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EXHIBIT 10.24
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Second Amendment") is
dated as of June 12, 2000, by and among the financial institutions executing
this Amendment (such financial institutions, and their successors and assigns,
are collectively referred to herein as the "Banks"), HASTINGS ENTERTAINMENT,
INC., a Texas corporation (the "Borrower"), and BANK OF AMERICA, N.A. (formerly
known as NationsBank, N.A.), as administrative agent for the Banks (the "Agent")
to the extent and in the manner provided for in the Credit Agreement (defined
below and herein so called).
BACKGROUND
A. The Banks, the Borrower, and the Agent are parties to that certain Credit
Agreement dated as of December 16, 1998, as amended and modified by that certain
First Amendment to Credit Agreement and Waiver Agreement, dated as of May 2,
2000 ("First Amendment"), and as modified by that certain Waiver Agreement,
dated as of May 31, 2000 ("Waiver") (said Credit Agreement, as amended and
modified, the "Credit Agreement"; terms defined in the Credit Agreement and not
otherwise defined herein shall be used herein as defined in the Credit
Agreement).
B. As a result of certain Accounting Adjustments (as defined in the First
Amendment and as used herein), certain Waived Events of Default (as defined in
the Waiver and used herein) exist. The waiver of the Waived Events of Default
terminates on June 12, 2000.
C. The Borrower has requested that the Lenders amend the Credit Agreement and
permanently waive the Waived Events of Default.
D. As an accommodation to the Borrower in order to permit the Borrower to obtain
additional Advances under the Credit Agreement, the Lenders hereby agree to
amend the Credit Agreement and permanently waive the Waived Events of Default,
subject to the terms and conditions set forth herein.
E. NOW, THEREFORE, in consideration of the covenants, conditions and agreements
hereafter set forth, and for other good and valuable consideration, the receipt
and adequacy of which are all hereby acknowledged, the parties hereto covenant
and agree as follows:
1. AMENDMENTS. The Credit Agreement is hereby amended as follows:
(a) The definition of "Applicable Margin" set forth in Section 1.1 of the Credit
Agreement is hereby amended to read as follows:
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"Applicable Margin" means with respect to (a) LIBOR Loans that are not
Overadvance Loans, 2.50% per annum, (b) LIBOR Loans that are Overadvance
Loans, 3.25% per annum and (c) with respect to the Commitment Fee, 0.50%
per annum.
(b) The definition of "Base Rate" set forth in Section 1.1 of the Credit
Agreement is hereby amended to read as follows:
"Base Rate" means, as determined by the Agent on a daily basis, a per
annum interest rate equal to the higher of (a) the sum of (i) the Prime
Rate on such day and (ii)(A) with respect to any Base Rate Loan which is
not an Overadvance Loan, 1.00% and (B) with respect to any Base Rate Loan
which is an Overadvance Loan, 1.75% and (b) the sum of (i)(A) with respect
to any Base Rate Loan which is not an Overadvance Loan, 1.50%, and (B) with
respect to any Base Rate Loan which is an Overadvance Loan, 2.25%, plus
(ii) the Federal Funds Rate on such day. Each change in the Base Rate shall
become effective, without prior written notice to Borrower, automatically
as of the opening of business on the date of such change in the Base Rate.
(c) The definition of "Permitted Liens" set forth in Section 1.1 of the Credit
Agreement is hereby amended to read as follows:
"Permitted Liens" means: (i) Liens imposed by mandatory provisions of
Law such as carrier's, materialmen's, mechanics', warehousemen's,
landlord's and other like Liens arising in the ordinary course of business,
securing Indebtedness not yet due, (ii) Liens for Taxes, if the same are
not yet due and payable or qualify as a Contested Claim, (iii) encumbrances
consisting of minor zoning restrictions, easements or other restrictions on
the use of real Property, provided that such items do not or will not
impair or interfere with the use of such Property for the purposes intended
or the value thereof; (iv) pledges or deposits in connection with or to
secure worker's compensation, unemployment insurance, pensions or other
employee benefits, or public or statutory obligations, (v) purchase money
security interests securing Indebtedness permitted under Section 6.2(v),
(vi) Liens that exist on Property owned by Borrower on the date of this
Agreement and are listed in Schedule 4.5, together with all renewals,
extensions, refinancing and modifications (but not increases) of the
Indebtedness secured thereby, and (vii) Liens granted to the Collateral
Agent pursuant to the Collateral Documents to secure the Secured
Obligations.
(d) The definition of "Tangible Net Worth" set forth in Section 1.1 of the
Credit Agreement is hereby amended to read as follows:
"Tangible Net Worth" means, as of any date, the total shareholders'
equity (including common stock and preferred stock [other than mandatorily
redeemable stock] at stated value, additional paid-in capital and retained
earnings after deducting treasury stock) which would appear on the
consolidated balance sheet of Borrower and its Subsidiaries prepared as of
such date in accordance with GAAP, plus (i) subordinated
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Indebtedness in form and substance satisfactory to the Agent, (ii) the LIFO
reserve and (iii) deferred income taxes of the Company and its
Subsidiaries, on a consolidated basis, less the sum of the following: (A)
intellectual property rights of the Company and its Subsidiaries, on a
consolidated basis, (B) goodwill and experimental expenses of the Company
and its Subsidiaries, on a consolidated basis, (C) unamortized debt
discount and expense of the Company and its Subsidiaries, on a consolidated
basis, and (D) costs in excess of fair value of the net assets acquired. If
Borrower is required by Regulation S-X, any Financial Reporting Releases,
Staff Accounting Bulletins or other pronouncements or promulgation by the
U.S. Securities and Exchange Commission (collectively, "SEC Requirements"),
to present any portion of shareholders' equity separately in its
public-filed financial statements differently from a presentation that
would appear when presented in accordance with GAAP (SEC Requirements
notwithstanding), due to Borrower's obligations with respect to redemption
or repurchase of shares of its capital stock, then GAAP accounting
conventions shall prevail for the purpose of determining Tangible Net
Worth.
Section 1.1 of the Credit Agreement is hereby amended by deleting the
definition of "Current Liabilities.
Section 1.1 of the Credit Agreement is hereby amended by adding the
following defined terms thereto in proper alphabetical order to read as follows:
"Adjusted Net Worth" means, at any time, Consolidated Net Worth plus
the LIFO valuation reserve of Borrower and its Subsidiaries determined on a
consolidated basis in accordance with GAAP.
"Applicable Rent Reserve" means, at the time in question, an amount
equal to (a) the total annual rent payable by Borrower for the ground or
building leases for all of its stores divided by (b) the total number of
Borrower's stores, divided by (c) 12, multiplied by (d) 4, multiplied by
(e) the number of stores of Borrower with respect to which the landlord
thereof has not waived its Lien in assets of Borrower located in such
stores in a manner satisfactory to the Agent, plus (f) to the extent the
landlord with respect to the Amarillo distribution and return center has
not waived its Lien on the assets of the Borrower located on such site,
$80,000.
"Appraisal" means, at any time, an appraisal report setting forth the
organized liquidation value of Inventory of Borrower, as determined by an
appraisal performed within one month prior to such time by an independent
appraiser of recognized standing and reasonably acceptable to the Required
Banks, it being understood that a report issued by The Ozer Group
constitutes an Appraisal hereunder.
"Borrowing Base" means (a) at any time other than an Overadvance
Period, an amount equal to (i) 55% of Eligible Inventory minus (ii) the
Applicable Rent Reserve, (b) at any time during the First Overadvance
Period, an amount equal to (i) 65% of
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Eligible Inventory minus (ii) the Applicable Rent Reserve, and (c) at any
time during the Second Overadvance Period, an amount equal to (i) 70% of
Eligible Inventory minus (ii) the Applicable Rent Reserve.
"Borrowing Base Certificate" means the certificate, executed by the
president, chief financial officer or controller of Borrower, in the form
of Exhibit H hereto, certifying as to the level of the Borrowing Base at
the time in question.
"Collateral Agent" means Bank of America, N.A., in its capacity as
collateral agent under the Collateral Documents, and any successor thereto.
"Consolidated EBITAR" means, for any fiscal period, the sum of (a)
Consolidated Net Income for such period, plus (b) to the extent deducted in
determining Consolidated Net Income, Fixed Charges and Taxes for such
period.
"Consolidated Indebtedness" means, as of any date of determination,
the total of all Indebtedness of Borrower and its Subsidiaries outstanding
on such date, after eliminating all offsetting debits and credits between
Borrower and its Subsidiaries and all other items required to be eliminated
in the course of the preparation of consolidated financial statements of
Borrower and its Subsidiaries in accordance with GAAP.
"Consolidated Net Income" means, with reference to any period, the net
income (or loss) of Borrower and its Subsidiaries for such period (taken as
a cumulative whole), a determined in accordance with GAAP, after
eliminating all offsetting debits and credits between Borrower and its
Subsidiaries and all other items required to be eliminated in the course of
the preparation of consolidated financial statements of Borrower and its
Subsidiaries in accordance with GAAP, provided that there shall be excluded
any net income or gain and any net loss during such period from any
extraordinary items.
"Consolidated Net Worth" means, at any time,
(a) the total assets of Borrower and its Subsidiaries which would
be shown as assets on a consolidated balance sheet of Borrower and its
Subsidiaries as of such time prepared in accordance with GAAP, after
eliminating all amounts properly attributable to minority interests,
if any, in the stock and surplus of Subsidiaries, minus
(b) the total liabilities of Borrower and its Subsidiaries which
would be shown as liabilities on a consolidated balance sheet of
Borrower and its Subsidiaries as of such time prepared in accordance
with GAAP.
"Consolidated Total Capitalization" means, at any time, the sum of
Adjusted Net Worth and Consolidated Indebtedness.
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"Eligible Inventory" means, at the time of any determination thereof,
(i) each item of Inventory (excluding obsolete Inventory, Inventory on
consignment, Inventory used for demonstrations and display and net of
freight and reserves for pilferage and xxxx-xxxxx) valued at 61.22% of cost
with respect to Inventory held for sale and (ii) 50% of depreciated rental
video and DVDs with respect to fixed assets held for rental, as to which
the following requirements have been fulfilled to the reasonable
satisfaction of the Agent:
(a) Borrower or any of its Subsidiaries has lawful and absolute
title to such Inventory or fixed assets, as applicable;
(b) Such Inventory or fixed assets, as applicable, are not
defective or unmerchantable goods;
(c) Such Inventory or fixed assets, as applicable, are (a)
subject to a fully perfected Lien in favor of the Collateral Agent
pursuant to the Collateral Documents, prior to the rights of, and
enforceable as such against, any other Person (including holders of a
purchase money security interest) and (b) not subject to any Lien in
favor of any other Person other than Permitted Liens; and
(d) The sale of such Inventory or fixed assets, as applicable, by
the Agent (or its successors or assigns) upon an Event of Default is
not subject to any restriction or limitation.
"First Overadvance Period" means the period of time from and including
(a) August 1, 2000 through and including September 30, 2000 and (b) August
1, 2001 through and including September 30, 2001.
"Intercreditor Agreement" means that certain Intercreditor and
Collateral Agency Agreement, dated as of June 12, 2000, among the Agent,
the Lenders hereunder, the holders of the Note Purchase Notes and the
Collateral Agent, in substantially the form of Exhibit I hereto, as
amended, modified, renewed, supplemented or restated from time to time to
the extent permitted pursuant thereto.
"Inventory" has the meaning given to such term in the UCC.
"Note Purchase Agreement" means that certain Amended and Restated Note
Purchase Agreement, dated as of June 12, 2000, between Hastings
Entertainment, Inc., as issuer, and each of Metropolitan Life Insurance
Company and Metropolitan Insurance and Annuity Company.
"Note Purchase Notes" means the Notes as defined in the Note Purchase
Agreement.
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"Overadvance Loan" means any Loan or portion of any Loan, which (a)
when added to the aggregate principal amount of all outstanding Loans plus
the Letter of Credit Exposure plus the outstanding principal amount of the
Note Purchase Notes, causes the amount of the aggregate principal
outstanding amount of the Loans plus Letter of Credit Exposure plus the
outstanding principal amount of the Note Purchase Notes to exceed 55% of
Eligible Inventory minus the Applicable Rent Reserve or (b) is made at any
time that the aggregate principal amount of the outstanding Loans plus
Letter of Credit Exposure plus the outstanding principal amount of the Note
Purchase Notes exceeds 55% of Eligible Inventory minus the Applicable Rent
Reserve.
"Second Overadvance Period" means that period of time from and
including (a) October 1, 2000 through and including December 31, 2000, and
(b) October 1, 2001 through and including December 16, 2001.
"Secured Obligations" has the meaning assigned to such term in the
Security Agreement.
"Security Agreement" means that certain Security Agreement, dated as
of May 26, 2000, among the grantors named therein and the Collateral Agent,
in the form of Exhibit J hereto, as amended, modified, renewed,
supplemented or restated from time to time to the extent permitted pursuant
thereto.
"Taxes" means, for any period, the sum of all U.S. Federal, state and
foreign income taxes of Borrower and its Subsidiaries, all as determined on
a consolidated basis in accordance with GAAP.
Section 2.1(a) of the Credit Agreement is hereby amended to read as
follows:
(a) Loans. From time to time during the Availability Period, each Bank
severally agrees to make revolving loans (each, a "Loan") to Borrower, on
and subject to the terms and conditions set forth in this Agreement, in an
aggregate principal amount at any one time outstanding up to but not
exceeding such Bank's Commitment; provided, however, at no time shall (i)
the aggregate principal amount of all Loans outstanding plus the Letter of
Credit Exposure plus the outstanding principal amount of the Note Purchase
Notes exceed the aggregate Commitments of all Banks and (ii) the aggregate
principal amount of all Loans outstanding plus the Letter of Credit
Exposure plus the outstanding principal amount of the Note Purchase Notes
exceed the Borrowing Base then in effect.
Section 2.6(a) of the Credit Agreement is hereby amended to read as
follows:
(a) Borrower shall pay to the Agent, for the ratable account of the
Banks, a fee in an amount equal to the product of (i) the Applicable Margin
for Commitment Fee and (ii) the unused portion of the Commitment of all
Banks during the Availability Period (the "Commitment Fee"). The Commitment
Fee shall be payable quarterly in arrears on
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each Quarterly Date during the Availability Period and on the Commitment
Termination Date.
Section 2.8 of the Credit Agreement is hereby amended by adding a new
Section 2.8(d) thereto to read as follows:
(d) To the extent that at any time the aggregate principal amount of
all outstanding Loans plus the Letter of Credit Exposure plus the
outstanding principal amount of the Note Purchase Notes exceed the
Borrowing Base then in effect, Borrower shall immediately repay Loans in an
amount equal to such excess.
Section 2.14(a) of the Credit Agreement is hereby amended by amending the
first sentence thereof to read as follows:
(a) Subject to the terms and conditions hereof, the Commitments may be
utilized, upon the request of Borrower, in addition to the Loans provided
for in Section 2.1 hereof, by the issuance by the Issuing Bank of one or
more Letters of Credit for the account of Borrower; provided, however, that
no Letter of Credit may be issued if (i) after giving effect thereto (A)
the Letter of Credit Exposure (including the amount of the requested Letter
of Credit) would exceed the Letter of Credit Limit, (B) such Letter of
Credit Exposure plus the aggregate outstanding principal balance of the
Loans would exceed the Commitments of all Banks, or (C) such Letter of
Credit Exposure plus the aggregate outstanding principal balance of the
Loans plus the aggregate outstanding principal balance of the Note Purchase
Notes would exceed the Borrowing Base, and (ii) the expiration date thereof
extends beyond the earlier of one year from issuance or 5 Business Days
prior to the Commitment Termination Date.
Section 5.1 of the Credit Agreement is hereby amended by (i) deleting "and"
at the end of Section 5.1(i) thereof, (ii) deleting "." at the end of Section
5.1(j) thereof and inserting "; and" in lieu thereof and (iii) adding new
Sections 5.1(k), 5.1(l) and 5.1(m) thereto to read as follows:
(k) Monthly Statements. As soon as available, and in any event within
30 days after the end of each fiscal month, copies of the unaudited
consolidated statements of income of Borrower and its Subsidiaries for such
month and for the portion of the Fiscal Year ending with such month, and
the related consolidated balance sheet as at the end of such period, in
each case setting forth in comparative form the corresponding figures for
the corresponding periods for the preceding Fiscal Year, all in reasonable
detail and certified by the president, chief financial office or controller
of Borrower as being true, complete and accurate in all material respects,
as fairly presenting the consolidated financial condition and results of
operations of Borrower and its Subsidiaries for the periods therein
covered, and as having been prepared in accordance with GAAP, subject to
normal year-end audit adjustments.
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(l) Borrowing Base Certificate. Within 20 days after the end of each
fiscal month, Borrower shall furnish a Borrowing Base Certificate,
calculated as of the end of such fiscal month, executed by the president,
chief financial officer or controller of Borrower.
(m) Appraisals. Within a reasonable time after reasonable request by
the Required Banks, at Borrower's expense, an updated Appraisal; provided,
however, so long as no Default or Event of Default exists, such a request
may be made only once during any Fiscal Quarter (with respect to which the
Agent shall coordinate its requests on behalf of itself and the Lenders
with the Note Purchase Note holders under the Note Purchase Agreement such
that a request for Appraisal under this Agreement shall be deemed to be a
request for an Appraisal under the Note Purchase Agreement and a request
for Appraisal under the Note Purchase Agreement shall be a request for
Appraisal under this Agreement).
Section 5.8 of the Credit Agreement is hereby amended to read as follows:
SECTION 5.8 Access; Books and Records. Upon reasonable notice, during
all business hours, Borrower authorizes and will permit any representatives
of the Agent, the Issuing Bank or any Bank (i) to have access to, and grant
permission for such representatives to examine, copy or make excerpts from,
any and all books, records and documents that relate to the business,
operations or Property of Borrower or any of its Subsidiaries, (ii) to
inspect any and all Property of Borrower or any of its Subsidiaries
(including audits and Appraisals of Collateral), and (iii) to discuss the
business, operations and financial condition of Borrower or any of its
Subsidiaries with its officers and employees and its independent certified
public accountants, legal counsel (except for attorney/client privileged
information and work product) and other consultants, all of the foregoing
at the expense of Borrower. Borrower will, and will cause each of its
Subsidiaries to, maintain adequate books and records of its respective
transactions in accordance with GAAP.
Section 5.17 of the Credit Agreement is hereby amended to read as follows:
SECTION 5.17 Subsidiaries. At any time that any Person becomes a
Subsidiary, (i) such Subsidiary shall execute a Guaranty Agreement, (ii)
such Subsidiary shall execute Collateral Documents granting a first
priority Lien in all of its material assets, (iii) 100% of such
Subsidiary's Capital Stock shall be pledged to secure the Obligations, and
(iv) the Banks shall receive such board resolutions, officer's certificates
and opinions of counsel as the Agent shall reasonably request in connection
with the actions described in clauses (i), (ii) and (iii) above.
Section 6.1 of the Credit Agreement is hereby amended to read as follows:
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SECTION 6.1 Certain Financial Matters. Borrower will not permit:
(a) the ratio of Consolidated EBITAR to Fixed Charges to be less than
(i) 0.45 to 1.00 as of the first Fiscal Quarter of Fiscal Year 2000, (ii)
0.35 to 1.00 as of the second Fiscal Quarter of Fiscal Year 2000, (iii)
0.50 to 1.00 as of the third Fiscal Quarter of Fiscal Year 2000 and (iv)
1.00 to 1.00 as of the end of any Fiscal Quarter thereafter, in each case
for the four-quarter period ending as of the end of each such Fiscal
Quarter; or
(b) The Tangible Net Worth as of the end of any Fiscal Quarter to be
less than the sum of (i) $83,000,000 plus (ii) fifty percent (50%) of the
cumulative amount of net income of Borrower from February 1, 2000 through
the end of such Fiscal Quarter (without regard to, or reduction for, any
net loss reported for any Fiscal Quarter) plus (iii) an amount equal to
100% of the tangible net worth of any Person that becomes a Subsidiary of
Borrower or is merged into or consolidated with Borrower or any Subsidiary
of Borrower or substantially all of the assets of which are acquired by
Borrower or any Subsidiary of Borrower to the extent the purchase price
paid therefor is paid in equity securities of Borrower or any Subsidiary of
Borrower, plus (iv) 100% of the Net Cash Proceeds of any offerings of
Capital Stock of Borrower or any of its Subsidiaries; or
(c) the ratio of Consolidated Indebtedness to Consolidated Total
Capitalization to exceed 0.50 to 1.00 at any time; or
(d) the ratio of Funded Debt to Adjusted EBITDA to be more than (i)
4.00 to 1.00 as of the first Fiscal Quarter of Fiscal Year 2000, (ii) 5.25
to 1.00 as of the second Fiscal Quarter of Fiscal Year 2000, (iii) 4.75 to
1.00 as of the third Fiscal Quarter of Fiscal Year 2000, and (iv) 2.50 to
1.00 as of any Fiscal Quarter thereafter, in each case calculating Funded
Debt a of the end of such Fiscal Quarter and Adjusted EBITDA for the
four-quarter period ending as of the end of such Fiscal Quarter; or
(e) Adjusted EBITDA to be less than (i) $10,500,000 as of the first
Fiscal Quarter of Fiscal Year 2000, (ii) $8,000,000 as of the second Fiscal
Quarter of Fiscal Year 2000, (iii) $11,000,000 as of the third Fiscal
Quarter of Fiscal Year 2000, (iv) $25,000,000 as of the fourth Fiscal
Quarter of Fiscal Year 2000, (v) $22,000,000 as of the first and second
Fiscal Quarters of Fiscal Year 2001 and (vi) $24,500,000 as of the third
Fiscal Quarter of Fiscal Year 2001, in each case calculated for the
four-quarter period ending as of each such Fiscal Quarter; or
(f) the aggregate amount of capital expenditures of Borrower and its
Subsidiaries (excluding, however, the capitalized cost of video tapes
purchased by Borrower and its Subsidiaries for rental) to exceed
$13,500,000 for any Fiscal Year.
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Section 6.2 of the Credit Agreement is hereby amended by amending clause (v)
thereto to read as follows:
(v) purchase-money Indebtedness for equipment purchases which does not
exceed, in aggregate, $2,000,000 for any Fiscal Year;
Section 6.4 of the Credit Agreement is hereby amended to read as follows:
SECTION 6.4 Restricted Payments. Borrower will not directly or
indirectly (i) declare or make, or incur any liability to pay or make, any
Dividends, or (ii) redeem, repurchase, retire or otherwise acquire for
value any of its capital stock, warrants, stock equivalents or other
evidence of equity of any class or nature (other than the repurchase by
Borrower of stock options issued under Borrower's employee stock option
plan for non-cash consideration consisting of restricted stock of
Borrower). Further, Borrower will not directly or indirectly set apart any
money or other Property for a defeasance, sinking or analogous fund for any
Dividend or distribution thereon, or for any redemption, retirement or
other acquisition thereof.
Section 6.5 of the Credit Agreement is hereby amended to read as follows:
SECTION 6.5 Limitation on Investments. Borrower will not, and will not
permit any of its Subsidiaries to, make or have outstanding any Investments
in any Person, except for (i) Temporary Cash Investments; (ii) Investments
in Subsidiaries; and (iii) other Investments which do not exceed $1,000,000
in aggregate at any given time (including Investments listed in Schedule
6.5).
Section 6.7 of the Credit Agreement is hereby amended to read as follows:
SECTION 6.7 Limitation on Sale of Property. Borrower will not, and
will not permit any of its Subsidiaries to, sell, assign, lease, sublease
or discount or otherwise exchange or dispose of any of its Property other
than (i) sales of inventory in the ordinary course of its business, (ii)
sales or other dispositions of obsolete equipment that is no longer needed
for its ordinary business or which is being replaced by equipment of at
least comparable value and utility to the equipment replaced when such
equipment was efficiently operational and functional, (iii) sales of
previously viewed video tapes, and (iv) sales of fixed assets (which shall
not include sales of previously viewed video tapes) during each Fiscal Year
which have an aggregate book value not in excess of 5% of the book value of
Borrower's and its Subsidiaries' total fixed assets as of the beginning of
such Fiscal Year.
Section 6.11 of the Credit Agreement is hereby amended to read as follow:
SECTION 6.11 Subsidiaries. Borrower will not, and will not permit any
of its Subsidiaries to, create or permit to exist any Subsidiary and will
not become a general
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partner, venturer or similar capacity in any partnership, venture or
similar Person, except Subsidiaries which are in existence as of June 12,
2000.
Section 6.13 of the Credit Agreement is hereby amended to read as follows:
SECTION 6.13 Acquisitions. Borrower will not, and will not permit any
of its Subsidiaries to, make any Acquisitions.
Article 6 of the Credit Agreement is hereby amended by adding a new Section
6.14 thereto to read as follows:
SECTION 6.14 Note Purchase Agreement. Borrower shall not change or
amend (or take any action or fail to take any action the result of which is
an effective amendment or change) any provision of the Note Purchase
Agreement or any documents, instrument or agreement relating thereto.
Section 7.1 of the Credit Agreement is hereby amended by (i) deleting "." at
the end of clause (l) thereto and inserting "; or" in lieu thereof and (ii)
adding new clauses (m), (n) and (o) thereto, respectively, to read as follows:
(m) Borrower shall fail to deliver to the Banks by 5:00 p.m., Dallas
time, on June 19, 2000, an unqualified opinion by KPMG Peat Marwick with
respect to the audited financial statements of the Borrower and its
Subsidiaries for the Fiscal Year ended January 31, 2000; or
(n) Borrower shall fail to deliver to the Banks by 5:00 p.m., Dallas
time, on June 19, 2000, copies of (i) Borrower's Annual Report on Form 10-K
for the Fiscal Year ended January 31, 2000 (together with Borrower's annual
report to shareholders, if any, prepared pursuant to Rule 14a-3 under the
Exchange Act) prepared in accordance with the requirements therefor and
filed with the Securities and Exchange Commission, and (ii) Borrower's
Quarterly Report on Form 10-Q for the Fiscal Quarter ended April 30, 2000
prepared in accordance with the requirements therefor and filed with the
Securities and Exchange Commission; or
(o) Borrower shall fail to deliver to the Agent by June 22, 2000 an
opinion of Nevada counsel in form and substance satisfactory to Agent.
Section 10.3 of the Credit Agreement is hereby amended by adding a clause
thereto to read as follows:
(d) Without in any way limiting the obligations of Borrower otherwise
set forth in this Section 10.3, Borrower agrees to promptly pay all
reasonable out-of-pocket expenses and attorneys' fees of the Agent and each
Lender for any enforcement, collection, restructuring, refinancing or
"work-out", or otherwise incurred in obtaining
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performance by Borrower and its Subsidiaries under the Loan Documents,
which in each case shall include without limitation reasonable fees and
expense of consultants and counsel for the Agent and any Bank.
Section 10.6 of the Credit Agreement is hereby amended to read as follows:
SECTION 10.6 Amendments and Waivers. Subject to the Intercreditor
Agreement, all modifications, consents, amendment, waivers and the like of
any provision of any Loan Document, or consent to any departure by Borrower
or any of its Subsidiaries therefrom (collectively, the foregoing are
referred to in this Section 10.6 as a "modification"), shall be effective
only if the same is in a writing in form, scope and substance, and subject
to conditions and requirements, if any, acceptable to the Agent and the
Required Banks, and if so acceptable, is signed by Borrower, the Agent and,
at least, the Required Banks; provided that no such modification shall,
unless consented to in writing by all the Banks, (i) modify the Commitment
of any Bank or subject any Bank to any additional funding obligation, (ii)
reduce the principal amount or the stated rate of interest on any Loan or
reduce any fees hereunder (other than fees payable solely to the Agent or
the Issuing Bank, as applicable), (iii) extends the date fixed for any
principal reduction pursuant to Section 2.8 or Section 2.9, the payment of
any interest on any Loan, the payment of any Reimbursement Obligation or
the payment of any fees hereunder (other than fees payable solely to the
Agent or the Issuing Bank, as applicable), the maturity date of any of the
Obligations or the Commitment Termination Date, (iv) release or impair the
Lien in any Property in favor of the Banks, (v) release any guarantor of
the Obligations, (vi) change the percentage of the Commitments or the
aggregate unpaid principal amount of the Notes, or the number of Banks
which shall be required for the Banks or any of them to take any action
under this Section 10.6 or any other provision of the Loan Documents, or
(vii) affects this Section 10.6 or Section 10.3 or Section 10.4 or modifies
the definition of "Required Banks"; provided, further, that, (y) no
modification or waiver which modifies the rights, duties or obligations of
the Agent shall be effective without the prior written consent of the
Agent, and (z) no modification or waiver which modifies the rights, duties,
obligations or commitment of the Issuing Bank shall be effective without
the prior written consent of the Issuing Bank.
(a) The Commitment of each Bank is hereby amended to be the amount set forth by
each Bank's name on the signature pages to this Second Amendment.
(b) The Notice of Borrowing is hereby amended to be in the form of the Notice of
Borrowing attached hereto as Exhibit A.
(c) The Continuation/Conversion Notice is hereby amended to be in the form of
the Continuation/Conversion Notice attached hereto as Exhibit F.
(d) The Compliance Certificate is hereby amended to be in the form of the
Compliance Certificate attached hereto as Exhibit G.
13
(e) The Borrowing Base Certificate is hereby added as Exhibit H to the Credit
Agreement to be in the form of Exhibit H attached hereto.
(f) The Security Agreement is hereby added as Exhibit J to the Credit Agreement
to be in the form of Exhibit J attached hereto.
(g) The Intercreditor Agreement is hereby added as Exhibit I to the Credit
Agreement to be in the form of Exhibit I attached hereto.
2. WAIVER. The Lenders hereby waive the Waived Events of Default (as defined in
the Waiver). The waiver provided in this Section 2 hereby supersedes and
replaces the Waiver.
3. REPRESENTATIONS AND WARRANTIES TRUE; NO EVENT OF DEFAULT. By its execution
and delivery hereof, the Borrower represents and warrants that, as of the date
hereof, after giving effect to the amendments provided for in Section 1 of this
Amendment and the waiver provided for in Section 2 of this Amendment: 5.
(a) the representations and warranties contained in the Credit Agreement and the
other Loan Documents are true and correct on and as of the date hereof as made
on and as of such date, except for (i) Section 4.3(i)(C) of the Credit Agreement
with respect to the Note Offering, (ii) Section 4.6(a) of the Credit Agreement
with respect to a restatement of the Financial Statements as a result of the
Accounting Adjustments, (iii) Section 4.10 of the Credit Agreement with respect
to Litigation as a result of the Accounting Adjustments, (iv) Section 4.13 of
the Credit Agreement with respect to a reduction in Taxes as a result of the
Accounting Adjustments, and (v) Section 4.15 of the Credit Agreement with
respect to options of Xxx Xxxxxx, Xxxx Xxxxx and Xxxx Xxxxxxxxx to purchase more
than 150,000 shares of Capital Stock of the Borrower;
(b) no event has occurred and is continuing which constitutes a Default or an
Event of Default;
(c) the Borrower has full power and authority to execute and deliver this
Amendment, and this Amendment constitutes the legal, valid and binding
obligation of the Borrower, enforceable in accordance with its terms, except as
enforceability may be limited by applicable Debtor Relief Laws and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law) and except as rights to indemnify may be limited
by federal or state securities laws;
(d) neither the execution, delivery and performance of this Amendment nor the
consummation of any transactions contemplated herein or therein will conflict
with any Law, the articles of incorporation, bylaws or other governance document
of the Borrower or any of its Subsidiaries, or any indenture, agreement or other
instrument to which the Borrower or any of its Subsidiaries or any of their
respective property is subject; and
14
(e) except for authorizations, approvals, consents and other actions received or
taken prior to the execution and acknowledgment thereof, no authorization,
approval, consent, or other action by, notice to, or filing with, any
governmental authority or other Person (including the Board of Directors of the
Borrower), is required for the execution, delivery or performance by the
Borrower of this Amendment.
4. CONDITIONS OF EFFECTIVENESS. This Amendment shall be effective as of June 12,
2000 (provided, however, the waiver of the Waived Events of Default shall be
effective as of the dates provided in the Waiver), subject to the following:
(a) the Agent shall have received counterparts of this Amendment executed by the
Borrower and Banks comprising the Required Banks;
(b) the Intercreditor Agreement shall be duly executed and delivered by all
parties thereto;
(c) the Agent shall have received for the account of each Bank an amendment fee
in immediately available funds in an amount equal to the product of (i) 0.50%
and the Commitment of each Bank (after giving effect to this Amendment);
(d) the Agent shall have received a fee for arranging, structuring and
negotiating the First Amendment, the Waiver and this Amendment in an amount
agreed to by the Borrower and the Agent;
(e) the Agent shall have received an officer's certificate of the Borrower,
including a certificate of incumbency and certified corporate resolution of the
Borrower, in form and substance satisfactory to the Agent, authorizing the
execution, delivery and performance of this Second Amendment;
(f) the Agent shall have received an officer's certificate of each Subsidiary of
the Borrower, including a certificate of incumbency and certified corporate
resolution of each Subsidiary of the Borrower, in form and substance
satisfactory to the Agent, authorizing the execution, delivery and performance
of its respective Guaranty Agreement;
(g) the Agent shall have received a Guaranty Agreement, duly executed by each of
the Borrower's Subsidiaries;
(h) the Agent shall have received an opinion(s) of counsel to the Borrower and
its Subsidiaries, in form and substance satisfactory to the Agent;
(i) the Agent shall have received a Borrowing Base Certificate, signed by the
president, chief financial officer or controller of Borrower, containing a
calculation of the Borrowing Base as of April 30, 2000;
15
(j) the Borrower shall have delivered to the Banks copies, certified by an
authorized financial officer of Borrower, of good-faith management projections
and pro forma consolidated financial statements for Borrower and its
Subsidiaries for Fiscal Years 2000 through 2003;
(k) the Agent shall have received a certificate of insurance as required
pursuant to Section 3.3 of the Security Agreement;
(l) the Agent shall have received stock certificates representing 100% of the
Borrower's ownership interests in its Subsidiaries, along with the corresponding
stock powers;
(m) the Note Purchase Agreement and each other document and instrument related
thereto shall have been executed in form and substance satisfactory to the
Agent; and
(n) the Agent shall receive, in form and substance satisfactory to the Agent and
its counsel, such other documents, certificates and instruments as the Agent or
any Bank (through the Agent) shall reasonably require.
5. REFERENCE TO THE CREDIT AGREEMENT.
(a) Upon the effectiveness of this Amendment, each reference in the Credit
Agreement to "this Agreement", "hereunder", or words of like import shall mean
and be a reference to the Credit Agreement, as amended by this Amendment.
(b) The Credit Agreement, as amended by this Amendment, and all other Loan
Documents shall remain in full force and effect and are hereby ratified and
confirmed.
16
1. RELEASE. THE BORROWER HEREBY ACKNOWLEDGES THAT THE BORROWER HAS NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE
WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF
BORROWER'S LIABILITY TO REPAY THE AGENT OR EACH BANK AS PROVIDED IN THE CREDIT
AGREEMENT OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM
THE AGENT OR ANY BANK. THE BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY
REMISES, ACQUITS, AND FULLY AND FOREVER RELEASES AND DISCHARGES THE AGENT AND
EACH BANK AND ALL AFFILIATES AND SUBSIDIARIES OF THE AGENT AND EACH BANK, THEIR
RESPECTIVE OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS, PRINCIPALS, DIRECTORS AND
SHAREHOLDERS, AND THEIR RESPECTIVE HEIRS, LEGAL REPRESENTATIVES, SUCCESSORS AND
ASSIGNS (COLLECTIVELY, THE "RELEASED BANK PARTIES") FROM ANY AND ALL CLAIMS,
DEMANDS, CAUSES OF ACTION, OBLIGATIONS, REMEDIES, SUITS, DAMAGES AND LIABILITIES
(COLLECTIVELY, THE "BORROWER CLAIMS") OF ANY NATURE WHATSOEVER, WHETHER NOW
KNOWN, SUSPECTED OR CLAIMED, WHETHER ARISING UNDER COMMON LAW, IN EQUITY OR
UNDER STATUTE, WHICH THE BORROWER EVER HAD OR NOW HAS AGAINST THE RELEASED BANK
PARTIES WHICH MAY HAVE ARISEN AT ANY TIME ON OR PRIOR TO THE DATE OF THIS
AMENDMENT AND WHICH WERE IN ANY MANNER RELATED TO THE CREDIT AGREEMENT OR ANY
OTHER LOAN DOCUMENTS OR THE ENFORCEMENT OR ATTEMPTED ENFORCEMENT BY THE AGENT OR
ANY BANK OF RIGHTS, REMEDIES OR RECOURSES RELATED THERETO. THE BORROWER
COVENANTS AND AGREES NEVER TO COMMENCE, VOLUNTARILY AID IN ANY WAY, PROSECUTE OR
CAUSE TO BE COMMENCED OR PROSECUTED AGAINST ANY OF THE RELEASED BANK PARTIES ANY
ACTION OR OTHER PROCEEDING BASED UPON ANY OF THE BORROWER CLAIMS WHICH MAY HAVE
ARISEN AT ANY TIME ON OR PRIOR TO THE DATE OF THIS AMENDMENT AND WERE IN ANY
MANNER RELATED TO THE CREDIT AGREEMENT, ANY OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS ASSOCIATED THEREWITH.
2. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay on demand all
reasonable costs and expenses of the Agent in connection with the preparation,
reproduction, execution and delivery of this Amendment and the other instruments
and documents to be delivered hereunder.
3. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each
which when so executed and delivered shall be deemed to be an original and all
of which taken together shall constitute but one and the same instrument.
17
4. GOVERNING LAW: BINDING EFFECT. This Amendment shall be governed by and
construed in accordance with the laws of the State of Texas (without regard to
any principles of conflicts of laws) and, to the extent controlling, the federal
laws of the United States, and shall be binding upon the Borrower, the Agent,
each Bank and their respective successors and assigns.
5. HEADINGS. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
6. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS AMENDMENT, AND THE
OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AS TO THE
SUBJECT MATTER HEREIN AND THEREIN AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES.
7. TIME OF ESSENCE. Time is important to all parties hereto in the performance
of this Amendment and they have agreed that strict compliance is required as to
any date set forth herein.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
the date first above written.
BORROWER:
HASTINGS ENTERTAINMENT, INC.
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
19
BANKS:
BANK OF AMERICA, N.A., Individually, as the
Agent and the Issuing Bank
Commitment: $16,667,000
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
00
XXXXX XXXX XX XXXXX, NATIONAL ASSOCIATION
Commitment: $13,333,000
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
21
XXXXX FARGO BANK (TEXAS), N.A.
Commitment: $13,333,000
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
22
AMARILLO NATIONAL BANK
Commitment: $6,667,000
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
