Portlnd2-4234015.1 0021524-00023
SECOND SUPPLEMENTAL INDENTURE
Dated as of January 20, 2000
between
HOLLYWOOD ENTERTAINMENT CORPORATION,
AS ISSUER,
and
U.S. TRUST COMPANY, NATIONAL ASSOCIATION
AS TRUSTEE
Amending the Indenture,
Dated as of August 13, 1997,
as Amended by
the First Supplemental Indenture,
Dated as of June 24, 1999
SECOND SUPPLEMENTAL INDENTURE, dated as of January 20,
2000 (this "Supplemental Indenture"), among Hollywood
Entertainment Corporation, an Oregon corporation (the "Company")
and U.S. Trust Company, National Association, as trustee under
the Indenture referred to below (the "Trustee").
W I T N E S S E T H :
WHEREAS the Company has heretofore executed and
delivered to the Trustee an Indenture, dated as of August 13,
1997, and the First Supplemental Indenture, dated as of June 24,
1999 (collectively and as amended from time to time, the
"Indenture"), providing for the issuance of an aggregate
principal amount of up to $250,000,000 of 10 5/8% Senior
Subordinated Notes due 2004 (the "Securities");
WHEREAS, as permitted by Section 9.2 of the Indenture,
the Company intends to amend the Indenture (a) to permit the
Company to designate Xxxx.xxx (as defined below), an Unrestricted
Subsidiary, notwithstanding its failure to otherwise meet the
tests set forth in the Indenture for that status and to add a
category to the definition of "Permitted Investment" to prevent
the Company's existing Investment in Xxxx.xxx, from causing a
default when it becomes an Unrestricted Subsidiary, (b) to permit
Xxxx.xxx to sell up to $30 million of its Capital Stock in a
private placement before it is designated an Unrestricted
Subsidiary, (c) to add a category to the definition of "Permitted
Investment" to include a contribution of the Trademarks (as
defined below) to a Wholly Owned Subsidiary of the Company, (d)
to increase the Consolidated Coverage Ratio test for the
incurrence of Indebtedness, and (e) make other miscellaneous
changes to the Indenture as of the date first written above;
WHEREAS, pursuant to Section 9.2 of the Indenture, the
Company has received the written consent of the Holders of at
least a majority in principal amount of the outstanding
Securities to the amendments to be effected by this Supplemental
Indenture;
WHEREAS, pursuant to Section 9.2 of the Indenture, the
Trustee and the Company are authorized to execute and deliver
this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and
for other good and valuable consideration, the receipt of which
is hereby acknowledged, the Company and the Trustee mutually
covenant and agree for the equal and ratable benefit of the
holders of the Securities as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITION OF TERMS.
For all purposes of this Supplemental Indenture, except as
otherwise herein expressly provided or unless the context
otherwise requires:
(a) capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
(b) the terms and expressions used herein shall have
the same meanings as corresponding terms and expressions used in
the Indenture; and
(c) the words "herein," "hereof" and "hereby" and
other words of similar import used in this Supplemental Indenture
refer to this Supplemental Indenture as a whole and not to any
particular section hereof.
ARTICLE II
AMENDMENTS TO THE ORIGINAL INDENTURE
SECTION 2.1. The following definitions shall be added
to Section 1.1 of the Indenture, in alphabetical order, and such
definitions shall read in their entirety as follows:
"`Amendment Effective Date' means January 20, 2000."
"`Hollywood Management Company' means Hollywood
Management Company, an Oregon corporation and Wholly Owned
Subsidiary."
"`Prohibited Xxxx.xxx Guarantee' means any Guarantee by
the Company or any Restricted Subsidiary of or in respect of any
Indebtedness or other obligation of any Xxxx.xxx Group Member."
"`Xxxx.xxx' means Xxxx.xxx, Inc., a Delaware
corporation and, at the Amendment Effective Date, a direct or
indirect Wholly Owned Subsidiary, and any successor Person
thereto."
"`Xxxx.xxx Group Member' means Xxxx.xxx, Xxxx.xxx
Holding Company and all of the direct and indirect Subsidiaries
thereof."
"`Xxxx.xxx Holding Company' means a Subsidiary of the
Company that is (i) a direct Subsidiary of the Xxxx.xxx Parent
and (ii) the direct or indirect parent corporation of Xxxx.xxx
and all other Xxxx.xxx Group Members."
"`Xxxx.xxx Parent' means a Subsidiary of the Company
that is the direct parent corporation of Xxxx.xxx Holding
Company."
"`Xxxx.xxx Parent Guarantee' means the Guarantee of the
payment of the Securities by the Xxxx.xxx Parent on the same
terms and conditions of those set forth in this Indenture."
"`Xxxx.xxx Unrestricted Designation' means the
designation of the Xxxx.xxx Group Members as Unrestricted
Subsidiaries by the Board of Directors in the manner provided in
the definition of `Unrestricted Subsidiary' herein, it being
understood that any such designation shall be made with respect
to all Xxxx.xxx Group Members then in existence."
"`Xxxx.xxx Unrestricted Designation Disabling Event'
means: (i) the Investments made by the Company and its Restricted
Subsidiaries (excluding all Xxxx.xxx Group Members) in all
Xxxx.xxx Group Members after December 31, 1999 and before the
effective time of the Xxxx.xxx Unrestricted Designation
(`Relevant Investments') shall exceed $25.0 million or, if the
Excess Investment Payment has been paid, $40.0 million; provided,
however, (A) no such Investment in excess of $25.0 million shall
be made prior to August 1, 2000 and (B) the amount of any
dividends, repayments of loans or transfers of assets that are
paid prior to (or substantially simultaneously with) such
effective time shall reduce the amount of Relevant Investments
(but not below $0); (ii) the existence of any Prohibited Xxxx.xxx
Guarantee; (iii) the failure of the Xxxx.xxx Parent to (x) have
executed and delivered to the Trustee a supplemental indenture
pursuant to which it will give the Xxxx.xxx Parent Guarantee,
(y) have Special Purpose Status and (z) be a Wholly Owned
Subsidiary; (iv) if the Xxxx.xxx Unrestricted Designation shall
have not occurred on or before July 31, 2000, the failure of the
Company to have paid the Delayed Designation Payment; and (v) the
occurrence and continuance of any other Default or Event of
Default."
"`Xxxx.xxx Upstream' means any dividends, repayments of
loans or transfers of assets made by any Xxxx.xxx Group Member."
"`Special Purpose Status' means: (i) in relation to
Hollywood Management Company at any time, such Subsidiary shall
not then be an operating company (other than with respect to
services performed for the Company or any Restricted Subsidiary)
or an obligor or guarantor with respect to any Indebtedness or
other substantial liabilities or obligations other than the
Senior Credit Facility, the Guarantee contemplated by
Section 4.14, obligations incurred in the ordinary course with
respect to its employees, or solely as the result of its status
as a member of the consolidated group including the Company as
defined in Section 1504 of the Code or under the tax laws of any
jurisdiction, and (ii) in relation to the Xxxx.xxx Parent at any
time, such Subsidiary shall not then be an operating company or
an obligor or guarantor with respect to any Indebtedness or other
substantial liabilities or obligations other than the Senior
Credit Facility, the Xxxx.xxx Parent Guarantee or solely as the
result of its status as a member of the consolidated group
including the Company as defined in Section 1504 of the Code or
under the tax laws of any jurisdiction."
"`Trademarks" means all trademarks, service marks,
trade names, domain names, trade dress, logos, slogans, designs
and other source-identifying indicia which are, have been, or
will be used, adopted for use, or intended to be used in any way
in connection with all products and services promoted, sold,
rented, maintained or supported by the Company."
"Trademark License Default" means a default by any
party under the agreement pursuant to which the Trademark License
is granted that results in or is reasonably likely to result in
(i) the inability of the Company to use the Trademarks or the
loss to the Company of the practical benefits thereof or (ii)
damages in a material amount to the Company and its Subsidiaries
on a consolidated basis."
"`Trademark License' means a license granted from
Hollywood Management Company on or prior to December 31, 2000
permitting the Company and/or a Restricted Subsidiary to use the
Trademarks pursuant to an agreement, a copy of which shall be
filed by the Company with the Trustee promptly after execution
thereof, that contains customary quality control guidelines, a
definition of the geographical scope of the license, provisions
establishing a reasonable royalty to be paid to Hollywood
Management Company for the rights granted by the agreement, and
provisions establishing procedures with respect to the selection,
registration, maintenance and enforcement of the trademark rights
governed by the agreement; provided that such agreement shall not
contain provisions that restrict the Company's right to use the
Trademarks in a manner substantially similar to its use of the
Trademarks prior to the effectiveness of such agreement."
SECTION 2.2. The definitions of "Asset Disposition," "Net
Available Cash," "Permitted Investment," "Senior Indebtedness,"
and "Unrestricted Subsidiary" in Section 1.1 of the Indenture
shall be amended to read in their entirety as follows:
"`Asset Disposition' means any sale, lease, transfer or
other disposition (or series of related sales, leases, transfers
or dispositions) by the Company or any Restricted Subsidiary,
including any disposition by means of a merger, consolidation or
similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (i) any shares of Capital
Stock of a Restricted Subsidiary (other than directors'
qualifying shares and, to the extent required by local ownership
laws in foreign countries, shares owned by foreign shareholders),
(ii) all or substantially all the assets of any division,
business segment or comparable line of business of the Company or
any Restricted Subsidiary or (iii) any other assets of the
Company or any Restricted Subsidiary outside of the ordinary
course of business of the Company or such Restricted Subsidiary.
Notwithstanding the foregoing, the term "Asset Disposition" shall
not include (w) a disposition by a Restricted Subsidiary to the
Company or by the Company or a Restricted Subsidiary to a Wholly
Owned Subsidiary, (x) for purposes of Section 4.6, a disposition
that constitutes a Permitted Investment or a Restricted Payment
permitted by Section 4.4, (y) a disposition of assets having a
fair market value of less than $1 million, and (z) the sale by
Xxxx.xxx Group Members of shares of Capital Stock in one or more
private placements that (A) result in gross proceeds of no more
than $30 million in the aggregate from and after the Amendment
Effective Date and (B) do not result in or require any Prohibited
Xxxx.xxx Guarantee. For purposes hereof, "ordinary course of
business" for the Company shall be deemed to include, without
limitation, (i) the sale of rental inventory, consistent with
past practice, and (ii) sales or closures of stores; provided,
however, that the Company or a Restricted Subsidiary acquires or
opens another store within 90 days thereof for each such store
sold or closed."
"`Net Available Cash' from an Asset Disposition means
cash payments received by the Company or any of its Subsidiaries
therefrom (including any cash payments received by way of
deferred payment of principal pursuant to a note or installment
receivable or otherwise, but only as and when received, but
excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other
obligations relating to such properties or assets or received in
any other noncash form) in each case net of (i) all legal, title
and recording tax expenses, commissions and other fees and
expenses incurred, and all Federal, state, provincial, foreign
and local taxes required to be paid or accrued as a liability
under GAAP, as a consequence of such Asset Disposition, (ii) all
payments made on any Indebtedness which is secured by any assets
subject to such Asset Disposition, in accordance with the terms
of any Lien upon or other security agreement of any kind with
respect to such assets, or which must by its terms, or in order
to obtain a necessary consent to such Asset Disposition, or by
applicable law, be repaid out of the proceeds from such Asset
Disposition, (iii) all distributions and other payments required
to be made to minority interest holders in Subsidiaries or Joint
Ventures as a result of such Asset Disposition and (iv) the
deduction of appropriate amounts provided by the seller as a
reserve, in accordance with GAAP, against any liabilities
associated with the property or other assets disposed in such
Asset Disposition and retained by the Company or any Restricted
Subsidiary after such Asset Disposition including without
limitation under any indemnification obligations associated with
such Asset Disposition. Net Available Cash from a Xxxx.xxx
Upstream means cash payments received by the Company or any
Subsidiary of the Company (excluding any Xxxx.xxx Group Member)
from the Xxxx.xxx Upstream (including any cash payments received
by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise, but only as and when
received)."
"`Permitted Investment' means an Investment by the
Company or any Restricted Subsidiary in (i) the Company; (ii) a
Restricted Subsidiary or a Person that will, upon the making of
such Investment, become a Restricted Subsidiary; provided,
however, that the primary business of such Restricted Subsidiary
is a Related Business; provided further, that no such Investment
shall constitute assets owned by the Company as of the Issue Date
(or any substitute or replacement assets therefor); (iii) another
Person if as a result of such Investment such other Person is
merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, the Company or a Restricted
Subsidiary; provided, however, that such Person's primary
business is a Related Business; provided, further, that no such
Investment shall constitute assets owned by the Company as of the
Issue Date (or any substitute or replacement assets therefor);
(iv) Temporary Cash Investments; (v) receivables owing to the
Company or any Restricted Subsidiary if created or acquired in
the ordinary course of business and payable or dischargeable in
accordance with customary trade terms; provided, however, that
such trade terms may include such concessionary trade terms as
the Company or any such Restricted Subsidiary deems reasonable
under the circumstances; (vi) payroll, travel and similar
advances to cover matters that are expected at the time of such
advances ultimately to be treated as expenses for accounting
purposes and that are made in the ordinary course of business;
(vii) loans or advances to employees made in the ordinary course
of business consistent with past practices of the Company or such
Restricted Subsidiary; (viii) stock, obligations or securities
received in settlement of debts created in the ordinary course of
business and owing to the Company or any Restricted Subsidiary or
in satisfaction of judgments; (ix) any Person to the extent such
Investment represents the non-cash portion of the consideration
received for an Asset Disposition as permitted under Section 4.6
hereof; (x) Persons other than the Company and Restricted
Subsidiaries (but excluding all Xxxx.xxx Group Members after the
Xxxx.xxx Unrestricted Designation), in an aggregate amount after
the Issue Date of up to $15 million; provided, however, the
amount of any dividends, repayments of loans or transfers of
assets as a return on such Permitted Investments shall reduce the
amount of such $15 million amount used (but not below $0);
(xi) Hollywood Management Company in the form of a transfer or
contribution of the Trademarks by the Company to Hollywood
Management Company for so long as Hollywood Management Company
(A) remains a Restricted Subsidiary, (B) shall have granted to
the Company the Trademark License and no Trademark License
Default shall have occurred and be continuing and (C) has Special
Purpose Status, and (xii) Xxxx.xxx Group Members notwithstanding
their designation as Unrestricted Subsidiaries, provided such
Investment is made prior to such designation and does not
constitute or result in a Xxxx.xxx Unrestricted Designation
Disabling Event."
"`Senior Indebtedness' of the Company means (i) all
Bank Indebtedness of the Company, whether outstanding on the
Issue Date or thereafter Incurred, including the Guarantees by
the Company of all Bank Indebtedness, (ii) the principal of and
accrued and unpaid interest (including interest accruing on or
after the filing of any petition in bankruptcy or for
reorganization relating to the Company whether or not a claim for
post-filing interest is allowed in such proceeding) in respect of
(A) indebtedness of the Company for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which the Company is
responsible or liable unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding,
it is provided that such obligations are subordinate in right of
payment to the Securities, and (iii) all Obligations of the
Company in respect of any of the foregoing; provided, however,
that Senior Indebtedness shall not include (1) any obligation of
the Company to any Subsidiary, (2) any liability for federal,
state, local or other taxes owed or owing by the Company, (3) any
accounts payable or other liability to trade creditors arising in
the ordinary course of business (including guarantees thereof or
instruments evidencing such liabilities), (4) any Indebtedness of
the Company (and any accrued and unpaid interest in respect
thereof) which is subordinate or junior in any respect (other
than as a result of the Indebtedness being unsecured) to any
other Indebtedness or other obligation of the Company, including
any Senior Subordinated Indebtedness and any Subordinated
Obligations, (5) any obligations with respect to any Capital
Stock or (6) that portion of any Indebtedness which at the time
of Incurrence is Incurred in violation of this Indenture."
"`Unrestricted Subsidiary' means (i) any Subsidiary of
the Company that at the time of determination shall be designated
an Unrestricted Subsidiary by the Board of Directors in the
manner provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any Subsidiary
of the Company (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or holds any Lien on any property of, the
Company or any other Subsidiary of the Company that is not a
Subsidiary of the Subsidiary to be so designated; provided,
however, that either (A) the Subsidiary to be so designated has
total assets of $1,000 or less, (B) if such Subsidiary has assets
greater than $1,000 and is not a Xxxx.xxx Group Member, such
designation would be permitted under Section 4.4 or (C) if such
Subsidiary is a Xxxx.xxx Group Member, such designation occurs no
later than December 31, 2000, no Xxxx.xxx Unrestricted
Designation Disabling Event shall have occurred and be
continuing, and the Xxxx.xxx Parent Guarantee shall have become
effective pursuant to a supplemental indenture executed and
delivered to the Trustee. The Board of Directors may designate
any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided, however, that immediately after giving effect to such
designation (x) the Company could Incur $1.00 of additional
Indebtedness under Section 4.3(a) and (y) no Default shall have
occurred and be continuing. Any such designation by the Board of
Directors shall be notified by the Company to the Trustee by
promptly filing with the Trustee a copy of the board resolution
giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing
provisions."
SECTION 2.3. Section 2.4 of the Indenture shall be amended
to read in its entirety as follows:
"SECTION 2.4. Paying Agent to Hold Money in Trust . On or
prior to each due date of the principal and interest on any
Security or of a payment under Section 4.17, the Company shall
deposit with the Paying Agent a sum sufficient to pay such
principal and interest or payment when so becoming due. The
Company shall require each Paying Agent (other than the Trustee)
to agree in writing that the Paying Agent shall hold in trust for
the benefit of Securityholders or the Trustee all money held by
the Paying Agent for the payment of principal of or interest on
the Securities or for a payment under Section 4.17 and shall
notify the Trustee of any default by the Company in making any
such payment. If the Company or a Subsidiary acts as Paying
Agent, it shall segregate the money held by it as Paying Agent
and hold it as a separate trust fund. The Company at any time
may require a Paying Agent to pay all money held by it to the
Trustee and to account for any funds disbursed by the Paying
Agent. Upon complying with this Section, the Paying Agent shall
have no further liability for the money delivered to the Trustee.
Upon any bankruptcy or reorganization proceedings relating to the
Company, the Trustee shall serve as Paying Agent for the
Securities."
SECTION 2.4. Section 4.3 of the Indenture shall be amended
to read in its entirety as follows:
"SECTION 4.3. Limitation on Indebtedness .
(a) The Company shall not, and shall not permit any
Restricted Subsidiary to, Incur, directly or indirectly, any
Indebtedness unless, immediately after giving effect to such
Incurrence, the Consolidated Coverage Ratio exceeds 2.50 to 1
through and including June 30, 2001, 2.75 to 1 after June 30,
2001 through and including December 31, 2001, and 3.00 to 1 after
December 31, 2001.
(b) Notwithstanding Section 4.3(a), the Company and
its Restricted Subsidiaries may Incur any or all of the following
Indebtedness:
(i) Indebtedness and other Obligations Incurred
pursuant to the Senior Credit Facility, to the extent that, after
giving effect to any such Incurrence, the aggregate principal
amount of such Indebtedness then outstanding does not exceed
$300,000,000;
(ii) Indebtedness represented by $250,000,000 of the
Securities;
(iii) Indebtedness outstanding on the Issue Date
(other than Indebtedness described in clause (i) of this
Section 4.3(b));
(iv) Indebtedness of the Company owed to and held by
any Wholly Owned Subsidiary or Indebtedness of a Restricted
Subsidiary owed to and held by the Company or a Wholly Owned
Subsidiary; provided, however, that any subsequent issuance
or transfer of any Capital Stock which results in any such
Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary or any subsequent transfer of such Indebtedness
(other than to the Company or Wholly Owned Subsidiary) shall
be deemed, in each case, to constitute the Incurrence of
such Indebtedness by the issuer thereof;
(v) Refinancing Indebtedness, the net proceeds of
which are used to extend, refinance, renew, replace, defease
or refund Indebtedness that was permitted by the Indenture
to be Incurred pursuant to paragraph (a) or pursuant to
clause (ii), (iii) or this clause (v) of this Section
4.3(b);
(vi) Indebtedness in respect of performance bonds,
bankers' acceptances, letters of credit and surety or appeal
bonds entered into by the Company and the Restricted
Subsidiaries in the ordinary course of their business;
(vii) Hedging Obligations consisting of Interest
Rate Agreements entered into in the ordinary course of
business and not for the purpose of speculation; provided,
however, that such Interest Rate Agreements do not increase
the Indebtedness of the Company outstanding at any time
other than as a result of fluctuations in interest rates or
by reason of fees, indemnities and compensation payable
thereunder;
(viii) Indebtedness Incurred by the Company or any
Restricted Subsidiary in connection with the purchase or
improvement of property (real or personal) or other capital
expenditures in the ordinary course of business (including
for the purchase of assets or stock of any Related Business)
or consisting of Capitalized Lease Obligations Incurred, in
either case subsequent to the Issue Date in an aggregate
principal amount which does not exceed 5% of aggregate total
revenue of the Company and its Restricted Subsidiaries
(excluding the Xxxx.xxx Group Members, unless the Xxxx.xxx
Unrestricted Designation shall not have occurred by
December 31, 2000) during the most recently completed four
fiscal quarter period on a consolidated basis (measured at
the time of Incurrence);
(ix) Guarantees of Indebtedness Incurred pursuant to
the Senior Credit Facility (subject to compliance with
Section 4.14); and
(x) Indebtedness in an aggregate principal amount
which, together with all other Indebtedness of the Company
and its Restricted Subsidiaries outstanding on the date of
such Incurrence (other than Indebtedness permitted by
clauses (i) through (ix) above or paragraph (a)), does not
exceed $10 million.
(c) Notwithstanding the foregoing, the Company shall
not, and shall not permit any Restricted Subsidiary to, Incur any
Indebtedness pursuant to the foregoing Section 4.3(b) if the
proceeds thereof are used, directly or indirectly, to Refinance
(i) any Subordinated Obligations unless such Indebtedness shall
be subordinated to the Securities to at least the same extent as
such Subordinated Obligations or (ii) any Senior Subordinated
Indebtedness unless such Indebtedness shall be Senior
Subordinated Indebtedness or Subordinated Obligations.
(d) For purposes of determining compliance with this
Section 4.3, (i) in the event that an item of Indebtedness meets
the criteria of more than one of the types of Indebtedness
described above, the Company, in its sole discretion, will
classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the
above clauses and (ii) an item of Indebtedness may be divided and
classified in more than one of the types of Indebtedness
described above. Any such classification shall be made as of the
Incurrence date and shall not thereafter be changed. At the
request of the Trustee, the Company shall promptly provide to the
Trustee an Officers' Certificate setting forth any
classifications of Indebtedness for purposes of this Section
4.3(b)."
(e) Notwithstanding anything to the contrary set forth
in this Section 4.3, from and after the Xxxx.xxx Unrestricted
Designation, (i) the Company shall not, and shall not permit any
Restricted Subsidiary to, Incur or suffer to exist any Prohibited
Xxxx.xxx Guarantee and (ii) the Xxxx.xxx Parent shall (A) be
fully obligated under the Xxxx.xxx Parent Guarantee, (B) have
Special Purpose Status and (C) be a Wholly Owned Subsidiary."
SECTION 2.5. Section 4.4(a) of the Indenture shall be
amended to read in its entirety as follows:
"SECTION 4.4. Limitation on Restricted Payments .
(a) The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, make a
Restricted Payment if at the time the Company or such Restricted
Subsidiary makes such Restricted Payment: (i) a Default or Event
of Default will have occurred and be continuing (or would result
therefrom); (ii) the Company is not able to Incur an additional
$1.00 of Indebtedness under Section 4.3(a); or (iii) the
aggregate amount of such Restricted Payment together with all
other Restricted Payments (the amount of any payments made in
property other than cash to be valued at the fair market value of
such property as determined in good faith by the Board of
Directors) declared or made since the Issue Date would exceed the
sum of:
(A) 50% of the Consolidated Net Income accrued
during the period (treated as one accounting period)
from the beginning of the fiscal quarter immediately
following the fiscal quarter in which the Issue Date
occurs to the end of the most recent fiscal quarter
prior to the date of such Restricted Payment for which
financial statements of the Company are available (or,
in case such Consolidated Net Income accrued during
such period (treated as one accounting period) shall be
a deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by
the Company from the issuance or sale of its Capital
Stock (other than Disqualified Stock) subsequent to the
Issue Date (other than an issuance or sale to a
Subsidiary of the Company);
(C) the amount by which Indebtedness of the
Company or its Restricted Subsidiaries is reduced on
the Company's balance sheet upon the conversion or
exchange (other than by a Subsidiary of the Company)
subsequent to the Issue Date, of any Indebtedness of
the Company or its Restricted Subsidiaries convertible
or exchangeable for Capital Stock (other than
Disqualified Stock) of the Company (less the amount of
any cash, or the fair value of any other property,
distributed by the Company or any Restricted Subsidiary
upon such conversion or exchange);
(D) an amount equal to the sum of (i) the net
reduction in Investments in Unrestricted Subsidiaries
resulting from dividends, repayments of loans or
advances or other transfers of assets subsequent to the
Issue Date, in each case to the Company or any
Restricted Subsidiary from Unrestricted Subsidiaries,
and (ii) the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market
value of the net assets of an Unrestricted Subsidiary
at the time such Unrestricted Subsidiary is designated
a Restricted Subsidiary; provided, however, that the
foregoing sum shall not exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments
previously made (and treated as a Restricted Payment)
by the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary; and
(E) $5.0 million."
SECTION 2.6. Sections 4.4(c) and 4.4(d) shall be added to
the Indenture to read in their entireties as follows:
"(c) Notwithstanding anything to the contrary set forth in
this Section 4.4, the Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, make any
Investment in any Xxxx.xxx Group Member after the Xxxx.xxx
Unrestricted Designation."
"(d) Notwithstanding anything to the contrary set forth in
this Section 4.4, the Company shall not, and shall not permit any
Subsidiary of the Company to, directly or indirectly, declare or
pay a dividend or otherwise distribute to shareholders of the
Company shares of Capital Stock of any Xxxx.xxx Group Member."
SECTION 2.7. Section 4.5 of the Indenture shall be amended
to read in its entirety as follows:
"SECTION 4.5. Limitation on Restrictions on
Distributions from Restricted Subsidiaries. The Company shall
not, and shall not permit any Restricted Subsidiary to, create or
otherwise cause or permit to exist or become effective any
encumbrance or restriction on the ability of any Restricted
Subsidiary (a) to pay dividends or make any other distributions
on its Capital Stock to the Company or a Restricted Subsidiary or
pay any Indebtedness owed to the Company or any Restricted
Subsidiary,(b) to make any loans or advances to the Company or
any Restricted Subsidiary or (c) to transfer any of its property
or assets to the Company or any Restricted Subsidiary, except:
(i) any encumbrance or restriction pursuant to an
agreement in effect at or entered into on the Issue Date;
(ii) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement relating to
any Indebtedness Incurred by such Restricted Subsidiary
which was entered into on or prior to the date on which such
Restricted Subsidiary was acquired by the Company (other
than as consideration in, or to provide all or any portion
of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to
which such Restricted Subsidiary became a Restricted
Subsidiary or was acquired by the Company) and outstanding
on such date;
(iii) any encumbrance or restriction pursuant to an
agreement effecting a Refinancing of Indebtedness Incurred
pursuant to an agreement referred to in clause (i) or (ii)
of this Section 4.5 (or effecting a Refinancing of such
Refinancing Indebtedness pursuant to this clause (iii)) or
contained in any amendment to an agreement referred to in
clause (i) or (ii) of this Section 4.5 or this clause (iii);
provided, however, that the encumbrances and restrictions
with respect to such Restricted Subsidiary contained in any
such refinancing agreement or amendment are no more
restrictive in any material respect than encumbrances and
restrictions with respect to such Restricted Subsidiary
contained in such agreements;
(iv) any such encumbrance or restriction consisting of
customary non-assignment provisions in leases governing
leasehold interests to the extent such provisions restrict
the transfer of the lease or the property leased thereunder;
(v) in the case of this Section 4.5(c), restrictions
contained in security agreements or mortgages permitted
hereunder securing Indebtedness of a Restricted Subsidiary
permitted hereunder to the extent such restrictions restrict
the transfer of the property subject to such security
agreements or mortgages;
(vi) any restriction with respect to a Restricted
Subsidiary imposed pursuant to an agreement entered into for
the sale or disposition of all or substantially all the
Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition;
(vii) any encumbrance or restriction pursuant to
the Senior Credit Facility that is no more restrictive in
any material respect than the encumbrances and restrictions
contained in the Senior Credit Facility on the Issue Date;
and
(viii) any restrictions imposed by operation of
applicable law."
SECTION 2.8. The first two paragraphs of Section 4.6 of
the Indenture shall be amended to read in their entirety as
follows:
"SECTION 4.6. Limitation on Sales of Assets and
Subsidiary Stock.
(a) The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, consummate any
Asset Disposition unless the Company or such Restricted
Subsidiary receives consideration at the time of such Asset
Disposition at least equal to the fair market value (including as
to the value of all non-cash consideration), as determined in
good faith by the Board of Directors, of the shares and assets
subject to such Asset Disposition, and at least 75% of the
consideration therefor received by the Company or such Restricted
Subsidiary is in the form of cash or cash equivalents.
With respect to any Asset Disposition occurring on or
after the Issue Date or any Xxxx.xxx Upstream occurring after the
Xxxx.xxx Unrestricted Designation from which the Company or any
Restricted Subsidiary receives Net Available Cash, the Company or
such Restricted Subsidiary shall: (i) within 360 days after the
date such Net Available Cash is received and to the extent the
Company or such Restricted Subsidiary elects (or is required by
the terms of any Senior Indebtedness) to (A) apply an amount
equal to such Net Available Cash to prepay, repay or purchase
Senior Indebtedness of the Company, in each case owing to a
Person other than the Company or any Affiliate of the Company, or
(B) invest an equal amount, or the amount not so applied pursuant
to clause (A), in Additional Assets (including by means of an
Investment in Additional Assets by a Restricted Subsidiary with
Net Available Cash received by the Company or another Restricted
Subsidiary) and (ii) apply such excess Net Available Cash (to the
extent not applied pursuant to clause (i)) as provided in the
following paragraphs of this Section 4.6; provided, however, that
in connection with any prepayment, repayment or purchase of
Senior Indebtedness pursuant to clause (A) above, the Company or
such Restricted Subsidiary shall retire such Senior Indebtedness
and shall cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so
prepaid, repaid or purchased. The amount of Net Available Cash
required to be applied pursuant to clause (ii) above and not
theretofore so applied shall constitute "Excess Proceeds."
Pending application of Net Available Cash pursuant to this
provision, such Net Available Cash shall be invested in Temporary
Cash Investments."
SECTION 2.9. Section 4.7(a) of the Indenture shall be
amended to read in its entirety as follows:
"SECTION 4.7. Limitation on Affiliate Transactions.
(a) The Company shall not, and shall not permit any
Restricted Subsidiary to, enter into or permit to exist any
transaction or series of related transactions (including the
purchase, sale, lease or exchange of any property, employee
compensation arrangements or the rendering of any service) with
any Affiliate of the Company (an "Affiliate Transaction") unless
the terms thereof: (1) are no less favorable to the Company or
such Restricted Subsidiary than those that could be obtained at
the time of such transaction in arm's-length dealings with a
Person who is not such an Affiliate, (2) if such Affiliate
Transaction (or series of related Affiliate Transactions) involve
aggregate payments in an amount in excess of $1.0 million in any
one year, (i) are set forth in writing, (ii) comply with clause
(1) of this Section 4.7 and (iii) have been approved by a
majority of the disinterested members of the Board of Directors,
and (3) if such Affiliate Transaction (or series of related
Affiliate Transactions) involves aggregate payments in an amount
in excess of $5.0 million in any one year, (i) comply with clause
(2) and (ii) have been determined by a nationally recognized
consulting, accounting, appraisal or investment banking firm to
be fair, from a financial standpoint, to the Company and its
Restricted Subsidiaries or, in the case of an Affiliate
Transaction between the Company and a Restricted Subsidiary, to
the Company. Notwithstanding the preceding provisions of this
Section 4.7(a), no fairness determination shall be required with
respect to the Trademark License."
SECTION 2.10. In Section 4.11 of the Indenture, the
existing material after the heading shall be placed in a
subsection "(a)," and a new subsection shall be added to read in
its entirety as follows:
"(b) Except for Liens securing the Senior Credit Facility,
the Company shall not, and shall not permit any Subsidiary of the
Company to, directly or indirectly, Incur or permit to exist any
Lien on the Capital Stock of Xxxx.xxx Holding Company or Xxxx.xxx
Parent."
SECTION 2.11. Section 4.12 of the Indenture shall be
amended to read in its entirety as follows:
"SECTION 4.12. Limitation on Issuance or Sale of
Capital Stock of Restricted Subsidiaries. The Company shall not
(i) sell, pledge, hypothecate or otherwise dispose of any shares
of Capital Stock of a Restricted Subsidiary (other than pledges
of Capital Stock securing Senior Indebtedness), or (ii) permit
any Restricted Subsidiary, directly or indirectly, to issue or
sell or otherwise dispose of any shares of its Capital Stock
other than (A) to the Company or a Wholly Owned Subsidiary, (B)
directors' qualifying shares,(C) if, immediately after giving
effect to such issuance or sale, such Restricted Subsidiary would
no longer constitute a Restricted Subsidiary, or (D) shares of
Capital Stock of any Xxxx.xxx Group Member in one or more private
placements that result in gross proceeds of no more than $30
million in the aggregate from and after the Amendment Effective
Date; provided that, in the case of the foregoing clauses (C) and
(D), such issuance, sale or placement does not result in or
require any Prohibited Xxxx.xxx Guarantee."
SECTION 2.12. A new Section 4.17 shall be added to the
Indenture to read in its entirety as follows:
"SECTION 4.17. Additional Payments by the Company.
(a) If the Investments made by the Company and its
Restricted Subsidiaries (excluding all Xxxx.xxx Group Members) in
all Xxxx.xxx Group Members from and after December 31, 1999 and
before the effective time of the Xxxx.xxx Unrestricted
Designation shall exceed $25.0 million (measured as described in
the definition of "Xxxx.xxx Unrestricted Designation Disabling
Event") for a period of more than 30 consecutive days, the
Company shall pay to each Holder an amount equal to $10.00 for
every $1,000 principal amount of Notes held by such Holder
("Excess Investment Payment").
(b) If the Xxxx.xxx Unrestricted Designation shall not
have occurred on or before July 31, 2000, the Company shall pay
to each Holder an amount equal to $10.00 for every $1,000
principal amount of Notes held by such Holder ("Delayed
Designation Payment").
(c) Payments pursuant to this Section 4.17 shall be
made to the Holders of record at the close of business on the
first Business Day following the date on which the event occurs
that requires the Company to make such payment. Such payments
shall be made on or before the earlier of (i) the next regular
interest payment date that is no earlier than the 10th Business
Day following the date on which the event occurs that requires
the Company to make such payment or (ii) the 30th day following
the date on which the event occurs that requires the Company to
make such payment.
(d) Payments pursuant to this Section 4.17 shall be
considered paid on the date due if on such date the Trustee or
the Paying Agent holds in accordance with this Indenture money
sufficient to pay all amounts then due. The Company shall pay
interest on overdue payments under this Section 4.17 at the same
rate per annum set forth in the Securities to the extent lawful."
SECTION 2.13. Section 6.1 of the Indenture shall be amended
to eliminate the word "or" at the end of clause (vii), to add the
word "or" to the end of clause (viii) and to add a clause (ix)
read in its entirety as follows:
"(ix) there shall have occurred a Trademark License
Default and such default continues for a period of 30 days."
ARTICLE III
MISCELLANEOUS
SECTION 3.1. Company's Investment in Xxxx.xxx. The
Company represents and warrants that as of December 31, 1999 its
Investment in Xxxx.xxx did not exceed an aggregate of $55,000,000
plus the amount contributed by the Company to Xxxx.xxx effective
October 1, 1998.
SECTION 3.2. Successors and Assigns. This Supplemental
Indenture shall be binding upon the Company and its successors
and assigns and shall inure to the benefit of the successors and
assigns of the Trustee and the Holders and, in the event of any
transfer or assignment of rights by any Holder or the Trustee,
the rights and privileges conferred upon that party in the
Indenture and this Supplemental Indenture and in the Securities
shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions of the
Indenture.
SECTION 3.3. No Waiver. Neither a failure nor a delay on
the part of either the Trustee or the Holders in exercising any
right, power or privilege under this Supplemental Indenture shall
operate as a waiver thereof, nor shall a single or partial
exercise thereof preclude any other or further exercise of any
right, power or privilege. The rights, remedies and benefits of
the Trustee and the Holders herein expressly specified are
cumulative and not exclusive of any other rights, remedies or
benefits which either may have under this Supplemental Indenture
at law, in equity, by statute or otherwise.
SECTION 3.4. Ratification of Indenture; Supplemental
Indentures Part of Indenture. Except as expressly amended
hereby, the Indenture is in all respects ratified and confirmed
and all the terms, conditions and provisions thereof shall remain
in full force and effect. This Supplemental Indenture shall form
a part of the Indenture for all purposes, and every Holder of
Securities heretofore or hereafter authenticated and delivered
shall be bound hereby.
SECTION 3.5. Modification. No modification, amendment or
waiver of any provision of this Supplemental Indenture, shall in
any event be effective unless the same shall be in writing and
signed by the Trustee, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for
which given.
SECTION 3.6. Governing Law. THIS SUPPLEMENTAL INDENTURE
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION
OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 3.7. Notices.
(a) Any notice or communication shall be in writing
and delivered in person, by overnight courier or facsimile or
mailed by first-class mail addressed as follows:
If to the Company: Hollywood
Entertainment Corporation
0000 XX Xxxxxx Xxxx
Xxxxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Chief Financial
Officer
With copies to: Stoel Rives LLP
(which copies shall not 000 X.X. Xxxxx
Xxxxxx,Xxxxx 2600
constitute notice) Xxxxxxxx, XX
00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx X.
Xxxxxxx,Esq.
If to the Trustee: U.S. Trust
Company, National Association
Xxx Xxxxxxxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Corporate
Trust Administration
(b) The Successor Company or the Trustee by notice to
the other may designate additional or different addresses for
subsequent notices or communications.
(c) All notices and communications (other than those
sent to Holders) shall be deemed to have been duly given: at the
time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if
mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after
timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery.
(d) Any notice or communication mailed or sent by
overnight courier or facsimile to a Holder shall be sent to the
Holder at the Holder's address as it appears on the registration
books of the Registrar and shall be sufficiently given if so sent
within the time prescribed.
(e) Failure to send a notice or communication to a
Holder or any defect in it shall not affect its sufficiency with
respect to other Holders. If a notice or communication is sent
in the manner provided above, it is duly given, whether or not
the addressee receives it.
(f) Where this Supplemental Indenture provides for
notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such
notice.
SECTION 3.8. Trustee Makes No Representation. The Trustee
makes no representation as to the validity or sufficiency of this
Supplemental Indenture.
SECTION 3.9. Counterparts. The parties may sign any
number of copies of this Supplemental Indenture. Each signed
copy shall be an original, but all of them together represent the
same agreement.
SECTION 3.10. Effect of Headings. The Section headings
herein are for convenience only and shall not affect the
construction thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed as of the date first
above written.
HOLLYWOOD ENTERTAINMENT CORPORATION,
AS ISSUER
By:
Name:
Title:
U.S. TRUST COMPANY, NATIONAL
ASSOCIATION,
AS TRUSTEE
By:
Name:
Title:
