Notice Of Default Sent By Salus Capital Partners to RadioShack $RSH

RadioShack made an 8-K filing with a copy of the letter:

Please take NOTICE, that multiple Events of Default have occurred and are continuing under the Credit Agreement and the other Loan Documents, including under:

(i) Section 7.1(c) of the Credit Agreement (as a result of the Credit Parties’ breach of Section 5.6 of the Credit Agreement), which arose as a result of the Borrower and certain of the other Credit Parties entering into certain agreements and transactions with Persons constituting Affiliates of the Borrower, which agreements and transactions are prohibited under Section 5.6 of the Credit Agreement, including (a) the Recapitalization and Investment Agreement, dated as of October 3, 2014 (the “Recapitalization Agreement”), between the Borrower and General Retail Holdings L.P. (the “Sponsor”), (b) the Loan Sale Agreement, dated as of October 3, 2014 (the “Loan Sale Agreement”), by and among General Electric Capital Corporation, the other entities listed as Sellers, General Retail Holdings L.P. and General Retail Funding LLC, RadioShack Corporation, certain subsidiaries of RadioShack Corporation, and solely with respect to Section 7(h), Standard General Master Fund L.P., Standard General OC Master Fund L.P., Standard General Limited and Standard General Focus Fund L.P., and (c) the First Amendment to Credit Agreement, dated October 3, 2014 (the “First Amendment”, and the Credit Agreement, dated as of December 10, 2013, among the Borrower, certain subsidiaries of the Borrower that are designated as credit parties, the lenders party thereto and General Electric Capital Corporation, as agent for the lenders, as amended by the First Amendment, the “Amended Credit Agreement”), among the Borrower, certain subsidiaries of the Borrower that are designated as credit parties, the lenders thereto and Cantor Fitzgerald Securities, as successor agent for the lenders, and the other documents related thereto, and the performance by the Credit Parties of their obligations thereunder (including, without limitation, the incurrence and payment of approximately $38.1 million in fees to Sponsor and its affiliates and the Credit Parties’ agreement to the terms set forth in Section 5.19 of the Recapitalization Agreement (Directors’ and Officers’ Indemnification and Insurance));

(ii) Section 7.1(c) of the Credit Agreement (as a result of the Credit Parties’ breach of Section 5.6 of the Credit Agreement), which arose as a result of the outstanding principal amount of the ABL Obligations exceeding the amount of ABL Obligations permitted to exist under Section 5.5(f) of the Credit Agreement, due to the creation and funding (or deemed funding) of the “Term Out Revolving Loans” (as defined in the Amended Credit Agreement) in the principal amount of $275,000,000, which reduced the Revolving Loan Commitments (and, in turn, the Maximum ABL Facility Amount) (each as defined in the Intercreditor Agreement) by $275,000,000, which, in turn, reduced the permitted amount of the ABL Obligations to $310,000,000, an amount which is significantly less than the principal amount of ABL Obligations currently outstanding;

(iii) Section 7.1(c) of the Credit Agreement (as a result of the Credit Parties’ breach of Section 5.15 of the Credit Agreement), which arose as a result of the Credit Parties amending the ABL Loan Documents in a manner prohibited by the Intercreditor Agreement (i.e., by changing the conditions that must be satisfied for the Credit Parties to make payments on account of the Obligations under the Credit Agreement in a manner that makes such conditions more difficult to satisfy due to the amendment of the definitions of the terms “Average Daily Availability Percentage” and “Maximum Revolving Loan Balance,” of the ABL Credit Agreement (as set forth in the definition of “Payment Conditions” in the Amended Credit Agreement)); and

(iv) Section 7.1(c) of the Credit Agreement (as a result of the Credit Parties’ breach of Section 5.15(a)(i)(A) of the Credit Agreement), and (ii) Section 7.1(d) of the Credit Agreement (as a result of the Credit Parties’ failure to “perform or observe any other term, covenant or agreement contained in…any Loan Agreement…”, which default has remained unremedied for a period of thirty (30) or more days), and which, in each case, arose as a result of the Borrower’s Borrowing Base Certificate reflecting an NOLV Factor higher than that which was required to be utilized under the ABL Credit Agreement. The improper use of the higher NOLV Factor has resulted in tens of millions of dollars in additional credit being made available to the Borrower, in violation of the provisions contained in the Intercreditor Agreement and therefore in violation of the Credit Agreement.

The Events of Default described in this paragraph are collectively referred to herein as the “Existing Events of Default”. The Agent is investigating whether additional Events of Default currently exist.