$50,000,000
TERM LOAN AGREEMENT
dated as of
June 16, 1997
among
THE MUSICLAND GROUP, INC.,
MUSICLAND STORES CORPORATION,
VARIOUS FINANCIAL INSTITUTIONS
and
XXXXXX GUARANTY TRUST COMPANY OF NEW YORK,
as Agent
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS................................1
1.1. Definition...........................................................1
1.2. Accounting Terms and Determinations.................................12
1.3. Types of Borrowings.................................................13
ARTICLE II
THE CREDITS................................13
2.1. Commitments to Lend.................................................13
2.2. Notice of Borrowing.................................................13
2.3. Notice to Banks; Funding of Loans...................................14
2.4. Conversion and Continuation Elections for Borrowings................15
2.5. Notes...............................................................15
2.6. Amortization of Loans...............................................16
2.7. Interest Rates......................................................16
2.8. Upfront Fee.........................................................17
2.9. Optional Prepayments................................................17
2.10. General Provisions as to Payments...................................17
2.11. Funding Losses......................................................18
2.12. Computation of Interest and Fees....................................18
2.13. Regulation D Compensation...........................................19
ARTICLE III
CONDITIONS................................19
3.1. Conditions to Effectiveness.........................................19
3.2. Conditions to First Borrowing.......................................20
3.3. Conditions to Second Borrowing......................................21
3.4. Conditions to Both Borrowings.......................................21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES.....................22
4.1. Corporate Existence and Power.......................................22
4.2. Corporate and Governmental Authorization; No
Contravention.......................................................22
4.3. Binding Effect......................................................22
4.4. Financial Information...............................................22
4.5. Subsidiaries........................................................23
4.6. Litigation..........................................................23
4.7 Compliance with ERISA...............................................23
4.8. Taxes...............................................................24
4.9. Not an Investment Company...........................................24
4.10. Compliance with Laws, etc...........................................24
4.11. Possession of Franchises, Licenses, etc.............................24
4.12. Environmental Matters...............................................25
4.13. Undisclosed Liabilities.............................................25
4.14. Title to Properties.................................................25
4.15. Retail Store Leases.................................................25
4.16. Full Disclosure.....................................................26
ARTICLE V
COVENANTS................................26
5.1. Information.........................................................26
5.2. Maintenance of Property; Insurance..................................29
5.3. Conduct of Business and Maintenance of Existence....................29
5.4. Compliance with Laws................................................29
5.5. Inspection of Property, Books and Records...........................30
5.6. Liens...............................................................30
5.7. Consolidations, Mergers and Sales of Assets.........................31
5.8. Use of Proceeds.....................................................32
5.9. Further Assurances..................................................32
5.10. Amendments to Senior Subordinated Indenture.........................32
5.11. EBITDA..............................................................32
5.12. Inventory...........................................................32
ARTICLE VI
DEFAULTS 33................................33
6.1. Events of Default...................................................33
6.2. Notice of Default...................................................35
ARTICLE VII
THE AGENT................................36
7.1. Appointment and Authorization.......................................36
7.2. Agent and Affiliates................................................36
7.3. Action by Agent.....................................................36
7.4. Consultation with Experts...........................................36
7.5. Liability of Agent..................................................36
7.6. Indemnification.....................................................37
7.7. Credit Decision.....................................................37
7.8. Successor Agent.....................................................37
7.9. Agent's Fee.........................................................38
ARTICLE VIII
CHANGE IN CIRCUMSTANCES.........................38
8.1. Basis for Determining Interest Rate Inadequate
or Unfair...........................................................38
8.2. Illegality..........................................................38
8.3. Increased Cost and Reduced Return...................................39
8.4. Taxes...............................................................40
8.5. Base Rate Loans Substituted for Euro-Dollar Loans...................42
ARTICLE IX
GUARANTY..................................42
9.1. The Guaranty........................................................42
9.2. Guaranty Unconditional..............................................43
9.3. Discharge Only Upon Payment in Full; Reinstatement in
Certain Circumstances...............................................43
9.4. Waiver..............................................................44
9.5. Delay of Subrogation................................................44
9.6. Stay of Acceleration................................................44
9.7. Subordination of Indebtedness.......................................44
ARTICLE X
MISCELLANEOUS..............................44
10.1. Notices.............................................................44
10.2. No Waivers..........................................................45
10.3. Expenses; Indemnification...........................................45
10.4. Sharing of Set-Offs.................................................46
10.5. Amendments and Waivers..............................................46
10.6. Successors and Assigns..............................................47
10.7. Margin Stock........................................................48
10.8. Limitation on Liability.............................................48
10.9. Survival of Obligations.............................................49
10.10. Independence of Covenants...........................................49
10.11. Severability of Provisions..........................................49
10.12. Governing Law; Submission to Jurisdiction...........................49
10.13. Counterparts; Integration...........................................50
10.14. WAIVER OF JURY TRIAL................................................50
10.15. Collateral Agent....................................................50
Schedule 1.1......-........Commitments and Commitment Percentages
Schedule 3.1(d)...-........Warrants
Schedule 4.5......-........Subsidiaries of MSC
Schedule 4.8......-........Taxes
Schedule 4.10.....-........Compliance with Laws
Schedule 5.6......-........Liens
Exhibit A.........-........Form of Note
Exhibit B.........-........Form of Subsidiary Guaranty
Exhibit C.........-........Form of Security Agreement
Exhibit D.........-........Form of Opinion of Xxxxx Xxxxx Xxxxxx
Exhibit E.........-........Form of Opinion of Special Counsel to the
..................Borrower and the other Loan Parties
Exhibit F.........-........Form of Opinion of Special Securities Counsel
..................to MSC
Exhibit G.........-........Form of Warrant Certificate
Exhibit H.........-........Form of Warrant and Registration Rights
..................Agreement
Exhibit I.........-........Form of Notice of Borrowing
Exhibit J.........-........Form of Notice of Conversion/Continuation
Exhibit K.........-........Form of Assignment and Assumption Agreement
Exhibit L.........-........Form of Bi-Weekly Inventory Report
TERM LOAN AGREEMENT
TERM LOAN AGREEMENT dated as of June 16, 1997 among THE MUSICLAND GROUP,
INC., MUSICLAND STORES CORPORATION, the financial institutions which are from
time to time parties hereto and XXXXXX GUARANTY TRUST COMPANY OF NEW YORK, as
Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. The following terms, as used herein, have the
following meanings:
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent and submitted to
the Agent (with a copy to the Borrower) duly completed by such Bank.
"Affiliate" means, with respect to any Person, any other Person that,
directly or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, such Person.
"Agent" means Xxxxxx in its capacity as agent for the Banks hereunder, and
its successors in such capacity.
"Applicable Law" means, anything in Section 10.12 to the contrary
notwithstanding, (a) all applicable common law and principles of equity and (b)
all applicable provisions of all (i) constitutions, statutes, rules,
regulations, ordinances and orders of governmental bodies, (ii) authorizations,
consents, approvals, licenses or exemptions of, registrations or filings with,
or reports or notices to, governmental bodies and (iii) orders, decisions,
judgments and decrees of all courts, administrative agencies and arbitrators.
"Applicable Lending Office" means, with respect to any Bank, (i) in the
case of its Base Rate Loans, its Domestic Lending Office and (ii) in the case of
its Euro-Dollar Loans, its Euro Dollar Lending Office.
"Assignee" - see Section 10.6(c).
"Bank" means each bank listed on the signature pages hereof, each Assignee
which becomes a Bank pursuant to Section 10.6, and their respective successors.
"Base Rate" means, for any day, a rate per annum equal to the higher of (i)
the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds
Rate for such day.
"Base Rate Loan" means a Loan which bears interest by reference to the Base
Rate.
"Benefit Arrangement" means at any time an employee benefit plan within the
meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and
which is maintained or otherwise contributed to by any member of the ERISA
Group.
"Borrower" means The Musicland Group, Inc., a Delaware corporation, and its
successors.
"Borrowing" - See Section 1.3.
"Capital Lease" means any lease of property the liability under which, in
accordance with generally accepted accounting principles as in effect on the
date of this Agreement, is required to be capitalized on the lessee's balance
sheet.
"Capital Stock" means, with respect to any Person, the beneficial ownership
interests in said Person, including, without limitation, the capital stock of
any Person that is a corporation and the partnership interests (general and
limited) in any Person that is a partnership.
"Change of Control" means the occurrence of any of the following events:
(x) (i) any "Person" or "group" (within the meaning of Section 13(d) or 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other (A)
than members of management ("Management") of MSC and (B) Xxxxxxxxx, Xxxxxx and
Xxxxxxxx Securities Corporation ("DLJ"), is or becomes the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act) of 3O% or more of the fully
diluted Voting Securities of MSC or (ii) management or DLJ is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of at least
50t of the fully diluted Voting Securities of MSC or (y) individuals who at the
beginning of any period of two consecutive calendar years constituted the board
of directors of MSC (together with any new directors whose election by the board
of directors of MSC or whose nomination for election by MSC's shareholders was
approved by the members of the board of directors of MSC then still in office
who either were members of the board of directors of MSC at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the members of the
board of directors of MSC.
"Collateral" means all collateral on which the Collateral Agent has a Lien
pursuant to the Security Agreement.
"Collateral Agent" means Xxxxxx in its capacity as collateral agent for the
Banks hereunder and for the lenders under the Credit Agreement, and its
successors in such capacity.
"Commitment" means, with respect to each Bank, the amount set forth
opposite the name of such Bank on the signature pages Schedule 1.1, as such
amount may be changed pursuant to assignments pursuant to Section 10.6. The
original amount of the Commitment of each Bank is set forth on Schedule 1.1.
"Commitment Percentage" means, with respect to each Bank, the percentage
which the amount of such Bank's Commitment is of the aggregate amount of all
Commitments. The original Commitment Percentages of the Banks are set forth on
Schedule 1.1.
"Commitment Period" means the period commencing on the 91st day after the
Effective Date and ending at the close of business on October 31, 1997.
"Consolidated Subsidiary" means, as to any Person at any date, any
Subsidiary or other entity the accounts of which would be consolidated with
those of such Person in such Person's consolidated financial statements prepared
in accordance with generally accepted accounting principles as in effect on the
date of this Agreement.
"Credit Agreement" means the Credit Agreement dated as of October 7, 1994
among MSC, the Borrower, various financial institutions and Xxxxxx, as Agent, as
such Credit Agreement is amended or otherwise modified from time to time.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, other than (x) trade accounts payable arising in the ordinary course
of business (provided that (A) trade accounts payable which bear interest shall
constitute Debt if, and to the extent that, the outstanding amount of all trade
accounts payable of MSC and its Subsidiaries which bear interest exceeds
$100,000,000 and (B) if at any time a Specified Event (as defined below) exists,
then all trade accounts payable of MSC and its Subsidiaries which bear interest
shall constitute Debt until a Specified Event no longer exists) and (y) trade
accounts payable of such Person which are subject to a bona fide dispute between
such Person and the Person claiming payment, (iv) all obligations of such Person
as lessee under Capital Leases, (v) all Debt of others secured by a Lien on any
asset of such Person, whether or not such Debt is assumed by such Person and
(vi) all Debt of others Guaranteed by such Person. For purposes of part (B) of
the proviso to clause (iii)(x) above, a Specified Event shall exist at any time
that the aggregate amount of all interest paid on trade accounts payable of MSC
and its Subsidiaries (calculated for the period ending on the last day of the
most recent month for which such information is available) exceeds either (I)
$5,000,000 for the period of 12 consecutive months ending on the date of
calculation or (II) $2,000,000 for the period of three consecutive months ending
on the date of calculation.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or other similar transaction (including any option with respect to any of the
foregoing transactions) or any combination of the foregoing transactions.
"Designated Affiliate" means, as to any Bank, an Affiliate of such Bank
designated by such Bank to hold some or all of the Warrants issuable pursuant to
Section 3.1(v)(d).
"Domestic Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in New York City are authorized by law to close.
"Domestic Lending Office" means, as to each Bank, its office located at its
address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Agent.
"EBITDA" means, for any period, Net Income for such period plus to the
extent deducted in determining such Net Income, depreciation and amortization
expense, interest on Debt, and all Federal, state or foreign income taxes plus
any excess of Rent Expense over actual cash payments for rent or minus any
excess of actual cash payments for rent over Rent Expense.
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 3.1.
"Eligible Assignee,, means a bank, savings and loan association, insurance
company, pension fund, mutual fund, commercial finance company or similar
financial institution having capital and surplus of not less than $200,000,000.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, plans, injunctions, permits, concessions, grants, franchises,
licenses, agreements and other governmental restrictions relating to the
environment, the effect of the environment on human health or to emissions,
discharges or releases of pollutants, contaminants, Hazardous Substances or
wastes into the environment including, without limitation, ambient air, surface
water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, Hazardous Substances or wastes or the
clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means MSC, any Subsidiary of MSC and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with MSC or any Subsidiary of
MSC, are treated as a single employer under Section 414 of the Internal Revenue
Code.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office, branch or
affiliate located at its address set forth in its Administrative Questionnaire
(or identified in its Administrative Questionnaire as its Euro-Dollar Lending
Office) or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower
and the Agent.
"Euro-Dollar Loan" means a Loan which bears interest by reference to the
London Interbank Offered Rate.
"Euro-Dollar Reserve Percentage" means, for any day for any Euro-Dollar
Loan of any Bank, that percentage (expressed as a decimal) which is in effect on
such day, as prescribed by the Board of Governors of the Federal Reserve System
(or any successor), for determining the maximum reserve requirement for such
Bank in respect of "Eurocurrency liabilities" (or in respect of any other
category of liabilities which includes deposits by reference to which the
interest rate on Euro-Dollar Loans is determined or any category of extensions
of credit or other assets which includes loans by a non-United States office of
such Bank to United States residents).
"Event of Default" has the meaning set forth in Section 6.1.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Xxxxxx on such day on such transactions
as determined by the Agent.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt or other obligation of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (a) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership or joint
venture arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay or to maintain net worth or other
financial conditions, or otherwise) or (b) entered into for the purpose of
assuring in any other manner the obligee of such Debt or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part). The term "Guarantee" shall not include endorsements of checks
for collection or deposit in the ordinary course of business. The term
"Guarantee" or "Guaranteed" used as a verb has a corresponding meaning.
"Guaranteed Obligations" means all indebtedness, liabilities, obligations,
covenants and duties of, and all terms and conditions to be observed by, the
Borrower due or owing to, or in favor or for the benefit of, the Agent and the
Banks under the Loan Documents, or any of them, of every kind, nature and
description, direct or indirect, absolute or contingent, due or not due,
contractual or tortious, liquidated or unliquidated, arising by operation of law
or otherwise, now existing or hereafter arising, and whether or not (a) for the
payment of money or the performance or non-performance of any act, (b) arising
or accruing before or after the filing by or against the Borrower of a petition
under the Bankruptcy Code or (c) allowable under Section 502(b)(2) of the
Bankruptcy Code.
"Guaranty" means the guarantee set forth in Article IX hereof.
"Hazardous Substances" means any toxic, radioactive, caustic or otherwise
hazardous substance, including petroleum, its derivatives, by-products and other
hydrocarbons, or any substance having any constituent elements displaying any of
the foregoing characteristics. "Indemnitee" has the meaning set forth in Section
10.3(b).
"Interest Expense" means, for any period, the interest expense of MSC and
its Consolidated Subsidiaries determined on a consolidated basis for such
period. Notwithstanding the foregoing, Interest Expense shall not include any
amount payable in respect of any lease which was classified as an Operating
Lease as of December 31, 1996 if, and to the extent that, such amount is
included in Rent Expense.
"Interest Period" means, with respect to each Euro-Dollar Borrowing, the
period commencing on the date of such Borrowing and ending one month thereafter,
as the Borrower may elect in the applicable Notice of Borrowing or Notice of
Conversion/ Continuation; Provided that:
(a) any Interest Period which would otherwise end on a day which is not
a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on
the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last EuroDollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Euro-Dollar Business Day of a calendar
month; and
(c) the Borrower may not select any Interest Period which would end
after the Maturity Date or which would result in the aggregate
principal amount of all Euro-Dollar Loans having Interest Periods
ending after December 14, 1998 being in excess of the amount of the
Loans scheduled to be outstanding after giving effect to the payment of
the installment of the Loans payable pursuant to Section 2.6 on such
date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Inventory" means, with respect to the Borrower or any Subsidiary, all
goods of such Person which are of a type sold by such Person in the ordinary
course of business.
"Investment" means, with respect to any Person, any direct or indirect
purchase or other acquisition by such Person of, or any beneficial interest in,
stock or other ownership interests in any other Person, or any direct or
indirect loan, advance (other than advances to employees for moving and travel
expenses and similar expenditures in the ordinary course of business) or capital
contribution by such Person to any other Person (including any Debt or account
receivable owed by such other Person which did not arise from sales to such
other Person in the ordinary course of business).
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of
this Agreement, a Person shall be deemed to own subject to a Lien any asset
which such Person has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset.
"Loan" means a loan made by a Bank to the Borrower pursuant to Section
2.1. A Loan may be a Base Rate Loan or a Euro-Dollar Loan.
"Loan Documents" means this Agreement, the Notes, the Subsidiary
Guaranty and the Security Agreement.
"Loan Party" means MSC, the Borrower and each other Subsidiary of MSC which
is a party to any Loan Document.
"London Interbank Offered Rate" has the meaning set forth in Section
2.7(b).
"Material Financial Obligation" means a principal or face amount of
Debt and/or payment obligations in respect of Derivatives Obligations or
Synthetic Lease Obligations of MSC and/or one or more of its Subsidiaries,
arising in one or more related or unrelated transactions, exceeding in the
aggregate $2,500,000.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $2,000,000.
"Maturity Date" means February 15, 1999.
"Xxxxxx" means Xxxxxx Guaranty Trust Company of New York.
'"MSC" means Musicland Stores Corporation, a Delaware corporation.
'"MSC Common Stock" - see Section 3.1(v)(d).
'"MSC's 1996 Form 10-K" means MSC's annual report on Form 10-K for
1996, as filed with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934.
'"MSC's Latest Form 10-Q" means MSC's quarterly report on Form 10-Q for
the quarter ended March 31, 1997, as filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"Net Income" means for any period the net income of MSC and its
Consolidated Subsidiaries on a consolidated basis for such period minus all
dividends paid on Preferred Stock; provided that, in calculating such net
income, there shall be excluded (A) any net gains or net losses on the sale or
other disposition, not in the ordinary course of business, of
Investments and other capital assets, together with any related charges for,
reduction of or provisions for taxes thereon; (B) net gains arising from the
collection of the proceeds of insurance policies; (C) any income or loss from
any Subsidiary that is not a Consolidated Subsidiary; (D) any net gains or net
losses resulting from the defeasance of Debt; (E) earnings from discontinued
businesses; (F) Restructuring Charges and, if applicable, non-recurring
professional fees recorded on the books of MSC in the third and fourth fiscal
quarters of 1996; (G) any adjustment of intangible assets pursuant to the
application of Financial Accounting Standards Board Statement No. 121; and (H)
any other extraordinary gains or losses.
"Notes" means promissory notes of the Borrower substantially in the
form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the
Loans, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" - see Section 2.2.
"Notice of Conversion/Continuation" - see Section 2.4.
"Operating Lease" means, as applied to any Person, any lease (including
any Synthetic Lease) of any property (whether real, personal or mixed) by such
Person as lessee which is not a Capital Lease.
"Parent" means, with respect to any Bank, any Person controlling such
Bank.
"Participant" - see Section 10.6(b).
""PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Liens" means Liens permitted by Section 5.6.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Preferred Stock" means preferred stock of MSC.
"Prime Rate" means the rate of interest publicly announced by Xxxxxx in
New York City from time to time as its Prime Rate.
"Registration Rights Agreement" - see Section 3. 1 (v) (e).
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Rent Expense" means, for any period, the aggregate amount payable during
such period by a lessee with respect to and pursuant to the terms of all
Operating Leases as would be required to be reported in the financial statements
of MSC and its Consolidated Subsidiaries for such period as the total rent
expense in accordance with generally accepted accounting principles as in effect
on the date of this Agreement; provided, however, that any lease which was
classified as an operating Lease as of December 31, 1996 shall be treated as an
Operating Lease for purposes of this definition notwithstanding the
reclassification under GAAP of such lease as Debt after such date (and "Rent
Expense" shall not include the portion of any payment under such lease
attributable to the principal of the Debt under such lease as so reclassified).
"Replacement Credit Agreement" means, at any time the Credit Agreement
is no longer in effect, any credit facility (whether a revolving facility, a
term facility or a combination thereof) pursuant to which MSC or any Subsidiary
thereof may obtain loans or other financial accommodations in the amount of
$100,000,000 or more (or, if no credit facility is available in such amount, the
credit facility pursuant to which MSC or any Subsidiary may then obtain the
largest amount of loans and other financial accommodations).
"Required Banks" means at any time Banks having more than 50% of the
aggregate amount of the Commitments or, if the Commitments shall have expired or
been terminated, holding Notes evidencing more than 50% of the aggregate unpaid
principal amount of the Loans.
"Restructuring Charges" means (x) up to $75,000,000 of liabilities
recorded on the books of MSC in 1996 in connection with facility closing
decisions, termination of employees and costs related to the foregoing, (y) up
to $20,000,000 of liabilities (not more than $10,000,000 of which may be cash
charges) recorded on the books of MSC after December 31, 1996 in connection with
facility closing decisions, termination of employees and costs related to the
foregoing and (z) up to $3,000,000 of non-recurring professional fees recorded
on the books of MSC in any fiscal quarter beginning with the fiscal quarter
ended March 31, 1997.
"Retail Store Lease" means any lease under which the Borrower or any
Wholly-Owned Consolidated Subsidiary of the Borrower is the tenant and pursuant
to which the Borrower or such Subsidiary leases space for one of its retail
stores.
"Security Agreement" - see Section 3.1(v)(c).
"Senior Subordinated Indenture" means the Indenture dated as of June
17, 1993 between MSC, the Borrower and Bank One, N.A., formerly known as Bank
One, Columbus, N.A. (as successor to Xxxxxx Trust and Savings Bank), as Trustee,
pursuant to which the Senior Subordinated Notes were issued, as amended or
otherwise modified from time to time.
"Senior Subordinated Notes" means $110,000,000 aggregate principal
amount of the Borrower's 9% senior subordinated notes due 2003 issued pursuant
to the Senior Subordinated Indenture.
"Subordinated Debt" means (a) the Debt evidenced by the Senior
Subordinated Notes, (b) other Debt of the Borrower having subordination terms no
less favorable to the Banks than those contained in the Senior Subordinated
Indenture, covenants and defaults no more burdensome to the Borrower and its
Subsidiaries than those contained in the Senior Subordinated Indenture and no
required payments of principal earlier than 91 days after the Maturity Date and
(c) other Debt of the Borrower having maturities and other terms, and which is
subordinated to the obligations of the Borrower hereunder in a manner,
satisfactory to the Agent and the Required Banks.
"Subordinated Debt Guarantee" means MSC's guarantee of the obligations
of the Borrower under the Senior Subordinated Notes.
"Subsidiary" means, as to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person; unless
otherwise specified, "Subsidiary" means a Subsidiary of MSC.
"Subsidiary Guaranty" - see Section 3.1(v)(b).
"Synthetic Lease" means a lease transaction under which the parties
intend that (i) the lease will be treated as an "operating lease" by the lessee
pursuant to Statement of Financial Accounting Standards No. 13, as amended, and
(ii) the lessee will be entitled to various benefits ordinarily available to
owners (as opposed to lessees) of like property.
"Synthetic Lease Obligations" means, with respect to any Person, the
sum of (a) all rental obligations of such Person as lessee under Synthetic
Leases which are attributable to principal and (b) all payment obligations of
such Person under Synthetic Leases assuming such Person exercises the option to
purchase the leased property at the end of the lease term.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"United States" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
"Voting Securities" means any securities having ordinary power to vote
for the election of directors.
"Warrant" means a right to purchase a share of Common Stock of MSC as
evidenced by a Warrant Certificate.
"Warrant Certificate" means a Warrant Certificate substantially in the
form of Exhibit G hereto, with appropriate insertions, as amended or otherwise
modified from time to time.
"Wholly-Owned Consolidated Subsidiary" means, with respect to any
Person, any Consolidated Subsidiary of such Person all of the shares of capital
stock or other ownership interests of which (except directors' qualifying
shares) are at the time directly or indirectly owned by such Person.
SECTION 1.2. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a basis consistent (except for changes concurred in by MSC's independent
public accountants) with the most recent audited consolidated financial
statements of MSC and its Consolidated Subsidiaries delivered to the Banks;
provided that, if MSC notifies the Agent that MSC wishes to amend any covenant
in Article V to eliminate the effect of any change in generally accepted
accounting principles on the operation of such covenant (or if the Agent
notifies MSC that the Required Banks wish to amend Article V for such purpose),
then MSC's compliance with such covenant shall be determined on the basis of
generally accepted accounting principles in effect immediately before the
relevant change in generally accepted accounting principles became effective,
until either such notice is withdrawn or such covenant is amended in a manner
satisfactory to MSC and the Required Banks.
SECTION 1.3. Types of Borrowings. The term "Borrowing" denotes the
aggregation of the Loans of the Banks to be made, continued or converted to the
Borrower pursuant to Article II on a single date and for a single Interest
Period. Borrowings are classified for purposes of this Agreement by reference to
the pricing of the Loans comprising such Borrowing (e.g., a "EuroDollar
Borrowing" is a Borrowing comprised of Euro-Dollar Loans).
ARTICLE II
THE CREDITS
SECTION 2.1. Commitments to Lend. Each Bank severally agrees, on the
terms and conditions set forth in this Agreement, (a) to make a loan to the
Borrower at any time during the Commitment Period in an amount equal to such
Bank's Commitment Percentage of $25,000,000 (or such lesser amount as the
Borrower may request) and (b) to make an additional loan to the Borrower at any
time during the Commitment Period (but not before September 15, 1997) in an
amount equal to such Bank's Commitment Percentage of $25,000,000 (or such lesser
amount as the Borrower may request). Amounts borrowed which are repaid or
prepaid may not be reborrowed (it being understood that continuations and
conversions pursuant to Section 2.4 are not repayments or prepayments), and the
Commitments shall expire concurrently with the Borrowing pursuant to clause (b)
above (or, if such Borrowing is not requested, on October 31, 1997).
SECTION 2.2. Notice of Borrowing. The Borrower shall give the Agent a
notice in the form of Exhibit I hereto (a "Notice of Borrowing") of each
Borrowing not later than (x) 12:00 P.M. (New York City time) on the date of such
Borrowing if such Borrowing initially is to be a
Base Rate Borrowing and (y) 1:00 P.M. (New York City time) on the third
Euro-Dollar Business Day before such Borrowing if such Borrowing initially is to
be a Euro-Dollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic Business Day in
the case of a Base Rate Borrowing and a Euro-Dollar Business Day in the case of
a Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing (which shall be an integral
multiple of $1,000,000), and
(c) whether the Loans comprising such Borrowing are to be Base Rate Loans
or Euro-Dollar Loans.
SECTION 2.3. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify
each Bank of the contents thereof and of such
Bank's share of such Borrowing and such Notice of Borrowing shall not thereafter
be revocable by the Borrower.
(b) Not later than 2:00 P.M. (New York City time) on the date of each
Borrowing, each Bank shall make available its share of such Borrowing, in
Federal or other funds immediately available in New York City, to the Agent at
its address referred to in Section 10.1. Unless the Agent determines that any
applicable condition specified in Article III has not been satisfied, the Agent
will promptly make the funds so received from the Banks available to the
Borrower at the Agent's aforesaid address.
(c) Unless the Agent shall have received notice from a Bank prior to
the date of any Borrowing (or, if such Borrowing initially is to be a Base Rate
Borrowing, prior to 1:00 p.m. (New York City time) on the date of such
Borrowing) that such Bank will not make available to the Agent such Bank's share
of such Borrowing, the Agent may assume that such Bank has made such share
available to the Agent on the date of such Borrowing in accordance with
subsection (b) of this Section 2.3 and the Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Bank shall not have so made such share available
to the Agent, such Bank and the Borrower severally agree to repay to the Agent
forthwith on demand such corresponding amount together with interest thereon,
for each day from the date such amount is made available to the Borrower until
the date such amount is repaid to the Agent, at (i) in the case of the Borrower,
a rate per annum equal to the higher of the Federal Funds Rate and the interest
rate applicable thereto pursuant to Section 2.7 and (ii) in the case of such
Bank, the Federal Funds Rate. If such Bank shall repay to the Agent such
corresponding amount, such amount so repaid shall constitute such Bank's Loan
included in such Borrowing for purposes of this Agreement.
SECTION 2.4. Conversion and Continuation Elections for Borrowinqs. (a) The
Borrower may, upon irrevocable written notice to the Agent in accordance with
subsection (b) of this Section 2.4:
(I) elect, as of any Euro-Dollar Business Day, to convert a Euro-Dollar
Borrowing to a Base Rate Borrowing or to convert a Base Rate Borrowing
to a Euro-Dollar Borrowing; or
(ii) elect, as of the last day of the applicable Interest Period, to
continue a Euro-Dollar Borrowing expiring on such day for another
Interest Period.
(b) The Borrower shall deliver a notice in the form of Exhibit J hereto
(a "Notice of Conversion/Continuation") to be received by the Agent not later
than (i) 12:00 P.M. (New York City time) on the date of any conversion into a
Base Rate Borrowing and (ii) 1:00 P.M. (New York City time) on the third
Euro-Dollar Business Day before the date of any conversion into or continuation
of a Euro-Dollar Borrowing, in each case specifying the Borrowing to be
converted or continued and the proposed date of such conversion or continuation.
(c) If, upon the expiration of any Interest Period for a Euro-Dollar
Borrowing, the Borrower has failed to give timely notice of continuation of such
Borrowing for a new Interest Period, such Borrowing shall automatically convert
into a Base Rate Borrowing.
(d) Notwithstanding any other provision of this Agreement, the Borrower
may not convert into a Euro-Dollar Loan, or continue a Euro-Dollar Loan for a
new Interest Period, at any time a Default exists.
SECTION 2.5. Notes. (a) The Loans of each Bank shall be evidenced by a
single Note payable to the order of such Bank for the account of its Applicable
Lending Office in an amount equal to the aggregate unpaid principal amount of
such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the Agent, request
that its Loans of a particular type be evidenced by a separate Note in an amount
equal to the aggregate unpaid principal amount of such Loans. Each such Note
shall be in substantially the form of Exhibit A hereto with appropriate
modifications to reflect the fact that it evidences solely Loans of the relevant
type. Each reference in this Agreement to the "Note" of such Bank shall be
deemed to refer to and include any or all of such Notes, as the context may
require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.2(e), the
Agent shall forward such Note to such Bank. Each Bank shall record the date,
amount, type and maturity of each Loan made by it and the date and amount of
each payment of principal made by the Borrower with respect thereto, and may, if
such Bank so elects in connection with any transfer or enforcement of its Note,
endorse on the schedule forming a part thereof appropriate notations to evidence
the foregoing information with respect to each such Loan then outstanding;
provided that the failure of any Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or under
the Notes. Each Bank is hereby irrevocably authorized by the Borrower so to
endorse its Note and to attach to and make a part of its Note a continuation of
any such schedule as and when required.
SECTION 2.6. Amortization of Loans. The Loans shall be repaid in
installments as follows: 50% of the aggregate original principal amount of each
Bank's Loans shall be due and
payable on December 14, 1998; and the balance of each Bank's Loans shall be due
and payable on the Maturity Date.
SECTION 2.7. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Loan is made until it becomes due, at a rate per annum equal to the sum of
1% plus the Base Rate for such day. Such interest shall be payable on the first
Domestic Business Day of each month. Any overdue principal of or interest on any
Base Rate Loan shall bear interest, payable on demand, for each day until paid
at a rate per annum equal to the sum of 3% plus the Base Rate for such day.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of 2% plus the London Interbank
Offered Rate applicable to such Interest Period. Such interest shall be payable
for each Interest Period on the last day thereof.
The "London Interbank Offered Rate" applicable to any Interest Period
means the rate per annum at which deposits in dollars are offered by Xxxxxx to
prime banks in the London interbank market at approximately 11:00 A.M. (London
time) two Euro-Dollar Business Days before the first day of such Interest Period
in an amount approximately equal to the principal amount of the Euro-Dollar Loan
of Xxxxxx to which such Interest Period is to apply and for a period of time
comparable to such Interest Period.
(c) Any overdue principal of or interest on any Euro-Dollar Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to (i) during the remainder of the then-applicable Interest Period for
such Loan, the higher of (x) the sum of 4% plus the London Interbank Offered
Rate applicable to such Loan and (y) the sum of 3% plus the Base Rate for such
day and (ii) thereafter, the sum of 3% plus the Base Rate for such day.
(d) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall give prompt notice to the Borrower and the
Banks of each rate of interest so determined, and its determination thereof
shall be conclusive in the absence of manifest error.
SECTION 2.8. Up front Fee. On the Effective Date, the Borrower shall
pay to the Agent for the account of each Bank a closing fee in an amount equal
to 1% of such Bank's Commitment.
SECTION 2.9. Optional Prepayments. (a) Subject in the case of any
Euro-Dollar Borrowing to Section 2.11, the Borrower may, upon notice to the
Agent not later than 12:00 P.M. (New York City) on any Domestic Business Day,
prepay any Base Rate Borrowing, or upon at least three Euro-Dollar Business
Days' notice to the Agent, prepay any Euro-Dollar Borrowing, in each case in
whole at any time, or from time to time in part in amounts aggregating
$1,000,000 or any larger multiple thereof, by paying the principal amount to be
prepaid together with accrued interest thereon to the date of prepayment. Each
such optional prepayment shall be applied to prepay ratably the Loans of the
Banks.
(b) Upon receipt of a notice of prepayment pursuant to this Section,
the Agent shall promptly notify each Bank of the contents thereof and of such
Bank's ratable share of such prepayment and such notice shall not thereafter be
revocable by the Borrower.
(c) Any prepayment shall be applied to the unpaid installments of the Loans
in the inverse order of the maturity of such installments.
SECTION 2.10. General Provisions as to Payments. (a) The Borrower shall
make each payment of principal of, and (subject to Section 2.13) interest on,
the Loans and of fees hereunder, not later than 12:00 Noon (New York City time)
on the date when due, in Federal or other funds immediately available in New
York City, to the Agent at its address referred to in Section 10.1. The Agent
will promptly distribute to each Bank its ratable share of each such payment
received by the Agent for the account of the Banks. Whenever any payment of
principal of, or interest on, the Base Rate Loans or of fees shall be due on a
day which is not a Domestic Business Day, the date for payment thereof shall be
extended to the next succeeding Domestic Business Day. Whenever any payment of
principal of, or interest on, the Euro-Dollar Loans shall be due on a day which
is not a Euro-Dollar Business Day, the date for payment thereof shall be
extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar
Business Day falls in another calendar month, in which case the date for payment
thereof shall be the next preceding Euro-Dollar Business Day. If the date for
any payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice from the Borrower prior to
the date on which any payment is due to any Bank hereunder that the Borrower
will not make such payment in full, the Agent may assume that the Borrower has
made such payment in full to the Agent on such date and the Agent may, in
reliance upon such assumption, cause to be distributed to such Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent that
the Borrower shall not have so made such payment, each Bank shall repay to the
Agent forthwith on demand such amount distributed to such Bank together with
interest thereon, for each day from the date such amount is distributed to such
Bank until the date such Bank repays such amount to the Agent, at the Federal
Funds Rate.
SECTION 2.11. Funding Losses. If the Borrower makes any payment of
principal with respect to any Euro-Dollar Loan (pursuant to Article II, VI or
VIII or otherwise) on any day other than the last day of an Interest Period
applicable thereto, or the last day of an applicable period fixed pursuant to
Section 2.7(c), or if the Borrower fails to borrow or prepay any Euro-Dollar
Loans after notice has been given to any Bank in accordance with Section 2.4(a)
or 2.9(b), the Borrower shall reimburse each Bank within 15 days after demand
for any resulting loss or expense incurred by it (or by an existing or
prospective Participant in the related Loan), including (without limitation) any
loss incurred in obtaining, liquidating or employing deposits from third
parties, but excluding loss of margin for the period after any such payment or
failure to borrow or prepay, provided that such Bank shall have delivered to the
Borrower a certificate as to the amount of such loss or expense, which
certificate shall be conclusive in the absence of manifest error.
SECTION 2.12. Computation of Interest and Fees. Interest based on the
Prime Rate hereunder shall be computed on the basis of a year of 365 days (or
366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last
day). All other interest and fees shall be computed on the basis of a year of
360 days and paid for the actual number of days elapsed (including the first day
but excluding the last day).
SECTION 2.13. Regulation D Compensation. Each Bank that incurs reserve
requirements under Regulation D of the Board of Governors of the Federal Reserve
System (or any successor), as in effect from time to time, may require the
Borrower to pay, contemporaneously with each payment of interest on the
EuroDollar Loans, additional interest on the related Euro-Dollar Loan of such
Bank at a rate per annum determined by such Bank up to but not exceeding the
excess of (i) (A) the applicable London Interbank Offered Rate divided by (B)
one minus the applicable Euro-Dollar Reserve Percentage over (ii) the applicable
London Interbank Offered Rate. Any Bank wishing to require payment of such
additional interest (x) shall so notify the Borrower and the Agent, in which
case such additional interest on the Euro-Dollar Loans of such Bank shall be
payable to such Bank at the place indicated in such notice with respect to each
Euro-Dollar Loan having an Interest Period commencing at least three Euro-Dollar
Business Days after the giving of such notice and (y) shall notify the Borrower
at least five Euro-Dollar Business Days prior to each date on which interest is
payable on the Euro-Dollar Loans of the amount then due it under this Section.
ARTICLE III
CONDITIONS
SECTION 3.1. Conditions to Effectiveness. This Agreement shall become
effective on the date (the "Effective Date") on which the Agent shall have
received (i) the up front fees payable pursuant to Section 2.8, (ii)
confirmation that the Borrower has paid all reasonable fees, costs and expenses
payable to the Agent and to Xxxxx, Xxxxx & Platt, Zalkin, Rodin & Xxxxxxx LLP
and Ernst & Young LLP, professional advisors to the Agent and the Banks, to the
extent then billed, (iii) confirmation that the Fourth Amendment to the Credit
Agreement has become effective in accordance with its terms, (iv) evidence
reasonably satisfactory to the Agent that the required majority of the holders
of the Senior Subordinated Notes have waived all provisions of the Senior
Subordinated Indenture that would prohibit the incurrence of the Debt
contemplated under this Agreement or would prohibit, or require that an equal
and ratable Lien be granted in connection with, the Liens in favor of the
Collateral Agent under the Security Agreement and (v) each of the following
documents:
(a) counterparts of this Agreement signed by each of the
parties hereto (it being understood that, in the case of any Bank, the
Agent may rely on facsimile confirmation of the execution of a
counterpart hereof by such Bank);
(b) a Subsidiary Guaranty substantially in the form of Exhibit
B hereto (as amended or otherwise modified from time to time, the
"Subsidiary Guaranty"), executed by each Subsidiary of the Borrower;
(c) a Security Agreement substantially in the form of Exhibit
C hereto (as amended or otherwise modified from time to time, the
"Security Agreement"), executed by the Borrower and each Subsidiary
thereof, together with such UCC financing
statements and other documents deemed necessary or desirable by the
Collateral Agent to perfect the Collateral Agent's Lien in the Collateral
thereunder;
(d) a Warrant Certificate duly executed by MSC for each Bank (or, as to any
Bank, its Designated Affiliate) representing the right to purchase that number
of shares of common stock, par value $0.01 per share, of MSC ("MSC Common
Stock") set forth across from such Bank's name on Schedule 3.1(d) hereto;
(e) a Warrant and Registration Rights Agreement substantially in the form
of Exhibit H hereto (as amended or otherwise modified from time to time, the
"Registration Rights Agreement") duly executed by the parties thereto;
(f) an opinion of Xxxxx Xxxxx Xxxxxx, Assistant General Counsel of
theBorrower, substantially in the form of Exhibit D hereto;
(g) an opinion of Xxxxxx & Xxxxxxx, special counsel for the Borrower and
the other Loan Parties, substantially in the form of Exhibit E hereto;
(h) an opinion of Xxxx & Xxxxxxx, special securities counsel to MSC,
substantially in the form of Exhibit F hereto; and
(i) all documents the Agent may reasonably request relating to the
existence of the Borrower and the other Loan Parties, the corporate authority
for and the validity of this Agreement and the other Loan Documents, and any
other matters relevant hereto, all in form and substance satisfactory to the
Agent.
The Agent shall promptly notify the Borrower and the Banks of the
occurrence of the Effective Date.
SECTION 3.2. Conditions to First Borrowing. The obligation of the Banks
to make Loans in connection with the first Borrowing hereunder is subject to the
conditions precedent that (a) more than 90 days have elapsed since the Effective
Date, (b) the Borrower shall have delivered to the Agent and the Banks copies of
the most recent statement of operations required to be delivered under Section
5.1(m) of the Credit Agreement and such statement of operations shall show that
EBITDA for the three months ending on the day as of which such statement was
prepared was not less than negative $9,500,000, (c) the Borrower shall have
delivered to the Agent and the Banks copies of the most recent report on trade
payables required to be delivered under Section 5.1(k) of the Credit Agreement
and such report (which report shall be as of a date not be more than 14 days
prior to the date of such Borrowing) shall show that the aggregate amount of all
trade payables arising out of the purchase of inventory of the Borrower and its
Subsidiaries was not less than $300,000,000, (d) the conditions precedent set
forth in Section 3.4 shall be satisfied and (e) the Agent shall have received a
duly executed Note for the account of each Bank dated on or before the date of
such Borrowing and otherwise complying with the provisions of Section 2.5.
SECTION 3.3. Conditions to Second Borrowing. The obligation of the
Banks to make Loans in connection with the second Borrowing hereunder is subject
to the conditions precedent that (a) the first Borrowing has occurred, (b) the
Borrower shall have delivered to the Agent and the Banks copies of the most
recent statement of operations required to be
delivered under Section 5.1(m) of the Credit Agreement and such statement
of operations shall show that EBITDA for the three months ending on the day as
of which such statement was prepared was not less than negative $9,500,000, (c)
the Borrower shall have delivered to the Agent and the Banks copies of the most
recent report on trade payables required to be delivered under Section 5.1(k) of
the Credit Agreement and such report (which report shall not be more than 14
days prior to the date of such Borrowing) shall show that the aggregate amount
of all trade payables of the Borrower and its Subsidiaries arising out of the
purchase of inventory was not less than $275,000,000 and (d) the conditions
precedent set forth in Section 3.4 shall be satisfied.
SECTION 3.4. Conditions to Both Borrowings. The obligation of each Bank to
make any Loan is subject to the satisfaction of the following conditions:
(a) the Agent shall have received a Notice of Borrowing as
required by Section 2.2;
(b) the fact that, immediately before and after the making of
such Loan, (i) no Default shall have occurred and be continuing, (ii)
no "Default" under and as defined in the Credit Agreement shall have
occurred and be continuing and (iii) no event or condition shall exist
which would permit the holder or holders of any Material Financial
Obligation (or any trustee or agent therefor) to accelerate the
maturity thereof or otherwise to cause such Material Financial
Obligation to become due and payable prior to its scheduled maturity;
and
(c) the fact that the representations and warranties of the
Borrower and MSC contained in this Agreement shall be true on and as of
the date of such Loan.
Each Notice of Borrowing hereunder shall be deemed to be a representation and
warranty by the Borrower on the date of such Borrowing as to the facts specified
in clauses (b) and (c) of this Section. The Borrower will provide such
information as the Agent or the Required Banks may reasonably request to
demonstrate the accuracy of such representation and warranty.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each of the Borrower and MSC represents and warrants that:
SECTION 4.1. Corporate Existence and Power. Each of MSC and each of its
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and is duly
qualified as a foreign corporation and authorized to do business in all
jurisdictions wherein the character of the properties owned or held under lease
by it or the nature of the business transacted by it makes such qualification
necessary, except for those jurisdictions in which the failure so to qualify or
be authorized, singly or in the aggregate, have not had and will not have a
materially adverse effect upon the business, financial position or results of
operations of MSC and its Subsidiaries taken as a whole, or the ability of any
Loan Party to perform its obligations under any Loan Document, and each of MSC
and each of its Subsidiaries has all corporate powers, and all material
governmental licenses, authorizations, consents and approvals, required to carry
on its respective businesses as presently conducted.
SECTION 4.2. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by each Loan Party of
each Loan Document to which such Loan Party is a party are within the corporate
powers of such Loan Party, have been duly authorized by all necessary corporate
action, require no action by or in respect of, or filing or recording with, any
governmental body, agency or official (other than the filing of Uniform
Commercial Code financing statements in various jurisdictions pursuant to the
Security Agreement) and do not (a) contravene, or constitute a default under,
any provision of Applicable Law or of the respective certificate of
incorporation or by-laws of such Loan Party or of any agreement, judgment,
injunction, order, decree or other instrument binding upon such Loan Party, or
(b) result in the creation or imposition of any Lien on any asset of any Loan
Party or any of their respective Subsidiaries other than the security interests
created under the Loan Documents.
SECTION 4.3. Binding Effect. Each of the Loan Documents is a valid and
binding obligation of each Loan Party that is a party thereto.
SECTION 4.4. Financial Information. (a) The consolidated statement of
financial position of MSC and its Consolidated Subsidiaries as of December 31,
1996 and the related consolidated statements of income, cash flow and changes in
stockholders' equity for the fiscal year then ended, reported on by Xxxxxx
Xxxxxxxx & Co. and set forth in MSC's 1996 Form 10-K, a copy of which has been
delivered to each of the Banks, fairly present, in conformity with generally
accepted accounting principles, the consolidated financial position of MSC and
its Consolidated Subsidiaries as of such date and their consolidated results of
operations and changes in financial position for such fiscal year.
(b) The consolidated statement of financial position of MSC and its
Consolidated Subsidiaries as of March 31, 1997 and the related consolidated
statements of income, cash flows and changes in stockholders' equity for the
fiscal quarter then ended, as set forth in MSC's Latest Form 10-Q, a copy of
which has been delivered to each of the Banks, fairly present, in conformity
with generally accepted accounting principles applied on a basis consistent with
the financial statements referred to in subsection (a) of this Section, the
consolidated financial position of MSC and its Consolidated Subsidiaries as of
such date and their consolidated results of operations and cash flows for the
quarter and three-month period then ended (subject to normal year-end
adjustments).
(c) Except as disclosed in MSC's Latest Form 10-Q, since December 31,
1996 there has been no material adverse change in the business, financial
position or results of operations of MSC and its Consolidated Subsidiaries,
taken as a whole.
SECTION 4.5. Subsidiaries. The Subsidiaries of MSC and their respective
jurisdictions of incorporation
are listed on Schedule 4.5 hereto.
SECTION 4.6. Litigation. There are no actions, suits or proceedings
pending against, or to the knowledge of MSC or any Subsidiary of MSC threatened
against or affecting, MSC or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which, singly or in the
aggregate,could materially and adversely affect the business, consolidated
financial position or consolidated results of operations of MSC and its
Consolidated Subsidiaries taken as a whole, or which in any manner draws into
question the validity of any Loan Document.
SECTION 4.7. Compliance with ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other security under ERISA or the Internal Revenue Code or (iii)
incurred any liability under Title IV of ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA.
SECTION 4.8. Taxes. Except as set forth on Schedule 4.8, all United
States Federal income tax returns and all other material tax returns which are
required to be filed by or with respect to MSC and its Subsidiaries have been
filed and all taxes due pursuant to such returns or pursuant to any assessment
received by MSC or any such Subsidiary have been paid. The charges, accruals and
reserves on the books of MSC and each of its Subsidiaries in respect of taxes
(excluding any provision for deferred income taxes) are, in the opinion of MSC,
adequate. MSC does not know of any proposed tax assessment against it or any of
its Subsidiaries that would be material to the business, results of operation or
financial position of MSC and its Consolidated Subsidiaries, taken as a whole,
except any such proposed assessment which has been disclosed in writing to the
Banks and which is being contested in good faith by appropriate proceedings.
SECTION 4.9. Not an Investment Company. Neither MSC nor any of its
Subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
SECTION 4.10. Compliance with Laws, etc. Except as set forth in
Schedule 4.10, each of MSC and each of its Subsidiaries is in compliance with
all Applicable Laws and all agreements and other instruments binding upon MSC or
such Subsidiary, except for failures to comply which, singly or in the aggregate
would not have a materially adverse effect on the business, results of
operations or financial position of MSC and its Consolidated Subsidiaries taken
as a whole or on the ability of any Loan Party to perform all of its obligations
under the Loan Documents.
SECTION 4.11. Possession of Franchises, Licenses, etc. Each of MSC and
each of its Subsidiaries owns or possesses all franchises, certificates,
licenses, permits and other authorizations from governmental or political
subdivisions or regulatory authorities, and each of MSC and each of its
Subsidiaries is licensed or otherwise has lawful right to use, all patents,
trademarks, service marks, trade names, copyrights, licenses and other rights,
in each case free from burdensome restrictions, which are necessary in any
material respect for the ownership, maintenance and operation of its properties
and assets, and neither MSC nor any of its Subsidiaries is in violation of any
provision thereof in any material respect.
SECTION 4.12. Environmental Matters. In the ordinary course of its
business, MSC conducts an ongoing review of the effect of Environmental Laws on
the business, operations and properties of MSC and its Subsidiaries, in the
course of which it identifies and evaluates associated liabilities and costs
(including, without limitation, any capital or operating expenditures required
for clean-up or closure of properties presently or previously owned, any capital
or operating expenditures required to achieve or maintain compliance with
environmental protection standards imposed by law or as a condition of any
license, permit or contract, any related constraints on operating activities,
including any periodic or permanent shutdown of any facility or reduction in the
level of or change in the nature of operations conducted thereat, any costs or
liabilities in connection with off-site disposal of wastes or Hazardous
Substances, and any actual or potential liabilities to third parties, including
employees, and any related costs and expenses). On the basis of this review, MSC
has reasonably concluded that such associated liabilities and costs, including
the costs of compliance with Environmental Laws, are unlikely to have a material
adverse effect on the business, financial condition, results of operations or
prospects of MSC and its Consolidated Subsidiaries, taken as a whole.
SECTION 4.13. Undisclosed Liabilities. Neither MSC nor any of its
Subsidiaries has any material liability or liabilities of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
and there is no existing condition, situation or set of circumstances which
could be reasonably expected to result in such a liability, in each case, that
is not reflected in the most recent balance sheet delivered pursuant to Section
4.4 or Section 5.1 or otherwise disclosed in writing to the Banks.
SECTION 4.14. Title to Properties. Each of MSC and each of its
Subsidiaries has good, marketable and legal title to, or a valid leasehold
interest in, its properties and assets, free and clear of all Liens, other than
Permitted Liens, and not subject to any agreements which would, singly or in the
aggregate, be reasonably likely to have a material adverse effect on the
business, financial condition, results of operations or prospects of MSC and its
Consolidated Subsidiaries, taken as a whole.
SECTION 4.15. Retail Store Leases. Each retail store operated by the
Borrower or any of its Subsidiaries is the subject of a lease under which the
Borrower or such Subsidiary is the tenant which is legal, valid and binding in
all material respects, and is in full force and effect in accordance with its
terms, and under which the Borrower or such Subsidiary enjoys peaceful and
undisturbed possession. The Borrower and each of its Subsidiaries is in
compliance with all Retail Store Leases to which it is a party and no default by
the Borrower or any such Subsidiary or, to the best of the Borrower's knowledge,
by the landlord, has occurred under any Retail Store Lease except for failures
to comply or defaults which singly or in the aggregate would not have a
materially adverse effect on the business, results of operations or financial
position of the Borrower.
SECTION 4.16. Full Disclosure. All information heretofore furnished by
any Loan Party to the Agent or any Bank for purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all such
information hereafter furnished by any Loan Party to the Agent or any Bank will
be, true and accurate in all material respects on the date as of which such
information is stated or certified. MSC has disclosed to the Banks in writing
any and all facts which materially and adversely affect or may affect (to the
extent MSC can now reasonably foresee), the business, operations or financial
condition of MSC and its
Consolidated Subsidiaries, taken as a whole, or the ability of any Loan
Party to perform its obligations under this Agreement or any other Loan
Document.
ARTICLE V
COVENANTS
MSC and the Borrower agree that, so long as any Bank has any Commitment
hereunder, or any amount payable hereunder or under any Note remains unpaid:
SECTION 5.1. Information. MSC will deliver to each Bank:
(a) as soon as available and in any event within 90 days after the end
of each fiscal year of MSC, a consolidated statement of financial position of
MSC and its Consolidated Subsidiaries as of the end of such fiscal year and the
related consolidated statements of income, cash flow and changes in
stockholders' equity for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year, all reported on in a
manner acceptable to the Securities and Exchange Commission by Xxxxxx Xxxxxxxx &
Co. or other independent public accountants of nationally recognized standing,
which report shall be without qualifications other than a "going concern"
qualification and other qualifications acceptable to the Required Banks;
(b) as soon as available and in any event within 45 days after the end
of each of the first three quarters of each fiscal year of MSC, the consolidated
statement of financial position of MSC and its Consolidated Subsidiaries as of
the end of such quarter and the related consolidated statement of income of MSC
and its Consolidated Subsidiaries for such quarter and the related consolidated
statements of income and cash flow of MSC and its Consolidated Subsidiaries for
the portion of MSC's fiscal year ended at the end of such quarter, setting forth
in each case in comparative form the figures for the corresponding quarter, and
the corresponding portion, of MSC's preceding fiscal year, all certified
(subject, in the case of such quarterly financial statements, to normal year-end
auditing adjustments) by the chief financial officer of MSC as to fairness of
presentation and preparation in accordance with generally accepted accounting
principles applied on a basis consistent with those used in preparing the
financial statements referred to in Section 5.1(a) hereof (subject to such
changes in accounting principles as shall be described in such certificate and
shall have been approved in writing attached to such certificate by MSC's
independent accountants);
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the chief
financial officer or the Treasurer of MSC (i) setting forth in reasonable detail
the calculations required to establish whether MSC is in compliance with the
requirements of Sections 5.10 and 5.11 on the date of such financial statements,
and (ii) stating whether there exists on the date of such certificate any
Default and, if any Default then exists, setting forth the details thereof and
the action which MSC is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements as to (i)
whether anything has come to their attention to cause them to believe
that there existed on the date of such statements any Default, (ii)
confirming the calculations set forth in the officer's certificate delivered
simultaneously therewith pursuant to clause (c) above and (iii) confirming that
MSC is authorized by such firm of independent public accountants to deliver its
statement to the Banks pursuant to this Agreement and that it is its
understanding that the Banks are relying on such statement;
(e) forthwith upon the occurrence of any Default, a certificate of the
chief financial officer or the Treasurer of MSC setting forth the details
thereof and the action which MSC or the relevant Subsidiary is taking or
proposes to take with respect thereto;
(f) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and all annual, quarterly, monthly and other reports
and proxy statements which MSC or the Borrower shall file with the Securities
and Exchange Commission;
(g) if and when any member of the ERISA Group (i) gives or is required
to give notice to the PBGC of any "reportable event" (as defined in Section 4043
of ERISA) with respect to any Plan which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any Multiemployer
Plan is in reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent
to terminate, impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of
such notice; (iv) applies for a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code, a copy of such application; (v) gives
notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of
such notice and other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such
notice; or (vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which has resulted or could result
in the imposition of a Lien or the posting of a bond or other security, a
certificate of the president or chief financial officer of MSC setting forth
details as to such occurrence and action, if any, which MSC or applicable member
of the ERISA Group is required or proposes to take with respect thereto;
(h) bi-weekly not later than the Friday following the week ended the
previous Saturday, commencing June 27 and continuing every two weeks thereafter,
a certificate of the chief financial officer or the Treasurer (or, in the
absence of both of the foregoing, an Assistant Treasurer) of MSC with respect to
inventory, substantially in the form of Exhibit L hereto; and
(i) from time to time such additional information regarding the
financial position, results of operations or business of MSC or any of its
Subsidiaries as the Agent, at the request of any Bank, may reasonably request.
Documents filed by MSC or the Borrower with the Securities and Exchabge
Commission and provided to the Baniks shall, to the extent that they contain the
preceding information, be deemed to satisfy the delivery requirements se forth
above.
SECTION 5.2. Insurance. MSC will maintain, and will cause each of its
Subsidiaries to maintain (either in the name of MSC or the Borrower or in such
Subsidiary's own name), insurance (which may include self-insurance) on all of
its inventory in at least such amounts and against such risks as is usually
insured against in the same general area by companies of established repute
engaged in the same or a similar business; and will furnish to the Banks, upon
written request from the Agent, full information as to the insurance carried.
SECTION 5.3. Conduct of Business and Maintenance of Existence. MSC will
keep, and will cause each of its subsidiaries to keep, in full force and effect
its corporate existence and the rights, privileges and franchises necessary or
desirable in tyhe normal conduct of its business, except to the extent failure
to do any of the foregoing will not have a material adverse effect on MSC and
its Subsidiaries taken as a whole. MSC will not engage in any busienss other
than holding all the outstanding Capital Stock of the Borrower and providing all
the outstanding Capital Stock of the Borrower and providing all the outstanding
Capital Stock of the Borrower and providing services and management activities
for the Borrower. The Borrower and its Subsidiaries will continue to engage
primarily in the same general businwesses engaged in by the Borrower and its
Subsidiaries on the date of this Agreement.
SECTION 5.4. Compliance with Laws. MSC will comply, and will couse each
of its Subsidiaries to comply, with all Applicable Laws (including, without
limitation, ERISA and the rules and regulations thereunder) except where the
necessity of compliance therewith is being vontested in good faith by
appropriate proceedings and except where failure to so comply, simgly or in the
agtgregate with all other failures to comply, would not have a materially
adverse effect on MSC and its Subsidiaries, taken as a whole, or on the ability
of MSC or any other Loan Party to perform its obligations under any Loan
Document.
SECTION 5.5. Inspection of Property, Books and Records. MSC will keep,
and will cause each of its Subsidiaries to keep, proper books of record and
account in which full, true and correct entries shall be made of all dealings an
transactions in relation to their respective businesses and activities. The
Borrower and each Subsidiary will at all times keep correct and accurate records
of its inventory. Each of MSC and the Borrower will, after notice by the Agent
(of, if an Event of Default exists, any Bank) to MSC or the Borrower, as the
case may be, permit representatives or the Agent (or, if an Event of Default
exists, any Bank) to visit and inspect any of its properties, to examine and
make abstracts from and copies of any of its books and records and to discuss
its affairs, finances and accounts with its officers, employees (so long as, to
the extent that an officer of MSC or the Borrower I reasonably made available by
MSC or the Borrower, such officer is present) and independent public accountants
(whose fees and expenses shall be paid by MSC or the Borrower, and by this
provision each of MSC and the Borrower authorizes such accountants to discuss
such affairs, finances and accounts so long as, to the extent that an officer or
MSC or the Borrower is reasonably made available by MSC or the Borrower, such
officer is present), all at such reasonable times and as often as may reasonably
be desired and to the extent that the foregoing is reasonably related to the
monitoring of the covenants herein or the security granted pursuant hereto or
the ability of the Loan Parties to comply with their obligations (including
payment obligations) hereunder and under the other Loans Documents.
SECTION 5.6. Liens. MSC will not, and will not permit any Subsidiary to,
create, assume or suffer to exist any Lien on any asset now owned or hereafter
acquired by it, except for:
(a)......any Liens created by this Agreement and the Loan Documents:
(b) Liens of the Borrower or any of its Subsidiaries existing on the date
of this Agreement set forth on Schedule 5.6;
(c) any Lien on any asset of the Borrower or any of its Subsidiaries
securing Debt of the Borrower or such Subsidiary incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such asset,
provided that (I) such Lien attaches to such asset concurrently with or within
180 days after the acquisition thereof, (ii) the aggregate principal amount of
the Debt so secured by such Lien at no time exceeds an amount equal to 80% of
the lesser of the cost to the Borrower or such Subsidiary of the asset subject
to such Lien and the fair market value of such asset at the time of such
acquisition and (iii) the aggregate amount of all Debt secured by Liens
permitted by this clause (c) shall not any time exceed $20,000,000;
(d) any Lien existing on any asset prior to the acquisition thereof by the
Borrower or any of its Subsidiaries and not created in contemplation of such
acquisition;
(e) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, provided that the amount of such Debt is not increased
and such Debt is not secured by any additional assets; and
(f) Liens on assets of MSC and its Subsidiaries arising in the ordinary
course of its business which (i) do not secure Debt and (ii) do not in the
aggregate materially detract from the value of such assets or materially impair
the use thereof in the operation of the business of MSC or the applicable
Subsidiary;
(g) Liens securing the Outstanding Credit Extensions (and guaranties
thereof) under and as defined in the Credit Agreement to the extent such
Outstanding Credit Extensions exceed $245,000,000;
(h) Liens securing Debt permitted by Section 5.11(i) of the Credit
Agreement as in effect after the effectiveness of the Fourth Amendment thereto;
and
(i) other Liens securing Debt in an aggregate principal amount not in
excess of $10,000,000.
Notwithstanding the foregoing clauses (a) through (i), (i) MSC will
not, and will not permit any Subsidiary to, create, assume or suffer to exist
any Lien on the Capital Stock of any Subsidiary of MSC other than Liens securing
obligations under the Credit Agreement and (ii) the Borrower will not at any
time permit the aggregate amount of all obligations secured by Liens on
inventory of the Borrower and its Subsidiaries (other than Liens described in
clauses (a) and (g) above) to exceed $5,000,000.
SECTION 5.7. Use of Proceeds. The Borrower will use the proceeds of the
Loans for working capital and other general corporate purposes. None of such
proceeds will be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of buying or carrying any "margin stock"
within the meaning of Regulation U.
SECTION 5.8. Further Assurances. MSC will, and will cause each
Subsidiary to, take such actions as are necessary or as the Agent (acting at the
request of any Bank) may reasonably request from time to time to ensure that (a)
the obligations of the Borrower hereunder and under the other Loan Documents are
guaranteed by MSC and all Subsidiaries of MSC pursuant to the Guaranty or the
Subsidiary Guaranty, as the case may be, and (b) the obligations of the Borrower
hereunder and under the other Loan Documents and the obligations of each
Subsidiary under the Subsidiary Guaranty are secured by perfected,
first-priority security interests (subject only to Permitted Liens) in
substantially all of the Inventory of the Borrower and its Subsidiaries
(excluding Inventory of TMG U.K.-Delaware located outside the United States).
SECTION 5.9. Amendments to Senior Subordinated Indenture. The Borrower
will not consent to any amendment, modification, supplement or waiver of any of
the provisions of the Senior Subordinated Indenture or any other document
governing any Subordinated Debt that, in any such case, would have a material
adverse impact on the Banks.
SECTION 5.10. EBITDA. MSC will not permit EBITDA for any period of 12
consecutive months to be less than $25,000,000.
SECTION 5.11. Inventory. The Borrower will not at any time permit the
value of all Inventory of the Borrower and its Subsidiaries (excluding (i)
Inventory which is subject to any Lien other than Liens arising under the
Security Agreement and (ii) Inventory of TMG U.K.-Delaware, Inc. located outside
the United States) to be less than $150,000,000.
ARTICLE VI
DEFAULTS
SECTION 6.1. Events of Default. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of or interest on
any Loan, any fees or any other amount payable hereunder;
(b) MSC or the Borrower shall fail to observe or perform any covenant
contained in Sections 5.5 to 5.11, inclusive, or any Loan Party shall fail to
perform any obligation under any other Loan Document;
(c) MSC or the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause (a) or
(b) above) and such failure shall continue for 30 days after written notice
thereof has been given to MSC by the Agent at the request of any Bank;
(d) any material representation, warranty, certification or statement made
by any Loan Party in this Agreement, in any other Loan Document or in any
certificate, financial statement or other document delivered pursuant to this
Agreement (including any amendment or modification hereof or thereof) shall
prove to have been incorrect in any material respect when made (or deemed made);
(e) MSC and/or any Subsidiary shall fail to make any payment in respect of
the Credit Agreement or any Replacement Credit Agreement at the scheduled
maturity thereof;
(f) the maturity of the Credit Agreement or any Replacement Credit
Agreement shall be accelerated;
(g) MSC or any Subsidiary shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced against MSC
or any Subsidiary seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days; or an order for relief shall
be entered against MSC or any Subsidiary under the federal bankruptcy laws as
now or hereafter in effect;
(I) any Loan Document shall at any time for any reason be declared null and
void, invalid or unenforceable (except to the extent permitted by the terms
hereof or thereof), or the validity or enforceability of any Loan Document shall
at any time be contested by any Loan Party, or a proceeding shall be commenced
by any Loan Party or any Affiliate of any Loan Party seeking to establish the
invalidity or unenforceability thereof;
(j) any court of competent jurisdiction shall have determined that the
subordination of the Senior Subordinated
Notes or the Subordinated Debt Guarantee to the obligations of MSC and the
Borrower to the Banks and the Agent under the Loan Documents shall not be in
accordance in any material respect with the terms and conditions set forth in
the Senior Subordinated Indenture, or the validity or enforceability of any
provision of such subordinations shall at any time be contested by any Loan
Party, or any Affiliate of any Loan Party, or a proceeding shall be
commenced by any Loan Party or any Affiliate of any Loan Party seeking to
establish the invalidity or unenforceability thereof;
(k) except to the extent permitted by the terms hereof or thereof and
other than as a result of any default by or agreement of the Collateral Agent,
the Security Agreement and related UCC filings shall fail or cease to create a
valid, perfected and first priority lien on or security interest in
substantially all inventory of the Borrower and the Subsidiaries; or
(1) (i) the Borrower shall at any time cease to be the Wholly-Owned
Consolidated Subsidiary of MSC (other than as a result of the merger of MSC and
the Borrower) or (ii) a Change of Control shall occur;
then, and in every such event, the Agent shall (i) if requested by the Required
Banks, by notice to the Borrower terminate the Commitments (if they have not
previously expired or been terminated) and they shall thereupon terminate,
and/or (ii) if requested by the Required Banks, by notice to the Borrower
declare the Notes (together with accrued interest thereon) to be, and the Notes
shall thereupon become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower; provided that in the case of any of the Events of Default specified in
clause (g) or (h) above with respect to the Borrower, without any notice to the
Borrower or any other act by the Agent or the Banks, the Commitments (if they
have not previously expired or been terminated) shall thereupon terminate and
the Notes (together with accrued interest thereon) shall become immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower.
SECTION 6.2. Notice of Default. The Agent shall give notice to the
Borrower under Section 6.1(c) promptly upon being requested to do so by any Bank
and shall thereupon notify all the Banks thereof.
ARTICLE VII
THE AGENT
SECTION 7.1. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement and the other Loan Documents as are
delegated to the Agent by the terms hereof or thereof, together with all such
powers as are reasonably incidental thereto.
SECTION 7.2. Agent and Affiliates. Xxxxxx shall have the same rights
and powers under this Agreement as any other Bank and may exercise or refrain
from exercising the same as though it were not the Agent, and Xxxxxx and its
affiliates may accept deposits from, lend money to, and generally engage in any
kind of business with MSC or any Subsidiary or affiliate of MSC as if it were
not the Agent hereunder.
SECTION 7.3. Action by Agent. The obligations of the Agent hereunder
are only those expressly set forth herein. Without limiting the generality of
the foregoing, the Agent shall not be required to take any action with respect
to any Default, except as expressly provided in Article VI.
SECTION 7.4. Consultation with Experts. The Agent may consult with
legal counsel (who may be counsel for any Loan Party), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
SECTION 7.5. Liability of Agent. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or not taken by it in connection herewith
(i) with the consent or at the request of the Required Banks (or, if required
under Section 10.5, all Banks) or (ii) in the absence of its own gross
negligence or willful misconduct. Neither the Agent nor any of its affiliates
nor any of their respective directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into or verify (i) any
statement, warranty or representation made in connection with this Agreement or
any other Loan Document; (ii) the performance or observance of any of the
covenants or agreements of any Loan Party; (iii) the satisfaction of any
condition specified in Article III, except receipt of items required to be
delivered to the Agent; or (iv) the validity, effectiveness or genuineness of
this Agreement, any other Loan Document or any other instrument or writing
furnished in connection herewith. The Agent shall not incur any liability by
acting in reliance upon any notice, consent, certificate, statement, or other
writing (which may be a bank wire, telex, facsimile transmission or similar
writing) believed by it to be genuine or to be signed by the proper party or
parties.
SECTION 7.6. Indemnification. Each Bank shall, ratably in accordance
with its Commitment (or, after the Commitments have expired or been terminated,
its pro rata share of the unpaid principal amount of the Notes), indemnify the
Agent, its affiliates and their respective directors, officers, agents and
employees (to the extent not reimbursed by the Borrower) against any cost,
expense (including counsel fees and disbursements), claim, demand, action, loss
or liability (except such as result from such indemnities' gross negligence or
willful misconduct) that such indemnities may suffer or incur in connection with
this Agreement or any action taken or omitted by such indemnities hereunder.
SECTION 7.7. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
SECTION 7.8. Successor Agent. The Agent may resign at any time by
giving notice thereof to the Banks and the Borrower. Upon any such resignation,
the Required Banks shall have the right (subject to the consent of the Borrower
so long as no Default exists) to appoint a successor Agent. If no successor
Agent shall have been so appointed by the Required Banks, and shall have
accepted such appointment, within 30 days after the retiring Agent gives notice
of resignation, then the retiring Agent may (subject to the consent of the
Borrower so long as no Default exists), on behalf of the Banks, appoint a
successor Agent, which shall be a commercial bank organized or licensed under
the laws of the United States or of any State thereof and having a combined
capital and surplus of at least $200,000,000. Upon the acceptance of its
appointment as Agent hereunder by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all the rights and
duties of the retiring Agent, and the retiring Agent shall be discharged from
its duties and obligations hereunder. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Article shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was Agent.
SECTION 7.9. Agent's Fee. The Borrower shall pay to the Agent for its own
account fees in the amounts and at the times previously agreed upon between the
Borrower and the Agent.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.1. Basis for Determining Interest Rate Inadequate or Unfair. If
on or prior to the first day of any Interest Period for any Euro-Dollar
Borrowing:
(a) the Agent determines that deposits in dollars (in the
applicable amount) are not being offered to Xxxxxx in the London
interbank eurodollar market for such Interest Period, or
(b) Banks having 50% or more of the aggregate amount of the
Loans comprising such Borrowing advise the Agent that the London
Interbank Offered Rate as determined by the Agent will not adequately
and fairly reflect the cost to such Banks of funding their Euro-Dollar
Loans for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, the obligations of the Banks to make,
convert into or continue Euro-Dollar Loans shall be suspended (and each Loan
which was to be made as, converted into or continued as a Euro-Dollar Loan shall
be made as, remain or be converted into a Base Rate Loan).
SECTION 8.2. Illegality. If, on or after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or its Euro-Dollar Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for any Bank (or its
EuroDollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and
such Bank shall so notify the Agent, the Agent shall forthwith give notice
thereof to the other Banks and the Borrower, whereupon until such Bank notifies
the Borrower and the Agent that the circumstances giving rise to such suspension
no longer exist, the obligation of such Bank to make and maintain Euro-Dollar
Loans shall be suspended. Before giving any notice to the Agent pursuant to this
Section, such Bank shall designate a different Euro-Dollar Lending Office if
such designation will avoid the need for giving such notice and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank
shall determine that it may not lawfully continue
to maintain any outstanding Euro-Dollar Loan to the last day of the current
Interest Period therefor and shall so specify in such notice, such Loan shall
(on the date specified in such notice) convert into a Base Rate Loan (on which
interest and principal shall be payable contemporaneously with the related
Euro-Dollar Loans of the other Banks).
SECTION 8.3. Increased Cost and Reduced Return.
(a) If, on or after the date hereof, the adoption of any applicable
law, rule or regulation, or any change in any applicable law, rule or
regulation, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Applicable Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency shall
impose, modify or deem applicable any reserve (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal Reserve
System, but excluding any such requirement with respect to which such Bank is
entitled to compensation during the relevant Interest Period under Section
2.13), special deposit, insurance assessment or similar requirement against
assets of, deposits with or for the account of, or credit extended by, any Bank
(or its Applicable Lending Office) or shall impose on any Bank (or its
Applicable Lending Office) or on the London interbank market any other condition
affecting its Euro-Dollar Loans, its Note or its obligation to make or maintain
Euro-Dollar Loans and the result of any of the foregoing is to increase the cost
to such Bank (or its Applicable Lending Office) of making or maintaining any
Euro-Dollar Loan, or to reduce the amount of any sum received or receivable by
such Bank (or its Applicable Lending Office) under this Agreement or under its
Note with respect thereto, by an amount deemed by such Bank to be material,
then, within 15 days after demand by such Bank (with a copy to the Agent), the
Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change in any such law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on capital
of such Bank (or its Parent) as a consequence of such Bank's obligations
hereunder to a level below that which such Bank (or its Parent) could have
achieved but for such adoption, change, request or directive (taking into
consideration its policies with respect to capital adequacy) by an amount deemed
by such Bank to be material, then from time to time, within 15 days after demand
by such Bank (with a copy to the Agent), the Borrower shall pay to such Bank
such additional amount or amounts as will compensate such Bank (or its Parent)
for such reduction.
(c) Each Bank will promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Bank to compensation pursuant to this Section and will designate a
different Applicable Lending Office if such designation will avoid the need for,
or reduce the amount of, such compensation and will not, in the judgment of such
Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank
claiming compensation under this Section and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive
in the absence of manifest error. In determining such amount, such Bank may use
any reasonable averaging and attribution methods.
SECTION 8.4. Taxes. (a) For purposes of this Section 8.4, the following
terms have the following meanings:
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by the
Borrower pursuant to this Agreement or under any Note, and all liabilities with
respect thereto, excluding (i) in the case of each Bank and the Agent, taxes
imposed on its net income, and franchise or similar taxes imposed on it, by a
jurisdiction under the laws of which such Bank or the Agent (as the case may be)
is organized or in which its principal executive office is located or, in the
case of each Bank, in which its Applicable Lending Office is located and (ii) in
the case of each Bank, any United States withholding tax imposed on such
payments but only to the extent that such Bank is subject to United States
withholding tax at the time such Bank first becomes a party to this Agreement.
"Other Taxes" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies, which
arise from any payment made pursuant to this Agreement or under any Note or from
the execution or delivery of, or otherwise with respect to, this Agreement or
any Note.
(b) Any and all payments by the Borrower to or for the account of any
Bank or the Agent hereunder or under any Note shall be made without deduction
for any Taxes or Other Taxes; provided that, if the Borrower shall be required
by law to deduct any Taxes or Other Taxes from any such payments, (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 8.4) such Bank or the Agent (as the case may be) receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
the Borrower shall make such deductions, (iii) the Borrower shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law and (iv) the Borrower shall furnish to the Agent,
at its address referred to in Section 10.1, the original or a certified copy of
a receipt evidencing payment thereof.
(c) The Borrower agrees to indemnify each Bank and the Agent for the
full amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed or asserted by any jurisdiction on amounts payable under
this Section 8.4) paid by such Bank or the Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto, excluding any of the foregoing which result solely from the
gross negligence or willful misconduct of such Bank or the Agent (as the case
may be). This indemnification shall be paid within 15 days after such Bank or
the Agent (as the case may be) makes demand therefor.
(d) Each Bank organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Bank listed on the signature pages hereof and on
or prior to the date on which it becomes a Bank in the case of each other Bank,
and from time to time thereafter if requested in writing by the Borrower (but
only so long as such Bank remains lawfully able to do so), shall provide the
Borrower with Internal Revenue Service form 1001 or 4224, as appropriate, or any
successor form prescribed by the Internal Revenue Service, certifying that such
Bank is entitled to benefits under an income tax treaty to which the United
States is a party which exempts the Bank from United States withholding tax or
reduces the rate of withholding tax on payments of interest for the account of
such Bank or certifying that the income receivable pursuant to this Agreement is
effectively connected with the conduct of a trade or business in the United
States.
(e) For any period with respect to which a Bank has failed to provide
the Borrower with the appropriate form pursuant to Section 8.4(d) (unless such
failure is due to a change in treaty, law or regulation occurring subsequent to
the date on which such form originally was required to be provided), such Bank
shall not be entitled to indemnification under Section 8.4(b) or (c) with
respect to Taxes imposed by the United States; provided that if a Bank, which is
otherwise exempt from or subject to a reduced rate of withholding tax, becomes
subject to Taxes because of its failure to deliver a form required hereunder,
the Borrower shall take such steps as such Bank shall reasonably request to
assist such Bank to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to or for the
account of any Bank pursuant to this Section 8.4, then such Bank will change the
jurisdiction of its Applicable Lending Office if, in the judgment of such Bank,
such change (i) will eliminate or reduce any such additional payment which may
thereafter accrue and (ii) is not otherwise disadvantageous to such Bank.
SECTION 8.5. Base Rate Loans Substituted for Euro-Dollar Loans. If (i)
the obligation of any Bank to make or maintain Euro-Dollar Loans has been
suspended pursuant to Section 8.2 or (ii) any Bank has demanded compensation
under Section 8.3 or 8.4 with respect to its Euro-Dollar Loans and the Borrower
shall, by at least five Euro-Dollar Business Days, prior notice to such Bank
through the Agent, have elected that the provisions of this Section shall apply
to such Bank, then, unless and until such Bank notifies the Borrower that the
circumstances giving rise to such suspension or demand for compensation no
longer exist:
(a) all Loans which would otherwise be made or maintained by
such Bank as Euro-Dollar Loans shall be made instead as Base Rate Loans
(on which interest and principal shall be payable contemporaneously
with the related EuroDollar Loans of the other Banks), and
(b) after each of its Euro-Dollar Loans, has been converted
into Base Rate Loans, all payments of principal which would otherwise
be applied to repay such Euro-Dollar Loans shall be applied to repay
its Base Rate Loans instead.
ARTICLE IX
GUARANTY
SECTION 9.1. The Guaranty. (a) MSC hereby unconditionally and irrevocably
guarantees to the Banks and the Agent, and to each of them, the due and punctual
payment, observance and performance of all of the Guaranteed Obligations when
and as due, whether at maturity, by acceleration, mandatory prepayment or
otherwise, according to the terms hereof and
thereof, and MSC hereby unconditionally and irrevocably agrees to cause
payment or performance of the Guaranteed Obligations to be made punctually as
and when the same shall become due upon demand. This Guaranty shall be of
payment and performance and not of collection merely.
SECTION 9.2. Guaranty Unconditional. The obligations of MSC under this
Article IX shall be continuing, unconditional and absolute and, without limiting
the generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(a) any extension, renewal, settlement, compromise, waiver or release in
respect of any Guaranteed Obligation, by operation of law or otherwise;
(b) any modification or amendment of or supplement to any Loan Document;
(c) any modification, amendment, waiver, release, nonperfection or
invalidity of any direct or indirect security, or of any Guarantee or other
liability of any third party, for any Guaranteed Obligation;
(d) any change in the corporate existence, structure or ownership of the
Borrower or any other Loan Party, or any insolvency, bankruptcy, reorganization
or other similar proceeding affecting the Borrower or any other Loan Party or
its assets or any resulting release or discharge of any Guaranteed Obligation;
(e) the existence of any claim, setoff or other right which MSC may have at
any time against the Borrower, the Agent, any Bank or any other Person, whether
or not arising in connection with the Loan Documents; provided that nothing
herein shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim;
(f) any invalidity or unenforceability relating to or against the Borrower
or any other Loan Party for any reason of the whole or any provision of any Loan
Document, or any provision of Applicable Law purporting to prohibit the payment
or performance by the Borrower of the Guaranteed Obligations; or
(g) any other act or omission to act or delay of any kind by the Borrower,
any other Loan Party, the Agent, any Bank or any other Person or any other
circumstance whatsoever that might, but for the provisions of this Section 9.2,
constitute a legal or equitable discharge of the obligations of MSC under this
Article IX.
SECTION 9.3. Discharge Only Upon Payment in Full; Reinstatement in
Certain Circumstances. MSC's obligations under this Article IX shall remain in
full force and effect until all of the Commitments shall have expired or been
terminated and all of the Guaranteed Obligations shall have been paid in full in
cash. If at any time all or any part of any payment previously applied to any
Guaranteed Obligation is rescinded or must be otherwise restored or returned
upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise,
MSC's obligations under this Article IX with respect to such payment shall be
reinstated at such time as though such payment had become due but not been made
at such time.
SECTION 9.4. Waiver. MSC irrevocably waives acceptance hereof,
presentment, demand, protest and any notice not provided for herein, as well as
any requirement that at any time any action be taken by any Person against the
Borrower or any other Person or any collateral.
SECTION 9.5. Delay of Subrogation. Notwithstanding any payment made by
or for the account of MSC pursuant to this Article IX, MSC shall not be
subrogated to any right of the Agent or any Bank until such time as the Agent
and each Bank shall have received final payment in cash of the full amount of
the Guaranteed Obligations.
SECTION 9.6. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by the Borrower under any Loan Document is stayed
upon the insolvency, bankruptcy or reorganization of the Borrower, all such
amounts otherwise subject to acceleration under the terms the Loan Documents
shall nonetheless be payable by MSC hereunder forthwith on demand by the Agent
made at the request of the Required Banks.
SECTION 9.7. Subordination of Indebtedness. Any indebtedness of the
Borrower for borrowed money now or hereafter owed to MSC is hereby subordinated
in right of payment to the payment of the Guaranteed Obligations, and if a
default in the payment of any amount owing under the Loan Documents shall have
occurred and be continuing, any such indebtedness of the Borrower owed to MSC,
if collected or received by MSC, shall be held in trust by MSC for the Banks and
be paid over to the Agent for application in accordance with this Agreement.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile transmission or similar
writing) and shall be given to such party: (x) in the case of MSC, the Borrower
or the Agent, at its address or facsimile number set forth on the signature
pages hereof, (y) in the case of any Bank, at its address or facsimile number
set forth in its Administrative Questionnaire or (z) in the case of any party,
at such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the Agent, MSC and the Borrower. Each such notice,
request or other communication shall be effective (i) if given by facsimile
transmission, when transmitted to the facsimile number specified in this Section
and confirmation of receipt is received, (ii) if given by mail, three Domestic
Business Days after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid, or (iii) if given by any other
means, when delivered at the address specified in this Section; provided that
notices to the Agent under Article II or Article VIII shall not be effective
until received.
SECTION 10.2. No Waivers. No failure or delay by the Agent or any Bank
in exercising any right, power or privilege hereunder or under any Note shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 10.3. Expenses; Indemnification. (a) The Borrower shall pay (i)
the reasonable fees and charges of Xxxxx, Xxxxx & Platt, Zalkin, Rodin & Xxxxxxx
LLP and Ernst & Young LLP, professional advisors to the Agent and the Banks, in
connection with the preparation and administration of this Agreement and the
other Loan Documents and matters relating thereto (including the monitoring and
administration of the provisions hereof and thereof), any waiver or consent
hereunder or any amendment hereof or any Default or alleged Default hereunder
(such fees and charges to be billed monthly and paid, without application of any
deposit, not later than 20 days after receipt by the Borrower), (ii) the
reasonable out-of-pocket expenses of the Banks in connection with this Agreement
and the other Loan Documents (excluding professional fees other than (x) those
described above and (y) those described in clause (iii) below) and (iii) if an
Event of Default occurs, all out-of-pocket expenses incurred by the Agent and
each Bank, including (without duplication) the reasonable fees and disbursements
of outside counsel and the allocated cost of inside counsel, in connection with
such Event of Default and collection, bankruptcy, insolvency and other
enforcement proceedings resulting therefrom.
(b) The Borrower agrees to indemnify the Agent and each Bank, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnity in connection
with any investigative, administrative or judicial proceeding (whether or not
such Indemnity shall be designated a party thereto) brought or threatened
relating to or arising out of this Agreement or any other Loan Document or any
actual or proposed use of proceeds of any Loan hereunder; provided that no
Indemnity shall have the right to be indemnified hereunder
for such Indemnity's own gross negligence or willful misconduct as
determined by a court of competent jurisdiction.
SECTION 10.4. Sharing of Set-Offs. Each Bank agrees that if it shall,
by exercising any right of set-off or counterclaim or otherwise, receive payment
of a proportion of the aggregate amount of principal and interest due with
respect to the Loans held by it which is greater than the proportion received by
any other Bank in respect of the aggregate amount of principal and interest due
with respect to the Loans held by such other Bank, the Bank receiving such
proportionately greater payment shall purchase such participation's in the Loans
held by the other Banks, and such other adjustments shall be made, as may be
required so that all such payments of principal and interest with respect to the
Loans held by the Banks shall be shared by the Banks pro rata; provided that
nothing in this Section shall impair the right of any Bank to exercise any right
of set-off or counterclaim it may have and to apply the amount subject to such
exercise to the payment of indebtedness of the Borrower other than its
indebtedness hereunder. The Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any holder of a participation in
the Loans, whether or not acquired pursuant to the foregoing arrangements, may
exercise rights of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of the Borrower in the amount of such participation.
SECTION 10.5. Amendments and Waivers. Any provision of this Agreement
or the Notes may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed by the Borrower and the Required Banks (and, if the
rights or duties of the Agent are affected thereby, by the Agent); provided that
no such amendment or waiver shall, unless signed by all the Banks, (i) increase
or decrease the Commitment of any Bank (except for a ratable decrease in the
Commitments of all Banks) or subject any Bank to any additional obligation, (ii)
reduce the principal of or rate of interest on any Loan or any fees hereunder,
(iii) postpone the date fixed for any payment of principal of or interest on any
Loan or any fees hereunder or for any expiration or termination of any
Commitment, (iv) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Notes which shall be required for the Banks or
any of them to take any action under this Section or any other provision of this
Agreement or (v) release all or substantially all of the collateral or any
guaranty except as expressly permitted hereunder.
SECTION 10.6. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that neither MSC nor the
Borrower may assign or otherwise transfer any of its rights under this Agreement
without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Borrower and the Agent, such Bank shall remain responsible for the performance
of its obligations hereunder, and the Borrower and the Agent shall continue to
deal solely and directly with such Bank in connection with such Bank's rights
and obligations under this Agreement. Any agreement pursuant to which any Bank
may grant such a participating interest shall provide that such Bank shall
retain the sole right and responsibility to enforce the obligations of the
Borrower hereunder, including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this Agreement; provided
that such
participation agreement may provide that such Bank will not agree to any
modification, amendment or waiver of this Agreement described in clause (i),
(ii), (iii), (iv) or (v) of Section 10.5 without the consent of the Participant.
The Borrower agrees that each Participant shall, to the extent provided in its
participation agreement, be entitled to the benefits of Article VIII with
respect to its participating interest. An assignment or other transfer which is
not permitted by subsection (c) or (d) below shall be given effect for purposes
of this Agreement only to the extent of a participating interest granted in
accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more Eligible Assignees
(each an "Assignee") all, or a proportionate part (equivalent to an initial
Commitment of not less than $5,000,000 (or, in the case of an assignment between
Banks, such lesser amount as the Borrower and the Agent may agree)) of all, of
its rights and obligations under this Agreement and the Notes, and such Assignee
shall assume such rights and obligations, pursuant to an Assignment and
Assumption Agreement in substantially the form of Exhibit K hereto executed by
such Assignee and such transferor Bank, with (and subject to) the written
consent of the Borrower and the Agent, which consents shall not be unreasonably
withheld; provided that if an Assignee is an affiliate of such transferor Bank,
no such consent shall be required. Upon execution and delivery of such
instrument and payment by such Assignee to such transferor Bank of an amount
equal to the purchase price agreed between such transferor Bank and such
Assignee, such Assignee shall be a Bank party to this Agreement and shall have
all the rights and obligations of a Bank with a Commitment (unless the
Commitments have expired or been terminated) as set forth in such instrument of
assumption, and the transferor Bank shall be released from its obligations
hereunder to a corresponding extent, and no further consent or action by any
party shall be required. Upon the consummation of any assignment pursuant to
this subsection (c), the transferor Bank, the Agent and the Borrower shall make
appropriate arrangements so that, if required, a new Note is issued to the
Assignee. In connection with any such assignment, the transferor Bank shall pay
to the Agent an administrative fee for processing such assignment in the amount
of $3,500. If the Assignee is not incorporated under the laws of the United
States of America or a state thereof, it shall deliver to the Borrower and the
Agent certification as to exemption from deduction or withholding of any United
States federal income taxes in accordance with Section 8.4.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank. No such assignment
shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights
shall be entitled to receive any greater payment under Section 8.3 or 8.4 than
such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrower's prior written
consent or by reason of the provisions of Section 8.2, 8.3 or 8.4 requiring such
Bank to designate a different Applicable Lending Office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
SECTION 10.7. Margin Stock. Each of the Banks represents to the Agent and
each of the other Banks that it in good faith is not relying upon any "margin
stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 10.8. Limitation on Liability. No claim may be made by the
Borrower or any Bank or the Agent against the Agent or any other Bank or the
affiliates, directors, officers, employees, attorneys or agents of the Agent or
any other Bank for any special, consequential or indirect damages in respect of
any breach or wrongful conduct (whether the claim is based on contract or tort
or duty imposed by law) arising out of or related to the transactions
contemplated hereby, or any act, omission or event occurring in connection
therewith; and the Borrower and each Bank hereby waives, releases and agrees not
to xxx upon any claim for any such damages, whether or not accrued and whether
or not known or suspected to exist in its favor; provided that the limitation on
liability and waiver provided herein shall not apply with respect to any claim
against such party resulting from such party's gross negligence or willful
misconduct.
SECTION 10.9. Survival of Obligations. The obligations of MSC and the
Borrower and the rights of the Agent and the Banks under Sections 7.5 and 7.6,
Article VIII, Article IX and Sections 10.2 and 10.3 shall survive any
termination of this Agreement; provided that any claim for amounts owing
pursuant to Article VIII must be made by the applicable Bank no later than 180
days after such termination.
SECTION 10.10. Independence of Covenants. All covenants hereunder shall
be given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the effectiveness of the first covenant.
SECTION 10.11. Severability of Provisions. Any provision of this
Agreement that is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 10.12. Governing Law; Submission to Jurisdiction. This
Agreement and each Note shall be governed by and construed in accordance with
the laws of the State of New York. Each of MSC and the Borrower hereby submits
to the nonexclusive jurisdiction of the United States District Court for the
Southern District of New York and of any New York State court sitting in New
York City for purposes of all legal proceedings arising out of or relating to
this Agreement or the transactions contemplated hereby. Each of MSC and the
Borrower irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
SECTION 10.13. Counterparts; Integration. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement constitutes the entire agreement and understanding among the
parties hereto and supersedes any and all prior agreements and understandings,
oral or written, relating to the subject matter hereof.
SECTION 10.14. WAIVER OF JURY TRIAL. EACH OF MSC, THE BORROWER, THE
AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 10.15. Collateral Agent. (a) The Banks hereby authorize Xxxxxx
to act as Collateral Agent under the Security Agreement. The Banks, the Company
and the Agent hereby agree that (i) in so acting, the Collateral Agent shall be
entitled to all rights, exculpation's, immunities, benefits and privileges
accorded to the Agent hereunder and (ii) each reference in Article VII and
Sections 10.3 and 10.8 hereof to the Agent shall be deemed to include Xxxxxx
acting in its capacity as the Collateral Agent.
(b) Without limiting clause (a) above, the Collateral Agent is
authorized on behalf of all Banks, without the necessity of any notice to or
further consent from the Banks, from time to time to take any action with
respect to the Security Agreement and any collateral thereunder which may be
necessary to perfect and maintain perfected the Liens upon the collateral
granted pursuant to the Security Agreement.
(c) Without limiting clause (a) above, the Banks irrevocably authorize
the Collateral Agent, at its option and in its discretion, to release any Lien
granted to or held by the Collateral Agent under the Security Agreement (i) upon
termination of the Commitments and payment in full of all Loans and all other
obligations payable by any Loan Party under this Agreement and any other Loan
Document; (ii) constituting property sold or to be sold or disposed of as part
of or in connection with any disposition expressly permitted hereunder; or (iii)
subject to Section 10.5, if approved, authorized or ratified in writing by the
Required Banks. Upon request by the Collateral Agent at any time, the Banks will
confirm in writing the Collateral Agent's authority pursuant to this Section
10.15(c) to release particular types or items of collateral granted under the
Security Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
THE MUSICLAND GROUP, INC.
By:
Title:
00000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
Facsimile number: (000) 000-0000
MUSICLAND STORES CORPORATION
By:
Title:
00000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
Facsimile number: (000) 000-0000
XXXXXX GUARANTY TRUST COMPANY
OF NEW YORK
By:
Title:
CITIBANK, N.A.
By:
Title:
BANK OF AMERICA ILLINOIS
By:
Title:
PNC BANK, N.A.
By:
Title:
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD., CHICAGO BRANCH
By:
Title:
SOCIETE GENERALE
By:
Title:
DLJ CAPITAL FUNDING, INC.
By:
Title:
FERNWOOD RESTRUCTURINGS LTD.
By:
Title:
NATIONSBANK, N.A.
By:
Title:
CREDIT AGRICOLE
By:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By:
Title:
NBD BANK
By:
Title:
XXXXXX GUARANTY TRUST COMPANY OF
NEW YORK, as Agent
By:
Title:
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000 Attention:
Houston Xxxxxxxx
Facsimile number: (000) 000-0000
