FORM OF GUARANTEE
September 29, 1999
Congress Financial Corporation(Central)
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: The Musicland Group, Inc. ("Borrower")
Gentlemen:
Congress Financial Corporation (Central) ("Lender") and Borrower have
entered into certain financing arrangements pursuant to which Lender may make
loans and advances and provide other financial accommodations to Borrower as set
forth in the Loan and Security Agreement, dated September 29, 1999, by and
between Borrower and Lender (as the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced, the "Loan
Agreement"), and other agreements, documents and instruments referred to
therein or at any time executed and/or delivered in connection therewith or
related thereto, including, but not limited to, this Guarantee (all of the
foregoing, together with the Loan Agreement, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, being collectively referred to herein as the "Financing Agreements").
Borrower is a wholly owned subsidiary of the Undersigned (the "Guarantor").
Therefore, in consideration of the benefits which will accrue to Guarantor and
as an inducement for and in consideration of Lender making loans and advances
and providing other financial accommodations to Borrower pursuant to the Loan
Agreement and the other Financing Agreements, Guarantor hereby agrees in favor
of ▇▇▇▇▇▇ as follows:
1. Guarantee.
(a) Guarantor absolutely and unconditionally guarantees and agrees to be
liable for the full and indefeasible payment and performance when due of the
following (all of which are collectively referred to herein as the "Guaranteed
Obligations"): (i) all obligations, liabilities and indebtedness of any kind,
nature and description of Borrower to Lender and/or its affiliates, including
principal, interest, charges, fees, costs and expenses, however evidenced,
whether as principal, surety, endorser, guarantor or otherwise, arising under
the Loan Agreement or the other Financing Agreements, whether now existing or
hereafter arising, whether arising before, during or after the initial or any
renewal term of the Loan Agreement or after the commencement of any case with
respect to Borrower under the United States Bankruptcy Code or any similar
statute (including, without limitation, the payment of interest and other
amounts, which would accrue and become due but for the commencement of such
case, whether or not such amounts are allowed or allowable in whole or in part
in any
such case and including loans, interest, fees, charges and expenses related
thereto and all other obligations of Borrower or its successors to Lender
arising after the commencement of such case), whether direct or indirect,
absolute or contingent, joint or several, due or not due, primary or secondary,
liquidated or unliquidated, secured or unsecured, and however acquired by Lender
and (ii) all expenses (including, without limitation, attorneys' fees and legal
expenses) incurred by Lender in connection with the preparation, execution,
delivery, recording, administration, collection, liquidation, enforcement and
defense of Borrower's obligations, liabilities and indebtedness as aforesaid to
Lender, the rights of Lender in any collateral or under this Guarantee and all
other Financing Agreements or in any way involving claims by or against Lender
directly or indirectly arising out of or related to the relationships between
Borrower, Guarantor or any other Obligor (as hereinafter defined) and Lender,
whether such expenses are incurred before, during or after the initial or any
renewal term of the Loan Agreement and the other Financing Agreements or after
the commencement of any case with respect to Borrower or Guarantor under the
United States Bankruptcy Code or any similar statute.
(b) This Guarantee is a guaranty of payment and not of collection. ▇▇▇▇▇▇▇▇▇
agrees that ▇▇▇▇▇▇ need not attempt to collect any Guaranteed Obligations from
Borrower, Guarantor or any other Obligor or to realize upon any collateral, but
may require Guarantor to make immediate payment of all of the Guaranteed
Obligations to Lender when due, whether by maturity, acceleration or otherwise,
or at any time thereafter. Lender may apply any amounts received in respect of
the Guaranteed Obligations to any of the Guaranteed Obligations, in whole or in
part (including attorneys' fees and legal expenses incurred by Lender with
respect thereto or otherwise chargeable to Borrower or Guarantor) and in such
order as Lender may elect.
(c) Payment by Guarantor shall be made to Lender at the office of Lender
from time to time on demand as Guaranteed Obligations become due. Guarantor
shall make all payments to Lender on the Guaranteed Obligations free and clear
of, and without deduction or withholding for or on account of, any setoff,
counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholding, restrictions or conditions of any kind. One or more successive or
concurrent actions may be brought hereon against Guarantor either in the same
action in which Borrower or any other Obligor is sued or in separate actions. In
the event any claim or action, or action on any judgment, based on this
Guarantee is brought against Guarantor, Guarantor agrees not to deduct, set-off,
or seek any counterclaim (other than compulsory counterclaims) for or recoup any
amounts which are or may be owed by Lender to Guarantor.
2. Waivers and Consents.
(a) Notice of acceptance of this Guarantee, the making of loans and
advances and providing other financial accommodations to Borrower and
presentment, demand, protest, notice of protest, notice of nonpayment or default
and all other notices to which Borrower or Guarantor is entitled are hereby
waived by Guarantor. Guarantor also
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waives notice of and hereby consents to, (i) any amendment, modification,
supplement, extension, renewal, or restatement of the Loan Agreement and any
of the other Financing Agreements, including, without limitation, extensions of
time of payment of or increase or decrease in the amount of any of the
Guaranteed Obligations, the interest rate, fees, other charges, or any
collateral, and the guarantee made herein shall apply to the Loan Agreement and
the other Financing Agreements and the Guaranteed Obligations as so amended,
modified, supplemented, renewed, restated or extended, increased or decreased,
(ii) the taking, exchange, surrender and releasing of collateral or guarantees
now or at any time held by or available to Lender for the obligations of
Borrower or any other party at any time liable on or in respect of the
Guaranteed Obligations or who is the owner of any property which is security for
the Guaranteed Obligations (individually, an "Obligor" and collectively, the
"Obligors"), (iii) the exercise of, or refraining from the exercise of any
rights against Borrower or any other Obligor or any collateral, (iv) the
settlement, compromise or release of, or the waiver of any default with respect
to, any of the Guaranteed Obligations and (v) any financing by Lender of
Borrower under Section 364 of the United States Bankruptcy Code or consent to
the use of cash collateral by Lender under Section 363 of the United States
Bankruptcy Code. Guarantor agrees that the amount of the Guaranteed Obligations
shall not be diminished and the liability of Guarantor hereunder shall not be
otherwise impaired or affected by any of the foregoing.
(b) No invalidity, irregularity or unenforceability of all or any part of
the Guaranteed Obligations shall affect, impair or be a defense to this
Guarantee, nor shall any other circumstance which might otherwise constitute a
defense available to or legal or equitable discharge of Borrower in respect of
any of the Guaranteed Obligations, or Guarantor in respect of this Guarantee,
affect, impair or be a defense to this Guarantee. Without limitation of the
foregoing, the liability of Guarantor hereunder shall not be discharged or
impaired in any respect by reason of any failure by Lender to perfect or
continue perfection of any lien or security interest in any collateral or any
delay by Lender in perfecting any such lien or security interest. As to
interest, fees and expenses, whether arising before or after the commencement of
any case with respect to Borrower under the United States Bankruptcy Code or any
similar statute, Guarantor shall be liable therefor, even if Borrower's
liability for such amounts does not, or ceases to, exist by operation of law.
Guarantor acknowledges that ▇▇▇▇▇▇ has not made any representations to Guarantor
with respect to Borrower, any other Obligor or otherwise in connection with the
execution and delivery by Guarantor of this Guarantee and Guarantor is not in
any respect relying upon Lender or any statements by Lender in connection with
this Guarantee.
(c) Guarantor hereby irrevocably and unconditionally waives and relinquishes
all statutory, contractual, common law, equitable and all other claims against
Borrower, any collateral for the Guaranteed Obligations or other assets of
Borrower or any other Obligor, for subrogation, reimbursement, exoneration,
contribution, indemnification, setoff or other recourse in respect to sums paid
or payable to Lender by Guarantor hereunder.
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3. Subordination. Payment of all amounts now or hereafter owed to
Guarantor by Borrower or any other Obligor is hereby subordinated in right of
payment to the indefeasible payment in full to Lender of the Guaranteed
Obligations and all such amounts and any security and guarantees therefor are
hereby assigned to Lender as security for the Guaranteed Obligations.
4. Acceleration. Notwithstanding anything to the contrary contained
herein or any of the terms of any of the other Financing Agreements, the
liability of Guarantor for the entire Guaranteed Obligations shall mature and
become immediately due and payable, upon maturity of the Obligations of Borrower
under the Loan Agreement, whether by acceleration or otherwise, and shall, at
Lender's option, mature and become immediately due and payable, even if the
liability of Borrower or any other Obligor therefor does not, upon the
occurrence of any act, condition or event which constitutes an Event of Default
as such term is defined in the Loan Agreement.
5. Account Stated. The books and records of Lender showing the account
between ▇▇▇▇▇▇ and Borrower shall be admissible in evidence in any action or
proceeding against or involving Guarantor as prima facie proof of the items
therein set forth, and the monthly statements of Lender rendered to Borrower, to
the extent to which no written objection is made within thirty (30) days from
the date of sending thereof to Borrower, shall be deemed conclusively correct
and constitute an account stated between ▇▇▇▇▇▇ and Borrower and be binding on
Guarantor.
6. Termination. This Guarantee is continuing, unlimited, absolute and
unconditional. All Guaranteed Obligations shall be conclusively presumed to have
been created in reliance on this Guarantee. Guarantor shall continue to be
liable hereunder until one of ▇▇▇▇▇▇'s officers actually receives a written
termination notice from Guarantor sent to Lender at its address set forth above
by certified mail, return receipt requested and thereafter as set forth below.
Revocation or termination hereof by Guarantor shall not affect, in any manner,
the rights of Lender or any obligations or duties of Guarantor under this
Guarantee with respect to (a) Guaranteed Obligations which have been created,
contracted, assumed or incurred prior to the receipt by Lender of such written
notice of revocation or termination as provided herein, including, without
limitation, (i) all amendments, extensions, renewals and modifications of such
Guaranteed Obligations (whether or not evidenced by new or additional
agreements, documents or instruments executed on or after such notice of
revocation or termination), (ii) all interest, fees and similar charges accruing
or due on and after revocation or termination, and (iii) all attorneys' fees and
legal expenses, costs and other expenses paid or incurred on or after such
notice of revocation or termination in attempting to collect or enforce any of
the Guaranteed Obligations against Borrower, Guarantor or any other Obligor
(whether or not suit be brought), or (b) Guaranteed Obligations which have been
created, contracted, assumed or incurred after the receipt by Lender of such
written notice of revocation or termination as provided herein pursuant to any
contract entered into by Lender prior to receipt of such notice. The sole effect
of such revocation or termination by Guarantor shall be to exclude from this
Guarantee the liability of Guarantor for those Guaranteed
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Obligations arising after the date of receipt by ▇▇▇▇▇▇ of such written notice
which are unrelated to Guaranteed Obligations arising or transactions entered
into prior to such date. Without limiting the foregoing, this Guarantee may not
be terminated and shall continue so long as the Loan Agreement shall be in
effect (whether during its original term or any renewal, substitution or
extension thereof).
7. Reinstatement. If after receipt of any payment of, or proceeds of
collateral applied to the payment of, any of the Guaranteed Obligations, Lender
is required to surrender or return such payment or proceeds to any Person for
any reason, then the Guaranteed Obligations intended to be satisfied by such
payment or proceeds shall be reinstated and continue and this Guarantee shall
continue in full force and effect as if such payment or proceeds had not been
received by Lender. Guarantor shall be liable to pay to Lender, and does
indemnify and hold Lender harmless for the amount of any payments or proceeds
surrendered or returned. This Section 7 shall remain effective notwithstanding
any contrary action which may be taken by ▇▇▇▇▇▇ in reliance upon such payment
or proceeds. This Section 7 shall survive the termination or revocation of this
Guarantee.
8. Amendments and Waivers. Neither this Guarantee nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender. Lender shall not by any act, delay, omission or otherwise be deemed to
have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.
9. Corporate Existence, Power and Authority. Guarantor is a corporation
duly organized and in good standing under the laws of its state or other
jurisdiction of incorporation and is duly qualified as a foreign corporation and
in good standing in all states or other jurisdictions where the nature and
extent of the business transacted by it or the ownership of assets makes such
qualification necessary, except for those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the financial condition,
results of operation or businesses of Guarantor or the rights of Lender
hereunder or under any of the other Financing Agreements. The execution,
delivery and performance of this Guarantee is within the corporate powers of
Guarantor, have been duly authorized and are not in contravention of law or the
terms of the certificates of incorporation, by-laws, or other organizational
documentation of Guarantor, or any indenture, agreement or undertaking to which
Guarantor is a party or by which Guarantor or its property are bound. This
Guarantee constitutes the legal, valid and binding obligation of Guarantor
enforceable in accordance with its terms.
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10. Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.
(a) The validity, interpretation and enforcement of this Guarantee and any
dispute arising out of the relationship between Guarantor and Lender, whether in
contract, tort, equity or otherwise, shall be governed by the internal laws of
the State of Illinois (without giving effect to principles of conflicts of law).
(b) Guarantor hereby irrevocably consents and submits to the non-exclusive
jurisdiction of the Courts of the State of Illinois and of Cook County, Illinois
and the United States District Court for the Northern District of Illinois and
waives any objection based on venue or forum non conveniens with respect to any
action instituted therein arising under this Guarantee or any of the other
Financing Agreements or in any way connected with or related or incidental to
the dealings of Guarantor and Lender in respect of this Guarantee or any of the
other Financing Agreements or the transactions related hereto or thereto, in
each case whether now existing or hereafter arising and whether in contract,
tort, equity or otherwise, and agrees that any dispute arising out of the
relationship between Guarantor or Borrower and Lender or the conduct of any such
persons in connection with this Guarantee, the other Financing Agreements or
otherwise shall be heard only in the courts described above (except that Lender
shall have the right to bring any action or proceeding against Guarantor or its
property in the courts of any other jurisdiction which Lender deems necessary or
appropriate in order to realize on any collateral at any time granted by
Borrower or Guarantor to Lender or to otherwise enforce its rights against
Guarantor or its property).
(c) Guarantor hereby waives personal service of any and all process upon
it and consents that all such service of process may be made by certified mail
(return receipt requested) directed to its address set forth on the signature
pages hereof and service so made shall be deemed to be completed five (5) days
after the same shall have been so deposited in the U.S. mails, or, at Lender's
option, by service upon Guarantor in any other manner provided under the rules
of any such courts. Within thirty (30) days after such service, Guarantor shall
appear in answer to such process, failing which Guarantor shall be deemed in
default and judgment may be entered by Lender against Guarantor for the amount
of the claim and other relief requested.
(d) GUARANTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS GUARANTEE OR ANY OF THE
OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF GUARANTOR AND LENDER IN RESPECT OF THIS GUARANTEE
OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR
THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN
CONTRACT, TORT, EQUITY OR OTHERWISE. ▇▇▇▇▇▇▇▇▇ HEREBY AGREES AND CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY
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COURT TRIAL WITHOUT A JURY AND THAT GUARANTOR OR LENDER MAY FILE AN ORIGINAL
COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF ▇▇▇▇▇▇▇▇▇ AND ▇▇▇▇▇▇ TO THE WAIVER OF THEIR RIGHT TO TRIAL BY
JURY.
(e) Lender shall not have any liability to Guarantor (whether in tort,
contract, equity or otherwise)for losses suffered by Guarantor in connection
with, arising out of, or in any way related to the transactions or relationships
contemplated by this Guarantee, or any act, omission or event occurring in
connection herewith, unless it is determined by a final and non-appealable
judgment or court order binding on Lender that the losses were the result of
acts or omissions constituting gross negligence or willful misconduct.
11. Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth above and to Guarantor
at its chief executive office set forth below, or to such other address as
either party may designate by written notice to the other in accordance with
this provision, and (b) deemed to have been given or made: if delivered in
person, immediately upon delivery; if by telex, telegram or facsimile
transmission, immediately upon sending and upon confirmation of receipt; if by
nationally recognized overnight courier service with instructions to deliver the
next business day, one (1) business day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing.
12. Partial Invalidity. If any provision of this Guarantee is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Guarantee as a whole, but this Guarantee shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
13. Entire Agreement. This Guarantee represents the entire agreement and
understanding of the parties concerning the subject matter hereof, and
supersedes all other prior agreements, understandings, negotiations and
discussions, representations, warranties, commitments, proposals, offers and
contracts concerning the subject matter hereof, whether oral or written.
14. Successors and Assigns. This Guarantee shall be binding upon Guarantor
and its successors and assigns and shall inure to the benefit of Lender and its
successors, endorsees, transferees and assigns. The liquidation, dissolution or
termination of Guarantor shall not terminate this Guarantee as to such entity or
as to Guarantor.
15. Construction. All references to the term "Guarantor" wherever used
herein shall mean Guarantor and its successors and assigns (including, without
limitation, any receiver, trustee or custodian for Guarantor or any of its
assets or Guarantor in its capacity as debtor or debtor-in-possession under the
United States Bankruptcy Code). All references to the term "Lender" wherever
used herein shall mean Lender and its successors and assigns and all references
to the term "Borrower" wherever used herein shall mean Borrower and its
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successors and assigns (including, without limitation, any receiver, trustee or
custodian for Borrower or any of its assets or Borrower in its capacity as
debtor or debtor-in-possession under the United States Bankruptcy Code). All
references to the term "Person" or "person" wherever used herein shall mean any
individual, sole proprietorship, partnership, corporation (including, without
limitation, any corporation which elects subchapter S status under the Internal
Revenue Code of 1986, as amended), limited liability company, limited liability
partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof. All references to
the plural shall also mean the singular and to the singular shall also mean the
plural.
IN WITNESS WHEREOF, ▇▇▇▇▇▇▇▇▇ has executed and delivered this Guarantee
as of the day and year first above written.
ATTEST: ------------------------------------
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Its Vice President, General Counsel Its Vice Chairman and C.F.O.
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and Secretary
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[CORPORATE SEAL] ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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