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Amended And Restated Term Loan Agreement

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Sectors: Specialty Retail
Governing Law: New York, View New York State Laws
Effective Date: October 09, 2002
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AMENDED AND RESTATED TERM LOAN AGREEMENT


Dated as of October 9, 2002


among


MTS, INCORPORATED,


THE LENDERS NAMED HEREIN,


and


JPMORGAN CHASE BANK,
as Administrative Agent and as Collateral Agent


-------------------------------


THIS AGREEMENT IS SUBJECT TO THAT CERTAIN INTERCREDITOR AGREEMENT
DATED AS OF OCTOBER 9, 2002, AMONG THE PARTIES HERETO AND THE CIT
GROUP/BUSINESS CREDIT, INC., A NEW YORK CORPORATION, AS AGENT.


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[CS&M Reference 6700-570]


TABLE OF CONTENTS


Page
---- ARTICLE I DEFINITIONS........................................................................1
SECTION 1.01. Defined Terms........................................................1
SECTION 1.02. Terms Generally......................................................6


ARTICLE II THE LOANS.........................................................................7
SECTION 2.01. Loans................................................................7
SECTION 2.02. Repayment of Loans; Evidence of Debt.................................7
SECTION 2.03. Interest.............................................................7
SECTION 2.04. Mandatory Prepayment.................................................8
SECTION 2.05. Optional Prepayment..................................................9
SECTION 2.06. Sharing of Setoffs..................................................10
SECTION 2.07. Payments............................................................10
SECTION 2.08. Taxes...............................................................10


ARTICLE III CERTAIN COVENANTS...............................................................12
SECTION 3.01. Guarantee Requirement; Collateral Requirement; Further Assurances...12
SECTION 3.02. Notices of Amendments, Waivers and Defaults.........................13
SECTION 3.03. Business and Liabilities of Pipernick...............................13
SECTION 3.04. Amendment of Agreements by the Borrower.............................13


ARTICLE IV INCORPORATION BY REFERENCE.......................................................13


ARTICLE V THE AGENT.........................................................................15


ARTICLE VI MISCELLANEOUS....................................................................17
SECTION 6.01. Notices.............................................................17
SECTION 6.02. Survival of Agreement...............................................17
SECTION 6.03. Binding Effect......................................................17
SECTION 6.04. Successors and Assigns..............................................17
SECTION 6.05. Expenses; Indemnity.................................................20
SECTION 6.06. Right of Setoff.....................................................21
SECTION 6.07. Applicable Law......................................................21
SECTION 6.08. Waivers; Amendment..................................................21
SECTION 6.09. Interest Rate Limitation............................................22
SECTION 6.10. Entire Agreement....................................................22
SECTION 6.11. WAIVER OF JURY TRIAL................................................22
SECTION 6.12. Severability........................................................23
SECTION 6.13. Counterparts........................................................23
SECTION 6.14. Headings............................................................23
SECTION 6.15. Jurisdiction; Consent to Service of Process.........................23
SECTION 6.16. Confidentiality.....................................................24
SECTION 6.17. Certain Agreements..................................................24


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AMENDED AND RESTATED TERM LOAN AGREEMENT dated as of October 9, 2002, among MTS, INCORPORATED, a California corporation (the "Borrower") the lenders listed in Schedule 2.01 hereto or becoming parties hereto pursuant to Section 6.04 (the "Lenders") and JPMORGAN CHASE BANK (f/k/a The Chase Manhattan Bank), a New York banking corporation, as administrative agent for the Lenders and as collateral agent for the Lenders (in such capacities, the "Agent") .


The Borrower has requested the Lenders, and the Lenders and the Agent have agreed, pursuant to the terms of the Assignment, Purchase and Amendment Agreement, to amend and restate the Existing Credit Agreement in the form of this Agreement and to permit the loans outstanding under the Existing Credit Agreement on the date hereof and after giving effect to the payments and assignments provided for in the Assignment, Purchase and Amendment Agreement to remain outstanding as term loans under this Agreement.


Accordingly, the Borrower, the Lenders and the Agent agree as follows:


ARTICLE I
DEFINITIONS


SECTION 1.01. Defined Terms. Except as expressly set forth in Article IV hereof, capitalized terms used but not defined herein shall have the meanings assigned to such terms in the other Loan Documents. As used in this Agreement, the following terms shall have the meanings specified below:


"Administrative Questionnaire" means an administrative questionnaire in a form supplied by the Agent.


"Affiliate" means, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the person specified and in any case shall include, when used with respect to the Borrower or any Subsidiary, any joint venture in which the Borrower or such Subsidiary holds an equity interest.


"Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 6.04), and accepted by the Agent, in a form approved by the Agent.


"Assignment, Purchase and Amendment Agreement" means the Assignment, Purchase and Amendment Agreement dated as of the date hereof among the Borrower, the Lenders and the Agent.


"Broadway Mortgage" means the mortgage on the Broadway Property to secure loans under the CIT Credit Agreement.


"Broadway Property" means the real property located at 692 Broadway, 14 E. 4th Street Units, New York, NY.


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"Business Day" means any day (other than a day which is a Saturday, Sunday or legal holiday in the State of New York) on which banks are open for business in New York City.


"CIT" means CIT Group/Business Credit, Inc.


"CIT Credit Agreement" means the Credit Agreement dated as of October 9, 2002 between the Borrower, the lenders party thereto and CIT, as agent for such lenders.


"CIT Facility" means the senior secured revolving credit facility in an aggregate principal amount of $75,000,000 established by the CIT Credit Agreement.


"CIT Real Estate Facility" means the real estate subfacility of the CIT Facility in an aggregate principal amount of $7,500,000.


"Collateral" shall have the meaning assigned to such term in the Security Documents.


"Collateral Requirement" means at any date that, except as set forth in Schedule 1.01A, (a) the Pledge Agreements create in favor of the Agent, for the benefit of the Secured Parties, perfected pledges of and security interests in all capital stock or other equity interests and all Indebtedness (including all capital stock or other equity interests in each Subsidiary (including Pipernick Corp.) and all intercompany loans or advances among MTS and the Subsidiaries) owned by the Borrower or any Subsidiary, (b) the Security Agreements create in favor of the Agent, for the benefit of the Lenders, perfected security interests in the Collateral of the Borrower and each Subsidiary, in each case as security for the Obligations, (c) the Mortgages create in favor of the Agent, for the benefit of the Lenders, perfected liens on each of the Mortgaged Properties (other than the Designated Mortgaged Properties referred to in the Existing Credit Agreement and, so long as any obligations remain outstanding under the CIT Credit Agreement, other than the property subject to the Broadway Mortgage) as security for the Obligations (or, in the case of any Mortgaged Property, such amount of the Obligations as shall be specified opposite such Mortgaged Property in Schedule 5.09 to the Existing Credit Agreement), and the Mortgaged Properties subject to the Mortgages include all interests in real property that have been mortgaged by the Borrower or any Subsidiary to secure obligations under the CIT Credit Agreement (other than, so long as any obligations remain outstanding under the CIT Credit Agreement, the Broadway Mortgage) provided, that, if CIT releases the lien on the Broadway Property evidenced by the Broadway Mortgage during such time as any obligations remain outstanding under the CIT Credit Agreement, the Borrower shall grant a mortgage in favor of the Agent, for the benefit of the Lenders, which mortgage shall create a perfected lien on the Broadway Property, to secure at least $18,000,000 of the Obligations, (d) the pledges, security interests and liens referred to in the preceding clauses (a), (b) and (c) are prior to all other liens other than (i) the liens securing the Lender Debt Obligations (as defined in the Intercreditor Agreement) and Permitted Liens (as defined in the Existing Credit Agreement) and (e) the Administrative Agent shall have received either (i) a counterpart of each of the Security Documents, duly executed and delivered on behalf of all Loan Parties party thereto, or (ii) in the case of any Person that becomes a Loan Party after the date hereof, a supplement to each Security Document, in the form specified therein, duly executed and delivered on behalf of such Loan Party; provided that the Agent may agree that the liens of the Security Documents will not be perfected with respect to specified assets if it shall determine and shall notify the Lenders


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(and, if any Lender shall object in writing, the Required Lenders shall also determine), based on information provided by the Borrower which is, in the judgment of the Agent and, if applicable, the Required Lenders, sufficient to make the determination in question, that the expense or difficulty of perfecting such liens with respect to such assets would be excessive in view of the benefit to the Lenders that would result therefrom.


"Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and "Controlling" and "Controlled" shall have meanings correlative thereto.


"Default" means any event or condition that constitutes an Event of Default or that upon notice or lapse of time or both would become an Event of Default.


"dollars" or "$" means lawful money of the United States of America.


"EBITDA" shall mean, for a given period, all earnings from operations of the Borrower and the Subsidiaries before all (a) interest and tax obligations, (b) depreciation and (c) amortization for said period, all determined in accordance with GAAP on a consistent basis with the latest audited consolidated financial statements of the Borrower, but excluding the effect of non-cash gains or losses for such period, determined in accordance with GAAP.


"Event of Default" means any of the events set forth in Section 10.1 of the CIT Credit Agreement, as incorporated by reference in Article III hereof.


"Existing Credit Agreement" means Credit Agreement dated as of April 27, 2001, as amended by a First Amendment dated as of October 5, 2001, a Second Amendment dated as of April 1, 2002, a Third Amendment dated as of April 30, 2002, a Fourth Amendment dated as of June 23, 2002, Fifth Amendment dated as of September 12, 2002, a Sixth Amendment dated as of September 30, 2002, and a Seventh Amendment dated as of October 4, 2002.


"Fixed Charge Coverage Amount" shall mean, for any specified period with respect to the Borrower and the Subsidiaries, the difference between (a) EBITDA and (b) the sum of (i) Capital Expenditures (as defined in the CIT Credit Agreement), (ii) income taxes paid or accrued and (iii) Fixed Charges (as defined in the CIT Credit Agreement).


"GAAP" means United States generally accepted accounting principles, applied on a consistent basis.


"Governmental Authority" means the government of the United States, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.


"Guarantee Agreement" means the Amended and Restated Guarantee Agreement dated as of April 27, 2001, among the Guarantors and the Administrative Agent acting on behalf of the


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Lenders, as the same may be amended, modified or supplemented from time to time in accordance with the provisions hereof.


"Guarantee Requirement" means at any date that the Parent, the Borrower and each Subsidiary is a Guarantor, in accordance with the terms of the Guarantee Agreement; provided that any Subsidiary that is not a US Subsidiary will not guarantee the Obligations of MTS; provided further, however, that any Subsidiary (including any Subsidiary that is not a US Subsidiary) that is a borrower or a guarantor of the obligations under the CIT Credit Agreement shall in any event be a Guarantor under the Guarantee Agreement.


"Guarantors" means the parties to the Guarantee Agreement on the date hereof and each other Subsidiary that becomes a party to the Guarantee Agreement pursuant to Section 3.01 or otherwise.


"Indemnity, Subrogation and Contribution Agreement" means the Indemnity, Subrogation and Contribution Agreement dated as of April 27, 2001, among the Guarantors and the Agent acting on behalf of the Secured Parties, as the same may be amended, modified or supplemented from time to time in accordance with the provisions hereof.


"Intercreditor Agreement" means the Intercreditor Agreement dated as of October 9, 2002 between CIT and JPMCB, as Agent for the Lenders, in substantially the form of Exhibit B hereto.


"Irish Security Agreement" means the Security Agreement dated as of April 27, 2001, among the Borrower, Ireland TR, Incorporated and the Agent acting on behalf of the Secured Parties, as the same may be amended, modified or supplemented from time to time in accordance with the provisions hereof.


"JPMCB" means JPMorgan Chase Bank.


"Loan Documents" means this Agreement, the Guarantee Agreement and the Security Documents.


"Loan Parties" means the Parent, the Borrower and each Subsidiary that is party to the Guarantee Agreement or any Security Document.


"Loans" means loans made by the Lenders to the Borrower under the Existing Credit Agreement and continuing outstanding as term loans under this Agreement.


"Maturity Date" means April 1, 2005, or any earlier date on which the CIT Facility matures or is terminated pursuant to the terms of the CIT Credit Agreement.


"Mortgage" shall mean one or more mortgages or deeds of trust, in form and substance satisfactory to the Borrowers' Agent and the Agent.


"Mortgaged Property" shall mean each parcel of real property owned by MTS or any US Subsidiary and listed on Schedule 5.09 to the Existing Credit Agreement.


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"Net Proceeds" means with respect to any refinancing of any Real Estate Collateral permitted under Section 9.9(q) of the CIT Credit Agreement (after giving effect to any amendments and waivers thereto) or sale of Real Estate Collateral permitted under Section 9.7(b) (x) of the CIT Credit Agreement (after giving effect to any amendments and waivers thereto), the cash proceeds received in respect thereof, including any cash received in respect of any non-cash proceeds, but only as and when received, net of the sum of all fees and out-of-pocket expenses paid by the Borrower or any Subsidiary to persons other than Affiliates in connection therewith.


"Obligations" means the due and punctual payment of (i) the principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, and (ii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Loan Parties to the Lenders under this Agreement, the Guarantee Agreement and the other Loan Documents.


"person" means any natural person, corporation, business trust, joint venture, limited liability company, association, company, partnership or government, or any agency or political subdivision thereof.


"Pledge Agreements" means (a) the Amended and Restated Pledge Agreement dated as of April 27, 2001, among MTS, the applicable Subsidiaries and the Agent acting on behalf of the Secured Parties, as the same may be amended, modified or supplemented from time to time in accordance with the provisions hereof and (b) in connection with the pledge of any equity interests in any Subsidiary that is not a US Subsidiary, any other pledge agreement that the Agent shall deem necessary or advisable to create liens on such equity interests to secure the Obligations or any of them.


"Prime Rate" means the rate of interest per annum publicly announced from time to time by JPMCB as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.


"Register" shall have the meaning given such term in Section 6.04(d).


"Related Parties" means, with respect to any specified person, such person's Affiliates and the respective directors, officers, employees, agents and advisors of such person and such person's Affiliates.


"Required Lenders" means, at any time, Lenders in the aggregate holding at least a majority of the aggregate unpaid principal amount of the Loans.


"Secured Parties" shall have the meaning assigned to such term in the Security Documents.


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"Security Agreements" means (a) the US Security Agreement, (b) the UK Security Agreement and (c) the Irish Security Agreement.


"Security Documents" means the Security Agreements, the Pledge Agreements, the Mortgages, the Indemnity, Subrogation and Contribution Agreement and each other security agreement, mortgage or other instrument or document executed and delivered pursuant to Section 3.01.


"subsidiary" means, with respect to any person, any corporation, partnership, limited liability company, association or other business entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership or limited liability company interests are, at the time any determination is being made, owned, controlled or held by such person.


"Subsidiary" means any subsidiary of the Borrower.


"TRKK" means Tower Records Kabushiki Kaisha, a Japanese corporation and, prior to the effectiveness of this Agreement, a wholly owned subsidiary of the Borrower.


"TRKK Sale" means the sale by the Borrower to Valtona Holding B.V., a corporation wholly owned by Nikko Principal Investments Japan Ltd., pursuant to a stock purchase agreement dated as of April 11, 2002, of all of the issued and outstanding capital stock of TRKK and the Japanese trademarks, service marks and trade names associated with the business conducted by TRKK.


"Trust Note" shall mean the Secured Promissory Note, dated as of the date hereof, issued by the Borrower to the order of The Russell M. Solomon and Doris E. Solomon 1994 Children's Trust.


"UK Security Agreement" means the Security Agreement dated as of April 27, 2001, among the Borrower, T.R. Services Incorporated and the Agent acting on behalf of the Secured Parties, as the same may be amended, modified or supplemented from time to time in accordance with the provisions hereof.


"US Security Agreement" means the Amended and Restated Security Agreement dated as of April 27, 2001, among the Borrower, certain US Subsidiaries and the Agent acting on behalf of the Secured Parties, as the same may be amended, modified or supplemented from time to time in accordance with the provisions hereof.


"US Subsidiary" means any Subsidiary that is organized under the laws of the United States or any state or other political subdivision, territory or possession thereof.


SECTION 1.02. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any


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agreement, instrument or other document (other than in Article IV) shall be construed as referring to such agreement, instrument or other document as amended, supplemented or otherwise modified from time to time, (b) any reference herein to any person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.


ARTICLE II
THE LOANS


SECTION 2.01. Loans. On the date hereof, Loans outstanding under the Existing Credit Agreement in the aggregate principal amount of $26,000,000 shall continue outstanding as Loans under this Agreement. The aggregate principal amounts of the Loans of the Lenders on the Closing Date are set forth opposite their respective names in Schedule 2.01. Principal amounts paid or prepaid in respect of Loans may not be reborrowed.


SECTION 2.02. Repayment of Loans; Evidence of Debt. The Borrower hereby unconditionally promises to pay to the Agent for the accounts of the Lenders the outstanding principal amounts of the Loans on the Maturity Date. Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the Loans of such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. The Agent shall maintain accounts in which it will record (i) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (ii) the amount of any sum received by the Agent hereunder from the Borrower and each Lender's share thereof. The entries made in the accounts maintained pursuant to this Section 2.03 shall be prima facie evidence of the existence and amounts of the obligations therein recorded; provided, however, that the failure of any Lender or the Agent to maintain such accounts or any error therein shall not in any manner (i) affect the obligations of the Borrower to repay the Loans in accordance with their terms or (ii) cause the Borrower's obligations to be greater than they would have been absent such failure or error.


SECTION 2.03. Interest.


(a) Subject to the provisions of paragraph (b) below, the Loans shall bear interest on each day (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to the greater of (i) 11% per annum and (ii) the Prime Rate on such day plus 5% per annum; provided, however, that in the event that the Loans shall not have been prepaid in the amount of at least $5,000,000 with the Net Proceeds of one or more transactions set forth in Sections 2.04(c) or 2.04(d) by the first anniversary of the date of this Agreement, the interest rate applicable to the Loans for each day after such anniversary shall be the interest rate otherwise applicable to such Loans on such day plus 4% per annum. Accrued interest on the Loans shall be payable in arrears on the last Business Day in each month and on the Maturity Date.


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(b) At all times during the continuance of any Event of Default, and at all times during the continuance of any Default or Event of Default (each as defined in the CIT Credit Agreement), the Loans shall bear interest at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to the rate in effect at such time under paragraph (a) above plus 2% per annum.


SECTION 2.04. Mandatory Prepayment.


(a) The Borrower shall prepay $1,000,000 in aggregate principal amount of the Loans on the date upon which the CIT Credit Agreement becomes effective with a portion of the proceeds of the Trust Note.


(b) The Borrower shall prepay $500,000 in aggregate principal amount of the Loans on August 1, November 1, February 1 and May 1 of each year, beginning August 1, 2003.


(c) In the event and on each occasion that any Net Proceeds are received by or on behalf of the Borrower or any Subsidiary from any refinancing of any Real Property Collateral (as defined in the CIT Credit Agreement) in a transaction permitted under Section 9.9(q) of the CIT Credit Agreement (after giving effect to any amendments and waivers thereto), the Borrower shall substantially simultaneously apply such Net Proceeds to prepay the Loans in an amount equal to 50% of such Net Proceeds, but only so long as (i) no Defau
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