SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of January 31, 1997, is
between WEI Acquisition Co., a Delaware corporation (which will
change its name to Wherehouse Entertainment, Inc.) ("Borrower"),
and United States Trust Company of New York, a New York banking
corporation, as collateral agent ("Collateral Agent") for
Alliance Entertainment Corp., Baker & Taylor, Inc., BMG
Distribution, EMI Music Distribution, Paramount Pictures,
Polygram Group Distribution, Inc., RED Inc., Sony Music
Corporation, Inc., Universal Music and Video Distribution and
Warner/Elektra/Atlantic Corporation and such other entities that
are added hereto pursuant to paragraph 15 (collectively "Trade
Creditors").
WHEREAS, Borrower is obligated to Trade Creditors for the
repayment of certain indebtedness created by the extension of
credit by each of the Trade Creditors; and
WHEREAS, the parties hereto desire to secure the obligations
of Borrower to Trade Creditors.
NOW, THEREFORE, intending to be legally bound, Borrower, Trade
Creditors and Collateral Agent agree as follows:
1. Definitions.
Whenever used herein the following terms shall, unless the
context otherwise requires, have the following respective
meanings:
a. "Account" means any right to payment for goods sold or
leased or for services rendered which is not evidenced by an
instrument or chattel paper.
b. "Account Debtor" means the Person who is obligated on an
Account or Contract Right.
c. "Collateral" means all of Borrower's now owned or
hereafter existing Inventory and all products and proceeds of
Inventory, in any form, including, without limitation, insurance
proceeds and all claims against third parties for loss or damage
to or destruction of any or all of the Inventory.
d. "Contract Right" means any right to payment under a
contract (including, but not limited to, contracts for the sale or
leasing of goods or for the rendering of services) not yet earned
by performance and not evidenced by an instrument or chattel paper.
e. "Document of Title" means a bill of lading, dock warrant,
dock receipt, warehouse receipt or order for the delivery of goods,
and also any other document which in the regular course of business
or financing is treated as adequately evidencing that the Person in
possession of it is entitled to receive, hold and dispose of the
document and the goods it covers.
f. "Interest Rate" means the prime rate as publicly announced
from time to time by CoreStates Bank, N.A., or its successors, at its
office in Philadelphia, Pennsylvania, plus two (2) percent.
g. "Inventory" means tangible personal property held for sale
and raw materials, work in process and materials used, produced or
consumed in business, and shall include tangible personal property sold
on a sale or return basis, tangible personal property returned by the
purchaser following a sale thereof and tangible personal property
represented by Documents of Title, but shall not include Rental
Inventory.
h. "Liabilities" means all existing and future liabilities,
whether absolute or contingent, of Borrower to Trade Creditors of any
nature whatsoever arising under the then existing and outstanding
extension of credit.
i. "Permitted Encumbrances" means (1) liens securing the payment
of taxes, either not yet overdue or the validity of which are being
contested in good faith by appropriate proceedings diligently pursued
and available to Borrower and with respect to which adequate reserves
have been set aside on its books, (2) security and other deposits
(including customs and revenue deposits) in the ordinary course
of Borrower's business, (3) liens in favor of credit card
processors with respect to credit card receivables processed by
them, and (4) non-consensual statutory liens (other than liens
securing the payment of taxes) arising in the ordinary course of
Borrower's business.
j. "Person" means an individual, a corporation, a government or
governmental subdivision or agency or instrumentality, a business trust,
an estate, a trust, a partnership, a cooperative, an association, two
or more Persons having a joint or common interest, or any other legal
or commercial entity.
k. "Proceeds" means whatever is received when Collateral or
Proceeds of Collateral is sold, exchanged, collected or otherwise
disposed of and also includes payments and rights to payment under
any policies of insurance with respect to any Collateral. The term
includes the Account arising when the right to payment is earned under
a Contract Right representing such Proceeds and, without limitation,
any accounts receivable representing such Proceeds.
l. "Rental Inventory" means all finished merchandise of Borrower
held for rental to retail customers, provided that such merchandise
has not previously been reported to Collateral Agent as comprising
part of Borrower's Inventory.
m. "Required Trade Creditors" shall mean Trade Creditors that have
extended trade credit in a principal amount at least equal to 66.6% in
principal amount of the aggregate trade credit then extended by all Trade
Creditors.
2. Grant of Security Interest.
To secure the payment, promptly when due, and the punctual
performance of all of the Liabilities, Borrower hereby grants to
Collateral Agent, for the benefit of Trade Creditors, a
continuing lien upon and security interest in all of the
Collateral, subject only to the terms of that certain
Intercreditor and Subordination Agreement, dated as of
January 31, 1997 (the "Congress Intercreditor Agreement"),
between and among Collateral Agent, Trade Creditors and Congress
Financial Corporation (Western), a California corporation
("Congress"). The Borrower, at its expense, shall take such
actions (including, without limitation, the filing of Uniform
Commercial Code financing statements) as shall be necessary or
appropriate to perfect, and maintain the perfection of, the
security granted hereby.
3. Records and Certifications.
Borrower shall faithfully keep complete and accurate books,
records and lists and make all necessary entries therein to
reflect the quantities, costs, current values and locations of
its Inventory and the transactions and facts giving rise to its
Accounts and Contract Rights constituting Proceeds of the
Collateral, and Borrower shall keep the Collateral Agent fully
and accurately informed as to the locations of all such books,
lists and records. Borrower shall permit Collateral Agent's
agents to have access during normal business hours to such books,
lists and records on Borrower's premises for the purpose of
examining, auditing and copying them. If Borrower refuses
Collateral Agent access in accordance with this provision, then
Collateral Agent shall have the right to take possession of such
books, lists and records, which right shall be enforceable by an
action of replevin or by any other appropriate remedy at law or
in equity.
4. Title, etc.
Borrower has acquired absolute and exclusive title to each and
every item or unit of the Collateral free and clear of all liens,
claims, security interests and other encumbrances, except (x) the
security interest granted by Borrower to Congress, (y) the
security interest created hereby in favor of Collateral Agent,
for the benefit of Trade Creditors, and (z) Permitted
Encumbrances. Borrower will warrant and defend its title to the
Collateral, subject to the rights of Collateral Agent and
Congress, against the claims and demands of all other persons
whomsoever. Without limiting the generality of the foregoing,
Borrower will not pledge, assign or otherwise encumber, or permit
any liens or security interests to attach to, any of the
Collateral, nor permit any of the Collateral to be levied upon
under any legal process, other than those liens described above.
Upon any breach of the foregoing covenant against encumbrances,
Collateral Agent may, at its sole election but without obligation
to do so, discharge the encumbrance for the account of and
without notice to Borrower, and all expenses incurred by
Collateral Agent in so doing, together with interest thereon at
the Interest Rate, shall be added to the Liabilities and shall be
payable by Borrower on demand. Without the prior written consent
of Collateral Agent in each case, Borrower will not sell,
exchange, lease, lend, salvage, replace or otherwise dispose of
any item or unit of the Collateral or any of Borrower's rights
therein, except that so long as Borrower is not in default
hereunder, Borrower shall have the right in the ordinary course
of its business to process and sell its Inventory and collect
payment therefor in the ordinary course of business and to return
Inventory to the suppliers thereof in the ordinary course of its
business, in each case free and clear of the security interest in
favor of Collateral Agent granted herein.
5. Taxes and Liens.
Borrower will immediately notify Collateral Agent in the event
there ever arises against any of the Collateral any lien,
assessment or tax or other liability other than the lien of
Congress, the lien created hereby in favor of Collateral Agent or
Permitted Encumbrances, whether or not entitled to priority over
Collateral Agent's security interest hereunder. In any such
event, whether or not such notice is given, Collateral Agent
shall (unless such lien, assessment, tax or other liability is
the subject of an appeal by Borrower and an appropriate bond has
been posted to stay the effect of any resulting lien) have the
right (but shall be under no obligation) to pay any tax or other
liability of Borrower deemed by Collateral Agent in good faith to
affect Collateral Agent's interests hereunder. Borrower shall
repay to Collateral Agent on demand all sums which Collateral
Agent shall have paid under this section in respect of taxes or
other liabilities of Borrower, with interest thereon at the
Interest Rate, and Borrower's liability to Collateral Agent for
such repayment with interest shall be included in the
Liabilities. Collateral Agent shall be subrogated to the extent
of any such payment by it to all the rights and liens of the
payee against Borrower's assets.
6. Insurance.
Borrower shall bear all risk of loss, destruction and damage
to any and all of the Inventory from any cause whatsoever at any
time during the term of this Agreement, and shall at its own cost
and expense obtain and keep in full force and effect, with
insurers of recognized standing in the financial community or
otherwise approved by Collateral Agent, all risk of physical loss
or damage insurance covering the Inventory wherever the same may
be, insuring against the risks of fire, explosion, theft and such
other risks as are customarily insured against by corporations
engaged in the same business and similarly situated with Borrower
(and specifically including vandalism and malicious mischief
coverage), in an amount or amounts usually carried by
corporations engaged in the same business and similarly situated
with Borrower. All policies of such insurance shall be written
for the benefit of Borrower, Congress and Collateral Agent as the
insured, shall bear an endorsement naming Collateral Agent,
Congress and Borrower as loss payees, as their respective
interests may appear, and shall provide for at least ten (10)
days' advance written notice to Collateral Agent of any
cancellation. Collateral Agent and Borrower agree that all
insurance proceeds shall be payable to Borrower if at the time of
such payment no Event of Default then exists. A copy of all such
policies (or certificates therefor) shall be delivered to
Collateral Agent. If Borrower fails to pay any premium on any
such insurance, Collateral Agent shall have the right, but shall
be under no obligation, to pay such premium for Borrower's
account. Borrower shall repay to Collateral Agent on demand all
sums which Collateral Agent shall have paid under this section in
respect of insurance premiums, with interest thereon at the
Interest Rate, and Borrower's liability to Collateral Agent for
such repayment with interest shall be included in the
Liabilities. Borrower hereby assigns to Collateral Agent and
Congress, as their interests may appear, any return or unearned
premium which may be due upon the cancellation for any reason
whatsoever of any policy of insurance maintained in respect of
the Collateral and hereby directs the insurer to pay Collateral
Agent and Congress, as their interests may appear, any amount so
due, except that Collateral Agent shall have no right to any such
amount unless and until there exists an Event of Default.
Borrower's rights to receive payment of any such return or
unearned premium and the proceeds of any such insurance shall
constitute a part of the Collateral to the extent allocable to
Inventory that constitutes Collateral for all purposes hereof.
7. Control of and Access to Inventory
Borrower shall maintain possession and control of its
Inventory at all times, provided that upon the occurrence of an
Event of Default, Collateral Agent shall have the right to take
possession of such Inventory as constitutes Collateral or any
portion thereof, subject only to the provisions of the Congress
Intercreditor Agreement, and for the purpose of taking custody of
such Inventory Borrower agrees that upon request of Collateral
Agent it will lease warehousing space in Borrower's own premises
to Collateral Agent and will erect such structures and post such
signs as Collateral Agent may require in order to place such
Inventory under the exclusive control of Collateral Agent.
Notwithstanding any taking of possession by Collateral Agent of
any Inventory, the same shall remain at all times at Borrower's
sole risk, and to the full extent permitted by law Collateral
Agent shall not be responsible for any loss, damage or diminution
in the value thereof. If any of Borrower's Inventory
constituting Collateral is or becomes evidenced by a Document of
Title, Collateral Agent may require Borrower to promptly deliver
the same to Collateral Agent appropriately endorsed to the order
of Collateral Agent subject only to the provisions of the
Congress Intercreditor Agreement. All costs of transportation,
packaging, custody, processing, storage, insurance and salvage of
any unit or item of Borrower's Inventory which may be incurred by
Collateral Agent shall be promptly repaid to Collateral Agent by
Borrower together with interest thereon at the Interest Rate, and
Borrower's liability to Collateral Agent for such repayment with
interest shall be included in the Liabilities. Borrower will
afford Collateral Agent's agents reasonable access during normal
business hours to Borrower's Inventory from time to time upon
request for purposes of examination, inspection and appraisal and
to verify Borrower's records pertaining thereto.
8. Notices of Loss, etc.
Borrower will immediately notify Collateral Agent of any event
causing any material deterioration, loss or depreciation in value
of such of Borrower's Inventory as constitutes the Collateral.
9. Accounts and Contract Rights.
a. Collateral Agent hereby authorizes Borrower to collect all
Accounts constituting Proceeds of Collateral from the Account Debtors.
Upon the occurrence of an Event of Default, Collateral Agent shall
have the right, acting if it so chooses in Borrower's name, acting in a
commercially reasonable manner, to collect Borrower's Accounts
constituting Proceeds of the Collateral itself, to sell, assign,
compromise, discharge or extend the time for payment of any
Account, to institute legal action for the collection of any
Account, and to do all reasonable acts and things necessary or
incidental thereto; provided, however, that such rights shall be
subject to the provisions of the Congress Intercreditor
Agreement. Borrower hereby ratifies all that Collateral Agent
shall do in accordance with the terms hereof. Collateral Agent
may at any time, after the occurrence of an Event of Default and
subject to the provisions of the Congress Intercreditor
Agreement, notify any Account Debtor that the Account
constituting Proceeds of Collateral payable by such Account
Debtor has been assigned to Collateral Agent and is to be paid
directly to Collateral Agent. At Collateral Agent's request,
after the occurrence of an Event of Default and subject to the
provisions of the Congress Intercreditor Agreement, Borrower
shall so notify Account Debtors and shall indicate on all
billings to Account Debtors that payments thereon are to be made
to Collateral Agent.
10. Significant Locations.
Borrower represents and warrants to Collateral Agent as
follows: (i) the chief executive office of Borrower is located
in Los Angeles County, California, and such chief executive
office is the sole location where Borrower maintains the records
with respect to the Collateral; (ii) the locations set forth in
Schedule A hereto are the only locations where Borrower stores or
processes Inventory. Borrower will notify Collateral Agent in
writing prior to any change in the location specified above and
will reimburse Collateral Agent for the costs of any additional
Uniform Commercial Code filings requested by Collateral Agent as
a result thereof. Borrower agrees to notify Collateral Agent
promptly in the event of a change in the location of any place of
business or the establishment of any additional place of business
of Borrower.
11. Further Assurances; Information.
Without limiting Borrower's obligations under paragraph 2
hereof, Borrower will execute and deliver to Collateral Agent
from time to time all such other agreements, instruments and
other documents (including without limitation all requested
financing and continuation statements) and do all such other
further acts and things as Collateral Agent may reasonably
request in order to further evidence or carry out the intent of
this Agreement or to perfect the lien and security interest
created hereby or intended so to be. Borrower will provide to
Collateral Agent and each of Trade Creditors all reports and
appraisals relating to the Collateral required by Congress at the
same time such reports are delivered to Congress.
12. Default and Remedies.
Borrower shall be in default of this Agreement upon:
(1) the failure by Borrower to observe any material provision
of this Agreement, which failure shall continue fifteen
days after written notice thereof provided by Collateral
Agent; or
(2) notice to Collateral Agent by Required Trade Creditors of
the failure by Borrower to observe any material provision
of any currently existing credit agreements or arrangements
between Borrower and Required Trade Creditors.
Upon the occurrence of any Event of Default which shall be
continuing, (i) upon notice by Collateral Agent to Borrower, the
entire unpaid amount of such of the Liabilities as are not then
otherwise due and payable shall become immediately due and
payable without notice to or demand on Borrower or any guarantor
of any of the Liabilities (Borrower and all such guarantors,
collectively, the "Obligors") and (ii) subject to the provisions
of the Congress Intercreditor Agreement, Collateral Agent may at
its option exercise from time to time any and all rights and
remedies available to it under the Uniform Commercial Code or
otherwise, including the right to collect, assemble, receipt for
or foreclose or otherwise realize upon any of the Collateral and
to dispose of any of the Collateral at one or more public or
private sales or other proceedings, and Borrower agrees that
Collateral Agent or its nominee may become the purchaser at any
such sale or sales. Borrower agrees that ten (10) days shall be
reasonable prior notice of the date of any public sale or other
disposition of all or any part of the Collateral, or of the date
on or after which any private sale or other disposition of the
same may be made.
Subject to the provisions of the Congress Intercreditor
Agreement, all rights and remedies granted Collateral Agent
hereunder or under any other agreement between Collateral Agent
and Borrower shall be deemed concurrent and cumulative and not
alternative, and Collateral Agent may proceed with any number of
remedies at the same time or at different times until all the
Liabilities are fully satisfied. The exercise of any one right
or remedy shall not be deemed a waiver or release of or an
election against any other right or remedy, and Collateral Agent
may proceed against any one or more of the Obligors and the
Collateral and any other Collateral granted by Borrower to
Collateral Agent under any other agreement, all in any order and
through any available remedies. A waiver on any one occasion
shall not be construed as a waiver or bar on any future occasion.
All property of any kind held at any time by Collateral Agent as
Collateral shall stand as one general continuing collateral
security for all the Liabilities and may be retained by
Collateral Agent as security until all the Liabilities are fully
satisfied.
13. Payment of Expenses
Borrower will pay to Collateral Agent on demand any and all
expenses (including reasonable attorneys' fees and legal
expenses) which may have been incurred by Collateral Agent with
interest at the Interest Rate (i) in connection with the
interpretation or enforcement of this Agreement, (ii) in the
prosecution or defense of any action growing out of or connected
with the subject matter of this Agreement, the Liabilities, the
Collateral or any of Collateral Agent's rights therein or
thereto; or (iii) in connection with the custody, preservation,
use, operation, preparation for sale or sale of any of the
Collateral, the incurring of all of which are hereby authorized
to the extent Collateral Agent in good faith deems the same
advisable or is directed to do so by Trade Creditors. Borrower's
liability to Collateral Agent for any such payment with interest
shall be included in the Liabilities. The enumeration of specific
Events of Default shall not compromise the demand character of
any Liability which by its terms is payable on demand and demand
may be made thereon at any time irrespective of the non-
occurrence of any such Event of Default, any provision hereof to
the contrary notwithstanding. The Proceeds of any Collateral
received by Collateral Agent at any time before or after default,
whether from a sale or other disposition of Collateral or
otherwise, or the Collateral itself, may be applied with
reasonable promptness to the payment in full or in part of such
of the Liabilities and in such order and manner as Collateral
Agent may elect or shall be directed by Trade Creditors.
Borrower to the extent of its rights in the Collateral waives and
releases any right to require Collateral Agent to collect any of
the Liabilities from any other of the Collateral or any other
Collateral then held by Collateral Agent under any theory of
marshaling of assets or otherwise, provided, however, that
Collateral Agent be subject to the obligations of a Collateral
Agent under the Uniform Commercial Code to act in a commercially
reasonable manner.
14. Power of Attorney.
Borrower hereby irrevocably appoints any officer, employee or
agent of Collateral Agent as Borrower's true and lawful attorney-
in-fact with power, upon the occurrence of an Event of Default,
to (i) endorse Borrower's name upon any notes, checks, drafts,
money orders, or other instruments of payment that may come into
Collateral Agent's possession and which constitute proceeds of
any Collateral; (ii) sign and endorse Borrower's name upon any
documents of title, invoices, freight or express bills,
assignments, verifications and notices in connection with any of
the Collateral, and any instruments or documents relating thereto
or to Borrower's rights therein; and (iii) execute in Borrower's
name and file one or more financing statements covering the
Collateral. Any such attorney of Borrower shall have full power
to do any and all things necessary to be done with respect to the
above transactions as fully and effectually as Borrower might do,
and Borrower hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof.
15. Additional Trade Creditors
Borrower may add additional entities as Trade Creditors under
this Agreement in its discretion so long as any such additional
Trade Creditor has agreed to provide Borrower, as of the date it
is added, with credit of $250,000 or more on terms acceptable to
Borrower. Such additional Trade Creditor shall be added as a
Trade Creditor under this Security Agreement effective upon the
delivery by Borrower to Collateral Agent and Congress of an
Agreement Regarding Additional Trade Creditor in the form
attached hereto as Exhibit A, executed by Borrower and such
additional Trade Creditor. Upon delivery of such Agreement
Regarding Additional Trade Creditor, the entity designated
therein as an Additional Trade Creditor shall be deemed a Trade
Creditor for all purposes under this Security Agreement, entitled
to all benefits and subject to all obligations set forth in this
Security Agreement. Notwithstanding anything herein to the
contrary, this Section 15 may not be amended without the consent
of Borrower.
16. Miscellaneous.
a. At no time during the past five years has Borrower been known
by or used any name, including any trade or fictitious name, other than
that set forth in the premises of this Agreement. Borrower will give
Collateral Agent notice prior to any change in its name.
b. This Agreement shall commence on the date hereof and shall
continue in full force and effect so long as any of the Liabilities shall
exist from time to time. If after the discharge of all Liabilities
Borrower should subsequently incur additional Liabilities, this Agreement
shall automatically be revived and thereafter continue in full force
and effect until such time as Borrower, having no Liabilities
then outstanding and not then being entitled to incur any
additional Liabilities, shall give written notice to Collateral
Agent of its election to terminate this Agreement.
c. Absent manifest error, statements of account rendered to Borrower
by Collateral Agent hereunder shall become final and be effective unless
objection thereto is made within thirty (30) days of receipt by Borrower.
d. No modification or waiver of any provision hereof shall be
effective unless the same is in writing and signed by the party against
whom its enforcement is sought.
e. This Agreement may be signed in any number of counterparts and
by different parties in separate counterparts, all with the same effect
as if the signatures were on the same counterpart, and all counterparts
hereof, taken together, shall constitute but one and the same
Agreement.
f. Words of any gender shall include any other gender, and singular
words shall include the plural and vice versa, whenever the same is
necessary to produce a fair and meaningful construction.
g. All the rights and remedies of Collateral Agent hereunder shall
be cumulative with and not alternative to or in lieu of Collateral
Agent's rights and remedies under any other agreement or agreements.
h. This Agreement shall bind and inure to the benefit of the parties
and their respective successors and assigns, except that Borrower shall
not assign any of its respective rights hereunder without the prior
written consent of the other party hereto, which shall not be
unreasonably withheld.
i. Captions in this Agreement are included for convenience of reference
only and shall not constitute a part of this Agreement for any other purpose.
j. Any provision hereof which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without affecting the validity or
enforceability of the remainder of this Agreement or the validity or
enforceability of such provision in any other jurisdiction.
k. This Agreement and all issues arising hereunder shall be governed by
the laws of the State of California.
IN WITNESS WHEREOF, this Agreement has been duly executed
under due authorization on the day and year first set forth
above.
WEI Acquisition Co.
By: /s/ Eliot Cobb
----------------------------
Title: VP/Treasurer
-------------------------
United States Trust Company of
New York, Collateral Agent
By: /s/ Louis P. Young
----------------------------
Title: Vice President
---------------------------
EXHIBIT A
Agreement Regarding Additional Trade Creditor
This Agreement Regarding Additional Trade Creditor
("Agreement") is dated as of_____________, l9__ by and between
_________________ ("Additional Trade Creditor") and Wherehouse
Entertainment, Inc. ("Borrower"), as successor to WEI Acquisition
Co .
A. Certain of Borrower's trade creditors have
entered into that certain Intercreditor and Subordination
Agreement (the "Intercreditor Agreement") dated as of January __,
1997, by and among _________________, as Collateral Agent for the
trade creditors named therein ("Collateral Agent") and Congress
Financial Corporation (Western), a California corporation
("Congress").
B. Pursuant to that certain Security Agreement dated
as of January __, 1997, by and between Borrower and Collateral
Agent (the "Trade Security Agreement"), Borrower granted to
Collateral Agent, for the benefit of Trade Creditors (as defined
therein), a lien in its sale inventory and proceeds thereof.
Section ___ of the Trade Security Agreement provides that
Borrower may designate additional entities as Trade Creditors
entitled to the benefits of such lien granted pursuant to the
Trade Security Agreement.
C. The Trade Creditors who are parties to the
Intercreditor Agreement and the Trade Security Agreement have
entered into that certain [Collateral Agent Agreement] dated as
of __________, 1997 pursuant to which Collateral Agent has been
appointed by such Trade Creditors. Section ____ of the
Collateral Agent Agreement provides that Borrower may designate
additional entities as Trade Creditors for purposes of the
Collateral Agent Agreement.
D. Borrower and Additional Trade Creditor desire to
add Additional Trade Creditor as a Trade Creditor for purposes of
the Intercreditor Agreement, the Trade Security Agreement and the
Collateral Agent Agreement.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
Section 1. Additional Trade Creditor acknowledges
that it has committed to extend an open line of credit to
Borrower equal to $250,000 or more and Borrower acknowledges that
the terms and conditions of this line of credit are acceptable to
it; provided, however, that nothing herein shall obligate
Additional Trade Creditor to maintain this open line of credit
for any period of time and the parties acknowledge that the
Additional Trade Creditor is free to adjust the terms and
conditions (or eliminate) this line of credit at any time.
Section 2. Additional Trade Creditor acknowledges
that it has received copies of and agrees to be bound by the
terms of the Intercreditor Agreement, the Trade Security
Agreement and the Collateral Agent Agreement and appoints
Collateral Agent pursuant to the terms of the Collateral Agent
Agreement.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed by their respective officers hereunder
to duly authorize, as of the date first above written.
WHEREHOUSE ENTERTAINMENT, INC.
By:______________________________
Its:_____________________________
[ADDITIONAL TRADE CREDITOR]
By:______________________________
Its:_____________________________