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LOAN AND SECURITY AGREEMENT
BY AND AMONG
GUITAR CENTER, INC.
AND
MUSICIAN'S FRIEND, INC.
AND
THE LENDERS THAT ARE SIGNATORIES HERETO
AS THE LENDERS,
AND
FOOTHILL CAPITAL CORPORATION
AS AGENT,
AND
BANKBOSTON RETAIL FINANCE, INC.
AS DOCUMENTATION AGENT
DATED AS OF DECEMBER 17, 1999
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17.9.a.i.1.1 TABLE OF CONTENTS
1. DEFINITIONS AND CONSTRUCTION.............................................................................1
1.1 Definitions.....................................................................................1
1.2 Accounting Terms...............................................................................28
1.3 Code...........................................................................................29
1.4 Construction...................................................................................29
1.5 Schedules and Exhibits.........................................................................29
2. LOAN AND TERMS OF PAYMENT...............................................................................29
2.1 Revolver Advances..............................................................................29
2.2 Increase or Reduction in Facility Amount and Commitments.......................................31
2.3 Borrowing Procedures and Settlements...........................................................32
2.4 Payments.......................................................................................39
2.5 Overadvances...................................................................................40
2.6 Interest and Letter of Credit Fees: Rates, Payments, and Calculations.........................40
2.7 Cash Management................................................................................42
2.8 Crediting Payments.............................................................................44
2.9 Designated Account.............................................................................44
2.10 Maintenance of Loan Account; Statements of Obligations.........................................44
2.11 Fees...........................................................................................45
2.12 Letters of Credit..............................................................................45
2.13 LIBOR Option...................................................................................48
2.14 Capital Requirements...........................................................................51
2.15 Joint and Several Liability of the Borrowers...................................................52
3. CONDITIONS; TERM OF AGREEMENT...........................................................................54
3.1 Conditions Precedent to the Initial Extension of Credit........................................54
3.2 Conditions Subsequent to the Initial Extension of Credit.......................................57
3.3 Conditions Precedent to all Extensions of Credit...............................................57
3.4 Term...........................................................................................58
3.5 Effect of Termination..........................................................................58
3.6 Early Termination by Borrowers.................................................................59
4. CREATION OF SECURITY INTEREST...........................................................................59
4.1 Grant of Security Interest.....................................................................59
4.2 Negotiable Collateral..........................................................................59
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral.........................59
4.4 Delivery of Additional Documentation Required..................................................60
4.5 Power of Attorney..............................................................................60
4.6 Right to Inspect...............................................................................60
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4.7 Control Agreements.............................................................................61
5. REPRESENTATIONS AND WARRANTIES..........................................................................61
5.1 No Encumbrances................................................................................61
5.2 Eligible Accounts..............................................................................61
5.3 Eligible Inventory.............................................................................62
5.4 Equipment......................................................................................62
5.5 Location of Inventory and Equipment............................................................62
5.6 Inventory Records..............................................................................62
5.7 Location of Chief Executive Office; FEIN.......................................................62
5.8 Due Organization and Qualification; Subsidiaries...............................................62
5.9 Due Authorization; No Conflict.................................................................63
5.10 Litigation.....................................................................................64
5.11 No Material Adverse Change.....................................................................64
5.12 Fraudulent Transfer............................................................................64
5.13 Employee Benefits..............................................................................64
5.14 Environmental Condition........................................................................64
5.15 Brokerage Fees.................................................................................65
5.16 Year 2000 Compliance...........................................................................65
5.17 Intellectual Property..........................................................................65
5.18 Leases.........................................................................................65
5.19 DDAs...........................................................................................65
5.20 Offsite Storage Locations......................................................................65
6. AFFIRMATIVE COVENANTS...................................................................................65
6.1 Accounting System..............................................................................65
6.2 Collateral Reporting...........................................................................66
6.3 Financial Statements, Reports, Certificates....................................................68
6.4 Guarantor Reports..............................................................................70
6.5 Return.........................................................................................70
6.6 Title to Equipment.............................................................................70
6.7 Maintenance of Equipment.......................................................................71
6.8 Taxes..........................................................................................71
6.9 Insurance......................................................................................71
6.10 No Setoffs or Counterclaims....................................................................73
6.11 Location of Inventory and Equipment............................................................73
6.12 Compliance with Laws...........................................................................73
6.13 Employee Benefits..............................................................................73
6.14 Leases.........................................................................................74
6.15 Year 2000 Compliance...........................................................................74
6.16 Projections....................................................................................74
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6.17 Corporate Existence, etc.......................................................................74
6.18 Disclosure Updates.............................................................................74
6.19 Mailing Lists..................................................................................75
6.20 Inventory Cycle Counts.........................................................................75
6.21 Distribution Centers...........................................................................75
6.22 Permitted Acquisitions.........................................................................75
7. NEGATIVE COVENANTS......................................................................................75
7.1 Indebtedness...................................................................................75
7.2 Liens..........................................................................................76
7.3 Restrictions on Fundamental Changes............................................................76
7.4 Disposal of Assets.............................................................................77
7.5 Change Name....................................................................................77
7.6 Guarantee......................................................................................77
7.7 Nature of Business.............................................................................77
7.8 Prepayments and Amendments.....................................................................77
7.9 Change of Control..............................................................................78
7.10 Consignments...................................................................................78
7.11 Distributions..................................................................................78
7.12 Accounting Methods.............................................................................78
7.13 Investments....................................................................................78
7.14 Transactions with Affiliates...................................................................78
7.15 Suspension.....................................................................................78
7.16 Compensation...................................................................................78
7.17 Use of Proceeds................................................................................78
7.18 Change in Location of Chief Executive Office; Inventory and Equipment with Bailees.............80
7.19 No Prohibited Transactions Under ERISA.........................................................80
7.20 Financial Covenants. Fail to maintain:.........................................................81
7.21 Credit Card Receipts...........................................................................81
7.22 Capital Expenditures...........................................................................81
7.23 Securities Accounts............................................................................82
8. EVENTS OF DEFAULT.......................................................................................82
9. THE LENDER GROUP'S RIGHTS AND REMEDIES..................................................................85
9.1 Rights and Remedies............................................................................85
9.2 Remedies Cumulative............................................................................87
10. TAXES AND EXPENSES......................................................................................88
11. WAIVERS; INDEMNIFICATION................................................................................88
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11.1 Demand; Protest; etc...........................................................................88
11.2 The Lender Group's Liability for Collateral....................................................88
11.3 Indemnification................................................................................89
12. NOTICES.................................................................................................89
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER..............................................................90
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS..............................................................91
14.1 Assignments and Participations.................................................................91
14.2 Successors.....................................................................................94
15. AMENDMENTS; WAIVERS.....................................................................................94
15.1 Amendments and Waivers.........................................................................94
15.2 No Waivers; Cumulative Remedies................................................................95
16. AGENT; THE LENDER GROUP.................................................................................96
16.1 Appointment and Authorization of Agent.........................................................96
16.2 Delegation of Duties...........................................................................97
16.3 Liability of Agent.............................................................................97
16.4 Reliance by Agent..............................................................................97
16.5 Notice of Default or Event of Default..........................................................98
16.6 Credit Decision................................................................................98
16.7 Costs and Expenses; Indemnification............................................................99
16.8 Agent in Individual Capacity...................................................................99
16.9 Successor Agent...............................................................................100
16.10 Lender in Individual Capacity.................................................................100
16.11 Withholding Tax...............................................................................100
16.12 Collateral Matters............................................................................102
16.13 Restrictions on Actions by Lenders; Sharing of Payments.......................................103
16.14 Agency for Perfection.........................................................................103
16.15 Payments by Agent to the Lenders..............................................................104
16.16 Concerning the Collateral and Related Loan Documents..........................................104
16.17 Field Audits and Examination Reports; Confidentiality; Disclaimers by Lenders; Other
Reports and Information.......................................................................104
16.18 Several Obligations; No Liability.............................................................105
16.19 Legal Representation of Agent.................................................................106
16.20 Documentation Agent...........................................................................106
17. GENERAL PROVISIONS.....................................................................................106
17.1 Effectiveness.................................................................................106
17.2 Section Headings..............................................................................106
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17.3 Interpretation................................................................................106
17.4 Severability of Provisions....................................................................107
17.5 Amendments in Writing.........................................................................107
17.6 Counterparts; Telefacsimile Execution.........................................................107
17.7 Revival and Reinstatement of Obligations......................................................107
17.8 Integration...................................................................................107
17.9 Guitar as Agent for Borrowers.................................................................107
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EXHIBITS AND SCHEDULES
Exhibit A-1 Form of Assignment and Acceptance
Exhibit B-1 Form of Borrowing Base Certificate
Exhibit C-2 Form of Compliance Certificate
Exhibit L-1 Form of LIBOR Notice
Schedule C-1 Revolving Credit Commitments
Schedule E-1 Warehouse Locations
Schedule E-2 Retail Stores
Schedule E-3 Offsite Storage Locations
Schedule P-1 Permitted Liens
Schedule R-1 Real Property Collateral
Schedule 2.7(a) Guitar Cash Management
Schedule 2.7(b) MFI Cash Management
Schedule 5.7 Chief Executive Office; FEIN
Schedule 5.8 Organization and Qualification
Schedule 5.10 Litigation
Schedule 5.19 Demand Deposit Accounts
Schedule 6.11 Location of Inventory and Equipment
Schedule 7.1 Permitted Indebtedness
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "AGREEMENT"), is
entered into as of December 17, 1999, between and among, on the one hand, the
lenders identified on the signature pages hereof (such lenders, together with
their respective successors and assigns, are referred to hereinafter each
individually as a "LENDER" and collectively as the "LENDERS"), FOOTHILL
CAPITAL CORPORATION, a California corporation, as agent for the Lenders (in
such capacity, together with its successors, if any, "AGENT"), and BANKBOSTON
RETAIL FINANCE, INC., a Delaware corporation, as documentation agent for the
Lenders (in such capacity, together with its successors, if any,
"Documentation Agent"), with a place of business at 00 Xxxxx Xxxxxx, 00xx
Xxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, and, on the other hand, GUITAR CENTER,
INC., a Delaware corporation ("GUITAR"), and MUSICIAN'S FRIEND, INC., a
Delaware corporation ("MFI").
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS.
As used in this Agreement, the following terms shall have
the following definitions:
"ACCOUNT DEBTOR" means any Person who is or who may become
obligated under, with respect to, or on account of, an Account, a General
Intangible, or Negotiable Collateral.
"ACCOUNTS" means all of a Borrower's currently existing and
hereafter arising "accounts" (as that term is defined in the Code), and any
and all credit insurance, guaranties, or security therefor.
"ACQUIRED INDEBTEDNESS" means, with respect to any
Permitted Acquisition, Indebtedness of a Person existing at the time such
Person becomes a Subsidiary or assumed in connection with the acquisition of
assets from such Person, and not incurred in connection with, or in
anticipation of, such Person becoming a Subsidiary or such acquisition.
"ACQUISITION" means any purchase or other acquisition by a
Borrower of the assets or Stock of any other Person, other than the purchase
of Inventory or Equipment in the ordinary course of business.
"ADMINISTRATIVE BORROWER" has the meaning set forth in
SECTION 17.9.
"ADVANCES" has the meaning set forth in SECTION 2.1.
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"AFFILIATE" means, as applied to any Person, any other
Person who, directly or indirectly, controls, is controlled by, or is under
common control with, such Person. For purposes of this definition, "control"
means the possession, directly or indirectly, of the power to direct the
management and policies of a Person, whether through the ownership of Stock,
by contract, or otherwise.
"AGENT" means Foothill Capital Corporation, a California
corporation, solely in its capacity as agent for the Lenders, and shall
include any successor agent.
"AGENT'S ACCOUNT" shall mean an account at a bank
designated by Agent from time to time as the account into which Borrowers
shall make all payments to Agent for the benefit of the Lender Group, and
into which the Lender Group shall make all payments to Agent, under this
Agreement and the other Loan Documents. Initially, until Agent notifies
Administrative Borrower and the Lender Group to the contrary, the Agent
Account shall be that certain deposit account bearing account number
323-266193 and maintained by Agent with The Chase Manhattan Bank, N.A., 4 New
Xxxx Xxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, ABA #000-000-000.
"AGENT ADVANCES" has the meaning set forth in SECTION
2.3(e)(i).
"AGENT'S LIENS" has the meaning set forth in SECTION 4.1.
"AGENT-RELATED PERSONS" means Agent together with its
Affiliates, officers, directors, employees, counsel, and agents.
"AGREEMENT" HAS the meaning set forth in the preamble hereto.
"APPLICABLE BASE RATE MARGIN" means, as of any date of
determination, the following margin based upon the applicable Leverage Ratio;
PROVIDED, that for the period from the Closing Date through the date Agent
receives the first certified calculation of the Leverage Ratio delivered by
Borrowers pursuant to SECTION 6.3(b)(iv) establishing that a different
Applicable Base Rate Margin applies, the Applicable Base Rate Margin shall be
0.50 percentage points,
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LEVERAGE RATIO APPLICABLE BASE RATE MARGIN
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less than 2.25:1.0 0.25 percentage points
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equal to or greater than 2.25:1.0 0.50 percentage points
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The Applicable Base Rate Margin shall be based upon
Guitar's Leverage Ratio which will be calculated quarterly as at the end of
each fiscal quarter of Guitar based upon the 4 immediately preceding fiscal
quarters, including the fiscal quarter then ended. The applicable margin
shall be redetermined quarterly on the date Agent receives the certified
calculation of the Leverage Ratio pursuant to SECTION 6.3(b)(iv) hereof.
"APPLICABLE LIBOR RATE MARGIN" means, as of any date of
determination, the following margin based upon the applicable Leverage Ratio;
PROVIDED, that for the period from the Closing Date through the date Agent
receives the first certified calculation of the Leverage Ratio delivered by
Borrowers pursuant to SECTION 6.3(b)(iv) establishing that a different
Applicable LIBOR Rate Margin applies, the Applicable LIBOR Rate Margin shall
be 1.50 percentage points,
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LEVERAGE RATIO APPLICABLE LIBOR RATE MARGIN
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less than 2.25:1.0 1.375 percentage points
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equal to or greater than 2.25:1.0, 1.50 percentage points
but less than 4.00:1.0
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equal to or greater than 4.00:1.0, 1.75 percentage points
but less than 4.50:1.0
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equal to or greater than 4.50:1.0 2.00 percentage points
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The Applicable LIBOR Rate Margin shall be based upon
Guitar's Leverage Ratio which will be calculated quarterly as at the end of
each fiscal quarter of Guitar based upon the 4 immediately preceding fiscal
quarters, including the quarter then ended. The applicable margin shall be
redetermined quarterly on the date Agent receives the certified calculation
of the Leverage Ratio pursuant to SECTION 6.3(b)(iv) hereof. Anything to the
contrary contained herein notwithstanding, any LIBOR Rate Advance that is
outstanding on the day on which the Applicable LIBOR Rate Margin changes,
shall, until the end of the Interest Period relating to such LIBOR Rate
Advance, continue to bear interest at the Applicable LIBOR Rate Margin that
was in effect on the date such LIBOR Rate Advance initially was made.
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"ASSIGNEE" has the meaning set forth in SECTION 14.1.
"ASSIGNMENT AND ACCEPTANCE" means an Assignment and
Acceptance in the form of EXHIBIT A-1 attached hereto.
"AUTHORIZED PERSON" means any officer or other employee of
Administrative Borrower.
"AVAILABILITY" means, as of any date of determination,
determined at the close of business on such date, if such date is a Business
Day, and determined at the close of business on the immediately preceding
Business Day, if such date of determination is not a Business Day, the amount
that Borrowers are entitled to borrow as Advances under SECTION 2.1 (after
giving effect to all then outstanding Obligations and all sublimits and
Reserves applicable hereunder).
"BANKRUPTCY CODE" means the United States Bankruptcy Code,
as amended, and any successor statute.
"BASE LIBOR RATE" means the rate per annum, determined by
Agent (rounded upwards, if necessary, to the next 1/16%) at which Dollar
deposits are offered to Xxxxx Fargo in the London interbank market on or
about 11:00 a.m. (California time) 2 Business Days prior to the commencement
of the applicable Interest Period, for a term and in amounts comparable to
the Interest Period and amount of the LIBOR Rate Advance requested by
Borrowers in accordance with this Agreement.
"BASE RATE" means, the rate of interest publicly announced
by Xxxxx Fargo as its "prime rate", with the understanding that the "prime
rate" is one of Xxxxx Fargo's base rates (not necessarily the lowest of such
rates) and serves as the basis upon which effective rates of interest are
calculated for those loans making reference thereto.
"BASE RATE ADVANCE" means each portion of an Advance
bearing interest at a rate determined by reference to the Base Rate.
"BENEFIT PLAN" means a "defined benefit plan" (as defined
in SECTION 3(35) of ERISA) for which any Borrower or any Subsidiary or ERISA
Affiliate of such Borrower has been an "employer" (as defined in Section 3(5)
of ERISA) within the past six years.
"BOARD OF DIRECTORS" means the Board of Directors of Guitar
or any committee thereof duly authorized to act on behalf of the Board of
Directors.
"BOOKS" means all of any Borrower's books and records
(including all of its records indicating, summarizing, or evidencing its
assets (including the Collateral) or liabilities, all of its information
relating to its business operations or financial condition, and all of its
computer programs, disks, files, printouts, runs, or other computer prepared
information).
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"BORROWERS" means Guitar and MFI, collectively, jointly and
severally, and each of them is referred to as a "BORROWER."
"BORROWING" means a borrowing hereunder consisting of
Advances made on the same day by the Lenders, or Agent on behalf thereof, to
Administrative Borrower, or by Swing Lender in the case of a Swing Loan, or
by Agent in the case of an Agent Advance.
"BORROWING BASE" has the meaning set forth in SECTION 2.1.
"BORROWING BASE CERTIFICATE" means a certificate in the
form of EXHIBIT B-1.
"BBRF" means BankBoston Retail Finance, Inc., a Delaware
corporation.
"BUSINESS DAY" means any day that is not a Saturday,
Sunday, or other day on which national banks are authorized or required to
close.
"CAPITAL LEASE" means a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP.
"CAPITAL STOCK" of any Person means any and all shares,
interests, participations, or other equivalents (however designated) of, or
rights, warrants, or options to purchase, corporate stock or any other equity
interest (however designated) of or in such Person.
"CAPITALIZED LEASE OBLIGATION" means any Indebtedness
represented by obligations under Capital Lease.
"CASH EQUIVALENTS" means and refers to: (a) marketable
direct obligations issued or unconditionally guaranteed by the United States
Government or issued by any agency thereof and backed by the full faith and
credit of the United States, in each case maturing within one (1) year from
the date of acquisition thereof; (b) marketable direct obligations issued by
any state of the United States of America or any political subdivision of any
such state or any public agency or instrumentality thereof maturing within
one (1) year from the date of acquisition thereof and, at the time of
acquisition, having the highest rating obtainable from either S&P or Xxxxx'x;
(c) commercial paper maturing no more than one (1) year from the date of
acquisition thereof and, at the time of acquisition, having a rating of A-2
or P-2, or better, from S&P or Xxxxx'x; (d) certificates of deposit or
bankers' acceptances maturing within one (1) year from the date of
acquisition thereof either (i) issued by any bank organized under the laws of
the United States of America or any state thereof or the District of Columbia
which bank has a rating of A or A2, or better, from S&P or Xxxxx'x, or (ii)
certificates of deposit less than or equal to One Hundred Thousand Dollars
($100,000) in the aggregate issued by any other bank insured by the Federal
Deposit Insurance Corporation.
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"CHANGE OF CONTROL" means and refers to the occurrence of
one or more of the following events: (a) any Person, other than Permitted
Holders, or related group for purposes of Section 13(d) of the Exchange Act
(a "Group"), together with any Affiliates thereof, shall become the
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of Guitar representing at least thirty
percent (30%) of the Voting Stock of Guitar, (b) Guitar shall hold directly
less than 100% of the issued and outstanding Stock of MFI, (c) Guitar shall
hold directly less than 100% of the issued and outstanding Stock of each
Guarantor other than MCI, or (d) a majority of the members of the Board of
Directors shall not constitute Continuing Directors. For purposes of this
definition, "Board of Directors" does not include any committee thereof.
"CLOSING DATE" means the date of the making of the initial
Advance (or other extension of credit) hereunder.
"CODE" means the California Uniform Commercial Code.
"COLLATERAL" means all of each Borrower's right, title, and
interest in and to each of the following:
(a) the Accounts,
(b) the Books,
(c) the Equipment,
(d) the General Intangibles,
(e) the Inventory,
(f) the Investment Property,
(g) the Negotiable Collateral,
(h) the Real Property Collateral,
(i) any money, or other assets of a Borrower that now or
hereafter come into the possession, custody, or control of any member of the
Lender Group, and
(j) the proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the foregoing, and any and all Accounts, Books, Equipment,
General Intangibles, Inventory, Investment Property, Negotiable Collateral,
Real Property, money, deposit accounts, or other tangible or intangible
property resulting from the sale, exchange, collection, or other disposition
of any of the foregoing, or any portion thereof or interest therein, and the
proceeds thereof.
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The foregoing notwithstanding, the "Collateral" shall not include any (i)
General Intangibles that are now or hereafter held by a Borrower as licensee
or otherwise, solely in the event and to the extent that: (a) as the
proximate result of the grant, assignment, transfer, or conveyance of a
security interest, such Borrower's rights in or with respect to such item of
General Intangibles would be forfeited or would become void, voidable,
terminable, or revocable, or if such Borrower would be deemed to have
breached, violated, or defaulted the underlying license or other agreement
that governs such item of General Intangibles pursuant to the restrictions in
the underlying license or other agreement that governs such item of General
Intangibles; (b) any such restriction shall be effective and enforceable
under applicable law, including Section 9318(4) of the Code; and (c) any such
forfeiture, voidness, voidability, terminability, revocability, breach,
violation, or default cannot be remedied by such Borrower using its best
efforts (but without any obligation to make any material expenditures of
money or to commence legal proceedings); PROVIDED, HOWEVER, that the grant,
assignment, transfer, and conveyance of security interest hereunder shall
extend to, and the term "Collateral" shall include, (1) any and all proceeds
of such item of General Intangibles to the extent that the assignment or
encumbering of such proceeds is not so restricted, and (2) upon any such
licensor or other applicable party's consent with respect to any such
otherwise excluded item of General Intangibles being obtained, thereafter
such item of General Intangibles as well as any proceeds thereof that might
theretofore have been excluded from such grant, assignment, transfer, and
conveyance of a security interest and the term "Collateral;" and (ii)
Equipment, acquired with Permitted Purchase Money Indebtedness, that is
subject to a Purchase Money Lien that is a Permitted Lien, and the holder of
such Purchase Money Lien has prohibited a Borrower from granting any other
Lien in such Equipment as a condition to Borrower obtaining or maintaining
the Permitted Money Indebtedness, and the Borrower has not otherwise obtained
a waiver of such condition.
"COLLATERAL ACCESS AGREEMENT" means a landlord waiver,
bailee letter, or acknowledgement agreement of any lessor, warehouseman,
processor, consignee, or other Person in possession of, having a Lien upon,
or having rights or interests in the Equipment or Inventory, in each case, in
form and substance reasonably satisfactory to Agent.
"COLLECTIONS" means ALL cash, checks, notes, instruments,
and other items of payment (including insurance proceeds, proceeds of cash
sales, rental proceeds, and tax refunds) of Borrowers.
"COMMITMENT" means, with respect to each Lender, its
Revolving Credit Commitment, and, with respect to all Lenders, their
Revolving Credit Commitments, in each case as such Dollar amounts are set
forth beside such Lender's name under the applicable heading on SCHEDULE C-1
attached hereto or on the signature page of the Assignment and Acceptance
pursuant to which such Lender became a Lender hereunder in accordance with
the provisions of SECTION 14.1.
"COMPLIANCE CERTIFICATE" means a certificate substantially
in the form of EXHIBIT C-2 delivered by the chief financial officer of
Administrative Borrower to Agent.
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"CONCENTRATION ACCOUNTS" means, collectively, the Guitar
Concentration Account and the MFI Concentration Account.
"CONTINUING DIRECTOR" means and refers to (a) any member of
the Board of Directors who was a director of Guitar on the Closing Date, and
(b) any person who becomes a member of the Board of Directors after the
Closing Date if such person was appointed or nominated for election to the
Board of Directors by a majority of the Continuing Directors (including any
such Continuing Director previously appointed pursuant to this clause (b)),
but excluding any such person originally proposed for election in opposition
to the Board of Directors in office at the Closing Date in an actual or
threatened election contest relating to the election of the directors of
Guitar (as such terms are used in Rule 14a-11 under the Exchange Act) and
whose initial assumption of office resulted form such contest or the
settlement thereof.
"CONTROL AGREEMENT" means a control agreement, in form and
substance reasonably satisfactory to Agent, between the applicable Borrower,
Agent, and the applicable securities intermediary with respect to the
applicable Securities Account and related Investment Property.
"CREDIT CARD AGREEMENTS" means those certain agreements
between Agent and the credit card clearinghouses and processors of a Borrower
acceptable to Agent in the exercise of its Permitted Discretion, pursuant to
which such credit card clearinghouses or processors agree to transfer on a
daily basis all credit card receipts of such Borrower, or other amounts
payable by such clearinghouses or processors, into the Concentration Account.
"CYCLE COUNT MANUAL" means that certain procedures manual
of the Borrowers titled "Guitar Center Cycle Count Guide", which sets forth
the policies and procedures utilized by Borrowers in the conduct of their
inventory cycle counts.
"DAILY BALANCE" means, with respect to each day during the
term of this Agreement, the amount of an Obligation owed at the end of such
day.
"DDA" means any checking or other demand deposit account
maintained by Borrowers.
"DEFAULT" means an event, condition, or default that, with
the giving of notice, the passage of time, or both, would be an Event of
Default.
"DEFAULTING LENDER" means any Lender that fails to make any
Advance that it is required to make hereunder on any Funding Date and that
has not cured such failure by making such Advance within 1 Business Day after
written demand upon it by Agent to do so.
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"DEFAULTING LENDERS RATE" means the Base Rate for the first
3 days from and after the date the relevant payment is due and, thereafter,
at that interest rate then applicable to the relevant Loan.
"DESIGNATED ACCOUNT" means account number 4629 103789 of
Administrative Borrower maintained with the Designated Account Bank, or such
other deposit account of Administrative Borrower (located within the United
States) that has been designated as such, in writing, by Administrative
Borrower to Agent.
"DESIGNATED ACCOUNT BANK" means Xxxxx Fargo, whose office
is located at Warner Ranch Commercial Banking Office, 0000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx 000, Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000, and whose ABA number
is 121 000 248.
"DILUTION" means, as of any date of determination, a
percentage, based upon the experience of the Borrowers for such immediately
prior 3 month period, that is the result of dividing the Dollar amount of (a)
bad debt write-downs, discounts, advertising allowances, returns, credits, or
other dilutive items with respect to Eligible Accounts, by (b) Borrowers'
Collections with respect to Eligible Accounts (excluding extraordinary items)
PLUS the Dollar amount of clause (a).
"DILUTION RESERVE" means, as of any date of determination,
an amount sufficient to reduce the advance rate against Eligible Accounts by
one percentage point for each percentage point by which Dilution is in excess
of percentage amount as is determined by Agent from time to time in its
Permitted Discretion.
"DISBURSEMENT LETTER" means an instructional letter
executed and delivered by Administrative Borrower to Agent regarding the
extensions of credit to be made on the Closing Date, the form and substance
of which shall be reasonably satisfactory to Agent.
"DOCUMENTATION AGENT" means BBRF, solely in its capacity as
documentation agent for the Lenders, and shall include any successor
documentation agent.
"DOCUMENTATION AGENT-RELATED PERSONS" means Documentation
Agent and any successor syndication and arrangement agent together with their
respective Affiliates, and the officers, directors, employees, counsel,
agents, and attorneys-in-fact of such Persons and their Affiliates.
"DOLLARS" or "$" means United States dollars.
"EBITDA" means, with respect to any period, the
consolidated net income of Guitar and its Subsidiaries for such period (a)
plus all interest expense, income tax expense, depreciation and amortization
(including amortization of any goodwill or other intangibles) for such
period, (b) minus gains attributable to any fixed asset sales in such period,
(c) PLUS the transaction and conversion costs related to the acquisition of
MFI, (d) PLUS an amount equal to the cumulative effect of the accounting
change for the pre-opening
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costs of Guitar as required by GAAP, and (e) PLUS or MINUS any other non-cash
charges or extraordinary expenses or income which may have been subtracted or
added in calculating consolidated net income for such period.
"ELIGIBLE ACCOUNTS" means, from and after the Receivables
Activation Date, those rights to payment against credit card clearinghouses
or, processors subject to Credit Card Agreements acceptable to Agent, in the
exercise of its Permitted Discretion, created by a Borrower in the ordinary
course of its business, that arise out of such Borrower's sale of goods or
rendition of services, that comply with each and all of the representations
and warranties respecting Eligible Accounts made by Borrowers in the Loan
Documents, and that are not excluded as ineligible by virtue of the one or
more of the criteria for Eligible Accounts established by Agent from time to
time in its Permitted Discretion as a result of its field audit or other due
diligence efforts. Any goods giving rise to Eligible Accounts have been
delivered to the customer, or to the customer's agent for immediate shipment
to and unconditional acceptance by the customer. Eligible Account shall not
include the following unless an exception to any of the following has been
consented to in writing by Agent:
(a) an Account owed by an employee, Affiliate, or
agent of any Borrower,
(b) an Account to the extent arising on account of a
transaction wherein goods were placed on consignment or were sold pursuant to
a guaranteed sale, a sale or return, a sale on approval, a xxxx and hold, or
on any other terms by reason of which the payment by the Account Debtor may
be conditional,
(c) an Account payable in a currency other than
Dollars,
(d) an Account that is owed by an Account Debtor that
has asserted a right of setoff, has disputed its liability, or has made any
claim with respect to its obligation to honor a Borrower's right to payment,
to the extent of the amount owed by such Borrower to the Account Debtor, the
amount of such actual or asserted right of setoff, or the amount of such
dispute or claim, as the case may be
(e) an Account with respect to which the Account Debtor
is subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business;
(f) an Account to the extent that the collection of
which Agent, in its Permitted Discretion, believes to be doubtful by reason
of the Account Debtor's financial condition;
(g) on account of a transaction to the extent to which
the goods, the sale of which gives rise to such right to payment, have not
been shipped and billed to a Borrower's customer or the services giving rise
to such right to payment have not been performed and accepted by a Borrower's
customer,
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(h) with the exception of Household Retail Services USA
and Conseco Finance Services Corp. a right to payment against a private label
credit card clearinghouse or processor,
(i) other than a right to payment subject to a valid
and enforceable Credit Card Agreement,
(j) a right to receive progress payments or other
advance xxxxxxxx that are due prior to the completion of performance by a
Borrower of the subject contract for goods or services, and
(k) otherwise not in compliance with any other criteria
for eligibility established from time to time by Agent in its Permitted
Discretion.
"ELIGIBLE INVENTORY" means Inventory consisting of first
quality new, and merchantable used and vintage, finished goods held for sale
in the ordinary course of a Borrower's business, that complies with each and
all of the representations and warranties respecting Eligible Inventory made
by Borrowers in the Loan Documents, and that are not excluded as ineligible
by virtue of the one or more of the criteria set forth below. In determining
the amount to be so included, Inventory shall be valued at the lower of cost
or market on a basis consistent with Borrowers' historical accounting
practices. An item of Inventory shall not be included in Eligible Inventory
if:
(a) a Borrower does not have good, valid, and
marketable title thereto,
(b) it is not located at one of Borrowers' warehouse
locations set forth on SCHEDULE E-1 (or in-transit from one of Borrowers'
warehouse locations to another), or located at (or in-transit from one of
Borrowers' warehouse locations to) one of Borrowers' business locations set
forth on SCHEDULE E-2 that offers finished goods for sale to the general
public (each a "RETAIL STORE"), or located at one of Borrowers' offsite
storage locations set forth on SCHEDULE E-3 (each an "OFFSITE STORAGE
LOCATION") (or in-transit from a Retail Store to an Offsite Storage Location
or in transit from an Offsite Storage Location to a Retail Store),
(c) if it is (i) located at one of Borrowers' warehouse
locations set forth on SCHEDULE E-1 or stored with a warehouseman or other
third Person and it is not subject to a Collateral Access Agreement executed
by the lessor or warehouseman or (ii) located at one of Borrowers' Retail
Stores or Offsite Storage Locations and that is located in one of the
Specified States unless it is subject to a Collateral Access Agreement
executed by the lessor or unless Agent has established Reserves with respect
thereto against the Borrowing Base as provided in SECTION 2.1(b)(iii),
(d) it is not subject to a valid and perfected first
priority security interest in favor of Agent, for the benefit of the Lender
Group,
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(e) it consists of goods returned or rejected by a
Borrower's customers (other than in the ordinary course of such Borrower's
business and which otherwise comply with the criteria for Eligible Inventory),
(f) it consists of Slow Moving Inventory, or
(g) it consists of goods that are custom items,
work-in-process, or goods that constitute spare parts, packaging and shipping
materials, supplies used or consumed in a Borrower's business (but not
including accessories to musical instruments held for sale), xxxx and hold
goods, damaged or defective goods, samples, "seconds," or Inventory acquired
on consignment.
"ELIGIBLE TRANSFEREE" means (a) any one or more of: Bank of
America, N.A., FleetBoston, N.A., Union Bank of California, The CIT Group, La
Salle Bank, N.A., Sanwa Bank of California, and GECC, or any Affiliate
thereof, (b) any Affiliate (other than individuals) of a pre-existing Lender,
(c) so long as no Event of Default has occurred and is continuing, any other
Person approved by Agent and Administrative Borrower (such approval by
Administrative Borrower not to be unreasonably withheld, conditioned or
delayed), and (d) during the continuation of an Event of Default, any other
Person approved by Agent.
"EQUIPMENT" means all of Borrowers' present and hereafter
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools, parts,
goods (other than consumer goods, farm products, or Inventory), wherever
located, including all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, and any successor statute thereto.
"ERISA AFFILIATE" means (a) any corporation subject to
ERISA whose employees are treated as employed by the same employer as the
employees of a Borrower under IRC Section 414(b), (b) any trade or business
subject to ERISA whose employees are treated as employed by the same employer
as the employees of a Borrower under IRC Section 414(c), (c) solely for
purposes of Section 302 of ERISA and Section 412 of the IRC, any organization
subject to ERISA that is a member of an affiliated service group of which a
Borrower is a member under IRC Section 414(m), or (d) solely for purposes of
Section 302 of ERISA and Section 412 of the IRC, any party subject to ERISA
that is a party to an arrangement with a Borrower and whose employees are
aggregated with the employees of a Borrower under IRC Section 414(o).
"ERISA EVENT" with respect to any Person means (a) the
occurrence of a reportable event, within the meaning of Section 4043 of
ERISA, with respect to any Plan
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of such Person or any of its ERISA Affiliates unless the 30-day notice
requirement with respect to such event has been waived by the PBGC; (b) the
provision by the administrator of any Plan of such Person or any of its ERISA
Affiliates of a notice of intent to terminate such Plan, pursuant to Section
4041(a)(2) of ERISA (including any such notice with respect to a plan
amendment referred to in Section 4041(e) of ERISA); (c) the cessation of
operations at a facility of such Person or any of its ERISA Affiliates in the
circumstances described in Section 4062(e) of ERISA; (d) the withdrawal by
such Person or any of its ERISA Affiliates from a Multiple Employer Plan
during a plan year for which it was a substantial employer, as defined in
Section 4001(a)(2) of ERISA; (e) the failure by such Person or any of its
ERISA Affiliates to make a payment to a Plan which failure would result in
the imposition of a Lien under Section 302(f)(1) of ERISA; (f) the adoption
of an amendment to a Plan of such Person or any of its ERISA Affiliates
requiring the provision of security to such Plan, pursuant to Section 307 of
ERISA; or (g) the institution by the PBGC of proceedings to terminate any
Plan of such Person or any of its ERISA Affiliates, pursuant to Section 4042
of ERISA, or the occurrence of any event or condition described in Section
4042 of ERISA that could constitute grounds for the termination of, or the
appointment of a trustee to administer, such Plan.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 8.
"EXCESS AVAILABILITY" means the amount, as of the date any
determination thereof is to be made, equal to Availability PLUS cash and Cash
Equivalents, MINUS the aggregate amount, if any, of all trade payables of
Borrowers aged in excess of Borrowers' historical levels with respect thereto
and all book overdrafts in excess of Borrowers' historical practices with
respect thereto, in each case as determined by Agent in its Permitted
Discretion.
"EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended, and any successor statute.
"EXISTING LENDER" means Xxxxx Fargo.
"FACILITY AMOUNT" means, as of the date of any
determination thereof, the maximum amount of Advances that then may be
outstanding subject to the limitations, deductions, reserves and other
conditions set forth in SECTION 2.1, which amount shall be (i) initially set
at $100,000,000 as of the Closing Date, (ii) thereafter, shall be subject to
increase or decrease in accordance with SECTION 2.2, (iii) shall at no time
be less than $75,000,000, and (iv) shall at no time exceed the Maximum
Facility Amount.
"FAMILY MEMBER" means, with respect to any individual, any
other individual having a relationship by blood (to the second degree of
consanguinity), marriage, or adoption to such individual.
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"FAMILY TRUSTS" means, with respect to any individual,
trusts or other estate planning vehicles established for the benefit of
Family Members of such individual and in respect of which such individual
serves as trustee or in a similar capacity.
"FEE LETTER" shall mean that certain letter agreement,
dated as of the Closing Date, between the Borrowers and Agent, for the sole
and separate account of Agent, setting forth certain fees payable to Agent.
"FEE SPLIT LETTER" shall mean that certain letter
agreement, dated as of the Closing Date, between Foothill, in its individual
capacity, and BBRF, in its individual capacity, setting forth the allocation
to BBRF of certain fees payable by Borrowers to Agent pursuant to the Fee
Letter.
"FEIN" means Federal Employer Identification Number.
"FOOTHILL" means Foothill Capital Corporation, a California
corporation.
"FUNDED DEBT" means and refers to all consolidated
Indebtedness of Guitar or its Subsidiaries that matures one (1) year or more
from the date of issuance, or that is renewable or extendable, at the sole
option of Guitar or its Subsidiaries, as applicable, by its terms to a date
that is one (1) year or more from the date of issuance thereof, or that,
under a revolving credit or similar agreement, obligates the lender to extend
credit over a period of one (1) year or more from the date of issuance.
"FUNDING DATE" means the date on which a Borrowing occurs.
"FUNDING LOSSES" has the meaning set forth in SECTION
2.13(b)(ii).
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"GENERAL INTANGIBLES" means all of Borrowers' present and
future general intangibles and other personal property (including contract
rights, rights to payment against credit card clearinghouses and processors,
rights arising under common law, statutes, or regulations, choses or things
in action, goodwill, patents, trade names, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due
or recoverable from pension funds, route lists, rights to payment and other
rights under any royalty or licensing agreements, infringement claims,
computer programs, information contained on computer disks or tapes,
literature, reports, catalogs, money, deposit accounts, insurance premium
rebates, tax refunds, and tax refund claims), other than goods, Accounts,
Investment Property, and Negotiable Collateral.
"GOVERNING DOCUMENTS" means, with respect to any Person,
the certificate or articles of incorporation, by-laws, or other
organizational documents of such Person.
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"GOVERNMENTAL AUTHORITY" shall mean any federal, state,
local, or other governmental or administrative body, instrumentality,
department, or agency or any court, tribunal, administrative hearing body,
arbitration panel, commission, or other similar governmental or
administrative dispute-resolving panel or body.
"GUARANTOR" means any one or more of MCI, for so long as
the Borrowers hold 50% or more of the issued and outstanding Stock of MCI,
and each other Subsidiary of Guitar, other than MFI, and MFI.
"GUARANTOR SECURITY AGREEMENT" means a Security Agreement,
dated as of even date herewith, made by each of the Guarantors in favor of
Agent, for the benefit of the Lender Group, in form and substance
satisfactory to Agent.
"GUARANTY" means a General Continuing Guaranty, dated as of
even date herewith, made by each of the Guarantors in favor of Agent, for the
benefit of the Lender Group, in form and substance satisfactory to Agent,
pursuant to which they guaranty the payment and performance of all present
and future Obligations.
"GUITAR" has the meaning set forth in the preamble to this
Agreement.
"GUITAR COLLECTION ACCOUNT" has the meaning set forth in
SECTION 2.7(a).
"GUITAR COLLECTION ACCOUNT BANK" has the meaning set forth
in SECTION 2.7(a).
"GUITAR CONCENTRATION ACCOUNT" has the meaning set forth in
SECTION 2.7(a).
"GUITAR CONCENTRATION ACCOUNT BANK" has the meaning set
forth in SECTION 2.7(a).
"HAZARDOUS MATERIALS" means (a) substances that are defined
or listed in, or otherwise classified pursuant to, any applicable laws or
regulations as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," or any other formulation intended to define,
list, or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, reproductive
toxicity, or "EP toxicity", (b) oil, petroleum, or petroleum derived
substances, natural gas, natural gas liquids, synthetic gas, drilling fluids,
produced waters, and other wastes associated with the exploration,
development, or production of crude oil, natural gas, or geothermal
resources, (c) any flammable substances or explosives or any radioactive
materials, and (d) asbestos in any form or electrical equipment that contains
any oil or dielectric fluid containing levels of polychlorinated biphenyls in
excess of 50 parts per million.
"INDEBTEDNESS" means, with respect to any Person, without
duplication, (a) all obligations for borrowed money, (b) all obligations
evidenced by bonds, debentures, notes, or other similar instruments and all
reimbursement or other obligations in respect of letters of credit, bankers
acceptances, interest rate swaps, or other financial products, (c)
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all obligations under Capital Leases, (d) all obligations or liabilities of
others secured by a Lien on any property or asset of such Person,
irrespective of whether such obligation or liability is assumed, and (e) any
obligation of such Person guaranteeing or intended to guarantee (whether
guaranteed, endorsed, co-made, discounted, or sold with recourse to such
Person) any obligation of any other Person.
"INDEMNIFIED LIABILITIES" has the meaning set forth in
SECTION 11.3.
"INDEMNIFIED PERSON" has the meaning set forth in SECTION
11.3.
"INSOLVENCY PROCEEDING" means any proceeding commenced by
or against any Person under any provision of the Bankruptcy Code or under any
other bankruptcy or insolvency law, assignments for the benefit of creditors,
formal or informal moratoria, compositions, extensions generally with a
significant number of such Person's creditors, or proceedings seeking
reorganization, arrangement, or other similar relief.
"INTANGIBLE ASSETS" means, with respect to any Person, that
portion of the book value of all of such Person's assets that would be
treated as intangibles under GAAP.
"INTEREST PERIOD" means, with respect to each LIBOR Rate
Advance, a period commencing on the date of the making of such LIBOR Rate
Advance and ending 1, 2, 3 or 6 months thereafter; PROVIDED, HOWEVER, that
(a) if any Interest Period would end on a day that is not a Business Day,
such Interest Period shall be extended (subject to clauses (c)-(e) below) to
the next succeeding Business Day, (b) interest shall accrue from and
including the first day of each Interest Period to, but excluding, the day on
which any Interest Period expires, (c) any Interest Period that would end on
a day that is not a Business Day shall be extended to the next succeeding
Business Day unless such Business Day falls in another calendar month, in
which case such Interest Period shall end on the next preceding Business Day,
(d) with respect to an Interest Period that begins on the last 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),
the Interest Period shall end on the last Business Day of the calendar month
that is 1, 2, 3, or 6 months after the date on which the Interest Period
began, as applicable, and (e) Borrowers may not elect an Interest Period
which will end after the Maturity Date.
"INVENTORY" means all present and future inventory in which
any Borrower has any interest, including goods held for sale or lease or to
be furnished under a contract of service and all of Borrowers' present and
future raw materials, work in process, finished goods, and packing and
shipping materials, wherever located.
"INVENTORY REAPPRAISAL" means an appraisal of the
liquidation value of Borrowers' Inventory (the methodology and implementation
of such appraisal to be satisfactory to Agent in its Permitted Discretion),
conducted by an appraisal or auctioneer firm acceptable to Agent.
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"INVENTORY SECURITY AGREEMENT" means a security agreement,
dated as of even date herewith, between Guitar and MFI, as debtors, and
Agent, as secured party, which agreement shall be governed by the laws of
Delaware and otherwise shall be in form and substance reasonably satisfactory
to Agent.
"INVESTMENT" means, with respect to any Person, any
investment by such Person in any other Person (including Affiliates) in the
form of loans, guarantees, advances, or capital contributions (excluding (a)
commission, travel, and similar advances to officers and employees of such
Person made in the ordinary course of business, and (b) bona fide accounts
receivable arising from the sale of goods or services in the ordinary course
of business consistent with past practice), purchases or other acquisitions
for consideration of Indebtedness or Stock, and any other items that are or
would be classified as investments on a balance sheet prepared in accordance
with GAAP.
"INVESTMENT PROPERTY" means "investment property" as that
term is defined in of the Code, whether now owned or hereafter acquired.
"IRC" means the Internal Revenue Code of 1986, as amended,
and any successor statute.
"L/C" has the meaning set forth in SECTION 2.12(a).
"L/C UNDERTAKING" has the meaning set forth in SECTION
2.12(a).
"LENDER" and "LENDERS" have the respective meanings set
forth in the preamble to this Agreement, and shall include any other Person
made a party to this Agreement in accordance with the provisions of SECTION
14.1 hereof.
"LENDER GROUP" means, individually and collectively, each
of the Lenders, and Agent.
"LENDER GROUP EXPENSES" means all (a) costs or expenses
(including taxes, and insurance premiums) required to be paid by Borrowers
under any of the Loan Documents that are paid or incurred by the Lender
Group, (b) reasonable fees or charges paid or incurred by the Lender Group in
connection with the Lender Group's transactions with Borrowers, including,
fees or charges for photocopying, notarization, couriers and messengers,
telecommunication, public record searches (including tax lien, litigation,
and UCC searches and including searches with the patent and trademark office,
the copyright office, or the department of motor vehicles), filing,
recording, publication, appraisal (including Collateral appraisals in
accordance with the provisions of this Agreement), and real estate title
policies and endorsements, (c) costs and expenses incurred by Agent in the
disbursement of funds to Borrowers (by wire transfer or otherwise), (d)
charges paid or incurred by Agent resulting from the dishonor of checks, (e)
reasonable costs and expenses paid or incurred by the Lender Group to correct
any default or enforce any provision of the
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Loan Documents, or in gaining possession of, maintaining, handling,
preserving, storing, shipping, selling, preparing for sale, or advertising to
sell the Collateral, or any portion thereof, irrespective of whether a sale
is consummated, (f) reasonable costs and expenses paid or incurred by the
Lender Group in examining the Books, (g) reasonable costs and expenses of
third party claims or any other suit paid or incurred by the Lender Group in
enforcing or defending the Loan Documents or in connection with the
transactions contemplated by the Loan Documents or the Lender Group's
relationship with Borrowers or any guarantor under the Loan Documents, (h)
Agent's reasonable fees and expenses (including reasonable attorneys fees)
incurred in advising, structuring, drafting, reviewing, administering,
amending, terminating, enforcing (including reasonable attorneys fees and
expenses incurred in connection with a "workout," a "restructuring," or an
Insolvency Proceeding concerning any Borrower or any guarantor of the
Obligations), defending, or concerning the Loan Documents, irrespective of
whether suit is brought, and (i) each of the Lenders' reasonable fees and
expenses (including reasonable attorneys fees) incurred in terminating,
enforcing (including reasonable attorneys fees and expenses incurred in
connection with a "workout," a "restructuring," or an Insolvency Proceeding
concerning any Borrower), or defending the Loan Documents, irrespective of
whether suit is brought.
"LENDER-RELATED PERSON" means, with respect to any Lender,
such Lender, together with such Lender's Affiliates, and the officers,
directors, employees, counsel, and agents of such Lender.
"LETTER OF CREDIT" means an L/C or an L/C Undertaking, as
the context requires.
"LETTER OF CREDIT USAGE" means, as of any date of
determination, the aggregate undrawn amount of all outstanding Letters of
Credit.
"LEVERAGE RATIO" means and refers to, for the period to be
determined, the ratio of (a) the aggregate amount of Funded Debt as of the
last day of such period, to (b) consolidated EBITDA for such period.
"LIBOR DEADLINE" has the meaning set forth in SECTION
2.13(b)(ii).
"LIBOR NOTICE" means a written notice in the form of
EXHIBIT L-1 attached hereto.
"LIBOR RATE" means, for each Interest Period for each LIBOR
Rate Advance, the rate per annum determined by Agent (rounded upwards, if
necessary, to the next 1/16%) determined by dividing (a) the Base LIBOR Rate
for such Interest Period, by (b) 100% minus the Reserve Percentage. The LIBOR
Rate shall be adjusted on and as of the effective day of any change in the
Reserve Percentage.
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"LIBOR RATE ADVANCE" means each portion of an Advance
bearing interest at a rate determined by reference to the LIBOR Rate.
"LIEN" means any interest in property securing an
obligation owed to, or a claim by, any Person other than the owner of the
property, whether such interest shall be based on the common law, statute, or
contract, whether such interest shall be recorded or perfected, and whether
such interest shall be contingent upon the occurrence of some future event or
events or the existence of some future circumstance or circumstances,
including the lien or security interest arising from a mortgage, deed of
trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement,
security agreement, conditional sale or trust receipt, or from a lease,
consignment, or bailment for security purposes and also including
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases, and other title exceptions and encumbrances
affecting Real Property.
"LOAN ACCOUNT" has the meaning set forth in SECTION 2.10.
"LOAN DOCUMENTS" means this Agreement, the Disbursement
Letter, the Letters of Credit, the Suretyship Agreement, the Guaranty, the
Guarantor Security Agreement, the tri-party blocked account agreements
governing the Guitar Collection Accounts, the Guitar Concentration Account,
the MFI Concentration Account, the Collateral Access Agreements, any Control
Agreement, the Mortgages, the Stock Pledge Agreement, the Trademark Security
Agreement, the Inventory Security Agreement, the Fee Letter, and any other
agreement entered into, now or in the future, by any Obligor and the Lender
Group in connection with this Agreement.
"MATERIAL ADVERSE CHANGE" means (a) a material adverse
change in the business, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of Guitar and its
Subsidiaries taken as a whole, (b) the material impairment of any Borrower's
ability to perform its obligations under the Loan Documents to which it is a
party or of the Lender Group's ability to enforce the Obligations or realize
upon the Collateral, or (c) a material impairment of the priority of the
Agent's Liens with respect to the Collateral as a result of an action or
failure to act on the part of any Borrower.
"MATURITY DATE" has the meaning set forth in SECTION 3.4.
"MAXIMUM FACILITY AMOUNT" means $150,000,000.
"MCI" means Musician's Choice, Inc., a Delaware corporation.
"MFI has the meaning set forth in the preamble to this
Agreement.
"MFI CONCENTRATION ACCOUNT" has the meaning set forth in
SECTION 2.7(b).
"MFI CONCENTRATION ACCOUNT BANK" has the meaning set forth in
SECTION 2.7(b).
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"MORTGAGE" means, individually and collectively, one or
more mortgages, deeds of trust, or deeds to secure debt, executed and
delivered by an Obligor in favor of Agent, for the benefit of the Lender
Group, the form and substance of which shall be satisfactory to Agent, in
Agent's Permitted Discretion, that encumber Real Property Collateral and the
related improvements thereto.
"MULTIEMPLOYER PLAN" of any Person means a multiemployer
plan, as defined in Section 4001(a)(3) of ERISA, to which such Person or any
of its ERISA Affiliates is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions.
"MULTIPLE EMPLOYER PLAN" of any Person means a single
employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is
maintained for employees of such Person or any of its ERISA Affiliates and at
least one Person other than such Person and its ERISA Affiliates or (b) was
so maintained and in respect of which such Person or any of its then current
ERISA Affiliates could have liability under Section 4064 or 4069 of ERISA in
the event such plan has been or were to be terminated.
"NEGOTIABLE COLLATERAL" means all of Borrowers' now owned
and hereafter acquired letters of credit, notes, drafts, instruments,
security certificates, documents (as defined in the Code), and chattel paper.
"NET CASH PROCEEDS" means, (a) the gross cash proceeds
received by either Guitar or MFI, as the case may be, in respect of a
Permitted Disposition of Real Property Collateral, less (b) the sum of (i)
the amount, if any, of all taxes (other than income taxes) payable by Guitar
or MFI, as the case may be, in connection with such Permitted Disposition and
their good faith best estimate of the amount of all income taxes payable in
connection with such Permitted Disposition, (ii) (A) the amount of any
reasonable reserve established in accordance with GAAP against any
liabilities associated with the Real Property Collateral sold and leased back
and retained by Guitar or MFI, as the case may be, provided that the amount
of any subsequent reduction of such reserve (other than in connection with a
payment in respect of any such liability) shall be deemed to be Net Cash
Proceeds of such Permitted Disposition occurring on the date of such
reduction, and (B) the amount applied to repay any Indebtedness to the extent
such Indebtedness is required by its terms to be repaid as a result of such
Permitted Disposition, and (iii) reasonable and customary fees, commissions,
and expenses and other costs paid by Guitar or MFI, as the case may be, in
connection with such Permitted Disposition (other than those payable to any
Affiliate thereof), in each case only to the extent not already deducted in
arriving at the amount referred to in CLAUSE (a).
"NET LIQUIDATION PERCENTAGE" means the percentage of book
value estimated to be recoverable in an orderly liquidation of Borrowers'
Inventory, such percentage to be as determined by a qualified appraisal
company selected by Agent.
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"OBLIGATIONS" means all loans, Advances, debts, principal,
interest (including any interest that, but for the provisions of the
Bankruptcy Code, would have accrued), contingent reimbursement obligations
with respect to Letters of Credit, premiums, liabilities (including all
amounts charged to Borrowers' Loan Account pursuant hereto), obligations,
fees, charges, costs, or Lender Group Expenses (including any fees or
expenses that, but for the provisions of the Bankruptcy Code, would have
accrued), lease payments, guaranties, covenants, and duties owing by any
Borrower to the Lender Group of any kind and description pursuant to or
evidenced by the Loan Documents (and irrespective of whether for the payment
of money), whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, and including all interest not
paid when due and all Lender Group Expenses that a Borrower is required to
pay or reimburse by the Loan Documents, by law, or otherwise.
"OBLIGORS" means, collectively, jointly and severally,
Borrowers and the Guarantor, and "Obligor" means any one of them.
"OFFSITE STORAGE LOCATION" is defined in clause (b) of the
definition of "Eligible Inventory."
"ORIGINATING LENDER" has the meaning set forth in SECTION
14.1(e).
"OVERADVANCE" has the meaning set forth in SECTION 2.5.
"PARTICIPANT" has the meaning set forth in SECTION 14.1(e).
"PAY-OFF LETTER" means a letter, in form and substance
reasonably satisfactory to Agent, from Existing Lender to Agent respecting
the amount necessary to repay in full all of the obligations of Borrowers
owing to Existing Lender and obtain a release of all of the Liens existing in
favor of Existing Lender in and to the assets of Borrowers.
"PERMITTED ACQUISITION" means an Acquisition of all or
substantially all of the assets or Stock of another Person made by any
Borrower so long as (a) no Default or Event of Default shall have occurred
and be continuing or would result from the consummation of the proposed
Acquisition, (b) the assets being acquired, or the Person whose Stock is
being acquired, are useful in or engaged in, as applicable, the business of
the Obligors as such business exists on the Closing Date, (c) the aggregate
consideration paid or payable for Permitted Acquisitions during any fiscal
year, after giving effect to the proposed Acquisition, shall not exceed
$5,000,000, (d) the aggregate consideration paid or payable for all Permitted
Acquisitions, after giving effect to the proposed Acquisition, shall not
exceed $15,000,000, and (e) each Borrower shall have complied with SECTION
6.22. Without limiting whether or not an Acquisition shall constitute a
Permitted Acquisition, in the event that Borrowers request of Agent that the
Inventory and Accounts being acquired through a Permitted Acquisition be
included in the Borrowing Base as Eligible Accounts or Eligible Inventory, as
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the case may be, Agent shall have completed its audit, appraisal, and
standard due diligence review with respect to the assets or Person that is to
be the subject of the proposed Permitted Acquisition and the results thereof
shall be satisfactory to Agent in the exercise of its Permitted Discretion
before such Inventory or Accounts shall be included in the Borrowing Base.
"PERMITTED DISCRETION", with respect to any determination
by a member of the Lender Group, means a determination made in good faith and
in the exercise of reasonable (from the perspective of a secured asset-based
lender) business judgment.
"PERMITTED DISPOSITIONS" means (a) sales, exchanges,
trade-ins, or other dispositions of Equipment that is significantly worn,
damaged, or obsolete in the ordinary course of a Borrower's business, (b)
sales of Inventory to buyers in the ordinary course of a Borrower's business,
(c) the use or transfer of money, or Cash Equivalents by a Borrower in a
manner that is not prohibited by the terms of this Agreement or the other
Loan Documents, (d) the licensing by a Borrower, on a non-exclusive basis, of
patents, trademarks, copyrights, and other intellectual property rights in
the ordinary course of such Borrower's business, (e) provided that no Event
of Default has occurred and is continuing or would result therefrom,
including an Event of Default resulting from a Change of Control, the sale,
transfer, or other disposition by Guitar of the Stock of MCI, (f) provided
that no Event of Default has occurred and is continuing or would result
therefrom, the sale, license, lease, exchange, transfer, or other
dispositions of any parcel or parcels of Real Property owned in fee by Guitar
(including goods that are fixtures and Equipment associated with the property
in an amount not to exceed $50,000) as of the Closing Date and not comprising
Real Property Collateral, (g) provided that no Event of Default has occurred
and is continuing or would result therefrom, the sale and lease-back of the
retail store #110 owned in fee by Guitar and located in Hollywood,
California, as more specifically described on SCHEDULE R-1, PROVIDED that
Guitar receives a minimum of $3,000,000 in Net Cash Proceeds from such sale
and lease-back, (h) provided that no Event of Default has occurred and is
continuing or would result therefrom, the sale or sale and lease-back of
distribution center owned in fee by MFI and located in Medford, Oregon, as
more specifically described on SCHEDULE R-1, PROVIDED that MFI receives a
minimum of $1,700,000 in Net Cash Proceeds from such sale and lease-back, and
(i) provided that no Event of Default has occurred and is continuing or would
result therefrom, including an Event of Default resulting from a Change of
Control, the sale, license, lease, exchange, transfer, or other dispositions
of any other tangible personal property of the Borrowers that do not exceed,
on a book value basis, $500,000 in the aggregate is any fiscal year.
"PERMITTED HOLDERS" means the individuals referenced in the
Permitted Holders Side Letter and their Family Members, and their Family
Trusts.
"PERMITTED HOLDERS SIDE LETTER" means that certain side
letter, dated as of even date herewith, between Borrowers and Agent, in form
and substance reasonably satisfactory to Agent.
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"PERMITTED INVESTMENTS" means (a) Investments in Cash
Equivalents, (b) loans and advances to officers and employees of the
Borrowers in the ordinary course of business, other than as provided for in
clause (c), in an aggregate amount at any one time outstanding not to exceed
$500,000, (c) loans and advances to officers and employees of the Borrowers
in the ordinary course of business to facilitate the purchase by such
officers or employees of the Stock of Guitar and the repayment of any such
loans or advances is secured by a first priority Lien on the Stock purchased
thereby, in an aggregate amount outstanding at any one time not to exceed
$1,000,000, (d) Investments in negotiable instruments for collection, (e)
advances made in connection with purchases of goods or services in the
ordinary course of business, (f) Permitted Acquisitions, (g) Investments by
the Borrowers in MCI not to exceed $10,000,000 outstanding at any one time,
and (h) other Investments in an aggregate amount not to exceed $250,000
outstanding at any one time.
"PERMITTED LIENS" means (a) Liens held by Agent for the
benefit of the Lender Group, (b) Liens for unpaid taxes that either (i) are
not yet overdue or (ii) do not constitute an Event of Default hereunder and
are the subject of Permitted Protests, (c) Liens set forth on SCHEDULE P-1,
(d) the interests of lessors under operating leases, (e) Purchase Money Liens
, but only if such Lien shall at all times be confined solely to the fixed
assets the purchase price of which was financed through the incurrence of the
Purchase Money Indebtedness secured by such Lien, or the interests of lessors
under Capital Leases to the extent that such interests secure Permitted
Purchase Money Indebtedness and so long as the Lien attaches only to the
asset purchased or acquired and the proceeds thereof, (f) Liens arising by
operation of law in favor of warehousemen, landlords, carriers, mechanics,
materialmen, laborers, or suppliers, incurred in the ordinary course of
business of Borrowers and not in connection with the borrowing of money, and
which Liens either (i) are for sums not yet overdue, or (ii) are the subject
of Permitted Protests, (g) Liens arising from deposits made in connection
with obtaining worker's compensation or other unemployment insurance, (h)
Liens or deposits to secure performance of bids, tenders, or leases incurred
in the ordinary course of business of Borrowers and not in connection with
the borrowing of money, (i) Liens arising by reason of security for surety or
appeal bonds in the ordinary course of business of Borrowers, (j) Liens
resulting from any judgment or award that is not an Event of Default
hereunder, (k) Liens with respect to Real Property Collateral that exist as
of the Closing Date, (l) with respect to any Real Property, easements, rights
of way, or zoning that do not materially interfere with or impair the use or
operation of the Real Property by Borrowers, and (m) Liens arising in
connection with any Acquired Indebtedness.
"PERMITTED PROTEST" means the right of Borrowers to protest
any Lien (other than any such Lien that secures the Obligations), tax (other
than payroll taxes or taxes that are the subject of a United States federal
tax lien), or rental payment, provided that (a) a reserve with respect to
such obligation is established on the Books in such amount as is required
under GAAP, (b) any such protest is instituted and diligently prosecuted by
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Borrowers in good faith, and (c) Agent, in the exercise of its Permitted
Discretion, is satisfied that, while any such protest is pending, there will
be no impairment of the enforceability, validity, or priority of any of the
Liens of Agent on behalf of the Lender Group in and to the Collateral.
"PERMITTED PURCHASE MONEY INDEBTEDNESS" means, as of any
date of determination, (i) Purchase Money Indebtedness incurred after the
Closing Date in an aggregate amount outstanding at any one time not to exceed
$10,000,000, or (ii) Purchase Money Indebtedness incurred on or before the
Closing Date and as set forth on SCHEDULE 7.1.
"PERSON" means natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts,
or other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"PERSONAL PROPERTY COLLATERAL" means all Collateral other
than such of the Real Property Collateral.
"PHYSICAL COUNT" means a physical count of Borrowers'
Inventory (the methodology and implementation of such physical count to be
satisfactory to Agent in its Permitted Discretion), conducted by an
appraisal, accounting, auction, or other professional firm acceptable to
Agent.
"PLAN" means a Single Employer Plan or a Multiple Employer
Plan.
"PROJECTIONS" means Guitar's forecasted consolidated (a)
balance sheets, (b) profit and loss statements, (c) cash flow statements, and
(d) capitalization statements, all prepared on a consistent basis with
Guitar's historical financial statements, together with appropriate
supporting details and a statement of underlying assumptions.
"PRO RATA SHARE" means the percentage obtained by dividing
(i) such Lender's Revolving Credit Commitment, by (ii) the aggregate amount
of all Lenders' Revolving Credit Commitments.
"PUBLIC OFFERING" means an underwritten public offering of
the common Stock of any Person.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness (other
than the Obligations, but including Capitalized Lease Obligations), incurred
at the time of, or within 20 days after, the acquisition of any fixed assets
for the purpose of financing all or any part of the acquisition cost thereof.
"PURCHASE MONEY LIEN" means a Lien upon fixed assets that
secures Purchase Money Indebtedness.
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"REAL PROPERTY" means any estates or interests in real
property now owned or hereafter acquired by an Obligor, and the improvements
related thereto.
"REAL PROPERTY COLLATERAL" means (i) the retail store #110
owned in fee by Guitar and located in Hollywood, California, and (ii) the
distribution center owned in fee by MFI and located in Medford, Oregon, in
each case more specifically described on SCHEDULE R-1, and any Real Property
hereafter acquired in fee by an Obligor.
"RECEIVABLES DUE DILIGENCE DATE" means that date as of
which Agent has completed, to its satisfaction in its Permitted Discretion,
its field audit of Borrowers' Accounts, including historic dilution, cyclical
patterns, and such other matters affecting credit quality and collectability
as Agent shall determine.
"RECEIVABLES ACTIVATION DATE" means that date, on or after
the Receivables Due Diligence Date, designated by written notice from the
Administrative Borrower to the Agent as the date from and after which the
Borrowers elect to include Eligible Accounts in the Borrowing Base, which
written notice is to be received by Agent no less than 15 days prior to the
designated Receivables Activation Date.
"REQUIRED AVAILABILITY" means, as of the date of the
determination thereof, Excess Availability in an amount no less than the
lesser of (i) 15% of the Facility Amount in effect on such date of
determination, and (ii) $20,000,000.
"REQUIRED LENDERS" means, at any time, Lenders whose Pro
Rata Shares aggregate 51% of the Commitments, or if the Commitments have been
terminated irrevocably, 51% of the Obligations then outstanding.
"RESERVE PERCENTAGE" means, on any day, that percentage
prescribed by the Board of Governors of the Federal Reserve System (or any
successor Governmental Authority) for determining the reserve requirements
(including any basic, supplemental, marginal, or emergency reserves) that is
in effect on such date with respect to deposits of Dollars in a non-United
States or an international banking office of a bank used to fund a LIBOR Rate
Advance.
"RETAIL STORE" is defined in clause (b) of the definition
of "Eligible Inventory."
"REVOLVING CREDIT COMMITMENT" means, for each Lender, the
Dollar amount of the obligation of such Lender to make Advances (in an
aggregate amount at any one time outstanding), as such amount is set forth
opposite the name of such Lender under the caption Revolving Credit
Commitment on SCHEDULE C-1 (as such amount shall be increased or decreased
pursuant to SECTION 2.2).
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"REVOLVER USAGE" means, as of any date of determination,
the sum of (a) the aggregate amount of Advances outstanding, PLUS (b) the
amount of the Letter of Credit Usage.
"RISK PARTICIPATION LIABILITY" means, as to each Letter of
Credit, all reimbursement obligations of Borrowers to the issuer of an L/C or
to the issuer of a letter of credit with respect to the transaction for which
an L/C Undertaking was executed and delivered (to the extent such
reimbursement obligations are subject to such L/C Undertaking), consisting of
(a) the amount available to be drawn or which may become available to be
drawn under the Letter of Credit, (b) all amounts which that been paid and
made available by the issuing bank to the extent not reimbursed by Borrowers,
whether by the making of an Advance or otherwise, and (c) all accrued and
unpaid interest, fees, and expenses payable with respect thereto.
"SEC" means the United States Securities and Exchange
Commission and any successor thereto.
"SECURITIES ACCOUNT" means a "securities account" as that
term is defined in Section 8-501 of the Code.
"SENIOR INDENTURE" means the Indenture , dated as of July
2, 1996, between Guitar Center Management Company, Inc., a California
corporation (predecessor in interest by merger to Guitar), as issuer, and
U.S. Trust Company of California, N.A., as trustee, pursuant to which the
Senior Notes were issued, as modified, amended or replaced from time to time
in a manner permitted by this Agreement.
"SENIOR INDENTURE INDEBTEDNESS" means the Senior Notes and
any other Indebtedness of any Obligor under the Senior Indenture, together
with any refinancings thereof permitted by the terms of SECTION 7.8(c).
"SENIOR NOTE DOCUMENTS" means the collective reference to
the Senior Notes, the Senior Indenture and each agreement, instrument and
document delivered in connection therewith or relating thereto, as modified,
amended, or replaced from time to time in a manner permitted by this
Agreement.
"SENIOR NOTES" means the 11% $100,000,000 Senior Notes due
2006 of Guitar issued pursuant to the Senior Indenture, as modified, amended
or replaced from time to time in a manner permitted by this Agreement.
"SETTLEMENT" has the meaning set forth in SECTION 2.3(f)(i).
"SETTLEMENT DATE" has the meaning set forth in SECTION
2.3(f)(i).
"SINGLE EMPLOYER PLAN" of any Person means a single
employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is
maintained for employees of such Person or any of its ERISA Affiliates and no
Person other than such
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Person and its ERISA Affiliates or (b) was so maintained and in respect of
which such Person or any of its then current ERISA Affiliates could have
liability under Section 4069 of ERISA in the event such plan has been or were
to be terminated.
"SLOW MOVING INVENTORY" means goods (i) that have been
included in Borrowers' Inventory for in excess of 120 days, or (ii)
classified as slow moving on Borrowers' books and records if not otherwise
included in clause (i).
"SOLVENT" means, with respect to any Person on a particular
date, that such Person is not insolvent (as such term is defined in the
Uniform Fraudulent Transfer Act).
"SPECIFIED STATE" means any State which provides for a
statutory lien of distraint in favor of a lessor of real property that is
prior to the Liens of Agent hereunder.
"STOCK" means all shares, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in
a Person, whether voting or nonvoting, including common stock, preferred
stock, or any other "equity security" (as such term is defined in Rule 3a11-1
of the General Rules and Regulations promulgated by the SEC under the
Exchange Act).
"STOCK PLEDGE AGREEMENT" means a stock pledge agreement, in
form and substance reasonably satisfactory to Agent, executed and delivered
by Guitar and MFI to Agent with respect to the pledge of the capital Stock of
each of Guitar's and MFI's Subsidiaries.
"SUBORDINATED INDEBTEDNESS" means any Indebtedness of a
Borrower that is subordinated to the Obligations of the Borrowers under the
Loan Documents on, and that otherwise contains, terms and conditions
acceptable to Agent in the exercise of its Permitted Discretion.
"SUBSIDIARY" of a Person means a corporation, partnership,
limited liability company, or other entity in which that Person directly or
indirectly owns or controls the shares of Stock having ordinary voting power
to elect a majority of the board of directors (or appoint other comparable
managers) of such corporation, partnership, limited liability company, or
other entity.
"SURETYSHIP AGREEMENT" means an agreement, in form and
substance satisfactory to Agent, dated as of even date herewith and entered
into by each Borrower for the benefit of the Lender Group.
"SWING LENDER" means any Lender appointed by the Agent in
writing, and which appointment has been accepted by such Lender in writing,
as the "Swing Lender".
"SWING LOAN" has the meaning set forth in SECTION 2.3(d)(i).
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"TANGIBLE NET WORTH" means, as of any date of
determination, the result of (a) Guitar's total stockholder's equity, MINUS
(b) all Intangible Assets of Borrowers.
"TRADEMARK SECURITY AGREEMENT" means a Trademark Security
Agreement made by the Borrowers for the benefit of the Lender group, in form
and substance satisfactory to Agent.
"VOIDABLE TRANSFER" has the meaning set forth in SECTION 17.7.
"VOTING STOCK" means, with respect to any Person, Capital
Stock of any class or classes if the holders of such Capital Stock are
ordinarily, in the absence of contingencies, entitled to vote for the
election of the directors (or other persons performing similar functions) of
such Person even if the right to so vote has been suspended by the happening
of such a contingency.
"XXXXX FARGO" means Xxxxx Fargo Bank, National Association,
a national banking association.
"WITHDRAWAL LIABILITY" has the meaning specified in Part I
of Subtitle E of Title IV of ERISA.
"YEAR 2000 COMPLIANT" means, with regard to any Person,
that all software in goods produced or sold by, or utilized by and material
to the business operations or financial condition of, such Person are able to
interpret and manipulate data on and involving all calendar dates correctly
and without causing any abnormal ending scenario, including in relation to
dates on and after the year 2000.
1.2 ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP. When used herein,
the term "financial statements" shall include the notes and schedules
thereto. Whenever the term "Borrower" is used in respect of a financial
covenant or a related definition, it shall be understood to mean such
Borrower on a consolidated basis unless the context clearly requires
otherwise. All calculations made for the purposes of determining compliance
with this Agreement shall (except as otherwise expressly provided herein) be
made by application of GAAP applied on a basis consistent with the most
recent annual or quarterly financial statements delivered pursuant hereto
(or, prior to the delivery of the first financial statements hereunder,
consistent with the financial statements as at December 31, 1998); PROVIDED
HOWEVER, that if Administrative Borrower or Agent shall object to determining
such compliance or such basis due to any change in GAAP or the rules
promulgated with respect thereto, then such calculations shall be made on a
basis consistent with the most recent financial statements delivered by
Guitar hereunder as to which no such objection shall have been made.
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1.3 CODE. Any terms used in this Agreement that are defined in
the Code shall be construed and defined as set forth in the Code unless
otherwise defined herein.
1.4 CONSTRUCTION. Unless the context of this Agreement or any
other Loan Document clearly requires otherwise, references to the plural
include the singular, references to the singular include the plural, the term
"including" is not limiting, and the term "or" has, except where otherwise
indicated, the inclusive meaning represented by the phrase "and/or." The
words "hereof," "herein," "hereby," "hereunder," and similar terms in this
Agreement or any other Loan Document refer to this Agreement or such other
Loan Document, as the case may be, as a whole and not to any particular
provision of this Agreement or such other Loan Document, as the case may be.
Section, subsection, clause, schedule, and exhibit references herein are to
this Agreement unless otherwise specified. Any reference in this Agreement or
in the Loan Documents to this Agreement or any of the Loan Documents shall
include all alterations, amendments, changes, extensions, modifications,
renewals, replacements, substitutions, joinders, and supplements, thereto and
thereof, as applicable.
1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVER ADVANCES.
(a) Subject to the terms and conditions of this
Agreement, and during the term of this Agreement, each Lender agrees to make
advances ("ADVANCES") to Borrowers in an amount at any one time outstanding
not to exceed such Lender's Pro Rata Share of an amount equal to THE LOWEST
OF (i) the Facility Amount in effect at the time of such Advance LESS the
Letter of Credit Usage, (ii) the Borrowing Base LESS the Letter of Credit
Usage, or (iii) the maximum aggregate amount of Indebtedness permitted to be
incurred by Borrowers pursuant to the terms and conditions of the Senior
Indenture. For purposes of this Agreement, "BORROWING BASE," as of any date
of determination, shall mean the result of:
(x) THE LOWEST OF
(i) $30,000,000, and
(ii) from and after the Receivables
Activation Date, 85% of the amount of
Eligible Accounts, LESS the amount, if
any, of the Dilution Reserve, PLUS
(y) THE LESSER OF
(i) 70% of the value of Eligible
Inventory, and
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(ii) 80% of the product of the
value of Eligible Inventory times the
Net Liquidation Percentage (such Net
Liquidation Percentage as calculated by
the most recently concluded Inventory
Reappraisal as of the date of
determination of the Borrowing Base),
MINUS
(z) the aggregate amount of reserves, if
any, established by Agent under SECTION
2.1(b).
(b) Anything to the contrary in this SECTION 2.1
notwithstanding, Agent shall have the right to establish reserves in such
amounts, and with respect to such matters, as Agent in its Permitted
Discretion shall deem necessary or appropriate, against the Borrowing Base,
including reserves with respect to (i) sums that Borrowers are required to
pay (such as taxes, assessments, insurance premiums, or, in the case of
leased assets, rents or other amounts payable under such leases) and have
failed to pay under any Section of this Agreement or any other Loan Document,
(ii) amounts owing by Borrowers to any Person to the extent secured by a Lien
(other than any existing Permitted Lien set forth on SCHEDULE P-1 which is
specifically identified thereon as entitled to have priority over Agent's
Liens for the benefit of the Lender Group) on, or trust over, any of the
Collateral, which Lien or trust, in the Permitted Discretion of Agent, would
be likely to have a priority superior to the Liens of Agent, for the benefit
of the Lender Group (such as landlord liens, ad valorem taxes, property
taxes, or sales taxes where given priority under applicable law) in and to
such item of the Collateral, (iii) a minimum of 3 months rent for each leased
Retail Store or Offsite Storage Location located in a Specified State for
which an acceptable Collateral Access Agreement has not been received by
Agent (irrespective of whether any rent is currently due), (iv) in-store
customer credits and gift certificates, and (v) layaway and customer
deposits. In addition to the foregoing, Agent SHALL HAVE THE RIGHT TO HAVE
THE INVENTORY (A) REAPPRAISED THROUGH THE CONDUCT OF AN INVENTORY REAPPRAISAL
FROM TIME TO TIME AFTER THE CLOSING DATE FOR THE PURPOSE OF REDETERMINING THE
NET LIQUIDATION PERCENTAGE OF THE ELIGIBLE INVENTORY PORTION OF THE
COLLATERAL AND, AS A RESULT, REDETERMINING THE BORROWING BASE; PROVIDED,
HOWEVER, FOR SO LONG AS NO EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING,
BORROWERS SHALL HAVE NO OBLIGATION TO PAY FOR OR REIMBURSE AGENT TO THE
EXTENT SET FORTH IN SECTION 2.11(c) FOR REAPPRAISALS OF INVENTORY WITH A
FREQUENCY GREATER THAN 1 INVENTORY REAPPRAISAL DURING ANY 12 MONTH PERIOD AND
NO MORE THAN 2 INVENTORY REAPPRAISALS MAY BE PERFORMED IN ANY 12 MONTH
PERIOD, AND (B) PHYSICALLY COUNTED THROUGH THE CONDUCT OF A PHYSICAL COUNT
FROM TIME TO TIME AFTER THE CLOSING DATE; PROVIDED, HOWEVER, FOR SO LONG AS
NO EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING, BORROWERS SHALL HAVE NO
OBLIGATION TO PAY FOR OR REIMBURSE AGENT TO THE EXTENT SET FORTH IN SECTION
2.11(c) FOR MORE THAN 1 PHYSICAL COUNT DURING ANY 12 MONTH PERIOD AND NO MORE
THAN 2 PHYSICAL COUNTS MAY BE CONDUCTED DURING ANY 12 MONTH PERIOD.
(c) The Lenders shall have no obligation to make further
Advances hereunder to the extent such further Advances would cause the
Revolver Usage to exceed the Facility Amount or the maximum aggregate amount
of Indebtedness permitted to be incurred by Borrowers pursuant to the terms
and conditions of the Senior Indenture.
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(d) Amounts borrowed pursuant to this Section may be repaid
and, subject to the terms and conditions of this Agreement, reborrowed at any
time during the term of this Agreement.
2.2 INCREASE OR REDUCTION IN FACILITY AMOUNT AND COMMITMENTS.
(a) PROVIDED that no Event of Default shall have occurred
and is continuing or would result from any such increase in the Facility
Amount, and PROVIDED FURTHER, that after giving effect to any such increase
in the Facility Amount, the Facility Amount shall not exceed $150,000,000, at
any time and from time to time after the Closing, upon 45 days prior written
notice by Administrative Borrower to the Agent of the amount of the proposed
increase in the Facility Amount and the intended effective date of any such
increase (the "NOTICE OF PROPOSED INCREASE IN FACILITY AMOUNT"), Borrowers
may request an increase in the Facility Amount through an amendment to this
Agreement. Any such request by Borrowers to increase the Facility Amount
shall be for a minimum increase of $10,000,000 over the Facility Amount then
in effect, and in incremental amounts of $10,000,000 thereafter. Upon the
effective date of any such increase in the Facility Amount, (i) Borrowers
shall pay to Agent, for its separate account, a supplemental facility fee as
provided in the Fee Letter with respect to each incremental increase in the
Facility Amount and (ii) the Revolving Credit Commitment of all Lenders shall
be increased by such amount and the Revolving Credit Commitment of each
Lender shall be increased by its Pro Rata Share of the incremental increase
in the Facility Amount and SCHEDULE C-1 shall automatically be amended to
reflect such increase.
(b) Provided that no Event of Default has occurred and is
continuing, and, provided further, that after giving effect to any such
reduction, the Maximum Facility Amount shall not be less than $75,000,000,
Borrowers shall have the right to elect from time to time to permanently
reduce the Maximum Facility Amount in an amount not to exceed the sum of (i)
the difference between the Maximum Facility Amount and the Facility Amount
then in effect, and (ii) the unfunded portion of the Revolving Credit
Commitments of all Lenders, with a corresponding permanent reduction in the
Revolving Credit Commitments of the Lenders. Administrative Borrower shall
give Agent not less than 15 Business Days prior written notice designating
the date (which shall be a Business Day) as of which such reduction is to be
effective and the amount of the proposed reduction. Such reduction shall be
effective on the date specified in Administrative Borrower's notice given in
compliance hereunder, and shall be in a minimum amount of $10,000,000, and
integral multiples of $5,000,000 in excess thereof. Any reduction of the
Maximum Facility Amount pursuant to this SECTION 2.2(b) shall be without
premium or penalty, with the exception that from and after Borrowers'
election to permanently reduce the Maximum Facility Amount and the Lenders'
Revolving Credit Commitments pursuant to this SECTION 2.2(b), Borrowers shall
no longer have the right to request any further increase in the Maximum
Facility Amount pursuant to SECTION 2.2(a). Any reduction of the Lenders'
Revolving Credit Commitments pursuant to this SECTION 2.2(b) shall reduce the
Revolving Credit Commitment of each Lender by the amount of its Pro Rata
Share of the incremental reduction in the Facility Amount and SCHEDULE C-1
shall automatically be amended to reflect such reduction.
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2.3 BORROWING PROCEDURES AND SETTLEMENTS
(a) PROCEDURE FOR BORROWING. Each Borrowing shall be made
by an irrevocable written request by an Authorized Person delivered to Agent
(which notice must be received by Agent no later than 11:00 a.m. (California
time) on the Business Day immediately preceding the requested Funding Date)
specifying (i) the amount of such Borrowing, and (ii) the requested Funding
Date, which shall be a Business Day; PROVIDED, HOWEVER, that in the case of a
request for Swing Loan in an amount of $15,000,000, or less, such notice will
be timely received if it is received by Agent no later than 11:00 a.m.
(California time) on the Business Day that is the requested Funding Date. At
Agent's election, in lieu of delivering the above-described written request,
any Authorized Person may give Agent telephonic notice of such request by the
required time, with such telephonic notice to be confirmed in writing within
24 hours of the giving of such notice.
(b) AGENT'S ELECTION. Promptly after receipt of a request
for a Borrowing pursuant to SECTION 2.3(a), Agent shall elect, in its
discretion, (i) to have the terms of SECTION 2.3(c) apply to such requested
Borrowing, or (ii) to request Swing Lender to make a Swing Loan pursuant to
the terms of SECTION 2.3(d) in the amount of the requested Borrowing;
provided, however, that if Swing Lender declines in its sole discretion to
make a Swing Loan pursuant to SECTION 2.3(d), Agent shall elect to have the
terms of SECTION 2.3(c) apply to such requested Borrowing.
(c) MAKING OF ADVANCES.
(i) In the event that Agent shall elect to have
the terms of this SECTION 2.3(c) apply to a requested
Borrowing as described in SECTION 2.3(b), then promptly
after receipt of a request for a Borrowing pursuant to
SECTION 2.3(a), Agent shall notify the Lenders, not later
than 1:00 p.m. (California time) on the Business Day
immediately preceding the Funding Date applicable thereto,
by telecopy, telephone, or other similar form of
transmission, of the requested Borrowing. Each Lender shall
make the amount of such Lender's Pro Rata Share of the
requested Borrowing available to Agent in immediately
available funds, to such account of Agent as Agent may
designate, not later than 11:00 a.m. (California time) on
the Funding Date applicable thereto. After Agent's receipt
of the proceeds of such Advances, upon satisfaction of the
applicable conditions precedent set forth in SECTION 3
hereof, Agent shall make the proceeds of such Advances
available to Borrowers on the applicable Funding Date by
transferring same day funds equal to the proceeds of such
Advances received by Agent to the Designated Account;
PROVIDED, HOWEVER, that, subject to the provisions of
SECTION 2.3(i), Agent shall not request any Lender to make,
and no Lender shall have the obligation to make, any Advance
if Agent shall have received written notice from any Lender,
or otherwise has actual knowledge, that (1) one or more of
the applicable conditions precedent set forth in SECTION 3
will not be satisfied on the requested Funding Date for the
applicable Borrowing unless such condition
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has been waived, or (2) the requested Borrowing would exceed
the Availability of Borrowers on such Funding Date.
(ii) Unless Agent receives notice from a Lender on
or prior to the Closing Date or, with respect to any
Borrowing after the Closing Date, at least 1 Business Day
prior to the date of such Borrowing, that such Lender will
not make available as and when required hereunder to Agent
for the account of Borrowers the amount of that Lender's Pro
Rata Share of the Borrowing, Agent may assume that each
Lender has made or will make such amount available to Agent
in immediately available funds on the Funding Date and Agent
may (but shall not be so required), in reliance upon such
assumption, make available to Borrowers on such date a
corresponding amount. If and to the extent any Lender shall
not have made its full amount available to Agent in
immediately available funds and Agent in such circumstances
has made available to Borrowers such amount, that Lender
shall on the Business Day following such Funding Date make
such amount available to Agent, together with interest at
the Defaulting Lenders Rate for each day during such period.
A notice submitted by Agent to any Lender with respect to
amounts owing under this subsection shall be conclusive,
absent manifest error. If such amount is so made available,
such payment to Agent shall constitute such Lender's Advance
on the date of Borrowing for all purposes of this Agreement.
If such amount is not made available to Agent on the
Business Day following the Funding Date, Agent will notify
Administrative Borrower of such failure to fund and, upon
demand by Agent, Borrowers shall pay such amount to Agent
for Agent's account, together with interest thereon for each
day elapsed since the date of such Borrowing, at a rate per
annum equal to the interest rate applicable at the time to
the Advances composing such Borrowing. The failure of any
Lender to make any Advance on any Funding Date shall not
relieve any other Lender of any obligation hereunder to make
an Advance on such Funding Date, but no Lender shall be
responsible for the failure of any other Lender to make the
Advance to be made by such other Lender on any Funding Date.
(iii) Agent shall not be obligated to transfer to
a Defaulting Lender any payments made by Borrowers to Agent
for the Defaulting Lender's benefit, and Agent may in its
discretion transfer any such payments to each other
non-Defaulting Lender member of the Lender Group ratably in
accordance with their Commitments (but only to the extent
that such Defaulting Lenders Advance was funded by the other
members of the Lender Group) or, if so requested by
Administrative Borrower and if no Default or Event of
Default had occurred and is continuing (and to the extent
such Defaulting Lender's Advance was not funded by the
Lender Group), retain same to be re-advanced to Borrowers as
if such Defaulting Lender had made Advances to Borrowers;
nor shall a Defaulting Lender be entitled to the sharing of
any payments hereunder. Amounts payable to a Defaulting
Lender
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shall instead be paid to or retained by Agent as permitted
herein. Subject to the foregoing, Agent may hold and, in
its Permitted Discretion, re-lend to Borrowers for the
account of such Defaulting Lender the amount of all such
payments received and retained by it for the account of such
Defaulting Lender. Solely for the purposes of voting or
consenting to matters with respect to the Loan Documents,
such Defaulting Lender shall be deemed not to be a "Lender"
and such Lender's Commitment shall be deemed to be zero
(-0-). This section shall remain effective with respect to
such Defaulting Lender until (x) the Obligations under this
Agreement shall have been declared or shall have become
immediately due and payable, (y) the non-Defaulting Lenders,
Agent, and Administrative Borrower shall have waived such
Lender's default in writing, or (z) the Defaulting Lender
makes its Pro Rata Share of all outstanding Advances and
pays to Agent all amounts owing by Defaulting Lender in
respect thereof. The operation of this section shall not be
construed to increase or otherwise affect the Commitment of
any Lender, to relieve or excuse the performance by such
Defaulting Lender or any other Lender of its duties and
obligations hereunder or to relieve or excuse the
performance by each Borrower of its duties and obligations
hereunder to Agent or to Lenders other than such Defaulting
Lender. Any such failure to fund by any Defaulting Lender
shall constitute a material breach by such Defaulting Lender
of this Agreement and shall entitle Administrative Borrower
at its option, upon written notice to Agent, to arrange for
a substitute Lender to assume the Commitment of such
Defaulting Lender, such substitute Lender to be acceptable
to Agent, such consent not to be unreasonably withheld. In
connection with the arrangement of such a substitute Lender,
the Defaulting Lender shall have no right to refuse to be
replaced hereunder, and agrees to execute and deliver a
completed form of Assignment and Acceptance Agreement in
favor of the substitute Lender (and agrees that it shall be
deemed to have executed and delivered such document if it
fails to do so) subject only to being repaid its share of
the outstanding Obligations (including an assumption of its
Pro Rata Share of the Risk Participation Liability) without
any premium or penalty of any kind whatsoever; PROVIDED
further, HOWEVER, that any such assumption of the Commitment
of such Defaulting Lender shall not be deemed to constitute
a waiver of any of Borrowers' rights or remedies against any
such Defaulting Lender's arising out of or in relation to
such failure to fund.
(d) MAKING OF SWING LOANS.
(i) In the event Agent shall elect, with the
consent of Swing Lender, as a Lender, to have the terms of
this SECTION 2.3(d) apply to a requested Borrowing as
described in SECTION 2.3(b), Swing Lender as a Lender shall
make an Advance in the amount of such Borrowing (any such
Advance made solely by Swing Lender as a Lender pursuant to
this SECTION 2.3(d) being referred to as a "SWING LOAN" and
such Advances being referred to
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collectively as "SWING LOANS") available to Borrowers
on the Funding Date applicable thereto by transferring
same day funds to the Designated Account. Each Swing Loan
is an Advance hereunder and shall be subject to all the
terms and conditions applicable to other Advances, except
that all payments thereon shall be payable to Swing
Lender as a Lender solely for its own account (and for
the account of the holder of any participation interest
with respect to such Advance). Subject to the provisions
of SECTION 2.3(i), Agent shall not request Swing Lender
as a Lender to make, and Swing Lender as a Lender shall
not make, any Swing Loan if Agent shall have received
written notice from any Lender, or otherwise has actual
knowledge, that (i) one or more of the applicable
conditions precedent set forth in SECTION 3 will not be
satisfied on the requested Funding Date for the
applicable Borrowing unless such condition has been
waived, or (ii) the requested Borrowing would exceed the
Availability of Borrowers on such Funding Date. Swing
Lender as a Lender shall not otherwise be required to
determine whether the applicable conditions precedent set
forth in SECTION 3 have been satisfied on the Funding
Date applicable thereto prior to making, in its sole
discretion, any Swing Loan.
(ii) The Swing Loans shall be secured by the
Collateral and shall constitute Advances and Obligations
hereunder, and shall bear interest at the rate applicable
from time to time to Advances pursuant to SECTION 2.6
hereof.
(e) AGENT ADVANCES.
(i) Subject to the limitations set forth in the
proviso contained in this SECTION 2.3(e), Agent hereby is
authorized by Borrowers and the Lenders, from time to time
in Agent's sole discretion, (1) after the occurrence and
during the continuance of a Default or an Event of Default,
or (2) at any time that any of the other applicable
conditions precedent set forth in SECTION 3 have not been
satisfied, to make Advances to Borrowers on behalf of the
Lenders that Agent, in the exercise of its Permitted
Discretion, deems necessary or appropriate (A) to preserve
or protect the Collateral, or any portion thereof, (B) to
enhance the likelihood of repayment of the Obligations, or
(C) to pay any other amount chargeable to Borrowers pursuant
to the terms of this Agreement, including Lender Group
Expenses and the costs, fees, and expenses described in
SECTION 10 (any of the Advances described in this SECTION
2.3(e) being hereinafter referred to as "AGENT ADVANCES");
PROVIDED, HOWEVER, that at no time shall the aggregate
amount of outstanding Agent Advances under this SECTION
2.3(e) exceed the result of (1) the lesser of (A)
$10,000,000, and (B) 10% of the Borrowing Base then in
effect, MINUS (2) the amount of optional Overadvance Loans
made by Agent to the Borrowers pursuant to SECTION 2.3(i).
(ii) Agent Advances shall be repayable on demand
and secured by the Collateral, shall
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constitute Advances and Obligations hereunder, and shall
bear interest at the rate applicable from time to time to
Base Rate Advances pursuant to SECTION 2.6 hereof.
(f) SETTLEMENT. It is agreed that each Lender's funded
portion of the Advances is intended by the Lenders to equal, at all times,
such Lender's Pro Rata Share of the outstanding Advances. Such agreement
notwithstanding, Agent, Swing Lender, and the other Lenders agree (which
agreement shall not be for the benefit of or enforceable by Borrowers) that
in order to facilitate the administration of this Agreement and the other
Loan Documents, settlement among them as to the Advances, the Swing Loans,
and the Agent Advances shall take place on a periodic basis in accordance
with the following provisions:
(i) Agent shall request settlement ("SETTLEMENT")
with the Lenders on a weekly basis, or on a more frequent
basis if so determined by Agent, (1) on behalf of Swing
Lender, with respect to each outstanding Swing Loan, (2) for
itself, with respect to each Agent Advance, and (3) with
respect to Collections received, as to each by notifying the
Lenders by telecopy, telephone, or other similar form of
transmission, of such requested Settlement, no later than
2:00 p.m. (California time) on the Business Day immediately
prior to the date of such requested Settlement (the date of
such requested Settlement being the "SETTLEMENT DATE"). Such
notice of a Settlement Date shall include a summary
statement of the amount of outstanding Advances, Swing
Loans, and Agent Advances for the period since the prior
Settlement Date, the amount of repayments received in such
period, and the amounts allocated to each Lender of the
interest, fees, and other charges for such period. Subject
to the terms and conditions contained herein (including
SECTION 2.3(c)(iii)): (y) if a Lender's balance of the
Advances, Swing Loans, and Agent Advances exceeds such
Lender's Pro Rata Share of the Advances, Swing Loans, and
Agent Advances as of a Settlement Date, then Agent shall by
no later than 12:00 p.m. (California time) on the Settlement
Date transfer in immediately available funds to the account
of such Lender as such Lender may designate, an amount such
that each such Lender shall, upon receipt of such amount,
have as of the Settlement Date, its Pro Rata Share of the
Advances, Swing Loans, and Agent Advances; and (z) if a
Lender's balance of the Advances, Swing Loans, and Agent
Advances is less than such Lender's Pro Rata Share of the
Advances, Swing Loans, and Agent Advances as of a Settlement
Date, such Lender shall no later than 12:00 p.m. (California
time) on the Settlement Date transfer in immediately
available funds to such account of Agent as Agent may
designate, an amount such that each such Lender shall, upon
transfer of such amount, have as of the Settlement Date, its
Pro Rata Share of the Advances, Swing Loans, and Agent
Advances. Such amounts made available to Agent under clause
(z) of the immediately preceding sentence shall be applied
against the amounts of the applicable Swing Loan or Agent
Advance and, together with the portion of such Swing Loan or
Agent Advance representing Swing Lender's Pro Rata Share
thereof, shall constitute Advances of such Lenders. If any
such amount is not made available to Agent
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by any Lender on the Settlement Date applicable thereto
to the extent required by the terms hereof, Agent shall
be entitled to recover for its account such amount on
demand from such Lender together with interest thereon at
the Defaulting Lenders Rate.
(ii) In determining whether a Lender's balance of
the Advances, Swing Loans, and Agent Advances is less than,
equal to, or greater than such Lender's Pro Rata Share of
the Advances, Swing Loans, and Agent Advances as of a
Settlement Date, Agent shall, as part of the relevant
Settlement, apply to such balance the portion of payments
actually received in good funds by Agent or Swing Lender
with respect to principal, interest, fees payable by
Borrowers and allocable to the Lenders hereunder, and
proceeds of Collateral. To the extent that a net amount is
owed to any such Lender after such application, such net
amount shall be distributed by Agent or Swing Lender to that
Lender as part of such next Settlement.
(iii) Between Settlement Dates, Agent, to the
extent no Agent Advances or Swing Loans are outstanding, may
pay over to Swing Lender any payments received by Agent,
that in accordance with the terms of this Agreement would be
applied to the reduction of the Advances, for application to
Swing Lender's Pro Rata Share of the Advances. If, as of any
Settlement Date, Collections received since the then
immediately preceding Settlement Date have been applied to
Swing Lender's Pro Rata Share of the Advances other than to
Swing Loans or Agent Advances, as provided for in the
previous sentence, Swing Lender shall pay to Agent for the
accounts of the Lenders, and Agent shall pay to the Lenders,
to be applied to the outstanding Advances of such Lenders,
an amount such that each Lender shall, upon receipt of such
amount, have, as of such Settlement Date, its Pro Rata Share
of the Advances. During the period between Settlement Dates,
Swing Lender with respect to Swing Loans, Agent with respect
to Agent Advances, and each Lender with respect to the
Advances other than Swing Loans and Agent Advances, shall be
entitled to interest at the applicable rate or rates payable
under this Agreement on the daily amount of funds employed
by Swing Lender, Agent, or the Lenders, as applicable.
(g) NOTATION. Agent shall record on its books the principal
amount of the Advances owing to each Lender, including the Swing Loans owing to
Swing Lender, and Agent Advances owing to Agent, and the interests therein of
each Lender, from time to time. In addition, each Lender is authorized, at such
Lender's option, to note the date and amount of each payment or prepayment of
principal of such Lender's Advances in its books and records, including computer
records, such books and records constituting rebuttably presumptive evidence,
absent manifest error, of the accuracy of the information contained therein.
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(h) LENDERS' FAILURE TO PERFORM. All Advances (other than
Swing Loans and Agent Advances) shall be made by the Lenders simultaneously
and in accordance with their Pro Rata Shares. It is understood that (i) no
Lender shall be responsible for any failure by any other Lender to perform
its obligation to make any Advances hereunder, nor shall any Commitment of
any Lender be increased or decreased as a result of any failure by any other
Lender to perform its obligation to make any Advances hereunder, and (ii) no
failure by any Lender to perform its obligation to make any Advances
hereunder shall excuse any other Lender from its obligation to make any
Advances hereunder.
(i) OPTIONAL OVERADVANCES. Any contrary provision of this
Agreement notwithstanding, if the condition for borrowing under SECTION
3.3(d) cannot be fulfilled, the Lenders nonetheless hereby authorize Agent or
Swing Lender, as applicable, and Agent or Swing Lender, as applicable, may,
but is not obligated to, knowingly and intentionally continue to make
Advances (including Swing Loans) to Borrowers such failure of condition
notwithstanding, so long as, at any time, (i) the outstanding Revolver Usage
does not exceed the Borrowing Base by more than the lesser of (A) $10,000,000
and (B) 10% of the Borrowing Base then in effect, and (ii) the outstanding
Revolver Usage (except for and excluding amounts charged to the Loan Account
for interest, fees, or Lender Group Expenses) does not exceed the Facility
Amount. The foregoing provisions are for the sole and exclusive benefit of
Agent, Swing Lender, and the Lenders and are not intended to benefit
Borrowers in any way. The Advances and Swing Loans, as applicable, that are
made pursuant to this SECTION 2.3(i) shall be subject to the same terms and
conditions as any other Advance or Swing Loan, as applicable, except that the
rate of interest applicable thereto shall be the rates set forth in SECTION
2.6(c) hereof without regard to the presence or absence of a Default or Event
of Default.
(i) In the event Agent obtains actual knowledge
that the Revolver Usage exceeds the amounts permitted by the
preceding paragraph, regardless of the amount of or reason
for such excess, Agent shall notify Lenders as soon as
practicable (and prior to making any (or any further)
intentional Overadvances (except for and excluding amounts
charged to the Loan Account for interest, fees, or Lender
Group Expenses) unless Agent determines that prior notice
would result in imminent harm to the Collateral or its
value), and the Lenders thereupon shall, together with
Agent, jointly determine the terms of arrangements that
shall be implemented with Borrowers intended to reduce,
within a reasonable time, the outstanding principal amount
of the Advances to Borrowers to an amount permitted by the
preceding paragraph. In the event Agent or any Lender
disagrees over the terms of reduction or repayment of any
Overadvance, the terms of reduction and/or repayment thereof
shall be implemented according to the determination of the
Required Lenders.
(ii) Each Lender shall be obligated to settle with
Agent as provided in SECTION 2.3(f) for the amount of such
Lender's Pro Rata Share of any unintentional Overadvances by
Agent reported to such Lender, any intentional Overadvances
made as permitted under this SECTION 2.3(i), and any
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Overadvances resulting from the charging to the Loan Account
of interest, fees, or Lender Group Expenses.
2.4 PAYMENTS.
(a) PAYMENTS BY BORROWERS.
(i) All payments to be made by Borrowers shall be
made without set-off, recoupment, deduction, or
counterclaim, except as otherwise required by law. Except as
otherwise expressly provided herein, all payments by
Borrowers shall be made to Agent for the account of the
Lender Group at Agent's address set forth in SECTION 12, and
shall be made in immediately available funds, no later than
11:00 a.m. (California time) on the date specified herein.
Any payment received by Agent later than 11:00 a.m.
(California time), at the option of Agent, shall be deemed
to have been received on the following Business Day and any
applicable interest or fee shall continue to accrue until
such following Business Day.
(ii) Whenever any payment is due on a day other
than a Business Day, such payment shall be made on the
following Business Day, and such extension of time shall in
such case be included in the computation of interest or
fees, as the case may be.
(iii) Unless Agent receives notice from
Administrative Borrower prior to the date on which any
payment is due to the Lenders that Borrowers will not make
such payment in full as and when required, Agent may assume
that Borrowers have made (or will make) such payment in full
to Agent on such date in immediately available funds and
Agent may (but shall not be so required), in reliance upon
such assumption, distribute to each Lender on such due date
an amount equal to the amount then due such Lender. If and
to the extent Borrowers do not make such payment in full to
Agent on the date when due, each Lender severally shall
repay to Agent on demand such amount distributed to such
Lender, together with interest thereon at the Defaulting
Lender Rate for each day from the date such amount is
distributed to such Lender until the date repaid.
(b) APPORTIONMENT, APPLICATION, AND REVERSAL OF PAYMENTS.
Except as otherwise provided with respect to Defaulting Lenders, principal
and interest payments shall be apportioned ratably among the Lenders
(according to the unpaid principal balance of the Obligations to which such
payments relate held by each individual Lender) and payments of fees (other
than fees designated for Agent's sole and separate account) shall, as
applicable, be apportioned ratably among the Lenders having a Pro Rata Share
of the type of credit facility as to which the particular fee is applicable.
All payments shall be remitted to Agent and all such payments not relating to
principal or interest of specific Obligations or not constituting payment of
specific fees, and all proceeds of Collateral received by Agent, shall be
applied as in the following order:
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(i) to pay any fees or expense reimbursements then
due to Agent from Borrowers,
(ii) to pay any fees or expense reimbursements
then due to the Lenders from Borrowers,
(iii) to pay interest due in respect of all
outstanding Advances (including Swing Loans and Agent
Advances),
(iv) to pay fees, charges, commissions, and costs
in respect of all outstanding Letters of Credit,
(v) to pay or prepay principal of Agent Advances,
(vi) to pay principal of all outstanding Advances
that are Base Rate Advances (other than Agent Advances),
such prepayment to be made, first, to the outstanding Swing
Loans that are Base Rate Advances and, second, to all other
outstanding Advances that are Base Rate Advances,
(vii) to pay principal of all outstanding Advances
that are LIBOR Rate Advances, such prepayment to be made,
first, to the outstanding Swing Loans that are LIBOR Rate
Advances and, second, to all other outstanding Advances that
are LIBOR Rate Advances,
(viii) if an Event of Default has occurred and is
continuing, to provide cash collateral to be held by Agent,
for the ratable benefit of those Lenders having a Pro Rata
Share of the Letters of Credit, in an amount equal to 105%
of the maximum amount of the Lender Group's obligations
under Letters of Credit,
(ix) ratably to pay any other Obligations due to
Agent, or any Lender by Borrowers, and
(x) to Borrowers and wired to the Designated
Account.
2.5 OVERADVANCES. Subject to SECTION2.3(i), if, at any time or for
any reason, the amount of Obligations owed by Borrowers to the Lender Group
pursuant to SECTIONS 2.1, 2.12, OR 2.13 is greater than either the Dollar or
percentage limitations set forth in SECTIONS 2.1, 2.12, OR 2.13, (an
"OVERADVANCE"), Borrowers immediately shall pay to Agent, in cash, the amount
of such excess, which amount shall be used by Agent to reduce the Obligations
in accordance with the priority set forth in SECTION 2.4(b). In addition,
each Borrower hereby promises to pay the Obligations (including principal,
interest, fees, costs, and expenses) in Dollars in full to the Lender Group
as and when due and payable under the terms of this Agreement and the other
Loan Documents.
2.6 INTEREST AND LETTER OF CREDIT FEES: RATES, PAYMENTS, AND
CALCULATIONS.
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(a) INTEREST RATES. Except as provided in clause (c) below,
all Obligations (except for undrawn Letters of Credit) that have been charged
to the Loan Account pursuant to the terms hereof shall bear interest on the
Daily Balance thereof as follows (y) if a LIBOR Rate Advance, at a per annum
rate equal to the LIBOR Rate plus the Applicable LIBOR Margin, and (z)
otherwise, at a per annum rate equal to the Base Rate plus the Applicable
Base Rate Margin.
(b) LETTER OF CREDIT FEE. Borrowers shall pay Agent (for
the ratable benefit of the Lenders with a Revolving Credit Commitment based
upon their Pro Rata Share of the Revolving Credit Commitment), a fee (in
addition to the charges, commissions, fees, and costs set forth in SECTION
2.12(e)) equal to 1.50% per annum times the aggregate undrawn amount of all
outstanding Letters of Credit.
(c) DEFAULT RATE. Upon the occurrence and during the
continuation of an Event of Default, and at Agent's discretion (or as the
Agent is directed by the Required Lenders),
(i) all Obligations (except for undrawn Letters of
Credit) that have been charged to the Loan Account pursuant
to the terms hereof shall bear interest on the Daily Balance
thereof at a per annum rate equal to 2 percentage points
above the per annum rate otherwise applicable hereunder, and
(ii) the Letter of Credit fee provided for above
shall be increased to 2 percentage points above the per
annum rate otherwise applicable hereunder.
(d) PAYMENTS. Interest, Letter of Credit fees, and all
other fees payable hereunder shall be due and payable, in arrears, on the
first day of each month during the term hereof. Each Borrower hereby
authorizes Agent, without prior notice to such Borrower, to charge such
interest and fees, all Lender Group Expenses (as and when incurred), the
charges, commissions, fees, and costs provided for in SECTION 2.12(e) (as and
when accrued or incurred), the charges, commissions, fees, and costs provided
for in SECTION 2.13 (as and when accrued or incurred), the fees and charges
provided for in SECTION 2.11 (as and when accrued or incurred), and all other
payments due under any Loan Document to Borrowers' Loan Account, in each case
to the extent not otherwise paid by Borrowers, which amounts thereafter shall
accrue interest at the rate then applicable to Advances hereunder. Any
interest not paid when due shall be compounded and shall thereafter accrue
interest at the rate then applicable to Advances hereunder.
(e) COMPUTATION. All interest and fees chargeable under the
Loan Documents shall be computed on the basis of a 360 day year for the
actual number of days elapsed. In the event the Base Rate is changed from
time to time hereafter, the applicable rates of interest hereunder based upon
the Base Rate automatically and immediately shall be increased or decreased
by an amount equal to such change in the Base Rate.
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(f) INTENT TO LIMIT CHARGES TO MAXIMUM LAWFUL RATE. In no
event shall the interest rate or rates payable under this Agreement, plus any
other amounts paid in connection herewith, exceed the highest rate
permissible under any applicable law. Borrowers and the Lender Group, in
executing and delivering this Agreement, intend legally to agree upon the
rate or rates of interest and manner of payment stated within it; provided,
however, that, anything contained herein to the contrary notwithstanding, if
said rate or rates of interest or manner of payment exceeds the maximum
allowable under applicable law, then, ipso facto as of the date of this
Agreement, each Borrower is and shall be liable only for the payment of such
maximum as allowed by law, and payment received from such Borrower in excess
of such legal maximum, whenever received, shall be applied to reduce the
principal balance of the Obligations to the extent of such excess.
2.7 CASH MANAGEMENT.
(a) Guitar shall (i) establish and maintain a concentration
account in the name of Agent (the "GUITAR CONCENTRATION ACCOUNT") at the bank
which shall be designated as the concentration account bank for Guitar on
SCHEDULE 2.7(a) (the "GUITAR CONCENTRATION ACCOUNT BANK"), and (ii) deposit
or cause to be deposited promptly, and in any event no later than the first
Business Day after the date of receipt thereof, all Collections, including
cash, credit card sales drafts, credit card sales or change slips or
receipts, checks, drafts and all forms of daily store receipts or other
similar items of payment either into the Concentration Account or into other
bank accounts in Guitar's name (each a "GUITAR COLLECTION ACCOUNT" and,
collectively, the "GUITAR COLLECTION ACCOUNTS") at banks other than the
Concentration Account Bank as set forth on SCHEDULE 2.7(a) (each a "GUITAR
COLLECTION ACCOUNT BANK" and, collectively, the "GUITAR COLLECTION ACCOUNT
BANKS"). All Guitar Collection Account Banks and the Guitar Concentration
Account Bank shall be satisfactory to the Agent in the exercise of its
Permitted Discretion.
(b) MFI shall (i) establish and maintain an account in the
name of Agent (the "MFI CONCENTRATION ACCOUNT") at the bank which shall be
designated as the deposit account bank for MFI on SCHEDULE 2.7(b) (the "MFI
CONCENTRATION ACCOUNT BANK"), which bank shall be satisfactory to the Agent
in the exercise of its Permitted Discretion, and (ii) deposit or cause to be
deposited promptly, and in any event no later than the first Business Day
after the date of receipt thereof, all Collections, including cash, credit
card sales drafts, credit card sales or change slips or receipts, checks,
drafts and all forms of daily store receipts or other similar items of
payment into the MFI Concentration Account.
(c) Each of the Guitar Concentration Account Bank, the MFI
Concentration Account Bank, and the Designated Account Bank shall establish
and maintain tri-party blocked account agreements with the Agent and the
applicable Obligor, in form and substance acceptable to the Agent in the
exercise of its Permitted Discretion. Each such blocked account agreement
shall provide, among other things, that (i) all items of payment deposited in
such accounts and proceeds thereof are held by such banks as agent or
bailee-in-possession for the Agent, (ii) the bank executing such agreement
has no rights of setoff or recoupment or any other claim against such
account, as the case may be, other than for
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payment of its service fee and other charges directly related to the
administration of such account and for returned checks or other items of
payment, and (iii) each such bank agrees to immediately forward all amounts
received in the applicable MFI Concentration Account or Guitar Concentration
Account to the Agent's Account; PROVIDED, HOWEVER, that Agent reserves the
right, in its sole discretion, to require that collections representing
amounts attributable to trust fund taxes be segregated by the MFI
Concentration Account Bank or the Guitar Concentration Account Bank and held
in a separate account, (it being the intent of the Agent, to the extent it
has sufficient information to do so, to so segregate trust fund taxes, and
avoid the deposit of such funds into the Agent's Account). No Obligor shall,
or shall cause or permit any Subsidiary thereof to, accumulate or maintain
cash in disbursement or payroll accounts as of any date of determination in
excess of checks outstanding against such accounts as of that date and
amounts necessary to meet minimum balance requirements.
(d) So long as no Default or Event of Default has occurred
and is continuing, the Obligors may amend SCHEDULE 2.7(a), or (b) to add or
replace a Guitar Collection Account Bank or Guitar Collection Account, or to
replace the MFI Concentration Account, the Guitar Concentration Account or
the Designated Account; PROVIDED, HOWEVER, that (i) Agent shall have
consented in writing in advance to the opening of such account with the
relevant bank and (ii) prior to the time of the opening of an account to
replace the MFI Concentration Account, the Guitar Concentration Account or
the Designated Account, the applicable Obligor or the Subsidiaries thereof,
as applicable, and such bank shall have executed and delivered to Agent a
tri-party blocked account agreement, in form and substance satisfactory to
Agent in the exercise of its Permitted Discretion. The Obligors shall close
any of their accounts (and establish replacement accounts in accordance with
the foregoing sentence) promptly and in any event within 45 days of notice
from Agent that the creditworthiness of any bank holding an account is no
longer acceptable to Agent in the exercise of its Permitted Discretion, or as
promptly as practicable and in any event within 60 days of notice from Agent
that the operating performance, funds transfer or availability procedures or
performance with respect to accounts of the bank holding such accounts or
Agent's liability under any tri-party blocked account agreement with such
bank is no longer acceptable to Agent in the exercise of its Permitted
Discretion.
(e) The Guitar Collection Accounts, the Designated Account,
the MFI Concentration Account, and the Guitar Concentration Account shall all be
cash collateral accounts, with all cash, checks and similar items of payment in
such accounts securing payment of the Advances and all other Obligations, and in
which each Obligor and each Subsidiary Guarantor shall have granted a Lien to
Agent pursuant to this Agreement.
(f) Each Obligor shall and shall cause its Affiliates,
officers, employees, agents, directors or other Persons acting for or in concert
with such Obligor (each a "RELATED PERSON") to (i) hold in trust for Agent all
checks, cash and other items of payment received by Obligor or any such Related
Person, and (ii) within one (1) Business day after receipt by such Obligor or
any Related Person of any checks, cash or other items of payment, deposit the
same into a Guitar Collection Account or the MFI Concentration Account of such
Obligor, as applicable. Each Obligor and each Related Person thereof
acknowledges and
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agrees that all Collections are the property of Agent for the benefit of the
Lenders. All proceeds of the sale or other disposition of any Collateral
shall be deposited directly into an Obligor's Collection or Concentration
Account, as applicable.
(g) Guitar further agrees that with respect to each bank at
which a Guitar Collection Account is located, Guitar shall require each such
bank to forward immediately by daily sweep all amounts in each Guitar
Collection Account into Guitar's Concentration Account, PROVIDED, HOWEVER, up
to $30,000 may be retained and not swept daily in each Guitar Collection
Account which is established and maintained at a Guitar Collection Account
Bank.
2.8 CREDITING PAYMENTS. The receipt of any payment by Agent (whether
from transfers to Agent by the Concentration Account Banks or otherwise)
shall not be considered a payment on account unless such payment item is a
wire transfer of immediately available federal funds made to the Agent
Account or unless and until such payment item is honored when presented for
payment. Should any payment item not be honored when presented for payment,
then Borrowers shall be deemed not to have made such payment and interest
shall be calculated accordingly. Anything to the contrary contained herein
notwithstanding, any payment item shall be deemed received by Lender only if
it is received into the Agent Account on a Business Day on or before 11:00
a.m. (California time). If any Collection item is received into the Agent
Account on or after 11:00 a.m. (California time) on a Business Day, it shall
be deemed to have been received by Agent as of the opening of business on the
immediately following Business Day.
2.9 DESIGNATED ACCOUNT. Agent is authorized to make the Advances,
and issue the Letters of Credit under this Agreement based upon telephonic or
other instructions received from anyone purporting to be an Authorized
Person, or without instructions if pursuant to SECTION 2.6(d). Administrative
Borrower agrees to establish and maintain the Designated Account with the
Designated Account Bank for the purpose of receiving the proceeds of the
Advances requested by Borrowers and made by Agent or the Lenders hereunder.
Unless otherwise agreed by Agent and Borrowers, any Advance, Agent Advance,
or Swing Loan requested by Borrowers and made by Agent or the Lenders
hereunder shall be made to the Designated Account.
2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS. Agent
shall maintain an account on its books in the name of Borrowers (the "LOAN
ACCOUNT") on which Borrowers will be charged with all Advances made by Agent
or the Lenders to Borrowers or for Borrowers' account, including, accrued
interest, Lender Group Expenses, and any other payment Obligations of
Borrowers. In accordance with SECTION 2.8, the Loan Account will be credited
with all payments received by Agent from Borrowers or for Borrowers' account,
including all amounts received in the Agent Account from any the
Concentration Accounts. Agent shall render statements regarding the Loan
Account to Administrative Borrower, including principal, interest, fees, and
including an itemization of all charges and expenses constituting Lender
Group Expenses owing, and such statements shall be conclusively presumed to
be correct and accurate and constitute an
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account stated between each Borrower and the Lender Group unless, within 60
days after receipt thereof by Administrative Borrower, Administrative
Borrower shall deliver to Agent written objection thereto describing the
error or errors contained in any such statements.
2.11 FEES. Borrowers shall pay to Agent the following fees, which
fees shall be non-refundable when paid (irrespective of whether this
Agreement is terminated thereafter):
(a) FEE LETTER FEES. Borrowers shall pay to the Agent the
fees set forth in the Fee Letter in accordance with the terms thereof, and
such fees constitute Indebtedness hereunder.
(b) UNUSED LINE FEE. To the Agent, for the ratable benefit
of each Lender with a Revolving Credit Commitment, on the first day of each
month during the term of this Agreement, an unused line fee in an amount
equal to 0.25% per annum TIMES the result of (a) the average Facility Amount
in effect during the immediately preceding month, LESS (b) the sum of (i) the
average Daily Balance of Advances that were outstanding during the
immediately preceding month, PLUS (ii) the average Daily Balance of the
Letter of Credit Usage during the immediately preceding month, and
(c) FINANCIAL EXAMINATION, VALUATION, AND APPRAISAL FEES.
(i) For the sole and separate account of Agent, a separate fee of $750 pay
day, per examiner, plus out-of-pocket expenses for each financial analysis
and examination (i.e., audits) of Borrowers performed by personnel employed
by Agent; PROVIDED, HOWEVER, that if no Event of Default is continuing, there
shall be no more than 4 such audits during any 12 month period and Borrower
shall be required to pay no more that $50,000 plus out-of-pocket expenses to
reimburse Agent for audits conducted during any 12 month period; (ii) a
one-time charge of $3,000 plus reasonable out-of-pocket expenses for the
establishment of electronic collateral reporting systems; (iii) for the sole
and separate accounts of Agent and each Lender that exercises its rights
under SECTION 4.6, the actual charges paid or incurred by Agent or any Lender
if it elects to employ the services of one or more third Persons to perform
such audits of Borrowers or their Books, to appraise the Collateral, or to
assess a Borrower's business valuation; and (iv) subject to the limitations
set forth in SECTION 2.1(b), for the sole and separate account of Agent, the
out-of-pocket costs and expenses incurred by Agent for the engagement of
appraisal, accounting, auction, or other professional firms to conduct
Inventory Appraisals or Physical Counts.
2.12 LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this Agreement,
Agent agrees to issue letters of credit for the account of a Borrower (each,
an "L/C") or to purchase participations, or execute indemnities or
reimbursement obligations (each such undertaking, an "L/C UNDERTAKING") with
respect to letters of credit issued by an issuing bank for the
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account of a Borrower. Agent shall have no obligation to issue a Letter of
Credit if any of the following would result:
(i) the Letter of Credit Usage would exceed the
Borrowing Base LESS the amount of outstanding Advances,
(ii) the Letter of Credit Usage would exceed
$10,000,000, or
(iii) the Revolver Usage would exceed the Facility
Amount then in effect.
Borrowers and Agent acknowledge and agree that certain of the letters of
credit that are to be the subject of L/C Undertakings may be outstanding on
the Closing Date. Each Letter of Credit shall have an expiry date no later
than the Maturity Date (without regard to any potential renewal term) and all
such Letters of Credit shall be in form and substance acceptable to Agent (in
the exercise of its Permitted Discretion). If Agent is obligated to advance
funds under a Letter of Credit, Borrowers immediately shall reimburse such
amount to Agent and, in the absence of such reimbursement, the amount so
advanced immediately and automatically shall be deemed to be an Advance
hereunder and, thereafter, shall bear interest at the rate then applicable to
Base Rate Advances under SECTION 2.6.
(b) Each Lender agrees to fund its Pro Rata Share of any
Advance deemed made pursuant to the foregoing subsection on the same terms
and conditions as if Borrowers had requested such Advance. Each Lender with a
Pro Rata Share of the Letters of Credit shall be deemed to have purchased a
participation in each Letter of Credit, in an amount equal to its Pro Rata
Share of the Risk Participation Liability of such Letter of Credit, and each
Lender agrees to pay to Agent such Lender's Pro Rata Share of any payments
made by Agent under such Letter of Credit. The obligation of each Lender to
deliver to Agent an amount equal to its respective Pro Rata Share pursuant to
the preceding two sentences shall be absolute and unconditional and such
remittance shall be made notwithstanding the occurrence or continuation of an
Event of Default or Default or the failure to satisfy any condition set forth
in SECTION 3 hereof. If any Lender fails to make available to Agent the
amount of such Lender's Pro Rata Share of any payments made by Agent in
respect of such Letter of Credit as provided in this Section, Agent shall be
entitled to recover such amount on demand from such Lender together with
interest thereon at the Base Rate until paid in full.
(c) Each Borrower hereby agrees to indemnify, save, defend,
and hold the Lender Group harmless from any loss, cost, expense, or
liability, expenses, and reasonable attorneys fees incurred by the Lender
Group arising out of or in connection with any Letter of Credit unless
arising as a result of the gross negligence or willful misconduct of the
Lender Group, any Lender-Related Person, the issuing bank, or any of their
Affiliates. Each Borrower agrees to be bound by the issuing bank's
regulations and interpretations of any letter of credit that is the subject
of an L/C Undertaking and opened to or for such Borrower's account or by
Agent's interpretations of any L/C issued by Agent to or for such Borrower's
account, even though this interpretation may be different from such
Borrower's
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own, and each Borrower understands and agrees that the Lender Group shall not
be liable for any error, negligence, or mistake, whether of omission or
commission, in following a Borrower's instructions or those contained in the
Letter of Credit or any modifications, amendments, or supplements thereto.
Each Borrower understands that the L/C Undertakings may require Agent to
indemnify the issuing bank for certain costs or liabilities arising out of
claims by a Borrower against such issuing bank. Each Borrower hereby agrees
to indemnify, save, defend, and hold the Lender Group harmless with respect
to any loss, cost, expense (including reasonable attorneys fees), or
liability incurred by the Lender Group under any L/C Undertaking as a result
of the Lender Group's indemnification of any such issuing bank unless such
indemnification results from the gross negligence or willful misconduct of
the Lender Group or any Lender-Related Person.
(d) Each Borrower hereby authorizes and directs any bank
that issues a letter of credit that is the subject of an L/C Undertaking to
deliver to Agent all instruments, documents, and other writings and property
received by the issuing bank pursuant to such letter of credit, and to accept
and rely upon Agent's instructions with respect to all matters arising in
connection with such letter of credit and the related application.
(e) Any and all charges, commissions, fees, and costs
incurred by Agent relating to the letters of credit that are the subject of
an L/C Undertaking but not in excess of the issuing bank's standard schedule
for such charges, commissions, fees, and costs then in effect, shall be
considered Lender Group Expenses for purposes of this Agreement and
immediately shall be reimbursable by Borrowers to Agent.
(f) If by reason of (i) any change in any applicable law,
treaty, rule, or regulation or any change in the interpretation or
application thereof by any Governmental Authority, or (ii) compliance by the
issuing bank or the Lender Group with any direction, request, or requirement
(irrespective of whether having the force of law) of any Governmental
Authority or monetary authority including, Regulation D of the Federal
Reserve Board as from time to time in effect (and any successor thereto):
(i) any reserve, deposit, or similar requirement
is or shall be imposed or modified in respect of any Letters
of Credit issued hereunder, or
(ii) there shall be imposed on the issuing bank or
the Lender Group any other condition regarding any Letter of
Credit issued pursuant hereto;
and the result of the foregoing is to increase, directly
or indirectly, the cost to the Lender Group of issuing, making, guaranteeing,
or maintaining any Letter of Credit or to reduce the amount receivable in
respect thereof by the Lender Group, then, and in any such case, Agent may,
at any time within a reasonable period, and in any event within 180 days,
after the additional cost is incurred or the amount received is reduced,
notify Administrative Borrower, and Borrowers shall pay on demand such
amounts Agent may specify to be necessary to compensate the Lender Group for
such additional cost or reduced receipt, together with interest on such
amount from the date of such demand until
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payment in full thereof at the rate then applicable to Advances hereunder;
PROVIDED, HOWEVER, that (x) before making any such demand, the Agent agrees
to use reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions and so long as such efforts would not be
disadvantageous to it, in its reasonable discretion, in any legal, economic,
or regulatory manner) to avoid the need for, or materially reduce the amount
of, such increased cost, and (y) Borrowers shall not be obligated to pay any
such increased cost which relates to a period ending more than 180 days prior
to the date of receipt by Administrative Borrower of such notice. The
determination by Agent of any amount due pursuant to this Section, as set
forth in a certificate setting forth the calculation thereof in reasonable
detail, shall, in the absence of manifest or demonstrable error, be final and
conclusive and binding on all of the parties hereto.
2.13 LIBOR OPTION.
(a) INTEREST AND INTEREST PAYMENT DATES. In lieu of having
interest charged at the rate based upon the Base Rate, Borrowers shall have
the option (the "LIBOR OPTION") to have interest on a portion (whether upon
the making of such Advance or at any time subsequent thereto that such
portion is outstanding) of the Advances be charged at the LIBOR Rate.
Interest on LIBOR Rate Advances shall be payable on the first day of each
month and on the last day of each Interest Period applicable thereto. On the
last day of each applicable Interest Period, unless Administrative Borrower
has properly exercised the LIBOR Option with respect thereto, the interest
rate applicable to such LIBOR Rate Advances automatically shall convert to
the rate of interest then applicable to non-LIBOR Rate Advances under SECTION
2.6 hereof. At any time that an Event of Default has occurred and is
continuing, Agent shall have the right to convert the interest rate on all
outstanding LIBOR Rate Advances to the rate then applicable to Base Rate
Advances under SECTION 2.6 hereof; PROVIDED, HOWEVER, that, unless the Lender
Group shall declare all Obligations immediately due and payable pursuant to
SECTION 9 hereof, any outstanding LIBOR Rate Advances shall continue to bear
interest at the rate applicable thereto that is based upon the LIBOR Rate
(subject to the ability of the Lender Group to apply SECTION 2.6(c)(i)
thereto) until the last day of each such Interest Period, at which time the
interest rate applicable thereto automatically shall convert to the rate of
interest then applicable to non-LIBOR Rate Advances under SECTION 2.6 hereof.
(b) LIBOR Election.
(i) Administrative Borrower may, at any time and from
time to time, so long as no Event of Default has occurred and
is continuing, elect to exercise the LIBOR Option by notifying
Agent prior to 11:00 a.m. (California time) at least 3
Business Days prior to the commencement (including the
extension or continuation of any prior Interest Period) of the
proposed Interest Period (the "LIBOR DEADLINE"). Notice of
Administrative Borrower's election of the LIBOR Option for a
permitted portion of the Advances and an Interest Period
pursuant to this Section shall be made by delivery to Agent of
a LIBOR Notice received by Agent before the LIBOR Deadline, or
by
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telephonic notice received by Agent before the LIBOR
Deadline (to be confirmed by delivery to Agent of a LIBOR
Notice received by Agent prior to 5:00 p.m. (California time)
on the same day. Promptly (but in no event later than 3:00
p.m. (California time) on the date of receipt thereof) upon
its receipt of each such LIBOR Notice, Agent shall provide a
copy thereof to each of the Lenders.
(ii) Each LIBOR Notice shall be irrevocable and binding on
Borrowers. In connection with each LIBOR Rate Advance,
Borrowers shall indemnify, defend, and hold Agent and the
Lenders harmless against any loss, cost, or expense incurred
by Agent or any Lender as a result of any failure to fulfill,
on or before the date specified in the LIBOR Notice, the
applicable conditions set forth herein or the termination,
prior to the end of the applicable Interest Period, of the
applicability of interest at the LIBOR Rate, as provided
hereunder, including any loss (including loss of anticipated
profits which shall be determined based upon the difference
between the effective interest rate charged on redeployed
funds and the LIBOR Rate that would have applied to the
Advance in question), cost, or expense incurred by reason of
the liquidation or reemployment of deposits or other funds
acquired or committed to be acquired by Agent, any Lender or
any of their participants to fund the requested LIBOR Rate
Advances that, as a result of such failure, are not so
employed on such date (such losses, costs, and expenses,
collectively, "FUNDING LOSSES") other than Funding Losses
which are the result of the gross negligence or willful
misconduct of Agent, any Agent-Related Person, any Lender, or
any Lender-Related Person.
(iii) Borrowers shall have not more than seven (7) Interest
Periods in effect at any given time. Borrowers only may
exercise the LIBOR Option for LIBOR Rate Advances of at least
$1,000,000 and integral multiples of $500,000 in excess
thereof.
(c) PREPAYMENTS. Borrowers may prepay LIBOR Rate Advances at
any time; PROVIDED, HOWEVER, that in the event that LIBOR Rate Advances are
prepaid on any date that is not the last day of the Interest Period applicable
thereto, including as a result of any automatic prepayment through the required
application by Agent of proceeds of Collections or for any other reason,
including early termination of the term of this Agreement or acceleration of the
Obligations pursuant to the terms hereof, Borrowers shall indemnify, defend, and
hold Agent and the Lenders and their participants harmless against any and all
Funding Losses that arise in connection with such prepayment other than Funding
Losses which are the result of the gross negligence or willful misconduct of
Agent, any Agent-Related Person, any Lender, or any Lender-Related Person.
(d) SPECIAL PROVISIONS APPLICABLE TO LIBOR RATE.
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(i) The LIBOR Rate may be adjusted by Agent with respect to
any Lender on a prospective basis to take into account any
additional or increased costs to such Lender of maintaining or
obtaining any eurodollar deposits or increased costs due to
changes in applicable law occurring subsequent to the
commencement of the then applicable Interest Period, including
but not limited to changes in tax laws (except changes of
general applicability in corporate income tax laws) and
changes in the reserve requirements imposed by the Board of
Governors of the Federal Reserve System (or any successor),
excluding the Reserve Percentage, which additional or
increased costs would increase the cost of funding loans
bearing interest at the LIBOR Rate. In any such event, the
affected Lender shall give Administrative Borrower and Agent
notice of such a determination and adjustment; PROVIDED,
HOWEVER, that (x) before making any such demand, the affected
Lender agrees to use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions and so
long as such efforts would not be disadvantageous to it, in
its reasonable discretion, in any legal, economic, or
regulatory manner) to designate a different eurodollar lending
office if the making of such designation would allow the
affected Lender to continue to perform its obligations to make
LIBOR Rate Advances or to continue to fund or maintain LIBOR
Rate Advances and avoid the need for, or materially reduce the
amount of, such increased cost, and (y) Borrowers shall not be
obligated to pay any such increased cost which relates to a
period ending more than 180 days prior to the date of receipt
by Administrative Borrower of such notice and certificate; and
the Agent shall promptly transmit the notice to each other
Lender and Borrowers may, by notice to such affected Lender
(1) require such Lender to furnish to Administrative Borrower
a statement setting forth the basis for adjusting such LIBOR
Rate and the method for determining the amount of such
adjustment, or (2) repay the LIBOR Rate Advances with respect
to which such adjustment is made.
(ii) In the event that any change in market conditions or
any law, regulation, treaty, or directive, or any change
therein or in the interpretation of application thereof, shall
at any time after the date hereof, in the reasonable opinion
of any Lender, make it unlawful or impractical for such Lender
to fund or maintain LIBOR Advances or to continue such funding
or maintaining, or to determine or charge interest rates at
the LIBOR Rate, such Lender shall give notice of such changed
circumstances to Agent and Administrative Borrower; PROVIDED,
HOWEVER, that before making any such demand, the affected
Lender agrees to use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions and so
long as such efforts would not be disadvantageous to it, in
its reasonable discretion, in any legal, economic, or
regulatory manner) to designate a different eurodollar lending
office if the making of such designation would allow the
affected Lender to continue to perform its obligations to make
LIBOR Rate Advances or to continue to fund or maintain LIBOR
Rate Advances; and the Agent shall
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immediately transmit the notice to each other Lender and (y)
in the case of any LIBOR Rate Advances that are outstanding,
the date specified in such Lender's notice shall be deemed to
be the last day of the Interest Period of such LIBOR Rate
Advances, and interest upon the LIBOR Advances of the affected
Lender then outstanding shall thereafter accrue interest at
the rate then applicable to Base Rate Advances as provided in
SECTION 2.6 hereof, and (z) Borrowers shall not be entitled to
elect the LIBOR Option from such affected Lender until such
affected Lender determines that it would no longer be unlawful
or impractical to do so, PROVIDED, HOWEVER, that each other
Lender shall remain obligated as provided in this Agreement to
make LIBOR Rate Advances.
(e) NO REQUIREMENT OF MATCHED FUNDING. Anything to the
contrary contained herein notwithstanding, neither Agent, nor any Lender, nor
any participant is required actually to acquire eurodollar deposits to fund
or otherwise match fund any Advances as to which interest accrues at the
LIBOR Rate. The provisions of this Section shall apply as if each Lender or
its participants had match funded any Advances as to which interest is
accruing at the LIBOR Rate by acquiring eurodollar deposits for each Interest
Period in the amount of the LIBOR Rate Advances.
2.14 CAPITAL REQUIREMENTS. If after the date hereof any Lender
determines that (i) the adoption of or change in any law, rule, regulation or
guideline regarding capital requirements for banks or bank holding companies,
or any change in the interpretation or application thereof by any
Governmental Authority charged with the administration thereof, or (ii)
compliance by such Lender or its parent bank holding company with any
guideline, request or directive of any such entity regarding capital adequacy
(whether or not having the force of law), the effect of reducing the return
on such Lender's or such holding company's capital as a consequence of such
Lender's Commitment to make Advances hereunder or its obligations in respect
of any Letter of Credit to a level below that which such Lender or such
holding company could have achieved but for such adoption, change or
compliance (taking into consideration such Lender's or such holding company's
then existing policies with respect to capital adequacy and assuming the full
utilization of such entity's capital) by any amount deemed by such Lender to
be material, than such Lender may, by written notice given to Agent and
Administrative Borrower, require Borrowers to pay, on demand, an amount equal
to such Lender's additional costs incurred during the ninety (90) days
preceding the date on which such notice is given and during each fiscal
quarter thereafter; PROVIDED, HOWEVER, that in the event that payments to any
Lender are required to be made hereunder as a result of such additional
costs, Borrowers shall be entitled to substitute for such Lender any other
bank or financial institution reasonably acceptable to the Agent and the
Required Lenders. Each such Lender shall state in the notice required by this
SECTION 2.14, in reasonable detail, the cause and amount of such additional
cost. Within 30 days after receipt of such notice, Borrowers may, at their
option, elect to terminate that portion of the Revolving Credit Commitment
that is held by such Lender.
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2.15 JOINT AND SEVERAL LIABILITY OF THE BORROWERS.
(a) Each of the Borrowers is accepting joint and several
liability hereunder and under the other Loan Documents in consideration of
the financial accommodations to be provided by the Agent and the Lenders
under this Agreement, for the mutual benefit, directly and indirectly, of
each of the Borrowers and in consideration of the undertakings of the other
Borrower to accept joint and several liability for the Obligations.
(b) Each of the Borrowers, jointly and severally, hereby
irrevocably and unconditionally accepts, not merely as a surety but also as a
co-debtor, joint and several liability with the other Borrower, with respect
to the payment and performance of all of the Obligations (including, without
limitation, any Obligations arising under this SECTION 2.15), it being the
intention of the parties hereto that all the Obligations shall be the joint
and several obligations of each Person comprising the Borrowers without
preferences or distinction among them.
(c) If and to the extent that any of the Borrowers shall
fail to make any payment with respect to any of the Obligations as and when
due or to perform any of the Obligations in accordance with the terms
thereof, then in each such event the other Persons comprising the Borrowers
will make such payment with respect to, or perform, such Obligation.
(d) The Obligations of each Person comprising the Borrowers
under the provisions of this SECTION 2.15 constitute the absolute and
unconditional, full recourse Obligations of each Person comprising the
Borrowers enforceable against each such Borrower to the full extent of its
properties and assets, irrespective of the validity, regularity or
enforceability of this Agreement or any other circumstances whatsoever.
(e) Except as otherwise expressly provided in this
Agreement, each Person comprising the Borrowers hereby waives notice of
acceptance of its joint and several liability, notice of any Advances issued
under or pursuant to this Agreement, notice of the occurrence of any Default,
Event of Default, or of any demand for any payment under this Agreement,
notice of any action at any time taken or omitted by Agent or Lenders under
or in respect of any of the Obligations, any requirement of diligence or to
mitigate damages and, generally, to the extent permitted by applicable law,
all demands, notices and other formalities of every kind in connection with
this Agreement (except as otherwise provided in this Agreement). Except as
otherwise expressly provided in this Agreement, each Person comprising the
Borrowers hereby assents to, and waives notice of, any extension or
postponement of the time for the payment of any of the Obligations, the
acceptance of any payment of any of the Obligations, the acceptance of any
partial payment thereon, any waiver, consent or other action or acquiescence
by Agent or Lenders at any time or times in respect of any default by any
Person comprising the Borrowers in the performance or satisfaction of any
term, covenant, condition or provision of this Agreement, any and all other
indulgences whatsoever by Agent or Lenders in respect of any of the
Obligations, and the taking, addition, substitution or release, in whole or
in part, at any time or times, of any security for any of the Obligations or
the addition, substitution or release, in whole or in part, of any Person
comprising the Borrowers. Without limiting the generality of the foregoing
except as otherwise expressly provided in this Agreement, each of the
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Borrowers assents to any other action or delay in acting or failure to act on
the part of Agent or any Lender with respect to the failure by any Person
comprising the Borrowers to comply with any of its respective Obligations,
including, without limitation, any failure strictly or diligently to assert
any right or to pursue any remedy or to comply fully with applicable laws or
regulations thereunder, which might, but for the provisions of this SECTION
2.15 afford grounds for terminating, discharging or relieving any Person
comprising the Borrowers, in whole or in part, from any of its Obligations
under this SECTION 2.15, it being the intention of each Person comprising the
Borrowers that, so long as any of the Obligations hereunder remain
unsatisfied, the Obligations of such Person comprising the Borrowers under
this SECTION 2.15 shall not be discharged except by performance and then only
to the extent of such performance. The Obligations of each Person comprising
the Borrowers under this SECTION 2.15 shall not be diminished or rendered
unenforceable by any winding up, reorganization, arrangement, liquidation,
reconstruction or similar proceeding with respect to any Person comprising
the Borrowers or any Agent or Lender. The joint and several liability of the
Persons comprising the Borrowers hereunder shall continue in full force and
effect notwithstanding any absorption, merger, amalgamation or any other
change whatsoever in the name, constitution or place of formation of any of
the Persons comprising the Borrowers or Agent or any Lender.
(f) The provisions of this SECTION 2.15 are made for the
benefit of the Agent, the Lenders and their respective successors and
assigns, and may be enforced by it or them from time to time against any or
all of the Persons comprising the Borrowers as often as occasion therefor may
arise and without requirement on the part of the Agent, any such Lender,
successor or assign first to xxxxxxxx any of its or their claims or to
exercise any of its or their rights against any of the other Persons
comprising the Borrowers or to exhaust any remedies available to it or them
against any of the other Persons comprising the Borrowers or to resort to any
other source or means of obtaining payment of any of the Obligations
hereunder or to elect any other remedy. The provisions of this SECTION 2.15
shall remain in effect until all of the Obligations, other than contingent
indemnity obligations, shall have been paid in full or otherwise fully
satisfied. If at any time, any payment, or any part thereof, made in respect
of any of the Obligations, is rescinded or must otherwise be restored or
returned by Agent or any Lender upon the insolvency, bankruptcy or
reorganization of any of the Persons comprising the Borrowers, or otherwise,
the provisions of this SECTION 2.15 will forthwith be reinstated in effect,
as though such payment had not been made.
(g) Each of the Persons comprising the Borrowers hereby
agrees that it will not enforce any of its rights of contribution or
subrogation against the other Person comprising the Borrowers with respect to
any liability incurred by it hereunder or under any of the other Loan
Documents, any payments made by it to the Agent or the Lenders with respect
to any of the Obligations or any collateral security therefor until such time
as all of the Obligations, other than contingent indemnity obligations, have
been paid in full in cash. Any claim which any Borrower may have against any
other Borrower with respect to any payments to Agent or any Lender hereunder
or under any other Loan Documents are hereby expressly made subordinate and
junior in right of payment, without limitation as to any increases in the
Obligations arising hereunder or thereunder, to the prior payment in full in
cash of the Obligations and, in the event of any insolvency, bankruptcy,
receivership, liquidation, reorganization or other similar proceeding under
the laws of any jurisdiction relating to any Borrower, its debts or its
assets, whether voluntary or involuntary, all such Obligations, other
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than contingent indemnity obligations, shall be paid in full in cash before
any payment or distribution of any character, whether in cash, securities or
other property, shall be made to any other Borrower therefor.
(h) Each of the Persons comprising the Borrowers hereby
agrees that, after the occurrence and during the continuance of any Default
or Event of Default, the payment of any amounts due with respect to the
indebtedness owing by any Borrower to any other Borrower is hereby
subordinated to the prior payment in full in cash of the Obligations. Each
Borrower hereby agrees that after the occurrence and during the continuance
of any Default or Event of Default, such Borrower will not demand, xxx for or
otherwise attempt to collect any indebtedness of any other Borrower owing to
such Borrower until the Obligations, other than contingent indemnity
obligations, shall have been paid in full in cash. If, notwithstanding the
foregoing sentence, such Borrower shall collect, enforce or receive any
amounts in respect of such indebtedness, such amounts shall be collected,
enforced and received by such Borrower as trustee for the Lender Group, and
shall deliver any such amounts to the Agent for application to the
Obligations in accordance with SECTION 2.4(B).
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF CREDIT. The
obligation of the Lender Group (or any member thereof) to make the initial
Advance (or otherwise to extend any credit provided for hereunder), is
subject to the fulfillment, to the reasonable satisfaction of Agent, of each
of conditions precedent set forth below:
(a) the Closing Date shall occur on or before December 15,
1999;
(b) Agent shall have received all financing statements
required by Agent, duly executed by the Obligors, and Agent shall have
received endorsed filed copies from the appropriate governmental agencies
reflecting the filing of all such financing statements;
(c) Agent shall have received each of the following
documents, in form and substance satisfactory to Agent, duly executed, and
each such document shall be in full force and effect:
(i) this Agreement;
(ii) tri-party blocked account agreements
governing the Concentration Accounts and the Designated
Account;
(iii) the Control Agreement(s), if any;
(iv) the Disbursement Letter;
(v) the Stock Pledge Agreement, together with all
certificates (if any) representing shares of Stock of each
of the Subsidiaries of Guitar and
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MFI and Stock of any other Person pledged thereunder, as
well as Stock powers with respect to the foregoing endorsed
in blank;
(vi) the Trademark Security Agreement;
(vii) the Guaranty;
(viii) the Guarantor Security Agreement;
(ix) the Suretyship Agreement;
(x) the Mortgages;
(xi) the Inventory Security Agreement;
(xii) the Fee Letter;
(xiii) the Fee Split Letter;
(xiv) the Permitted Holders Side Letter;
(xv) the Pay-Off Letter, together with UCC
termination statements and other documentation evidencing
the termination by Existing Lender of its Liens in and to
the properties and assets of Borrowers;
(d) Agent shall have received a certificate from the
Secretary of Guitar attesting to the resolutions of each Borrower's Board of
Directors authorizing its execution, delivery, and performance of this
Agreement and the other Loan Documents to which a Borrower is a party and
authorizing specific officers of such Borrower to execute the same;
(e) Agent shall have received copies of each Borrower's
Governing Documents, as amended, modified, or supplemented to the Closing
Date, certified by the Secretary of Guitar;
(f) Agent shall have received a certificate of status with
respect to each Borrower, dated within 14 days of the Closing Date, such
certificate to be issued by the appropriate officer of the jurisdiction of
organization of such Borrower, which certificate shall indicate that such
Borrower is in good standing in such jurisdiction;
(g) Agent shall have received certificates of status with
respect to each Borrower, each dated within 21 days of the Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions in
which its failure to be duly qualified or licensed would constitute a
Material Adverse Change, which certificates shall indicate that such Borrower
is in good standing in such jurisdictions;
(h) Agent shall have received a certificate from the
Secretary of Guitar attesting to the resolutions of each Guarantor's Board of
Directors authorizing such
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Guarantor's execution, delivery, and performance of the Loan Documents to
which such Guarantor is a party and authorizing specific officers of such
Guarantor to execute the same;
(i) Agent shall have received copies of each Guarantor's
Governing Documents, as amended, modified, or supplemented to the Closing
Date, certified by the Secretary of Guitar;
(j) Agent shall have received a certificate of status with
respect to each Guarantor, dated within 14 days of the Closing Date, such
certificate to be issued by the appropriate officer of the jurisdiction of
organization of such Guarantor, which certificate shall indicate that
Guarantor is in good standing in such jurisdiction;
(k) Agent shall have received certificates of status with
respect to Guarantor, each dated within 21 days of the Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions in
which its failure to be duly qualified or licensed would constitute a
Material Adverse Change, which certificates shall indicate that such
Guarantor is in good standing in such jurisdictions;
(l) Agent shall have received a certificate of insurance,
together with the endorsements thereto, as are required by SECTION 6.9, the
form and substance of which shall be satisfactory to Agent and its counsel;
(m) Agent shall have received such Collateral Access
Agreements from lessors, warehousemen, bailees, and other third persons as
Agent may require in the exercise of its Permitted Discretion;
(n) Agent shall have received an opinion of Obligors'
counsel in form and substance satisfactory to Agent in its Permitted
Discretion;
(o) Agent shall have received satisfactory evidence that
all tax returns required to be filed by Obligors have been timely filed and
all taxes upon Obligors or their properties, assets, income, and franchises
(including real property taxes and payroll taxes) have been paid prior to
delinquency, except such taxes that are the subject of a Permitted Protest;
(p) Borrowers shall have Excess Availability after giving
effect to the initial extensions of credit, of at least $15,000,000;
(q) Agent shall have completed its business, legal, and
collateral due diligence;
(r) Agent shall have completed reference checks with
respect to Borrowers' senior management, the results of which are
satisfactory to Agent in its sole discretion;
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(s) Agent shall have received a liquidation value appraisal
of Guitar's Inventory, the results of which are satisfactory to Agent in its
sole discretion;
(t) Agent shall have received copies of all employment or
similar agreements between Guitar or any Subsidiary thereof and any Permitted
Holder or Affiliate thereof, certified as current, complete and correct by an
Authorized Person;
(u) Agent shall have received a copy of Borrowers' Cycle
Count Manual, certified as current, complete and correct by an Authorized
Person;
(v) Borrowers shall pay all Lender Group Expenses incurred
by Agent or any other Lender in connection with the entry of Agent and the
Lenders into this Agreement; and
(w) all other documents and legal matters in connection
with the transactions contemplated by this Agreement shall have been
delivered, executed, or recorded and shall be in form and substance
reasonably satisfactory to Agent and its counsel.
3.2 CONDITIONS SUBSEQUENT TO THE INITIAL EXTENSION OF CREDIT. The
obligation of the Lender Group (or any member thereof) to continue to make
Advances or to issue Letters of Credit is subject to the fulfillment, on or
before the date applicable thereto, of each of the conditions subsequent set
forth below (the failure by Borrowers to so perform or cause to be performed
constituting an Event of default):
(a) within 15 days of the Closing Date, Agent shall have
received a liquidation value appraisal of MFI's Inventory, the results of
which are satisfactory to Agent in its sole discretion, unless the failure to
obtain such an appraisal within the time period provided is due to the
actions of a Person other than an Obligor or an Affiliate thereof;
(b) within 30 days of the Closing Date, Borrowers shall
deliver to Agent the certified copies of the policies of insurance, together
with the endorsements thereto, as are required by SECTION 6.9, the form and
substance of which shall be satisfactory to Agent and its counsel; and
(c) within 30 days of the Closing Date, Agent shall have
received searches from the appropriate governmental agencies reflecting the
filing of all such financing statements and the first priority position, with
the exception of Permitted Liens, of the security interest of Agent in the
Personal Property Collateral.
3.3 CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT. The
obligation of the Lender Group (or any member thereof) to make all Advances,
Swing Loans, or to issue Letters of Credit (and to make any other extensions
of credit provided for hereunder) shall be subject to the following
conditions precedent:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all
material respects on and as of the
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date of such extension of credit, as though made on and as of such date
(except to the extent that such representations and warranties relate solely
to an earlier date),
(b) no Default or Event of Default shall have occurred and
be continuing on the date of such extension of credit, nor shall either
result from the making thereof,
(c) no injunction, writ, restraining order, or other order
of any nature prohibiting, directly or indirectly, the extending of such
credit shall have been issued and remain in force by any Governmental
Authority against any Borrower, Agent, any Lender, or any of their
Affiliates, and
(d) the amount of the Revolver Usage, after giving effect
to the requested Advances or Letter of Credit, shall not exceed the
Availability.
The foregoing conditions precedent are not conditions to each
Lender (i) participating in or reimbursing Agent for such Lenders' Pro Rata
Share of any drawings under Letters of Credit as provided herein, or (ii)
participating in or reimbursing Swing Lender or the Agent for such Lenders'
Pro Rata Share of any Swing Loan or Agent Advance as provided herein.
3.4 TERM. This Agreement shall become effective upon the execution
and delivery hereof by Borrowers and the Lender Group and shall continue in
full force and effect for a term ending on December 16, 2004 (the "MATURITY
DATE"). The foregoing notwithstanding, the Lender Group shall have the right
to terminate its obligations under this Agreement immediately and without
notice upon the occurrence and during the continuation of an Event of Default.
3.5 EFFECT OF TERMINATION. On the date of termination of this
Agreement, all Obligations (including contingent reimbursement obligations of
Borrowers with respect to any outstanding Letters of Credit) immediately
shall become due and payable without notice or demand. No termination of this
Agreement, however, shall relieve or discharge Borrowers of Borrowers'
duties, Obligations, or covenants hereunder, continuing security interests in
the Collateral, for the benefit of the Lender Group, shall remain in effect
until all Obligations have been fully and finally discharged and the Lender
Group's obligations to provide additional credit hereunder have been
terminated. Upon termination of this Agreement and after all Obligations
(other than contingent indemnification obligations) have been fully and
finally discharged and the Lender Group's obligations to provide additional
credit under the Loan Documents have been terminated irrevocably, Agent will,
at Borrowers' sole expense, execute and deliver any Uniform Commercial Code
termination statements, lien releases, mortgage releases, re-assignments of
trademarks, discharges of security interests, and other similar discharge or
release documents (and, if applicable, in recordable form) as are reasonably
necessary to release, as of record, the security interests, financing
statements, and all other notices of security interests and liens
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previously filed by Agent for the benefit of the Lender Group with respect to
the Obligations.
3.6 EARLY TERMINATION BY BORROWERS. Borrowers have the option, at
any time upon 90 days prior written notice to Agent, to terminate this
Agreement by paying to Agent, for the benefit of the Lender Group, in cash,
the Obligations (including either (i) providing cash collateral to be held by
Agent for the benefit of the Lender Group in an amount equal to 105% of the
maximum amount of the Lender Group's obligations under outstanding Letters of
Credit, or (ii) causing the original Letters of Credit to be returned to
Agent, but excluding contingent indemnification obligations), in full,
without any penalty or premium.
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Each Borrower hereby grants to
Agent, for the benefit of the Lender Group a continuing security interest in
all currently existing and hereafter acquired or arising Personal Property
Collateral in order to secure prompt repayment of any and all Obligations and
in order to secure prompt performance by Borrowers of each of their covenants
and duties under the Loan Documents ("AGENT'S LIENS"). The Agent's Liens in
and to the Personal Property Collateral shall attach to all Personal Property
Collateral without further act on the part of the Lender Group or Borrowers.
Anything contained in this Agreement or any other Loan Document to the
contrary notwithstanding, except for Permitted Dispositions, no Borrower has
authority, express or implied, to dispose of any item or portion of the
Collateral.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral, and
if and to the extent that perfection of priority of Agent's security interest
is dependent on possession, each Borrower, immediately upon the request of
Agent, shall endorse and deliver physical possession of such Negotiable
Collateral to Agent.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE
COLLATERAL. At any time after the occurrence and during the continuation of
an Event of Default, Agent or Agent's designee may (a) notify customers or
Account Debtors of Borrowers that the Accounts, General Intangibles, or
Negotiable Collateral have been assigned to Agent for the benefit of the
Lender Group or that Agent for the benefit of the Lender Group or that Agent
for the benefit of the Lender Group has a security interest therein, or (b)
collect the Accounts, General Intangibles, and Negotiable Collateral directly
and charge the collection costs and expenses to the Loan Account. Each
Borrower agrees that it will hold in trust for the Lender Group, as the
Lender Group's trustee, any Collections that it receives and promptly will
deliver said Collections to Agent in their original form as received by
Borrowers.
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4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time
upon the reasonable request of Agent, each Borrower shall execute and deliver
to Agent, all financing statements, fixture filings, security agreements,
Control Agreements, pledges, assignments, endorsements of certificates of
title, and all other documents that Agent reasonably may request, in form and
substance reasonably satisfactory to Agent, to perfect and continue perfected
Agent's Liens in the Collateral (whether now owned or hereafter arising or
acquired), and in order to fully consummate all of the transactions
contemplated hereby and under the other the Loan Documents.
4.5 POWER OF ATTORNEY. Each Borrower hereby irrevocably makes,
constitutes, and appoints Agent (and any of Agent's officers, employees, or
agents designated by Agent) as such Borrower's true and lawful attorney, with
power to (a) if such Borrower refuses to, or fails timely to execute and
deliver any of the documents described in SECTION 4.4, sign the name of such
Borrower on any of the documents described in SECTION 4.4, (b) at any time
that an Event of Default has occurred and is continuing, sign such Borrower's
name on any invoice or xxxx of lading relating to any Account, drafts against
Account Debtors, and notices to Account Debtors, (c) send requests for
verification of Accounts, PROVIDED that if no Event of Default is continuing,
Agent shall send out such requests no more often that 2 times during any 12
month period, (d) endorse such Borrower's name on any Collection item that
may come into the Lender Group's possession and deposit into Agent's Account,
(e) at any time that an Event of Default has occurred and is continuing,
notify the post office authorities to change the address for delivery of such
Borrower's mail to an address designated by Agent, to receive and open all
mail addressed to such Borrower, and to retain all mail relating to the
Collateral and forward all other mail to such Borrower, (f) at any time that
an Event of Default has occurred and is continuing, make, settle, and adjust
all claims under such Borrower's policies of insurance and make all
determinations and decisions with respect to such policies of insurance, and
(g) at any time that an Event of Default has occurred and is continuing,
settle and adjust disputes and claims respecting the Accounts directly with
Account Debtors, for amounts and upon terms that Agent determines to be
reasonable, and Agent may cause to be executed and delivered any documents
and releases that Agent determines, in the exercise of its Permitted
Discretion, to be necessary. The appointment of Agent as each Borrower's
attorney, and each and every one of its rights and powers, being coupled with
an interest, is irrevocable until all of the Obligations have been fully and
finally repaid and performed and the Lender Group's obligations to extend
credit hereunder are terminated.
4.6 RIGHT TO INSPECT. Agent and each Lender (through any of their
respective officers, employees, or agents) shall have the right, from time to
time hereafter to inspect the Books and to check, test, and appraise the
Collateral in order to verify each Borrower's financial condition or the
amount, quality, value, condition of, or any other matter relating to, the
Collateral, provided that prior to the occurrence and continuance of an Event
of Default, such inspections, checks, tests, and appraisals shall occur only
during a Borrower's normal business hours upon at least one Business Day's
prior notice. Without
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in any way limiting the foregoing, each Borrower will, upon the request of
Agent and the Required Lenders, (i) during any period when no Event of
Default has occurred and is continuing, participate in a meeting of the Agent
and Lenders once during each calendar year to be held at Guitar's corporate
offices (or such other location as may be agreed upon between Agent and
Administrative Borrower) at such time as may be agreed to by Administrative
Borrower and Agent, and (ii) following the occurrence and during the
continuance of an Event of Default, participate in meetings of the Agent and
Lenders at such frequency as the Agent shall request in the exercise of its
Permitted Discretion to be held at Guitar's corporate offices (or such other
location as may be agreed upon between Agent and Administrative Borrower) at
such time as may be agreed to by Administrative Borrower and Agent.
4.7 CONTROL AGREEMENTS. Each Obligor agrees that it will not
transfer assets out of any Securities Accounts other than as permitted under
SECTION 7.24 and, if to another securities intermediary, unless each of such
Obligor, Agent, and the substitute securities intermediary have entered into
a Control Agreement. No arrangement contemplated hereby or by any Control
Agreement in respect of any Securities Accounts or other investment property
shall be modified by an Obligor without the prior written consent of Agent.
Upon the occurrence and during the continuance of a Default or Event of
Default, Agent may notify any securities intermediary to liquidate or
transfer the applicable Securities Account or any related investment property
maintained or held thereby and remit the proceeds thereof to the Agent
Account.
5. REPRESENTATIONS AND WARRANTIES. In order to induce the Lender Group to
enter into this Agreement, Guitar, and each of its Subsidiaries, as
applicable, makes the following representations and warranties to the Lender
Group which shall be true, correct, and complete, in all material respects,
as of the date hereof, and shall be true, correct, and complete in all
material respects as of the Closing Date, and at and as of the date of the
making of each Advance (or other extension of credit) made thereafter, as
though made on and as of the date of such Advance (or other extension of
credit) (except to the extent that such representations and warranties relate
solely to an earlier date) and such representations and warranties shall
survive the execution and delivery of this Agreement:
5.1 NO ENCUMBRANCES. Each Borrower has good and indefeasible title
to the Collateral, free and clear of Liens except for Permitted Liens.
5.2 ELIGIBLE ACCOUNTS. The Eligible Accounts are bona fide
existing payment obligations of Account Debtors created by the sale and
delivery of Inventory or the rendition of services to Borrowers' customers in
the ordinary course of Borrowers' business, owed to a Borrower without
defenses, disputes, offsets, counterclaims, or rights of return or
cancellation. As to each Eligible Account, such Eligible Account is in
compliance with the criteria for eligibility set forth under the definition
of "Eligible Accounts" in SECTION 1.1.
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5.3 ELIGIBLE INVENTORY. All Eligible Inventory is of good and
merchantable quality, free from defects. As to each item of Eligible
Inventory, such Inventory is in compliance with the criteria for eligibility
set forth under the definition of "Eligible Inventory" in SECTION 1.1.
5.4 EQUIPMENT. All of the Equipment is used or held for use in the
Obligors' business and substantially all of such Equipment is fit for such
purposes.
5.5 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and
Equipment are not stored with a bailee, warehouseman, or similar party and
are located only at the locations identified on SCHEDULE 6.11 permitted by
SECTION 6.11.
5.6 INVENTORY RECORDS. Each Obligor keeps correct and accurate
records, with the exception of insignificant errors, itemizing and describing
the type, quality, and quantity of the Inventory and its cost therefor.
5.7 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief executive
office of the Obligors is located at the address indicated in SCHEDULE 5.7
and each Obligor's FEIN is identified in SCHEDULE 5.7.
5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each Obligor is duly organized and existing and in good
standing under the laws of the jurisdiction of its organization and qualified
to do business in any state where the failure to be so qualified would
reasonably be expected to cause a Material Adverse Change.
(b) Set forth on SCHEDULE 5.8, is a complete and accurate
description of the authorized capital Stock of each Obligor (other than
Guitar) as of the Closing Date, by class, and, as of the Closing Date, a
description of the number of shares of each such class that are issued and
outstanding. Other than as described on SCHEDULE 5.8, there are no
subscriptions, options, warrants, or calls relating to any shares of the
capital Stock of any Obligor (other than Guitar) as of the Closing Date,
including any right of conversion or exchange under any outstanding security
or other instrument. No Obligor is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital Stock or any security convertible into or exchangeable for any of its
capital Stock.
(c) Set forth on SCHEDULE 5.8, is a complete and accurate
list of each Borrower's direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their incorporation; (ii) the number of shares of each class
of common and preferred Stock authorized for each of such Subsidiaries; and
(iii) the number and the percentage of the outstanding shares of each such
class owned directly or indirectly by Borrowers. All of the outstanding
capital Stock of each such Subsidiary has been validly issued and is fully
paid and non-assessable.
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(d) Except as set forth on SCHEDULE 5.8, no capital Stock
(or any securities, instruments, warrants, options, purchase rights,
conversion or exchange rights, calls, commitments or claims of any character
convertible into or exercisable for Stock) of any direct or indirect
Subsidiary of Borrowers is subject to the issuance of any security,
instrument, warrant, option, purchase right, conversion or exchange right,
call, commitment or claim of any right, title, or interest therein or thereto.
5.9 DUE AUTHORIZATION; NO CONFLICT.
(a) The execution, delivery, and performance by each
Obligor of the Loan Documents to which it is a party have been duly
authorized by all necessary action on the part of such Obligor.
(b) The execution, delivery, and performance by each
Obligor of the Loan Documents to which it is a party do not and will not (i)
violate any provision of federal, state, or local law or regulation
(including Regulations T, U, and X of the Federal Reserve Board), applicable
to such Obligor, the Governing Documents of such Obligor, or any order,
judgment, or decree of any court or other Governmental Authority binding on
such Obligor, (ii) conflict with, result in a breach of, or constitute (with
due notice or lapse of time or both) a default under any material contractual
obligation of such Obligor, (iii) result in or require the creation or
imposition of any Lien of any nature whatsoever upon any properties or assets
of such Obligor, other than Permitted Liens, or (iv) except to the extent
previously obtained, require any approval of stockholders or any approval or
consent of any Person under any material contractual obligation of such
Obligor.
(c) Other than the filing of financing statements, fixture
filings, and Mortgages, the execution, delivery, and performance by each
Obligor of the Loan Documents to which such Obligor is a party do not and
will not require any registration with, consent, or approval of, or notice
to, or other action with or by, any Governmental Authority or other Person.
(d) The Loan Documents to which each Obligor is a party,
and all other documents contemplated hereby and thereby, when executed and
delivered by such Obligor will be the legally valid and binding obligations
of such Obligor, enforceable against such Obligor in accordance with their
respective terms, except as enforcement may be limited by equitable
principles or by bankruptcy, insolvency, reorganization, moratorium, or
similar laws relating to or limiting creditors' rights generally.
(e) The Agent's Liens granted by Borrowers to Agent, for
the benefit of the Lender Group, in and to its assets pursuant to this
Agreement and the other Loan Documents are validly created, perfected (except
where the lack of perfection is the result of the Agent's failure to file a
financing statement, or to continue a financing statement once filed, or to
continue possession of Collateral where the security interest therein is
perfected through possession), and first priority Liens, subject only to
Permitted Liens.
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5.10 LITIGATION. Other than those matters disclosed on SCHEDULE
5.10, there are no actions, suits, or proceedings pending or, to the best
knowledge of Borrowers, threatened against a Borrower, or any of its
Subsidiaries, as applicable, except for matters arising after the Closing
Date that, if decided adversely to a Borrower, or any of its Subsidiaries, as
applicable, would not reasonably be expected to cause in a Material Adverse
Change.
5.11 NO MATERIAL ADVERSE CHANGE. All financial statements relating
to Borrowers or any guarantor of the Obligations that have been delivered by
Borrowers to the Lender Group have been prepared in accordance with GAAP
(except, in the case of unaudited financial statements, for the lack of
footnotes and being subject to year-end audit adjustments) and fairly present
Borrowers' (or such guarantor's, as applicable) financial condition as of the
date thereof and results of operations for the period then ended. There has
not been a Material Adverse Change with respect to Borrowers (or such
guarantor, as applicable) since the date of the latest financial statements
submitted to the Lender Group on or before the Closing Date.
5.12 FRAUDULENT TRANSFER.
(a) Each Obligor is Solvent.
(b) No transfer of property is being made by an Obligor and
no obligation is being incurred by an Obligor in connection with the
transactions contemplated by this Agreement or the other Loan Documents with
the intent to hinder, delay, or defraud either present or future creditors of
such Obligor.
5.13 EMPLOYEE BENEFITS. (a) no ERISA Event has occurred or is
reasonably expected to occur with respect to any Plan of an Obligor or any of
its ERISA Affiliates; (b) no Obligor nor any of its ERISA Affiliates has
incurred or is reasonably expected to incur any Withdrawal Liability to any
Multiemployer Plan; and (c) no Obligor nor any of its ERISA Affiliates has
been notified by the sponsor of a Multiemployer Plan of an Obligor or any of
its ERISA Affiliates that such Multiemployer Plan is in reorganization or has
been terminated, within the meaning of Title IV of ERISA, and no such
Multiemployer Plan is reasonably expected to be in reorganization or to be
terminated, within the meaning of Title IV of ERISA, and any such event,
either individually or in the aggregate could reasonably be expected to
result in a liability of the Obligors and their Subsidiaries in excess of
$250,000. As of the Closing Date, none of Obligors, any of their
Subsidiaries, nor any of their ERISA Affiliates maintains or contributes to
any Benefit Plan.
5.14 ENVIRONMENTAL CONDITION. None of Obligors' properties or
assets has ever been used to produce, treat, release, or transport, any
Hazardous Materials. None of Obligors' properties or assets has ever been
designated or identified in any manner pursuant to any environmental
protection statute as a Hazardous Materials disposal site, or a candidate for
closure pursuant to any environmental protection statute. No Lien arising
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under any environmental protection statute has attached to any revenues or to
any real or personal property owned or operated by an Obligor. No Obligor has
received a summons, citation, notice, or directive from the Environmental
Protection Agency or any other federal or state governmental agency
concerning any action or omission by such Obligor resulting in the releasing
or disposing of Hazardous Materials into the environment.
5.15 BROKERAGE FEES. No Obligor has utilized the services of any
broker or finder in connection with Borrowers' obtaining financing from the
Lender Group under this Agreement and no brokerage commission or finders fee
is payable in connection herewith.
5.16 YEAR 2000 COMPLIANCE. On the basis of a comprehensive
inventory, review, and assessment undertaken by the Obligors of material
computer applications utilized by the Obligors or contained in material
products produced or sold by an Obligor, and upon inquiry made of Obligors'
material suppliers and vendors, Obligors' management is of the considered
view that each Obligor, its material products, and all such suppliers and
vendors are Year 2000 Compliant.
5.17 INTELLECTUAL PROPERTY. Each Obligor owns, or holds licenses
in, all trademarks, trade names, copyrights, patents, patent rights, and
licenses that are necessary to the conduct of its business as currently
conducted.
5.18 LEASES. Each Obligor enjoys peaceful and undisturbed
possession under all leases material to the business of such Obligor and to
which it is a party or under which it is operating. All of such leases are
valid and subsisting and no material default by such Obligor exists under any
of them.
5.19 DDAS. Set forth on SCHEDULE 5.19 are all of Obligors' current
DDAs, including, with respect to each depository (i) the name and address of
that depository; and (ii) the account number(s) of the account(s) maintained
with such depository.
5.20 OFFSITE STORAGE LOCATIONS. With respect to each Offsite
Storage Location, (i) no more than $500,000 in Inventory is stored at each
such location and no more than $1,500,000 in the aggregate is stored at all
Offsite Storage Locations, and (ii) Guitar has complete and unrestricted
access to each such location and the Inventory located thereat.
6. AFFIRMATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations (other
than contingent indemnification obligations), each Obligor or its
Subsidiaries, as applicable, shall do all of the following:
6.1 ACCOUNTING SYSTEM. Maintain a system of accounting that
enables Borrowers to produce financial statements in accordance with GAAP and
maintain records pertaining to the Collateral that contain information as
from time to time reasonably may be requested
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by Agent. Each Borrower also shall keep an inventory reporting system that
shows all additions, sales, claims, returns, and allowances with respect to
the Inventory.
6.2 COLLATERAL REPORTING. Provide Agent with the following
documents at the following times in form reasonably satisfactory to Agent:
(a) on a daily basis, from and after the Receivables
Activation Date and during any period after the occurrence and during the
continuance of an Event of Default, a sales journal, collection journal, and
credit register since the last such schedule,
(b) on a weekly basis and, in any event, by no later than
the third Business Day of the immediately following week
(i) from and after the Receivables Activation Date
and during any period when no Event of Default has occurred
and is continuing, a sales journal, collection journal, and
credit register since the last such schedule,
(ii) during any period after the occurrence and
during the continuance of an Event of Default, (A) a
Borrowing Base Certificate setting forth the calculation of
the Borrowing Base as of such date and demonstrating
Borrowers' compliance with the limitation on Advances set
forth in SECTION 2.1(c), and, (B) Inventory reports
specifying Borrowers' cost and the wholesale
market value of its Inventory by category, with additional
detail showing additions to and deletions from the Inventory
with additional detail showing additions to and deletions
from the Inventory (the so called "roll forward inventory
collateral report"),
(iii) during any period after the occurrence and
during the continuance of an Event of Default, Inventory
reports specifying the cost of Borrowers' Inventory by
category, with additional detail showing additions to and
deletions from the Inventory (the so-called "Roll Forward
Inventory Collateral Report"),
(c) on a monthly basis and, in any event, by no later than
the 10th day of each month during the term of this Agreement,
(i) prior to the Receivables Activation
Date, a sales journal, collection journal, and credit
register since the last such schedule.
(ii) during any period when no Event of Default
has occurred and is continuing, a Borrowing Base Certificate
setting forth the calculation of the Borrowing Base and
demonstrating Borrowers' compliance with the limitation on
Advances set forth in SECTION 2.1(a)(iii) as of the last day
of the immediately preceding month.
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(iii) during any period when no Event of Default
has occurred and is continuing, Inventory reports specifying
the cost of Borrowers' Inventory by category, with
additional detail showing additions to and deletions from
the Inventory (the so-called "Roll Forward Inventory
Collateral Report"),
(iv) a listing, by vendor, of Borrowers'
accounts payable and any book overdraft,
(v) a consigned inventory report by vendor,
(vi) an inventory reconciliation to general ledger,
(vii) and a calculation of Dilution for the
prior month,
(d) on a monthly basis and, in any event, by no later than
the 16th day of each month during the term of this Agreement, a detailed
aging, by total, of the Eligible Accounts, together with a reconciliation to
the detailed calculation of the Borrowing Base previously provided to Agent,
together with a calculation of Accounts or rights to payment that are not
Eligible Accounts, gift certificates, and merchandise credits,
(e) promptly upon request of Agent in the exercise of its
Permitted Discretion,
(i) copies of invoices in connection with the
Accounts, customer statements, credit memos, remittance
advices and reports, deposit slips, shipping and delivery
documents in connection with the Accounts and for
Inventory and Equipment acquired by Borrowers, purchase
orders and invoices
(ii) a list of all unissued credit memos
and a copy of Borrowers' unissued credit log,
(iii) notice of all returns, or credit memos as
reported in the accounts receivable activity report,
(iv) copies of all draft or unaudited results of
the then most recently completed component of Borrowers'
Inventory cycle count program, together with a report of all
adjustments to Borrowers' Inventory made on the basis of the
results of such cycle count component.
(v) evidence of payment of sales taxes, and
(vi) such other reports as to the Collateral or the
financial condition of Borrowers, or the above reports but
at a greater reporting
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frequency, as Agent may request from time to time in its
Permitted Discretion,
(f) on the Receivables Activation Date, a roll-forward to the
Business day immediately preceding the Receivables Activation Date of the sales
journal, collection journal, and credit register delivered by Borrower to Agent
for the immediately preceding month pursuant to SECTION 6.2(c)(i).
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to Agent,
with copies to each Lender:
(a) as soon as available, but in any event within 45 days
after the end of each month during each of Guitar's fiscal years,
(i) a company prepared balance sheet, income
statement, and statement of cash flow covering Borrowers'
operations during such period,
(ii) a certificate signed by the chief financial
officer of Administrative Borrower to the effect that:
(A) the financial statements delivered
hereunder have been prepared in accordance with
GAAP (except for the lack of footnotes and being
subject to year-end audit adjustments) and fairly
present the financial condition of Borrowers in
all material respects,
(B) the representations and warranties
of each Borrower contained in this Agreement and
the other Loan Documents are true and correct in
all material respects on and as of the date of
such certificate, as though made on and as of such
date (except to the extent that such
representations and warranties relate solely to an
earlier date), and
(C) there does not exist any condition
or event that constitutes a Default or Event of
Default (or, to the extent of any non-compliance,
describing such non-compliance as to which he or
she may have knowledge and what action Borrowers
have taken, are taking, or propose to take with
respect thereto).
(b) as soon as available, but in any event within 45 days
after the end of each fiscal quarter during each of Guitar's fiscal years,
(i) a company prepared balance sheet, income
statement, and statement of cash flow covering Borrowers'
operations during such period,
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(ii) a certificate signed by the chief financial
officer of Administrative Borrower to the effect that:
(A) the financial statements delivered
hereunder have been prepared in accordance with
GAAP (except for the lack of footnotes and being
subject to year-end audit adjustments) and fairly
present the financial condition of Borrowers in
all material respects,
(B) the representations and warranties
of Borrowers contained in this Agreement and the
other Loan Documents are true and correct in all
material respects on and as of the date of such
certificate, as though made on and as of such date
(except to the extent that such representations
and warranties relate solely to an earlier date),
(C) there does not exist any condition
or event that constitutes a Default or Event of
Default (or, to the extent of any non-compliance,
describing such non-compliance as to which he or
she may have knowledge and what action Borrowers
have taken, are taking, or propose to take with
respect thereto),
(iii) a Compliance Certificate demonstrating, in
reasonable detail, compliance at the end of such quarter
period with the financial covenants contained in SECTION
7.20, and
(iv) a detailed calculation of the Leverage Ratio,
certified as correct by the chief financial officer of
Administrative Borrower, in sufficient detail as
determined by Agent in its Permitted Discretion, to
permit the redetermination of the applicable interest
rate margins.
(c) as soon as available, but in any event within 105 days
after the end of each of Guitar's fiscal years, financial statements of
Borrowers for each such fiscal year, audited by independent certified public
accountants reasonably acceptable to Agent and certified, without any
qualifications, by such accountants to have been prepared in accordance with
GAAP (such audited financial statements to include a balance sheet, income
statement, and statement of cash flow and, if prepared, such accountants'
letter to management), and the delivery by Guitar of its Form 10-K annual
report to the Lender Group within 105 days of the end of its fiscal year,
which report is otherwise in compliance with the auditors' certification
requirements of this clause (c), shall be deemed to satisfy the delivery
requirement of this clause (c),
(d) if filed by Guitar, within 5 Business Days following such
filing,
(i) 10-Q quarterly reports, Form 10-K annual
reports, and Form 8-K current reports,
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(ii) any other filings made by Borrowers with the
SEC, and
(iii) any other material information that is
provided by a Borrower to its shareholders generally,
(e) if and when filed by Borrowers and as requested by
Agent in the exercise of its Permitted Discretion, satisfactory evidence of
payment of applicable excise taxes in each jurisdictions in which (i) a
Borrower conducts business or is required to pay any such excise tax, (ii)
where a Borrower's failure to pay any such applicable excise tax would result
in a Lien on the properties or assets of such Borrower, or (iii) where a
Borrower's failure to pay any such applicable excise tax would constitute a
Material Adverse Change,
(f) not later than 45 days after the end of each of
Guitar's fiscal quarters, a "Same Store Sales Analysis" comparing the sales
of each Borrower's retail locations for such fiscal quarter to the comparable
period for each such retail location for the immediately preceding fiscal
year; and
(g) upon the request of Agent, in the exercise of its
Permitted Discretion, any other report reasonably requested relating to the
financial condition of Borrowers.
Each Borrower agrees to deliver financial statements prepared on
both a consolidated and consolidating basis and that no Obligor will have a
fiscal year different from that of Guitar.
6.4 GUARANTOR REPORTS. Cause each Guarantor of any of the
Obligations to deliver its annual financial statements at the time when
Guitar provides its audited financial statements to Agent and, upon the
request of Agent following and during the continuation of an Event of
Default, copies of all federal income tax returns as soon as the same are
available and in any event no later than 30 days after the same are required
to be filed by law.
6.5 RETURN. Cause returns and allowances, if any, as between a
Borrower and its Account Debtors to be on the same basis and in accordance
with the usual customary practices of such Borrower, as they exist at the
time of the execution and delivery of this Agreement. If, at a time when an
Event of Default has occurred and is continuing, any Account Debtor returns
any Inventory to a Borrower that exceeds $100,000 for any particular sale
transaction, such Borrower promptly shall determine the reason for such
return and, if Agent consents (which consent shall not be unreasonably
withheld), issue a credit memorandum (with a copy to be sent to Agent) in the
appropriate amount to such Account Debtor.
6.6 TITLE TO EQUIPMENT. Upon Agent's request in the exercise of its
Permitted Discretion, immediately deliver to Agent, properly endorsed, any
and all certificates or
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documents of title to any items of Equipment which, individually, have a
value in excess of $100,000, or in the aggregate have a value in excess of
$750,000.
6.7 MAINTENANCE OF EQUIPMENT. Maintain the Equipment in good
operating condition and repair (ordinary wear and tear excepted), and to the
extent necessary to the continued operations of an Obligor make all necessary
replacements thereto so that the value and operating efficiency thereof shall
at all times be maintained and preserved. Other than those items of Equipment
that constitute fixtures on the Closing Date or Equipment with an aggregate
book value to Borrowers in an amount not to exceed $1,000,000 during any
fiscal year, no Borrower shall permit any item of Equipment to become a
fixture to real estate or an accession to other property, other than Real
Property Collateral, and such Equipment shall at all times remain personal
property unless a part of Real Property Collateral.
6.8 TAXES. Cause all assessments and taxes, whether real, personal,
or otherwise, due or payable by, or imposed, levied, or assessed against any
Obligor or any of its property to be paid in full, before delinquency or
before the expiration of any extension period, except to the extent that the
validity of such assessment or tax shall be the subject of a Permitted
Protest. The Obligors will make timely payment or deposit of all tax payments
and withholding taxes required of it by applicable laws, including those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and
federal income taxes, and will, upon request, furnish Agent with proof
satisfactory to Agent indicating that each Obligor has made such payments or
deposits. Upon the request of Agent in the exercise of its Permitted
Discretion, Administrative Borrower shall deliver satisfactory evidence of
payment of applicable excise taxes in each jurisdictions in which (a) such
Obligor conducts business or is required to pay any such excise tax, or (b)
where such Obligor's failure to pay any such applicable excise tax would
result in a Lien on the properties or assets of such Obligor, in each case,
where such Obligor's failure to pay any such applicable excise tax would
constitute a Material Adverse Change.
6.9 INSURANCE.
(a) At their expense, maintain insurance respecting the
Collateral wherever located and with respect to Borrowers' business, covering
loss or damage by fire, theft, explosion, and all other hazards and risks as
ordinarily are insured against by other Persons engaged in the same or
similar businesses. Each Borrower also shall maintain business interruption,
public liability, and product liability insurance, as well as insurance
against "employee dishonesty." All such policies of insurance shall be in
such amounts and with such insurance companies as are reasonably satisfactory
to Agent. Each Borrower shall deliver certified copies of all such policies
to Agent with 438 BFU lender's loss payable endorsements or other reasonably
satisfactory lender's loss payable endorsements, naming Agent as sole loss
payee or additional insured, as appropriate. Each policy of insurance or
endorsement shall contain a clause requiring the insurer to give not less
than 30 days prior written notice to Agent in the event of cancellation of
the policy for any reason whatsoever,
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other than for the non-payment of premium, for which the notice period shall
be 10 days. If a Borrower fails to provide and pay for such insurance, Agent
may, at its option, but shall not be required to, procure the same and charge
Borrowers' Loan Account therefor.
(b) At its expense, maintain key man life insurance
policies with respect to the following individuals and in the following
amounts:
NAME AMOUNT
---------------------- --------------
Xx. Xxxxx Xxxxxxxxx $3,500,000
Mr. Xxxxx Xxxxxx $5,000,000
All proceeds payable under such life insurance policies
shall be payable to Agent for the benefit of the Lender Group to be applied
on account of the Obligations in accordance with SECTION 2.4(b).
(c) At its expense, obtain and maintain (i) insurance of
the type necessary to insure the Improvements and Chattels (as such terms are
defined in the Mortgages), for the full replacement cost thereof, against any
loss by fire, lightning, windstorm, hail, explosion, aircraft, smoke damage,
vehicle damage, earthquakes (but only for Obligors' locations in the States
of California, Arizona, Nevada and Washington, and any States in which any
Obligor initiates business operations after the Closing Date where Persons
engaged in the same or similar businesses as such Obligor customarily obtain
earthquake insurance), elevator collision, and other risks from time to time
included under "extended coverage" policies, in such amounts as Agent may
require, but in any event in amounts sufficient to prevent any Obligor from
becoming a co-insurer under such policies, (ii) combined single limit bodily
injury and property damages insurance against any loss, liability, or damages
on, about, or relating to each parcel of Real Property Collateral, in an
amount of not less than $2,000,000; and (iii) business rental insurance
covering annual receipts for a 12 month period for each parcel of Real
Property Collateral.
(d) Each Borrower shall give Agent prompt notice of any
material loss covered by such insurance. Agent shall have the exclusive right
to adjust any losses payable under any such insurance policies, without any
liability to Borrowers whatsoever in respect of such adjustments; PROVIDED,
HOWEVER, prior to the occurrence and during the continuance of an Event of
Default, Borrowers shall have the right to adjust any losses payable under
any such insurance policies involving amounts less than $2,500,000. Any
monies received as payment for any loss under any insurance policy mentioned
above (other than liability insurance policies) or as payment of any award or
compensation for condemnation or taking by eminent domain, shall be paid over
to Agent to be applied at the option of the Required Lenders either to the
prepayment of the Obligations without premium, in such order or manner as the
Required Lenders may elect, or shall be disbursed to Borrowers under staged
payment terms reasonably satisfactory to the Required Lenders for application
to the cost of repairs, replacements, or restorations. All repairs,
replacements, or restorations shall be effected with reasonable promptness
and shall be of a value at least equal to the value of the
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items or property destroyed prior to such damage or destruction. Upon the
occurrence and during the continuance of an Event of Default, Agent shall
have the right to apply all prepaid premiums to the payment of the
Obligations in such order or form as Agent shall determine in its Permitted
Discretion.
(e) No Borrower shall take out separate insurance
concurrent in form or contributing in the event of loss with that required to
be maintained under this SECTION 6.9, unless Agent is included thereon as
named insured with the loss payable to Agent under a standard California
438BFU (NS) Mortgagee endorsement, or its equivalent. Administrative Borrower
immediately shall notify Agent whenever such separate insurance is taken out,
specifying the insurer thereunder and full particulars as to the policies
evidencing the same, and originals of such policies immediately shall be
provided to Agent.
6.10 NO SETOFFS OR COUNTERCLAIMS. Make payments hereunder and under
the other Loan Documents by or on behalf of the Obligors without setoff or
counterclaim and free and clear of, and without deduction or withholding for
or on account of, any federal, state, or local taxes.
6.11 LOCATION OF INVENTORY AND EQUIPMENT. Keep the Inventory and
Equipment only at the locations identified on SCHEDULE 6.11; provided,
however, that Borrowers may amend SCHEDULE 6.11 so long as such amendment
occurs by written notice to Agent not less than 30 days prior to the date on
which the Inventory or Equipment is moved to such new location, so long as
such new location is within the continental United States, and so long as,
not less than 30 days prior to the effectiveness of such amendment, Borrowers
provide any financing statements or fixture filings necessary to perfect and
continue perfected the Agent's Liens on such assets and, if requested by
Agent in the exercise of its Permitted Discretion, also provides to Agent a
Collateral Access Agreement.
6.12 COMPLIANCE WITH LAWS. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any governmental
authority, including the Fair Labor Standards Act and the Americans With
Disabilities Act, other than laws, rules, regulations, and orders the
non-compliance with which, individually or in the aggregate, would not result
in and would reasonably not be expected to result in a Material Adverse
Change.
6.13 EMPLOYEE BENEFITS.
(a) ERISA EVENTS. Promptly and in any event within 10 days
after an Obligor or any of its Subsidiaries knows or has reason to know that
any ERISA Event with respect to such Obligor or any of its ERISA Affiliates
has occurred, a statement of the chief financial officer of Administrative
Borrower describing such ERISA Event and the action, if any, that such
Obligor or such ERISA Affiliate has taken and proposes to take with respect
thereto.
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(b) PLAN TERMINATIONS. Promptly and in any event within 5
Business Days after receipt thereof by an Obligor, any of its Subsidiaries, or,
to the knowledge of such Obligor, any of its other ERISA Affiliates, copies of
each notice from the PBGC stating its intention to terminate any Plan of such
Obligor or any of its ERISA Affiliates or to have a trustee appointed to
administer any such Plan.
(c) PLAN ANNUAL REPORTS. Promptly and in any event within 30
days after the filing thereof with the Internal Revenue Service, copies of each
Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with
respect to each Plan of Obligors or any of their ERISA Affiliates.
(d) MULTIEMPLOYER PLAN NOTICES. Promptly and in any event
within 5 Business Days after RECEIPT thereof by an Obligor, any of its
Subsidiaries, or, to the knowledge of such Obligor, any of its other ERISA
Affiliates from the sponsor of a Multiemployer Plan of such Obligor or any of
its ERISA Affiliates, copies of each notice concerning (i) the imposition of
Withdrawal Liability by any such Multiemployer Plan, (ii) the reorganization or
termination, within the meaning of Title IV of ERISA, of any such Multiemployer
Plan or (iii) the amount of liability incurred, or that may be incurred, by such
Obligor or any of its ERISA Affiliates in connection with any event described in
clause (i) or (ii).
6.14 XXXXXX.Xxx when due (after giving effect to all cure periods
under such leases) all rents and other amounts payable under any leases to
which any Borrower is a party or by which a Borrower's properties and assets
are bound, unless such payments are the subject of a Permitted Protest or
where the failure to make such payment would have only a DE MINIMIS effect on
the business, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of the Borrowers taken as a whole. To the
extent that any Borrower fails timely to make payment of such rents and other
amounts payable when due under its leases, Agent shall be entitled, in its
discretion, to reserve an amount equal to such unpaid amounts against the
Borrowing Base.
6.15 YEAR 2000 COMPLIANCE. Be and shall remain Year 2000 Compliant.
6.16 PROJECTIONS. Not later than 30 days prior to the end of each
fiscal year of Guitar, deliver to Agent Projections of Borrowers, in form and
substance (including as to scope and underlying assumptions) satisfactory to
Agent in its Permitted Discretion, for the forthcoming fiscal year, month by
month, certified by the chief financial officer of Administrative Borrower as
being such officer's good faith best estimate of the financial performance of
the Obligors during the period covered thereby.
6.17 CORPORATE EXISTENCE, ETC. Except as otherwise permitted
hereunder, at all time preserve and keep in full force and effect each
Obligor's valid corporate existence and good standing and any rights and
franchises material to such Obligor's businesses.
6.18 DISCLOSURE UPDATES. Promptly and in no event later than 5
Business Days after obtaining knowledge thereof, (i) notify Agent if any
written information, exhibit, or
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report furnished to the Lender Group contained any untrue statement of a
material fact or omitted to state any material fact necessary to make the
statements contained therein not misleading in light of the circumstances in
which made, and (ii) correct any defect or error that may be discovered
therein or in any Loan Document or in the execution, acknowledgement, filing,
or recordation thereof.
6.19 MAILING LISTS. Add Agent as an addressee on all mailing lists
maintained by or for the Obligors.
6.20 INVENTORY CYCLE COUNTS. Perform Inventory cycle counts in the
manner and at the times described in Guitar's Cycle Count Manual as in effect
on the Closing Date.
6.21 DISTRIBUTION CENTERS. From and after the Closing Date,
Inventory located at the Medford, Oregon and Knoxville, Tennessee
distribution centers of MFI shall be used solely to support direct response
sales fulfillment, PROVIDED, HOWEVER, Borrowers may from time to time
transfer Inventory from MFI to Guitar in order to correct overstock
situations and to use repackaged, slow moving, or discontinued items for
promotional purposes or as Guitar may otherwise reasonably deem appropriate.
6.22 PERMITTED ACQUISITIONS. In connection with any Permitted
Acquisition involving the acquisition of the Stock of another Person by any
Borrower, Borrowers shall execute and deliver to Agent such amendments ,
modifications, or supplements to the Loan Documents as Agent may request in the
exercise of its Permitted Discretion, including an amendment to the Stock Pledge
Agreement to pledge all of the issued and outstanding Stock of such acquired
Person thereunder together with the delivery of certificates (if any)
representing such shares of Stock with attached stock powers endorsed in blank,
and shall cause the Person that is the subject of the Permitted Acquisition to
execute and deliver to Agent all appropriate joinder documents to make it an
Obligor party to the Loan Documents and appropriate UCC-1 financing statements,
fixture filings, Collateral Access Agreements, mortgages or deeds of trust, and
any other documents, instruments, or Agreements that Agent may request in the
exercise of its Permitted Discretion.
7. NEGATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations (other
than contingent indemnification obligations), no Obligor nor any of its
Subsidiaries will do any of the following:
7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to
any Indebtedness, except:
(a) Indebtedness evidenced by this Agreement, together with
Indebtedness to issuers of letters of credit that are the subject of L/C
Undertakings;
(b) Indebtedness set forth on SCHEDULE 7.1;
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(c) Permitted Purchase Money Indebtedness;
(d) Subordinated Indebtedness in an amount not to exceed
$1,000,000 outstanding at any one time;
(e) unsecured Indebtedness incurred by Guitar in the ordinary
course of business for borrowed money, in an amount not in excess of $1,000,000;
(f) Acquired Indebtedness in an amount not to exceed
$5,000,000 outstanding at any one time;
(g) Indebtedness not otherwise permitted under this SECTION
7.1 in an aggregate amount outstanding at any time less than or equal to
$500,000;
(h) endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business; and
(i) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) through (g) of this SECTION 7.1 (and continuance
or renewal of any Permitted Liens associated therewith) so long as: (i) the
terms and conditions of such refinancings, renewals, or extensions do not
materially impair the prospects of repayment of the Obligations by Borrowers,
(ii) the net cash proceeds of such refinancings, renewals, or extensions do
not result in an increase in the aggregate principal amount of the
Indebtedness so refinanced, renewed, or extended, (iii) such refinancings,
renewals, refundings, or extensions do not result in a shortening of the
average weighted maturity of the Indebtedness so refinanced, renewed, or
extended, (iv) to the extent that Indebtedness that is refinanced was
subordinated in right of payment to the Obligations, then the subordination
terms and conditions of the refinancing Indebtedness must be at least as
favorable to the Lender Group as those applicable to the refinanced
Indebtedness, and (v) if such refinancing, renewal, refunding, or extension
involves the Senior Notes, such refinancing, renewal, refunding, or extension
also complies with SECTION 7.8(C).
7.2 LIENS. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its property or assets, of
any kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including Liens that are replacements
of Permitted Liens to the extent that the original Indebtedness is refinanced
under SECTION 7.1(H) and so long as the replacement Liens only encumber those
assets or property that secured the original Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES.
(a) Enter into any merger, consolidation, reorganization, or
recapitalization, or reclassify its Stock.
(b) Liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution).
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(c) Convey, sell, assign, lease, transfer, or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its property or assets;
PROVIDED, HOWEVER, that nothing contained in this SECTION 7.3 shall
be construed to restrict or limit (i) any offering, issuance, or sale by
Guitar, in one or more transactions, public or private, of its Stock
(including any concomitant increase in the number of authorized shares of
Stock of Guitar or in the authorized share capital of Guitar), so long as
such offerings, issuances, and sales are made in compliance with all
applicable laws and regulations and would not, individually or collectively,
result in a Change of Control, (ii) Permitted Acquisitions, (iii) the merger
or consolidation of a wholly owned Solvent Subsidiary into another wholly
owned Solvent Subsidiary or a wholly owned Solvent Subsidiary with and into a
Borrower, (iv) Permitted Dispositions, (v) the merger or consolidation of MCI
with any other Person provided that such merger or consolidation would not
result in a Change of Control, or (vi) Permitted Investments.
7.4 DISPOSAL OF ASSETS. Sell, lease, assign, transfer, or
otherwise dispose of any of Obligors' properties or assets, other than
pursuant to Permitted Dispositions.
7.5 CHANGE NAME. Change any Obligor's name, FEIN, corporate
structure (within the meaning of SECTION 9402(7) of the Code), or identity,
or add any new fictitious name, except that any Obligor may do so upon at
least 30 days prior written notice to Agent of such change and so long as, at
the time of such written notification, Administrative Borrower provides any
financing statements or fixture filings necessary to perfect and continue
perfected Agent's or any other member of the Lender Group's security
interests in the Collateral.
7.6 GUARANTEE. Guarantee or otherwise become in any way liable
with respect to the obligations of any third Person except by endorsement of
instruments or items of payment for deposit to the account of an Obligor or
which are transmitted or turned over to Agent or guarantees of the
Obligations or trade guarantees made in the ordinary course of business in an
aggregate contingent amount not to exceed $250,000 outstanding at any one
time.
7.7 NATURE OF BUSINESS. Make any change in the principal nature of
a Obligor's business.
7.8 PREPAYMENTS AND AMENDMENTS.
(a) Except in connection with a refinancing permitted by
SECTION 7.1(i) or as provided in subsection (c) or (d) below, prepay, redeem,
retire, defease, purchase, or otherwise acquire any Indebtedness owing to any
third Person, other than the Obligations in accordance with this Agreement,
(b) Except as permitted by subsection (c) below, directly or
indirectly, amend, modify, alter, increase, or change any of the terms or
conditions of any agreement,
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instrument, document, indenture, or other writing evidencing or concerning
Indebtedness permitted under SECTIONS 7.1(b), (c), or (d),
(c) Guitar shall not, and shall not permit any Subsidiary to,
amend, supplement, or modify any Senior Note Document or repay the principal of,
or make any other payment in relation to, the Senior Notes; PROVIDED, so long as
no Event of Default has occurred and is continuing or would result therefrom,
the foregoing shall not prohibit (i) the payment of regularly scheduled interest
on the Senior Notes, (ii) the repayment of the Senior Notes at the stated
maturity date of July 1, 2006, (iii) the repayment of the Senior Notes with the
proceeds of any refinancing thereof (provided that such refinancing Indebtedness
complies with the requirements of SECTION 7.1(i) and is otherwise on terms
substantially similar to the Senior Notes), and (iv) modifications or amendments
to the Senior Notes or the Senior Note Documents if the effect thereof could not
be expected to result in a Material Adverse Change and otherwise do not involve
the amendment or modification of provisions which would increase interest rates,
principal or interest payment amounts, total principal amounts, or require
payment of any such amounts at earlier times, or similar terms and provisions,
and
(d) Notwithstanding anything to the contrary contained in this
Agreement or in any other Loan Document, Borrowers may prepay any other
Indebtedness, if, after giving effect to such prepayment, no Event of Default
shall have occurred or is continuing and Excess Availability shall be at least
equal to $30,000,000.
7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly or
indirectly, any Change of Control without the prior written consent of Agent
and the Required Lenders.
7.10 CONSIGNMENTS. Consign any Inventory or sell any Inventory on
xxxx and hold, sale or return, sale on approval, or other conditional terms
of sale (except for Borrowers' customary return policy applicable to the
return of inventory purchased by Borrowers' retail customers in the ordinary
course of Borrowers' business), or have possession of any property on
consignment to an Obligor.
7.11 DISTRIBUTIONS. Make any distribution or declare or pay any
dividends (in cash or other property, other than Stock) on, or purchase,
acquire, redeem, or retire any of any Obligor's Stock, of any class, whether
now or hereafter outstanding; PROVIDED, HOWEVER, that the foregoing shall not
restrict the ability of:
(i) Any Borrower's Subsidiaries to make any dividend or
other distribution to such Borrower; or
(ii) Guitar to make any dividend or other distribution
to its shareholders consisting of shares of its common Stock or
warrants or other rights to acquire Guitar's common Stock.
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7.12 ACCOUNTING METHODS. Modify or change its method of accounting
(other than as may be required to conform to GAAP) or enter into, modify, or
terminate any agreement currently existing, or at any time hereafter entered
into with any third party accounting firm or service bureau for the
preparation or storage of Obligors' accounting records without said
accounting firm or service bureau agreeing to provide Agent information
regarding the Collateral or the Obligors' financial condition.
7.13 INVESTMENTS. Except for Permitted Investments, directly or
indirectly make, acquire, or incur any liabilities (including contingent
obligations) for or in connection with any Investment; PROVIDED, HOWEVER,
that no Obligor shall have Permitted Investments consisting of Investment
Property or Cash Equivalents (other than in the Guitar Collection Accounts,
the Concentration Accounts, or the Designated Account) in excess of $100,000
outstanding at any one time without the prior written consent of Agent, which
consent may be conditioned, at Agent's election, on such Obligor entering
into Control Agreements or similar arrangements governing such Permitted
Investments, as Agent shall determine in its Permitted Discretion, to perfect
(and further establish) Agent's Liens in such Permitted Investments.
7.14 TRANSACTIONS WITH AFFILIATES. Except as otherwise permitted by
this Agreement, directly or indirectly enter into or permit to exist any
material transaction with any Affiliate of any Obligor except for
transactions that are in the ordinary course of such Obligor's business, upon
fair and reasonable terms, that are fully disclosed to Agent, and that are no
less favorable to such Obligor than would be obtained in an arm's length
transaction with a non-Affiliate.
7.15 SUSPENSION. Suspend or go out of a substantial portion of its
business.
7.16 COMPENSATION. Increase the annual fee or per-meeting fees paid
to directors of any Obligor during any year by more than 25% over the prior
year; pay or accrue total cash compensation, during any year, to officers and
senior management employees who are Permitted Holders or Affiliates thereof
in an aggregate amount in excess of 125% of that paid or accrued in the prior
year; PROVIDED, HOWEVER, the foregoing limitation of on increases in
compensation shall not apply to compensation to Permitted Holders and their
Affiliates required of the Borrowers pursuant to the terms and conditions of
employment or similar agreements in effect as of the Closing Date.
7.17 USE OF PROCEEDS. Use the proceeds of the Advances for any
purpose other than (a) on the Closing Date, (i) to repay in full the
outstanding principal, accrued interest, and accrued fees and expenses owing
to Existing Lender, and (ii) to pay transactional fees, costs, and expenses
incurred in connection with this Agreement, and (b) thereafter, consistent
with the terms and conditions hereof, for its lawful and permitted corporate
purposes including the financing of working capital, store expansion via
development or purchase, and capital expenditures.
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7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND
EQUIPMENT WITH BAILEES. Relocate its chief executive office to a new location
without providing 30 days prior written notification thereof to Agent and so
long as, within 10 days prior to such relocation, Administrative Borrower
provides any financing statements or fixture filings necessary to perfect and
continue perfected the Agent's Liens and also provides to Agent a Collateral
Access Agreement with respect to such new location. The Inventory and
Equipment shall not at any time now or hereafter be stored with a bailee,
warehouseman, or similar party without Agent's prior written consent.
7.19 NO PROHIBITED TRANSACTIONS UNDER ERISA. Directly or
indirectly:
(a) engage, or permit any Subsidiary of an Obligor to engage,
in any prohibited transaction which is reasonably likely to result in a civil
penalty or excise tax described in Sections 406 of ERISA or 4975 of the IRC for
which a statutory or class exemption is not available or a private exemption has
not been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Plan any accumulated
funding deficiency (as defined in Sections 302 of ERISA and 412 of the IRC),
whether or not waived;
(c) fail, or permit any Subsidiary of an Obligor to fail, to
pay timely required contributions or annual installments due with respect to any
waived funding deficiency to any Plan;
(d) terminate, or permit any Subsidiary of an Obligor to
terminate, any Plan where such event would result in any liability of such
Borrower, any of its Subsidiaries or any ERISA Affiliate under Title IV of
ERISA;
(e) fail, or permit any Subsidiary of an Obligor to fail, to
make any required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of an Obligor to fail, to
pay any required installment or any other payment required under Section 412 of
the IRC on or before the due date for such installment or other payment;
(g) amend, or permit any Subsidiary of an Obligor to amend, a
Plan resulting in an increase in current liability for the plan year such that
either an Obligor, any Subsidiary of an Obligor or any ERISA Affiliate thereof
is required to provide security to such Plan under Section 401(a)(29) of the
IRC; or
(h) withdraw, or permit any Subsidiary of an Obligor to
withdraw, from any Multiemployer Plan where such withdrawal is reasonably likely
to result in any liability of any such entity under Title IV of ERISA;
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which, individually or in the aggregate with all other events under clauses
(a) through (h), results in or reasonably would be expected to result in a
claim against or liability of Borrowers, any of their Subsidiaries or any
ERISA Affiliate in excess of $250,000.
7.20 FINANCIAL COVENANTS. Fail to maintain:
(a) Tangible Net Worth for the relevant fiscal quarter of
not less than the relevant amount set forth in the following table, measured
on a fiscal quarter-end basis:
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Period Ending Minimum Tangible Net Worth
-----------------------------------------------------------------------------------
12/31/99 $63,500,000
-----------------------------------------------------------------------------------
03/31/00 $65,600,000
-----------------------------------------------------------------------------------
06/30/00 $68,000,000
-----------------------------------------------------------------------------------
09/30/00 $70,800,000
-----------------------------------------------------------------------------------
12/31/00 $78,900,000
-----------------------------------------------------------------------------------
03/31/01 $80,900,000
-----------------------------------------------------------------------------------
06/30/01 $83,400,000
-----------------------------------------------------------------------------------
09/30/01 $86,200,000
-----------------------------------------------------------------------------------
12/31/01 $94,200,000
-----------------------------------------------------------------------------------
03/31/02 $96,300,000
-----------------------------------------------------------------------------------
06/30/02 $98,700,000
-----------------------------------------------------------------------------------
09/30/02 $101,500,000
-----------------------------------------------------------------------------------
12/31/02 $109,500,000
-----------------------------------------------------------------------------------
03/31/03 and for each fiscal quarter thereafter $110,000,000
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
(b) Required Availability, measured at any time.
7.21 CREDIT CARD RECEIPTS. Amend, modify, supplement or restate the
Credit Card Agreements in any material respect without the prior written consent
of Agent, which shall not be unreasonably withheld.
7.22 CAPITAL EXPENDITURES. Make Consolidated capital expenditures
in any fiscal year in excess of the amount set forth in the following table for
the applicable period (the "MAXIMUM CONSOLIDATED CAPITAL EXPENDITURES AMOUNT");
PROVIDED that the Maximum Consolidated Capital Expenditures Amount for any
fiscal year as set forth below shall be
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increased by an amount equal to that portion, if any, of the Maximum
Consolidated Expenditures Amount set forth for the previous fiscal year that
was not utilized for actual capital expenditures during such fiscal year:
-----------------------------------------------------------------------------------
Applicable Period Maximum Consolidated Capital Expenditures Amount
-----------------------------------------------------------------------------------
Fiscal Year 1999 $21,000,000
-----------------------------------------------------------------------------------
Fiscal Year 2000 $26,100,000
-----------------------------------------------------------------------------------
Fiscal Year 2001 $30,300,000
-----------------------------------------------------------------------------------
Fiscal Year 2002 $32,900,000
-----------------------------------------------------------------------------------
Fiscal Year 2003 $36,800,000
-----------------------------------------------------------------------------------
Fiscal Year 2004 $38,700,000
-----------------------------------------------------------------------------------
7.23 SECURITIES ACCOUNTS. No Obligor shall establish or maintain
any Securities Account unless Agent shall have received a Control Agreement,
duly executed and in full force and effect, in respect of such Securities
Account. Each Obligor agrees that it will not transfer assets out of any
Securities Accounts; PROVIDED, HOWEVER, that, so long as no Event of Default
has occurred and is continuing or would result therefrom, such Obligor may
use such assets to the extent permitted by this Agreement.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an
event of default (each, an "EVENT OF DEFAULT") under this Agreement:
8.1 If any Obligor, or any of its Subsidiaries, fails to pay when due and
payable or when declared due and payable, any portion of the Obligations
(whether of principal, interest (including any interest which, but for the
provisions of the Bankruptcy Code, would have accrued on such amounts), fees and
charges due the Lender Group, reimbursement of Lender Group Expenses, or other
amounts constituting Obligations); PROVIDED, HOWEVER, that in the case of
Overadvances that are caused by the charging of interest, fees, or Lender Group
Expenses to Borrowers' Loan Account, such event shall not constitute an Event of
Default if, within 3 Business Days of incurring such Overadvance, Borrowers
repay, or otherwise eliminate, such Overadvance;
8.2 If any Obligor:
(a) fails to perform, keep, or observe any term, provision,
condition, covenant, or agreement contained in SECTIONS 2.7 (Cash Management),
3.3 (Conditions Precedent to all Extensions of Credit), 4.2 (Negotiable
Collateral), 4.4 (Delivery of
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Additional Documentation Required), 6.9 (Insurance), 6.10 (No Setoffs or
Counterclaims), 6.17 (Corporate Existence, etc.), 7.1 (Indebtedness), 7.2
(Liens), 7.3 (Restrictions on Fundamental Changes), 7.4 (Disposition of
Assets), 7.6 (Guarantee), 7.7 (Nature of Business), 7.8 (Prepayments and
Amendments), 7.9 (Change of Control), 7.11 (Distributions), 7.12 (Accounting
Methods), 7.13 (Investments), 7.14 (Transactions with Affiliates), 7.15
(Suspension), 7.17 (Use of Proceeds), 7.20 (Financial Covenants), 7.21
(Credit Card receipts), 7.22 (Capital Expenditures), or 7.23 (Securities
Accounts) of this Agreement, or makes any knowing or intentional breach of
any negative covenant contained in any of the other Loan Documents (excluding
SECTION 5 (Representations and Warranties) which is covered by SECTION 8.12);
(b) fails or neglects to perform, keep, or observe any term,
provision, condition, covenant, or agreement contained in SECTIONS 4.5 (Power of
Attorney), 6.2 (Collateral Reporting), 6.3 (Financial Statements, Reports,
Certificates), 6.5 ( Returns), 6.6 (Title to Equipment), 6.8 (Taxes), 6.11
(Location of Inventory and Equipment), 6.12 (Compliance with Laws), 6.13
(Employee Benefits) 7.5 (Change Name), 7.10 (Consignments), 7.18 (Change in
Location of Chief Executive Office; Inventory and Equipment with Bailees), or
7.19 (No Prohibited Transaction Under ERISA) of this Agreement and such failure
continues for a period of 5 Business Days; or
(c) fails or neglects to perform, keep, or observe any other
term, provision, condition, covenant, or agreement contained in this Agreement,
or in any of the other Loan Documents (giving effect to any grace periods, cure
periods, or required notices, if any, expressly provided for in such Loan
Documents); in each case, other than any such term, provision, condition,
covenant, or agreement that is the subject of another provision of this SECTION
8, in which event such other provision of this SECTION 8 shall govern), and such
failure continues for a period of 15 Business Days;
PROVIDED that, during any period of time that any such failure
or neglect of any such Obligor referred to in this paragraph exists, even if
such failure or neglect is not yet an Event of Default by virtue of the
existence of a grace or cure period or the pre-condition of the giving of a
notice, the Lender Group shall be relieved of its obligation to extend credit
hereunder;
8.3 If there is a Material Adverse Change;
8.4 If any material portion of an Obligor's, or any of its Subsidiaries',
properties or assets is attached, seized, subjected to a writ or distress
warrant, or is levied upon, or comes into the possession of any third Person in
connection with a claim of such Person, in an amount, together with (a) the
amount of all existing attachments, seizures, writs or distress warrants,
levies, or possessions PLUS (b) the amount of all existing judgements or claims
subject to the provisions of SECTION 8.9, is in excess of $500,000 in the
aggregate, and any such attachment, seizure, subjection to writ or distress
warrant, levy, or possession is not released or discharged within 15 days after
the occurrence thereof, (PROVIDED that Agent may maintain reserves with respect
to all such attachments, seizures, writs or
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distress warrants, levies, or possessions that affect any Collateral included
in the Borrowing Base without regard to whether an Event of Default exists
under this SECTION 8.4);
8.5 If an Insolvency Proceeding is commenced by any Obligor or any of
its Subsidiaries;
8.6 If an Insolvency Proceeding is commenced against any Obligor, or any
of its Subsidiaries, and any of the following events occur: (a) such Obligor
or the Subsidiary consents to the institution of the Insolvency Proceeding
against it; (b) the petition commencing the Insolvency Proceeding is not
timely controverted; (c) the petition commencing the Insolvency Proceeding is
not dismissed within 60 calendar days of the date of the filing thereof;
provided, however, that, during the pendency of such period, Agent (including
any successor agent) and each other member of the Lender Group shall be
relieved of its obligation to extend credit hereunder; (d) an interim trustee
is appointed to take possession of all or a substantial portion of the
properties or assets of, or to operate all or any substantial portion of the
business of, a Borrower or any of its Subsidiaries; or (e) an order for
relief shall have been issued or entered therein;
8.7 If any Obligor or any of its Subsidiaries is enjoined, restrained, or
in any way prevented by court order from continuing to conduct all or any
material part of its business affairs and such order shall remain
undischarged or unstayed for a period in excess of 30 days;
8.8 If a notice of Lien, levy, or assessment is filed of record with
respect to any of any Obligor's or any of its Subsidiaries' properties or
assets in an amount in excess of $500,000 by the United States Government, or
any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a Lien, whether xxxxxx
or otherwise, upon any of an Obligor's or any of its Subsidiaries' properties
or assets and the same is not paid within 30 days of the payment date thereof
(PROVIDED that Agent may maintain reserves with respect to all such notice of
Lien, levies, or assessments that affect any Collateral included in the
Borrowing Base without regard to whether an Event of Default exists under
this SECTION 8.8);
8.9 If a judgment or other claim becomes a Lien or encumbrance upon any
material portion of any Obligor's or any of its Subsidiaries' properties or
assets and such judgment or claim is not removed or released or stayed within
15 days of the entry of such judgment (PROVIDED that Agent may maintain
reserves with respect to all such Liens that affect any Collateral included
in the Borrowing Base without regard to whether an Event of Default exists
under this SECTION 8.9);
8.10 If there is a default (after giving effect to all waivers of and cure
periods under such material agreements) in any material agreement to which
any Obligor or any of its
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Subsidiaries is a party with one or more third Persons involving claims,
Indebtedness, or other obligations in excess of $5,000,000, and such default
(a) occurs at the final maturity of the obligations thereunder, or (b)
results in a right by such third Person(s), irrespective of whether
exercised, to accelerate the maturity of any Obligor's or any of its
Subsidiaries' obligations thereunder to terminate such agreement, or to
refuse to renew such agreement pursuant to an automatic renewal right therein;
8.11 If any Obligor or any of its Subsidiaries makes any payment on account
of Indebtedness that has been contractually subordinated in right of payment
to the payment of the Obligations, except to the extent such payment is
permitted by the terms of the subordination provisions applicable to such
Indebtedness;
8.12 If any material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to the
Lender Group by any Obligor, any of its Subsidiaries, or any officer,
employee, agent, or director of any Obligor or any of its Subsidiaries, or if
any such warranty or representation is withdrawn; or
8.13 If the obligation of any guarantor of the Obligations under its
guaranty is limited or terminated by operation of law or by the guarantor
thereunder, or any such guarantor becomes the subject of an Insolvency
Proceeding; PROVIDED, HOWEVER, the termination of the Guaranty with respect
to MCI at any time after the date on which Guitar ceases to hold 50% or more
of the issued and outstanding Stock of MCI shall not constitute an Event of
default under this SECTION 8.13.
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the
continuation, of an Event of Default, the Required Lenders (at their election
but without notice of their election and without demand) may, except to the
extent otherwise expressly provided or required below, authorize and instruct
Agent to do any one or more of the following on behalf of the Lender Group
(and Agent, acting upon the instructions of the Required Lenders, shall do
the same on behalf of the Lender Group), all of which are authorized by
Borrowers:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due
and payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrowers under this Agreement, under any of the Loan Documents;
(c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of the Lender Group, but
without affecting Agent's rights and security interests, for the benefit of
the Lender Group, in the Personal Property Collateral or the Real Property
Collateral and without affecting the Obligations;
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(d) Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Agent considers advisable,
and in such cases, Agent will credit Borrowers' Loan Account with only the
net amounts received by Agent in payment of such disputed Accounts after
deducting all Lender Group Expenses incurred or expended in connection
therewith;
(e) Cause Borrowers to hold all returned Inventory in trust
for the Lender Group, segregate all returned Inventory from all other
property of Borrowers or in a Borrower's possession and conspicuously label
said returned Inventory as the property of the Lender Group;
(f) Without notice to or demand upon any Obligor or any
guarantor, make such payments and do such acts as Agent considers necessary
or reasonable to protect its security interests in the Collateral. Each
Borrower agrees to assemble the Personal Property Collateral if Agent so
requires, and to make the Personal Property Collateral available to Agent as
Agent may designate. Each Borrower authorizes Agent to enter the premises
where the Personal Property Collateral is located, to take and maintain
possession of the Personal Property Collateral, or any part of it, and to
pay, purchase, contest, or compromise any encumbrance, charge, or Lien that
in Agent's determination appears to conflict with the Agent's Liens and to
pay all expenses incurred in connection therewith. With respect to any of a
Borrower's owned or leased premises, each Borrower hereby grants Agent a
license to enter into possession of such premises and to occupy the same,
without charge, for up to 120 days in order to exercise any of the Lender
Group's rights or remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to any Obligor (such notice being
expressly waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of Section 9505 of the
Code), set off and apply to the Obligations any and all (i) balances and
deposits of any Borrower held by the Lender Group (including any amounts
received in the Guitar Collection Accounts), or (ii) indebtedness at any time
owing to or for the credit or the account of any Borrower held by the Lender
Group;
(h) Hold, as cash collateral, any and all balances and
deposits of any Borrower held by the Lender Group, and any amounts received
in the Guitar Collection Accounts or the Concentration Accounts, to secure
the full and final repayment of all of the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Personal Property Collateral. Each Borrower hereby
grants to Agent a license or other right to use, without charge, such
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or
any property of a similar nature, as it pertains to the Personal Property
Collateral, in completing production of, advertising for sale, and selling
any Personal Property Collateral and such Borrower's rights under all
licenses and all franchise agreements shall inure to the Lender Group's
benefit;
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(j) Sell the Personal Property Collateral at either a
public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places
(including a Borrower's premises) as Agent determines is commercially
reasonable. It is not necessary that the Personal Property Collateral be
present at any such sale;
(k) Agent shall give notice of the disposition of the
Personal Property Collateral as follows:
(i) Agent shall give Borrowers and each
holder of a security interest in the Personal
Property Collateral who has filed with Agent a
written request for notice, a notice in writing of
the time and place of public sale, or, if the sale
is a private sale or some other disposition other
than a public sale is to be made of the Personal
Property Collateral, then the time on or after
which the private sale or other disposition is to
be made;
(ii) The notice shall be personally
delivered or mailed, postage prepaid, to Borrowers
as provided in SECTION 12, at least 10 days before
the date fixed for the sale, or at least 10 days
before the date on or after which the private sale
or other disposition is to be made; no notice
needs to be given prior to the disposition of any
portion of the Personal Property Collateral that
is perishable or threatens to decline speedily in
value or that is of a type customarily sold on a
recognized market. Notice to Persons other than
Borrowers claiming an interest in the Personal
Property Collateral shall be sent to such
addresses as they have furnished to Agent;
(iii) If the sale is to be a public
sale, Agent also shall give notice of the time and
place by publishing a notice one time at least 10
days before the date of the sale in a newspaper of
general circulation in the county in which the
sale is to be held;
(l) The Lender Group may credit bid and purchase at any public
sale; and
(m) The Lender Group shall have all other rights and
remedies available to it at law or in equity pursuant to any other Loan
Documents; and
(n) Any deficiency that exists after disposition of the
Personal Property Collateral as provided above will be paid immediately by
Borrowers. Any excess will be returned, without interest and subject to the
rights of third Persons, by Agent to Borrowers.
9.2 REMEDIES CUMULATIVE. The rights and remedies of the Lender Group
under this Agreement, the other Loan Documents, and all other agreements
shall be cumulative. The Lender Group shall have all other rights and
remedies not inconsistent herewith as provided under the Code, by law, or in
equity. No exercise by the Lender Group of one right or remedy shall be
deemed an election, and no waiver by the Lender Group of any
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Event of Default shall be deemed a continuing waiver. No delay by the Lender
Group shall constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If any Obligor fails to pay any monies (whether taxes,
assessments, insurance premiums, or, in the case of leased properties or
assets, rents or other amounts payable under such leases) due to third
Persons, or fails to make any deposits or furnish any required proof of
payment or deposit, all as required under the terms of this Agreement, then,
to the extent that Agent determines that such failure by such Obligor would
reasonably be expected to result in a Material Adverse Change, in its
discretion and without prior notice to the Obligors, Agent may do any or all
of the following: (a) make payment of the same or any part thereof; (b) set
up such reserves in Borrowers' Loan Account as Agent deems necessary, in its
Permitted Discretion, to protect the Lender Group from the exposure created
by such failure; or (c) obtain and maintain insurance policies of the type
described in SECTION 6.9 and take any action with respect to such policies as
Agent deems prudent, in its Permitted Discretion. Any such amounts paid by
Agent shall constitute Lender Group Expenses. Any such payments made by Agent
shall not constitute an agreement by the Lender Group to make similar
payments in the future or a waiver by the Lender Group of any Event of
Default under this Agreement. Agent need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence that the
same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Except as set forth in this Agreement and
the other Loan Documents, each Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or
renewal of accounts, documents, instruments, chattel paper, and guarantees
relating to the Obligations or the Collateral at any time held by the Lender
Group on which such Borrower may in any way be liable.
11.2 THE LENDER GROUP'S LIABILITY FOR COLLATERAL. Each Borrower hereby
agrees that: (a) so long as the Lender Group complies with its obligations,
if any, under Section 9207 of the Code and as otherwise required by law, the
Lender Group shall not in any way or manner be liable or responsible for: (i)
the safekeeping of the Collateral; (ii) any loss or damage thereto occurring
or arising in any manner or fashion from any cause other than as a result of
the gross negligence or willful misconduct of Agent, any other member of the
Lender Group, or any Lender-Related Persons; (iii) any diminution in the
value thereof; or (iv) any act or default of any carrier, warehouseman,
bailee, forwarding agency, or other third party; and (b) all risk of loss,
damage, or destruction of the Collateral shall be borne by the Obligors.
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11.3 INDEMNIFICATION. Each Obligor shall pay, indemnify, defend, and
hold the Agent-Related Persons, the Lender-Related Persons with respect to
each Lender, each Participant, and each of their respective officers,
directors, employees, counsel, agents, and attorneys-in-fact (each, an
"INDEMNIFIED PERSON") harmless (to the fullest extent permitted by law) from
and against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all reasonable attorneys fees and disbursements
and other costs and expenses actually incurred in connection therewith (as
and when they are incurred and irrespective of whether suit is brought), at
any time asserted against, imposed upon, or incurred by any of them in
connection with or as a result of or related to the execution, delivery,
enforcement, performance, and administration of this Agreement and any other
Loan Documents or the transactions contemplated herein, and with respect to
any investigation, litigation, or proceeding related to this Agreement, any
other Loan Document, or the use of the proceeds of the credit provided
hereunder (irrespective of whether any Indemnified Person is a party
thereto), or any act, omission, event or circumstance in any manner related
thereto (all the foregoing, collectively, the "INDEMNIFIED LIABILITIES"). The
Obligors shall have no obligation to any Indemnified Person under this
SECTION 11.3 with respect to any Indemnified Liability that a court of
competent jurisdiction finally determines to have resulted from the gross
negligence or willful misconduct of such Indemnified Person. This provision
shall survive the termination of this Agreement and the repayment of the
Obligations. If any Indemnified Person makes any payment to any other
Indemnified Person with respect to an Indemnified Liability for which the
Obligors were required to indemnify the Indemnified Person receiving such
payment, the Indemnified Person making such payment is entitled to be
indemnified and reimbursed by the Obligors with respect thereto.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other Loan Document
shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by registered or certified
mail (postage prepaid, return receipt requested), overnight courier, or
telefacsimile to the Administrative Borrower or the Agent, as the case may
be, at its address set forth below:
If to Administrative
Borrower or to an Obligor: GUITAR CENTER, INC.
0000 Xxxxxxxx Xxxxx
Xxxxxx Xxxxx, Xxxxxxxxxx 00000-0000
Attn: Chief Financial Officer
Fax No. 000.000.0000
with copies to: XXXXXX & XXXXXXX
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000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
Fax No. 000.000.0000
to Agent: FOOTHILL CAPITAL CORPORATION
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Business Finance Division Manager
Fax No. 000.000.0000
with copies to: XXXXXXX, PHLEGER & XXXXXXXX LLP
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxxxxx Hilson, Esq.
Fax No. 000.000.0000
The parties hereto may change the address at which they are
to receive notices hereunder, by notice in writing in the foregoing manner
given to all other parties. All notices or demands sent in accordance with
this SECTION 12, other than notices by the Lender Group in connection with
Sections 9504 or 9505 of the Code, shall be deemed received on the earlier of
the date of actual receipt or 3 days after the deposit thereof in the mail.
Each Borrower acknowledges and agrees that notices sent by the Lender Group
in connection with Sections 9504 or 9505 of the Code shall be deemed sent
when deposited in the mail or personally delivered, or, where permitted by
law, transmitted telefacsimile or other similar method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN
RESPECT OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND
THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR
RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING
IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED
AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF
LOS ANGELES, STATE OF
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CALIFORNIA, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE REQUIRED LENDERS' OPTION,
IN THE COURTS OF ANY JURISDICTION WHERE THE REQUIRED LENDERS ELECT TO BRING
SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH
BORROWER AND EACH MEMBER OF THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED
UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM
NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT
IN ACCORDANCE WITH THIS SECTION 13.
EACH BORROWER AND EACH MEMBER OF THE LENDER GROUP HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH
BORROWER AND EACH MEMBER OF THE LENDER GROUP REPRESENT THAT EACH HAS REVIEWED
THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY
OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
14.1 ASSIGNMENTS AND PARTICIPATIONS.
(a) Any Lender may assign and delegate to one or more
Eligible Transferees (each an "ASSIGNEE") all, or any ratable part of all, of
the Obligations, the Commitments and the other rights and obligations of such
Lender hereunder and under the other Loan Documents, in a minimum amount of
$2,500,000; provided, however, that Borrowers and Agent may continue to deal
solely and directly with such Lender in connection with the interest so
assigned to an Assignee until (i) written notice of such assignment, together
with payment instructions, addresses and related information with respect to
the Assignee, shall have been given to Administrative Borrower and Agent by
such Lender and the Assignee; (ii) such Lender and its Assignee shall have
delivered to Administrative Borrower and Agent an Assignment and Acceptance
in form and substance satisfactory to Agent; and (iii) the assignor Lender or
Assignee has paid to Agent for Agent's sole and separate account a processing
fee in the amount of $5,000. Anything contained herein to the contrary
notwithstanding, the consent of Agent shall not be required (and payment of
any fees shall not be required) if such assignment is in connection with any
merger, consolidation, sale, transfer, or other disposition of all or any
substantial portion of the business or loan portfolio of such Lender.
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(b) From and after the date that Agent notifies the
assignor Lender (with a copy to Agent) that it has received an executed
Assignment and Acceptance and payment of the above-referenced processing fee,
(i) the Assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, shall have the rights and obligations of a Lender
under the Loan Documents, and (ii) the assignor Lender shall, to the extent
that rights and obligations hereunder and under the other Loan Documents have
been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights (except with respect to SECTION 11.3 hereof) and be released from
its obligations under this Agreement (and in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's
rights and obligations under this Agreement and the other Loan Documents,
such Lender shall cease to be a party hereto and thereto), and such
assignment shall effect a novation between each of the Borrowers and the
Assignee.
(c) By executing and delivering an Assignment and
Acceptance, the assigning Lender thereunder and the Assignee thereunder
confirm to and agree with each other and the other parties hereto as follows:
(1) other than as provided in such Assignment and Acceptance, such assigning
Lender makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any
other Loan Document furnished pursuant hereto; (2) such assigning Lender
makes no representation or warranty and assumes no responsibility with
respect to the financial condition of Borrowers or the performance or
observance by Borrowers of any of their obligations under this Agreement or
any other Loan Document furnished pursuant hereto; (3) such Assignee confirms
that it has received a copy of this Agreement, together with such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (4) such
Assignee will, independently and without reliance upon Agent, such assigning
Lender or any other Lender, 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 action under this Agreement; (5) such Assignee
appoints and authorizes Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement as are delegated to Agent, by
the terms hereof, together with such powers as are reasonably incidental
thereto; and (6) such Assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of this Agreement are
required to be performed by it as a Lender.
(d) Immediately upon each Assignee's making its processing
fee payment under the Assignment and Acceptance and receipt and
acknowledgment by Agent of such fully executed Assignment and Acceptance,
this Agreement shall be deemed to be amended to the extent, but only to the
extent, necessary to reflect the addition of the Assignee and the resulting
adjustment of the Commitments arising therefrom. The Commitment allocated to
each Assignee shall reduce such Commitments of the assigning Lender pro tanto.
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(e) Any Lender may at any time, with the written consent of
Agent, sell to one or more commercial banks, financial institutions, or other
Persons not Affiliates of such Lender (a "PARTICIPANT") participating
interests in the Obligations, the Commitment, and the other rights and
interests of that Lender (the "ORIGINATING LENDER") hereunder and under the
other Loan Documents (provided that no written consent of Agent shall be
required in connection with any sale of any such participating interests by a
Lender to an Eligible Transferee); provided, however, that (i) the
Originating Lender's obligations under this Agreement shall remain unchanged,
(ii) the Originating Lender shall remain solely responsible for the
performance of such obligations, (iii) each Borrower, Agent, and the Lenders
shall continue to deal solely and directly with the Originating Lender in
connection with the Originating Lender's rights and obligations under this
Agreement and the other Loan Documents, (iv) no Lender shall transfer or
grant any participating interest under which the Participant has the right to
approve any amendment to, or any consent or waiver with respect to, this
Agreement or any other Loan Document, except to the extent such amendment to,
or consent or waiver with respect to this Agreement or of any other Loan
Document would (A) extend the final maturity date of the Obligations
hereunder in which such Participant is participating; (B) reduce the interest
rate applicable to the Obligations hereunder in which such Participant is
participating; (C) release all or a material portion of the Collateral or
guaranties (except to the extent expressly provided herein or in any of the
Loan Documents) supporting the Obligations hereunder in which such
Participant is participating; (D) postpone the payment of, or reduce the
amount of, the interest or fees payable to such Participant through such
Lender; or (E) change the amount or due dates of scheduled principal
repayments or prepayments or premiums; and (v) all amounts payable by
Borrowers hereunder shall be determined as if such Lender had not sold such
participation; except that, if amounts outstanding under this Agreement are
due and unpaid, or shall have been declared or shall have become due and
payable upon the occurrence of an Event of Default, each Participant shall be
deemed to have the right of set-off in respect of its participating interest
in amounts owing under this Agreement to the same extent as if the amount of
its participating interest were owing directly to it as a Lender under this
Agreement (and the rights of the Originating Lender shall be reduced by a
corresponding amount). The rights of any Participant only shall be derivative
through the Originating Lender with whom such Participant participates and no
Participant shall have any direct rights as to the other Lenders, Agent,
Borrowers, the Collections, the Collateral, or otherwise in respect of the
Obligations. No Participant shall have the right to participate directly in
the making of decisions by the Lenders among themselves.
(f) Subject to SECTION 16.17(d), in connection with any
such assignment or participation or proposed assignment or participation, a
Lender may disclose all documents and information which it now or hereafter
may have relating to Borrowers or Borrowers' business.
(g) Any other provision in this Agreement notwithstanding,
any Lender may at any time create a security interest in, or pledge, all or
any portion of its rights under and interest in this Agreement in favor of
any Federal Reserve Bank in accordance with Regulation A of the Federal
Reserve Bank or U.S. Treasury Regulation 31 CFR Section 203.14, and
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such Federal Reserve Bank may enforce such pledge or security interest in any
manner permitted under applicable law.
14.2 SUCCESSORS. This Agreement shall bind and inure to the benefit
of the respective successors and assigns of each of the parties; PROVIDED,
HOWEVER, no Borrower may assign this Agreement or any rights or duties
hereunder without the Lenders' prior written consent and any prohibited
assignment shall be absolutely void AB INITIO. No consent to assignment by
the Lenders shall release Borrowers from their Obligations prior to the date
of such assignment. A Lender may assign this Agreement and the other Loan
Documents and its rights and duties hereunder and thereunder pursuant to
SECTION 14.1 hereof and, except as expressly required pursuant to SECTION
14.1 hereof, no consent or approval by any Borrower is required in connection
with any such assignment.
15. AMENDMENTS; WAIVERS.
15.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision
of this Agreement or any other Loan Document, and no consent with respect to
any departure by any Borrower therefrom, shall be effective unless the same
shall be in writing and signed by the Required Lenders (or by Agent at the
written request of the Required Lenders) and Borrowers and then any such
waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given; PROVIDED, HOWEVER, that no such waiver,
amendment, or consent shall, unless in writing and signed by all the Lenders
and Borrowers and acknowledged by Agent, do any of the following:
(a) increase or extend the Commitment of any Lender;
(b) postpone or delay any date fixed by this Agreement or
any other Loan Document for any payment of principal, interest, fees or other
amounts due to the Lenders (or any of them) hereunder or under any other Loan
Document;
(c) reduce the principal of, or the rate of interest
specified herein on any Loan, or any fees or other amounts payable hereunder
or under any other Loan Document;
(d) change the percentage of the Commitments that is
required for the Lenders or any of them to take any action hereunder;
(e) amend SECTION 2.1(a)(x)(ii) with respect to the 85%
advance rate, SECTION 2.1(a)(y)(i) with respect to the 70% advance rate, or
SECTION 2.1(a)(y)(ii) with respect to the 80% advance rate, to increase any
such advance rate percentage to a percentage amount in excess of the
foregoing stated percentages;
(f) amend SECTION 2.2(a);
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(g) amend this Section or any provision of the Agreement
providing for consent or other action by all Lenders;
(h) release Collateral other than as permitted by
SECTION 16.12;
(i) change the definition of "Required Lenders";
(j) release any Borrower from any Obligation for the
payment of money; or
(k) amend any of the provisions of SECTION 16.
and, provided further, however, that no amendment, waiver or consent shall,
unless in writing and signed by Agent, affect the rights or duties of Agent
under this Agreement or any other Loan Document. The foregoing
notwithstanding, any amendment, modification, waiver, consent, termination,
or release of or with respect to any provision of this Agreement or any other
Loan Document that relates only to the relationship of the Lender Group among
themselves, and that does not affect the rights or obligations of Borrowers,
shall not require consent by or the agreement of Borrowers. The Lender Group
agrees that in the event the Borrowers elect to restructure their business
operations to provide for and accomplish generally the following: (i) the
conversion of Guitar to an administrative holding company through the
contribution of substantially all of its operating assets, including all of
its retail stores, to capitalize a wholly owned operating subsidiary, and
(ii) the establishment of management agreements between the holding company
and the retail operating subsidiary for the provision by the holding company
of management, finance, accounting and other administrative services to the
retail operating subsidiary, as well as to MFI, the amendment to this
Agreement to permit such restructure, whether in the form of an amendment or
an amended and restated loan and security agreement, subject to the requisite
approval of the Lender Group as provided in this SECTION 15.1, the necessity
of which is not affected by this paragraph, shall be without any amendment
fee or other charge for consent, the Borrowers being obligated only to
reimburse the Lender Group for reasonable out-of-pocket costs and expenses
incurred (including filing fees and reasonable attorneys' fees) to effectuate
the amendment.
15.2 NO WAIVERS; CUMULATIVE REMEDIES. No failure by Agent or any
Lender to exercise any right, remedy, or option under this Agreement, any
other Loan Document, or any present or future supplement hereto or thereto,
or in any other agreement between or among any Borrower and Agent or any
Lender, or delay by Agent or any Lender in exercising the same, will operate
as a waiver thereof. No waiver by Agent or any Lender will be effective
unless it is in writing, and then only to the extent specifically stated. No
waiver by Agent or the Lenders on any occasion shall affect or diminish
Agent's and each Lender's rights thereafter to require strict performance by
Borrowers of any provision of this Agreement. Agent's and each Lender's
rights under this Agreement and the other
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Loan Documents will be cumulative and not exclusive of any other right or
remedy which Agent or any Lender may have.
16. AGENT; THE LENDER GROUP.
16.1 APPOINTMENT AND AUTHORIZATION OF AGENT. Each Lender hereby
designates and appoints Foothill as its agent under this Agreement and the
other Loan Documents and each Lender hereby irrevocably authorizes Agent to
take such action on its behalf under the provisions of this Agreement and
each other Loan Document and to exercise such powers and perform such duties
as are expressly delegated to Agent by the terms of this Agreement or any
other Loan Document, together with such powers as are reasonably incidental
thereto. Agent agrees to act as such on the express conditions contained in
this Section 16. The provisions of this SECTION 16 are solely for the benefit
of Agent, and the Lenders and Borrowers shall have no rights as a third party
beneficiary of any of the provisions contained herein; PROVIDED, HOWEVER,
that certain of the provisions of SECTION 16.10, 16.11 and 16.17(d) hereof
also shall be for the benefit of Borrowers. Any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document
notwithstanding, Agent shall not have any duties or responsibilities, except
those expressly set forth herein, nor shall Agent have or be deemed to have
any fiduciary relationship with each other or any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or any other Loan Document or otherwise
exist against Agent; it being expressly understood and agreed that the use of
the word "Agent" is for convenience only, that Foothill is merely the
representatives of the Lenders, and has only the contractual duties set forth
herein. Except as expressly otherwise provided in this Agreement, Agent shall
have and may use its sole discretion with respect to exercising or refraining
from exercising any discretionary rights or taking or refraining from taking
any actions which Agent is expressly entitled to take or assert under or
pursuant to this Agreement and the other Loan Documents. Without limiting the
generality of the foregoing, or of any other provision of the Loan Documents
that provides rights or powers to Agent, Lenders agree that Agent shall have
the right to exercise the following powers as long as this Agreement remains
in effect: (a) maintain, in accordance with its customary business practices,
ledgers and records reflecting the status of the Advances, the Collateral,
the Collections, and related matters; (b) execute or file any and all
financing or similar statements or notices, amendments, renewals,
supplements, documents, instruments, proofs of claim, notices and other
written agreements with respect to the Loan Documents; (c) make Advances, for
itself or on behalf of Lenders as provided in the Loan Documents; (d)
exclusively receive, apply, and distribute the Collections as provided in the
Loan Documents; (e) open and maintain such bank accounts and lock boxes as
Agent deems necessary and appropriate in accordance with the Loan Documents
for the foregoing purposes with respect to the Collateral and the
Collections; (f) perform, exercise, and enforce any and all other rights and
remedies of the Lender Group with respect to Borrowers, the Obligations, the
Collateral, the Collections, or otherwise related to any of same as provided
in the Loan Documents; and (g) incur and pay such Lender Group
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Expenses as Agent may deem necessary or appropriate for the performance and
fulfillment of its functions and powers pursuant to the Loan Documents.
16.2 DELEGATION OF DUTIES. Except as otherwise provided in this
section, Agent may execute any of its duties under this Agreement or any
other Loan Document by or through agents, employees or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to
such duties. Agent shall not be responsible for the negligence or misconduct
of any agent or attorney-in-fact that it selects as long as such selection
was made in compliance with this section and without gross negligence or
willful misconduct.
16.3 LIABILITY OF AGENT. None of the Agent-Related Persons shall (i)
be liable for any action taken or omitted to be taken by any of them under or
in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or
willful misconduct), or (ii) be responsible in any manner to any of the
Lenders for any recital, statement, representation or warranty made by
Borrowers or any Subsidiary or Affiliate of Borrowers, or any officer or
director thereof, contained in this Agreement or in any other Loan Document,
or in any certificate, report, statement or other document referred to or
provided for in, or received by Agent under or in connection with, this
Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other
Loan Document, or for any failure of any Borrower or any other party to any
Loan Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Lender to ascertain
or to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or
to inspect the Books or properties of Borrowers or the books or records or
properties of any of Borrowers' Subsidiaries or Affiliates.
16.4 RELIANCE BY AGENT. Agent shall be entitled to rely, and shall
be fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent, or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including
counsel to any Borrower or counsel to any Lender), independent accountants
and other experts selected by Agent. Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless Agent shall first receive such advice or concurrence of the
Lenders as it deems appropriate and until such instructions are received,
Agent shall act, or refrain from acting, as it deems advisable. If Agent so
requests, it shall first be indemnified to its reasonable satisfaction by
Lenders against any and all liability and expense that may be incurred by it
by reason of taking or continuing to take any such action. Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in
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accordance with a request or consent of the Lenders and such request and any
action taken or failure to act pursuant thereto shall be binding upon all of
the Lenders.
16.5 NOTICE OF DEFAULT OR EVENT OF DEFAULT. Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event
of Default, except with respect to defaults in the payment of principal,
interest, fees, and expenses required to be paid to Agent for the account of
the Lenders, except with respect to Events of Default of which Agent has
actual knowledge, unless Agent shall have received written notice from a
Lender or Borrowers referring to this Agreement, describing such Default or
Event of Default, and stating that such notice is a "notice of default."
Agent promptly will notify the Lenders of its receipt of any such notice or
of any Event of Default of which Agent has actual knowledge. If any Lender
obtains actual knowledge of any Event of Default, such Lender promptly shall
notify the other Lenders and Agent of such Event of Default. Each Lender
shall be solely responsible for giving any notices to its Participants, if
any. Subject to SECTION 16.4, Agent shall take such action with respect to
such Default or Event of Default as may be requested by the Required Lenders
in accordance with SECTION 9; provided, however, that unless and until Agent
has received any such request, Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default
or Event of Default as it shall deem advisable.
16.6 CREDIT DECISION. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that
no act by Agent hereinafter taken, including any review of the affairs of
Borrowers and their Subsidiaries or Affiliates, shall be deemed to constitute
any representation or warranty by any Agent-Related Person to any Lender.
Each Lender represents to Agent that it has, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial
and other condition and creditworthiness of Borrowers and any other Person
(other than the Lender Group) party to a Loan Document, and all applicable
bank regulatory laws relating to the transactions contemplated hereby, and
made its own decision to enter into this Agreement and to extend credit to
Borrowers. Each Lender also represents that it will, independently and
without reliance upon any Agent-Related Person and based on such documents
and information as it shall deem appropriate at the time, continue to make
its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement and the other Loan Documents, and to make such
investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of Borrowers and any other Person (other than the Lender
Group) party to a Loan Document. Except for notices, reports and other
documents expressly herein required to be furnished to the Lenders by Agent,
Agent shall not have any duty or responsibility to provide any Lender with
any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of
Borrowers and any other
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Person party to a Loan Document that may come into the possession of any of
the Agent-Related Persons.
16.7 COSTS AND EXPENSES; INDEMNIFICATION. Agent may incur and pay
Lender Group Expenses to the extent Agent reasonably deems necessary or
appropriate for the performance and fulfillment of its functions, powers, and
obligations pursuant to the Loan Documents, including without limiting the
generality of the foregoing, court costs, reasonable attorneys fees and
expenses, costs of collection by outside collection agencies and auctioneer
fees and costs of security guards or insurance premiums paid to maintain the
Collateral, whether or not Borrowers are obligated to reimburse Agent or
Lenders for such expenses pursuant to the Loan Agreement or otherwise. Agent
is authorized and directed to deduct and retain sufficient amounts from
Collections to reimburse Agent for such out-of-pocket costs and expenses
prior to the distribution of any amounts to Lenders. In the event Agent is
not reimbursed for such costs and expenses from Collections, each Lender
hereby agrees that it is and shall be obligated to pay to or reimburse Agent
for the amount of such Lender's Pro Rata Share thereof. Whether or not the
transactions contemplated hereby are consummated, the Lenders shall indemnify
upon demand the Agent-Related Persons (to the extent not reimbursed by or on
behalf of Borrowers and without limiting the obligation of Borrowers to do
so), according to their Pro Rata Shares, from and against any and all
Indemnified Liabilities; provided, however, that no Lender shall be liable
for the payment to any Agent-Related Person of any portion of such
Indemnified Liabilities resulting solely from such Person's gross negligence
or willful misconduct. Without limitation of the foregoing, each Lender shall
reimburse Agent upon demand for such Lender's ratable share of any costs or
out-of-pocket expenses (including attorneys fees and expenses) incurred by
Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect
of rights or responsibilities under, this Agreement, any other Loan Document,
or any document contemplated by or referred to herein, to the extent that
Agent is not reimbursed for such expenses by or on behalf of Borrowers. The
undertaking in this section shall survive the payment of all Obligations
hereunder and the resignation or replacement of Agent.
16.8 AGENT IN INDIVIDUAL CAPACITY. Foothill and its Affiliates may
make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with any
Borrower and its Subsidiaries and Affiliates and any other Person (other than
the Lender Group) party to any Loan Documents as though Foothill were not
Agent hereunder, and, in each case, without notice to or consent of the
Lenders. The Lenders acknowledge that, pursuant to such activities, Foothill
or its Affiliates may receive information regarding a Borrower or its
Affiliates and any other Person (other than the Lender Group) party to any
Loan Documents that is subject to confidentiality obligations in favor of
such Borrower or such other Person and that prohibit the disclosure of such
information to the Lenders, and the Lenders acknowledge that, in such
circumstances (and
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in the absence of a waiver of such confidentiality obligations, which waiver
Agent will use its reasonable best efforts to obtain), Agent shall not be
under any obligation to provide such information to them. The terms "Lender"
and "Lenders" include Foothill in its individual capacity.
16.9 SUCCESSOR AGENT. Agent may resign as Agent upon 45 days notice
to the Lenders. If Agent resigns under this Agreement, the Required Lenders
shall appoint a successor Agent for the Lenders. If no successor Agent is
appointed prior to the effective date of the resignation of Agent, Agent may
appoint, after consulting with the Lenders, a successor Agent. If Agent has
materially breached or failed to perform any material provision of this
Agreement or of applicable law, the Required Lenders may agree in writing to
remove and replace Agent with a successor Agent from among the Lenders. In
any such event, upon the acceptance of its appointment as successor Agent
hereunder, such successor Agent shall succeed to all the rights, powers and
duties of the retiring Agent and the term "Agent" shall mean such successor
Agent and the retiring Agent's appointment, powers and duties as Agent shall
be terminated. After any retiring Agent's resignation hereunder as Agent, the
provisions of this SECTION 16 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
If no successor Agent has accepted appointment as Agent by the date which is
45 days following a retiring Agent's notice of resignation, the retiring
Agent's resignation shall nevertheless thereupon become effective and the
Lenders shall perform all of the duties of Agent hereunder until such time,
if any, as the Lenders appoint a successor Agent as provided for above.
16.10 LENDER IN INDIVIDUAL CAPACITY. Any Lender and its respective
Affiliates may make loans to, issue letters of credit for the account of,
accept deposits from, acquire equity interests in and generally engage in any
kind of banking, trust, financial advisory, underwriting or other business
with each Borrower and its Subsidiaries and Affiliates and any other Person
(other than the Lender Group) party to any Loan Documents as though such
Lender were not the agent of Agent hereunder without notice to or consent of
the Lenders. The Lenders acknowledge that, pursuant to such activities, such
Lender and its respective Affiliates may receive information regarding
Borrowers or their Affiliates and any other Person (other than the Lender
Group) party to any Loan Documents that is subject to confidentiality
obligations set forth in SECTION 16.17(d) in favor of Borrowers or such other
Person and that prohibit the disclosure of such information to the Lenders,
and the Lenders acknowledge that, in such circumstances (and in the absence
of a waiver of such confidentiality obligations, which waiver such Lender
will use its reasonable best efforts to obtain), such Lender not shall be
under any obligation to provide such information to them. With respect to the
Swing Loans and Agent Advances, Swing Lender shall have the same rights and
powers under this Agreement as any other Lender and may exercise the same as
though it were not the sub-agent of the Agent.
16.11 WITHHOLDING TAX.
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(a) If any Lender is a "foreign corporation, partnership or
trust" within the meaning of the IRC and such Lender claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the IRC, such
Lender agrees with and in favor of Agent and Borrowers, to deliver to Agent and
Borrowers:
(i) if such Lender claims an exemption from, or a reduction
of, withholding tax under a United States tax treaty, properly
completed IRS Forms 1001 and W-8 before the payment of any
interest in the first calendar year and before the payment of
any interest in each third succeeding calendar year during
which interest may be paid under this Agreement;
(ii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because
it is effectively connected with a United States trade or
business of such Lender, two properly completed and executed
copies of IRS Form 4224 before the payment of any interest is
due in the first taxable year of such Lender and in each
succeeding taxable year of such Lender during which interest
may be paid under this Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required under the
IRC or other laws of the United States as a condition to
exemption from, or reduction of, United States withholding tax.
Such Lender agrees promptly to notify Agent and Administrative Borrower of any
change in circumstances which would modify or render invalid any claimed
exemption or reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001
and such Lender sells, assigns, grants a participation in, or otherwise
transfers all or part of the Obligations of Borrowers to such Lender, such
Lender agrees to notify Agent of the percentage amount in which it is no
longer the beneficial owner of Obligations of Borrowers to such Lender. To
the extent of such percentage amount, Agent will treat such Lender's IRS Form
1001 as no longer valid.
(c) If any Lender claiming exemption from United States
withholding tax by filing IRS Form 4224 with Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of
Borrowers to such Lender, such Lender agrees to undertake sole responsibility
for complying with the withholding tax requirements imposed by Sections 1441
and 1442 of the IRC.
(d) If any Lender is entitled to a reduction in the
applicable withholding tax, Agent may withhold from any interest payment to
such Lender an amount equivalent to the applicable withholding tax after
taking into account such reduction. If the forms or other documentation
required by subsection (a) of this Section are not delivered to Agent, then
Agent may withhold from any interest payment to such Lender not providing
such forms or other documentation an amount equivalent to the applicable
withholding tax.
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(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that Agent did not
properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered, was not properly executed,
or because such Lender failed to notify Agent of a change in circumstances
which rendered the exemption from, or reduction of, withholding tax
ineffective, or for any other reason) such Lender shall indemnify Agent fully
for all amounts paid, directly or indirectly, by Agent as tax or otherwise,
including penalties and interest, and including any taxes imposed by any
jurisdiction on the amounts payable to Agent under this Section, together
with all costs and expenses (including attorneys fees and expenses). The
obligation of the Lenders under this subsection shall survive the payment of
all Obligations and the resignation or replacement of Agent.
16.12 COLLATERAL MATTERS.
(a) The Lenders hereby irrevocably authorize Agent, at its
option and in its sole discretion, to release any Lien on any Collateral (i)
upon the termination of the Commitments and payment and satisfaction in full
by Borrowers of all Obligations; (ii) constituting property being sold or
disposed of if a release is required or desirable in connection therewith and
if Administrative Borrower certifies to Agent that the sale or disposition is
permitted under SECTION 7.4 of this Agreement or the other Loan Documents
(and Agent may rely conclusively on any such certificate, without further
inquiry); (iii) constituting property in which Borrowers owned no interest at
the time the security interest was granted or at any time thereafter; or (iv)
constituting property leased to Borrowers under a lease that has expired or
is terminated in a transaction permitted under this Agreement. Except as
provided above, Agent will not execute and deliver a release of any Lien on
any Collateral without the prior written authorization of (y) if the release
is of all or substantially all of the Collateral, all of the Lenders, or (z)
otherwise, the Required Lenders. Upon request by Agent or Administrative
Borrower at any time, the Lenders will confirm in writing Agent's authority
to release any such Liens on particular types or items of Collateral pursuant
to this SECTION 16.12; provided, however, that (1) Agent shall not be
required to execute any document necessary to evidence such release on terms
that, in Agent's opinion, would expose Agent to liability or create any
obligation or entail any consequence other than the release of such Lien
without recourse, representation, or warranty, and (2) such release shall not
in any manner discharge, affect, or impair the Obligations or any Liens
(other than those expressly being released) upon (or obligations of Borrowers
in respect of) all interests retained by Borrowers, including, the proceeds
of any sale, all of which shall continue to constitute part of the Collateral.
(b) Agent shall have no obligation whatsoever to any of the
Lenders to assure that the Collateral exists or is owned by Borrowers or is
cared for, protected, or insured or has been encumbered, or that the Agent's
Liens have been properly or sufficiently or lawfully created, perfected,
protected, or enforced or are entitled to any particular priority, or to
exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent pursuant to any of the
Loan Documents, it being understood and agreed
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that in respect of the Collateral, or any act, omission or event related
thereto, subject to the terms and conditions contained herein, Agent may act
in any manner it may deem appropriate, in its sole discretion given Agent's
own interest in the Collateral in its capacity as one of the Lenders and that
Agent shall have no other duty or liability whatsoever to any Lender as to
any of the foregoing, except as otherwise provided herein.
16.13 RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF PAYMENTS.
(a) Each of the Lenders agrees that it shall not, without
the express consent of Agent, and that it shall, to the extent it is lawfully
entitled to do so, upon the request of Agent, set off against the
Obligations, any amounts owing by such Lender to Borrowers or any accounts of
Borrowers now or hereafter maintained with such Lender. Each of the Lenders
further agrees that it shall not, unless specifically requested to do so by
Agent, take or cause to be taken any action, including, the commencement of
any legal or equitable proceedings, to foreclose any Lien on, or otherwise
enforce any security interest in, any of the Collateral the purpose of which
is, or could be, to give such Lender any preference or priority against the
other Lenders with respect to the Collateral.
(b) If, at any time or times any Lender shall receive (i)
by payment, foreclosure, setoff or otherwise, any proceeds of Collateral or
any payments with respect to the Obligations arising under, or relating to,
this Agreement or the other Loan Documents, except for any such proceeds or
payments received by such Lender from Agent pursuant to the terms of this
Agreement, or (ii) payments from Agent in excess of such Lender's ratable
portion of all such distributions by Agent, such Lender promptly shall (1)
turn the same over to Agent, in kind, and with such endorsements as may be
required to negotiate the same to Agent, or in same day funds, as applicable,
for the account of all of the Lenders and for application to the Obligations
in accordance with the applicable provisions of this Agreement, or (2)
purchase, without recourse or warranty, an undivided interest and
participation in the Obligations owed to the other Lenders so that such
excess payment received shall be applied ratably as among the Lenders in
accordance with their Pro Rata Shares; provided, however, that if all or part
of such excess payment received by the purchasing party is thereafter
recovered from it, those purchases of participations shall be rescinded in
whole or in part, as applicable, and the applicable portion of the purchase
price paid therefor shall be returned to such purchasing party, but without
interest except to the extent that such purchasing party is required to pay
interest in connection with the recovery of the excess payment.
16.14 AGENCY FOR PERFECTION. Agent and each Lender hereby appoints
each other Lender as agent for the purpose of perfecting the Agent's Liens in
assets which, in accordance with Article 9 of the UCC can be perfected only
by possession. Should any Lender obtain possession of any such Collateral,
such Lender shall notify Agent thereof, and, promptly upon Agent's request
therefor shall deliver such Collateral to Agent or in accordance with Agent's
instructions.
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16.15 PAYMENTS BY AGENT TO THE LENDERS. All payments to be made by
Agent to the Lenders shall be made by bank wire transfer or internal transfer
of immediately available funds pursuant to such wire transfer instructions as
each party may designate for itself by written notice to Agent. Concurrently
with each such payment, Agent shall identify whether such payment (or any
portion thereof) represents principal, premium or interest on Advances or
otherwise.
16.16 CONCERNING THE COLLATERAL AND RELATED LOAN DOCUMENTS. Each
member of the Lender Group authorizes and directs Agent to enter into this
Agreement and the other Loan Documents relating to the Collateral, for the
benefit of the Lender Group. Each member of the Lender Group agrees that any
action taken by Agent or all Lenders, as applicable, in accordance with the
terms of this Agreement or the other Loan Documents relating to the
Collateral and the exercise by Agent or all Lenders, as applicable, of their
respective powers set forth therein or herein, together with such other
powers that are reasonably incidental thereto, shall be binding upon all of
the Lenders.
16.17 FIELD AUDITS AND EXAMINATION REPORTS; CONFIDENTIALITY;
DISCLAIMERS BY LENDERS; OTHER REPORTS AND INFORMATION.
By signing this Agreement, Agent (with respect to clause (d)
below only) and each Lender:
(a) is deemed to have requested that Agent furnish such
Lender, promptly after it becomes available, a copy of each field audit or
examination report (each a "REPORT" and collectively, "REPORTS") prepared by
Agent, and Agent shall so furnish each Lender with such Reports;
(b) expressly agrees and acknowledges that Agent does not
(i) make any representation or warranty as to the accuracy of any Report, and
(ii) shall not be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are
not comprehensive audits or examinations, that Agent or other party
performing any audit or examination will inspect only specific information
regarding Borrowers and will rely significantly upon the Books, as well as on
representations of Borrowers' personnel;
(d) agrees to keep, and, as to Agent, to cause all
Agent-Related Persons, and as to each Lender, to cause all Lender-Related
Persons of such Lender, to keep, all Reports and other material, non-public
information regarding each Borrower and its Subsidiaries and their
operations, assets, and existing and contemplated business plans in a
confidential manner; it being understood and agreed by Borrowers that in any
event such Lender may make disclosures (a) to the extent necessary to counsel
for and other advisors, accountants, and auditors to such Lender, (b)
reasonably required by any bona fide potential or actual Assignee,
transferee, or Participant in connection with any contemplated or actual
assignment or transfer by such Lender of an interest herein or any
participation interest in
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such Lender's rights hereunder, (c) of information that has become public by
disclosures made by Persons other than such Lender, its Affiliates,
assignees, transferees, or participants, or (d) to the extent required or
requested by any court, governmental or administrative agency, pursuant to
any subpoena or other legal process, or by any law, statute, regulation, or
court order; provided, however, that, unless prohibited by applicable law,
statute, regulation, or court order, such Lender shall notify Administrative
Borrower of any request by any court, governmental or administrative agency,
or pursuant to any subpoena or other legal process for disclosure of any such
non-public material information concurrent with, or where practicable, prior
to the disclosure thereof; and
(e) without limiting the generality of any other
indemnification provision contained in this Agreement, agrees: (i) to hold
Agent and any such other Lender preparing a Report harmless from any action
the indemnifying Lender may take or conclusion the indemnifying Lender may
reach or draw from any Report in connection with any loans or other credit
accommodations that the indemnifying Lender has made or may make to
Borrowers, or the indemnifying Lender's participation in, or the indemnifying
Lender's purchase of, a loan or loans of Borrowers; and (ii) to pay and
protect, and indemnify, defend and hold Agent, and any such other Lender
preparing a Report harmless from and against, the claims, actions,
proceedings, damages, costs, expenses and other amounts (including, attorney
costs) incurred by Agent and any such other Lender preparing a Report as the
direct or indirect result of any third parties who might obtain all or part
of any Report through the indemnifying Lender.
In addition to the foregoing: (x) Any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by Borrowers to Agent that has not been contemporaneously
provided by Borrowers to such Lender, and, upon receipt of such request,
Agent shall provide a copy of same to such Lender promptly upon receipt
thereof from Borrowers; (y) To the extent that Agent is entitled, under any
provision of the Loan Documents, to request additional reports or information
from Borrowers, any Lender may, from time to time, reasonably request Agent
to exercise such right as specified in such Lender's notice to Agent,
whereupon Agent promptly shall request of Administrative Borrower the
additional reports or information specified by such Lender, and, upon receipt
thereof from Administrative Borrower, Agent promptly shall provide a copy of
same to such Lender; and (z) Any time that Agent renders to Borrowers a
statement regarding the Loan Account, Agent shall send a copy of such
statement to each Lender.
16.18 SEVERAL OBLIGATIONS; NO LIABILITY. Notwithstanding that
certain of the Loan Documents now or hereafter may have been or will be
executed only by or in favor of Agent in its capacity as such, and not by or
in favor of the Lenders, any and all obligations on the part of Agent (if
any) to make any credit available hereunder shall constitute the several (and
not joint) obligations of the respective Lenders on a ratable basis,
according to their respective Commitments, to make an amount of such credit
not to exceed, in principal amount, at any one time outstanding, the amount
of their respective Commitments. Nothing contained herein shall confer upon
any Lender any interest in, or subject any Lender to any liability for, or in
respect of, the business, assets, profits, losses, or
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liabilities of any other Lender. Each Lender shall be solely responsible for
notifying its Participants of any matters relating to the Loan Documents to
the extent any such notice may be required, and no Lender shall have any
obligation, duty, or liability to any Participant of any other Lender. Except
as provided in SECTION 16.7, no member of the Lender Group shall have any
liability for the acts or any other member of the Lender Group. No Lender
shall be responsible to Borrowers or any other Person for any failure by any
other Lender to fulfill its obligations to make credit available hereunder,
nor to advance for such other Lender or on its behalf in connection with its
Commitment, nor to take any other action on its behalf hereunder or in
connection with the financing contemplated herein.
16.19 LEGAL REPRESENTATION OF AGENT. In connection with the
negotiation, drafting, and execution of this Agreement and the other Loan
Documents, or in connection with future legal representation relating to loan
administration, amendments, modifications, waivers, or enforcement of
remedies, Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP ("XXXXXXX") only has represented
and only shall represent Foothill in its capacity as Agent and as a Lender.
Each other Lender hereby acknowledges that Xxxxxxx does not represent any
other Lender in connection with any such matters.
16.20 DOCUMENTATION AGENT.
Notwithstanding the provisions of this Agreement or any
of the other Loan Documents, BBRF (in its capacity as Documentation Agent as
opposed to its capacity as a Lender) shall have no powers, rights, duties,
responsibilities, or liabilities with respect to this Agreement and the other
Loan Documents nor shall BBRF have or be deemed to have any fiduciary
relationship with any Lender.
17. GENERAL PROVISIONS.
17.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by each Borrower and each member of the Lender Group
whose signature is provided for on the signature pages hereof.
17.2 SECTION HEADINGS. Headings and numbers have been set forth
herein for convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire Agreement.
17.3 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against the Lender Group or
Borrowers, whether under any rule of construction or otherwise. On the
contrary, this Agreement has been reviewed by all parties and shall be
construed and interpreted according to the ordinary meaning of the words used
so as to fairly accomplish the purposes and intentions of all parties hereto.
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17.4 SEVERABILITY OF PROVISIONS. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the
purpose of determining the legal enforceability of any specific provision.
17.5 AMENDMENTS IN WRITING. Except as set forth in SECTION 15.1,
this Agreement can only be amended by a writing signed by Agent, the Required
Lenders, and each Borrower.
17.6 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to
be an original, and all of which, when taken together, shall constitute but
one and the same Agreement. Delivery of an executed counterpart of this
Agreement by telefacsimile shall be equally as effective as delivery of an
original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability,
and binding effect of this Agreement. The foregoing shall apply to each other
Loan Document mutatis mutandis.
17.7 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. ` If the incurrence
or payment of the Obligations by Borrowers or any guarantor of the
Obligations or the transfer by either or both of such parties to the Lender
Group of any property of either or both of such parties should for any reason
subsequently be declared to be void or voidable under any state or federal
law relating to creditors' rights, including provisions of the Bankruptcy
Code relating to fraudulent conveyances, preferences, and other voidable or
recoverable payments of money or transfers of property (collectively, a
"VOIDABLE TRANSFER"), and if the Lender Group is required to repay or
restore, in whole or in part, any such Voidable Transfer, or elects to do so
upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that the Lender Group is required or elects
to repay or restore, and as to all reasonable costs, expenses, and attorneys
fees of the Lender Group related thereto, the liability of Borrowers or such
guarantor automatically shall be revived, reinstated, and restored and shall
exist as though such Voidable Transfer had never been made.
17.8 INTEGRATION. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to
the transactions contemplated hereby and shall not be contradicted or
qualified by any other agreement, oral or written, before the date hereof.
17.9 GUITAR AS AGENT FOR BORROWERS. Each Borrower hereby irrevocably
appoints Guitar as the borrowing agent and attorney-in-fact for such Borrower
(the "ADMINISTRATIVE BORROWER") which appointment shall remain in full force
and effect unless and until Agent shall have received prior written notice
signed by each Borrower that such appointment has been revoked and that
another Borrower has been appointed Administrative Borrower. Each
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Borrower hereby irrevocably appoints and authorizes the Administrative
Borrower (i) to provide Agent with all notices with respect to Advances and
Letters of Credit obtained for the benefit of any Borrower and all other
notices and instructions under this Agreement and (ii) to take such action as
the Administrative Borrower deems appropriate on its behalf to obtain
Advances and Letters of Credit and to exercise such other powers as are
reasonably incidental thereto to carry out the purposes of this Agreement. It
is understood that the handling of the Loan Account and Collateral of
Borrowers in a combined fashion, as more fully set forth herein, is done
solely as an accommodation to Borrowers in order to utilize the collective
borrowing powers of Borrowers in the most efficient and economical manner and
at their request, and that Lender Group shall not incur liability to any
Borrower as a result hereof. Each Borrower expects to derive benefit,
directly or indirectly, from the handling of the Loan Account and the
Collateral in a combined fashion since the successful operation of each
Borrower is dependent on the continued successful performance of the
integrated group. To induce Lender Group to do so, and in consideration
thereof, each Borrower hereby jointly and severally agrees to indemnify
Lender Group and hold Lender Group harmless against any and all liability,
expense, loss or claim of damage or injury, made against Lender Group by any
Borrower or by any third party whosoever, arising from or incurred by reason
of (a) the handling of the Loan Account and Collateral of Borrowers as herein
provided, (b) Lender Group's relying on any instructions of the
Administrative Borrower, or (c) any other action taken by Lender Group
hereunder or under the other Loan Documents, except that Borrowers will have
no liability to the relevant Agent-Related Person or Lender-Related Person
under this SECTION 17.9 with respect to any liability that has been finally
determined by a court of competent jurisdiction to have resulted solely from
the gross negligence or willful misconduct of such Agent-Related Person or
Lender-Related Person, as the case may be.
[Signature page to follow.]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the date first above written.
GUITAR CENTER, INC.,
a Delaware corporation
By:___________________________
Title:
MUSICIAN'S FRIEND, INC.,
a Delaware corporation
By:___________________________
Title:
FOOTHILL CAPITAL CORPORATION,
a California corporation, as Agent and as a Lender
By:___________________________
Title:
WIRING INSTRUCTIONS:
THE CHASE MANHATTAN BANK
NEW YORK, NY
ABA# 000000000
CREDIT: FOOTHILL CAPITAL CORPORATION
ACCOUNT NO. 323-266193
REFERENCE: FOR THE BENEFIT OF GUITAR CENTER, INC.
BANKBOSTON RETAIL FINANCE INC,
a Delaware corporation, as Documentation Agent and as a
Lender
By:___________________________
Title:
WIRING INSTRUCTIONS:
ABA#
ACCOUNT NO.
ACCOUNT NAME:
-S-1-
REFERENCE:
-S-2-
