11
SECOND AMENDMENT AGREEMENT
THIS SECOND AMENDMENT AGREEMENT ("Second Amendment") is entered into as
of March 1, 1999, and is among HOLLYWOOD ENTERTAINMENT CORPORATION, an Oregon
corporation dba "Hollywood Video" (the "Borrower"), SOCIETE GENERALE, as
Agent, ▇▇▇▇▇▇▇ ▇▇▇▇▇ CREDIT PARTNERS L.P., as Documentation Agent, the Co-
Agents named in the Credit Agreement referred to below, and each of the
Lenders, as defined therein, currently party to the Credit Agreement.
RECITALS:
A. The Borrower, Societe Generale, as Agent, ▇▇▇▇▇▇▇▇▇, Lufkin &
▇▇▇▇▇▇▇▇ Securities Corporation, as Administrative Agent, and ▇▇▇▇▇▇▇ Sachs
Credit Partners L.P., as Documentation Agent, the Co-Agents named therein and
the Lenders are (or, as described below, were) parties to that certain
Revolving Credit Agreement dated as of September 5, 1997, and amended by a
First Amendment Agreement dated as of March 31, 1998, providing for a
revolving credit facility in the maximum principal amount of $300,000,000 (as
from time to time amended, supplemented or restated, the "Credit Agreement").
Capitalized terms used herein without definition have the meanings ascribed
to them in the Credit Agreement.
▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation and DLJ Capital
Funding, Inc. are no longer parties to the Credit Agreement.
C. The parties desire to amend the Credit Agreement to modify certain
of the terms and conditions of the Loan Documents.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Definitions.
1.1 Amendments to Definitions. The definition of each of the following
terms is hereby amended to read in its entirety as set forth below:
"Adjusted EBITDA" means, for any Person for any period, (a)
such Person's EBITDA for such period minus (b) all costs of
acquisition of Rental Items for Stores for such period, to the
extent that (i) such costs of acquisition are accounted for as
capital expenditures under GAAP and (ii) such Rental Items were
acquired for a particular Store (A) after its opening, or (B) in
the case of a Store acquired during such period, after it commences
to operate as a Store (i.e., excluding the cost of acquisition of
such Store's initial inventory, the intent of the parties being to
adjust EBITDA for the recurring costs of keeping a Store in stock,
and not for the initial cost of equipping a Store with inventory).
"Material Subsidiary" means, at any time, each Subsidiary of
the Borrower (i) that then has a Net Worth in excess of the lesser
of (A) $5,000,000 or (B) 3% of Borrower's Net Worth; but excluding
(ii) ▇▇▇▇.▇▇▇, unless it (A) is wholly-owned by the Borrower or
one more Affiliates of the Borrower, and (B) has otherwise
qualified as a Material Subsidiary for a period of thirty (30)
consecutive days, exclusive of days on which ▇▇▇▇.▇▇▇ has on file
with the Securities and Exchange Commission a registration
statement for the public offering of its common stock that
contemplates gross proceeds, in a single closing, of at least
$5,000,000, provided that, within the 90 days preceding the date on
which the determination is being made, the Borrower has indicated
to the Agent in writing that it intends, in good faith, to complete
such offering within 90 days after the date of such notice.
"Rental Items" means videotapes, video discs (regardless of
format), videogames, audiotapes and related equipment to the extent
that such items were acquired by Borrower (or the relevant
Subsidiary) for sale or rental to its customers or are held by
Borrower (or the relevant Subsidiary) for rental to its customers.
"Rental Revenues" means revenues received by the Borrower (on
a consolidated basis) for the rental of Rental Items.
1.2 Additional Definitions. The Credit Agreement is hereby amended by
adding thereto, in appropriate alphabetical order, the definitions set forth
below:
"▇▇▇▇.▇▇▇" means, collectively, (a) ▇▇▇▇.▇▇▇, Inc., a Delaware
corporation (and any successor corporation resulting from a
reincorporation of that Person for the purpose of changing its
state of incorporation); (b) any direct Subsidiary of Borrower of
which ▇▇▇▇.▇▇▇, Inc. is a subsidiary (for purposes of this
definition only, the "▇▇▇▇.▇▇▇ Parent"); and (c) any subsidiary of
the ▇▇▇▇.▇▇▇ Parent; provided, however, that (x) references to
"▇▇▇▇.▇▇▇" with respect to a registration statement filed with the
Securities and Exchange Commission ("Registration Statement") shall
mean such of the foregoing Persons as is identified in the
Registration Statement as the "issuer" of the securities covered
thereby; and (y) on and after the earlier of (i) the date as of
which any Registration Statement is filed, unless and until
Borrower elects to terminate, rather than consummate, the public
offering contemplated thereby, or (ii) any other transaction
consented to pursuant to Section 4 hereof is consummated,
"▇▇▇▇.▇▇▇" shall mean, collectively, only (1) the "issuer"
identified in the Registration Statement and its subsidiaries, or
(2) the Person whose shares are the subject of such other issuance
or disposition and its subsidiaries, as the case may be.
"Tangible Net Worth" means (a) Net Worth, less (b) all
components thereof attributable to intangible assets (determined in
accordance with GAAP).
2. Amendments to Other Provisions.
2.1 Amendment to Section 2.3.2. Section 2.3.2 of the Credit Agreement
is hereby amended to read in its entirety as follows:
2.3.2 Mandatory Reductions. (a) To the extent that,
by the date that is six (6) months after the Borrower's or any
Subsidiary's receipt of any Net Available Cash in respect of an
Asset Disposition, the Borrower has not reinvested (or caused to be
reinvested, by one or more Subsidiaries) such Net Available Cash in
Additional Similar Assets (determined on a first-in, first-out
basis), or (b) to the extent that such Net Available Cash, when
aggregated with all prior Permitted Acquisitions effected with Net
Available Cash during the fiscal year in which such Net Available
Cash is received, exceeds $50,000,000, on the date such excess Net
Available Cash is received (the amount of such unreinvested Net
Available Cash, or of such excess Net Available Cash, as the case
may be, the "Excess Disposition Proceeds"): the Total Commitment
shall be reduced by an amount equal to such Excess Disposition
Proceeds.
2.2 Amendment to Section 5.10.6. Section 5.10.6 of the Credit
Agreement is hereby amended to read in its entirety as follows:
5.10.6 Shareholder, SEC and Government Reports. As
soon as available, all reports sent by the Borrower, or any
Subsidiary, to its shareholders and all quarterly and annual
reports filed by the Borrower, or any Subsidiary, with the
Securities and Exchange Commission and each other Governmental
Authority having jurisdiction over the Borrower or such Subsidiary.
2.3 Amendment to Section 5.14. Section 5.14 of the Credit Agreement is
hereby amended to read in its entirety as follows:
5.14 Tangible Net Worth. The Borrower shall maintain at all
times a Tangible Net Worth equal to or greater than the sum of:
(a) One Hundred Seventy-Five Million Dollars
($175,000,000), plus
(b) Seventy-five percent (75%) of the Borrower's
cumulative Net Income for those fiscal quarters of the
Borrower ended after September 30, 1998, in which the
Borrower's Net Income was greater than zero (but excluding,
for purposes of determining Net Income for the fiscal quarter
ended December 31, 1998, the effect of the write-down referred
to in clause (e) below), plus
(c) one hundred percent (100%) of the amount, if any, by
which the Tangible Net Worth of the Borrower increases after
September 30, 1998 as a result of the issuance of common stock
or the conversion of debt securities into common stock in
connection with the acquisition of another Person (or of some
or all of the assets of another Person), plus
(d) ninety percent (90%) of the amount, if any, by which
the shareholders' equity of the Borrower increases after
September 30, 1998, as a result of all other issuances of
common stock or conversions of debt securities into common
stock; minus
(e) the lesser of (i) $100,000,000, and (ii) the amount
by which Borrower writes down the value of its inventory after
September 30, 1998, as reflected in Borrower's financial
statements for the year ended December 31, 1998.
2.4 Amendment to Section 6.4. Clause (c) of Section 6.4 of the Credit
Agreement is hereby amended to read in its entirety as follows:
(c) purchase money Liens covering videotapes, video discs or
videogames purchased by the Borrower or any Subsidiary in the
ordinary course of business, provided that such purchase money
Liens do not secure at any time an amount in excess of five percent
(5%) of the Borrower's Total Revenues for the period of four fiscal
quarters then most recently ended;
2.5 Amendment to Section 6.6.2. Section 6.6.2 of the Credit Agreement
is hereby amended to read in its entirety as follows:
6.6.2 Make or maintain Investments in Subsidiaries
(including Subsidiaries acquired as Permitted Acquisitions);
provided that (i) the Borrower's Aggregate Investments in
Subsidiaries, other than ▇▇▇▇.▇▇▇, that are not Material
Subsidiaries do not exceed five percent (5%) of the Borrower's Net
Worth; (ii) the total assets of all Subsidiaries, determined (on a
consolidated basis, where applicable) in accordance with GAAP, but
excluding any value accorded under GAAP to the goodwill of
▇▇▇▇.▇▇▇, do not exceed thirty percent (30%) of Borrower's total
assets, determined on a consolidated basis in accordance with GAAP,
but excluding any value accorded under GAAP to the goodwill of
▇▇▇▇.▇▇▇; and (iii) the Borrower's Aggregate Investment in
▇▇▇▇.▇▇▇, exclusive of goodwill, shall not exceed $55,000,000;
2.6 Amendment to Section 9.9.2. Section 9.9.2 of the Credit Agreement
is hereby amended by adding the following to the end thereof:
Notwithstanding any other provision of any Loan Document, any
action or circumstance, otherwise permitted under the Loan
Documents, that requires any waiver, consent or amendment of any
documentation governing an issuance of Subordinated Debt shall be
prohibited unless such waiver, consent or amendment is obtained
prior to the taking or occurrence thereof.
3. Utilization Fee. In addition to the interest and fees heretofore
payable under the Loan Documents, the Borrower agrees to pay to the Agent,
for the account of the Lenders in proportion to their Percentage Interests, a
utilization fee, computed daily at the rate of 0.375% per annum for the
period commencing on the date of this Agreement and ending on the Maturity
Date, on the aggregate unpaid principal of the Loans, payable in arrears on
the last Business Day of each calendar quarter, on the Maturity Date, and on
demand after the occurrence of any Default or Event of Default but prior to
termination of the Commitments. Computations of the utilization fee shall be
made on the basis of a year of three hundred sixty (360) days for the actual
number of days (including the first day but excluding the last day) occurring
in the period for which such fee is payable. The utilization fee shall be
fully earned as of the day it is due hereunder, and shall be nonrefundable.
It shall be treated, for all purposes of the Loan Documents, as a "fee" that
accrues and becomes payable under the Credit Agreement.
4. Consent to Issuance or Sale of Common Stock of ▇▇▇▇.▇▇▇. The Majority
Lenders hereby consent to the issuance by ▇▇▇▇.▇▇▇, or the sale by Borrower,
of shares of the common stock of ▇▇▇▇.▇▇▇, for purposes of Section 6.1(d) of
the Credit Agreement; provided that the first such issuance or sale takes
place in a single transaction and is for an aggregate consideration, in cash
or stock, having a fair market value of at least $5,000,000 and is otherwise
effected in compliance with the terms of the Credit Agreement.
5. Effectiveness. The amendments to the terms of the Credit Agreement
provided for herein shall become effective, as of March 1, 1999, immediately
upon the execution and delivery by the Borrower, the Agent and Majority
Lenders of counterparts hereof and payment by the Borrower to the Agent, for
the ratable account of the Lenders, of the amendment fee provided for in a
separate letter agreement among the Borrower, the Agent and the Documentation
Agent with respect to the amendments provided for herein; and each reference
herein to the effect that any provision of the Credit Agreement is "hereby
amended" shall mean that such provision is so amended, effective upon such
execution and delivery.
6. Representations and Warranties. The Borrower represents and warrants to
Agent and the Lenders as follows, which representations and warranties shall
survive the execution of this Second Amendment: except as set forth in the
Borrower Disclosure Letter (which indicates which sections of this Second
Amendment or the Credit Agreement are qualified by the disclosures set forth
therein, provided that inadvertent failure to indicate all sections of this
Second Amendment or the Credit Agreement that a particular disclosure is
intended to qualify shall not constitute a breach hereunder):
6.1 Binding Obligations, Etc. This Second Amendment has been duly
executed and delivered by the Borrower and constitutes (and the Credit
Agreement, as amended hereby constitutes), and the other Loan Documents when
duly executed and delivered will constitute, the legal, valid and binding
obligations of the Borrower enforceable against the Borrower in accordance
with their respective terms.
6.2 Other Representations and Warranties. Except as set forth in a
separate disclosure letter delivered by the Borrower to the Agent prior to
the date hereof, each of the representations and warranties of Borrower set
forth in Sections 4.1 through 4.17 of the Credit Agreement is true and
correct as if set forth herein in full and made on and as of the date hereof.
6.3 Absence of Defaults. As of the date hereof, no Event of Default or
Default has occurred and is continuing.
7. Miscellaneous.
7.1 Execution in Counterparts. This Second Amendment may be executed
in any number of counterparts, all of which taken together shall constitute a
single agreement, and shall not become effective until the parties described
in Section 5 hereof have executed and delivered this Second Amendment.
7.2 Limitation; Certain Acknowledgments.
7.2.1 Except as expressly provided herein, nothing in this
Second Amendment shall alter or affect any provision, condition or covenant
contained in the Credit Agreement or any other Loan Document, or limit or
impair any rights, powers or remedies of the Agent or any Lender thereunder,
it being the intent of the parties hereto that the provisions of the Loan
Documents shall continue in full force and effect except as expressly
modified hereby or pursuant to another Loan Document executed and delivered
in connection with the transactions contemplated hereby.
7.2.2 The Borrower acknowledges and agrees that the
Obligations, as amended pursuant hereto, are intended to, and shall, continue
to constitute "Designated Senior Indebtedness" for all purposes of the High
Yield Notes and the Indenture. The Borrower shall designate the Agent as the
"Representative" of the Lenders for purposes of the Indenture in accordance
with the procedures set forth therein, and shall take such action as may be
required from time to time under the Indenture to keep each such designation
in effect.
7.2.3 The Borrower's Obligations with respect to Loans made by
any Lender who surrenders its Note for cancellation without requesting the
issuance of a replacement Note, or to which no replacement Note is delivered,
for whatever reason, shall in no manner be impaired or otherwise adversely
affected by such surrender and cancellation, it being the intent of the
parties that such surrender shall not effect a release or other discharge of
any of such Obligations.
7.3 Entire Agreement. This Second Amendment, together with the letter
agreement referred to in Section 5 hereof, contains the entire agreement of
the parties with respect to the subject matter hereof and supersedes all
prior written or oral communications between the parties with respect
thereto.
7.4 Governing Law. This Second Amendment shall be governed by, and
construed in accordance with, the internal laws of the State of New York,
without reference to principles of conflicts of law.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment
to be executed by their respective officers or agents thereunto duly
authorized as of the date first written above.
BORROWER: HOLLYWOOD ENTERTAINMENT CORPORATION
By: /S/▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Senior Vice President
AGENT: SOCIETE GENERALE
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Director
DOCUMENTATION
AGENT: ▇▇▇▇▇▇▇ ▇▇▇▇▇ CREDIT PARTNERS L.P.
By: /S/▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Authorized Signatory
LENDERS AND
CO-AGENTS: SOCIETE GENERALE
By: /S/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Director
▇▇▇▇▇▇▇ SACHS CREDIT PARTNERS L.P.
By: /S/▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Authorized Signatory
CREDIT LYONNAIS LOS ANGELES BRANCH as a
Co-Agent and a Lender
By: /S/▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: First Vice President and Manager
DEUTSCHE BANK AG, NEW YORK BRANCH AND/OR
CAYMAN ISLANDS BRANCH, as a Co-Agent and a Lender
By: /S/▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
--------------------
Name: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
Title: Director
By: /S/▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
KEYBANK NATIONAL ASSOCIATION,
as a Co-Agent and a Lender
By: /S/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Title: Assistant Vice President
U.S. BANK NATIONAL ASSOCIATION
By: /S/▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
THE SUMITOMO BANK, LIMITED
By: /S/▇▇▇▇▇▇ ▇. TATA
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Name: ▇▇▇▇▇▇ ▇. Tata
Title: Senior Vice President
By:__________________________________
Name:________________________________
Title:_______________________________
UNION BANK OF CALIFORNIA, N.A.
By: /S/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: Vice President
▇▇▇ ▇▇▇▇▇▇
PRIME RATE INCOME TRUST
By: /S/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President & Director
THE BANK OF NOVA SCOTIA
By: /S/▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Officer
By: ▇. ▇▇▇▇▇
Name: ▇. ▇▇▇▇▇
Title: Vice President
▇▇▇▇▇▇ GUARANTY TRUST COMPANY
By:__________________________________
Name:________________________________
Title:_______________________________
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By: /S/▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Senior Vice President
THE SAKURA BANK, LTD., SAN FRANCISCO AGENCY
By: /S/▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
SUNTRUST BANK CENTRAL FLORIDA, N.A.
By: /S/▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: /S/▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Senior Vice President
CITY NATIONAL BANK
By: /S/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
BANQUE WORMS CAPITAL CORPORATION
By:__________________________________
Name:________________________________
Title:_______________________________
GENERAL ELECTRIC CAPITAL CORPORATION
By:__________________________________
Name:________________________________
Title:_______________________________
FLEET BUSINESS CREDIT CORPORATION
(FKA SANWA BUSINESS CREDIT CORPORATION)
By: /S/▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: S.V.P.
BANKBOSTON
By: /S/▇▇▇▇▇ ▇. ▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Managing Director Credit Derivatives
THE TORONTO-DOMINION BANK
By: /S/▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Mgr. Cr. Admin