FIFTH AMENDMENT TO
CREDIT AGREEMENT
Dated as of January 29, 2003
Among
NEW ENGLAND AUDIO CO., INC. and NEA DELAWARE, INC.,
as Borrowers,
TWEETER HOME ENTERTAINMENT GROUP, INC.,
TWEETER HOME ENTERTAINMENT GROUP FINANCING COMPANY TRUST,
THEG USA, L.P.,
TWEETER OF CALIFORNIA, INC.,
THE VIDEO SCENE INC.,
SOUND ADVICE, INC.
and
SOUND ADVICE OF ARIZONA INC.,
as Guarantors
THE LENDERS PARTY HERETO
and
FLEET NATIONAL BANK,
as Agent for the Lenders
FIFTH AMENDMENT TO CREDIT AGREEMENT
This FIFTH AMENDMENT TO CREDIT AGREEMENT is entered into as of January
29, 2003 by and among NEW ENGLAND AUDIO CO., INC., a Massachusetts corporation
("New England Audio"), and NEA DELAWARE, INC., a Delaware corporation ("NEA
Delaware"), (each a "Borrower" and collectively the "Borrowers"), TWEETER HOME
ENTERTAINMENT GROUP, INC., a Delaware corporation ("Tweeter"), TWEETER HOME
ENTERTAINMENT GROUP FINANCING TRUST, a Massachusetts business trust ("Tweeter
Trust"), THEG USA, L.P., a Delaware limited partnership ("THEG"), TWEETER OF
CALIFORNIA, INC., a California corporation ("TOC"), THE VIDEO SCENE INC., a
California corporation ("TVS"), SOUND ADVICE, INC., a Florida corporation
("Sound Advice"), successor by merger to TWT Acquisition Corp. and SAI
Distributors, Inc., and SOUND ADVICE OF ARIZONA INC., a Florida corporation
("SAOA") (Tweeter, Tweeter Trust, THEG, TOC, TVS, Sound Advice and SAOA, each a
"Guarantor" and collectively the "Guarantors") (each Borrower and each Guarantor
a "Loan Party" and the Borrowers and the Guarantors collectively the "Loan
Parties"), WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking associations
("Wachovia"), successor by merger to First Union National Bank and FLEET
NATIONAL BANK, national banking association, as Agent (the "Agent" and together
with Wachovia, the "Lenders").
Recitals
The Borrowers, the Guarantors, the Lenders and the Agent are parties to
a Credit Agreement dated as of June 29, 2001 (as amended, the "Credit
Agreement"). All capitalized terms used herein and not otherwise defined shall
have the meanings set forth in the Credit Agreement. An Event of Default has
occurred under the Credit Agreement, and the Borrowers, the Agent and the
Lenders desire to waive such Event of Default and to amend the Credit Agreement
in certain respects, in each case on the terms and conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrowers, the Guarantors, the
Lenders and the Agent hereby agree as follows:
Section 1. Amendment to Definitions.
(a) Section 1.1 of the Credit Agreement is hereby amended
by deleting the definitions of "Applicable Base Rate" and "Compliance
Certificate" in their entirety and substituting therefor the following:
"Applicable Base Rate" shall mean the Base Rate in
effect from time to time plus one-quarter percent (0.25%) per
annum.
"Compliance Certificate" shall mean a certificate
substantially in the form of Exhibit C hereto and acceptable
to the Majority Lenders, executed by the chief executive
officer or chief financial officer of Tweeter.
(b) Section 1.1 of the Credit Agreement is hereby amended
by adding the following new definitions thereto in alphabetical order:
"Borrowing Base" shall mean up to sixty percent (60%)
of all Eligible Inventory of the Borrowers, less any reserves
which the Majority Lenders from time to time determine in
their discretion as being appropriate.
"Borrowing Base Certificate" shall mean a certificate
with respect to the Borrowing Base signed by the chief
financial officer of the Borrowers in a form approved by the
Majority Lenders.
"Eligible Inventory" shall mean the Borrower's
inventory of goods held for retail sale which initially and at
all times until sold: are new and unused, in first class
condition, merchantable and saleable through normal trade
channels; are valued at the lower of cost or net realized
value; are at a location which has been identified in writing
to and approved by the Agent; are subject to a first perfected
security interest in favor of the Agent; are owned by the
Borrower free and clear of any lien except liens in favor of
the Agent and the Lenders and liens which have been
subordinated to the liens in favor of the Agent and the
Lenders on terms and conditions approved by the Majority
Lenders; may be sold without any Person's being subject to the
payment or assessment of any federal or state tax; do not
constitute scrap, waste, defective goods or the like or
obsolete goods; and have not been designated by the Majority
Lenders in their sole discretion as unacceptable for any
reason by notice to the Borrowers. All inventory, whether or
not Eligible Inventory, constitutes collateral for the Lender
Obligations.
Section 2. Amendments to Credit Agreement.
(a) Section 2.1(a) of the Credit Agreement is hereby
amended by deleting the first sentence thereof in its entirety and substituting
therefor the following:
Subject to the terms and conditions of this Agreement and so
long as there exists no Default, at any time prior to the
Revolving Credit Termination Date, each Lender, severally and
not jointly, shall make such Revolving Credit Advances to the
Borrowers as the Borrowers may from time to time request, by
notice to the Agent in accordance with Section 2.2, (i) as to
each Lender, in an aggregate amount not to exceed at any time
such Lender's Commitment Percentage of the Maximum Revolving
Credit Amount, and (ii) as to all Lenders, not to exceed the
lesser of (A) the Maximum Revolving Credit Amount and (B) the
Borrowing Base in effect at such time, minus (1) outstanding
Revolving Credit Advances and (2) the amount available to be
drawn under all Letters of Credit.
(b) Section 4.1 of the Credit Agreement is hereby amended
by deleting paragraph (a) thereof in its entirety and substituting therefor the
following:
(a) If at any time the sum of the aggregate
outstanding principal balance of all Revolving Credit Advances
made hereunder plus the amount available to be drawn under all
Letters of Credit exceeds the lesser of (i) the
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Maximum Revolving Credit Amount or (ii) the Borrowing Base in effect at
such time, the Borrowers, jointly and severally, shall immediately
repay to the Agent for the ratable accounts of the Lenders an amount
equal to such excess.
(c) Section 6.1 of the Credit Agreement is hereby amended by deleting
paragraph (a) thereof in its entirety and substituting therefor the following:
(a) As soon as available, and in any event within (i)
thirty (30) days after the end of each month and (ii) forty-five (45)
days after the end of each of the first three quarters of each fiscal
year of Tweeter, Tweeter shall furnish to the Agent: (A) consolidated
and consolidating balance sheets of Tweeter and its Subsidiaries as of
the end of such month or quarter and consolidated and consolidating
statements of income, shareholders' equity and cash flow of Tweeter and
its Subsidiaries for such month or quarter and for the period
commencing at the end of the previous fiscal year and ending with the
end of such month or quarter, setting forth in each case in comparative
form the corresponding figures for the corresponding period of the
preceding fiscal year, all in reasonable detail and (B) a Compliance
Certificate.
(d) Section 6.1 of the Credit Agreement is hereby further amended
by adding the following paragraph (c) thereto:
(c) Borrowing Base Certificate.
(i) As soon as available and in any event within
5 Business Days after the end of each monthly accounting
period (ending on the last day of each calendar month)
commencing with January 31, 2003, Tweeter shall furnish to the
Agent and the Lenders a Borrowing Base Certificate as of the
last day of such monthly accounting period.
(ii) Each Borrowing Base Certificate shall have
attached to it such additional schedules and/or other
information as the Majority Lenders may reasonably request.
(iii) Tweeter shall notify the Agent promptly upon
becoming aware of any event or condition that could reasonably
be expected to have a Material Adverse Effect on the Borrowing
Base.
(e) Section 7.6 of the Credit Agreement is hereby amended by
adding the following proviso at the end thereof:
; provided, however, that for the four-quarter period ending March 31,
2003 Tweeter and its Subsidiaries shall earn Consolidated EBITDA of not
less than $27,410,000.
Section 3. Waiver of Covenant Default. The Borrowers hereby represent
and warrant that Tweeter and its Subsidiaries earned Consolidated EBITDA of not
less than $35,451,000 for the four-quarter period ended December 31, 2002. On
the basis of such
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representation and warranty, the Agent and the Lenders hereby waive the
Borrowers' failure to satisfy the requirements of Section 7.6 of the Credit
Agreement for the four-quarter period ended December 31, 2002. This waiver is
limited as specified and shall not constitute a modification, amendment or
waiver of any other provision of the Credit Agreement or constitute a course of
dealing between the parties.
Section 4. Amendment of Schedule 2. Schedule 2 to the Credit Agreement
is hereby deleted in its entirety and the new Schedule 2 attached hereto is
substituted therefor as of the date hereof.
Section 5. Confirmation of Security Interests. The Borrowers and the
Guarantors hereby acknowledge, agree and confirm that, without limiting the
terms of the Security Documents, the security interests, pledges and mortgages
granted under the Security Documents secure the due and punctual payment and
performance of all Lender Obligations, including all obligations under the
Credit Agreement as amended through the date hereof.
Section 6. Effectiveness; Conditions to Effectiveness. This Fifth
Amendment to Credit Agreement shall become effective as of January 29, 2003 upon
(a) execution hereof by the Borrowers, the Guarantors, the Lenders and the Agent
and (b) receipt by Agent, on behalf of the Lenders, of an amendment fee in the
amount of $20,000 to be paid to the Lenders pro rata.
Section 7. Representations and Warranties; No Default. The Loan Parties
hereby confirm to the Lenders and the Agent the representations and warranties
of the Loan Parties set forth in Article 5 of the Credit Agreement as of the
date hereof after giving effect hereto, as if set forth herein in full (except
that the references in Article 5 of the Credit Agreement to the 2000 Financial
Statements shall be deemed to refer to the most recent annual audited
consolidated financial statements of Tweeter and its Subsidiaries furnished to
the Agent). The Loan Parties hereby certify that, after giving effect hereto, no
Default exists under the Credit Agreement.
Section 8. Miscellaneous. The Loan Parties agree, jointly and
severally, to pay on demand all the Agent's fees and reasonable expenses in
preparing, executing and delivering this Fifth Amendment to Credit Agreement,
and all related instruments and documents, including, without limitation, the
reasonable fees and out-of-pocket expenses of the Agent's special counsel,
▇▇▇▇▇▇▇ Procter LLP. This Fifth Amendment to Credit Agreement shall be a Lender
Agreement and shall be governed by and construed and enforced under the laws of
The Commonwealth of Massachusetts without regard to principles relating to
choice of law.
[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Borrowers, the Guarantors, the Lender and the
Agent have caused this Fifth Amendment to the Credit Agreement to be executed
under seal by their duly authorized officers as of the date first set forth
above.
NEW ENGLAND AUDIO CO., INC.
By:
-------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Senior Vice President and
Chief Financial Officer
NEA DELAWARE, INC.
By:
-------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Senior Vice President and
Chief Financial Officer
TWEETER HOME ENTERTAINMENT GROUP, INC.
By:
-------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Senior Vice President and
Chief Financial Officer
TWEETER HOME ENTERTAINMENT
GROUP FINANCING COMPANY TRUST
By:
-------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Senior Vice President and
Chief Financial Officer
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THEG USA, L.P.
By: New England Audio Co., Inc., General Partner
By:
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Senior Vice President and
Chief Financial Officer
TWEETER OF CALIFORNIA, INC.
By:
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Senior Vice President and
Chief Financial Officer
THE VIDEO SCENE INC.
By:
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Senior Vice President and
Chief Financial Officer
SOUND ADVICE, INC.
By:
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
SOUND ADVICE OF ARIZONA INC.
By:
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
FLEET NATIONAL BANK, as Agent
By:
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
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FLEET NATIONAL BANK
By:
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
WACHOVIA BANK, NATIONAL ASSOCIATION
By:
-----------------------------------------
Name ▇▇▇▇▇▇▇ ▇. ▇▇▇
Title: Vice President
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SCHEDULE 2
Pricing Schedule
The Eurodollar Rate Margin and the Applicable Commitment Fee on any day
are the respective percentages set forth below in the applicable row under the
column corresponding to the Status that exists on such day:
STATUS LEVEL I LEVEL II LEVEL III LEVEL IV
Eurodollar Rate Margin 1.75 2.00 2.25 2.50
Commitment Fee 0.25 0.25 0.375 0.375
For purposes of this Schedule, the following terms have the following
meanings:
"Level I Status" exists at any date if, at such date, the Applicable
Leverage Ratio is less than 1.50-to-1.00 and no Default exists.
"Level II Status" exists at any date if, at such date, the Applicable
Leverage Ratio is equal to or greater than 1.50-to-1.00 and less than
2.00-to-1.00 and no Default exists.
"Level III Status" exists at any date if, at such date, the Applicable
Leverage Ratio is equal to or greater than 2.00-to-1.00 and less than
2.50-to-1.00 and no Default exists.
"Level IV Status" exists at any date if, at such date, no other Status
exists.
"Status" refers to the determination of which of Level I Status, Level
II Status, Level III Status or Level IV Status exists at any date.
For the period from the Closing Date through the date five Business
Days following the Agent's receipt of the financial statements of Tweeter and
its Subsidiaries for the period ended June 30, 2001, the Status shall be deemed
to be Level I so long as no Default exists. Thereafter, the "Applicable Leverage
Ratio" shall be determined on the date five Business Days following the Agent's
receipt of the financial statements of Tweeter and its Subsidiaries for the
previous fiscal quarter certified by the chief financial officer of Tweeter,
commencing with receipt of the financial statements for the fiscal quarter
ending June 30, 2001, and shall be equal to the Consolidated Leverage Ratio in
effect as of the end of such previous fiscal quarter as reflected on such
financial statements.
