EXHIBIT 10.26
SECOND AMENDMENT AND WAIVER
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FIRST AMENDMENT TO WARRANT AGREEMENT (this "Amendment"), dated as of
August 12, 1998, among VIDEO UPDATE, INC., a Delaware corporation (the
"Borrower"), the lending institutions party to the Credit Agreement referred to
below the "Banks") and BANQUE PARIBAS, as Agent (in such capacity, the "Agent").
Unless otherwise indicated, all capitalized terms used herein and not otherwise
defined shall have the respective meanings provided such terms in the Credit
Agreement referred to below.
W I T N E S S E T H:
WHEREAS, the Borrower, the Banks and the Agent are parties to a Credit
Agreement, dated as of March 6, 1998 (as amended modified or supplemented to the
date hereof, the "Credit Agreement"); and
WHEREAS, subject to and on the terms and condition set forth in this
Amendment, the parties hereto wish to amend the Credit Agreement as herein
provided and the Banks desire to grant the waivers described below;
NOW, THEREFORE, it is agreed:
I. Amendments and Waivers to Credit Agreement.
1. Section 7.08(c) of the Credit Agreement is amended by (i) deleting
the word "and" appearing immediately after the text "information systems"
contained in the proviso to said Section and inserting a comma in lieu thereof
and (ii) inserting the text "and (v) make additional expenditures in connection
with the operation of existing stores of the Borrower and its Subsidiaries (but
for purposes of this clause (v), excluding, in any event, expenditures
constituting, or made in connection with, Permitted Transactions).
2. Section 8.01(a) of the Credit Agreement is hereby amended by (i)
inserting the text "(x)" immediately prior to the test "the consolidated and
consolidating statements" appearing in said Section and (ii) deleting the text
"and a detailed schedule" appearing in said Section and inserting the test
"(y) a statement setting forth the Consolidated EBITDA and Consolidated Free
Cash Flow for such month and (z) a detailed schedule" in lieu thereof.
3. Section 8 of the Credit Agreement is hereby further amended by
inserting the text "inserting the following new Section 8.20 at the end of said
Section:
"8.20 Special Covenants relating to the Second
Amendment (a) On or prior to the earlier to occur of (i)
August 12, 1999 and (ii) the date of the termination of the
Total Commitment, the Borrower shall pay to the Agent for the
per rata distribution to each of the Banks which has consented
to the Second Amendment prior to the close of business on
August 12, 1998 (based upon the aggregate Commitments and
outstanding Term Loans of each such Bank on August 12, 1998),
a consent fee equal to 1/2 to 1% on the sum of (x) the
aggregate
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Commitments of such Bank as in effect on such date plus (y)
the aggregate principal amount of all outstanding Term Loans
of such Bank on such date.
(b) On or prior to November 12, 1998, the Borrower
shall have delivered to the Agent and the Banks a Plan of
Action for obtaining additional sources of capital, which Plan
of Action shall be in form and substance satisfactory to the
Agent and the Banks.
(c) Within 7 days after the end of each fiscal month
ending on or prior to January 31, 1999, the Borrower shall
have delivered to the Agent and the Banks a statement of the
Consolidated Revenue for such month, together with a
certificate of the chief financial officer or controller of
the Borrower certifying as to compliance of the Borrower with
the provisions of Section 9.20"
4. Each of Sections 9.09, 9.13 and 9.14 of the Credit Agreement are
hereby amended by (i) deleting the date "May 1, 1998" appearing in the
parenthetical in each such Section and inserting the date "August 1, 1998" in
lieu thereof and (ii) deleting the date "July 31, 1998" appearing in the
parenthetical in each such Section and inserting the date "October 31, 1998" in
lieu thereof.
5. Section 9.11 of the Credit Agreement is hereby amended by (i)
deleting the date "May 1, 1998" appearing in the parenthetical in said Section
and inserting the date "August 1, 1998" in lieu thereof, (ii) deleting the date
"July 31, 1998" appearing in the parenthetical in each such Section and
inserting the date "October 31, 1998" in lieu thereof and (iii) deleting the
ratios "4.00:1.0", "3.50:1.0" and 3.25:1.0" appearing in the table in said
Section opposite the fiscal quarters ended October 31, 1998, January 31, 1999
and April 31, 1999, respectively, and inserting the ratios "5.10:1.0",
"4.80:1.0" and "4.50:1.0", respectively, in lieu thereof.
6. The Banks hereby waive compliance by the Borrower with the financial
covenants contained in Sections 9.09, 9.10, 9.11, 9.12, 9.13 and 9.14 of the
Credit Agreement for (and only for) the fiscal quarter of the Borrower ending
July 31, 1998.
7. Section 9.12 of the Credit Agreement is hereby amended by (x)
deleting the amount "$110,000,000" appearing in clause (ii) of said Section and
inserting the amount "$94,000,000" in lieu thereof and (y) inserting the
following text at the end of said Section:
"less the amount of any one-time charge taken by the
Borrower as a result of any acceleration of
videocassette tape amortization required in
connection with the implementation of a revenue
sharing arrangement with its videocassette tape
suppliers."
8. Section 9.13 of the Credit Agreement is hereby amended by deleting
the amounts "86,750", "$124.750" and "$130,125" appearing in the table in said
Section and inserting the amount $26,500", "$56,100" and $86,750", respectively,
in lieu thereof.
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9. Section 9.14 of the Credit Agreement is hereby amended by deleting
the amounts "29,050", "$45,800" and "$49,150" appearing in the table in said
Section and inserting the amounts "$7,500", "$18,325" and "$29,050",
respectively, in lieu thereof.
10. Section 9 of the Credit Agreement is hereby amended by inserting
the following new Section 9.20 at the end of said Section.
"9.20 Consolidated Revenue. The Borrower will not permit its
Consolidated Revenue for any monthly period, in each case
taken as one accounting period, ending on a date set forth
below to be less than the amount set forth opposite such date
below:
FISCAL MONTH ENDED AMOUNT
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August 31, 1998 $21,600,000
September 30, 1998 $19,100,000
October 31, 1998 $20,100,000
November 31, 1998 $21,100,000
December 31, 1998 $24,300,000
January 31, 1999 $24,500,000
11. Section 10.03 of the Credit Agreement is hereby amended by
inserting the text ", 8.20" immediately after the text "8.18" appearing in said
Section.
12. The definition of "Applicable Margin" appearing in Section 11 of
the Credit Agreement is hereby amended by inserting the following text
immediately following the text "equal to" appearing in said definition:
"(I) at any time prior to the Initial Compliance Date, (i) in the case
of Revolving Loans, Capital Expenditure Loans and A Term Loans
maintained as (x) Eurodollar Loans, 4.00% and (y) Base Rate Loans,
3.00%, (ii) in the case of B Term Loans maintained as (x) Eurodollar
Loans, 4.25% and (y) Base Rate Loans, 3.25% and (iii) in the case of
Swingline Loans, 3.00% and (II) thereafter,"
13. The definition of "Fees" appearing in Section 11 of the Credit
Agreement is hereby amended by deleting the text "Section 3.01" and inserting
the text "Sections 3.01 and 8.20(a)" in lieu thereof.
14. The definition of "Pro Forma Basis" appearing in Section 11 of the
Credit Agreement is hereby amended by (i) deleting each reference to "February
1, 1998" appearing in clause (iii) of said definition and inserting the date
"August 1, 1998" in lieu thereof, (ii) deleting
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clause (iii) of said definition and inserting the date "August 1, 1998" in lieu
thereof, (ii) deleting the parenthetical "(or, in the case of any determination
of compliance with Section 9.11, November 1, 1997)" in each place said
parenthetical appears in said definition and (iii) deleting the text "(or,
November 1, 1997, as the case may be)" appearing in said definition in its
entirety.
15. Section 11 of the Credit Agreement is hereby further amended by
inserting the following definitions in said Section in appropriate alphabetical
order:
"Consolidated Revenue" shall mean, for any period,
the total rental revenue and product sale revenue of the
Borrower and its Subsidiaries for such period, determined on a
consolidated basis.
"Second Amendment" shall mean the Second Amendment to
this Agreement, dated as of August 7, 1998.
II. Miscellaneous.
1. In order to induce the Banks to enter into this Amendment, the
Borrower hereby (i) makes each of the representations, warranties and agreements
contained in Section 7 of the Credit Agreement and (ii) represents and warrants
that there exists no Default or Event of Default, in each case on the Second
Amendment Effective Date (as defined below), both before and after giving effect
to this Amendment.
2. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
3. This Amendment may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged wit the Borrower and the Agent.
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
5. This Amendment shall become effective on the date (the "Second
Amendment Effective Date") when (i) the Borrower and the Banks constituting the
Required Banks shall have signed a copy hereof (whether the same or different
copies) and shall have delivered (including by way of facsimile transmission)
the same to White & Case LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxx (facsimile number 212-354-8113), (ii) the Borrower shall
have permanently reduced the Total Unutilized Revolving Loan Commitment by an
amount equal to $5,000,000 in accordance with the terms of Section 3.02 (a) of
the Credit Agreement, (iii) the Agent and the Banks shall have received the
opinion of Ernst & Young LLP required to be delivered pursuant to Section
8.01(c) f the Credit Agreement in respect of the fiscal year ended April 30,
1998, which opinion shall be in form and substance
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satisfactory to the Agent and (iv) each of the Banks which has executed and
delivered a copy hereof in accordance with the requirements of clause (i) of
this Section 5 prior to 3:00PM on August 12, 1998, shall have received a consent
fee equal to $75,000.
6. From and after the Second Amendment Effective Date, all references
to the Credit Amendment in the Credit Amendment and the other Credit Documents
shall be deemed to be references to the Credit Agreement as modified hereby.
* * *
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IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Agreement to be duly executed and delivered as of the date first above
written.
VIDEO UPDATE, INC.
By: ________________________________
Name:
Title:
BANQUE PARIBAS,
Individually and as Agent
By: ________________________________
Name:
Title:
CAROLINA FIRST BANK
By: ________________________________
Name:
Title:
CREDITANSTALT-BANKVEREIN
By: ________________________________
Name:
Title:
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FIRST SOURCE FINANCIAL LLP
By: ________________________________
Name:
Title:
FLEET NATIONAL BANK OF
MASSACHUSETTS
By: ________________________________
Name:
Title:
XXXXXXX XXXXX SENIOR FLOATING
RATE FUND LLC
By: ________________________________
Name:
Title:
PPM AMERICA, INC. as agent, on
behalf of Xxxxxxx National Life
Insurance Company
By: ________________________________
Name:
Title:
BOEING CAPITAL CORPORATION
By: ________________________________
Name:
Title:
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KEY CORPORATE CAPITAL INC.
By: ________________________________
Name:
Title:
PARIBAS CAPITAL FUNDING LLC
By: ________________________________
Name:
Title:
THE BANK OF NOVA SCOTIA
By: ________________________________
Name:
Title:
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