EXHIBIT 10.7
SECOND MODIFICATION AGREEMENT
This SECOND MODIFICATION AGREEMENT entered into as of March 31, 1999,
between Video City, Inc., a Delaware corporation with its principal executive
offices at 000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx, 00000, (as a
"Borrower" and "Agent Borrower") and its wholly owned subsidiaries listed as "a
Borrower" below ("Subsidiaries", and together with Video City, Inc., the
"Borrowers") and BankBoston Retail Finance Inc., a Delaware corporation with an
address of 00 Xxxxx Xxxxxx, Xxxxxx 00000 (the "Lender").
WHEREAS, the Lender established a revolving line of credit pursuant to a
certain Loan and Security Agreement by and between the Lender and the Borrowers
dated as of December 29, 1998, as amended by that certain Modification Agreement
dated as of January 8, 1999 (the "Loan Agreement") whereby Lender agreed to lend
to Borrowers upon Borrowers' request, but subject to the terms and conditions
set forth in the Loan Agreement, up to Thirty Million Dollars and Zero Cents
($30,000,000).
WHEREAS, the Borrowers intend to acquire 100% of the issued and outstanding
stock of Video Galaxy, Inc., a Delaware corporation ("Video Galaxy"), pursuant
to an Agreement of Merger and Plan of Reorganization by and among Video City,
Inc., Video Galaxy, Inc. and Xxxxx X. Xxxxxx, Xxxxxx X. Xxxxxx and Xxxx Xxxxxxxx
dated as of March 30, 1999 (the "Galaxy Purchase Agreement").
WHEREAS, the Loan Agreement prohibits the Borrowers from consummating the
transactions contemplated by the Galaxy Purchase Agreement absent the consent of
the Lender.
WHEREAS, the Borrowers have requested that the Lender consent to the
consummation the transactions contemplated by the Galaxy Purchase Agreement by
the Borrowers.
WHEREAS, the Lender is willing to consent to the consummation of the
transactions contemplated by the Galaxy Purchase Agreement on the terms and
conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Lender and the Borrowers
mutually agree as follows:
1. Definitions. All capitalized terms used herein shall have the same
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meaning as set forth in the Loan Agreement, unless otherwise defined herein.
2. Effective Date. This Modification Agreement shall be effective upon
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receipt by the Lender of each of the following documents in a form acceptable to
Lender in its sole discretion: (i) an original executed copy of this Agreement
signed by the Borrowers and Lender; (ii) evidence that the transactions
contemplated by the Galaxy Purchase Agreement, including the funding of at least
$1,700,000 of the cash purchase price by Xxxxxx Entertainment, Inc., have closed
and been fully consummated; (iii) an Amended and Restated Revolving Credit Note
in the form attached hereto as Exhibit 1; (iv) an agreement executed by Xxxxxx
Entertainment, Inc., modifying its Subordination Agreement dated as of December
28, 1998 to
increase the minimum availability requirement in Section 4 thereof to
$3,000,000; and (v) such other documents as it may require in its sole
discretion.
3. Modifications to Loan Agreement.
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(a) Schedule 1 to the Loan Agreement shall be deleted and
Schedule 1 attached hereto shall be substituted therefor.
(b) The words "Video Galaxy, Inc." shall be added to the list of
Related Entities attached as Exhibit 4-2 to the Loan
Agreement.
(c) The words "Video Galaxy, Inc. - Video Galaxy" shall be added
to the list of Trade Names attached as Exhibit 4-3 to the
Loan Agreement.
(d) Exhibit 4-5(i) attached hereto, scheduling the new locations
to be acquired by the Borrowers, shall be incorporated by
reference into Exhibit 4-5 to the Loan Agreement.
(e) The following shall be added to the schedule of Indebtedness
attached as Exhibit 4-7 to the Loan Agreement: "Xxxxxx
Entertainment Inc. (Video Galaxy, Inc.) $1,700,000"
(f) The figure "$1,250,000" shall be substituted for the figure
"$500,000" in the "Excess Availability" provision of Exhibit
5-12(a) Financial Performance Covenants.
(g) The Video City Deposit Accounts listed on the attached Annex
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G shall be added to the list of deposit accounts set forth
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on Exhibit 7-1 to the Loan Agreement.
(h) The Credit Card Numbers listed on the attached Annex H shall
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be added to the list of credit card accounts set forth on
Exhibit 7-2 to the Loan Agreement.
4. Modification to Agented Borrowing Agreement.
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(a) Schedule 1 of the Agented Borrowing Agreement shall be
deleted and Schedule 1 attached hereto shall be substituted
therefor.
5. Representations and Warranties. In addition to all other
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representations, warranties, and covenants made by the Borrowers in the
Loan Agreement, the Borrowers hereby represent and warrant to the
Lender as follows:
(a) Acquisition.
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(i) The Galaxy Purchase Agreement has been duly authorized,
executed and delivered by each of the parties thereto
and constitutes a complete legal, valid and binding
obligation of each of the parties thereto, in
accordance with its terms.
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(ii) All necessary governmental and third party consents,
approvals, releases and filings required to be obtained
to effect the transactions contemplated by the Galaxy
Purchase Agreement have been obtained and are in full
force and effect.
(iii) The closing pursuant to the Galaxy Purchase Agreement,
including the funding of at least $1,700,000 of the
cash purchase price by Xxxxxx Entertainment, Inc., has
occurred, or will occur simultaneously with the
execution of this Modification Agreement and Video
City, Inc. has acquired all of the right, title, and
interest in and to all of the capital stock of Video
Galaxy in accordance with the terms of the Galaxy
Purchase Agreement.
(iv) All representations and warranties of the parties to
the Galaxy Purchase Agreement are, to the best of the
Borrowers' knowledge, including the schedules and
exhibits thereto, were, at the time of the closing,
true and correct in all material respects.
(v) The Borrowers have delivered to the Lender a true,
correct and complete copy of the Galaxy Purchase
Agreement, including all exhibits and schedules
thereto.
(b) Unrelated Entities. The Borrowers hereby represent and
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warrant that the following entities are not and have never
been a Related Entity of any of the Borrowers: Macat
Enterprises, Inc. And Franklin Design, and the Collateral is
not subject to any liens by the Town of Rocky Hill or the
Town of Plainsfield, Connecticut.
(c) Representations and Warranties: No Event of Default. The
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representations and warranties herein, in the Loan Agreement
and in each other Loan Document and certificate or other
writing delivered to the Lender pursuant to the Loan
Agreement on or prior to the Effective Date of this
Modification Agreement shall be correct and accurate as to
each Borrower on and as of the Effective Date of this
Modification Agreement as though made on and as of such
date; and no Default or Event of Default shall have occurred
and be continuing as of the Effective Date of this Agreement
or would result from this Agreement becoming effective in
accordance with its terms.
(d) Organization, Good Standing, Etc. Each Borrower (i) is a
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corporation, duly organized, validly existing and in good
standing under the laws of its state of organization, (ii)
has all requisite power and authority to execute, deliver
and perform this Agreement, and to perform the Loan
Agreement, as amended hereby, and (iii) is duly qualified to
do business and is in good standing in each jurisdiction in
which the character of the properties owned or leased by it
or in which the transaction of its business makes such
qualification necessary.
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(e) Authorization, Etc. The execution, delivery and performance
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by the Borrowers of this Agreement, and the performance by
the Borrowers of the Loan Agreement, as amended hereby, (i)
have been duly authorized by all necessary action, (ii) do
not and will not contravene the Borrowers' charter or by-
laws, any applicable law or any contractual restriction
binding on or otherwise affecting it or any of its
properties, (iii) do not and will not result in or require
the creation of any lien or other encumbrance (other than
pursuant to any Loan Documents) upon or with respect to any
of its properties, and (iv) do not and will not result in
any suspension, revocation, impairment, forfeiture or
nonrenewal of any permit, license, authorization or approval
applicable to its operations or any of its properties.
(f) Governmental Approvals. No authorization or approval of
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other action by, and no notice to or filing with, any
governmental authority or agency or other regulatory body is
required in connection with the due execution, delivery and
performance by the Borrowers of this Agreement, or for the
performance of the Loan Agreement, as amended hereby.
(g) Enforceability of Loan Documents. This Agreement, the Loan
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Agreement, as amended hereby, and each other Loan Document
to which each Borrower is a party is a legal, valid and
binding obligation of such Borrower, enforceable against
such Borrower in accordance with its terms, except as such
enforceability may be limited by or subject to any
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally.
6. Miscellaneous.
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(a) Continued Effectiveness of the Loan Documents. Except as
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otherwise expressly provided herein, the Loan Agreement and
the other Loan Documents are, and shall continue to be, in
full force and effect and are hereby ratified and confirmed
in all respects, except that on and after the date hereof
(i) all references in the Loan Agreement to "this
Agreement", "hereto", "hereof", "hereunder" or words of like
import referring to the Loan Agreement shall mean the Loan
Agreement as amended by this Agreement and (ii) all
references in the other Loan Documents to the "Loan
Agreement", "thereto", "thereof", "thereunder" or words of
like import referring to the Loan Agreement shall mean the
Loan Agreement as amended by this Agreement. Except as
expressly provided herein, the execution, delivery and
effectiveness of this Agreement shall not operate as an
amendment of any right, power or remedy of the Lenders under
the Loan Agreement or any other Loan Document, nor
constitute an amendment of any provision of the Loan
Agreement or any other Loan Documents.
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(b) Counterparts. This Agreement may be executed in any number
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of counterparts and by different parties hereto in separate
counterparts (including, without limitation, by telecopy),
each of which shall be deemed to be an original, but all of
which taken together shall constitute one and the same
agreement.
(c) Headings. Section headings herein are included for
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convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
(d) Governing Law. This Agreement shall be governed by, and
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construed in accordance with, the law of the Commonwealth of
Massachusetts.
(e) Costs and Expenses. The Borrowers agree to pay on demand
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all fees, costs and expenses of the Lender (including,
without limitation, the reasonable fees, costs and other
client charges of legal counsel to the Lender) in connection
with the preparation, execution and delivery of this
Agreement and the other related agreements, instruments and
documents.
(f) Modification Agreement as Loan Document. The Borrowers
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hereby acknowledge and agree that this Agreement constitutes
a "Loan Document" under the Loan Agreement. Accordingly, it
shall be an Event of Default under the Loan Agreement if
(i) any representation or warranty made by the Borrowers
under or in connection with this Agreement shall have been
untrue, false or misleading in any material respect when
made, or (ii) the Borrowers shall fail to perform or observe
any term, covenant or agreement contained in this Agreement.
(g) Waiver of Jury Trial. EACH BORROWER AND THE LENDER EACH
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HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE ACTIONS OF THE LENDER IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
HEREOF.
INTENTIONALLY LEFT BLANK
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Executed under seal as of the date written above.
Video City, Inc. ("Borrower" and "Agent Old Republic Entertainment, Inc.
Borrower") ("Borrower")
/s/ Xxxxxxx X. Xxxxxx /s/ Xxxxxxx X. Xxxxxx
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By: Xxxxxxx X. Xxxxxx By: Xxxxxxx X. Xxxxxx
Title: Chief Financial Officer Title: Chief Financial Officer
Xxxxxxxx One, Inc. ("Borrower") Video Tyme, Inc. ("Borrower")
/s/ Xxxxxxx X. Xxxxxx /s/ Xxxxxxx X. Xxxxxx
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By: Xxxxxxx X. Xxxxxx By: Xxxxxxx X. Xxxxxx
Title: Chief Financial Officer Title: Chief Financial Officer
Videoland, Inc. ("Borrower") Video Galaxy, Inc. ("Borrower")
/s/ Xxxxxxx X. Xxxxxx /s/ Xxxxxxx X. Xxxxxx
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By: Xxxxxxx X. Xxxxxx By: Xxxxxxx X. Xxxxxx
Title: Chief Financial Officer Title: Chief Financial Officer
BANKBOSTON RETAIL FINANCE INC.
("Lender")
/s/ Xxxxxx XxXxxxxxx
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By: Xxxxxx XxXxxxxxx
Title: Senior Vice President
Signature Page to Second Modification Agreement
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