FIRST MODIFICATION OF CREDIT AGREEMENT
THIS MODIFICATION is made as of this 3rd day of October,
1997, by and between SPEC'S MUSIC, INC., a Florida corporation
("BORROWER"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New
York corporation ("LENDER").
STATEMENT OF FACTS
Lender and Borrower are parties to that certain Credit
Agreement, dated as of May 22, 1996 (the "CREDIT AGREEMENT"),
pursuant to which Lender has agreed to make one or more loans
from time to time to the Borrower in accordance with the terms
and conditions thereof. Lender and Borrower desire to modify the
Credit Agreement in certain respects, and Lender desires to grant
certain consents and waivers to Borrower, all in accordance with
and subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, the
covenants and agreements contained herein, and other good and
valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Borrower and Lender do hereby agree that all
capitalized terms used herein shall have the meanings ascribed
thereto in the Credit Agreement as amended hereby (except as
otherwise expressly defined or limited herein) and do hereby
further agree as follows:
STATEMENT OF TERMS
1. AMENDMENTS OF CREDIT AGREEMENT. Subject to the
fulfillment of the conditions precedent to the effectiveness of
this Modification which are set forth below, the Credit Agreement
shall be amended from and after this date as follows:
(a) Section 1.8 of the Credit Agreement is hereby
amended by deleting reference to the phrase "11:00 a.m. (Eastern
Standard Time)" and by substituting in lieu thereof the phrase
"1.00 p.m. (Eastern Standard Time)". Notwithstanding anything in
the preceding sentence to the contrary, Revolving Credit Loan
advance requests pursuant to Section 1.1 of the Credit Agreement
will continue to be required to be given by no later than 11:00
a.m. (Eastern Standard Time) on the Business Day of the proposed
advance.
(b) Section 1.5 of the Credit Agreement shall be amended
by deleting the phrase "Inventory of Borrower" and by
substituting in lieu thereof the phrase "Inventory of Borrower or
D S Latino".
(c) Section 6.2 of the Credit Agreement shall be deleted
in its entirety and the following new Section 6.2 shall be
substituted in lieu thereof:
SECTION 6.2 INVESTMENTS; LOANS AND ADVANCES. No
Credit Party shall make any investment in, or make any
loans or advances of money to any Person, through the
direct or indirect holding of securities or otherwise,
except (i) to the extent permitted under Section 6.1
above, (ii)
Borrower may make loans or advances from time
to time to any other Credit Party so long as no other
Default or Event of Default is caused thereby; provided,
however, that the sum of the aggregate outstanding
principal balance of all loans or advances made by
Borrower to D S Latino plus Borrower's initial $350,000
capital contribution to D S Latino shall not exceed
$750,000 at any one time, and (iii) Borrower may hold the
notes described on Schedule 2 to the Security Agreement.
(d) Section 8.1 shall be amended by adding thereto the
following clause (n), with the intent being that the occurrence
of any event specified in such clause (n) shall constitute an
"Event of Default" under the Credit Agreement:
(n) The occurrence of an Event of Default under
(and after giving effect to any notice and/or cure rights
expressly provided in) any of the other Loan Documents.
(e) Schedules 1.5, 3.9, 3.16, 3.17, 3.20, 4.1, 6.7
and 6.11 of the Credit Agreement are hereby deleted in their
entireties and the revised Schedules 1.5, 3.9, 3.16, 3.17, 3.20,
4.1, 6.7 and 6.11 attached hereto shall be substituted in lieu
thereof.
(f) The Credit Agreement shall be further modified
by adding to ANNEX A the following new definitions:
"Borrower Stock Pledge Agreement" shall mean the
Stock Pledge Agreement, dated as of May 7, 1997, executed
by Borrower in favor of Lender, with respect to the pledge
by Borrower of all of the issued and outstanding shares
of D S Latino owned by it, and all amendments,
modifications or replacements thereof or therefor.
"BORROWER TRADEMARK SECURITY AGREEMENT" shall mean
the Trademark Security Agreement, dated as of October 3,
1997, executed by Borrower in favor of Lender, and all
amendments, modifications or replacements thereof or
therefor.
"D S LATINO" shall mean D S Latino Inc., a Florida
corporation, and its successors and assigns.
"D S LATINO GUARANTY" shall mean the Guaranty
Agreement, dated as of May 7, 1997, executed by D S
Latino in favor of Lender, and all amendments,
modifications or replacements thereof or therefor.
"D S LATINO SECURITY AGREEMENT" shall mean the
Security Agreement, dated as of May 7, 1997, executed
by D S Latino in favor of Lender, and all amendments,
modifications or replacements thereof or therefor.
-2-
"D S LATINO TRADEMARK SECURITY AGREEMENT" shall
mean the Trademark Security Agreement, dated as of
May 7, 1997, executed by D S Latino in favor of Lender,
and all amendments, modifications or replacements
thereof or therefor.
"INTERCREDITOR AGREEMENT" shall mean the
Subordination and Intercreditor Agreement, dated as
of October 3, 1997, among the Lender, the Borrower and
MF, as the same may be amended, supplemented or restated
from time to time.
"MF" shall mean Music Funding I, LLC, a North
Carolina limited liability company, and its successors
and assigns.
"MF CREDIT AGREEMENT" shall mean the Credit
Agreement, dated as of October 3, 1997, between MF
and Borrower, as the same may be amended, supplemented
or restated from time to time.
"MF DOCUMENTS" shall mean the MF Credit Agreement
and any and all notes, guaranties, security
agreements, assignments, mortgages, pledge
agreements, financing statements, fixture filings,
and other agreements, instruments or documents which
govern, evidence or guarantee any of the MF Obligations
or which grant or convey any of the MF Liens, and any
extensions, renewals or modifications thereof or
replacements therefor.
"MF LIENS" shall mean any and all of the Liens
on any or all of the Collateral which may be now or
hereafter granted to MF by any or all of the Credit
Parties pursuant to any of the MF Documents to secure
any or all of the MF Obligations.
"MF LOANS" shall mean any and all loans made by
MF to Borrower under the MF Credit Agreement.
"MF OBLIGATIONS" shall mean any and all
indebtedness, obligations or liabilities which may
be now or hereafter owing by any or all of the Credit
Parties to MF under any or all of the MF Documents,
whether direct, indirect, absolute or contingent, or
joint or several, and whether for principal, interest,
fees or other amounts.
"163rd STREET" shall mean Spec's Music - 163rd
Street, Inc., a Florida corporation.
"PLANNED 1998 STORE CLOSINGS" shall mean
Borrower's closing of stores during its Fiscal Year
ending July 31, 1998.
-3-
"SELLERS" shall mean Digital Sound Distributors,
Inc., Hits Only, Inc. and Digital Sound Music
Publishing, Inc., all Florida corporations.
(g) ANNEX A to the Credit Agreement shall be amended by
deleting the proviso which appears at the end of the definition
therein of the term "Adjusted Tangible Net Worth" and
substituting the following proviso in lieu thereof:
; PROVIDED, however, that Borrower's Adjusted Tangible
Net Worth shall be computed without giving effect to
up to $1,500,000 of any restructuring charges incurred
by Borrower in its Fiscal Year ending July 31, 1997
and July 31, 1998 in connection with the Planning 1998
Store Closings.
(h) ANNEX A of the Credit Agreement is hereby amended by
deleting the first sentence of the definition of "Borrowing Base"
contained therein and by substituting in lieu thereof the
following
new first sentence of such definition:
"BORROWING BASE" shall mean at any time an amount
equal to the sum of (i) sixty percent (60%) of the
aggregate value of the Eligible Inventory of Borrower
available at such time less such reserves against
availability established by Lender from time to time
in its discretion PLUS (ii) sixty percent (60%) of the
aggregate value of the Eligible Inventory of D S Latino
available at such time less such reserves against
availability established by Lender from time to time
in its discretion; PROVIDED, however, that at no time
shall the Borrowing Base for purposes of this Agreement
exceed the Maximum Revolving Credit Loans.
The remainder of the definition of "Borrowing Base"
shall remain unchanged.
(I) ANNEX A of the Credit Agreement shall be further
modified by deleting the date "May 30, 1998" which appears in
clause (i) of the definition of the term "Commitment Termination
Date" and by substituting the date "August 1, 1998" in lieu
thereof. The remainder of such definition shall be unchanged.
(j) ANNEX A of the Credit Agreement shall be amended by
deleting the proviso which appears at the end of the definition
therein of the term "EBITDA" (and the semi-colon which
immediately precedes such proviso) and by substituting the
following in lieu thereof:
minus (iv) without duplication, any cash costs incurred in
such period in connection with the Planned 1998 Store
Closings.
(k) ANNEX A to the Credit Agreement shall be further
modified by deleting from ANNEX A the definitions of the terms
"Collateral Documents", "Current Ratio", "Pledge Agreement",
"Uncovered Leased Location", and "Unused Borrowing Availability"
and by substituting in lieu thereof the following new definitions
of such terms:
-4-
"COLLATERAL DOCUMENTS" shall mean the Security
Agreement, the D S Latino Security Agreement, the
Factor's Liens, the Chattel Mortgages, the Mortgage
Notes, the Pledge Agreements, the Borrower Trademark
Security Agreement, the D S Latino Trademark Security
Agreement, the D S Latino Guaranty, any and other Loan
Documents under which Lender may have Liens on any of
the Collateral to secure any of the Obligations, and
such term also shall include the Intercreditor Agreement.
"CURRENT RATIO" shall mean, as of any date and with
respect to any Person, the ratio of such Person's current
assets (excluding cash, tax refunds and deferred taxes)
to such Person's current liabilities (excluding the
Revolving Credit Loans and the MF Loans), all as
determined as of such date on a consolidated basis.
"PLEDGE AGREEMENTS" shall mean (i) the Borrower
Pledge Agreement and (ii) the Pledge Agreement, in
substantially the form of EXHIBIT D-4 to the Agreement,
between Borrower and Lender, including all amendments,
modifications or replacements thereof or therefor.
"UNCOVERED LEASED LOCATIONS" shall mean any leased
location of Borrower or D S Latino for which such
Credit Party has not provided Lender with a Lessor
Subordination and Consent in the form of EXHIBIT F to
the Agreement (or in such other form as may be
acceptable to Lender). The Uncovered Leased Locations
as of the Closing Date are indicated on SCHEDULE 3.6
as initially attached to the Agreement.
"UNUSED BORROWING AVAILABILITY" shall mean, at
any one time, the amount (if any) by which the
Borrowing Base at such time exceeds the sum of (I)
the aggregate outstanding principal balance at such
time of the Revolving Credit Loan plus (ii) the aggregate
outstanding balance at such time of all Letter of
Credit Obligations incurred by Lender.
(l) Section 8.1(m) of the Credit Agreement shall be
deleted.
2. CONSENT TO MF TRANSACTIONS. Subject to the
fulfillment of the conditions precedent to the effectiveness of
this Modification which are set forth below, Lender hereby
consents to the incurrence by the Credit Party of the MF
Obligations and to the grant by the Credit Parties of the MF
Liens to secure the same provided that the MF Obligations and the
MF Liens shall be and remain subject to the terms and conditions
of the Intercreditor Agreement (which shall be executed and
delivered by the Lender, MF and the Borrower on the date of this
Modification).
3. WAIVER OF CERTAIN DEFAULTS, EVENTS OF DEFAULT AND
CONDITIONS. Subject to the fulfillment of the conditions
precedent to the effectiveness of this Modification which are set
forth below, the Lender does hereby: (i) waive any Defaults or
Events of Default which may have arisen from any violation of the
financial covenants in SCHEDULE 6.11 of the Credit Agreement for
-5-
any fiscal period ending on or before August 31, 1997 (it being
understood and agreed that the revised financial covenants set
forth in revised SCHEDULE 6.11 attached to this Modification
shall apply, and Borrower shall be obligated to comply with the
same, for all fiscal periods ending on or after September 30,
1997); and (ii) waives compliance with any unfulfilled conditions
specified in paragraphs 1 through 5 of Lender's May 7, 1997
letter to Borrower regarding the Acquisition and Employment
Agreements relating to DS Latino described in such letter (it
being understood and agreed that the consequence of such waiver
shall be that Lender's consent to the Acquisition and the
Employment Agreements described in such letter shall be deemed
effective from and after May 7, 1997).
4. NO OTHER AMENDMENTS, WAIVERS OR CONSENTS. Except for
the amendments, waivers and consents expressly set forth and
referred to in SECTION 1, SECTION 2, and SECTION 3 above, the
Credit Agreement shall remain unchanged and in full force and
effect. Nothing in this Modification is intended, or shall be
construed, to constitute a novation or an accord and satisfaction
of any of the Borrower's indebtedness or other indebtedness to
the Lender under or in connection with the Credit Agreement
(collectively, the "OBLIGATIONS") or to modify, affect or impair
the perfection or continuity of Lender's security interests in,
security titles to or other liens on any collateral for the
Obligations.
5. REPRESENTATIONS AND WARRANTIES. To induce Lender to
enter into this Modification, the Borrower does hereby warrant,
represent and covenant to Lender that: (a) each representation or
warranty of the Borrower set forth in the Credit Agreement is
hereby restated and reaffirmed as true and correct on and as of
the date hereof as if such representation or warranty were made
on and as of the date hereof (except to the extent that any such
representation or warranty expressly relates to a prior specific
date or period), and no Default or Event of Default has occurred
and is continuing as of this date under the Credit Agreement as
amended by this Modification,; and (b) Borrower has the power and
is duly authorized to enter into, deliver and perform this
Modification and the Intercreditor Agreement, and each of this
Modification and the Intercreditor Agreement is the legal, valid
and binding obligation of Borrower enforceable against it in
accordance with its terms.
6. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS
MODIFICATION. The effectiveness of this Modification and the
amendments, waivers and consents provided in SECTION 1, SECTION 2
and SECTION 3 above are subject to the truth and accuracy in all
material respects of the representations and warranties of the
Borrower contained in SECTION 5 above and to the fulfillment of
the following additional conditions precedent:
(a) Lender shall have received one or more counterparts
of this Modification and the Borrower Trademark Security
Agreement duly executed and delivered by the Borrower, and Lender
shall have received one or more counterparts of the Intercreditor
Agreement duly executed and delivered by Borrower and MF;
-6-
(b) DS Latino, as guarantor of the Obligations, shall
have consented to the execution, delivery and performance of this
Modification and the Intercreditor Agreement and agreed to be
bound by signing one or more counterparts of this Modification in
the appropriate space indicated below and returning same to
Lender;
(C) Borrower shall have paid a modification fee of
$20,000 to Lender, which fee shall be deemed fully earned and
non-refundable upon the execution and delivery of this
Modification by Lender; and
(d) Borrower and MF shall have entered into the MF
Credit Agreement and the other MF Documents (all on terms and
conditions which are acceptable to Lender in all respects) and
all conditions precedent to the effectiveness of the MF Documents
shall have been fulfilled (other than the effectiveness of this
Modification) and MF shall have made the initial advance to
Borrower under the MF Credit Agreement in the amount of not less
than $500,000.
7. COUNTERPARTS. This Modification may be executed in
multiple counterparts), each of which shall be deemed to be an
original and all of which when taken together shall constitute
one and the same instrument.
8. ADDITIONAL PROVISIONS. (a) The Borrower (for itself
and on behalf of the other Credit Parties) hereby (i) releases,
acquits and forever discharges each of the Lender and its agents,
employees, officers, directors, representatives, attorneys,
Affiliates, successors and assigns (collectively, the "RELEASED
PARTIES") from any and all liabilities, claims, suits, debts,
Liens, losses, causes of action, demands, rights, damages, costs
and expenses of any kind, character or nature whatsoever, whether
known or unknown, or fixed or contingent, that the Borrower may
have or claim to have against such Released Party and which
arises out of or is connected with any action of commission or
omission of any Released Party existing or occurring prior to the
execution and delivery of this Modification (collectively, the
"RELEASED CLAIMS") and (ii) agrees forever to refrain (and to
cause the other Credit Parties to refrain) from commencing,
instituting or prosecuting any action or other proceeding against
any of the Released Parties with respect to the any of the
Released Claims. Notwithstanding anything in this Section to the
contrary, the Released Claims do not include the Lender's
obligations under the Credit Agreement as amended by this
Modification.
(b) Within thirty (30) days after the date of this
Agreement, Borrower shall cause ▇▇▇▇▇ ▇▇▇▇▇▇ to be dissolved and
its assets distributed to Borrower or Borrower shall cause ▇▇▇▇▇
▇▇▇▇▇▇ to be merged or consolidated with or into Borrower with
Borrower being the surviving corporation from such merger or
consolidation. Borrower represents and warrants to Lender that
▇▇▇▇▇ ▇▇▇▇▇▇ is an inactive Subsidiary and has no material assets
or income and ▇▇▇▇▇ ▇▇▇▇▇▇ does not own or have any other
interest in any of the inventory or equipment located at any of
Borrower's stores (including without limitation its store at ▇▇▇▇
▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇. ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇). Subject to the
fulfillment of the conditions precedent to the effectiveness of
this Modification which are set forth above, Lender hereby waives
any Default or Event of Default arising from Borrower's failure
prior to this date to disclose that ▇▇▇▇▇ ▇▇▇▇▇▇ is a Subsidiary
of Borrower.
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(C) Within seven (7) days after the date of this
Agreement, Borrower shall deliver to Lender a certificate of
insurance in form and substance satisfactory to Lender with
respect to the insurance coverage of D S Latino and showing
Lender as loss payee.
(d) Within thirty (30) days after the date of this
Agreement, Borrower shall cause to be delivered to Lender a
Blocked Account Agreement and Pledged Account Agreement with
respect to the D S Latino collection account and disbursement
account, respectively, each in form and substance satisfactory to
Lender.
9. GOVERNING LAW. THIS MODIFICATION SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
SUCH STATE WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING
CONFLICT OF LAWS.
IN WITNESS WHEREOF, the parties hereto have caused this
Modification to be duly executed and delivered as of the day and
year specified at the beginning hereof.
BORROWER:
SPEC'S MUSIC, INC.
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
Title: VP/CFO
-------------------------
LENDER:
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
Duly Authorized Signatory
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CONSENT OF GUARANTOR
The undersigned guarantor does hereby consent to the
execution, delivery and performance of the within and foregoing
First Modification of Credit Agreement, authorizes and directs
Spec's Music, Inc. to enter into the Intercreditor Agreement
described therein on the undersigned guarantor's behalf, and
agrees to be bound by the terms and conditions of this
Modification (including without limitation Section 8 hereof) and
the Intercreditor Agreement.
IN WITNESS WHEREOF, the undersigned guarantor has executed
this Consent under seal as of the day and year first above set
forth.
D S LATINO INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Title: VP/SECRETARY/TREASURER
------------------------------
CHIEF FINANCIAL OFFICER
REVISED SCHEDULE 1.5
to
CREDIT AGREEMENT
Dated as of May 22, 1996,
as amended as of October 3, 1997
ELIGIBLE INVENTORY
In determining whether Inventory of Borrower or D S Latino
constitutes Eligible Inventory, Lender shall not include
Inventory which:
(a) is not owned by such Credit Party free and
clear of all Liens and rights of others, except the
first-priority Liens in favor of Lender;
(b) is not located on premises owned or operated by
such Credit Party; PROVIDED, HOWEVER, that if the Inventory is
located on premises leased by such Credit Party, such Credit
Party shall use its best efforts to cause the lessor of such
premises to execute a Lessor Subordination and Consent in favor
of Lender substantially in the form of EXHIBIT F to the Credit
Agreement (or in such other form as is acceptable to Lender);
(C) is covered by a negotiable document of title unless
such document and evidence of acceptable insurance covering such
Inventory has been delivered to Lender;
(d) in Lender's good faith judgment, is obsolete,
unsalable, shopworn, damaged, or unfit;
(e) consists of raw materials, work in process,
supplies, repair parts, display items, packing and shipping
materials or goods which have been returned by buyer;
(f) consists of discontinued or slow-moving items,
finished goods of substandard quality or used items held for
resale;
(g) is placed by such Credit Party on consignment or is
held by such Credit Party on consignment by another Person;
(h) as to which Lender's Lien thereon is not a
first-priority and perfected security interest;
(i) is not of a type held for sale in the ordinary
course of such Credit Party's business;
SCHEDULE 1.5 - Page 1
(j) does not consist of compact disk, laser disk, audio
cassette tape, video tape or other finished goods Inventory that
is acceptable to Lender; or
(k) is not otherwise acceptable to Lender in its
judgment.
SCHEDULE 1.5 - Page 2
REVISED SCHEDULE 3.9
to
CREDIT AGREEMENT
Dated as of May 22, 1996,
as amended as of October 3, 1997
SUBSIDIARIES, JOINT VENTURES AND AFFILIATES;
OUTSTANDING STOCK AND INDEBTEDNESS
I. SUBSIDIARIES:
D S Latino Inc., a Florida corporation
Spec's Music - 163rd Street, a Florida corporation
II. JOINT VENTURES OR PARTNERSHIPS:
None.
III. AFFILIATES:
See Exhibit 1 attached hereto.
IV. OUTSTANDING INDEBTEDNESS OF BORROWER:
A. The Existing Indebtedness described on SCHEDULE 1.4;
B. The Obligations; and
C. The MF Obligations (but only if and for so long as
the Intercreditor Agreement is in effect).
V. ISSUED AND OUTSTANDING STOCK OF BORROWER:
5,300,319 shares of Common Stock issued and outstanding.
VI. ISSUED AND OUTSTANDING STOCK OF D S LATINO INC.:
850,000 shares of Common Stock issued and outstanding and
owned by Borrower.
SCHEDULE 3.9 - Page 1
EXHIBIT 1
to
Revised Schedule 3.9
to
CREDIT AGREEMENT
Dated as of May 22, 1996,
as amended as of October 3, 1997
Spec's Music, Inc.
LIST OF AFFILIATES
OWNERS OF 5% OR MORE OF THE VOTING STOCK OF THE BORROWER:
NAME PERCENTAGE OF OWNERSHIP
▇▇▇ ▇▇▇▇▇▇▇ Lieff 24.6%
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Zacks 24.4%
Dimensional Fund Advisors, Inc. 9.8%
PERSONS THAT CONTROL, ARE CONTROLLED BY OR ARE UNDER COMMON
CONTROL WITH THE BORROWER:
None, other than the Subsidiaries shown in Part I of
Schedule 3.9
OFFICERS, DIRECTORS, JOINT VENTURERS AND PARTNERS:
A. DIRECTORS OF BORROWER
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chair Emeritus
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, Chairman
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Zacks
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
B. OFFICERS OF BORROWER
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, President
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Zacks, Vice President
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Vice President and CFO
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Secretary
EXHIBIT 1 TO SCHEDULE 3.9 - Page 1
C. DIRECTORS OF D S LATINO INC.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
D. OFFICERS OF D S LATINO INC.
▇▇▇ ▇. ▇▇▇▇▇, Chairman
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Vice President, Secretary, Treasurer
and Chief Financial Officer
EXHIBIT 1 TO SCHEDULE 3.9 - Page 2F
REVISED SCHEDULE 3.16
to
CREDIT AGREEMENT
Dated as of May 22, 1996,
as amended as of October 3, 1997
EMPLOYMENT MATTERS
Spec's Music, Inc.: None.
DS Latino, Inc. is a party to an Employment Agreement, dated
May 8, 1997, with ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and an Employment Agreement,
dated May 8, 1997 with ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
SCHEDULE 3.16 - Page 1
REVISED SCHEDULE 3.17
to
CREDIT AGREEMENT
Dated as of May 22, 1996,
as amended as of October 3, 1997
PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES
Registration Serial Registration Filing
Owner Trademark Number Number Country Date Date
Spec's Music Inc. Hits Only 75/271864 USA 4/9/97
Spec's Music Inc. D S Latino 75/271865 USA 4/9/97
Spec's Music Inc. Design 75/271866 USA 4/9/97
Spec's Music Inc. Design 75/271867 USA 4/9/97
Spec's Music Inc. Raiz Latina 75/271868 USA 4/9/97
Spec's Music Inc. Epicentro 75/271869 USA 4/9/97
Musical
Spec's Music Inc. Oro Latino 75/271870 USA 4/9/97
D S Latino Inc. Hits Only 2,004,927 USA 10/1/96
D S Latino Inc. Tropical Sound 2,011,206 USA 10/22/96
Orchestra
SCHEDULE 3.17 - Page 1
REVISED SCHEDULE 3.20
to
CREDIT AGREEMENT
Dated as of May 22, 1996,
as amended as of October 3, 1997
INSURANCE POLICIES
As described on the attached copy of Certificates of
Insurance issued on (i) April 8, 1997 by Great Northern Insurance
Co., (ii) April 6, 1997 by Universal Insurance Company and (iii)
October 2, 1997 by Great Northern Ins. Co.
I. BORROWER COVERAGE REQUIREMENTS. The insurance
policies maintained by Borrower provide for, without limitation,
the following insurance coverage:
(a) "ALL RISK" physical damage insurance on all of
Borrower's tangible real and personal property and assets,
wherever located, which insurance includes, without limitation,
fire and extended coverage, boiler and machinery coverage, flood,
hurricane, earthquake, theft, burglary, explosion and collapse
coverage, and coverage for all other hazards and risks ordinarily
insured against by similarly-situated owners or users of such
properties engaged in similar businesses. All policies of
insurance on such real and personal property of the Borrowers
contain an endorsement, in form and substance accepted to Lender
showing loss payable to Lender as its interests may appear. Each
such endorsement, or an independent instrument furnished to
Lender, provides that the insurance companies will give Lender at
least thirty (30) days' prior written notice before any such
policy or policies of insurance shall be altered or cancelled and
that no act or default of Borrower shall affect the right of
Lender to recover under such policy or policies of insurance in
case of loss or damage;
(b) comprehensive general liability insurance against
claims for personal injury, bodily injury and property damage
with a minimum limit of $1,000,000 per occurrence and $2,000,000
in the aggregate, which coverage includes, without limitation,
premises/operations, broad form contractual liability,
underground explosion and collapse hazard, independent
contractors, broad form property coverage, products and completed
operations liability;
(c) statutory limits of worker's compensation insurance
which includes employee's occupational disease and employer's
liability;
(d) automobile liability insurance for all owned,
non-owned or hired automobiles against claims for personal
injury, bodily injury and property damage with a minimum combined
single limit of $1,000,000 per occurrence; and
SCHEDULE 3.20 - Page 1
(e) umbrella insurance of $4,000,000 per occurrence and
$4,000,000 in the aggregate.
All of such policies are in full force and effect and in form and
with insurers recognized as adequate by Lender and provide
coverage of such risks and for such amounts as is customarily
maintained for businesses of the scope and size of Borrower's and
as otherwise acceptable to Lender. Each insurance policy
contains a clause which provides that Lender's interest under
such policy shall not be invalidated by any act or omission of,
or any breach of warranty by, the insured, or by any change in
the title, ownership or possession of the insured property, or by
the use of the property for purposes more hazardous than is
permitted in such policy. Borrower has delivered to Lender a
certificate of insurance that evidences the existence of each
policy of insurance, payment of all premiums therefor and
compliance with all provisions of the Agreement.
II. SUMMARY OF TERMS OF BORROWER'S INSURANCE , ETC.
See attached certificate from the Borrower's insurer
(or such insurer's agent).
III. D S LATINO COVERAGE REQUIREMENTS. The insurance
policies maintained by D S Latino provide for, without
limitation, the same insurance coverage as the Borrower's
insurance coverage.
IV. SUMMARY OF TERMS OF D S LATINO'S INSURANCE
COVERAGE, ETC.
See attached Certificate of D S Latino's insurer (or
such insurer's agent).
SCHEDULE 3.20 - Page 2
REVISED SCHEDULE 4.1
to
CREDIT AGREEMENT
Dated as of May 22, 1996,
as amended as of October 3, 1997
FINANCIAL STATEMENTS AND OTHER NOTICES
Each Credit Party shall provide, or shall cause to be
provided, the following to Lender at the expense of the Credit
Parties:
(a) On each Business Day of each week, a Borrowing Base
Certificate for Borrower and D S Latino Inc., accompanied by such
supporting detail and documentation as may be requested by Lender
(including an Inventory roll-forward);
(b) Within one (1) Business Day after any Credit Party
returns any Inventory to any of its vendors, such Credit Party
shall give, or cause to be given to Lender, written notice of the
amount of such returned Inventory, and within 45 days after the
end of each Fiscal Month a detailed list of the items returned
during such period with a comparison of original cost versus
return credit and a listing of any applicable penalties or
restocking fees;
(C) Within one (1) Business Day after any Credit Party's
receipt thereof, such Credit Party shall notify Lender of such
Credit Party's receipt of notification from (i) any of its
vendors that a particular compact disk, cassette tape or other
item of Inventory is no longer included in such vendor's current
catalogue (and thereafter such Credit Party shall return the
affected Inventory to such vendor by the deadline specified by
such vendor in its notice) or (ii) any of the Major Labels that
such vendor has made a material adverse change in its inventory
return policies or practices;
(d) (i) Within twenty (20) days after the end of each
succeeding Fiscal Month, financial and other information for each
Credit Party, certified by the chief financial officer of such
Credit Party, including, without limitation, (w)
internally-prepared consolidated and consolidating statements of
income and cash flow and balance sheets of the Credit Parties,
each of which providing comparisons to budget and the prior
year's equivalent period, as well as a detailed Inventory report
by product mix, a report of store-by-store operating results, a
detailed report of all taxes or other Charges owed (including
copies of all sales tax reports) and a detailed report of all
returns of Inventory to vendors made for such period, (x) the
certification of the chief executive officer or chief financial
officer of such Credit Party that all such financial statements
are complete and correct and present fairly in accordance with
GAAP (subject to normal year-end audit adjustments and the
absence of footnotes) the financial position, the results of
operations and the statements of cash flow of Borrower and its
Subsidiaries as at the
SCHEDULE 4.1 - Page 1
end of such month and for the period then ended, and that there
was no Default or Event of Default in existence as of such time,
(y) a management discussion and analysis outlining financial
trends and significant events affecting the Credit Parties and
comparing such Credit Party's performance to budget for that
period and comparing such Credit Party's performance for that
period to the corresponding period from the prior year, and (z) a
certificate of such Credit Party's chief executive or financial
officer in reasonable detail showing the calculations used in
determining such Credit Party's compliance as of the end of such
month with the financial covenants set forth on SCHEDULE 6.11;
(ii) Within forty-five (45) days after the end of
each succeeding Fiscal Quarter, financial and other
information for each Credit Party, certified by the chief
financial officer of such Credit Party, including, without
limitation, (w) unaudited balance sheets as of the close of
such Fiscal Quarter and the related statements of income
and cash flow for that portion of the Fiscal Year ending as
the close of such Fiscal Quarter, (x) unaudited
statements of income and cash flows for such Fiscal Quarter,
in each case setting forth in comparative form the figures
for the corresponding period in the prior year and the figures
contained in the Projections for such Fiscal Year, all
prepared in accordance with GAAP (subject to normal year-end
adjustments), (y) a management discussion and analysis
outlining financial trends and significant events affecting
the Credit Parties and comparing such Credit Party's
performance to budget for that period and comparing
such Credit Party's performance for that period to the
corresponding period from the prior year, and (z) a
certificate of such Credit Party's chief executive or
financial officer in reasonable detail showing the
calculations used in determining such Credit Party's
compliance as of the end of such quarter with the
financial covenants set forth on SCHEDULE 6.11;
(e) Within thirty (30) days after the end of each
Fiscal Quarter, or more frequently upon Lender's request if a
Default or Event of Default has occurred and is continuing under
the Credit Agreement, updated Inventory valuations prepared by
▇▇▇▇▇ ▇▇▇▇▇▇▇ or such other independent appraiser of recognized
standing acceptable to Lender;
(f) Within ninety (90) days after the end of each
Fiscal Year, audited consolidated financial statements of
Borrower, consisting of balance sheets and statements of income
and retained earnings and cash flows, setting forth in
comparative form in each case the figures for the previous Fiscal
Year, which financial statements shall be prepared in accordance
with GAAP, certified (only with respect to the financial
statements) without qualification by a firm of independent
certified public accountants of recognized national standing
selected by Borrower and acceptable to Lender, and accompanied by
(i) a schedule in reasonable detail showing the calculations used
in determining Borrower's compliance with the financial covenants
set forth on SCHEDULE 6.11, (ii) a report from such accountants
to the effect that in connection with their audit examination,
nothing has come to their attention to cause them to believe that
a Default or Event of Default has occurred, (iii) the annual
letter from Borrower's
SCHEDULE 4.1 - Page 2
chief executive or financial officer to such accountants in
connection with their audit examination detailing Borrower's and
its Subsidiaries' contingent liabilities and material litigation
matters involving Borrower or any of its Subsidiaries, and (iv) a
certification of the chief executive officer or chief financial
officer of Borrower that all such financial statements are
complete and correct and present fairly in accordance with GAAP
the financial position, the results of operations and the
statements of cash flow of Borrower and its Subsidiaries as at
the end of such year and for the period then ended and that there
was no Default or Event of Default in existence as of such time;
(g) Not less than thirty (30) days after the end of
each Fiscal Year, an operating plan for each Credit Party for the
following year as approved by its board of directors together
with a complete statement of the assumptions on which such plan
is based, and which plan shall include such Credit Party's
monthly balance sheet, income statement and cash flow statement;
(h) Not less than thirty (30) days' prior written
notice of the opening or closing of any store by any Credit
Party;
(i) As soon as practicable, but in any event within
two (2) Business Days after any Credit Party becomes aware of the
existence of any Default or Event of Default, or any development
or other information which could have or result in a Material
Adverse Effect, telephonic or telegraphic notice by such Credit
Party to Lender specifying the nature of such Default or Event of
Default or development or information, including the anticipated
effect thereof, which notice shall be promptly confirmed in
writing within five (5) days;
(j) Within five (5) days after the date of the filing
thereof, copies of all federal, state and local tax returns,
information returns and reports in respect of income, franchise
or other taxes on or measured by income (excluding sales, use or
like taxes) filed by Borrower or any of its Subsidiaries;
(k) As often as Lender may request, such statements
and schedules further identifying and describing the Collateral
and such other reports in connection therewith as Lender may
reasonably request, all in reasonable detail;
(l) Promptly upon learning thereof, Borrower and each
other Credit Party shall advise Lender in reasonable detail of
(i) any material Lien (other than as permitted under SECTION 6.7)
or attaching to or asserted against any of the Collateral, (ii)
any material change in the composition of the Collateral or (iii)
the occurrence of any other event which could have or result in a
Material Adverse Effect upon the Collateral and/or Lender's Liens
thereon;
(m) (i) By the fifth (5th) day of each calendar
month, a Rent Payment Certificate, duly completed and executed on
behalf of Borrower by the chief executive officer or
SCHEDULE 4.1 Page 3
the chief financial officer of Borrower (or duly completed and
executed on behalf of D S Latino by the chief executive officer
or the chief financial officer of D S Latino, as the case may
be), certifying that, with respect to each of the Uncovered
Leased Locations shown on such certificate, such Credit Party has
sent to the lessor of such location (or its agent) a check for
the full rental payment due for such month and that either such
check has been paid or such Credit Party has adequate funds
available to pay such check when it is presented for payment, and
(ii) by the tenth (10th) day of each calendar month, a written
report (which may be faxed to Lender) from such Credit Party
confirming which of the rent checks for the Uncovered Leased
Locations for such month have been paid as of such date;
(n) Within ten (10) days after the end of each Fiscal
Month, a report on the Credit Parties' Inventory and accounts
payable as of the end of such period, including a reconciliation
of perpetual inventory to general ledger and to the Borrowing
Base, the results of monthly physical inventories, a detailed
report of Inventory by product line, a report of Inventory
turnover compared to the prior year and to budget (for the month
and for the year-to-date), a report of the value of Inventory by
location, a reconciliation of accounts payable to the general
ledger, an accounts payable roll-forward, and a report on
accounts payable turnover compared to the prior year and to
budget (for the month and the year-to-date).
(o) On the last Business Day of each calendar week,
an aging of the Credit Parties' accounts payable;
(p) Concurrently with the delivery thereof to MF, a
copy of each Borrowing Capacity Certificate and Inventory
valuation report delivered by Borrower under the MF Credit
Agreement;
(q) Promptly upon their becoming available, copies of
(i) all Financials, reports, notices and proxy statements made
publicly available by any Credit Party to its security holders;
and (ii) all regular and periodic reports and all registration
statements and prospectuses, if any, filed by any Credit Party
with any securities exchange or with the Securities and Exchange
Commission or any governmental or private regulatory authority;
and
(r) Such other information respecting Borrower's and
any other Credit Party's business, financial condition,
management, operations, licenses, permits, or prospects as Lender
may, from time to time, reasonably request.
SCHEDULE 4.1 - Page 4
REVISED SCHEDULE 6.7
to
CREDIT AGREEMENT
Dated as of May 22, 1996,
as amended as of October 3, 1997
LIENS
(a) The following financing statements and the Liens
perfected thereby:
FILING FILE DATE SECURED
OFFICE NO. FILED DEBTOR PARTY
Secretary of State 95-222633 November 1995 Spec's Music Inc. AT&T Credit Corp.
of Florida
Secretary of State 94-144051 July 18, 1994 Spec's Music Inc. NCR Credit Corp.
of Florida
Secretary of State 96000007828 April 30, 1996 Spec's Music Inc. General Electric
of Florida Capital Corp.
Secretary of State 970000103902 May 13, 1997 DS Latino Inc. General Electric
of Florida Capital Corp.
(b) The MF Liens in favor of MF and filed against
Spec's Music, Inc. and D S Latino, Inc. to secure the MF
Obligations but only if and for so long as the Intercreditor
Agreement is in effect.
SCHEDULE 6.7
REVISED SCHEDULE 6.11
to
CREDIT AGREEMENT
Dated as of May 22, 1996,
as amended as of October 3, 1997
FINANCIAL COVENANTS
Borrower shall not breach or fail to comply with any of
the following covenants, each of which shall be calculated on a
consolidated basis in accordance with GAAP consistently applied:
(a) MINIMUM EBITDA. Borrower's EBITDA for each
Fiscal Month ending on or after September 30, 1997
(measured on a cumulative basis from September 1, 1997
for each such Fiscal Month) shall be not less than the
amount shown below for such period:
FISCAL MONTH ENDING MINIMUM EBITDA
September 30, 1997 ($292,000)
October 31, 1997 (266,000)
November 30, 1997 (107,000)
December 31, 1997 1,068,000
January 31, 1998 1,305,000
February 28, 1998 1,415,000
March 31, 1998 1,624,000
April 30, 1998 1,694,000
May 31, 1998 1,772,000
June 30, 1998 1,814,000
July 31, 1998 1,880,000
(b) MINIMUM ADJUSTED TANGIBLE NET WORTH. Borrower's
Adjusted Tangible Net Worth as of the end of each Fiscal Month
ending on or after September 30, 1997 shall be not less than the
amount shown below for such month:
MINIMUM ADJUSTED
FISCAL MONTH ENDING TANGIBLE NET WORTH
September 30, 1997 $9,661,000
October 31, 1997 9,314,000
November 30, 1997 9,281,000
December 31, 1997 10,232,000
January 31, 1998 10,248,000
February 28, 1998 10,043,000
March 31, 1998 10,019,000
April 30, 1998 9,752,000
May 31, 1998 9,500,000
June 30, 1998 9,188,000
July 31, 1998 8,922,000
(C) MINIMUM FIXED CHARGE COVERAGE RATIO. Borrower shall
have a Fixed Charge Coverage Ratio for each Fiscal Month ending on
or after November 30, 1997 (measured on a cumulative basis from
September 1, 1997 for each such Fiscal Month) of not less than the
amount shown below for such period:
MINIMUM ADJUSTED FIXED
FISCAL MONTH ENDING CHARGED COVERAGE RATIO
November 30, 1997 0.1 to 1.0
December 31, 1997 or 1.5 to 1.0
thereafter
(d) MINIMUM CURRENT RATIO. Borrower shall have a Current
Ratio as of the end of each Fiscal Month ending on or after
September 30, 1997 of not less than the amount shown below for such
period:
FISCAL MONTH ENDING MINIMUM CURRENT RATIO
September 30, 1997 1.0 to 1.0
October 31, 1997 1.1 to 1.0
November 30, 1997 1.1 to 1.0
December 31, 1997 1.1 to 1.0
January 31, 1998 1.1 to 1.0
February 28, 1998 or 1.2 to 1.0
thereafter
(e) MAXIMUM CAPITAL EXPENDITURES. The Credit Parties shall
not make Capital Expenditures that exceed in aggregate amount the
sum of $150,000 for any Fiscal Quarter of Borrower ending on or
after October 31, 1997.
SCHEDULE 6.11
(f) MAXIMUM FIFO INVENTORY. The Credit Parties' total
inventory (as determined on a first-in, first-out basis) as of the
end of any Fiscal Month ending on or after September 30, 1997 shall
not exceed the amount shown below for such period; PROVIDED,
however, that in the event any Credit Party closes any of its
stores, each such limit shall be reduced by the average of the 12
month-end inventory levels of such store commencing with the month-end
prior to Lender's receipt of notice from Borrower of the
closing of such store:
FISCAL MONTH ENDING MAXIMUM FIFO INVENTORY
September 30, 1997 $17,055,000
October 31, 1997 17,342,000
November 30, 1997 17,342,000
December 31, 1997 or 15,042,000
thereafter
(g) ADDITIONAL MAXIMUM INVENTORY COVENANT. The Credit
Parties' total inventory (as determined on a first-in, first-out
basis) as of the end of any Fiscal Month ending on or after
December 31, 1997 shall not exceed the sum of (i) the Credit
Parties' accounts payable as of such date plus (ii) the aggregate
outstanding principal balance as of such date of the Revolving
Credit Loans, the Letter of Credit Obligations and the MF Loans.
SCHEDULE 6.11
CLOSING CERTIFICATE OF BORROWER
The undersigned officer of SPEC'S MUSIC, INC. (the
"Borrower"), a Florida corporation, hereby certifies and
covenants in his or her representative capacity on behalf of the
Borrower as follows:
1. Unless otherwise expressly defined herein, all
capitalized terms used herein shall have the meanings given such
terms in the Credit Agreement, dated as of May 22, 1996, as
amended, between Borrower and General Electric Capital
Corporation (the "CREDIT AGREEMENT"). This Certificate is being
executed and delivered pursuant to that certain First
Modification of Credit Agreement, dated as of October 3, 1997,
between General Electric Capital Corporation and Borrower (the
"MODIFICATION").
2. Each of the representations and warranties made by
the Borrower set forth in the Credit Agreement, the Modification
and the other Loan Documents executed by Borrower are true and
correct in all material respects on and as of the date of this
Certificate (except to the extent that any such representation or
warranty expressly relates to a prior specific date or period).
3. The Borrower is in compliance with all the terms and
provisions set forth in the Credit Agreement as amended by the
Modification on and as of the date of this Certificate.
4. No Default or Event of Default has occurred and is
continuing on and as of the date of this Certificate and after
giving effect to the Modification.
5. Except as disclosed on SCHEDULE 3.14 to the Credit
Agreement, there is no action or proceeding instituted or pending
before any court or governmental authority or, to the knowledge
of the Borrower, threatened (i) which reasonably could be
expected to have a Material Adverse Effect, or (ii) which seeks
to prohibit or restrict Borrower's ownership or operation of any
material portion of its business or assets or compel Borrower to
dispose of or hold separate all or any material portion of its
business or assets, and which reasonably could be expected to
have a Material Adverse Effect.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate on behalf of the Borrower and affixed its corporate
seal hereto, all as of this _2nd_ day of October 1997.
(CORPORATE SEAL) /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
_________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Secretary
The undersigned officer of the above-named Borrower hereby
further certifies in his or her representative capacity on behalf
of the Borrower as follows:
1. Attached hereto as EXHIBIT 1 is a true and correct
copy of resolutions of the Board of Directors of the Borrower
which were duly adopted as of October 2, 1997 (collectively, the
"RESOLUTIONS"), and which authorize the execution, delivery and
performance of the Modification, the Intercreditor Agreement and
the Borrower Trademark Security Agreement described therein. The
Resolutions were adopted in accordance with the Certificate or
Articles of Incorporation and By-laws of the Borrower. A true,
correct and complete copy of the Borrower's by-laws as in effect
on this date (collectively, the "BY-LAWS") is attached hereto as
EXHIBIT 2. A true, correct and complete copy of the Borrower's
Certificate or Articles of Incorporation as in effect on this
date (collectively, the "ARTICLES") is attached hereto as EXHIBIT
3. The Resolutions, the By-Laws and the Articles are in full
force and effect and have not been amended, altered or repealed
as of the date hereof except as shown on such Exhibits.
2. The persons named below are on the date hereof the
duly elected and qualified incumbents of the offices of the
Borrower set forth below next to their respective names, and the
signatures appearing at the right of their respective names below
are the genuine signatures of such officers:
NAME TITLE SIGNATURE
▇▇▇ ▇. ▇▇▇▇▇ President /s/ ▇▇▇ ▇. ▇▇▇▇▇
Chief Executive Officer
____________________ ____________________ ___________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Vice President /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chief Financial Officer
Secretary
____________________ ____________________ ___________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Secretary /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
____________________ ____________________ ___________________
▇▇▇▇▇▇▇▇ ▇. Zacks Vice President /s/ ▇▇▇▇▇▇▇▇ ▇. Zacks
Treasurer, and Assistant
Secretary
___________________ ____________________ ____________________
3. The corporate seal affixed to this Certificate, the
Modification and the Intercreditor Agreement is the legally
adopted, proper and only official corporate seal of the Borrower.
IN WITNESS WHEROF, the undersigned has executed this
Certificate on behalf of the Borrower and affixed its corporate
seal hereto, all as of this _2nd_ day of October, 1997.
(CORPORATE SEAL) /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
___________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Secretary
Exhibit 1
Board Resolutions Of
Spec's Music, Inc.
(the "CORPORATION")
Whereas, the Corporation has established certain loan
facilities for its benefit under a Credit Agreement (the "CREDIT
AGREEMENT"), dated as of May 22, 1996, between the Corporation
and General Electric Capital Corporation (the "LENDER"); and
WHEREAS, the Board of Directors of the Corporation
deems it to be in the best interest of the Corporation and its
shareholders that the Corporation enter into and execute the
Modification;
NOW, THEREFORE, BE IT RESOLVED, that the Modification,
together with all transactions contemplated thereby, is hereby
approved in its entirety; and
FURTHER RESOLVED, that the chairman, the president or
any vice president of the Corporation are each hereby severally
authorized and directed to execute and deliver the Modification,
which document shall be in substantially the same form as
reviewed by the Board of Directors of the Corporation, but with
such changes or additions thereto as any such officer shall deem
to be in the best interest of the Corporation (the chairman's,
the president's or any vice president's execution of the same
containing any such changes or additions being deemed to evidence
conclusively his or her decision that such changes or additions
are in the best interest of the Corporation); and
FURTHER RESOLVED, that the aforesaid officers of the
Corporation are each hereby severally authorized and directed to
do or to cause to be done all such other acts and things
(including without limitation the execution and delivery of such
intercreditor agreements, instruments, financing statements,
fixture filings, certificates and other agreements or documents)
as any such officer may deem necessary or desirable in order to
carry out and effectuate fully the purposes of the foregoing
resolutions.
TRADEMARK SECURITY AGREEMENT
THIS AGREEMENT is made as of the 3rd day of October, 1997,
between SPEC'S MUSIC, INC., a Florida corporation, having a
mailing address at ▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇ ("DEBTOR"), and GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation having an office at Suite
600, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
("Lender").
STATEMENT OF FACTS
In order to induce Lender to extend credit and other
financial accommodations to Debtor under the Credit Agreement
dated as of May 22, 1996 between Debtor and Lender (as the same
may hereafter be amended, restated, supplemented or replaced from
time to time, the "CREDIT AGREEMENT"), Debtor has agreed to grant
to Lender a security interest in certain trademark rights and
related assets of Debtor in accordance with the terms of this
Agreement.
In consideration of the foregoing premises and other good
and valuable consideration, Debtor hereby agrees that all
capitalized terms used herein (and not otherwise expressly
defined herein) shall have the meanings given such terms in the
Credit Agreement and Debtor and Lender hereby further agree as
follows:
Statement of Terms
1. GRANT OF SECURITY INTEREST. To secure the complete
and timely satisfaction of all of Debtor's obligations hereunder,
as well as to secure all of the rights of Lender hereunder, and
to secure the payment and performance of any and all Obligations
(as such term is defined in the Credit Agreement) (all such
obligations being herein collectively called the "SECURED
OBLIGATIONS"), Debtor hereby grants to Lender a present and
continuing security interest in the entire right, title and
interest of Debtor in and to the trademark application(s),
trademark(s), service ▇▇▇▇ application(s) and service ▇▇▇▇(s)
listed on SCHEDULE 1 attached hereto together with all goodwill
of Debtor's business relating thereto and all other assets of
Debtor necessary to produce the products for which such
applications will be or such trademarks are used, including
without limitation all proceeds thereof (such as, by way of
example, license royalties and proceeds of infringement suits),
the right to ▇▇▇ for past, present and future infringements, all
rights corresponding thereto throughout the world and all
renewals, extensions and other proceeds thereof (collectively
called the "TRADEMARKS").
2. REPRESENTATIONS AND WARRANTIES. Debtor represents and
warrants that as of the date hereof:
(a) The Trademarks are subsisting and have not been
adjudged invalid or unenforceable, in whole or in part, except
where the failure of any of the foregoing to be true could not
reasonably be expected to have a Material Adverse Effect;
(b) Each of the Trademarks is valid and enforceable,
except where the failure of any of the foregoing to be true could
not reasonably be expected to have a Material Adverse Effect;
(c) Debtor is the sole and exclusive owner of the entire
and unencumbered right, title and interest in and to each of the
material Trademarks, free and clear of any liens, charges and
encumbrances, including without limitation licenses and covenants
by Debtor not to ▇▇▇ third persons, except for any Permitted
Encumbrances;
(d) Debtor has the unqualified right to enter into this
Agreement and perform its terms; and
(e) Except as set forth on SCHEDULE 1 attached hereto,
Debtor has no rights, titles or interests in any trademarks or
trademark applications.
3. NO INCONSISTENT LICENSES. Debtor agrees that, so
long as this Agreement is in effect, it will not enter into any
agreement (for example, a license or assignment agreement) which
is inconsistent with Debtor's obligations under this Agreement,
without Lender's prior written consent.
4. EVENT OF DEFAULT. The failure of Debtor to perform
any of its obligations hereunder, any breach in any material
respect of any representation or warranty of Debtor herein, or
the occurrence of any Event of Default under (and as such term is
defined in) the Credit Agreement will also constitute a default
by Debtor under this Agreement after giving effect to any
applicable cure periods expressly provided for in the Credit
Agreement (herein referred to as an "EVENT OF DEFAULT").
5. REMEDIES ON DEFAULT. If any Event of Default shall
have occurred and be continuing, Lender shall have, in addition
to all other rights and remedies given it by this Agreement,
those allowed by law and the rights and remedies of a secured
party under the Uniform Commercial Code as enacted in State of
New York and, without limiting the generality of the foregoing,
Lender may immediately, without demand of performance and without
other notice or demand whatsoever to Debtor, sell at public or
private sale or otherwise realize upon, the whole or from time to
time any part of the Trademarks, or any interest which Debtor may
have therein and, after deducting from the proceeds of sale or
other disposition of the Trademarks all expenses (including all
expenses for legal services) shall apply the residue of such
proceeds toward the payment of the Secured Obligations (which
application shall be made, first, to Lender's costs and expenses
of such collection, sale or other disposition, including
reasonable attorney's fees, and then to the payment of the other
Secured Obligations then due to Lender. Debtor shall be liable
for any deficiency remaining after the application of such
proceeds. Any remainder of the proceeds after payment in full of
the Secured Obligations shall be paid over to Debtor. If
required by applicable law, notice of any sale or other
disposition of the Trademarks shall be given to Debtor at least
ten (10) days before the time of any intended public or private
sale or other disposition of the Trademarks is to be made, which
Debtor hereby agrees shall be reasonable notice of such sale or
other disposition. At any such sale or other
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disposition Lender may, to the extent permissible under
applicable law, purchase the whole or any part of the Trademarks
sold, free from any right of redemption on the part of Debtor,
which right is hereby waived and released.
6. NO WAIVER. No course of dealing between Debtor and
Lender, nor any failure to exercise, nor any delay in exercising,
on the part of Lender, any right, power or privilege hereunder
shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of
any other right, power or privilege.
7. SEVERABILITY. The provisions of this Agreement are
several, and if any clause or provision shall be held invalid and
unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall affect only such clause or
provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision of this Agreement
in any jurisdiction.
8. Modification. This Agreement is subject to
modification only by a writing signed by Debtor and Lender.
9. BENEFIT OF AGREEMENT. The benefits and burdens of
this Agreement shall inure to the benefit of and be binding upon
the respective heirs, legal representatives, successors and
assigns of the parties.
10. COLLATERAL DOCUMENT. This Agreement is one of the
Collateral Documents (as such term is defined in the Credit
Agreement).
11. Governing Law. THE VALIDITY AND INTERPRETATION OF
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND THE APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA.
12. TERMINOLOGY; HEADINGS. All singular terms used
herein shall include the plural and vice versa, and all pronouns
used herein shall be deemed to cover all genders. All section
headings used herein are for convenience of reference only and do
not constitute a substantive part of this Agreement.
13. TERMINATION OF AGREEMENT. This Agreement and the
assignment and security interest conveyed hereunder shall remain
in full force and effect until such time as the Credit Agreement
is no longer in effect and no Secured Obligations for the payment
of money are outstanding.
14. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts, each of which
counterparts when so executed and delivered, shall be
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deemed to be an original, and all of which counterparts, taken
together, shall constitute one and the same Agreement.
15. EXPENSES; INDEMNITY. Debtor will promptly upon
demand pay to Lender the amount of any and all expenses,
including reasonable attorney's fees and fees of other experts,
which Lender may from time to time incur in connection with (i)
the administration of this Agreement, (ii) the preservation of or
the sale or other disposition of or other realization upon any of
the Trademarks, (iii) the exercise or enforcement of any of the
rights of Lender hereunder or (iv) the failure by Debtor to
perform or observe any of the provisions hereof. Debtor also
hereby agrees to indemnify Lender and holds Lender harmless from
and against any liability, loss, damage, suit, action or
proceeding ever suffered or incurred by Lender as a result of (i)
Debtor's failure to observe, perform or discharge Debtor's duties
hereunder or (ii) Lender's holding or administering this
Agreement or its rights, titles or interests in the Trademarks,
unless with respect to any of the above, Lender is determined to
have acted with gross negligence or to have engaged in willful
misconduct. The obligations of Debtor under this paragraph 15
shall survive the termination of this Agreement.
16. SECURITY AGREEMENT. Lender also has a Lien in the
Trademarks under the terms of the Security Agreement (as such
term is defined in the Credit Agreement), and this Agreement is
intended to supplement such Security Agreement, but in the event
of any inconsistency between the terms of this Agreement and
those of such Security Agreement, the terms of such Security
Agreement shall control, and Lender may elect to pursue its
rights and remedies with respect to the Trademarks under either
or both of this Agreement or such Security Agreement.
[Remainder of page intentionally left blank]
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WITNESS the execution hereof under seal as of the day and year
first above written.
(CORPORATE SEAL) DEBTOR:
SPEC'S MUSIC, INC.
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Title: VP/CFO
----------------------------
LENDER:
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Authorized Signatory
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STATE OF GEORGIA
--------------
COUNTY OF ▇▇▇▇▇▇
-------------
CERTIFICATE OF ACKNOWLEDGMENT
Before me, the undersigned, a Notary Public in and for the
state and aforesaid, on this 3rd of October, 1997, personally
appeared ____Donald A. Molta_____, to me known personally, and who,
being by me duly sworn, deposes and says that he is the ___Vice
President_____ of SPEC'S MUSIC, INC. and that the seal affixed to
the foregoing instrument is the corporate seal of said corporation,
and that said instrument was signed and sealed on behalf of said
corporation by authority of its Board of Directors, and said
officer acknowledged said instrument to be the free act and deed of
said corporation. He/She is personally known to me or has produced
a ____FL Driver's License_____ as identification.
/S/ ▇▇▇▇▇ ▇. Butshen
--------------------------------
NOTARY PUBLIC
MY Commission expires:
[NOTARIAL SEAL]
SCHEDULE 1 TO
TRADEMARK SECURITY AGREEMENT EXECUTED BY SPEC'S MUSIC, INC.
Reg. Serial Reg. Filing
Trademark/Service Marks Number Number Country Date Date
HITS ONLY 75/271864 USA 4/9/97
D S Latino 75/271865 USA 4/9/97
Design 75/271866 USA 4/9/97
Design 75/271867 USA 4/9/97
RAIZ LATINA 75/271868 USA 4/9/97
EPICENTRO MUSICAL 75/271869 USA 4/9/97
ORO LATINO 75/271870 USA 4/9/97
SUBORDINATION AND
INTERCREDITOR AGREEMENT
This agreement is made and entered into as of this 3rd day
of October, 1997, among GENERAL ELECTRIC CAPITAL CORPORATION, a
New York corporation ("GECC"), MUSIC FUNDING 1, LLC, a North
Carolina limited liability company ("MF"), and SPEC'S MUSIC, INC.
a Florida corporation (the "BORROWER").
In consideration of the mutual covenants set forth herein, the
sum of $10.00 in hand paid by each party hereto to the other
party hereto, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
1. DEFINITIONS. (a) The following terms shall have the
following meanings as used in this Agreement:
"BORROWER" shall have the meaning set forth in the
preamble to this Agreement and shall include such person's
successors and permitted assigns and shall also include without
limitation the Borrower acting as a debtor-in-possession in any
Insolvency Proceeding.
"BUSINESS DAY" shall have the meaning given such term
in the GECC Credit Agreement.
"COLLATERAL" shall mean any and all of the real and
personal property of any and all of the Credit Parties, whether
now owned or hereafter acquired, whether tangible or intangible,
and wherever located, including, without limitation, any and all
accounts, general intangibles, inventory, equipment, fixtures,
documents, instruments, securities, and deposit accounts and
monies of any and all of the Credit Parties, together with any
and all Proceeds of any and all of the foregoing property.
"CREDIT DOCUMENTS" shall mean the MF Documents or the
GECC Documents, and in the case of each Creditor such term shall
include, without limitation, any supplemental or replacement
Credit Documents entered into or executed in connection with such
Creditor's provision of financing to any Credit Party in its
capacity as a debtor-in-possession in an Insolvency Proceeding.
"CREDIT PARTIES" shall mean the Borrower and its
Subsidiaries and shall also include without limitation any Credit
Party as a debtor-in-possession in any Insolvency Proceeding.
"CREDITOR" and "CREDITORS" shall mean GECC and MF
individually and collectively, respectively, and shall include
each such person's respective successors and assigns.
"ENFORCEMENT ACTION" shall mean, collectively or
individually, for one or both of the Creditors: (i) to make
demand for payment of or accelerate the maturity of any
Indebtedness, (ii) take possession of or to collect any
Collateral or any Proceeds thereof (other than GECC's collection
of any Credit Party's accounts receivable prior to an Event of
Default through any blocked or lock box account which may be
contemplated by the GECC Documents), or (iii) commence the
enforcement (by judicial proceedings or otherwise) of any of the
rights and remedies with respect to any Collateral or the
Proceeds thereof existing upon any Event of Default under any of
the Credit Documents.
"EVENT OF DEFAULT" shall mean any Default or Event of
Default as any such term is defined or used in the MF Documents
or the GECC Documents.
"FEDERAL BANKRUPTCY CODE" shall mean the U.S.
Bankruptcy Code of 1978, as amended (11 U.S.C. Section 101 et
seq.).
"GECC" shall have the meaning given such term in the
preamble to this Agreement and shall include its successors and
assigns.
"GECC BORROWING BASE" shall mean the Borrowing Base (as
such term is defined in the GECC Credit Agreement).
"GECC CREDIT AGREEMENT" shall mean the Credit
Agreement, dated as of May 22, 1996, between the Borrower and
GECC, as the same may be amended. supplemented or restated from
time to time.
"GECC Documents" shall mean the GECC Credit Agreement
and any and all notes, guaranties, security agreements,
assignments, mortgages, pledge agreements, financing statements,
fixture filings and other agreements, instruments or documents
which govern, evidence or guaranty any of the GECC Indebtedness
or which grant or convey any of the GECC Liens, and any
extensions, renewals, or modifications of or replacements for any
of such documents.
"GECC INDEBTEDNESS" shall mean any and all
indebtedness, obligations or liabilities which may be now or
hereafter owing by any or all of the Credit Parties to GECC under
any and all of the GECC Documents, whether direct or indirect,
absolute or contingent, or joint or several, and whether for
principal, interest, fees or other amounts.
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"GECC INTERESTS" shall have the meaning given such term
in Section 7 hereof.
"GECC Liens" shall mean any and all Liens on any or all
of the Collateral which may be now or hereafter granted to GECC
by any or all of the Credit Parties pursuant to any of the GECC
Documents to secure any or all of the GECC Indebtedness.
"GECC OVERADVANCE" shall mean the amount, if any, by
which the outstanding principal balance of the GECC Indebtedness
shall at any time exceed the GECC Borrowing Base as in effect at
such time.
"GECC UNUSED BORROWING AVAILABILITY" shall mean the
Unused Borrowing Availability as such term is defined in the GECC
Credit Agreement.
"INDEBTEDNESS" shall mean the MF Indebtedness or the
GECC Indebtedness and, in the case of each Creditor, such term
shall include, without limitation, any interest which would
accrue on such Creditor's Indebtedness but for the filing by or
against any Credit Party of any petition in bankruptcy and all
other Indebtedness of any Credit Party to such Creditor which may
be incurred in any Insolvency Proceeding of such Credit Party
whether or not recoverable by such Creditor from such Credit
Party or its estate under 11 U.S.C. Section 506.
"INSOLVENCY PROCEEDING" shall mean any insolvency or
receivership proceeding, or any proceeding under the Federal
Bankruptcy Code, or any other proceeding under any other
bankruptcy or insolvency laws or other laws relating to the
relief of debtors or the readjustment, extension or composition
of debts, and which is brought by or against any Credit Party.
"LIEN" and "LIENS" shall have the meaning given such
terms in the GECC Credit Agreement.
"MAXIMUM GECC OVERADVANCE AMOUNT" shall mean, as of any
date, an amount equal to the following: (i) if at such time the
aggregate outstanding principal balance of the MF Indebtedness is
equal to or greater than $1,000,000, the Maximum GECC Overadvance
Amount shall be $700,000, or (ii) if at such time the aggregate
outstanding principal balance of the MF Indebtedness is less than
$1,000,000, the Maximum GECC Overadvance amount shall be equal to
the lesser of (x) $1,000,000 or (y) the sum of $700,000 plus the
amount (if any) by which the aggregate outstanding principal
balance of the MF Indebtedness at such time is less than
$1,000,000.
"MF" shall have the meaning given such term in the
preamble to this Agreement and shall include its successors and
assigns.
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"MF CREDIT AGREEMENT" shall mean the Credit Agreement,
dated as of October 3, 1997, between MF and Borrower, as the same
may be amended, supplemented or restated from time to time.
"MF DOCUMENTS" shall mean the MF Credit Agreement and
any and all notes, guaranties, security agreements, assignments,
mortgages, pledge agreements, financing statements, fixture
filings and other agreements, instruments or documents which
govern, evidence or guaranty any of the MF Indebtedness or which
grant or convey any of the MF Liens, and any extensions,
renewals, or modifications thereof or replacements therefor.
"MF INDEBTEDNESS" shall mean any and all indebtedness,
obligations or liabilities which may be now or hereafter owing by
any or all of the Credit Parties to MF under any or all of the MF
Documents, whether direct, indirect, absolute or contingent, or
joint or several, and whether for principal, interest, fees or
other amounts.
"MF LIENS" shall mean any and all of the Liens on any
or all of the Collateral which may be now or hereafter granted to
MF by any or all of the Credit Parties pursuant to any of the MF
Documents to secure any or all of the MF Indebtedness.
"PERSON" shall have the meaning given such term in the
GECC Credit Agreement.
"PROCEEDS" shall mean, with respect to any particular
item or type of Collateral, whatever is received upon the sale,
exchange, collection or other disposition of such Collateral or
the Proceeds thereof as well as any amounts payable under any
policy of insurance on account of any loss of or damage to such
Collateral.
"SPECIFIED DEFAULT CONDITION" shall mean the occurrence
of any Default or Event of Default (as defined in the GECC Credit
Agreement) under Section 8.1(a), (b) (but only with respect to
Sections 1.7, 6.1, 6.2, 6.3, 6.6, 6.7, 6.8, 6.11, or Annex C of
or paragraphs (a) or (c) of Schedule 4.1 to the GECC Credit
Agreement), (f), (g) or (h) of the GECC Credit Agreement.
"SUBSIDIARY" shall have the meaning given such term in
the GECC Credit Agreement.
"TERMINATION DATE" shall have the meaning given such
term in the GECC Credit Agreement.
"TRIGGERING EVENT" shall mean the occurrence after the
date of this Agreement of any of the following events: (i) if a
GECC Overadvance of more than $500,000 shall occur; (ii) if
either the inventory advance rate used to calculate the GECC
Borrowing
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Base shall be increased by GECC by four percentage points (4.0%)
or more or if any lesser increase in such advance rate results in
an increase of the GECC Borrowing Base of more than $500,000;
(iii) if GECC expressly agrees in writing to increase the maximum
amount of credit available to the Borrower under the GECC Credit
Agreement to more than $15,000,000 in aggregate principal amount
at any one time; (iv) if GECC expressly waives in writing any
payment default under the GECC Credit Agreement; (v) if GECC
expressly agrees in writing to extend the due date of any
scheduled payment on the GECC Indebtedness or increase any
interest rates or fees payable under the GECC Documents; (vi) if
GECC expressly agrees in writing to forebear from taking any
Enforcement Action; (vii) if GECC expressly agrees in writing to
release any material portion of the Collateral (other than
inventory sold in the ordinary course of business or obsolete or
unnecessary equipment or fixtures sold by any Credit Party in
accordance with its historical business practices); (viii) if
GECC expressly agrees in writing to release any Credit Party from
liability for the GECC Indebtedness; (ix) if GECC elects to take
any Enforcement Action; (x) if in any Insolvency Proceeding of
any Credit Party GECC consents to the entry of an order for the
use of "cash collateral" by such Credit Party or if GECC enters
into a modification of the GECC Credit Agreement such that the
revolving credit facility provided by it to the Borrower
thereunder is converted to a debtor-in-possession financing
facility; or (xi) in any Insolvency Proceeding of any Credit
Party, GECC elects to vote in favor of or against any plan of
reorganization proposed by such Credit Party or any other Person
in such proceeding.
"TRIGGERING EVENT NOTICE" shall have the meaning given
such term in Section 7 hereof.
"UCC" shall mean the Uniform Commercial Code as in
effect on the date hereof in the state of the applicable
jurisdiction.
(b) All other undefined terms used in this
Agreement shall, unless the context otherwise dictates, have the
meanings given such terms in the UCC as in effect in the State of
New York to the extent the same are used or defined therein.
2. PAYMENT SUBORDINATION.
(a) From and after the date of this Agreement and
thereafter so long as this Agreement is in effect, and unless
GECC expressly consents in writing to the contrary, the MF
Indebtedness is not to be payable or prepayable, the maturity
date thereof is not to be accelerated, no other action may be
taken by MF to collect or enforce payment of the MF Indebtedness,
and no payment or prepayment on account of any principal of,
interest on, or other sums owing with respect to the MF
Indebtedness shall be made by the Borrower or received or
retained by MF; PROVIDED, however, that (i) regularly scheduled
payments of interest, fees or other amounts (other than
principal) on the MF Indebtedness may be made by the Borrower and
received and retained by MF if no Specified Default Condition has
occurred and is then continuing (and GECC shall honor the
Borrower's requests from time to time that GECC make advances on
behalf of the Borrower under the GECC Credit Agreement to fund
such scheduled payments subject to the
-5-
terms and conditions of the GECC Credit Agreement), (ii) payments
or prepayments of principal of the MF Indebtedness may be made by
the Borrower and received and retained by MF if no Default or
Event of Default has occurred and is then continuing, the
aggregate outstanding principal balance of the MF Indebtedness is
not less than $200,000 after giving effect to such payment or
prepayment and the GECC Unused Borrowing Availability is not less
than $1,250,000 after giving effect to such payment or
prepayment, and (iii) the maturity of the MF Indebtedness may be
accelerated upon the occurrence and during the continuation of
any Event of Default described in Section 8.1(g) or 8.1(h) of the
GECC Credit Agreement (but any such acceleration shall be subject
to all of the other terms and conditions of this Agreement,
including without limitation the payment subordination and turn-over
provisions set forth in paragraph (b) below).
(b) Should any payment or prepayment be received
by MF as prohibited in subsection (a) above, MF forthwith shall
deliver the same to GECC in precisely the form received (but with
the endorsement of MF, without recourse, where necessary for the
collection thereof by GECC) for application on the GECC
Indebtedness, and MF agrees that, until so delivered, the same
shall be deemed received by MF as agent and bailee for GECC and
such payment or prepayment shall be held in trust by MF as
property of GECC.
(C) No Creditor shall contest the validity,
enforceability or priority of any of the Indebtedness of the
other Creditor under its Credit Documents, provided that such
other Creditor's Indebtedness and the other Creditor's
enforcement thereof are consistent with the other terms and
conditions of this Agreement.
(d) Subject to the fulfillment of the closing
conditions for the MF Credit Agreement, MF agrees that its
initial advance to the Borrower thereunder shall be in the amount
of not less than $500,000, which initial advance may be repaid
subject to the provisions of paragraph (a) above.
3. LIEN SUBORDINATION.
(a) The relative priorities of the Creditors'
Liens which are set forth in paragraph (b) below shall apply: (i)
without regard to the time or order of creation, attachment or
perfection of such Liens (including, without limitation, the
order of filing of the Creditors' respective financing
statements, fixture filings or any other documents) or the time
or order of the execution and delivery of the Credit Documents;
and (ii) with respect to the relative priorities and the creation
or attachment of the Liens perfected by any party hereto on any
of the Collateral or with respect to the creation or attachment
of such Liens to the Proceeds of any of the Collateral or to the
Proceeds of the Proceeds of any of the Collateral,
notwithstanding anything to the contrary in the provisions of the
UCC, the Federal Bankruptcy Code, any other bankruptcy,
insolvency, or creditors' right law, or any other applicable law.
However, notwithstanding anything in this Agreement to the
contrary, the relative priorities specified in paragraph (b)
below are expressly conditioned upon the non-avoidability and
perfection of each Lien to which another Lien is subordinated
hereunder. If the Lien to which another Lien is subordinated
hereunder is not perfected or is avoidable for
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any reason, then the subordination and relative priority
provisions set forth in this Agreement shall not be effective as
to the particular item of property (and only as to such
particular item of property) which is the subject of such
unperfected or avoidable Lien.
(b) The GECC Liens on any or all of the
Collateral or the Proceeds thereof shall take priority over the
MF Liens on such property, and MF hereby agrees that the MF Liens
on any or all of the Collateral or the Proceeds thereof shall be
and are hereby rendered subordinate and inferior in priority to
the GECC Liens on such property.
(C) Except as expressly provided in this
Agreement, MF hereby agrees that GECC shall be entitled to manage
the Collateral in accordance with GECC's usual practices,
modified from time to time as it deems appropriate under the
circumstances, and without any obligation to give MF prior notice
thereof, and that GECC shall have no liability to MF for, and MF
hereby waives any claim which it may now or hereafter have
against GECC arising out of, any or all actions which GECC,
without violation of this Agreement, gross negligence or willful
misconduct on its part, takes or omits to take with respect to
the Collateral or any portion or Proceeds thereof (including,
without limitation, actions or inactions with respect to the
maintenance, preservation or insuring of any of the Collateral,
or the sale, exchange or the disposition of or foreclosure upon
any of the Collateral, or the collection, settlement or
compromise of any of the Collateral, or any customer dispute
pertaining thereto, or the settlement or adjustment of any
insurance claim with respect to any of the Collateral).
(d) Each Creditor hereby consents to the other
Creditor's receipt of a Lien in any or all of the Collateral
under such other Creditor's Credit Documents. No Creditor shall
contest the validity, perfection, priority or enforceability of
any Lien in any of the Collateral granted to the other Creditor
under its Credit Documents provided that such other Creditor's
Lien and the other Creditor's enforcement thereof are consistent
with the other terms and conditions of this Agreement.
(e) If any Creditor obtains possession of any
item of chattel paper, documents, instruments or certificated
securities evidencing or constituting any of the Collateral, such
Creditor shall hold the same as agent and bailee for the other
Creditor for purposes of perfecting such other Creditor's Liens
therein by such possession; provided that (i) such agency and
bailment shall not give rise to a fiduciary relationship between
such Creditors; (ii) if MF obtains possession of any such
Collateral prior to the Termination Date, MF shall promptly
delivery the same into the possession of GECC, and (iii) if GECC
has possession of any of such Collateral on the Termination Date,
GECC shall promptly delivery the same into the possession of MF
(but prior to such date, GECC may exercise its rights and
remedies with respect to such Collateral in accordance with the
GECC Documents including its right to sell or otherwise dispose
of such Collateral).
-7-
(f) MF shall not assert or enforce any right it
may have to ▇▇▇▇▇▇▇▇ the Collateral (or any part thereof or
Proceeds thereof) upon any foreclosure thereof by GECC. In any
Insolvency Proceeding of any Credit Party, MF agrees that it
shall not oppose any cash collateral order which GECC proposes to
consent to in such Insolvency Proceeding or any post-petition
financing which GECC proposes to provide such Credit Party in
such Insolvency Proceeding so long as such order or financing is
consented to or provided by GECC (as the case may be) pursuant to
and in compliance with Section 7(e) hereof.
4. INSOLVENCY, LIQUIDATION OR DISSOLUTION
PROCEEDINGS. (a) GECC shall have the right and is hereby
empowered to vote the full amount of the MF Indebtedness in any
Insolvency Proceeding of any Credit Party and at any meeting of
creditors of any Credit Party whether or not such meeting is held
in an Insolvency Proceeding of such Credit Party, provided that
such action is taken by GECC in a manner which is consistent with
the other terms and conditions of this Agreement. In any of the
foregoing proceedings or at any of the foregoing meetings, GECC
shall be entitled to vote the MF Indebtedness as GECC in its sole
discretion shall determine without regard to the interests of
anyone other than GECC, provided that such action is taken by
GECC in a manner which is consistent with the other terms and
conditions of this Agreement. In any Insolvency Proceeding of
any Credit Party, GECC shall be entitled to collect and enforce
the MF Indebtedness and to receive any distributions, dividends
or other payments upon the MF Indebtedness by filing such claim,
proof of debt or proof of claim as appropriate in the proceeding,
in GECC's name or MF's name, provided that such action is taken
by GECC in a manner which is consistent with the other terms and
conditions of this Agreement. GECC or any officer or employee
designated by GECC for such purpose is hereby constituted and
appointed attorney-in-fact for MF with full power (which power,
being coupled with an interest, shall be irrevocable so long as
this Agreement is in effect) to vote the MF Indebtedness in any
Insolvency Proceedings and at any meeting of any Credit Party's
creditors and to file any claim, proof of debt or proof of claim
in any such proceeding, and to endorse MF's name upon any
instruments given as a payment on or distribution in connection
with the MF Indebtedness, provided that such action is taken by
GECC in a manner which is consistent with the other terms and
conditions of this Agreement.
(b) In the event of any distribution, division or
application, partial or complete, voluntary or involuntary, by
operation of law or otherwise, of all or any part of the assets
of any Credit Party or the proceeds thereof, in whatever form, to
creditors of such Credit Party, or upon any indebtedness of such
Credit Party, by reason of the liquidation, dissolution or other
winding up of such Credit Party or such Credit Party's business,
or by reason of any Insolvency Proceeding, then and in any such
event, any payment or distribution of any kind or character,
either in cash, securities or other property, which shall be
payable or deliverable upon or with respect to any or all of the
MF Indebtedness (including without limitation any such payment or
distribution which may be payable or deliverable by virtue of the
provisions of any securities which are subordinate and junior in
right of payment to the MF Indebtedness) shall be paid or
delivered directly to GECC for application on the GECC
Indebtedness until the GECC Indebtedness shall first have been
fully paid and satisfied and before any payment is made on the MF
Indebtedness.
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5. CREDITOR DUE DILIGENCE. Each Creditor hereby
acknowledges that it will, independently and without reliance
upon the other Creditor and based upon such documents and
information as such Creditor deemed appropriate from time to
time, make and continue to make its own credit decisions in
connection with this Agreement, the Credit Parties, its Credit
Documents, its Obligation, its Liens, the Collateral and all
other aspects of its extensions of credit to the Credit Parties.
Without limiting the generality of the immediately preceding
sentence, it is contemplated that GECC may, from time to time and
upon MF's request, provide MF with copies of Borrowing Base
reports and GECC's adjustments thereto as well as certain other
Collateral reports prepared by Borrower or GECC for GECC's use in
administering its Indebtedness and Liens, and MF hereby
acknowledges and agrees that any such reports have been or will
be prepared or reviewed by GECC solely for its own benefit and
GECC shall make no representations or warranties to MF with
respect to and shall have no other responsibility to MF for the
accuracy or completeness of such reports.
6. ENFORCEMENT ACTIONS; NOTICE OF DEFAULTS. a) Except
as expressly provided in Section 7 below, GECC may, at its
option, take any Enforcement Action to foreclose or realize upon
or enforce any of its rights with respect to the Collateral or
any Proceeds thereof without the consent of or notice to MF and
MF hereby agrees that (i) any such Enforcement Action shall be
deemed to be "commercially reasonable" under the UCC, (to the
extent the UCC applies to the Collateral), so long as such
Enforcement Action is taken in good faith, without gross
negligence or willful misconduct, in accordance with the GECC
Credit Documents, and in an manner consistent with the other
terms and conditions of this Agreement, and (ii) MF shall not
take any Enforcement Action with respect to the Collateral or any
Proceeds thereof without GECC's prior written consent; PROVIDED,
however, that nothing contained herein shall be deemed to
prohibit MF from intervening or participating in any judicial or
bankruptcy proceeding to the extent necessary to preserve or
protect its interests.
(b) Each of the Creditors shall use its
reasonable efforts to provide the other Creditor with prompt
written notice of the occurrence of any Default or Event of
Default under the first Creditor's Credit Documents, but any
Creditor's failure to provide such notice to the other Creditor
shall not give rise to any liability on the part of the first
Creditor.
7. TRIGGERING EVENTS, PURCHASE OPTIONS, ETC.(a)
Promptly after GECC's acquiring actual knowledge of the
occurrence of any Triggering Event, GECC shall provide MF with
written notice of such occurrence (a "TRIGGERING EVENTS NOTICE"),
and subject to the terms and conditions hereof, MF thereafter
shall have the right (but not the obligation) to purchase all
(but not less than all) of GECC's rights, titles and interests
in, to and under the GECC Credit Documents, the GECC Indebtedness
and the GECC Liens (collectively, the "GECC INTERESTS") for a
purchase price, which shall be payable in United States dollars
by wire transfer of immediately available funds on the date of
such purchase, in an amount equal to the aggregate outstanding
balance of all of GECC's Indebtedness (including principal,
interest, fees and other amounts) as of the date of such
purchase. In the event MF elects to purchase the GECC Interests
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hereunder after its receipt of a Triggering Event Notice, MF
shall give GECC written notice of such election within ten (10)
Business Days after MF's receipt of such Triggering Event Notice
and such purchase shall be closed on the fifth (5th) Business Day
after GECC's receipt of such purchase notice from MF. At such
closing, upon payment of the purchase price by MF to GECC in the
manner and in the amount specified above, GECC shall deliver to
MF (or its designee) the executed originals of the GECC Credit
Documents then in GECC's possession together with (i) GECC's
endorsement (or assignment if requested by MF) without recourse
of any promissory note from the Borrower held by GECC as evidence
of the GECC Indebtedness, (ii) UCC financing statement
assignments duly executed by GECC in favor of MF (or its
designee) with respect to any and all financing statements or
fixture filings filed by GECC on any Credit Party in connection
with the perfection of the GECC Liens, (iii) a written assignment
of the GECC Interests, which assignment shall be in the form of
EXHIBIT A attached hereto, duly executed by GECC in favor of MF
(or its designee), and (iv) any of the Collateral in the form of
chattel paper or instruments (within the meaning of the UCC) that
may be then in the possession of GECC.
(b) Any purchase of the GECC Interests by MF from
GECC shall be made without recourse against GECC and without any
representations or warranties by GECC (except that GECC shall be
deemed to have represented and warranted to MF, or its designee,
that as of the closing of such purchase GECC will have good title
to the GECC Interests and will not have sold, assigned or
otherwise transferred any of the same to any person other than MF
or its designee), and MF shall purchase the GECC Interests from
GECC on an "AS IS" and "WHERE IS" basis. MF hereby acknowledges
that, in the event it elects to purchase the GECC Interests from
GECC hereunder, such purchase will be made by MF in reliance upon
its own independent investigation of the Credit Parties'
condition and creditworthiness, the Collateral's value, the GECC
Liens' perfection and priority, and the GECC Credit Documents'
validity and enforceability and not in reliance upon any
information, representations or advice provided by GECC.
(C) In the event MF (or its designee) purchases
the GECC Interests from GECC in accordance with and subject to
the terms and conditions of this Agreement, GECC shall from time
to time thereafter, upon reasonable request and at the expense of
MF (or its designee), execute such additional notices,
assignments and other similar documents as MF (or its designee)
may reasonably request in order to more fully effectuate such
purchase.
(d) MF will indemnify and hold GECC harmless from
and against any losses, damages or expenses (including attorney's
fees, court costs and other litigation expenses) which may be
incurred or suffered by GECC in its capacity as the former holder
of the GECC Interests as a result of any actions or omissions on
the part of MF (or its designee) which occur on or after the date
of the closing of the purchase of all of the GECC Interests from
GECC by MF (or its designee) pursuant to this Section 7 and which
relate to MF's (or its designees) receipt, administration,
modification, collection or other enforcement of any of the GECC
Interests; PROVIDED, HOWEVER, that GECC shall not be entitled to
any indemnification under this paragraph for any loss, damage or
expense such person incurs solely as a result of its own gross
negligence or willful misconduct. MF's indemnity obligations
under this paragraph shall survive any termination of this
Agreement.
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(e) Notwithstanding anything in this Agreement
to the contrary, GECC shall not, without the express prior
written consent of MF, (i) make any loan or other extensions of
credit to any Credit Parties other than under the revolving
credit facility provided under the GECC Credit Agreement or agree
to permit the maximum amount of credit available to the Borrower
under the Credit Agreement to be increased to more than
$15,000,000 in aggregate principal amount at any one time or
agree to permit a GECC Overadvance to occur at any time in an
amount which exceeds the Maximum GECC Overadvance Amount as then
in effect (except that (x) GECC shall not be required to obtain
MF's consent to GECC's converting such revolving credit facility
into a debtor-in-possession financing facility with any Credit
Party if there is no increase in the inventory advance rates for
or in the maximum credit available under such debtor-in-possession
financing facility and (y) GECC shall not be required
to obtain MF's consent to GECC's providing any loans or credit to
any Credit Party as a debtor-in-possession in an Insolvency
Proceeding, which loans may be made in such amounts and at such
inventory advance rates as may be acceptable to GECC, if GECC
determines in good faith that it needs to provide such financing
in order to prevent another lender from providing such financing
on terms which would result in such other lender having a lien on
the Collateral with priority over the GECC Liens thereon), or
(ii) expressly agree in writing to extend the final maturity date
of the GECC Indebtedness by more than ninety (90) days.
8. WAIVERS. Except as expressly provided in this
Agreement, each of the Creditors hereby expressly waives the
following on the part of the other Creditor: diligence in
protection or collection of any Collateral or Indebtedness;
presentment; demand; protest; notice to any and all persons of
protest; demand; default; nonpayment; the creation or existence
of any Indebtedness or any Collateral therefor; or of any
extensions of credit or indulgences to the Borrower; or of any
other matters or things whatsoever relating hereto or thereto.
9. EXERCISE OF RIGHTS. Except as expressly set forth
in Section 7 above, GECC may exercise all of its rights with
respect to any or all of the Collateral or the Proceeds thereof
without any obligation to MF until there has been full payment
and performance of the GECC Indebtedness and a termination of its
Liens on such property, GECC shall be entitled to manage and
supervise its Indebtedness and the Collateral and the Proceeds
thereof in accordance with applicable law and its practices in
effect from time to time without regard to the existence of the
MF Liens, and GECC shall have no liability to MF for (i) any and
all actions which GECC, in compliance with this Agreement and in
good faith, takes or omits to take with respect to its
Indebtedness or the Collateral or the Proceeds thereof (including
without limitation actions with respect to creation, perfection
or continuation of its Liens in any of the Collateral), the
occurrence of any default with respect to any such Indebtedness,
the foreclosure upon, sale, release or depreciation of, or any
failure to realize upon, any of the Collateral or the Proceeds
thereof, and the collection of any of its Indebtedness from any
Credit Party or any other party), and (ii) any election of the
application of Section 1111(b)(2) of the Federal Bankruptcy Code.
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10. PLEDGE OR TRANSFER OF MF INDEBTEDNESS. MF agrees
not to assign, transfer, pledge, or grant a security interest in
all or any part of the MF Indebtedness or the MF Liens unless (i)
such assignment, transfer, pledge or grant is made expressly
subject to this Agreement and (ii) MF's assignee, transferee,
pledgee or grantee expressly agrees in writing to assume MF's
obligations hereunder. MF shall place on any and all promissory
notes, agreements or other instruments or documents evidencing
the MF Indebtedness or granting the MF Liens a legend, in form
and substance satisfactory to GECC, stating that such notes,
agreements or other instruments or documents are subordinated
pursuant to this Agreement.
11. CONTINUING AGREEMENT AND TERMINATION.
(a) This Agreement is a continuing agreement and
this Agreement shall remain in full force and effect until the
Termination Date regardless of whether the GECC Indebtedness is
from time to time reduced and thereafter increased or entirely
extinguished and thereafter reincurred or incurred anew. This
Agreement shall remain in full force and effect and shall be
irrevocable until and shall terminate on the Termination Date.
No notice purporting to terminate this Agreement which is
received by GECC at any time prior to the Termination Date shall
be effective, in any manner or at any time whatsoever, to
terminate this Agreement.
(b) This Agreement shall be and remain absolute
and unconditional under any and all circumstances and, except as
expressly provided in Section 7 or Section 9 hereof, no act or
omission on the part of any Creditor shall affect or impair the
terms or conditions hereof. Without limiting the generality of
the foregoing, and except as expressly provided in Section 7 or
Section 9 above, GECC may change any of the terms of the GECC
Credit Agreement or any of the other GECC Documents, may grant
renewals, extensions or other indulgences of or with respect to
GECC Indebtedness or the Collateral or take any action for the
enforcement of, or waive any rights with respect to, any of the
GECC Indebtedness or the Collateral, all without any requirement
on GECC's part that it give notice of the same to MF or obtain
MF's consent thereto and all without affecting, impairing or
releasing any of MF's obligations under this Agreement.
(C) Notwithstanding anything in this Agreement
to the contrary, this Agreement shall terminate upon MF's (or its
designee's) purchase of all of the GECC Interests from GECC and
GECC's receipt of the purchase price therefor pursuant to Section
7 of this Agreement.
12. RIGHTS AGAINST OTHER CREDITORS. This Agreement
shall not modify, affect or impair in any way any of the rights
and priorities of the Creditors relative to any of the rights and
priorities of any other creditors (unsecured or secured) of any
or all of the Credit Parties.
13. CREDIT PARTIES' ACKNOWLEDGMENTS, CONSENTS AND
AGREEMENTS. The Borrower hereby acknowledges and consents (on
behalf of itself and all other Credit Parties) to the execution,
delivery and performance of this Agreement by MF and GECC and the
Borrower further agrees (on behalf of itself and all other Credit
Parties) to be bound by the provisions of this
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Agreement as they relate to the relative rights, remedies and
priorities of MF and GECC and the respective obligations of the
Credit Parties to them; PROVIDED, however that nothing in this
Agreement shall amend, modify, change or supersede the respective
terms of any of the GECC Indebtedness or the MF Indebtedness as
between the Credit Parties, on the one hand, and GECC or MF, on
the other hand, and in the event of any conflict or inconsistency
between the terms of this Agreement and those of any agreement,
note or other document evidencing or securing any of the GECC
Indebtedness, the MF Indebtedness or the Collateral, the
provisions of such other agreement, instrument or document shall
govern as between the Credit Parties, on the one hand, and GECC
or MF (as the case may be), on the other hand, and the Borrower
further agrees (on behalf of itself and the other Credit Parties)
that this Agreement shall not give any Credit Party any
substantive rights relative to GECC or MF and the Credit Parties
shall not be entitled to raise any actions or inactions on the
part of GECC or MF hereunder as a defense, counterclaim or other
claim against such party.
14. MISCELLANEOUS.
(a) Wherever possible, each provision of this
Agreement is to be interpreted in such manner as to be effective
and valid under applicable law, but if any provision hereof is
prohibited or invalid under such law, such provision is to be
ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
(b) This Agreement shall be binding upon and
shall inure to the benefit of GECC, MF, the Credit Parties and
their respective successors and assigns. Without limiting the
generality of the immediately preceding sentence, any person or
entity whose loans or advances to any Credit Party hereafter are
used to refinance in full the GECC Indebtedness or the MF
Indebtedness shall be deemed for purposes of this Agreement to be
the assignee of and successor to GECC or MF (as the case may be),
and from and after the date of any such refinancing in full of
GECC Indebtedness or the MF Indebtedness (as the case may be)
such person or entity shall be deemed a party hereto in the place
and stead of GECC or MF (as the case may be) as if such person or
entity had been the original signatory hereto and any and all
loans, advances, liabilities, covenants and duties at any time or
times owing by any or all of the Credit Parties to such successor
to GECC, whether direct or indirect, secured or unsecured, due or
to become due, or then existing or thereafter arising, shall be
deemed for all purposes hereunder to constitute and be the GECC
Indebtedness or the MF Indebtedness (as the case may be) and any
and all Liens on any of the Collateral granted to such successor
shall constitute and be the GECC Liens or the MF Liens (as the
case may be) hereunder.
(C) All singular terms used herein shall include
the plural, and any pronouns used herein shall include all
genders.
(d) This Agreement constitutes the sole and
entire agreement among the parties with respect to the subject
matter hereof and supersedes and replaces any and all prior or
concurrent agreements, understandings, negotiations or
correspondence between them with respect thereto.
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(e) Time is of the essence of this Agreement.
(f) No amendment or waiver of any provision of
this Agreement, nor consent to any departure therefrom, shall be
effective or binding upon any Creditor unless such Creditor shall
first have given its written consent thereto.
(g) This Agreement may be executed in one or
more counterparts and each such counterpart shall constitute an
original and all such counterparts together shall constitute one
and the same instrument.
(h) All sections headings herein are for
convenience of reference only and shall not limit or otherwise
affect the meaning or interpretation of this Agreement.
(i) All notices, demands and other
communications hereunder to any party shall be effective (i) if
given by telecopy, when such communication is transmitted to the
telecopy number set forth beneath such Person's signature below
(with such telecopy to be promptly confirmed by delivery of a
copy thereof by personal delivery or United States mail as
otherwise provided herein), (ii) if given by mail, three (3)
Business Days after such communication is deposited in the United
States mail with first class postage prepaid, return receipt
requested, and addressed to such Person at its address set forth
beneath its signature below, (iii) if sent for overnight delivery
by Federal Express, United Parcel Service or other reputable
national overnight delivery service, one (1) Business Day after
such communication is entrusted to such service for overnight
delivery and with recipient signature required, addressed as
aforesaid, or (iv) if given by any other written means, when
delivered at the address of such Person shown below. Any party
may designate a different address or telecopy number for its
receipt of such notices or other communications but no such
change shall be effective unless and until the other party
actually receives such written notice.
15. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN SUCH STATE.
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16. JURY TRIAL WAIVER AND FORUM CONSENTS. EACH OF
THE PARTIES HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE UNDER ANY
APPLICABLE LAW TO A TRIAL BY JURY WITH RESPECT TO ANY SUIT OR
LEGAL ACTION WHICH MAY BE COMMENCED BY OR AGAINST SUCH PERSON
CONCERNING THE INTERPRETATION, CONSTRUCTION, VALIDITY,
ENFORCEMENT OR PERFORMANCE OF THIS AGREEMENT. IN THE EVENT ANY
SUCH SUIT OR LEGAL ACTION IS COMMENCED BY GECC, EACH OF MF AND
THE CREDIT PARTIES HEREBY EXPRESSLY AGREES, CONSENTS AND SUBMITS
TO THE PERSONAL JURISDICTION OF ANY STATE OR FEDERAL COURT
SITTING IN ▇▇▇▇▇▇ COUNTY, GEORGIA, WITH RESPECT TO SUCH SUIT OR
LEGAL ACTION AND FURTHER EXPRESSLY CONSENTS AND SUBMITS TO AND
AGREES THAT VENUE IN ANY SUCH SUIT OR LEGAL ACTION IS PROPER IN
SAID COURTS AND FURTHER EXPRESSLY WAIVES ANY AND ALL PERSONAL
RIGHTS UNDER APPLICABLE LAW OR IN EQUITY TO OBJECT TO THE
JURISDICTION AND VENUE OF SAID COURTS. THE JURISDICTION AND
VENUE OF THE COURTS CONSENTED TO AND SUBMITTED TO AND AGREED UPON
IN THIS SECTION ARE NOT EXCLUSIVE BUT ARE CUMULATIVE AND IN
ADDITION TO THE JURISDICTION AND VENUE OF ANY OTHER COURT UNDER
ANY APPLICABLE LAW OR IN EQUITY.
IN WITNESS WHEREOF, the Creditors and the Borrower have
caused this Agreement to be executed and delivered by their
respective duly authorized officers, all as of the day and year
first above written.
General Electric Capital Corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Duly Authorized Signatory
Address:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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MUSIC FUNDING 1, LLC
By: GENEVA ASSOCIATES, LLC, Its Manager
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Manager
Address:
c/o Geneva Associates, LLC
First ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (910) 275 - 9155
SPEC'S MUSIC, INC. (for itself and on
behalf of the other Credit Parties)
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Title: VP/CFO
----------------------------------
Address:
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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EXHIBIT A
ASSIGNMENTS OF INTERESTS
FOR VALUE RECEIVED, including without limitation the
payment in cash or immediately available funds on this date by
_____________________________, a______________________[Insert
Name of Purchaser] ("Assignee"), to General Electric Capital
Corporation, a New York corporation ("Assignor"), of the Purchase
Price payable under (and as such term is defined in) the
Subordination and Intercreditor Agreement, dated as of October
3, 1997, between Music Funding I, LLC and Assignor (the
"Agreement"), Assignor hereby sells, transfers and assigns to
Assignee, without recourse and without any representations or
warranties of any kind on the part of Assignor except in either
case as expressly provided in the Agreement, all of the
Assignor's rights, titles and interests in, to and under the
following documents, indebtedness and collateral:
[(a) That certain Credit Agreement, dated
as of May 22, 1996, between Spec's Music, Inc.,
a Florida corporation (the "Borrower") and the
Assignor (the "Credit Agreement");
(b) The certain Promissory Note, dated
as of ________________, ____, executed by the
Borrower in favor of Assignor in the original
stated principal amount of $__________ (the
"NOTE");
(C) The certain Security Agreement, dated
as of _________________, _____, executed by the
Borrower in favor of Assignor in the original
stated principal amount of $__________ (the
"SECURITY AGREEMENT");
(d) [Insert description of Puerto Rico Collateral
Documents (collectively, the "OTHER COLLATERAL
DOCUMENTS");
(e) Any and all Uniform Commercial Code financing
statements or fixture filings filed by the Assignor
on the Borrower in order to perfect Assignor's security
interests under the Credit Agreement or the Other
Collateral Documents;
(f) Any and all indebtedness or obligations
of the Borrower to the Assignor which now exist
under any of the Note, the Credit Agreement or
the Other Collateral Documents (collectively, the
"OBLIGATIONS"); and
(g) Any and all real or personal property of the
Borrower which secures the Obligations pursuant to
the Credit Agreement or the Other Collateral
Documents (collectively, the "Collateral").]
This Assignment of Interests is executed and delivered
pursuant to, and is subject to all of the terms and conditions
of, the Agreement.
IN WITNESS WHEREOF, Assignor has executed and delivered this
Assignment of Interests, all as of this ______day of
_____________________, _____.
GENERAL ELECTRIC CAPITAL
CORPORATION
By:
-------------------------------------
Title:
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