EXECUTION COPY
AMENDMENT TO CREDIT AGREEMENT
THIS AMENDMENT TO CREDIT AGREEMENT (this "Agreement")
dated as of June 5, 2001 is entered into among Hollywood
Entertainment Corporation (the "Borrower"), Societe Generale, as
agent (the "Agent"), the Co-Agents (as defined below) and the
Lenders (as defined below).
RECITALS
A. The Borrower is party to that certain Revolving
Credit Agreement, as amended as of August 4, 2000 (as further
amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among the Borrower, the Agent, the co-agents
named therein (the "Co-Agents") and the financial institutions
from time to time party thereto (the "Lenders").
B. The Borrower has requested that the Lenders, and
the Lenders have agreed (on the terms and conditions set forth
herein), to amend certain provisions of the Credit Agreement.
AGREEMENT
In consideration of the Recitals and of the mutual
promises and covenants contained herein and for other good and
valuable consideration, the sufficiency and receipt of which is
hereby acknowledged, the Borrower, the Agent, the Co-Agents and
each of the Lenders hereby agree as follows:
SECTION 1. Definitions. Capitalized terms used herein
and not otherwise defined herein shall have the meanings given to
them in the Credit Agreement.
SECTION 2. Amendments. The Credit Agreement is hereby
amended as follows:
(a) All references to "Documentation Agent" and
"Xxxxxxx Xxxxx Credit Partners L.P." are deleted.
(b) Section 1.1 is amended as follows:
(i) The definition of "Adjusted Current Assets" is
amended by inserting "and amounts for the deferred tax
asset" after "Cash Equivalents" in the first
parenthetical therein.
(ii) The definition of "Adjusted Current
Liabilities" is amended by inserting "(other than
amounts for income taxes payable and accrued interest)"
after "all amounts".
(iii) The definition of "Adjusted EBITDA" is amended
and restated in its entirety as follows:
"'Adjusted EBITDA' means, for any Person for
any period, (a) such Person's EBITDA for such
period minus (b) without duplication, all costs of
acquisition of Rental Items (other than DVDs which
are Capital Assets) for Stores for such period, to
the extent that such Rental Items were acquired for
a particular Store (A) after its opening or (B) in
the case of a Store acquired during such period,
after it commenced to operate as a Store (i.e.,
excluding the cost of acquisition of such Store's
initial inventory, the intent of the parties being
to adjust EBITDA for the costs of keeping an
existing Store in stock, and not for the initial
cost of equipping a newly opened or acquired Store
with inventory), plus (c) the cost of product
transferred from rental inventory to previously
viewed merchandise inventory and sold."
(iv) The definition of "Adjusted Leverage Ratio"
is amended and restated in its entirety as follows:
"'Adjusted Leverage Ratio' means for any
period of four consecutive fiscal quarters of the
Borrower (determined on a consolidated basis), the
ratio of (a) the sum of (i) principal amount of
Loans outstanding hereunder on the last day of such
period plus (ii) the balance at the end of such
period of the Borrower's trade accounts payable
plus (iii) the balance at the end of such period of
accrued revenue sharing (as such amount would
appear on the Borrower's consolidated balance sheet
(in accordance with GAAP)) plus (iv) the balance at
the end of such period of any other accounts
payable or liability of the Borrower in connection
with Rental Items, not included in clauses (ii) and
(iii) above minus (v) the balance at the end of
such period of the Borrower's cash, to (b) the
Borrower's Adjusted Net Cash EBITDA for such
period."
(v) The definition of "Adjusted Net Cash EBITDA"
is amended and restated in its entirety as follows:
"'Adjusted Net Cash EBITDA' means Adjusted
EBITDA minus the direct and indirect cost of
acquisition, preparation and distribution of
initial Inventory for new Stores for the
corresponding period minus the cost of DVDs which
are Capital Assets."
(vi) The definition of "Asset Disposition" is
amended by inserting "or other inventory" after "Rental
Items" in clause (iii), deleting in clause (vii) "and"
and replacing it with "," , and inserting in clause
(viii) "43 Stores during fiscal year 2001 and" after
"transfer) of", inserting "thereafter" after "fiscal
year" and inserting at the end thereof ", provided, that
any number of such permitted closures not effected in
any fiscal year may be carried forward for one fiscal
year as additional permitted closures for such
subsequent fiscal year; and (ix) any disposition (in an
amount not to exceed $25,000,000) in connection with a
sale-leaseback transaction pertaining to the Borrower's
equipment for which the Borrower has delivered Pro Forma
Calculations to the Agent."
(vii) The definition of "Capital Assets" is amended
by inserting "(including, without limitation, catalogue
DVD purchases in a maximum cumulative amount of not more
than $17,000,000 for the six month period ending
September 30, 2001, $34,000,000 for the 12 month period
ending March 31, 2002 and $51,000,000 for the 18 month
period ending September 30, 2002)" at the end of clause
(a) therein (before "and")
(viii) The definition of "EBITDA" is amended and
restated in its entirety as follows:
"'EBITDA' means, for any Person for any
period, such Person's net income (or net loss),
excluding any extraordinary gains or losses and
taxes associated therewith, plus the sum of (a)
interest expense, (b) income tax expense, (c)
depreciation expense, (d) amortization expense, and
(e) all other non-cash items deducted for purposes
of determining net income (other than items that
will require cash payments and for which an accrual
or reserve is, or is required under GAAP, to be
made), in each case determined on a consolidated
basis in accordance with GAAP for such Person for
such period."
(ix) The definition of "Excess Cash Flow" is
amended and restated in its entirety as follows:
"'Excess Cash Flow' means, for any fiscal
quarter of the Borrower (commencing with the fiscal
quarter ended June 30, 2001 and determined on or
prior to the 45th day after the end of each such
fiscal quarter), the amount, if any, by which the
sum of:
(i) Adjusted Net Cash EBITDA of the Borrower
and its Subsidiaries for such period, plus
(ii) any negative change (Adjusted Current
Liabilities increase and/or Adjusted Current Assets
decrease) in the Working Capital Deficit of the
Borrower and its Subsidiaries for such period,
exceeds an amount equal to the sum of:
(i) the aggregate amount of all prepayments
of Loans during such period, solely to the extent
accompanied by a permanent reduction of the Total
Commitment, plus
(ii) Fixed Charges of the Borrower and its
Subsidiaries for such period, plus
(iii) any positive change (Adjusted Current
Assets increase and/or Adjusted Current Liabilities
decrease) in the Working Capital Deficit of the
Borrower and its Subsidiaries for such period, plus
(iv) $10,000,000 in the second quarter of
each calendar year or $5,000,000, in each other
quarter."
(x) The definition of "Leverage Ratio" is amended
by deleting the proviso therein.
(xi) The definition of "Margin" is amended and
restated in its entirety as follows:
"'Margin' means (a) with respect to IBOR
Loans, 5.00% per annum and (b) with respect to Base
Rate Loans, 4.00% per annum; provided that the
Margin shall be permanently reduced by .25% for (x)
each permanent reduction of the Total Commitment
(in accordance with Sections 2.3.1 and 2.3.2)
effected by the Borrower's payment to the Agent of
an amount (in one or more installments) of not less
than $20,000,000 and (y) upon receipt by the Agent
of notice from the Borrower thereof, each Rating
Upgrade; provided, further, that if any Loans
remain outstanding at the close of business on
December 24, 2002, the Margin in effect at that
time shall be permanently increased by 1.00%."
(xii) The definition of "Maturity Date" is amended
by deleting "September 5, 2002" and replacing it with
"December 23, 2003".
(xiii) The definition of "Xxxxx'x" is inserted in its
proper alphabetical place as follows:
"'Moody's' means Xxxxx'x Investors Service,
Inc."
(xiv) The definition of "Net Cash Proceeds" is
amended by inserting "or sale-leaseback transaction
contemplated under clause (ix) of the definition of
'Asset Disposition'" after "by the Borrower", and
inserting "or sale-leaseback transaction" after "such
issuance or sale" in the third and seventh lines
thereof.
(xv) The definition of "Pro Forma Calculations" is
amended by inserting "and 5.23" after "5.20".
(xvi) The definition of "Rating Agencies" is
inserted in its proper alphabetical place as follows:
"'Rating Agencies' means Moody's and S&P."
(xvii) The definition of "Rating Upgrade" is inserted
in its proper alphabetical place as follows:
"'Rating Upgrade' means at any time prior to
September 25, 2002, each rating level upgrade (to a
level higher than the existing ratings as at
June 5, 2001) by the Rating Agencies of the
Borrower's Senior Secured Bank Debt Rating;
provided, that if at any time the Rating Agencies
do not maintain equivalent Senior Secured Bank Debt
Ratings for the Borrower, the lower of the two
ratings shall be used to determine if there has
been a Rating Upgrade and the magnitude thereof;
provided, further, that if such ratings from the
Rating Agencies shall differ by two or more rating
levels, then the average of the two rating levels
shall be taken and rounded downward to the nearest
rating level (if necessary) to determine the
magnitude of the Rating Upgrade, if any."
(xviii) The definition of "Rental Items" is amended
and restated in its entirety as follows:
"'Rental Items' means (i) catalog and new
release videotapes, DVDs, video discs, videogames,
audiotapes or other recorded media (regardless of
format) and related equipment to the extent that
such items were acquired by Borrower (or the
relevant Subsidiary) for sale or rental to its
customers or are held by Borrower (or the relevant
Subsidiary) for rental to its customers and (ii)
costs incurred by the Borrower to prepare and
distribute the Rental Items described in clause (i)
above for use including, without limitation,
preparation, freight, taxes, cases and supplies."
(xix) The definition of "S&P" is inserted in its
proper alphabetical place as follows:
"'S&P' means Standard & Poor's Ratings Group,
a division of McGraw Hill, Inc."
(xx) The definition of "Senior Secured Bank Debt
Rating" is inserted in its proper alphabetical place as
follows:
"'Senior Secured Bank Debt Rating' means the
rating by the Rating Agencies of the Indebtedness
hereunder."
(xxi) The definition of "Tangible Net Worth" is
deleted.
(xxii) The definition of "Total Commitment" is
amended and restated in its entirety as follows:
"'Total Commitment' means (subject to
reduction or termination pursuant to Section 2.3 or
Section 7.2):
Period Amount
--------------------------------- ------------
Through and including July 23,
2001 $255,500,000
July 24, 2001 through and
including August 27, 2001 $255,000,000
August 28, 2001 through and
including September 24, 2001 $254,500,000
September 25, 2001 through and
including October 22, 2001 $254,000,000
October 23, 2001 through and
including November 26, 2001 $253,000,000
November 27, 2001 through and
including December 24, 2001 $252,000,000
December 25, 2001 through and
including January 21, 2002 $241,500,000
January 22, 2002 through and
including February 25, 2002 $239,500,000
February 26, 2002 through and
including March 25, 2002 $237,500,000
March 26, 2002 through and
including April 22, 2002 $221,500,000
April 23, 2002 through and
including May 27, 2002 $219,500,000
May 28, 2002 through and
including June 24, 2002 $217,500,000
June 25, 2002 through and
including July 22, 2002 $201,500,000
July 23, 2002 through and
including August 26, 2002 $199,500,000
August 27, 2002 through and
including September 23, 2002 $197,500,000
September 24, 2002 through and
including October 21, 2002 $181,500,000
October 22, 2002 through and
including November 25, 2002 $179,500,000
November 26, 2002 through and
including December 23, 2002 $177,500,000
December 24, 2002 through and
including January 27, 2003 $141,500,000
January 28, 2003 through and
including February 24, 2003 $139,500,000
February 25, 2003 through and
including March 24, 2003 $137,500,000
March 25, 2003 through and
including April 21, 2003 $116,500,000
April 22, 2003 through and
including May 26, 2003 $114,500,000
May 27, 2003 through and
including June 23, 2003 $112,500,000
June 24, 2003 through and
including July 21, 2003 $ 91,500,000
July 22, 2003 through and
including August 25, 2003 $ 89,500,000
August 26, 2003 through and
including September 22, 2003 $ 87,500,000
September 23, 2003 through and
including October 27, 2003 $ 66,500,000
October 28, 2003 through and
including November 24, 2003 $ 64,500,000
November 25, 2003 through and
including December 22, 2003 $ 62,500,000
Thereafter $ 0
(xxiii) The definition of "Working Capital" is
deleted.
(xxiv) The definition of "Working Capital Deficit" is
inserted in its proper alphabetical place as follows:
"'Working Capital Deficit' means, in relation
to any Person as at any date, the sum derived by
subtracting Adjusted Current Liabilities from
Adjusted Current Assets of such person as at such
date."
(c) Section 2.1.1 is amended by deleting "below
such Lender's name on the signature pages hereto," and inserting
"across from such Lender's name on Schedule 2.1.1,".
(d) Section 2.3.2 is amended by (i) deleting in
clause (c) "50%" and replacing it with "75%", adding at the end of
clause (c) after "Borrower", "(after repayment of the existing
High Yield Notes)" and deleting in clause (c) "and" at the end
thereof; (ii) deleting in clause (d) "on" and replacing it with
"within 15 days after" and also deleting in clause (d) "100%" and
replacing it with "75%"; (iii) adding a new clause (e) before the
proviso as follows: "and (e) on or prior to the date which is 30
days after the Borrower's receipt thereof, by an amount equal to
75% of the Net Cash Proceeds of a sale-leaseback transaction
contemplated under clause (ix) of the definition of 'Asset
Disposition;'"; and (iv) deleting the proviso and replacing it
with "provided, that after payment by the Borrower to the Agent of
any amounts owing under clause (b), (c), (d) or (e), the balance
of such Net Cash Proceeds or Excess Cash Flow, as the case may be,
shall immediately be used to pay trade accounts payable of the
Borrower or for other general working capital purposes as
permitted hereunder."
(e) Section 2.6.1(a) is amended by inserting
"Adjusted" immediately before "Base Rate" (before the
parenthetical) and deleting "changing as the Base Rate changes,"
from the parenthetical therein.
(f) Section 2.6.3 is amended by inserting "and
Fees" at the end of the caption thereof and inserting
"Computations of all fees hereunder (to the extent applicable)
shall be made on the basis of a year of three hundred sixty (360)
days."
(g) Sections 2.11.4, 2.11.5 and 2.11.6 are each
amended by deleting the text therein and replacing it with
"Intentionally Omitted."
(h) Section 4.6 is amended by deleting "2000" and
replacing it with "2001".
(i) Section 5.10.1 is amended by inserting
"(except with respect to the audit report for the fiscal year
2000)" after "shall be unqualified".
(j) Section 5.10.3 is amended by inserting "and
5.23" after "5.20,".
(k) Section 5.10.4 is replaced with "Intentionally
Omitted."
(l) Section 5.10.8(a) is amended and restated in
its entirety as follows:
"(a) All monthly reports reasonably requested
by the Agent, which shall be reviewed by FTI
Consulting/Xxxxxxxx & Xxxxx until after the review
by FTI Consulting/Xxxxxxxx & Xxxxx of the
Borrower's fiscal 2001 audited financial statements
and thereafter by mutual agreement among the
Borrower and the Agent."
(m) Section 5.10.8(b) is replaced with
"Intentionally Omitted."
(n) Section 5.14 is replaced with "Intentionally
Omitted."
(o) Section 5.15 is replaced with "Intentionally
Omitted."
(p) Section 5.16 is amended and restated in its
entirety as follows:
"5.16. Leverage Ratio. The Borrower shall
maintain its Leverage Ratio for the four fiscal
quarters ended on the following respective dates
such that it shall not exceed the following
respective ratios:
Date Leverage Ratio
------------------ --------------
June 30, 2001 7.10 to 1.00
September 30, 2001 7.20 to 1.00
December 31, 2001 3.50 to 1.00
March 31, 2002 3.50 to 1.00
June 30, 2002 3.10 to 1.00
September 30, 2002 2.90 to 1.00
December 31, 2002 2.40 to 1.00
March 31, 2003 2.10 to 1.00
June 30, 2003 1.90 to 1.00
September 30, 2003 1.60 to 1.00
December 31, 2003 1.20 to 1.00."
(q) Section 5.17 is amended by deleting the table
therein and replacing it as follows:
"Date Interest Coverage Ratio
------------------ -----------------------
June 30, 2001 1.20 to 1.00
September 30, 2001 1.20 to 1.00
December 31, 2001 2.40 to 1.00
March 31, 2002 2.30 to 1.00
June 30, 2002 2.40 to 1.00
September 30, 2002 2.50 to 1.00
December 31, 2002 2.80 to 1.00
March 31, 2003 3.10 to 1.00
June 30, 2003 3.50 to 1.00
September 30, 2003 4.20 to 1.00
December 31, 2003 4.80 to 1.00."
(r) Section 5.18 is amended by deleting the table
therein and replacing it as follows:
Interest and Rent
"Date Coverage Ratio
----------------- -----------------
June 30, 2001 1.04 to 1.00
September 30, 2001 1.04 to 1.00
December 31, 2001 1.27 to 1.00
March 31, 2002 1.24 to 1.00
June 30, 2002 1.25 to 1.00
September 30, 2002 1.27 to 1.00
December 31, 2002 1.32 to 1.00
March 31, 2003 1.35 to 1.00
June 30, 2003 1.38 to 1.00
September 30, 2003 1.46 to 1.00
December 31, 2003 1.50 to 1.00."
(s) Section 5.19 is deleted and replaced with
"Intentionally Omitted."
(t) Section 5.20 is amended and restated in its
entirety as follows:
"5.20. Adjusted Leverage Ratio. The Borrower
shall maintain its Adjusted Leverage Ratio for the
four fiscal quarters ended on the following
respective dates such that it shall not exceed the
following respective ratios:
Date Adjusted Leverage Ratio
----------------- ----------------------
June 30, 2001 5.40 to 1.00
September 30, 2001 5.70 to 1.00
December 31, 2001 2.40 to 1.00
March 31, 2002 2.60 to 1.00
June 30, 2002 2.30 to 1.00
September 30, 2002 2.20 to 1.00
December 31, 2002 1.50 to 1.00
March 31, 2003 1.40 to 1.00
June 30, 2003 1.20 to 1.00
September 30, 2003 0.90 to 1.00
December 31, 2003 0.50 to 1.00."
(u) Section 5.22 is amended by inserting "and
5.23" after "5.20".
(v) The following Section 5.23 is added:
"5.23. Minimum Adjusted Net Cash EBITDA. The
Borrower shall maintain a Minimum Adjusted Net Cash
EBITDA for the four fiscal quarters ended on the
following respective dates at a level which is not
to be less than the following respective amounts:
Minimum Adjusted
Date Net Cash EBITDA
------------------ ----------------
June 30, 2001 $ 70,000,000
September 30, 2001 $ 70,000,000
December 31, 2001 $ 147,677,000
March 31, 2002 $ 136,859,000
June 30, 2002 $ 145,723,000
September 30, 2002 $ 150,855,000
December 31, 2002 $ 166,712,000
March 31, 2003 $ 172,001,000
June 30, 2003 $ 176,855,000
September 30, 2003 $ 194,633,000
December 31, 2003 $ 198,465,000."
(w) Section 6.2 is amended as follows:
(i) Clause (d) is amended by inserting
"(excluding any Funded Debt attributable to sale-
leaseback transactions contemplated under clause
(ix) of the definition of 'Asset Disposition')"
after "Borrower's Total Revenues".
(ii) Clause (k) is deleted and replaced with
the following:
"(k) Indebtedness of the Borrower in
connection with the financing of the Borrower's
business insurance premiums, in an amount not to
exceed $2,500,000 in any fiscal year."
(x) Section 6.4 of the Credit Agreement is amended
as follows:
(i) Clause (c) is amended by deleting "5%"
and replacing it with "10%".
(ii) Clause (e) is amended by deleting "five
percent (5%) of the Borrower's Net Worth" and
replacing it with "$5,000,000".
(iii) Clause (f) is amended by deleting
"and".
(iv) Clauses (h) and (i) are inserted after
clause (g) as follows:
"; (h) Liens on the unearned portion of
insurance premiums which are payable to the
Borrower upon the cancellation of the
applicable business insurance policy, to the
extent that such premiums were financed with
Indebtedness under Section 6.2(k); and (i)
Liens securing Funded Debt in connection with
any sale-leaseback transaction permitted in
clause (ix) of the definition of Asset
Disposition."
(y) Section 6.6 is amended by inserting "(in
addition to the Investment under Section 6.6.5)" after
"$5,000,000" in the proviso at the end thereof.
(z) Section 6.12 is amended by (i) inserting "when
each of the outstanding principal amount of all Loans and the
Total Commitment is less than $100,000,000 and when the Leverage
Ratio (after making such expenditures) is below 1.00 to 1.00,"
after "and (z)", (ii) deleting the text in each of clauses I and
III and replacing it with "Intentionally Omitted." and (iii)
amending clause II by deleting "June 30, 2001" and replacing it
with "December 31, 2001", and deleting all text beginning with "an
amount equal to" and replacing it with "14 Stores, provided, that
not more than eight of such Stores shall be built or acquired
without the prior written consent of the Agent in its sole
discretion, based on a cost-benefit analysis performed by FTI
Consulting/Xxxxxxxx & Xxxxx."
(aa) Section 6.13 is amended by deleting "Other
than as provided in Section 6.12(z)(III), the", replacing it with
"The", deleting "and" in clause (x), replacing it with "," and
inserting the following at the end of clause (y) (before the "."):
"and (z) when combined with all other such substituted leases,
does not exceed an aggregate cost (which shall include, without
limitation, lease payments and start-up costs with respect to the
new lease and any cancellation costs with respect to the
terminated lease) of $2,500,000 in 2001 and $5,000,000 per year
thereafter; provided, further, that the Borrower shall not enter
into any such new lease or incur any expenditures with respect
thereto (to the extent that the aggregate amount of such
expenditures exceeds $1,000,000 in any year) without the prior
written consent of the Agent in its sole discretion based on a
cost-benefit analysis performed by FTI Consulting/Xxxxxxxx &
Xxxxx."
(bb) Section 8.1(c) is amended as follows:
(i) Subclause (i) is amended by inserting at the
end thereof "; provided that the Agent shall, as long as
there is no Default or Event of Default hereunder,
without the consent of any of the Lenders, release its
Liens in Collateral which is the subject of a sale-
leaseback transaction contemplated under clause (ix) of
the definition of "Asset Disposition".
(ii) Subclause (ii) is amended by deleting "change"
and "changes" and replacing them with "increase" and
"increases", respectively.
(iii) Subclause (iii) is amended by deleting
"change" and "changes" and replacing them with
"increase" and "increases", respectively.
(iv) Subclause (vi) is amended and restated in its
entirety as follows:
"(vi) delay the time for payment, or decrease
the rates or amounts of principal, interest or any
other amounts owing hereunder or under any of the
other Loan Documents; and".
(cc) Schedule 2.1.1 is added in the form attached
as Annex I hereto.
(dd) Exhibit B is amended by deleting
"Section 9.5.6" in Section 9 therein and inserting "Section 9.4.6"
in lieu thereof.
SECTION 3. Conditions Precedent to Effectiveness of
Agreement. This Agreement shall not be effective unless and until
the date (the "Effective Date") when each of the following
conditions shall have been satisfied in the sole discretion of the
Agent:
(a) the Agent shall have received counterparts of
this Agreement duly executed by the Borrower, Hollywood Management
and each of the Lenders;
(b) the Borrower shall have paid in cash (x) all
accrued fees of the Agent (including, without limitation, fees
payable under that certain fee letter between the Agent and the
Borrower, dated March 12, 2001), the Agents' legal counsel
(including, without limitation, the payment of legal counsel's
retainer), advisors and professionals in connection with the
negotiation, preparation, execution and delivery of this Agreement
and all other documents and agreements relating thereto and (y)
all travel costs and related expenses of the members of the
steering committee (as set forth in Annex II hereto);
(c) the Borrower shall have paid in cash to the
Agent, for the pro rata benefit of the Lenders, an amendment fee
in the amount of 1.50% of the principal amount of all Loans
outstanding immediately prior to the date hereof (such fee shall
be non-refundable and fully earned when paid);
(d) the Borrower shall have agreed in writing to
the extension of the engagement (at its own cost) of FTI
Consulting/Xxxxxxxx & Xxxxx (the "Financial Consultant") and
Nightingale & Associates (the "Management Advisor"), each in
accordance with Section 5(a) herein;
(e) the Borrower shall have delivered to the Agent
such other documents as the Agent shall have reasonably requested;
(f) there shall be no pending or, to the knowledge
of the Borrower after due inquiry, threatened litigation,
proceeding, inquiry or other action (i) seeking an injunction or
other restraining order, damages or other relief with respect to
the transactions contemplated by this Agreement and the other
documents and agreements executed or delivered in connection
herewith or (ii) which affects or could reasonably be expected to
affect the business, prospects, operations, assets, liabilities or
condition (financial or otherwise) of the Borrower or any of its
Subsidiaries, except, in the case of clause (ii), where such
litigation, proceeding, inquiry or other action could not
reasonably be expected to cause a Material Adverse Effect;
(g) no Default or Event of Default shall have
occurred and be continuing on the Effective Date (after giving
effect to this Agreement); and
(h) the Agent shall have received certificates of
incumbency, dated as of a recent date, for each of the Borrower
and Hollywood Management, in form and substance acceptable to the
Agent.
SECTION 4. Representations and Warranties. The
Borrower hereby represents and warrants to the Agent and to the
Lenders as follows:
(a) The Recitals in this Agreement are true and
correct in all respects.
(b) All representations and warranties of the
Borrower in the Credit Agreement and of each of the Borrower and
its Subsidiaries in the other Loan Documents to which it is a
party are incorporated herein in full by this reference and are
true and correct in all material respects as of the date hereof
(after giving effect to this Agreement and the supplement to the
Borrower Disclosure Letter delivered to the Agent in connection
with the execution and delivery of this Agreement).
(c) After giving effect to this Agreement, no
Default or Event of Default has occurred or is continuing.
(d) Each of the Borrower and its Subsidiaries has
the power, and has been duly authorized by all requisite action,
to execute and deliver this Agreement and the other documents and
agreements executed and delivered in connection herewith to which
it is a party. This Agreement has been duly executed by the
Borrower and Hollywood Management and the other documents and
agreements executed and delivered in connection herewith to which
the Borrower or Hollywood Management is a party have been duly
executed and delivered by each of the Borrower and Hollywood
Management.
(e) Neither the articles of incorporation nor the
bylaws of the Borrower or Hollywood Management have been amended,
supplemented or otherwise modified since August 4, 2000.
(f) This Agreement is the legal, valid and binding
obligation of the Borrower and Hollywood Management and the other
documents and agreements executed or delivered in connection
herewith to which the Borrower or Hollywood Management is a party
are the legal, valid and binding obligations of the Borrower and
Hollywood Management, in each case enforceable against each of the
Borrower and Hollywood Management in accordance with their
respective terms, except as such enforceability may be limited by
any applicable bankruptcy, insolvency, reorganization, moratorium,
or similar law affecting creditors' rights generally.
(g) The execution, delivery and performance of
this Agreement and the other documents and agreements executed and
delivered in connection herewith does not and will not (i) violate
any law, rule, regulation or court order to which any of the
Borrower or Hollywood Management is subject; (ii) conflict with or
result in a breach of the articles of incorporation or bylaws of
each of the Borrower and Hollywood Management or any agreement or
instrument to which it is party or by which the properties of the
Borrower or Hollywood Management are bound; or (iii) result in the
creation or imposition of any Lien, security interest or
encumbrance on any property of the Borrower or Hollywood
Management, whether now owned or hereafter acquired, other than
Liens in favor of the Agent.
(h) No consent or authorization of, filing with or
other act by or in respect of any Governmental Authority or any
other Person is required in connection with the execution,
delivery, performance, validity or enforceability of (i) this
Agreement by the Borrower or Hollywood Management or (ii) the
other documents or agreements executed or delivered in connection
herewith to which either of the Borrower or Hollywood Management
is party, or the consummation of the transactions contemplated
hereby or thereby.
(i) As of the date hereof the aggregate
outstanding principal balance of Revolving Loans is $255,500,000
and Swing Line Borrowings is $0. Interest and fees have accrued
thereon as provided in the Credit Agreement. The obligation of
the Borrower to repay the Loans and the other Obligations,
together with all interest and fees accrued thereon, is absolute
and unconditional, and there exist no rights of setoff or
recoupment, counterclaim or defense of any nature whatsoever to
payment of the Obligations.
(j) As of the date hereof, the Borrower has no
Subsidiaries except for Hollywood Management.
(k) The Borrower has taken all actions necessary
to timely comply with (and has timely complied with) the NASDAQ
Stock Market regulations approved on December 14, 1999 by the
Securities and Exchange Commission in connection with independent
director and audit committee standards and has not availed itself
of the one non-independent director exception.
(l) The compensation committee of the Borrower's
Board of Directors is comprised solely of independent directors.
SECTION 5. Borrower Covenants. In addition to, and not
in limitation of, the terms and conditions of the Credit
Agreement, the Borrower shall, and shall cause each of its
Subsidiaries to:
(a) through and until the date on which the Agent
and the Lenders have fully reviewed (in their own discretion) the
audited financial statements for the fiscal year, ended
December 31, 2001, and thereafter by mutual agreement of the
Borrower and the Agent, continue to cooperate in all respects with
the Financial Consultant and the Management Advisor;
(b) on September 6, 2002 pay in cash to the Agent
for the ratable account of the Lenders a single one-time fee in
the amount of 4% of the principal amount of Loans outstanding at
the close of business (New York time) on September 5, 2002 (such
fee shall be non-refundable and fully earned when paid);
(c) on or prior to the 60th day after the
Effective Date, use its best efforts to cause to be delivered to
the Agent counterparts of an amended and restated blocked account
agreement, in form and substance satisfactory to the Agent, duly
executed by the Borrower and Bank of America, N.A.; and
(d) through and until the Maturity Date, the
Borrower shall reimburse the members of the steering committee
(set forth on Annex II) for all travel and related expenses in
connection with the Loans and the Loan Documents.
SECTION 6. Effect and Construction of Agreement.
(a) Except as expressly provided herein, the
Credit Agreement and the other Loan Documents shall remain in full
force and effect in accordance with their respective terms, and
this Agreement shall not be construed to:
(i) impair the validity, perfection or priority of
any Lien or security interest securing the Obligations;
or
(ii) waive or impair any rights, powers or remedies
of the Agent or any Lender under the Credit Agreement or
any other Loan Document.
(b) This Agreement shall constitute a Loan
Document.
(c) In the event of any inconsistency between the
terms of this Agreement and the Credit Agreement or any of the
other Loan Documents, this Agreement shall govern. The Borrower
and Hollywood Management acknowledge that they have consulted with
counsel and with such other experts and advisors as they have
deemed necessary in connection with the negotiation, execution and
delivery of this Agreement. This Agreement shall be construed
without regard to any presumption or rule requiring that it be
construed against the party causing this Agreement or any part
hereof to be drafted.
SECTION 7. Miscellaneous.
(a) The Borrower agrees to execute (and to cause
Hollywood Management and each of its other Subsidiaries (if any)
to execute) such other and further documents and instruments as
the Agent may reasonably request to implement the provisions of
this Agreement (including, without limitation, any and all
documentation necessary to maintain the Agent's perfected security
interest in all Collateral with respect to Revised Article 9 of
the Uniform Commercial Code).
(b) This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and
their respective successors and assigns as permitted by Section
9.4 of the Credit Agreement. No other person or entity shall be
entitled to claim any right or benefit hereunder, including,
without limitation, the status of a third-party beneficiary of
this Agreement.
(c) This Agreement, together with the Credit
Agreement and the other Loan Documents, constitutes the entire
agreement and understanding among the parties relating to the
subject matter hereof, and supersedes all prior proposals,
negotiations, agreements and understandings relating to such
subject matter. In entering into this Agreement, each of the
Borrower and Hollywood Management acknowledges that it is not
relying on any statement, representation, warranty, covenant or
agreement of any kind made by the Agent, any Lender, or any
employee, agent or professional of the Agent or any Lender, except
for the express written agreements of the Agent and the Lenders
set forth herein.
(d) The provisions of this Agreement are intended
to be severable. If any provision of this Agreement shall be held
invalid or unenforceable in whole or in part in any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to
the extent of such invalidity or enforceability without in any
manner affecting the validity or enforceability of such provision
in any other jurisdiction or the remaining provisions of this
Agreement in any jurisdiction.
(e) This Agreement may be executed in counterparts
and by any party to this Agreement on separate counterparts, all
of which, when so executed, shall be deemed an original, but all
of such counterparts shall constitute one and the same agreement.
Any signature delivered by a party by facsimile transmission shall
be deemed to be, and effective as, an original signature hereto.
(f) Any notices with respect to this Agreement
shall be given in the manner provided for in Section 9.3 of the
Credit Agreement.
(g) All representations, warranties, waivers and
releases of the Borrower contained herein shall survive the
payment in full of the Obligations under the Credit Agreement.
(h) No amendment, modification, rescission, waiver
or release of any provision of this Agreement shall be effective
unless the same shall be in writing and signed by each of the
parties hereto.
(i) By its signature below, Hollywood Management
hereby agrees that the terms of this Agreement shall not affect in
any way its obligations and liabilities under the Hollywood
Management Guaranty, the Hollywood Management Security Agreement
and any other Loan Document to which it is a party, all of which
obligations and liabilities shall remain in full force and effect
and each of which is hereby reaffirmed.
SECTION 8. Release. The Borrower, Hollywood Management
and each of the Borrower's other Subsidiaries on behalf of each of
them and for each of their direct and indirect affiliates, parent
corporations, subsidiaries, subdivisions, successors,
predecessors, shareholders, and assigns, and their present and
former officers, directors, legal representatives, employees,
agents, and attorneys, and their heirs, executors, administrators,
trustee, successors and assigns (collectively, the "Releasors"),
hereby release and forever discharge (this "Release") each Lender
and the Agent and each of their respective direct and indirect
affiliates, parent corporations, subsidiaries, subdivisions,
successors, predecessors, shareholders, and assigns, and their
present and former officers, directors, legal representatives,
employees, agents, and attorneys, and their heirs, executors,
administrators, trustees, successors and assigns (collectively,
the "Releasees") of and from any and all claims, liabilities,
demands, rights, obligations, damages, expenses, attorneys' fees
and causes of action whatsoever from the beginning of the world to
the date hereof, whether individual, class or derivative in
nature, whether at law or in equity, whether based on federal,
state or foreign law or right of action, foreseen or unforeseen,
mature or unmatured, known or unknown, accrued or not accrued,
which Releasors have or had against the Releasees, arising out of
or relating to this Agreement or any other Loan Document (the
"Released Claims"), and covenant not to institute, maintain, or
prosecute any action, claim, suit, proceeding or cause of action
of any kind to enforce any of the Released Claims. In any
litigation arising from or related to an alleged breach of this
Release, this Release may be pleaded as a defense, counterclaim or
crossclaim, and shall be admissible into evidence without any
foundation testimony whatsoever. The Releasors expressly covenant
and agree that this Release shall be binding in all respects upon
their respective successors, heirs, assigns and transferees, and
shall inure to the benefit of the heirs, successors and assigns of
Releasees. Notwithstanding the foregoing, (x) the Agent and the
Lenders hereby expressly reserve any rights they have or may have,
collectively and individually, in connection with the Wattles Loan
and (y) the Borrower hereby reserves its rights to assert any
defense it may have with respect to the Wattles Loan in a
proceeding brought against the Borrower by the Agent or any
Lender, provided that the Borrower may not assert any such defense
or defenses with respect to any of the Obligations.
The Borrower, Hollywood Management and each of the
Borrower's other Subsidiaries acknowledge and agree that they
understand the meaning and effect of Section 1542 of the
California Civil Code which provides:
"A general release does not extend to claims
which the creditor does not know or suspect to
exist in his favor at the time of executing
the release, which if known by him must have
materially affected his settlement with the
debtor."
The Borrower, Hollywood Management and each of the
Borrower's other Subsidiaries agree to assume the risk of any and
all unknown, unanticipated or misunderstood defenses, claims,
contracts, liabilities, indebtedness and obligations which are
released, waived and discharged by this Agreement. The Borrower,
Hollywood Management and each of the Borrower's other Subsidiaries
hereby waive and relinquish all rights and benefits which they
might otherwise have under the aforementioned Section 1542 of the
California Civil Code or any similar law, to the extent such law
may be applicable, with regard to the release of such unknown,
unanticipated or misunderstood defenses, claims, contracts,
liabilities, indebtedness and obligations. To the extent that
such laws may be applicable, the Borrower, Hollywood Management
and each of the Borrower's other Subsidiaries waive and release
any right or defense which they might otherwise have under any
other law of any applicable jurisdiction which might limit or
restrict the effectiveness or scope of any of their waivers or
releases hereunder.
SECTION 9. GOVERNING LAW; JURISDICTION; WAIVER OF JURY
TRIAL. The governing law, jurisdictional, venue, service of
process and jury trial waiver provisions set forth in Sections
9.2, 9.13 and 9.16 of the Credit Agreement shall apply to any
suit, action or proceeding related to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first above written.
BORROWER:
HOLLYWOOD ENTERTAINMENT
CORPORATION
By:
Name:
Title:
ACKNOWLEDGED AND AGREED:
HOLLYWOOD MANAGEMENT COMPANY
By:
Name:
Title:
LENDERS:
SOCIETE GENERALE NEW YORK OFFICE,
as Agent and as a Lender
By:
Name:
Title:
CREDIT LYONNAIS LOS ANGELES
BRANCH, as a Co-Agent and a Lender
By:
Name:
Title:
DEUTSCHE BANK AG, NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH,
as a Co-Agent and a Lender
By:
Name:
Title:
By:
Name:
Title:
KEYBANK NATIONAL ASSOCIATION,
as a Co-Agent and a Lender
By:
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION
By:
Name:
Title:
SUMITOMO MITSUI BANKING
CORPORATION (formerly known as
The Sumitomo Bank, Limited)
By:
Name:
Title:
By:
Name:
Title:
UNION BANK OF CALIFORNIA, N.A.
By:
Name:
Title:
XXX XXXXXX PRIME RATE INCOME TRUST
By: Xxx Xxxxxx Investment
Advisory Corp.
By:
Name:
Title:
XXX XXXXXX SENIOR INCOME FUND
By: Xxx Xxxxxx Investment
Advisory Corp.
By:
Name:
Title:
THE BANK OF NOVA SCOTIA
By:
Name:
Title:
THE FUJI BANK, LIMITED
By:
Name:
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By:
Name:
Title:
SUNTRUST BANK
By:
Name:
Title:
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By:
Name:
Title:
CITY NATIONAL BANK
By:
Name:
Title:
GENERAL ELECTRIC CAPITAL
CORPORATION
By:
Name:
Title:
ARK CLO 2000-1, LIMITED
By: Patriarch Partners, LLC, as
Collateral Manager to ARK CLO
2000-1, Limited
By:
Name:
Title: Authorized Signatory
XXXXX FARGO BANK
By:
Name:
Title:
BANK OF AMERICA, N.A.
By:
Name:
Title:
Annex I
2.1.1 Lender Allocations
LENDERS
Bank/Institution Amount %
-------------------------------- ------------- ------
Societe Generale (steering
committee) 11,071,666.67 4.33%
Credit Lyonnais (steering
committee) 16,181,666.67 6.33%
Deutsche Bank 16,181,666.67 6.33%
KeyBank N.A.(steering committee) 26,401,666.67 10.33%
U.S. Bank (steering committee) 23,846,666.67 9.33%
VKM - (steering committee)
Prime Rate Income Trust 14,478,333.33 5.67%
VKM - Senior Income Trust 9,338,450.29 3.65%
Sumitomo 7,300,000.00 2.86%
Union Bank of California 16,181,666.67 6.33%
Bank of Nova Scotia 12,775,000.00 5.00%
Transamerica 17,033,333.33 6.67%
GE Capital 8,516,666.67 3.33%
Fuji Bank 10,220,000.00 4.00%
Mitsubishi Trust 10,220,000.00 4.00%
Sun Trust 13,626,666.67 5.33%
City National Bank 8,516,666.67 3.33%
Ark CLO-2000-1 (Patriarch
Partners) 16,181,666.67 6.33%
Bank of America 12,561,549.71 4.92%
Xxxxx Fargo 4,866,666.67 1.905%
TOTAL $255,500,000 100.0%
Annex II
Steering Committee Members
SOCIETE GENERALE
CREDIT LYONNAIS
XXX XXXXXX
U.S. BANK
KEYBANK
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