FIFTH AMENDMENT TO CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT dated as of March 17, 1998
(this "Fifth Amendment") amends the Credit Agreement dated as of October 7, 1994
(as heretofore amended, the "Credit Agreement") among THE MUSICLAND GROUP, INC.
(the "Borrower"), MUSICLAND STORES CORPORATION ("MSC"), various financial
institutions (the "Banks") and ▇▇▇▇▇▇ GUARANTY TRUST COMPANY OF NEW YORK, as
Agent (in such capacity, the "Agent"). Terms defined in the Credit Agreement
are, unless otherwise defined herein or the context otherwise requires, used
herein as defined therein.
WHEREAS, the Borrower, MSC, the Banks and the Agent have entered into
the Credit Agreement; and
WHEREAS, the parties hereto desire to amend the Credit Agreement as
hereinafter set forth;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION I Amendments. Effective on (and subject to the occurrence of)
the Fifth Amendment Effective Date (as defined below), the Credit Agreement
shall be amended as set forth below:
1.1 Addition of Definitions. Section 1.1 shall be amended by: (i)
adding the following definitions in appropriate alphabetical position:
"Designated Assets" means the Designated Media Play Stores and
Franklin Distribution Center.
"Designated Media Play Stores" means the Media Play stores
located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, the Media Play
store located at ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and the Media Play
store located at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇.
"Excess Securities Proceeds" means the lesser of (i) the gross
cash proceeds received by the Borrower from the issuance of the 1998
Senior Subordinated Notes in excess of $150,000,000 minus all amounts
which would be deducted to determine the Net Securities Proceeds from
such issuance and (ii)$114,000,000.
"Franklin Distribution Center" means the distribution center
located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
"1998 Senior Subordinated Indenture" means the Indenture among
MSC, the Borrower and Banc One, N.A., as Trustee, pursuant to which the
1998 Senior Subordinated Notes shall be issued, as amended or otherwise
modified from time to time.
"1998 Senior Subordinated Notes" means the Borrower's Senior
Subordinated Notes due 2008 to be issued pursuant to the 1998 Senior
Subordinated Indenture.
"Term Loan Extension" means any extension of the maturity date
of the loans under the Term Loan Agreement for a period of two years or
more (or any refinancing of such loans which has the effect of
extending the maturity date thereof for such a period).
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1.2 Amendment to Definition of Change of Control. The definition of
"Change of Control", shall be amended by (a) deleting the word "or" immediately
preceding clause(y) of such definition and inserting in lieu thereof a semicolon
(";") and (b) inserting the following at the end of such definition; or
(z) any "Change of Control" as defined in the Senior Subordinated
Indenture or the 1998 Senior Subordinated Indenture or any other
similar event, regardless of how designated, if the occurrence of such
event would require the Borrower to redeem or repurchase any
Subordinated Debt prior to its expressed maturity."
1.3 Amendment to Definition of Subordinated Debt Guarantee. The
definition of "Subordinated Debt Guarantee" shall be amended to read in its
entirety as follows:
"Subordinated Debt Guarantee" means, as applicable, MSC's guarantee of
the obligations of the Borrower under the Senior Subordinated Notes or
the 1998 Senior Subordinated Notes.
1.4 Amendment to Commitments. The first sentence of Section 2.1 shall
be amended to read in its entirety as follows:
Each Bank severally agrees, on the terms and conditions set forth in
this Agreement, to make loans to the Borrower pursuant to this Section
2.1 from time to time during the Term of this Agreement; provided that
(i) the amount of all Outstanding Credit Extensions shall not at any
time exceed (x) the aggregate amount of the Commitments minus (y) the
sum of (1) so long as the Term Loan Extension has not occurred, the
aggregate principal amount of Debt outstanding under the Term Loan
Agreement and (2) the amount of Excess Securities Proceeds which has
not been applied either to reduce the Commitments or to prepay, redeem,
repurchase or retire Senior Subordinated Notes (the "Subordinated Note
Prepayment Reserve"), it being understood that, notwithstanding the
limitations set forth in this clause (i) the Borrower may borrow all or
any portion of the Subordinated Note Prepayment Reserve so long as the
Borrower certifies that all of the proceeds of such Borrowing will be,
and such proceeds are, applied to prepay, redeem, repurchase or retire
Senior Subordinated Notes; and (ii) the aggregate principal amount of
Committed Loans by any Bank at any one time outstanding shall not
exceed the lesser of (x) its Commitment and (y) its pro rata share of
the amount set forth in clause (i) of this proviso.
1.5 Amendment to Mandatory Commitment Termination Provision. Section
2.11 shall be amended to read in its entirety as follows:
SECTION 2.11 Mandatory Reduction or Termination of Commitments. (a)
Promptly upon receipt by the Borrower or any Subsidiary of any Net Cash
Proceeds from any sale of, or any Net Securities Proceeds from any
financing secured by, any Designated Asset, the Commitments shall be
reduced by an amount (rounded down, if necessary, to an integral
multiple of $1,000,000) equal to (i) the aggregate amount of all Net
Cash Proceeds and all Net Securities Proceeds from all sales of, and
financings secured by, Designated Assets after March 1, 1998 minus (ii)
the aggregate amount of all such Net Cash Proceeds and Net Securities
Proceeds previously
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applied to reduce the Commitments pursuant to this sentence; provided
that the amount of the reduction of the Commitments required pursuant
to this clause (a) in respect of (x) the Designated Media Play Stores
shall not exceed $11,000,000 and (y) the Franklin Distribution Center
shall not exceed $22,000,000.
(b) On the date on which the Term Loan Extension occurs, the
Commitments shall be reduced by $50,000,000.
(c) If the Net Securities Proceeds of the 1998 Senior
Subordinated Notes exceed $264,000,000, then on the date of the
issuance of the 1998 Senior Subordinated Notes the Commitments shall be
reduced in an amount equal to such excess (rounded upward, if
necessary, to an integral multiple of $1,000,000).
(d) If the Borrower receives Excess Securities Proceeds from
the issuance of the 1998 Senior Subordinated Notes, then on March 31,
1999 the Commitments shall be reduced by an amount (rounded upward, if
necessary, to an integral multiple of $1,000,000) equal to the positive
remainder, if any, of (i) the amount of such Excess Securities Proceeds
minus (ii) the aggregate amount of all prepayments, redemptions,
repurchases or retirements of Senior Subordinated Notes which have
occurred after the date of the issuance of the 1998 Senior Subordinated
Notes.
(e) The Commitments shall terminate on the Termination Date,
and any Loans then outstanding (together with accrued interest thereon)
shall be due and payable on such date.
1.6 Amendment to Mandatory Prepayment Provision. Section 2.13 shall
be amended to read in its entirety as follows:
SECTION 2.13 Mandatory Prepayments. If at any time the
Outstanding Credit Extensions exceed the lesser of (x)
Aggregate Available Commitment and (y) the amount set forth in
clause (i) of the proviso to the first sentence of Section
2.1, the Borrower will immediately prepay Loans or provide
cash collateral as provided in Section 10.14 in an amount at
least equal to such excess.
1.7 Amendment to Restricted Payments Covenant. Section 5.10(b) shall
be amended by adding the following at the end thereof:
provided that so long as (i) no Default or Event of Default then exists
or would result therefrom, (ii) the Borrower will be in pro forma
compliance with Sections 5.7, 5.8 and 5.9 for the four fiscal quarters
ended immediately prior to the date of such prepayment (assuming the
prepayment, repurchase, redemption or retirement described below had
occurred on the first day of such period), the Borrower may prepay,
repurchase, redeem or retire Senior Subordinated Notes in an amount
equal to 100% of the amount, if any, by which (x) all Net Securities
Proceeds received by the Borrower after March 1, 1998 and not required
to be applied to reduce the Commitments pursuant to Section 2.11(c) of
this Agreement or Section 3(b) of the Fifth Amendment to this Agreement
or to
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prepay Synthetic Lease Obligations pursuant to Section 5.12(c)
exceed (y) $50,000,000.
1.8 Amendment to Debt Covenant. Section 5.11 shall be amended by
amending clause (c) thereof to read as follows:
(c) Debt consisting of the Senior Subordinated Notes, the 1998
Senior Subordinated Notes and the Subordinated Debt Guarantees;
1.9 Amendment to Synthetic Lease Covenant. Section 5.12(c) shall be
amended by adding the following sentence at the end thereof:
Notwithstanding the foregoing, the Borrower shall prepay Synthetic
Lease Obligations with proceeds of the 1998 Senior Subordinated Notes
in an amount equal to the Synthetic Lease Prepayment Amount (as defined
in Section 3 of the Fifth Amendment to this Agreement) and, if any
Synthetic Lease Obligations are outstanding after such prepayment,
clause (iii) above shall be amended automatically (and without any
other action by any party hereto) in its entirety to read as follows:
(iii) provide for any payment of any Synthetic Lease
Obligation which would result in the lenders thereunder having
received payment of a greater amount of the outstanding
Synthetic Lease Obligations thereunder after giving effect to
the prepayment thereof with the proceeds of the 1998 Senior
Subordinated Notes than the amount of the reductions in the
Commitments hereunder which have been made since the
reductions in the Commitments required to be made with the
proceeds of the 1998 Senior Subordinated Notes.
1.10 Amendment to Asset Sale Covenant. Section 5.13 shall be amended by
(i) adding the following proviso to the end of clause (ii) of the first sentence
thereof "and provided, further, that there shall be excluded from this clause
(ii) any sale of the Designated Media Play Stores" and (ii) adding the following
proviso to the end of clause (b) of the second sentence thereof ", provided,
however, that there shall be excluded from this clause (b) sales of the
Designated Media Play Stores."
1.11 Amendment to Merger Covenant. Section 5.15(b) shall be amended by
adding the following proviso at the end thereof ", provided, however, that the
Borrower may sell its assets currently located in the United Kingdom."
1.12 Amendment to Capital Expenditure Covenant. Section 5.16(a) shall
be amended by deleting the parenthetical in the second sentence of such section
and inserting in lieu thereof the following:
(provided that (i) the amount permitted for the 1998 fiscal year shall
be increased by the amount, if any, by which $20,000,000 exceeds the
actual Capital Expenditures made by the Borrower and its Subsidiaries
in the 1997 fiscal year and (ii) any prepayment of Borrower's Synthetic
Lease Obligations in connection with any Designated Asset shall be
disregarded for purposes of this Section 5.16(a))
1.13 Amendment to Guarantee Covenant. Section 5.18(b) shall be amended
in its entirety to read as follows: o(b) the Subordinated Debt Guarantees,".
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1.14 Amendment to Amendments to Senior Subordinated Indenture Covenant.
Section 5.22 shall be amended to read in its entirety as follows:
SECTION 5.22. Amendments to Subordinated Indentures. The
Borrower will not consent to any amendment, modification, supplement or
waiver of any of the provisions of the Senior Subordinated Indenture,
the 1998 Senior Subordinated Indenture or any other document governing
any Subordinated Debt that, in any such case, would have an adverse
impact on the Banks.
1.15 Amendment to Events of Default. Section 6.1(1) shall be amended in
its entirety to read as follows:
(1) any court of competent jurisdiction shall have determined
that the subordination of the Senior Subordinated Notes, the 1998
Senior Subordinated Notes or MSC's Subordinated Debt Guarantees thereof
to the obligations of MSC and the Borrower to the Banks and the Agent
under the Loan Documents shall not be in accordance in any material
respect with the terms and conditions set forth in the Senior
Subordinated Indenture or the 1998 Senior Subordinated Indenture, as
applicable, or the validity or enforceability of any provision of such
subordinations shall at any time be contested by any Loan Party, or any
Affiliate of any Loan Party, or a proceeding shall be commenced by any
Loan Party or any Affiliate of any Loan Party seeking to establish the
invalidity or unenforceability thereof;
SECTION 2 Representations and Warranties. The Borrower and MSC
represent and warrant to the Agent and the Banks that (a) except to the extent
disclosed in annual and quarterly filings filed by MSC or the Borrower with the
Securities and Exchange Commission since October 7, 1994, each representation
and warranty set forth in Section 4 of the Credit Agreement, as amended hereby
(as so amended, the "Amended Credit Agreement"), is true and correct as of the
date of the execution and delivery of this Fifth Amendment by the Borrower and
MSC (and assuming the effectiveness hereof), with the same effect as if made
on such date; (b) the execution and delivery by the Borrower and MSC of this
Fifth Amendment and the performance by the Borrower and MSC of their respective
obligations under the Amended Credit Agreement (i) are within the corporate
powers of the Borrower and MSC, (ii) have been duly authorized by all necessary
corporate action on the part of the Borrower and MSC, (iii) have received all
necessary governmental and regulatory approval and (iv) do not and will not
contravene or conflict with, or result in or require the creation or imposition
of any Lien under, any provision of Applicable Law or of the respective
certificate of incorporation or by-laws of the Borrower or MSC or of any
agreement, instrument, order or decree which is binding upon the Borrower, MSC
or any applicable Subsidiary; and (c) the Amended Credit Agreement is the legal,
valid and binding obligation of each of the Borrower and MSC, enforceable
against the Borrower and MSC in accordance with its terms.
SECTION 3 Effectiveness. The amendments set forth in Section 1 above
shall become effective or the date (the "Fifth Amendment Effective Date") when:
(a) the Agent shall have received:
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(i) counterparts of this Fifth Amendment executed by the
Borrower, MSC and the Required Banks (it being understood that, in the
case of any Bank, the Agent may rely upon facsimile confirmation of the
execution of a counterpart hereof by such Bank for purposes of
determining the effectiveness hereof);
(ii) an opinion of ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, Assistant General
Counsel of the Borrower, substantially in the form of Attachment 1
hereto; and
(iii) all documents the Agent may reasonably request relating
to the existence of the Borrower and MSC, the corporate authority for
and the validity of this Agreement and the other Loan Documents, and
any other matters relevant hereto, all in form and substance
satisfactory to the Agent; and
(b) the Borrower shall have issued (or shall concurrently issue) not
less than $100,000,000 of Senior Subordinated Notes due 2008 (the "1998 Senior
Subordinated Notes") for net proceeds of not less than $95,000,000, shall have
applied (or shall concurrently apply) not less than the sum of $50,000,000 plus
the Specified Amount (as defined below) of the net proceeds thereof to the
prepayment of the Loans and shall have permanently reduced (or shall
concurrently reduce) the Commitments by an amount not less than the Specified
Amount (it being understood that (i) the Agent shall have received true, correct
and complete copies of all documents related to the 1998 Senior Subordinated
Notes and the terms and provisions of each such document shall be substantially
as described in the "Description of Notes" delivered to the Banks on March 17,
1998 and (ii) the interest rate on the 1998 Senior Subordinated Notes shall not
exceed 10% per annum).
For purposes of clause (b) above, the "Specified Amount" shall be an
amount (rounded upward, if necessary, to an integral multiple of $1,000,000)
equal to (x) the lesser of the gross cash proceeds of the issuance of the 1998
Senior Subordinated Notes o2, $150,000,000 minus (y) the sum of (I) all amounts
which -.would be deducted to determine the Net Securities Proceeds of such
issuance, (II) $50,000,000 and (III) the Synthetic Lease Prepayment Amount (as
defined below). The "Synthetic Lease Prepayment Amount" shall be equal to: (i)
if the gross cash proceeds of the issuance of the 1998 Senior Subordinated Notes
are $120,000,000 or more, the aggregate amount of the Synthetic Lease
Obligations of the Borrower and its Subsidiaries on the date of the issuance of
the 1998 Senior Subordinated Notes (such aggregate amount, the "Outstanding
Synthetic Lease Obligations"); and (ii) if the gross cash proceeds of the 1998
Senior Subordinated Notes are less than $120,000,000, an amount (rounded upward,
if necessary, to an integral multiple of $1,000,000) equal to the outstanding
Synthetic Lease Obligations minus 50% of the amount by which such gross cash
proceeds are less than $120,000,000.
SECTION 4 Miscellaneous.
4.1 Continuing Effectiveness, etc. As herein amended, the Credit
Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects. After the Fifth Amendment Effective Date, all
references in the Credit Agreement and the other Loan Documents to "Credit
Agreement", "Agreement" or similar terms shall refer to the Amended Credit
Agreement.
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4.2 Counterparts. This Fifth Amendment may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original but all such counterparts
shall together constitute one and the same Fifth Amendment.
4.3 Governing Law. This Fifth Amendment shall be a contract made under
and governed by the internal laws of the State of New York applicable to
contracts made and to be performed entirely within such State.
4.4 Successors and Assigns. This Fifth Amendment shall be binding upon
the Borrower, MSC, the Banks and the Agent and their respective successors and
assigns, and shall inure to the benefit of the Borrower, MSC, the Banks and the
Agent and the respective successors and assigns of the Banks and the Agent.
IN WITNESS WHEREOF, the parties hereto have caused this Fifth Amendment
to be duly executed by their respective authorized officers as of the day and
year first above written.
THE MUSICLAND GROUP, INC.
By:
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Title:
MUSICLAND STORES CORPORATION
By:
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Title:
▇▇▇▇▇▇ GUARANTY TRUST COMPANY OF NEW
YORK
By:
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Title:
CITIBANK, N.A.
By:
-----------------------------------
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By:
-----------------------------------
Title:
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD., CHICAGO BRANCH
By:
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Title:
PNC BANK, NATIONAL ASSOCIATION
By:
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Title:
SOCIETE GENERALE
By:
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Title:
BEAR, ▇▇▇▇▇▇▇ INVESTMENT PRODUCTS INC.
By:
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Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:
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Title:
DLJ CAPITAL FUNDING, INC.
By:
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Title:
NATIONSBANK, N.A.
By:
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Title:
FERNWOOD RESTRUCTURINGS LTD.
By:
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Title:
HALCYON DISTRESSED SECURITIES, L.P.
By:
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Title:
BANK OF MONTREAL
By:
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Title:
WAYLAND INVESTMENT FUND, LLC
By:
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Title:
▇▇▇▇▇▇ COMMERCIAL PAPER, INC.
By:
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Title:
MELLON BANK, N.A., solely
in its capacity as Trustee
for First Plaza Group
Trust, as directed by
Contrarian Capital Advisors
LLC, and not in its
individual capacity
By:
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Title: