i) of the Participation Agreement is hereby amended by
adding the following text after the word "Participants" at the end of such
Section:
"and a "going concern" qualification for the fiscal years ending December
31, 1996 and December 31, 1997;"
Section 4. Ratification. This Amendment is limited as specified and shall
not constitute a modification, amendment, acceptance or waiver of any other
provision of the Participation Agreement or any other Operative Document. The
Participation Agreement as modified and amended by this Amendment is hereby
ratified and confirmed in all respects.
Section 5. Notices. Unless otherwise specifically provided herein, all
notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof to be given to any
Person shall be given in writing by certified or registered mail, by nationally
recognized courier service or by hand, or by facsimile communication followed by
such courier service delivery and any such notice shall become effective when
received or when delivery is refused, and shall be directed to the Address of
such Person. From time to time any party may designate a new Address for
purposes of notice hereunder by notice to each of the other parties hereto.
Section 6. Effective Date. This Amendment shall become effective upon
satisfaction of the following conditions on or before June 30, 1997 (the date of
such satisfaction shall be the "Effective Date"):
(a) Lessee, Owner Trustee, Owner Participant, Agent and each Lender shall
have executed and delivered a counterpart of this Amendment.
(b) Owner Trustee, Agent and each Lender shall have executed and delivered
a counterpart of an Amendment No. 1 to the Loan Agreement, substantially in the
form of Exhibit A attached hereto.
(c) Lessee and Owner Trustee shall have executed and delivered a
counterpart of an Amendment No. 1 to the Lease Agreement, substantially in the
form of Exhibit B attached hereto.
(d) Guarantor shall have executed and delivered a counterpart of an
Amendment No. 1 to the Guaranty, substantially in the form of Exhibit C attached
hereto.
(e) Agent shall have received a certificate from the corporate secretaries
of each of Lessee and Guarantor in form and substance satisfactory to Agent and
its counsel and certifying that (A) attached to such certificate are true and
correct copies of resolutions of the applicable entity's board of directors
authorizing the execution, delivery and performance of this Amendment and the
documents and transactions contemplated herein and (B) the officers of such
entity executing this Amendment and the other documents to be executed by such
entity pursuant hereto are authorized to execute such documents on behalf of
such entity.
(f) Agent shall have received opinions of counsel for each of Lessee and
Guarantor, in form and substance satisfactory to Agent and its counsel.
(g) Lessee shall have prepaid a portion of the final rent under the Lease
in an amount equal to $3,214,290, together with a partial payment of the next
scheduled Basic Rent payment in an amount equal to $59,601.98, to be applied as
a prepayment pursuant to clause third of Section 3.3(a) of the Loan Agreement.
(h) Lessee shall have paid an amendment fee as Supplemental Rent in an
amount equal to $167,411, which fee shall be irrevocable and fully earned upon
payment.
(i) Lessee shall have paid the fees and out-of-pocket costs and expenses of
counsel for the Agent and the Owner Trustee incurred in connection with the
negotiation, preparation, execution and delivery of this Amendment.
(j) The Credit Agreement shall have been amended, in form and substance
satisfactory to Agent and its counsel.
Section 7. Representations and Warranties. The Lessee represents and
warrants to each of the other parties hereto that:
(a) The execution, delivery and performance by Lessee of this Amendment and
those transactions and documents contemplated hereby to which Lessee is a party
have been duly authorized by all necessary corporate action and each constitutes
a legal, valid and binding obligation of Lessee enforceable against Lessee in
accordance with its terms, except as the enforcement thereof may be subject to
(i) the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar law affecting creditors, rights generally and (ii) general
principles of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law);
(b) Except as disclosed in MSC,s Form 10-K for the year ended December 31,
1996 or in MSC's Form 10-Q for the quarter ended March 31, 1997, each of
Lessee's representations and warranties contained in the Operative Documents is
true and correct in all material respects on and as of the date hereof as if
made on the date hereof;
(c) Neither the execution, delivery and performance of this Amendment nor
the consummation of the transactions and documents contemplated hereby does or
shall contravene, result in a breach of, or violate (i) any provision of
Lessee's certificate or articles of incorporation or bylaws, (ii) any law or
regulation, or any order or decree of any court or government instrumentality or
(iii) indenture, mortgage, deed of trust, lease, agreement or other instrument
to which Lessee is a party or by which Lessee or any of its property is bound,
except in any such case to the extent such conflict or breach has been waived by
a written waiver document a copy of which has been delivered to Agent on or
before the date hereof;
(d) Since the Closing Date, no provisions of Lessee's certificate or
articles of incorporation or by-laws have been amended or changed; and
(e) After giving effect to this Amendment, no Loan Default, Loan Event of
Default, Lease Default or Lease Event of Default has occurred and is continuing.
Section 8. Counterparts. This Amendment may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have
caused this Amendment to be duly executed by their respective
officers thereunto duly authorized as of the day and year
first above written.
MUSICLAND RETAIL, INC., as Lessee
By: Xxxx X. Xxxxxxx
Title: Chairman, President & CEO
FLEET NATIONAL BANK, not in its
individual capacity except as
expressly stated herein, but
solely as owner Trustee
By:
Title:
KLEINWORT XXXXXX LIMITED, as
Owner Participant, Agent and
Lender
By:
Title:
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD. CHICAGO, as Lender
By:
Title:
CREDIT LYONNAIS NEW YORK
BRANC:H, as successor to CREDIT
LYONNAIS CAYMAN ISLAND BRANCH, as
Lender
By:
Title:
THE FUJI BANK, LIMITED, as Lender
By:
Title:
IN WITNESS WHEREOF, the parties
hereto have caused this Amendment to be duly executed
by their respective officers thereunto duly
authorized as of the day and year first above
written.
MUSICLAND RETAIL, INC., as Lessee
By:
Title:
FLEET NATIONAL BANK, not in its
individual capacity except as
expressly stated but solely as
Owner Trustee
By:
Title: Vice President
KLEINWORT XXXXXX LIMITED, as
Owner Participant, Agent and
Lender
By:
Title:
THE LONG-TERM CREDIT BANK OF
JAPAN,LTD. CHICAGO BRANCH, as
Lender
By:
Title:
CREDIT LYONNAIS NEW YORK BRANCH,
as successor to CREDIT LYONNAIS
CAYMAN ISLAND BRANCH, as Lender
By:
Title:
THE FUJI BANK, LIMITED, as Lender
By:
Title:
IN WITNESS WHEREOF, the parties hereto have
caused this Amendment to be duly executed by their respective
officers thereunto duly authorized as of the day and year
first above written-
MUSICLAND RETAIL, INC., as Lessee
By:
Title:
FLEET NATIONAL BANK, not in its
individual capacity except as
expressly stated herein, but
solely as Owner Trustee
By:
Title:
KLEINWORT XXXXXX LIMITED,as Owner
Participart, Agent and Lender
By:
Title:
THE LONG-TERM CREDIT BANK OF
JAPAN,LTD., CHICAGO BRANCH, as
Lender
By:
Title:
CREDIT LYONNAIS NEW YORK BRANCH,
as successor to CREDIT LYONNAIS
CAYMAN ISLAND BRANCH, as Lender
By:
Title:
(8)
THE FUJI BANK, LIMITED, as Lender
By:
Title:
IN WITNESS WHEREOF, the parties hereto have
caused this Amendment to be duly executed by their
respective officers thereunto duly authorized as of
the day and year first above written.
MUSICLAND RETAIL, INC., as Lessee
By:
Title:
FLEET NATIONAL BANK, not in its
individual capacity except as
expressly stated herein, but
solely as Owner Trustee
By:
Title:
KLEINWORT XXXXXX LIMITED, as
Owner Participant, Agent and
Lender
By:
Title:
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD. CHICAGO BRANCH, as
Lender
By:
Title: Vice President and Deputy
General Manager
(9)
CREDIT LYONNAIS NEW YORK BRANCH,
as successor to CREDIT LYONNAIS
CAYMAN ISLAND BRANCH, as Lender
By:
Title:
THE FUJI BANK, LIMITED, as Lender
By:
Title:
IN WITNESS WHEREOF, the parties
hereto have caused this Amendment to be duly executed
by their respective officers thereunto duly
authorized as of the day and year first above
written.
MUSICLAND RETAIL, INC., as Lessee
By:
Title:
FLEET NATIONAL BANK, not in its
individual capacity except as
expressly stated herein, but
solely as Owner Trustee
By:
Title:
KLEINWORT XXXXXX LIMITED. as
Owner Participant,
Agent and Lender
By:
Title:
(10)
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD. CHICAGO
BRANCH, as Lender
By:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
as successor to CREDIT LYONNAIS
CAYMAN ISLAND BRANCH, as Lender
By: Xxxx Sidrune
Title: First Vice President
THE FUJI BANK, LIMITED, as Lender
By:
Title:
Section 9. Headings, etc. The headings of the various Sections of this
Amendment are for convenience of reference only and shall not modify, define,
expand or limit any of the terms or provisions hereof.
Section 10. Parties in Interest. Except as expressly provided herein, none
of the provisions of this Amendment are intended for the benefit of any Person
except the parties hereto, their successors and permitted assigns.
Section 11. Governing Law; Jurisdiction; Waivers. The terms and provisions
of Sections 8.8 and 8.13 of the Participation Agreement are incorporated herein
by reference as though fully set forth herein.
(11)
Section 12. Participation Agreement. From and after the date hereof,
all references in the Participation Agreement and each of the other Operative
Documents shall be deemed to be references to the Participation Agreement after
giving effect to this Amendment No. 1 and Waiver to Participation Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
MUSICLAND RETAIL, INC., as Lessee
By:
Title:
FLEET NATIONAL BANK, not in its
individual capacity except as
expressly stated herein, but solely
as Owner Trustee
By:
Title:
KLEINWORT XXXXXX LIMITED, as Owner
Participant, Agent and Lender
By:
Title:
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD. CHICAGO BRANCH, as Lender
By:
Title:
(12)
CREDIT LYONNAIS NEW YORK BRANCH, as
successor to CREDIT LYONNAIS CAYMAN
ISLAND BRANCH, as Lender
By:
Title:
THE FUJI BANK, LIMITED, as Lender
By: Tetsuo Kamatsu (K-219)
Title: Joint General Manager
