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WEI ACQUISITION CO.
Trade Creditors
________________________________________
INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT
________________________________________
Dated as of January 31, 1997
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TABLE OF CONTENTS
Page
SECTION 1 DEFINITIONS . . . . . . . . . . . . . . . . . .2
1.1 Defined Terms . . . . . . . . . . . . . .2
1.2 Other Definitional Provisions . . . . . .3
SECTION 2 THE COLLATERAL AGENT. . . . . . . . . . . . . .3
2.1 Appointment . . . . . . . . . . . . . . .3
2.2 Control by the Collateral
Agent and Required Trade
Creditors . . . . . . . . . . . . . . . .4
SECTION 3 NEW TRADE CREDITORS . . . . . . . . . . . . . . 5
SECTION 4 MANNER OF DISTRIBUTIONS . . . . . . . . . . . . 5
4.1 Distributions of Proceeds Upon
Exercise of Remedies. . . . . . . . . . . 5
SECTION 5 RELEASE OF COLLATERAL; TERMINATION
OF SECURITY AGREEMENT. . . . . . . . . . . . . .6
SECTION 6 CONCERNING THE COLLATERAL AGENT. . . . . . . . .7
6.1 Absence of Duties Not Specified, etc. . . 7
6.2 Reliance by Collateral Agent. . .. . .. .7
6.3 Default Notices . . . . . . . . . . . . . .8
6.4 Rights to Conduct Ordinary Business.. . . .8
6.5 Failure to Act. . . . . . . . . . . . . . .8
6.6 Resignation or Removal of Collateral
Agent. . . . . . . . . . . . . . . . . .. .8
6.7 Additional or Separate Agents . . . . . .. 9
SECTION 7 COVENANTS OF THE COMPANY. . . . . . . . . . . . .9
7.1 Payment of Expenses and Taxes . . . . . . .9
7.2 Indemnity . . . . . . . . . . . . . . . . 10
7.3 Additional Secured Obligations . . . . . 10
7.4 Survival. . . . . . . . . . . . . . .. . 10
SECTION 8 MISCELLANEOUS . . . . . . . . . . . . . . . . . 10
8.1 Indemnification . . . . . . . . . . . . . 10
8.2 Expenses as Obligations . . . . . . . .. .11
8.3 Governing Law . . . . . . . . . . . . . ..11
8.4 Survival of Representations,
Warranties and Covenants. . . . . . . . . 11
8.5 Counterparts. . . . . . . . . . . . . . . 11
8.6 Successors and Assigns. . . . . . . . . ..11
8.7 Table of Contents and Headings. . . . . . 11
8.8 WAIVER OF JURY TRIAL. . . . . . . . . . . 11
8.9 Severability. . . . . . . . . . . . . . . 12
8.10 Entire Agreement. . . . . .. .. . . . .. 12
8.11 Amendments, Etc.. . . . . . . . . . . . . .12
8.12 Waiver. . . . . . . . . . . . . . . . . . .12
8.13 Notices and Distribution. . . . . . . . . .12
8.14 Benefit of Covenants. . . . . . . . . . .. 13
INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT
INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT (the "Agreement"),
dated as of January 31, 1997, among WEI ACQUISITION CO., a Delaware
corporation (which will change its name to Wherehouse Entertainment,
Inc.) (the "Company"), each of the TRADE CREDITORS listed on the signature
pages hereof (the "Trade Creditors"), and UNITED STATES TRUST COMPANY
OF NEW YORK, in its capacity as collateral agent for the Trade Creditors.
Capitalized terms used herein without other definition have the
respective meanings assigned or referred to in Section 1.
W I T N E S S E T H:
WHEREAS, WEI Acquisition Co. ("Borrower") has acquired substantially
all of the assets of Wherehouse Entertainment, Inc. and WEI Holdings, Inc.,
debtors and debtors-in- possession, Delaware corporations ("Sellers")
pursuant to that certain Asset Purchase Agreement dated January 31, 1997
between Borrower and Sellers (the "Asset Purchase Agreement"). The terms
of the Asset Purchase Agreement have been approved pursuant to the terms
of the Confirmation Plan and the Confirmation Order (as hereinafter
defined); and
WHEREAS, Borrower and the Trade Creditors have entered into certain
agreements, documents and instruments pursuant to which the Trade Creditors
have agreed to extend certain trade financing to Borrower on the terms and
conditions set forth therein and, as a condition to such trade financing,
Borrower has granted security interests in certain Collateral to the
Collateral Agent for the benefit of the Trade Creditors pursuant to that
certain Security Agreement of even date herewith (the "Security Agreement");
and
WHEREAS, Congress Financial Corporation (Western) ("Congress") and
Borrower have entered into various agreements, including that certain Loan
and Security Agreement and other agreements, documents and instruments, of
even date herewith, as amended or modified from time to time
(collectively, the "Senior Loan Agreement"), pursuant to which
Congress has agreed to extend certain loans and financial
accommodations to Borrower, and, as a condition to such facility,
Borrower has granted security interests in certain Collateral to
Congress; and
WHEREAS, the Collateral Agent, the Trade Creditors and Congress
have entered into that certain Intercreditor and Subordination Agreement,
of even date herewith (the "Congress Intercreditor Agreement") relating
to the parties' respective interests in Collateral of Borrower; and
WHEREAS, the Trade Creditors desire to approve the Collateral Agent
and agree upon the parties' respective rights in and to the Collateral,
subject to the security interest of the Collateral Agent.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1
DEFINITIONS
1.1 Defined Terms. All capitalized terms used herein and not
otherwise defined herein shall have the meaning assigned to such terms
in the Security Agreement. For purposes of this Agreement, the following
terms shall have the following respective meanings:
"Accelerated Secured Principal" shall mean any Secured Principal
which shall have been declared or become due and payable prior to its
scheduled maturity because of an Event of Default.
"Affiliate" of any Person shall mean such Person, any subsidiary
of such Person, and any entity directly or indirectly controlled by or
under common control with such Person, including without limitation any
entity in which such Person holds, directly or indirectly, 20% or more of
the voting securities or other equity interests.
"Agreement" shall mean this Intercreditor and Collateral Agency
Agreement, including all and any amendments hereto and modifications hereof
and all schedules and exhibits hereto and thereto.
"Acceptance Instrument" shall mean an agreement entered into by a
prospective Secured Creditor substantially in the form of Exhibit A hereto.
"Business Day" shall mean each day other than Saturdays, Sundays and
each day on which national banking institutions in California are permitted
or required to be closed.
"Collateral Agent" shall mean United States Trust Company of New York,
solely in its role as collateral agent for the Trade Creditors under this
Agreement, or any successor collateral agent hereunder.
"Company" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Confirmation Order" means the Findings of Fact, Conclusions of
Law and Order Confirming Debtors' First Amended Chapter 11 Plan Under
Chapter 11 of the Bankruptcy Code dated January 7, 1997 and entered in
the Bankruptcy Case.
"Confirmation Plan" means the Debtors' First Amended Chapter 11
Plan in the Bankruptcy Case, dated September 26, 1996, as revised for
Technical Corrections on October 4, 1996 and Supplemental Amendments on
December 2, 1996 and December 13, 1996.
"Congress Intercreditor Agreement" shall have the meaning set
forth in the recitals.
"Event of Default" shall mean any event or condition which,
under the terms of any agreement with a Trade Creditor, allows such Trade
Creditor to accelerate the obligations of the Company thereunder.
"Indemnified Liabilities" shall have the meaning set forth in
Section 9.3 hereof.
"Lien" shall mean any mortgage, lien, pledge, charge, lease,
claim, security interest or encumbrance of any kind, including, without
limitation, the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement.
"Obligations" shall mean all obligations and liabilities of
the Company the payment or performance of which is secured or is purported
to be secured under the Security Agreement.
"Person" shall mean any individual, corporation, partnership,
trust, joint venture, unincorporated association or other enterprise or
any government or any agency, instrumentality or political subdivision
thereof.
"Required Trade Creditors" shall mean Trade Creditors that
have extended trade credit in a principal amount at least equal to 66.6%
in dollar amount of the aggregate trade credit then extended by all Trade
Creditors.
"Security Agreement" shall have the meaning set forth in the
recitals.
"Secured Principal" shall mean at any time the principal amount
of trade credit extended by the Trade Creditors.
1.2 Other Definitional Provisions.
(a) Definitions hereunder shall be equally applicable to the
singular and plural forms of the terms defined.
(b) The words "include," "includes" and "including" shall
be deemed to be followed by the words "without limitation" unless the
context otherwise requires.
(c) References to any Person shall include a reference to
such Person's permitted successors and assigns.
SECTION 2
THE COLLATERAL AGENT
2.1 Appointment. The Trade Creditors appoint and authorize
United States Trust Company of New York (or its successor as appointed
hereunder) to act as collateral agent hereunder with such powers as are
specifically granted to the Collateral Agent by the terms of this Agreement
or by the Security Agreement. The Collateral Agent accepts the
appointment contained in the preceding sentence and agrees to
serve as "Collateral Agent" hereunder and as "Secured Party"
under the Security Agreement. The Collateral Agent shall be
entitled to all of the benefits and immunities set forth herein.
2.2 Control by the Collateral Agent and Required Trade
Creditors.
(a) Subject to the provisions of this Section 2.2 and of
Section 6.5 hereof and the Congress Intercreditor Agreement, the
Collateral Agent shall take only those actions (i) which it is expressly
required to take by the terms of this Agreement; or (ii) as it may from
time to time be directed in writing by the Required Trade Creditors,
such direction to be evidenced by an instrument or instruments in
writing executed by the Required Trade Creditors and delivered to
the Collateral Agent. Notwithstanding the provisions of clause
(ii) above, the Collateral Agent may in its discretion refrain
from acting pursuant to any directions from the Required Trade
Creditors unless and until it shall have received an opinion of
counsel, reasonably satisfactory to it, to the effect that such
direction in not in conflict with the terms of this Agreement,
the Security Agreement, the Congress Intercreditor Agreement or
law. The Collateral Agent shall be under no obligation to
request or obtain such an opinion of counsel and shall be fully
protected if it acts or refrains from acting as instructed by the
Required Trade Creditors. Any action taken by or failure to act
of the Collateral Agent pursuant to directions given to the
Collateral Agent in accordance with this Section 2.2(a) shall be
binding on all Trade Creditors.
(b) The Collateral Agent shall maintain a list of the names
and addresses for notices of all Trade Creditors and shall provide such
list on request to any Trade Creditor.
(c) Any direction by the Required Trade Creditors shall state
the principal amount of trade credit extended by each such Trade Creditor
providing such direction. The Company will supply to the Collateral
Agent upon request a schedule of the Trade Credit then extended by each
Trade Creditor and the aggregate Trade Credit then extended by all Trade
Creditors, upon which the Collateral Agent shall be entitled to
rely except to the extent any Trade Creditor states that its
Trade Credit differs from such schedule.
SECTION 3
NEW TRADE CREDITORS
The Company may, from time to time, request that additional trade
creditors of the Company be added as Trade Creditors hereunder and
entitled to the benefits of this Agreement. Such request shall be in
writing delivered to the Collateral Agent and each Trade Creditor, and
shall include a representation that the proposed Trade Creditor has
extended to the Company open trade credit in an amount not less than
$250,000. Upon receipt of such notice, and upon execution by the
proposed Trade Creditor of an Acceptance Instrument and delivery
thereof to the Collateral Agent, such Person shall be deemed to
be a Trade Creditor for all purposes of this Agreement and the
Security Agreement, and shall have all of the rights and shall be
bound by all of the obligations of a Trade Creditor hereunder and
a Secured Party under the Security Agreement.
SECTION 4
MANNER OF DISTRIBUTIONS
4.1 Distributions of Proceeds Upon Exercise of Remedies. The
proceeds of any collection, sale or other realization of all or any part
of the Collateral, and of all proceeds of the enforcement of any Lien
created under the Security Agreement, shall be applied in the following
order of priority:
FIRST: To the Collateral Agent in an amount equal
to the fees, indemnities, costs and expenses incurred by
the Collateral Agent in the taking of any actions
required by or pursuant to this Agreement, the Security
Agreement, or the Congress Intercreditor Agreement
including, without limitation, reasonable compensation
for and expenses of the Collateral Agent's
representatives and counsel, and all charges, expenses,
liabilities and advances incurred or made by the
Collateral Agent whether provided for under the Security
Agreement, this Agreement or otherwise;
SECOND: To the Trade Creditors in an aggregate
amount equal to the sum of the unpaid interest incurred
through the date of such distribution, provided that if
such proceeds (after distribution of a portion thereof as
provided in paragraph FIRST of this Section 4.1) shall be
insufficient to pay in full such aggregate amount owed to
the Trade Creditors, then such payment shall be made to
each Trade Creditor on a pro rata basis in the proportion
the respective amounts of such interest owed to each
Trade Creditor on such date bear to the total amount of
such interest then owed;
THIRD: To the Trade Creditors in an aggregate
amount equal to the sum of the then unpaid principal
amount of trade credit then extended as of the date of
such distribution, provided that if such proceeds (after
distribution of a portion thereof as provided in
paragraphs FIRST and SECOND of this Section 4.1) shall be
insufficient to pay in full such aggregate amount owed to
the Trade Creditors, then such payment shall be made to
each Trade Creditor on a pro rata basis in the proportion
the outstanding principal amount of its Loans or the
outstanding principal amount of its trade credit extended
on such date bear to the total outstanding principal
amount of trade credit then owed to the Trade Creditors;
and
FOURTH: Any surplus then remaining to the Company
or the Person who may be lawfully entitled to receive the
same or as a court of competent jurisdiction may direct.
4.2 Address for Distributions. All distributions under
Section 4.1 to be made by the Collateral Agent to any Trade
Creditor shall be made to it at its address for payments set forth
on the signature page hereto or in the applicable Acceptance
Instrument, or as otherwise have been stated by notice in writing
by such Trade Creditor to the Collateral Agent.
4.3 Outstanding Trade Credit. Prior to making any
distribution under Section 4.1 or at such other time or times as is
deemed advisable in its sole discretion by the Collateral Agent,
the Collateral Agent may request an officer's certificate from each
Trade Creditor setting forth the aggregate amount owed to such
Trade Creditor, and may request from the Company an officer's
certificate setting forth the amount owed to each Trade Creditor.
The Collateral Agent shall be entitled to conclusively rely on the
amount provided by each Trade Creditor. If any Trade Creditor
fails to provide such officer's certificate within 10 days of the
request therefor, the Collateral Agent shall be entitled to rely
upon the officer's certificate of the Company with respect to such
Trade Creditor.
SECTION 5
RELEASE OF COLLATERAL;
TERMINATION OF SECURITY AGREEMENT
Except as expressly provided herein, without the prior written
consent of all of the Trade Creditors, the Collateral Agent shall
not consent to or permit the termination of the Lien of the
Security Agreement or the release of any of the Collateral from any
such Lien except for sales or returns of Collateral in the ordinary
course of business. The Collateral Agent may release its Lien on
all or any portion of the Collateral (i) upon the written request
of the Company, which request will be provided simultaneously by
the Company to each Trade Creditor; (ii) receipt by the Collateral
Agent of a direction in writing by the Trade Creditors holding
66.6% of the trade credit to the Company extended by the Trade
Creditors to release said Lien; and (iii) if the Collateral Agent
has not received written notice from any Trade Creditor that an
Event of Default has occurred and is continuing or would exist as
a result of such release. In such case the Collateral Agent shall
execute for recordation in public offices, at the expense of the
Company, such instrument or instruments in writing as reasonably
shall be requested by the Company in order to release the Lien of
the Security Agreement as to, and to make clear upon public records
the Company's title to, all or such portion of the Collateral under
the law of any jurisdiction. After the conditions set forth in
this Section 5 have been satisfied as to all of the Collateral,
title to all Collateral shall vest in the Company, free and clear
of any Lien of the Collateral Agent. Any direction by the Trade
Creditors under this Section 5 shall comply with Section 2.2(c)
hereof.
SECTION 6
CONCERNING THE COLLATERAL AGENT
The Collateral Agent shall be entitled to the rights and
privileges set forth in this Section 6.
6.1 Absence of Duties Not Specified, etc.
(a) The Collateral Agent (which term as used in this sentence
and in Section 6.4 hereof shall include reference to its officers,
directors, employees, agents, Affiliates and its Affiliates'
officers, directors, employees and agent(s)) (i) shall have no
duties or responsibilities except those expressly set forth in this
Agreement, in the Security Agreement, and the Congress
Intercreditor Agreement and shall not by reason of this Agreement,
the Security Agreement or the Congress Intercreditor Agreement, be
a trustee for any Trade Creditor; (ii) shall not be responsible to
any Trade Creditor for any recitals, statements, representations or
warranties contained in this Agreement, the Security Agreement or
the Congress Intercreditor Agreement or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this
Agreement, or the Security Agreement or the Collateral thereunder
(other than the due authorization of the Collateral Agent to
execute this Agreement or the Security Agreement) or for any
failure by the Company or any Person other than the Collateral
Agent to perform any of its obligations hereunder or thereunder;
and (iii) shall not be responsible for any action taken or omitted
to be taken by it hereunder, except for its own gross negligence or
willful misconduct.
(b) The Collateral Agent may consult with counsel,
accountants and other skilled Persons selected by it in good faith
prior to taking any act or refraining to act under this Agreement,
the Security Agreement and the Congress Intercreditor Agreement,
and shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the advice or opinion of any
such counsel, accountant or other skilled Person so long as such
advice or opinion is within the scope of such Person's professional
competence.
(c) The Collateral Agent may employ agents and attorneys-in-
fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by the Collateral
Agent except to the extent such selection is the result of gross
negligence or willful misconduct of the Collateral Agent.
(d) The obligations of the Collateral Agent hereunder are
only those expressly set forth herein, in the Security Agreement
and in the Congress Intercreditor Agreement. Without limiting the
generality of the foregoing and subject to the provisions of
Section 2.2, the Collateral Agent shall not be required to take any
action with respect to any Event of Default unless it receives a
written direction from the Required Trade Creditors.
6.2 Reliance by Collateral Agent. The Collateral Agent shall
be entitled to rely conclusively upon any certification, notice or
other communication (including any thereof by telephone, telecopy,
telex, telegram or cable) believed by it in good faith to be
genuine and correct and to have been signed or sent by or on behalf
of the proper Person or Persons, and upon advice and statements of
legal counsel, independent accountants and other experts selected
by the Collateral Agent. The Collateral Agent shall in all cases
be fully protected in acting, or in refraining from acting,
hereunder in accordance with written instructions signed by the
Required Trade Creditors and such instructions and any action taken
or failure to act pursuant thereto shall be binding on all of the
Trade Creditors. The Collateral Agent shall be entitled to rely
conclusively upon an officer's certificate of a Trade Creditor as
to the principal amount of trade credit then outstanding to that
Trade Creditor and, in the absence of such certificate, shall be
entitled to rely upon a certificate of an officer of the Company as
to the principal amount of any such trade credit then outstanding.
6.3 Default Notices. The Collateral Agent shall not be
deemed to have knowledge of the occurrence of an Event of Default
unless the Collateral Agent has received a written notice of such
Event of Default from a Trade Creditor or the Company. If the
Collateral Agent receives such a written notice of such Event of
Default, the Collateral Agent shall give prompt notice thereof to
the Trade Creditors.
6.4 Rights to Conduct Ordinary Business. The Collateral
Agent and its Affiliates may (without having to account therefor to
any Trade Creditor) accept deposits from, lend money to, act as
warrant, stock exchange or distribution agent for and generally
engage in any kind of banking, trust or other business with the
Company and any of its Affiliates as if it were not acting as the
Collateral Agent.
6.5 Failure to Act. The Collateral Agent shall in all cases
be fully justified in failing or refusing to act under this
Agreement, the Security Agreement and the Congress Intercreditor
Agreement unless it shall have received assurances to its
satisfaction from the Trade Creditors of their indemnification
obligations under Section 8.1 hereof in respect of any liability
and expense which may be incurred by the Collateral Agent by reason
of taking or continuing to take any such action.
6.6 Resignation or Removal of Collateral Agent. Subject to
the appointment and acceptance of a successor Collateral Agent as
provided below, the Collateral Agent may resign at any time by
giving at least 30 days' written notice thereof to the Trade
Creditors and the Company, such resignation to be effective upon
the acceptance of the position of Collateral Agent by a successor
Collateral Agent. The Collateral Agent may be removed at any time
with or without cause by written notice from the Required Trade
Creditors, and shall be so removed at any time the Collateral Agent
ceases to be the Secured Party under the Security Agreement. Upon
any such resignation or removal, the Required Trade Creditors shall
have the right to appoint a successor Collateral Agent which shall
be a bank or trust company selected by the Required Trade Creditors
and, so long as no Default shall have occurred and be continuing,
reasonably acceptable to the Company, if there be such an
institution willing, able and legally qualified to perform the
duties of the Collateral Agent hereunder upon reasonable or
customary terms. If, within 90 days of notice of resignation of
the Collateral Agent, a successor Collateral Agent shall not have
been appointed, the Collateral Agent may petition a court of
competent jurisdiction for the appointment of a successor
Collateral Agent. Upon the acceptance of any appointment as
Collateral Agent hereunder by a successor Collateral Agent, such
successor Collateral Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the
resigning or removed Collateral Agent, and the resigning or removed
Collateral Agent shall be discharged from its duties and
obligations hereunder. After any resigning or removed Collateral
Agent's resignation or removal hereunder as Collateral Agent, the
provisions of this Section 6 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by
it while it was acting as the Collateral Agent. Any successor
Collateral Agent shall also be appointed as successor Secured Party
under the Security Agreement.
6.7 Additional or Separate Agents. At any time or times, in
order to comply with any legal requirement in any jurisdiction, the
Collateral Agent may appoint another bank or trust company or one
or more other persons, either to act as co-agent or co-agents,
jointly with the Collateral Agent, or to act as separate agent or
agents on behalf of the Trade Creditors, or subclasses thereof,
with such power and authority as may be necessary for the effectual
operation of the provisions hereof and may be specified in the
instrument of appointment (which may, in the discretion of the
Collateral Agent, include provisions for the protection of such co-
agent or separate agent similar to the provisions of this Section
6).
6.8 Authorization. The Collateral Agent is duly authorized
to (a) act on behalf of the Trade Creditors in accordance with the
terms of this Agreement, (b) execute and deliver the Security
Agreement and the Congress Intercreditor Agreement and (c) perform
in accordance with the terms of this Agreement, the Security
Agreement and the Congress Intercreditor Agreement.
SECTION 7
COVENANTS OF THE COMPANY
7.1 Payment of Expenses and Taxes. The Company will:
(a) pay or reimburse the Collateral Agent for all of its
reasonable out-of-pocket costs and expenses incurred in connection
with the preparation, execution and delivery of, and any amendment,
consent or waiver, supplement or modification to, this Agreement,
the Security Agreement, and the Congress Intercreditor Agreement
and other documents prepared in connection with this Agreement, the
Security Agreement, and the Congress Intercreditor Agreement and
the consummation of the transactions contemplated by this
Agreement, the Security Agreement, and the Congress Intercreditor
Agreement, including the fees and disbursements of counsel to the
Collateral Agent, such payments or reimbursements to be made, to
the extent due and payable on the date hereof and, thereafter, from
time to time upon demand;
(b) pay or reimburse the Collateral Agent on demand for all
of its reasonable costs and expenses incurred in connection with
the interpretation, enforcement or preservation of, or any waiver
of or consent with respect to, any rights under this Agreement, the
Security Agreement, and the Congress Intercreditor Agreement,
including, without limitation, the fees and disbursements of
counsel of the Collateral Agent;
(c) pay, indemnify, and hold the Collateral Agent harmless on
demand from any and all recording and filing fees and any and all
liabilities with respect to, or resulting from, any stamp, excise
and other similar taxes, if any, which may be payable or determined
to be payable in connection with the execution and delivery of, or
consummation of any of the transactions contemplated by, or any
amendment, supplement or modification of, or any waiver or consent
under or in respect of, this Agreement, the Security Agreement and
the Congress Intercreditor Agreement; and
(d) pay to the Collateral Agent a fee for its services
provided hereunder and under the Security Agreement as set forth on
the Schedule attached hereto.
7.2 Indemnity. The Company shall indemnify the Collateral
Agent, the Trade Creditors, their Affiliates, and any such party's
officers, directors, employees, agents, attorneys-in-fact, against
any and all claims, suits, losses, penalties, demands, causes of
action and judgments of any nature whatsoever and all liabilities
and indebtedness of any and every kind and nature now or hereafter
owing, arising, due or payable, including all costs and expenses
(including, without limitation, attorneys' fees and expenses) (all
of the foregoing being herein collectively called "Indemnified
Liabilities"), which may be imposed on, incurred by or asserted
against any of them and that in any way relate to or arise out of
this Agreement, the Security Agreement and the Congress
Intercreditor Agreement or the enforcement of any of the terms
hereof or thereof including without limitation all amounts payable
by any Trade Creditor under Section 8.1 hereof; provided, however,
that the Company shall not be liable for any of the foregoing to
the extent that the liability incurred by the indemnitee has been
determined by a court of competent jurisdiction to be the result of
gross negligence or wilful misconduct of the party to be
indemnified.
7.3 Additional Secured Obligations. All amounts payable by
Company to the Collateral Agent under this Section 7 shall
constitute additional Obligations of the Company secured under the
Security Agreement and payable on demand.
7.4 Survival. The obligations of the Company under this
Section 7 shall survive the termination of this Agreement.
SECTION 8
MISCELLANEOUS
8.1 Indemnification. Each Trade Creditor will indemnify the
Collateral Agent, its Affiliates, their respective officers,
directors, employees, agents, attorneys-in-fact (to the extent not
reimbursed by the Company within 10 days of demand therefor) in the
proportion the then outstanding principal amount of Trade Credit
extended by such Trade Creditor bears to the total outstanding
principal amount of all Trade Credit for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever
which may be imposed on, incurred by or asserted against the
Collateral Agent in any way relating to or arising out of this
Agreement or the Security Agreement (including, without limitation,
the costs and expenses which the Company is obligated to pay to the
Collateral Agent hereunder or under the Security Agreement or the
enforcement of any of the terms hereof or thereof); provided,
however, that no Trade Creditor shall be liable for any of the
foregoing to the extent that the liability incurred by such
indemnitee has been determined by a court of competent jurisdiction
to be the result of gross negligence or willful misconduct of the
party to be indemnified.
8.2 Expenses as Obligations. If at any time or times
hereafter the Collateral Agent incurs expenses pursuant to action
taken pursuant to the provisions of this Agreement, the Security
Agreement, or the Congress Intercreditor Agreement, or to
intervene, file a petition, answer, complaint, motion or other
pleading in any suit or proceeding relating to this Agreement, the
Security Agreement, or the Congress Intercreditor Agreement or
relating to any Collateral, or to protect, take possession of, or
liquidate any Collateral, or to attempt to enforce any security
interest in or lien on any Collateral, or to enforce any rights of
the Collateral Agent against any other person, firm or corporation
which may be obligated to the Collateral Agent by virtue of this
Agreement, the Security Agreement, or the Congress Intercreditor
Agreement, or any other agreements, instruments or documents
contemplated hereby by the Security Agreement now or hereafter
delivered to the Collateral Agent by or for the benefit of the
Debtor, then in any of such events, all of the expenses including,
without limitation, reasonable attorneys' fees arising from such
services and any expenses, costs and charges (including costs and
expenses of servicing agents) relating to any such actions, and
interest on such sums at the prevailing Interest Rate, shall become
additional Obligations secured under the Security Agreement by the
Collateral, payable on demand.
8.3 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California.
8.4 Survival of Representations, Warranties and Covenants.
The representations, warranties and covenants of the Company
contained in this Agreement and in any of the Security Agreement
shall survive the date hereof.
8.5 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall
constitute one and the same instrument and any of the parties
thereto may execute this Agreement by signing any such counterpart.
8.6 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto, each party
that is or shall hereafter become a Trade Creditor hereunder and
their respective successors and permitted assigns; provided,
however, that the Company may not assign its rights or obligations
under this Agreement or the Security Agreement to any Person
without the consent of the Collateral Agent and each Trade
Creditor.
8.7 Table of Contents and Headings. The table of contents to
this Agreement and the headings of the various sections herein are
for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
8.8 WAIVER OF JURY TRIAL. THE COMPANY, THE COLLATERAL AGENT
AND THE TRADE CREDITORS HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE SECURITY AGREEMENT OR
TRANSACTIONS CONTEMPLATED THEREBY.
8.9 Severability. If any term, provision, covenant or
condition of this Agreement, or the application thereof to any
person, place or circumstance, shall be held by a court of
competent jurisdiction to be invalid, unenforceable or void, the
remainder of this Agreement, or such term, provision, covenant or
condition as applied to other persons, places and circumstances, as
applicable, shall remain in full force and effect.
8.10 Entire Agreement. This Agreement, the Security
Agreement, and the Congress Intercreditor Agreement set forth the
entire understanding among the parties with respect to the subject
matter hereof and all prior agreements, contracts, promises,
representations and statements between them, if any, whether
written or oral, with respect thereto are merged into this
Agreement.
8.11 Amendments, Etc. Except as expressly provided in
this Agreement or the Security Agreement, any provision of this
Agreement may be amended only by an instrument in writing signed by
the Company, the Collateral Agent and the Required Trade Creditors,
and any provision of this Agreement may be waived by the Collateral
Agent and the Trade Creditors, acting together; provided, however,
that any amendment hereof that does not adversely affect the
rights, privileges, immunities, duties or obligations of the
Company, shall not require the consent of the Company.
8.12 Waiver. No failure on the part of the Collateral Agent
or any Trade Creditor to exercise and no delay in exercising, and
no course of dealing with respect to, any right, power or privilege
under this Agreement, the Security Agreement, the Congress
Intercreditor Agreement, any loan or any note shall operate as a
waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under this Agreement, the Security
Agreement, the Congress Intercreditor Agreement, any loan or any
note preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by
law.
8.13 Notices and Distribution. All notices, directions and
other communications provided for herein (including, without
limitation, any waivers or consents under this Agreement) shall be
in writing, shall be sent by telecopy, telex, personal delivery,
courier or registered or certified mail, return receipt requested,
addressed to the party or parties for which intended, at the
address specified below its name on the signature pages hereto (or
such other address as any party may designate in a notice to each
other party hereto and shall be deemed to have been given when
transmission is verified (if telecopied), answered back (if
telexed), so delivered (if by personal delivery or courier) or five
Business Days after deposit thereof, postage prepaid, in a United
States Postal depository or with an authorized employee of the
United States Postal Service (if by registered or certified mail,
return receipt requested), in each case given or addressed as
aforesaid; provided that a notice of a change of address shall not
be deemed to have been given until actually received by the party
hereto distributing such communication.
8.14 Benefit of Covenants. The covenants of the Company and
the Collateral Agent set forth herein are solely for the benefit of
the Trade Creditors.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective
officers thereunto duly authorized as of the date first above
written.
WEI ACQUISITION CO.
/s/ ▇▇▇▇▇ ▇▇▇▇
By:___________________________________
Title: VP/Treasurer
ALLIANCE ENTERTAINMENT CORP.
/s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By:___________________________________
Title: Executive Vice President
▇▇▇▇▇ & ▇▇▇▇▇▇, Inc.
By ▇▇▇▇▇ & ▇▇▇▇▇▇ Entertainment
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
By:___________________________________
Title: Vice President, Finance
BMG MUSIC DISTRIBUTION
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
By:___________________________________
Title: Director of Credit
EMI MUSIC DISTRIBUTION
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
By:___________________________________
Title: Vice President, Credit
PARAMOUNT PICTURES
/s/ Gari ▇▇▇ ▇▇▇▇▇▇▇▇
By:___________________________________
Title: SVP Finance & Operations-Video
POLYGRAM GROUP DISTRIBUTION, INC.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
By:___________________________________
Title: VP, Credit
RED INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
By:___________________________________
Title: VP-Customer Financial Relations
SONY MUSIC ENTERTAINMENT, INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
By:___________________________________
Title: VP- Customer Financial Relations
UNIVERSAL MUSIC AND VIDEO DISTRIBUTION
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
By:___________________________________
Title: VP NTL Credit
WARNER\ELEKTRA\ATLANTIC CORP.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
By:___________________________________
Title: Senior Vice President, Credit
UNITED STATES TRUST COMPANY OF NEW YORK,
as Collateral Agent
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
By:___________________________________
Title: Vice President
EXHIBIT A
Agreement Regarding Additional Trade Creditor
This Agreement Regarding Additional Trade Creditor
("Agreement") is dated as of_____________, l9__ by and between
_________________ ("Additional Trade Creditor") and Wherehouse
Entertainment, Inc. ("Borrower"), as successor to WEI Acquisition
Co .
A. Certain of Borrower's trade creditors have
entered into that certain Intercreditor and Subordination
Agreement (the "Intercreditor Agreement") dated as of January __,
1997, by and among _________________, as Collateral Agent for the
trade creditors named therein ("Collateral Agent") and Congress
Financial Corporation (Western), a California corporation
("Congress").
B. Pursuant to that certain Security Agreement dated
as of January __, 1997, by and between Borrower and Collateral
Agent (the "Trade Security Agreement"), Borrower granted to
Collateral Agent, for the benefit of Trade Creditors (as defined
therein), a lien in its sale inventory and proceeds thereof.
Section ___ of the Trade Security Agreement provides that
Borrower may designate additional entities as Trade Creditors
entitled to the benefits of such lien granted pursuant to the
Trade Security Agreement.
C. The Trade Creditors who are parties to the
Intercreditor Agreement and the Trade Security Agreement have
entered into that certain [Collateral Agent Agreement] dated as
of __________, 1997 pursuant to which Collateral Agent has been
appointed by such Trade Creditors. Section ____ of the
Collateral Agent Agreement provides that Borrower may designate
additional entities as Trade Creditors for purposes of the
Collateral Agent Agreement.
D. Borrower and Additional Trade Creditor desire to
add Additional Trade Creditor as a Trade Creditor for purposes of
the Intercreditor Agreement, the Trade Security Agreement and the
Collateral Agent Agreement.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
Section 1. Additional Trade Creditor acknowledges
that it has committed to extend an open line of credit to
Borrower equal to $250,000 or more and Borrower acknowledges that
the terms and conditions of this line of credit are acceptable to
it; provided, however, that nothing herein shall obligate
Additional Trade Creditor to maintain this open line of credit
for any period of time and the parties acknowledge that the
Additional Trade Creditor is free to adjust the terms and
conditions (or eliminate) this line of credit at any time.
Section 2. Additional Trade Creditor acknowledges
that it has received copies of and agrees to be bound by the
terms of the Intercreditor Agreement, the Trade Security
Agreement and the Collateral Agent Agreement and appoints
Collateral Agent pursuant to the terms of the Collateral Agent
Agreement.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed by their respective officers hereunder
to duly authorize, as of the date first above written.
WHEREHOUSE ENTERTAINMENT, INC.
By:______________________________
Its:_____________________________
[ADDITIONAL TRADE CREDITOR]
By:______________________________
Its:_____________________________