EXHIBIT 10.1
AMENDMENT AND WAIVER AGREEMENT
This AMENDMENT AND WAIVER AGREEMENT (this "Agreement") is entered into
this the 30th day of August, 2002 (the "Closing Date") by and between Bank of
America, N.A. (the "Bank"), Source Interlink Companies, Inc. (the "Borrower"),
formerly known as The Source Information Management Company, and the undersigned
guarantors (the "Guarantors"). Capitalized terms used herein but not otherwise
defined shall have the meanings set forth in the Credit Agreement (defined
below).
RECITALS
A. The Borrower and the Bank are parties to that certain Credit
Agreement dated as of December 22, 1999, as amended by that certain letter
agreement dated October 29, 2001 by and between the Borrower and the Bank (as
amended and otherwise modified from time to time, the "Credit Agreement").
B. Events of Default exist under the Credit Agreement arising from
Borrower's failure to comply with: (i) the covenant set forth in Section 8.1(d)
of the Credit Agreement, prior to giving effect to this Agreement, for the
Fiscal Quarter ended January 31, 2002, and (ii) the covenant set forth in
Section 8.1(c) of the Credit Agreement, prior to giving effect to this
Agreement, for the Fiscal Quarter ended April 30, 2002 (collectively, the
"Existing Defaults").
C. The Borrower has requested that the Bank waive the Existing Defaults
and amend the Credit Agreement in certain respects.
D. The Bank has agreed, but only pursuant to the terms and conditions
set forth herein.
NOW THEREFORE, for good and valuable consideration, the mutual receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Estoppel; Reaffirmation. The Borrower acknowledges and agrees that,
as of August 23, 2002: (i) the outstanding principal balance of the Revolving
Loans was no less than $39,218,736.03, (ii) the outstanding amount under the
Myco Replacement Letter of Credit was no less than $4,073,973.00, (iii) the
outstanding amount under the Wausau Letter of Credit was no less than
$100,000.00, and (iv) the outstanding fees in respect of the Myco Replacement
Letter of Credit and the Wausau Letter of Credit are collectively no less than
$8,719.23, which amounts constitute valid and subsisting obligations of the
Borrower to the Bank that are not subject to any credits, offsets, defenses,
claims, counterclaims or adjustments of any kind. Each of the Guarantors
reaffirms its obligations under its respective guaranty and agrees that the
neither the execution nor performance of this Agreement shall operate to reduce
or discharge such obligations.
2. Limited Waiver. The Bank hereby waives the Existing Defaults;
provided, however, that nothing set forth herein or contemplated hereby shall
modify or affect the obligations of the Borrower to comply with each and every
other duty, term, condition or covenant contained in this Agreement and the
other Credit Documents from and after the date hereof.
3. Amendments.
(A) Section 1.1 of the Credit Agreement is amended in the following
respects:
(i) The definition of "Applicable Margin" is amended and
restated in its entirety to read as follows:
"Applicable Margin" shall mean 4.85% per annum.
(ii) The definition of "Credit Documents" is amended by
inserting the words "the Security Agreement, the Pledge
Agreement, the Myco Replacement Reimbursement Agreement,
the Letters of Credit, the Wausau Letter of Credit
Agreement, the Mortgages, the Hedging Agreement" after
the words "Guaranty Agreement," set forth therein.
(iii) The definition of "EBITDA" is amended and restated in its
entirety to read as follows:
"EBITDA" shall mean, for the applicable period of four
(4) consecutive Fiscal Quarters, the net income (or
loss) of the Borrower and its Subsidiaries (excluding
the Interlink Group) determined in accordance with GAAP
on a consolidated basis (excluding the write-up of
assets, retirement of debt for less than face value,
extraordinary gains and extraordinary losses), plus (a)
the following to the extent deducted in calculating such
net income: (i) interest expense (including the portion
of rent expense under Capitalized Leases that is treated
as interest in accordance with GAAP), (ii) taxes based
upon or measured by net income, (iii) Depreciation, (iv)
amortization (including any goodwill impairment
charges), (v) Borrower's loss in the Fiscal Quarter
ending January 31, 2002 on the sale of HMG stock in the
amount of $3,500,000, and (vi) any unrealized loss on
any swap agreements and minus (b) all non-cash items
increasing such net income for such period (including
any unrealized gain on any swap agreements).
(iv) The definition of "Eligible Accounts Receivable" is
amended by deleting the references to "three hundred
sixty-five (365) days" set forth in clause (a) and to
"365 days" set forth in clause (d) therein and replacing
each with a reference to "one hundred eighty (180)
days".
(v) The definition of "Guarantors" is amended by inserting
the words "and members of the Interlink Group" after the
words "Inactive Subsidiaries" in the first sentence
thereof.
(vi) The definition of "LIBOR Rate" is amended by deleting the
reference to "thirty (30) days" set forth therein and
replacing it with a reference to "ninety (90) days".
(vii) The definition of "RDP Receivables" is amended and
restated in its entirety to read as follows:
"RDP Receivables" shall mean accounts receivable of the
Borrower or any Guarantor representing amounts due the
Borrower or such Guarantor in respect of maintenance
fees for placement of publications, periodicals,
magazines and similar items in a particular display
location. Such
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receivables are sometimes referred to by the Borrower as
"retail display placement receivables."
(viii) The definition of "Revolving Loan Termination
Date" is amended by deleting the reference to "December
31, 2002" set forth therein and replacing it with a
reference to "August 1, 2003".
(ix) The definition of "Source Group" is amended by deleting
the reference to "its Subsidiaries" set forth therein
and replacing it with a reference to "the Guarantors".
(x) The following new definitions are hereby added to
Section 1.1 of the Credit Agreement in the appropriate
alphabetical order to read as follows:
"Capital Expenditures" shall mean, for any period, the
aggregate of all expenditures by the Borrower and its
Subsidiaries (excluding members of the Interlink Group)
for the acquisition or leasing of fixed or capital
assets or additions to equipment (including
replacements, capitalized repairs and improvements
during such period) which should be capitalized under
GAAP on a consolidated balance sheet of the Borrower and
its Subsidiaries (excluding members of the Interlink
Group). For the purpose of this definition, the purchase
price of equipment which is purchased within thirty (30)
days of the trade-in of existing equipment owned by the
Borrower or its Subsidiaries (excluding members of the
Interlink Group) or with insurance proceeds shall be
included in Capital Expenditures only to the extent of
the gross amount of such purchase price less the credit
granted by the seller of such equipment for such
equipment being traded in at such time, or the amount of
such proceeds, as the case may be.
"Capital Stock" shall mean (i) in the case of a
corporation, capital stock, (ii) in the case of an
association or business entity, any and all shares,
interests, participations, rights or other equivalents
(however designated) of capital stock, (iii) in the case
of a partnership, partnership interests (whether general
or limited), (iv) in the case of a limited liability
company, membership interests and (v) any other interest
or participation that confers on a Person the right to
receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"Eligible Rack Receivables" shall mean Rack Receivables
that qualify as Eligible Accounts Receivable, net of all
profit-sharing portions of such Rack Receivables.
"Hedging Agreement" shall mean, collectively (or
individually, as the context may indicate) that certain
ISDA Master Agreement dated as of January 18, 2001 by
and between the Borrower and the Bank and any additional
agreement by and between the Borrower or any of the
Guarantors and the Bank to protect the Borrower or such
Guarantor against fluctuations in interest rates, or
currency or raw materials values, including, without
limitation, any interest rate swap, cap or collar
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agreement or similar arrangement, any foreign currency
exchange agreement, currency protection agreements,
commodity purchase or option agreements or other
interest or exchange rate or commodity price hedging
agreements, in each case as amended, modified,
supplemented or restated from time to time.
"Interlink Group" shall mean The Interlink Companies,
Inc., International Periodical Distributors, Inc. and
Xxxxx X. Xxxxx, Inc., and any Subsidiaries now or
hereafter existing of any of the foregoing, individually
or collectively.
"Letter of Credit" means any letter of credit or other
guarantee or obligation which the Bank may in its
discretion agree to issue at the request of the
Borrower, including but not limited to the Myco
Replacement Letter of Credit and the Wausau Letter of
Credit.
"Letter of Credit Reserve" means, at any time, an amount
equal to one hundred percent (100%) of the sum of (i)
the aggregate undrawn amount of all Letters of Credit
outstanding at such time, plus (ii) the aggregate amount
of all drawings under Letters of Credit for which the
Bank has not been reimbursed.
"Mortgage" shall mean, collectively (or individually as
the context may indicate), those certain mortgages,
deeds of trust and/or deeds to secure debt executed by
the Borrower or Guarantors that are a party thereto in
favor of the Bank, encumbering Real Estate, and any
additional mortgage, deed of trust or deed to secure
debt or amendment, supplement, modification or
restatement thereof delivered to the Bank by the
Borrower or a Guarantor pursuant to the terms of the
Credit Documents, in each case as amended, modified,
supplemented or restated from time to time.
"Myco Replacement Letter of Credit" shall mean the
Irrevocable Letter of Credit in the amount of
$4,073,973, as issued by Bank of America, N.A. pursuant
to the Myco Replacement Reimbursement Agreement, in
favor of Amalgamated Bank of Chicago, as trustee, in
respect of the Industrial Project Revenue Bonds, Series
1995 (MYCO, Inc. Project), as issued pursuant to the
Indenture of Trust dated as of January 1, 0000 xxxxxxx
xxx Xxxx xx Xxxxxxxx, Xxxxxxxx and Amalgamated Bank of
Chicago, as trustee and tender agent, as amended,
modified, supplemented or restated from time to time.
"Myco Replacement Reimbursement Agreement" shall mean
that certain Reimbursement Agreement dated February 8,
2000, among Source-Myco, Inc., the Borrower and the
Bank, as amended, modified, supplemented or restated
from time to time.
"Pledge Agreement" shall mean that certain Pledge and
Security Agreement dated as of August 30, 2002 by the
Borrower in favor of the Bank, as amended, modified,
supplemented or restated from time to time.
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"Property" shall mean any interest in any kind of
property or asset, whether real, personal or mixed, or
tangible or intangible.
"Rack Receivables" shall mean accounts receivable of
Source-U.S. Marketing Services, Inc. representing
amounts due such Guarantor in respect of fees for
placement of publications, periodicals, magazines and
similar items in a particular display location.
"Security Agreement" shall mean that certain Security
Agreement dated as of August 30, 2002 by the Borrower
and the Guarantors in favor of the Bank, as amended,
modified, supplemented or restated from time to time.
"Wausau Letter of Credit" shall mean that certain
Irrevocable Standby Letter of Credit Number 3050553
dated August 5, 2002, in the amount of $100,000.00,
issued by Bank of America, N.A. for the benefit of
Employers Insurance Company of Wausau, as amended,
modified, supplemented or restated from time to time.
"Wausau Letter of Credit Agreement" shall mean that
certain Application and Agreement for Standby Letter of
Credit by and between the Borrower and the Bank in
respect of the Wausau Letter of Credit, as amended,
modified, supplemented or restated from time to time.
(B) Section 2.1 of the Credit Agreement is amended in the following
respects:
(i) Clause (b) of Section 2.1 of the Credit Agreement is
amended and restated in its entirety to read as follows:
(b) As used herein, the term "Borrowing Base" shall
mean at any time the amount, as determined with
reference to the Borrowing Base Certificate most
recently delivered by the Borrower to the Bank, unless
such Borrowing Base Certificate is rejected by the Bank
as not being prepared in accordance with Section 2.1(c)
of this Agreement, equal to:
(i) eighty percent (80%) of Eligible Accounts
Receivable (excluding Rack Receivables) outstanding
not more than ninety (90) days or, in the case of
RDP Receivables, not more than one hundred eighty
(180) days, from invoice date ("Tier I
Receivables"), plus
(ii) seventy percent (70%) of Eligible Accounts
Receivable (excluding Rack Receivables and RDP
Receivables) outstanding more than ninety (90) days
but less than one hundred eighty (180) days from
invoice date ("Tier II Receivables"), plus
(iii) seventy-five (75%) of Eligible Rack
Receivables outstanding not more than one hundred
eighty (180) days from invoice date, plus
(iv) fifty percent (50%) of Net Fixed Assets,
minus
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(v) the Letter of Credit Reserve.
(ii) Clause (c) of Section 2.1 of the Credit Agreement is
amended and restated in its entirety to read as follows:
(c) Within thirty (30) days after the end of each
month, the Borrower shall deliver to the Bank a
Borrowing Base Certificate in a form acceptable to the
Bank setting forth the Calculation of the Borrowing Base
and the aggregate amount of Revolving Loans outstanding
as of the end of such month and certified as true and
correct by the chief financial officer of the Borrower.
The Borrower covenants that each Borrowing Base
Certificate will be prepared in good faith by the
Borrower using the Borrower's best estimate of the
information called for therein based on past experience
and using consistent calculation methods.
(iii) Section 2.1 of the Credit Agreement is amended by adding
the following clause (f) at the end thereof:
(f) The Borrower and the Bank acknowledge and agree
that if the Bank shall make any payment on or in respect
of any Letter of Credit, or if any amount shall become
due by the Borrower to the Bank pursuant to the terms of
any agreement between the Borrower and the Bank with
respect to any Letter of Credit, the Borrower shall be
unconditionally obligated to pay or reimburse the Bank
on demand therefor, and any such payment by Bank or
reimbursement obligation shall be deemed a Revolving
Loan or, at the Bank's election, advanced and charged as
a Revolving Loan, in each case under the Revolving Line
of Credit.
(C) Section 2.3 of the Credit Agreement is amended by (i) deleting the
word "and" at the end of clause (b) thereof, (ii) deleting the period at the end
of clause (c) thereof and replacing it with "; and" and (iii) adding the
following clause (d) at the end of Section 2.3:
(d) In part, within five Business Days, in the event the
total principal amount outstanding at any time under the Revolving
Credit Note exceeds the Borrowing Base, in the amount of such
excess.
(D) Section 2.5 of the Credit Agreement is amended by inserting the
words "the members of the Interlink Group and" after the words "other than" set
forth therein.
(E) Section 2.8 of the Credit Agreement is amended and restated in its
entirety to read as follows:
Section 2.8 [Reserved]
(F) Section 6.9 of the Credit Agreement is amended by adding the
following sentence at the end thereof:
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"All policies shall have the Bank named as an additional insured (in
the case of liability insurance) or as the loss payee (in the case of
hazard insurance)."
(G) Section 6.10 of the Credit Agreement is amended and restated in its
entirety to read as follows:
Section 6.10 Maintenance of Books and Records; Inspection. Maintain
and cause each Subsidiary to maintain adequate books, accounts and
records and prepare all financial statements required under this
Agreement in accordance with GAAP, and in compliance with the
regulations of any governmental regulatory body having jurisdiction
over it. The Borrower shall permit, and cause each Guarantor to permit,
any employee or representative of the Bank to visit and inspect any of
its properties, to examine and audit its books of account, records,
reports and other papers, to make copies and extracts therefrom, and to
discuss its affairs, finances and accounts with its officers and, upon
prior written notice (of no less than three (3) Business Days) to the
Borrower or such Guarantor and subject to mutually satisfactory
arrangements between the Borrower and the Bank with regard to any
additional fees to be incurred, its independent public accounts (and by
this provision the Borrower, for itself and the Guarantors, authorizes
said accountants to discuss their finances and affairs with the Bank),
at such reasonable times and as often as may be reasonably requested.
Borrower agrees to pay or reimburse the Bank, upon its demand, for the
reasonable expenses incurred by the Bank for two field examinations of
Borrower's trading assets per calendar year by the Bank's personnel or
such other outside auditor hired by the Bank; provided, however, that
this provision shall not limit or otherwise affect the Bank's right to
conduct such examinations at any other time at the Bank's expense upon
prior written notice (of no less than three (3) Business Days) to the
Borrower or such Guarantor and subject to mutually satisfactory
arrangements between the Borrower and the Bank.
(H) Section 6.13 of the Credit Agreement is amended by adding the
following sentence at the end thereof:
"This section, however, shall not apply to Subsidiaries that are
members of the Interlink Group and such Subsidiaries shall not be
required to execute a Guaranty Agreement."
(I) Section 6.14 of the Credit Agreement is amended and restated in its
entirety to read as follows:
Section 6.14 Pledged Assets. The Borrower shall, and shall
cause each of the Guarantors to:
(a) except to the extent of Permitted Liens other than
Permitted Liens which are Liens granted to the Bank, cause all of
the owned Property of the Borrower and the Guarantors to be subject
at all times to first priority, perfected Liens in favor of the
Bank and, in the case of owned Real Estate or ground leased
Real Estate, title insured Liens in favor of the Bank, the
foregoing Liens to secure the obligations under the Credit
Documents pursuant to the terms and conditions of this
Agreement, the Security Agreement, the Pledge Agreement and the
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Mortgages or, with respect to any such Property acquired subsequent to
the Closing Date, promptly upon such acquisition, and in any event
within thirty (30) days thereafter, deliver such other additional
security documents as the Bank shall reasonably request, subject in any
case to Permitted Liens;
(b) deliver such other documentation as the Bank may reasonably
request in connection with the foregoing, including, without
limitation, appropriate UCC-1 financing statements, real estate title
insurance policies, surveys, environmental reports, landlord waivers,
certified resolutions and other organizational and authorizing
documents of such Person, and favorable opinions of counsel to such
Person (which shall cover, among other things, the legality, validity,
binding effect and enforceability of the documentation referred to
above and the perfection of the Bank's Liens thereunder), all in form,
content and scope reasonably satisfactory to the Bank; and
(c) shall otherwise comply with the terms and conditions set
forth in this Agreement, the Security Agreement, the Pledge Agreement,
the Mortgages and the other Credit Documents with respect to the
perfection and maintenance of the Bank's Liens, the monitoring of such
Liens and the provision of further assurances regarding such Liens.
Without limiting the generality of the above, the Borrower will
cause 100% of the issued and outstanding Capital Stock of each of its
Subsidiaries (excluding members of the Interlink Group) to be subject
at all times to a first priority, perfected Lien in favor of the Bank
pursuant to the terms and conditions of the Pledge Agreement and such
other security documents as the Bank shall reasonably request.
(J) Clause (g) of Section 7.5 of the Credit Agreement is amended and
restated in its entirety to read as follows:
(g) loans, advances and other extensions of credit from the
Borrower to members of the Interlink Group (including payables owing to
Borrower by any member of the Interlink Group) up to an aggregate
outstanding amount of $30,000,000.00 at any time; provided that any
such loan, advance or extension of credit is evidenced by a promissory
note in form and substance acceptable to the Bank that is delivered to
the Bank as collateral for the Obligations.
(K) Section 7.8 of the Credit Agreement is amended by adding the following
sentence at the end thereof:
"Notwithstanding the foregoing, Borrower shall not enter into
any tax sharing or tax allocation arrangements with any Affiliate of
the Borrower or any of its Subsidiaries in respect of its Federal,
state or other material tax returns without the prior written consent
of the Bank."
(L) The following new Section 7.16 is hereby added to the Credit Agreement:
7.16 Capital Expenditures. Make Capital Expenditures in excess
of $3,800,000 in any Fiscal Year.
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(M) Section 8.1 of the Credit Agreement is amended in the
following respects:
(i) by inserting "(but excluding all members of
the Interlink Group, notwithstanding
anything to the contrary contained herein)"
after the word "Subsidiaries" in the first
sentence thereof; and
(ii) by deleting clauses (c) and (d) thereof and
replacing them with the following new
clauses (c) and (d):
(c) Funded Debt to EBITDA. Maintain Funded
Debt to EBITDA Ratio, determined as of the end of
each Fiscal Quarter, of not greater than the ratios
set forth below for the period ending on the last day
of such Fiscal Quarter:
Fiscal Quarter Ending Funded Debt to EBITDA Ratio
--------------------- ---------------------------
July 31, 2002 3.5 to 1.0
October 31, 2002 4.0 to 1.0
January 31, 2003 and thereafter 2.5 to 1.0
(d) Minimum EBITDA. Maintain, as of the end
of each Fiscal Quarter for the then most recently
completed period of four (f) consecutive Fiscal
Quarters, EBITDA of not less than the amounts set
forth below for such period:
Four Fiscal Quarters Ending EBITDA
--------------------------- ------
July 31, 2002 $12,000,000
October 31, 2002 $10,000,000
January 31, 2003 and thereafter $15,000,000
(N) Section 9.1 of the Credit Agreement is amended by (i)
deleting the word "or" at the end of clause (m) thereof, (ii) deleting
the period at the end of clause (n) thereof and replacing it with ";"
and (iii) adding the following clauses (o) and (p) at the end of
Section 9.1:
(o) The occurrence of a default or an event of
default under that certain Loan and Security Agreement dated
as of February 22, 2001, as amended from time to time, by and
between Xxxxx X. Xxxxx, Inc. and Congress Financial
Corporation (Western), which results in an acceleration of, or
an enforcement action for, the obligations arising in
connection therewith or the maturity thereof; or
(p) The occurrence of a default or an event of
default under that certain Loan and Security Agreement dated
as of February 22, 2001, as amended from time to time, by and
between International Periodical Distributors, Inc. and
Congress Financial Corporation (Western), which results in an
acceleration of, or an enforcement action for, the obligations
arising in connection therewith or the maturity thereof.
(O) Section 10.2 of the Credit Agreement is amended by
inserting the words "or any of the other Credit Documents" after the
word "Agreement".
(P) Sections 2.4, 5.12, 5.13, 5.14, 6.1, 6.2, 6.3, 6.4, 6.6,
6.7, 6.9, 6.12, 7.1, 7.2, 7.5, 7.6, 7.7, 7.8, 7.9, 7.11 and 7.15 and
the introductory paragraph of Article VII of the Credit Agreement are
amended by replacing the term "Subsidiaries" with the term "Guarantors"
and the term
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"Subsidiary" with the term "Guarantor" in each instance in which such
terms appear in such sections and in such introductory paragraph.
4. Fees.
(A) Amendment Fee. In consideration of the Bank's willingness
to enter into this Agreement, the Borrower shall be obligated to pay
the Bank a fee in the amount of $115,000 (the "Amendment Fee"), which
shall be fully earned upon the effectiveness of this Agreement. The
Borrower may defer payment of the Amendment Fee (without interest)
until December 15, 2002; provided, that the Bank shall forgive the
Amendment Fee and waive the payment of any unpaid portion thereof in
the event that all of the Obligations are satisfied in full (and the
Revolving Line of Credit terminated and all letters of credit issued
thereunder or pursuant to that certain Reimbursement Agreement dated
February 8, 2000 by and among the Borrower, Source-Myco, Inc. and the
Bank (the "Myco Replacement Reimbursement Agreement") are terminated)
on or before December 15, 2002 and no Event of Default under Section
9.1(a) of the Credit Agreement shall have occurred and be continuing.
(B) Extension Fee. In consideration of the Bank's willingness
to extend the Revolving Termination Date as provided herein, the
Borrower shall be obligated to pay the Bank a fee in the amount of
$345,000 (the "Extension Fee"), which shall be fully earned on January
1, 2003. The Borrower may defer payment of the Extension Fee (without
interest) until August 1, 2003; provided, that the Bank shall forgive
payment of the Extension Fee and waive the payment of any unpaid
portion thereof in the event that all of the Obligations are satisfied
in full (and the Revolving Line of Credit terminated and all letters of
credit issued thereunder or pursuant to the Myco Replacement
Reimbursement Agreement are terminated) on or before August 1, 2003 and
no Event of Default under Section 9.1(a) of the Credit Agreement shall
have occurred and be continuing.
5. Expenses. Upon demand therefor, the Borrower shall reimburse the
Bank for all reasonable out-of-pocket expenses incurred by the Bank in
connection with the Bank's negotiation, review and closing of this Agreement,
including without limitation the fees and expenses of counsel (in-house and
outside) to the Bank, the costs of any environmental investigation, and any
audits, appraisals, title insurance premiums, survey and inspection fees.
6. Consultant. Solely after the occurrence of an Event of Default and
only so long as such Event of Default is continuing, at its discretion, the Bank
may engage an outside consultant (a "Consultant") to assist the Bank in its
analysis of the operations of the Borrower. The Borrower shall cooperate fully
with the Consultant, which cooperation shall include, but shall not be limited
to, allowing the Consultant reasonable access to the Borrower's books, records,
plans, personnel and operations to evaluate the Borrower's business plan and
evaluate the Borrower's business. The Borrower shall reimburse the Bank for all
reasonable costs and expenses associated with any Consultant.
7. Additional Reporting. In addition to any reporting requirements
under the Credit Agreement, the Borrower shall deliver to the Bank, with each
monthly Borrowing Base Certificate, (i) a written summary in form acceptable to
the Bank of the status of its efforts to refinance the Obligations, and (ii) an
accounts receivable aging for the Borrower and each Guarantor on a consolidated
basis in form acceptable to the Bank.
8. Release. Each of the Borrower and the Guarantors hereby represents
and warrants that it has no claims, counterclaims, offsets, or defenses to any
of the Credit Documents, or to the performance of its obligations thereunder. In
consideration of the Bank's willingness to enter into this Agreement,
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each of the Borrower and the Guarantors hereby releases the Bank and its
officers, employees, representatives, counsel, trustees and directors, from any
and all actions, causes of action, claims, demands, damages and liabilities of
whatever kind or nature, in law or in equity, now known or unknown, suspected or
unsuspected to the extent that any of the foregoing arises from any action or
failure to act on or prior to the date hereof.
9. Representations and Warranties of Borrower. The Borrower
hereby represents and warrants to the Bank that:
(a) after giving effect to this Agreement, no Default or Event
of Default exists under the Credit Documents;
(b) after giving effect to this Agreement, the representations
and warranties of the Borrower contained in Article V of the Credit
Agreement are true, accurate and complete in all material respects on
and as of the date hereof to the same extent as though made on and as
of such date except to the extent such representations and warranties
specifically relate to an earlier date; and
(c) (i) the execution, delivery and performance by the
Borrower of this Agreement are within the Borrower's corporate powers
and have been duly authorized by all necessary corporate action on the
part of the Borrower, (ii) subject to the effect of bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar
laws relating to or affecting creditors' rights (including, without
limitation, preference and fraudulent conveyance or transfer laws),
this Agreement constitutes a legal, valid and binding obligation of the
Borrower enforceable against the Borrower in accordance with its terms
and (iii) neither this Agreement, nor the execution, delivery or
performance by the Borrower hereof (A) violates any law or regulation,
or any order or decree of any court or Governmental Authority, or (B)
conflicts with or results in the breach or termination of, constitutes
a default under or accelerates any performance required by, any
material indenture, mortgage, deed of trust, lease, agreement or other
instrument to which the Borrower is a party or by which the Borrower or
any of its property is bound.
10. Representations and Warranties of Guarantors. Each of the
Guarantors hereby represents and warrants to the Bank that:
(a) it has had the assistance of legal counsel in
carefully reviewing, discussing and considering all terms of this
Agreement;
(b) it executes this Agreement as a free and voluntary
act, without any duress, coercion or undue influence exerted by or on
behalf of the Bank or any other party;
(c) it has full and complete authorization and power to
execute this Agreement in the capacities herein stated, and this
Agreement does not violate any law, rule, regulation, contract or
agreement otherwise enforceable by or against it; and
(d) its respective obligations under the Credit Documents
are its binding obligations and that it has no rights of offset.
11. Conditions Precedent to Effectiveness. This Agreement shall
be and become effective as of the date hereof (the "Effective Date") when all of
the following conditions precedent shall have been satisfied:
11
(a) Executed Counterparts. The Bank shall have received
executed counterparts of this Agreement, duly executed by the Borrower
and the Guarantors.
(b) Payment of Interest. The Borrower shall have paid
all interest accrued through the Effective Date.
(c) Reimbursement of Attorney Fees. The Borrower shall have
reimbursed the Bank for the fees and expenses of its counsel, Xxxxx &
Xxx Xxxxx, PLLC, billed through August 29, 2002 in the amount of
$60,000.00.
(d) Reimbursement of Field Exam Expenses. The Borrower
shall have reimbursed the Bank for its expenses incurred in connection
with its field exam in the amount of $11,571.31.
(e) Reimbursement of Appraisal Expenses. The Borrower
shall have reimbursed the Bank for its expenses incurred in connection
with appraisals in the amount of $17,800.00.
(f) Security Documents. The Borrower shall have granted
or shall have caused to be granted to the Bank a perfected first
priority Lien, subject only to Permitted Liens, in all of the
Borrower's and each of the respective Guarantor's real and
personal property assets (collectively, the "Collateral"),
including all capital stock of the Borrower in each of the
Guarantors, and the Bank shall have received, in form and
substance satisfactory to the Bank:
(i) fully executed and notarized mortgages, deeds of
trust or deeds to secure debt encumbering the fee
interest and/or leasehold interest of the Borrower
and the Guarantors in all of their owned or
ground-leased real property assets (the "Mortgaged
Properties"), including without limitation those set
forth on Schedule 11(f) hereto, in favor of the Bank;
(ii) a duly executed security agreement in the form
of Exhibit A attached hereto and duly executed UCC
financing statements for each appropriate
jurisdiction as is necessary, in the Bank's sole
discretion, to perfect the Bank's security interest
in all personal property of the Borrower and the
Guarantors;
(iii) a duly executed pledge agreement in the form of
Exhibit B attached hereto for all capital stock of
each Guarantor, and original stock certificates
evidencing all pledged shares accompanied by duly
executed in blank, undated stock powers for such
pledged shares; and
(iv) duly executed UCC financing statements for each
appropriate jurisdiction as is necessary to perfect
the Borrower's security interest in the "RDA/RDP
Receivables" of International Periodical
Distributors, Inc., as such term is defined in that
certain Agreement and Assignment for the Collection
of Retail Display Allowances dated as of January 31,
2001 by and between Borrower and International
Periodical Distributors, Inc. and a duly executed
collateral assignment of such agreement in the form
of Exhibit C attached hereto.
(g) Corporate Documents. The Bank shall have received:
(i) copies of any articles or certificates of
incorporation or other charter documents of the Borrower or
any Guarantor that have been amended or modified since such
documents were previously delivered to the Bank in certified
form on December 22,
12
1999 in connection with the closing of the Credit Agreement,
certified to be true and complete as of a recent date by the
appropriate Governmental Authority of the state or other
jurisdiction of its incorporation and certified by a secretary
or assistant secretary of such Person to be true and correct
as of the date hereof (or, if such documents have not been
amended or modified, certification by a secretary or assistant
secretary of such Person that such documents have not been
amended or modified since such date and that such documents
remain in full force and effect as of the date hereof);
(ii) copies of any bylaws of the Borrower or any
Guarantor that have been amended or modified since such
documents were previously delivered to the Bank in certified
form on December 22, 1999 in connection with the closing of
the Credit Agreement, certified by a secretary or assistant
secretary of such Person to be true and correct as of the date
hereof (or, if such documents have not been amended or
modified, certification by a secretary or assistant secretary
of such Person that such documents have not been amended or
modified since such date and that such documents remain in
full force and effect as of the date hereof);
(iii) copies of resolutions of the board of directors
of the Borrower and each Guarantor approving and adopting this
Agreement and the documents contemplated herein, the
transactions contemplated therein and authorizing execution
and delivery thereof, certified by a secretary or assistant
secretary of such Person to be true and correct and in force
and effect as of the date hereof;
(iv) copies of (A) certificates of good standing,
existence or its equivalent with respect to the Borrower and
each Guarantor certified as of a recent date by the
appropriate Governmental Authorities of the state or other
jurisdiction of incorporation and each other jurisdiction in
which the failure to so qualify and be in good standing could
have a Material Adverse Effect and (B) to the extent
available, a certificate indicating payment of all corporate
or comparable franchise taxes certified as of a recent date by
the appropriate governmental taxing authorities; and
(v) An incumbency certificate of the Borrower and
each Guarantor certified by a secretary or assistant secretary
to be true and correct as of the date hereof.
(h) Legal Opinion of Xxxxxxxxx Xxxxxxxx, LLP. The Bank shall
have received, dated as of the date hereof and in form and substance
reasonably satisfactory to the Bank, a legal opinion of Xxxxxxxxx
Xxxxxxxx, LLP, counsel to the Borrower and the Guarantors (which shall
cover among other things, authority, due authorization, enforceability,
as well as the attachment and validity of the Liens required by this
Agreement).
(i) Perfection Certificate. The Bank shall have received, in
form and substance reasonably satisfactory to the Bank, a lien
perfection certificate executed by the Borrower.
(j) Evidence of Insurance. The Bank shall have received copies
of insurance policies or certificates of insurance of each of the
Borrower and the Guarantors evidencing liability and casualty insurance
meeting the requirements set forth in Section 6.9 of the Credit
Agreement, including, but not limited to, naming the Bank as additional
insured (in the case of liability insurance) or loss payee (in the case
of hazard insurance).
13
(k) Borrowing Base Certificate. The Bank shall have received
a Borrowing Base Certificate current through the end of the month
preceding the date hereof certified as true and accurate by the chief
financial officer of the Borrower.
(l) Related Party Indebtedness. The Borrower shall have
delivered to the Bank a schedule in form and substance satisfactory to
the Bank setting forth a detailed list of the Indebtedness outstanding
from Affiliates of the Borrower to the Borrower, certified as true and
accurate by the chief financial officer of the Borrower.
12. Post-Closing Requirements. The parties agree that the Borrower and
Guarantors shall satisfy the following requirements within the time specified
below; provided, however, that failure to satisfy each requirement within the
time specified therefor shall constitute an Event of Default under the Credit
Documents:
(a) Within 60 days following the Closing Date, the Bank shall
have received, in form and substance reasonably satisfactory to the
Bank:
(i) in the case of each leasehold Real Estate of the
Borrower or any Guarantor, such estoppel letters, consents and
waivers from the landlords on such real property as may be
required by the Bank and which, with the use of commercially
reasonable efforts, the Borrower and the Guarantors are able
to obtain, which estoppel letters shall be in the form and
substance reasonably satisfactory to the Bank.
(b) Within 90 days following the Closing Date, the Bank shall
have received, in form and substance reasonably satisfactory to the
Bank:
(i) ALTA mortgagee title insurance policies (the
"Mortgage Policies"), in amounts not less than the respective
appraised amounts of each of the Mortgaged Properties,
assuring the Bank that each of the Mortgages creates a valid
and enforceable first priority mortgage Lien on the applicable
Mortgaged Property, free and clear of all defects and
encumbrances except Permitted Liens and any other defects
reasonably acceptable to the Bank, which Mortgage Policies
shall otherwise be in form and substance reasonably
satisfactory to the Bank and shall include such endorsements
as are reasonably requested by the Bank.
(c) Within 30 days following the Closing Date, the Bank shall
have received, in each case in form and substance reasonably
satisfactory to the Bank:
(i) a legal opinion of special local counsel for each
Guarantor oraganized in Canada (which shall cover among other
things, authority, due authorization, enforceability, as well
as the attachment, perfection and validity of the Liens
required by this Agreement);
(ii) a legal opinion of special local counsel for the
Borrower and the Guarantors for each state in which any
Mortgaged Property is located;
(iii) evidence as to (A) whether any Mortgaged
Property is in an area designated by the Federal Emergency
Management Agency as having special flood or mud slide hazards
(a "Flood Hazard Property") and (B) if any Mortgaged Property
is a Flood Hazard Property, (x) whether the community in which
such Mortgaged Property is located is participating in the
National Flood Insurance Program, (y) the applicable
14
Borrower's or Guarantor's written acknowledgment of receipt of
written notification from the Bank (1) as to the fact that
such Mortgaged Property is a Flood Hazard Property and (2) as
to whether the community in which each such Flood Hazard
Property is located is participating in the National Flood
Insurance Program and (z) copies of insurance policies or
certificates of insurance of the Borrower and Guarantors
evidencing flood insurance satisfactory to the Bank and naming
the Bank as sole loss payee; and
(iv) deposit account control agreements for all
deposit accounts, other than the deposit accounts maintained
with the Bank, in form and substance reasonably satisfactory
to the Bank.
13. Reference to and Effect on Credit Agreement. Subject to the terms
hereof and except as specifically modified hereby, the Credit Documents shall
remain in full force and effect. The execution, delivery and effectiveness of
this Agreement shall not operate as a waiver of any right, power or remedy of
the Bank under the Credit Documents, or constitute a waiver or amendment of any
provision of the Credit Documents, except as expressly set forth herein.
14. Credit Document. This Agreement and the documents executed in
connection herewith shall be deemed Credit Documents executed pursuant to the
Credit Agreement and the other Credit Documents and shall (unless otherwise
expressly indicated therein) be construed, administered and applied in
accordance with the terms and provisions of the Credit Agreement and the other
Credit Documents.
15. Further Assurances. The Bank, the Borrower and the Guarantors each
agrees to execute and deliver, or to cause to be executed and delivered, all
such instruments as they may reasonably request to effectuate the intent and
purposes, and to carry out the terms, of this Agreement.
16. CHOICE OF LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
17. Miscellaneous.
(a) This Agreement shall be binding on and shall inure to the
benefit of the Borrower, the Guarantors, the Bank and their respective
successors and permitted assigns. The terms and provisions of this
Agreement are for the purpose of defining the relative rights and
obligations of the Borrower, the Guarantors and the Bank with respect
to the transactions contemplated hereby and there shall be no third
party beneficiaries of any of the terms and provisions of this
Agreement.
(b) Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
(c) Wherever possible, each provision of this Agreement shall
be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining
provisions of this Agreement.
15
(d) Except as otherwise provided in this Agreement, if any
provision contained in this Agreement is in conflict with, or
inconsistent with, any provision in the Credit Documents, the provision
contained in this Agreement shall govern and control.
(e) This Agreement may be executed in any number of separate
counterparts, each of which shall collectively and separately
constitute one agreement. Delivery of an executed counterpart of this
Agreement by telecopy shall be effective as an original and shall
constitute a representation that an original shall be delivered to the
Bank.
18. Entirety. This Agreement and the other Credit Documents embody the
entire agreement between the parties and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof. This Agreement
and the other Credit Documents represent the final agreement between the parties
and may not be contradicted by evidence of prior, contemporaneous or subsequent
oral agreements of the parties. Any modification to this Agreement must be in
writing, signed by the party to be charged, to be effective.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK - SIGNATURE PAGES TO FOLLOW]
SCHEDULE 11(f)
MORTGAGED PROPERTIES
Owner Address
----- -------
Source-Interlink Companies, Inc. 000 Xxxxxxxxx Xxxxx Xxxx
Xxxx Xxxxx, XX 00000
Source-Myco, Inc. 0000 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Source-Xxxxxx Industries, Inc. 0000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Source-Huck Store Fixture Company 0000 Xxxxx 00xx Xxxxxx
Xxxxxx, XX 00000
Source-Huck Store Fixture Company Vacant Xxx xx 00xx Xx. & Xxxx
Xxxxxx, XX 00000
Source-Huck Store Fixture Company Vacant Xxx xx 00xx Xx. & Xxxxxx
Xxxxxx, XX 00000
17
Accepted and agreed to as of the date first above written.
BANK: BANK OF AMERICA, N.A
By: /s/ Xxxxx X Xxxx
--------------------------
Name: Xxxxx X. Xxxx
------------------------
Title: Senior Vice President
-----------------------
18
Accepted and agreed to as of the date first above written.
BORROWER: SOURCE INTERLINK COMPANIES, INC.
F/K/A THE SOURCE INFORMATION
MANAGEMENT COMPANY
By: /s/ S. Xxxxxx Xxxxxx
--------------------------
Name: S. Xxxxxx Xxxxxx
Title: Chairman and Chief
Executive Officer
GUARANTORS: THE SOURCE - CANADA CORP.
----------
By: /s/ S. Xxxxxx Xxxxxx
--------------------------
Name: S. Xxxxxx Xxxxxx
Title: Chief Executive
Officer
SOUCE - HUCK STORE FIXTURE COMPANY
By: /s/ S. Xxxxxx Xxxxxx
--------------------------
Name: S. Xxxxxx Xxxxxx
Title: Chief Executive
Officer
SOURCE - XXXXXX INDUSTRIES, INC.
By: /s/ S. Xxxxxx Xxxxxx
--------------------------
Name: S. Xxxxxx Xxxxxx
Title: Chief Executive
Officer
SOURCE - U.S. MARKETING SERVICES,
INC.
By: /s/ S. Xxxxxx Xxxxxx
--------------------------
Name: S. Xxxxxx Xxxxxx
Title: President
SOURCE - MYCO, INC.
By: /s/ S. Xxxxxx Xxxxxx
--------------------------
Name: S. Xxxxxx Xxxxxx
Title: President
19
SOURCE - CHESTNUT DISPLAY SYSTEMS,
INC.
By: /s/ S. Xxxxxx Xxxxxx
---------------------------
Name: S. Xxxxxx Xxxxxx
Title: President
XXXXX WIRE AND METAL PRODUCTS,
LTD.
By: /s/ S. Xxxxxx Xxxxxx
---------------------------
Name: S. Xxxxxx Xxxxxx
Title: Chief Executive Officer
HUCK STORE FIXTURE COMPANY OF NORTH
CAROLINA
By: /s/ S. Xxxxxx Xxxxxx
---------------------------
Name: S. Xxxxxx Xxxxxx
Title: Chief Executive Officer
T.C.E. CORPORATION
By: /s/ S. Xxxxxx Xxxxxx
---------------------------
Name: S. Xxxxxx Xxxxxx
Title: Chief Executive Officer
BRAND MANUFACTURING CORP.
By: /s/ S. Xxxxxx Xxxxxx
---------------------------
Name: S. Xxxxxx Xxxxxx
Title: Chief Executive Officer
VAIL COMPANIES, INC.
By: /s/ S. Xxxxxx Xxxxxx
---------------------------
Name: S. Xxxxxx Xxxxxx
Title: Chief Executive Officer
20
