SECOND AMENDMENT
THIS SECOND AMENDMENT, dated as of March 15, 2006 (this "Amendment"),
is among MOVIE GALLERY, INC. (the "U.S. Borrower"), MOVIE GALLERY CANADA,
INC. (the "Canadian Borrower" and, together with the U.S. Borrower, the
"Borrowers"), WACHOVIA BANK, NATIONAL ASSOCIATION, as an issuing bank (the
"U.S. Issuing Bank") and an administrative agent (the "U.S. Administrative
Agent"), and WACHOVIA CAPITAL FINANCE CORPORATION (CANADA) (formerly known as
Congress Financial Corporation (Canada)), as an issuing lender (the "Canadian
Issuing Bank") and an administrative agent (the "Canadian Administrative
Agent" and, together with the U.S. Administrative Agent, the "Administrative
Agents").
W I T N E S S E T H:
WHEREAS, the Borrowers have entered into that certain Credit
Agreement, dated as of April 27, 2005 (as amended, supplemented, amended
and restated or otherwise modified from time to time prior to the Second
Amendment Effective Date (as defined below), the "Existing Credit
Agreement") with the lenders party thereto from time to time
(the "Lenders"), the other agents party thereto from time to time, and
the Administrative Agents;
WHEREAS, the U.S. Borrower has requested that the Lenders agree to
amend certain provisions in the Existing Credit Agreement; and
WHEREAS, the Majority Lenders have consented to the amendments
requested by the Borrowers and have authorized the Administrative Agents to
enter into this Amendment to amend the Existing Credit Agreement as set forth
below (the Existing Credit Agreement, as amended by this Amendment, being
referred to as the "Credit Agreement") subject to the terms and conditions
set forth herein;
NOW, THEREFORE, in consideration of the agreements herein contained,
and for other valuable consideration the receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
PART I
DEFINITIONS
SUBPART 1.1. Definitions. Terms for which meanings are provided in
the Existing Credit Agreement are, unless otherwise defined herein or the
context otherwise requires, used in this Amendment with such meanings.
PART II
AMENDMENTS TO THE
EXISTING CREDIT AGREEMENT
SUBPART 2.1. Amendments. Subject to the terms of Part III,
effective on the Second Amendment Effective Date the Existing Credit
Agreement is hereby amended as set forth in this Part II.
SUBPART 2.1.1. Section 1.1 of the Existing Credit Agreement
is hereby amended as follows:
(i) by inserting the following definitions in such Section in the
appropriate alphabetical order:
"Available Cash" shall mean, at any time, funds that are
immediately accessible for use by the Borrowers and their
Subsidiaries.
"Non-Core Assets" shall mean assets of the Borrowers and
their Subsidiaries which are not essential or material to the
conduct of the businesses of the Borrowers and their
Subsidiaries, including without limitation, (i) the corporate
aircraft of the Borrowers and their Subsidiaries, (ii) assets
comprising the "Reel.com" business, (iii) assets comprising the
"Rack Division", (iv) assets comprising the iBlast division, (v)
the assets and/or Equity Interests of MG Automation, Inc., and
(vi) owned real estate of the Borrowers and their Subsidiaries.
"PIK Interest" as defined in Section 2.3(h).
"Revolver PIK Loan" as defined in Section 2.16(d).
"Second Amendment" means the Second Amendment to this
Agreement, dated as of March 15, 2006, among the Borrowers and
the Administrative Agents and effective as of the Second
Amendment Effective Date.
"Second Amendment Effective Date" is defined in Subpart 3.1
of the Second Amendment.
"Term PIK Loan" as defined in Section 2.16(b).
(ii) by deleting the definition of "Permitted Acquisition" in its
entirety.
(iii) by deleing the definition of "Permitted Acquisition
Indebtedness" in its entirety.
(iv) by amending the definition of "Seller Notes" in its entirety to
read as follows:
"Seller Notes" means any unsecured notes issued by either
Borrower or any of its Subsidiaries to the seller (or any
Affiliate thereof) in connection the Boards Transaction, which
Indebtedness is subject to pricing, amortization, maturity and
other non-pricing terms reasonably acceptable to the U.S.
Administrative Agent.
SUBPART 2.1.2. Section 2.3 of the Existing Credit Agreement
is hereby amended as follows:
(i) by amending subsection (g) in its entirety to read as follows:
(g) Applicable Margin; Applicable Canadian BA Stamping Fee.
(i) Subject to the remainder of this clause (i), with respect to
(A) any Advance under the Revolving Commitments and Term A Loans, the
Applicable Margin shall be as of any calculation date the interest rate
margin set forth below under the heading "Base Rate Advance Applicable
Margin" or "Eurodollar Advance Applicable Margin", as applicable,
determined by the U.S. Administrative Agent and (B) any Canadian BA,
the Applicable Stamping Fee shall be as of any calculation date the
interest rate margin set forth below under the heading "Applicable
Canadian BA Stamping Fee" determined by the Canadian Administrative
Agent, in each case based upon the Leverage Ratio determined for the
most recent Fiscal Quarter end, to be adjusted from time to time
effective as of the second Business Day after the Performance
Certificate referred to in Section 6.3 hereof is required to be
furnished by the U.S. Borrower to the Administrative Agents and each
Lender for the Fiscal Quarter most recently ended, expressed as a per
annum rate of interest as follows:
Base Rate Eurodollar Applicable
Advance Advance Canadian
Applicable Applicable BA Stamping
Leverage Ratio Margin Margin Fee
-------------------------- ------ ------ ------
Pricing Level 1 Greater than or
equal to 4.0 to 1.00 4.00% 5.00% 5.00%
Pricing Level 2 Greater than or
equal to 3.25 to 1.00,
but less than 4.00 to 1.00 2.50% 3.50% 3.50%
Pricing Level 3 Greater than or
equal to 2.75 to 1.00,
but less than 3.25 to 1.00 1.75% 2.75% 2.75%
Pricing Level 4 Greater than or
equal to 2.25 to 1.00,
but less than 2.75 to 1.00 1.50% 2.50% 2.50%
Pricing Level 5 Greater than or
equal to 1.75 to 1.00,
but less than 2.25 to 1.00 1.25% 2.25% 2.25%
Pricing Level 6 Less than 1.75 to 1.00 1.00% 2.00% 2.00%
In the event that the U.S. Borrower fails to timely provide the
Performance Certificate referred to in Section 6.3 hereof, and without
prejudice to any additional rights under Section 8.2 hereof, Pricing
Level 1 shall apply as of the first day after the date on which such
statements or certificate were required to have been delivered until
the actual delivery of such statements or certificate. Notwithstanding
the foregoing, after March 31, 2006 until and including the delivery of
the Performance Certificate for the first Fiscal Quarter of 2006 in
accordance with Section 6.3, (A) the Applicable Margin for Base Rate
Advances shall be 4.00% and (B) the Applicable Margin for Eurodollar
Advances and the Applicable Canadian BA Stamping Fee shall be 5.00%.
(ii) With respect to the Term B Loans, the Applicable Margin for
Eurodollar Advances shall be 3.75% per annum and the Applicable Margin
for Base Rate Advances shall be 2.75% per annum; provided that after
March 31, 2006 until and including the delivery of the Performance
Certificate for the first Fiscal Quarter of 2006 in accordance with
Section 6.3, the Applicable Margin for Eurodollar Advances shall be
5.25% and the Applicable Margin for Base Rate Advances shall be 4.25%;
provided further that at any time after the Second Amendment Effective
Date that the Leverage Ratio is greater than or equal to 4.00 to 1.00,
the Applicable Margin for Eurodollar Advances shall be 5.25% per annum
and the Applicable Margin for Base Rate Advances shall be 4.25% per
annum.
(ii) by inserting at the end thereof a new subsection (h) as
follows:
(h) PIK Interest. Notwithstanding any of the foregoing in this
Section 2.3, at any time when the Leverage Ratio is greater than or
equal to 4.00 to 1.00, the Borrowers may elect that .50% of the
applicable interest rate in respect of all Advances shall not be
required to be paid in cash at the time required by this Section 2.3,
but may be capitalized in accordance with Section 2.16 (the "PIK
Interest"). Unless the Borrower notifies the Administrative Agent not
less than three Business Days prior to the applicable Payment Date that
the Borrower elects to pay such payment in cash, the Borrower is deemed
to have elected that such interest shall constitute PIK Interest.
SUBPART 2.1.3. Article II of the Existing Credit Agreement is
hereby amended by inserting a new Section 2.16 as set forth
below:
Section 2.16 PIK Loans. (a) Each payment of PIK Interest
payable under this Agreement on and after the Second Amendment
Effective Date shall, on the applicable Payment Date when interest
otherwise would be payable in cash hereunder (i) in the case of PIK
Interest with respect to any Term Loan be deemed to be a additional
Term Loans in accordance with paragraph (b) below and (ii) in the case
of PIK Interest with respect to any Revolving Loan be deemed to be a
Revolver PIK Loan in accordance with paragraph (c) below.
(b) On each applicable Payment Date after the Second Amendment
Effective Date, each Term A Lender and Term B Lender shall be deemed to
have made an additional Term Loan in a principal amount equal to the
PIK Interest payable on the outstanding Term A Loans or Term B Loans,
as applicable. Each such additional Term Loan shall (i) be deemed to
be a Term A Loan or Term B Loan, as applicable, for all purposes under
this Agreement, (ii) initially on such Payment Date be a Base Rate
Advance and, thereafter, may from time to time be Eurodollar Advances
or Base Rate Advances, as determined by the Borrower and notified to
the Administrative Agent in accordance with Section 2.3 and (iii)
accrue interest in accordance with Section 2.3(g).
(c) On each applicable Payment Date after the Second Amendment
Effective Date, each Revolving Lender shall be deemed to have made a
term loan (a "Revolver PIK Loan") in a principal amount equal to the
PIK Interest payable on the outstanding Revolving Loans, Letter of
Credit Loans and Swing Line Loans, as applicable. Each Revolver PIK
Loan shall (a) be deemed to be Revolving Loans, Letter of Credit Loans
and Swing Line Loans, as applicable, for all purposes under this
Agreement; provided, however, that (x) outstanding Revolver PIK Loans
shall not reduce the amount that may be borrowed under the Revolving
Commitments had such Revolver PIK Loans not been outstanding, (y)
amounts repaid in respect of the Revolver PIK Loans shall not be
permitted to be reborrowed, and (y) amounts mandatorily prepaid in
respect of any Revolving Loans or Swing Line Loans under Sections
2.3(a), (b), (c), (d), and (j) shall be applied first to the Revolver
PIK Loans, (ii) initially on such Payment Date, as applicable, be a
Base Rate Advance, and, thereafter, may from time to time be Eurodollar
Advances or Base Rate Advances, as determined by the Borrower and
notified to the Administrative Agent in accordance with Section 2.3 and
(iii) accrue interest in accordance with Section 2.3(g).
SUBPART 2.1.4. Section 2.8 of the Existing Credit Agreement
is hereby amended as follows:
(i) by amending subsection (a) in its entirety to read as follows:
(a) (i) In addition to the scheduled repayments provided
for in Section 2.4 hereof, following the receipt by any Borrower
or any of its Subsidiaries of any Net Proceeds received in
connection with Casualty Events in excess of $5,000,000
(individually or in the aggregate when taken together with all
other Net Proceeds received in connection with Casualty Events)
since the Second Amendment Effective Date, the relevant Borrowers
shall deliver to the U.S. Administrative Agent a calculation of
the amount of such Net Proceeds and make a mandatory prepayment
of the Loans and other Obligations in an amount equal to 100% of
such Net Proceeds within 45 days of the receipt thereof to be
applied as set forth in Section 2.8(f); provided that no
mandatory prepayment on account of Net Proceeds shall be required
under this clause if relevant Borrower informs the U.S.
Administrative Agent in writing no later than 45 days following
receipt of such Net Proceeds of its or such Subsidiary's good
faith intention to apply such Net Proceeds to the rebuilding or
replacement of the damaged, destroyed or condemned assets or
property or reinvest such Net Proceeds in substantially similar
assets or property that will be used or useful in its business or
other assets or property that will be used or useful in its
business, and the relevant Borrower or such Subsidiary in fact so
uses or reinvests or notifies the U.S. Administrative Agent in
writing that it is contractually obligated to use or reinvest
such Net Proceeds within 180 days following the receipt of such
Net Proceeds, with the amount of such Net Proceeds unused after
such 180-day period being applied to the repayment of Loans
pursuant to Section 2.8(f); provided, further, that at any time
when any Default or Event of Default shall have occurred and be
continuing, all such Net Proceeds (together with Net Proceeds
received in connection with Dispositions not applied as provided
in clause (ii) below) shall be deposited in an account maintained
with the U.S. Administrative Agent to pay for such rebuilding,
replacement, use or reinvestment whenever no Default or Event of
Default is then continuing or except as otherwise agreed to by
the U.S. Administrative Agent for disbursement at the request of
the U.S. Borrower or such Subsidiary, as the case may be.
(ii) In addition to the scheduled repayments
provided for in Section 2.4 hereof, following the receipt
by any Borrower or any of its Subsidiaries of any Net
Proceeds received in connection with Dispositions (other
than Excluded Dispositions) in excess of (x) $20,000,000
(individually or in the aggregate when taken together with
all other Net Proceeds received in connection with
Dispositions of Non-Core Assets) in respect of
Dispositions of Non-Core Assets since the Second Amendment
Effective Date (including without limitation, any sale-
leasebacks permitted under Section 7.12(ii)) and (y)
$10,000,000 (individually or in the aggregate when taken
together with all other Net Proceeds received in connection
with Dispositions (other than the Dispositions described in
the foregoing clause (x)) and all Net Proceeds received in
connection with Casualty Events) since the Second Amendment
Effective Date (including without limitation, any sale-
leasebacks permitted under Section 7.12(iii)), the relevant
Borrower shall deliver to the U.S. Administrative Agent a
calculation of the amount of such Net Proceeds and make a
mandatory prepayment of the Loans and other Obligations in
an amount equal to 100% of such Net Proceeds within one
Business Day of the receipt thereof to be applied as set
forth in Section 2.8(f); provided, that at any time when
any Default or Event of Default shall have occurred and be
continuing, all Net Proceeds (together with Net Proceeds
received in connection with Casualty Events not applied as
provided in clause (i) above) shall be deposited in an
account maintained with the U.S. Administrative Agent to be
so used whenever no Default or Event of Default is then
continuing or except as otherwise agreed to by the U.S.
Administrative Agent for disbursement at the request of the
relevant Borrower.
(ii) by amending subsection (b) in its entirety to read as
follows:
(b) In addition to the scheduled repayments provided for
in Section 2.4 hereof, the relevant Borrower shall prepay the
Loans in an amount equal to the Net Proceeds received after the
Closing Date from any Indebtedness for Money Borrowed incurred by
the relevant Borrower or any of its Subsidiaries, except for
Indebtedness for Money Borrowed permitted by Section 7.1;
provided however, that prepayments in an amount equal to fifty-
percent (50%) of the Net Proceeds from Indebtedness for Money
Borrowed permitted by Section 7.1(m) shall be made if prior to
giving effect to the incurrence of such Indebtedness the Leverage
Ratio is greater than or equal to 3.00 to 1.00. Such Net
Proceeds shall be applied by the Borrowers on the Business Day of
receipt thereof by the relevant Borrower or the affected
Subsidiary to such prepayment in accordance with Section 2.8(f).
(iii) by amending subsection (c) in its entirety to read as follows:
(c) In addition to the scheduled repayments provided for
in Section 2.4 hereof and unless otherwise agreed by the Lenders,
the U.S. Borrower shall prepay the Loans with the Net Proceeds
received from the sale or issuance of any Equity Interests in the
U.S. Borrower after the Second Amendment Effective Date as
follows: (x) with respect to the first $75,000,000 of such Net
Proceeds, 75% of such Net Proceeds shall be applied to repay the
Loans and other Obligations and (y) with respect to any such Net
Proceeds in excess of $75,000,000, 50% of such Net Proceeds shall
be applied to repay the Loans and other Obligations. Such Net
Proceeds shall be applied by the U.S. Borrower on the Business
Day of receipt thereof to such prepayment in accordance with
Section 2.8(f). The U.S. Borrower shall be permitted to redeem
Senior Notes with any Net Proceeds which are not required to
prepay the Loans pursuant to this clause (c). In no event shall
the terms of any such Equity Interests provide for the payment of
cash dividends prior to the earlier of the Maturity Date and the
payment in full of the Obligations.
(iv) by amending subsection (f) to delete the parenthetical "(other
than clause (g) below)" in its entirety and inserting in lieu thereof
"(other than clauses (g) and (i) below)";
(v) by inserting at the end thereof a new subsection (i) as set
forth below:
(i) In addition to the scheduled repayments provided for
in Section 2.4 hereof, if for any consecutive five-Business Day
period, the aggregate amount of Available Cash held by the U.S.
Borrower and its Subsidiaries exceeds $20,000,000 (any such
excess, "Excess Available Cash"), on such fifth Business Day the
U.S. Borrower shall immediately apply such Excess Available Cash
toward the prepayment of any U.S. Revolving Loan Oustandings in
the manner set forth in Section 2.8(f)(ii)(A),(B) and (C).
(vi) by inserting at the end thereof a new subsection (j) as set
forth below:
(j) In addition to the scheduled repayments provided for
in Section 2.4 hereof, the relevant Borrower shall prepay the
Loans in an amount equal to 100% of the proceeds received by the
relevant Borrower or any of its Subsidiaries after the Second
Amendment Effective Date from any adjustments or other payments
under the Merger Agreement (other than any Merger Agreement
Events) or any tax refund from any Governmental Authority. Such
proceeds shall be applied by the relevant Borrower or the
affected Subsidiary to such prepayment in accordance with Section
2.8(f).
SUBPART 2.1.5. Section 3.3 of the Existing Credit Agreement
is hereby amended by (x) deleting the "and" preceding clause
(c), (y) inserting a ";" at the end of clause (c), and (z)
inserting the following new clause (d):
(d) prior to giving effect to any proposed Advance, the
aggregate amount of Available Cash shall not exceed $15,000,000;
SUBPART 2.1.6. Section 4.1(k) of the Existing Credit
Agreement is hereby amended in its entirety to read as follows:
(k) Since the Second Amendment Effective Date, there has
been no event which has had or which could reasonably be expected
to have a Material Adverse Effect.
SUBPART 2.1.7. Section 5.16 of the Existing Credit Agreement
is hereby amended in its entirety to read as follows:
(a) Promptly upon request by an Administrative Agent, or
any Lender through an Administrative Agent, each Borrower will,
and will cause its Subsidiaries, as appropriate, to (i) correct
any material defect or error that may be discovered in any Loan
Document or in the execution, acknowledgment, filing or
recordation thereof, and (ii) do, execute, acknowledge, deliver,
record, re-record, file, re-file, register and re-register any
and all such further acts, deeds, certificates, assurances and
other instruments as an Administrative Agent, or any Lender
through an Administrative Agent, may reasonably require from time
to time in order to carry out more effectively the purposes of
the Loan Documents; and
(b) By no later than June 15, 2006, the Borrowers shall
deliver in accordance with Section 4.9 of the U.S. Pledge and
Security Agreements, Control Agreements (as defined in the U.S.
Pledge and Security Agreements) with respect to such accounts
designated by the U.S. Administrative Agent.
SUBPART 2.1.8. Section 6.4 of the Existing Credit Agreement
is hereby amended as follows:
(i) by inserting at the end thereof new clauses (g) and (h) as set
forth below:
(g) On the first Friday following the Second Amendment
Effective Date and every fourth Friday thereafter at any time
when the Leverage Ratio is greater than or equal to 3.00 to 1.00,
(i) a consolidated cash flow forecast, in form satisfactory to
the U.S. Administrative Agent, showing, on a weekly basis for the
succeeding thirteen weeks beginning with the next succeeding
Monday, (x) beginning and ending liquidity on a consolidated
basis and (y) weekly receipts and disbursements for the
succeeding thirteen weeks on a consolidated basis, and (ii) a
comparison of actual weekly cash flows for the four weeks
preceding the week in which such comparison is delivered to the
forecasted weekly cash flows for such four weeks as set forth in
the most recently delivered forecast covering such four weeks
delivered pursuant to the foregoing clause (i).
(h) As soon as available and in any event within (x) for
the first six months following the Second Amendment Effective
Date, 45 days and (y) thereafter, 30 days after the end of each
month, in each case to be delivered at any time when the Leverage
Ratio is greater than or equal to 3.00 to 1.00, unaudited balance
sheets of the U.S. Borrower on a consolidated basis with its
Subsidiaries and the related statements of operations and the
related statements of cash flows of the U.S. Borrower on a
consolidated basis with its Subsidiaries that shall be certified
by the chief financial officer of the U.S. Borrower, to be, in
his or her opinion, complete and correct in all material respects
and to present fairly, in accordance with GAAP, the financial
position of the U.S. Borrower on a consolidated basis with its
Subsidiaries as at the end of such period and the results of
operations for such period, and for the elapsed portion of the
year ended with the last day of such period, subject only to
normal year-end adjustments.
SUBPART 2.1.9. Section 6.5 of the Existing Credit Agreement
is hereby amended by deleting "$25,000,000" in subsection (d)
thereof and substituting in lieu thereof "$10,000,000".
SUBPART 2.1.10. Section 7.1 of the Existing Credit Agreement
is hereby amended as follows:
(i) by deleting "$10,000,000" in subsection (f) thereof and
substituting in lieu thereof "$5,000,000";
(ii) by inserting the following at the end of subsection (i):
"; provided that no such Indebtedness shall be incurred if
the Leverage Ratio is greater than or equal to 3.00 to 1.00
prior to, and immediately after, the incurrence of such
Indebtedness"
(iii) by amending subsection (j) in its entirety to read as follows:
(j) Indebtedness under the Seller Notes;
(iv) by inserting the following at the end of subsection (m):
", provided that such Indebtedness is unsecured and that
any principal payments in respect of such Indebtedness shall not
be made prior to the earlier of the Maturity Date and the
payment in full of the Obligations"
SUBPART 2.1.11. Section 7.2 of the Existing Credit Agreement
is hereby amended by amending subsection (f) in its entirety to
read as follows:
(f) Liens securing Indebtedness of Foreign Subsidiaries
up to an aggregate amount not to exceed $25,000,000; provided
that no such Liens shall be created, incurred or assumed if the
Leverage Ratio is greater than or equal to 3.00 to 1.00;
provided, further, that such Liens do not create a security
interest in (i) any assets owned by the Canadian Borrower or any
of its Subsidiaries or (ii) any Collateral;
SUBPART 2.1.12. Section 7.4 of the Existing Credit Agreement
is hereby amended by amending clause (iii) of subsection (a) in
its entirety to read as follows:
(iii) a Disposition (A) for fair market value, (B) the Net
Proceeds received from such Disposition, together with the Net
Proceeds of all other assets Disposed of pursuant to this clause
since the Second Amendment Effective Date, does not exceed, when
added to the aggregate amount of sale-leasebacks consummated
under Section 7.12, $100,000,000, provided that any Dispositions
in excess of $20,000,000 in the aggregate after the Second
Amendment Effective Date shall require the consent of the U.S.
Administrative Agent and (C) the Net Proceeds of which are
applied as set forth in Section 2.8(a)(ii).
SUBPART 2.1.13. Section 7.5 of the Existing Credit Agreement
is hereby amended as follows:
(i) by amending subsection (g) in its entirety to read as follows:
(g) [Intentionally omitted];
(ii) by amending subsection (h) in its entirety to read as follows:
(h) [Intentionally omitted];
(iii) by deleting "$5,000,000" in subsection (k) and substituting in
lieu thereof "$1,000,000".
(iv) by amending subsection (l) in its entirety to read as follows:
(l) Investments in Foreign Subsidiaries (other than those
organized under any of the laws of Canada and/or Province or
Territory thereof) not to exceed $25,000,000; provided that (i)
the aggregate amount of Investments made under this clause (m)
when aggregated with (w) the amount of Investments in Foreign
Subsidiaries under clauses (e) and (i) of this Section 7.4(b),
(x) Indebtedness of one or more Foreign Subsidiaries incurred
under Section 7.1(i), (y) intercompany loans made pursuant to
Section 7.1(g)(ii) and (z) unsecured Contingent Obligations of
Indebtedness of Foreign Subsidiaries granted under Section
7.1(k), shall not exceed the amount set forth in Section
7.1(g)(ii); provided further that no such Investments shall be
permitted to be made if, before, and immediately after, giving
effect to such Investment, the Leverage Ratio is greater than or
equal to 3.00 to 1.00;
(v) by adding the following at the end of subsection (m) thereof:
"; provided that no such Investments shall be permitted to
be made if, before, and immediately after, giving effect to such
Investment, the Leverage Ratio is greater than or equal to 3.00
to 1.00"
(vi) by deleting "$25,000,000" in subsection (o) and substituting in
lieu thereof "$10,000,000".
(vii) by adding the following at the end of subsection (q):
"; provided that no such Investments shall be permitted to
be made if, before, and immediately after, giving effect to such
Investment, the Leverage Ratio is greater than or equal to 3.00
to 1.00; provided, however, that additional Investments in
Canadian Subsidiaries which are committed to by the Borrower on
or before February 21, 2006, of up to $2,000,000 shall be
permitted during the 2006 Fiscal Year without regard to the
Leverage Ratio"
SUBPART 2.1.14. Section 7.6 of the Existing Credit Agreement
is hereby amended in its entirety to read as follows:
Restricted Payments, etc. None of the U.S. Borrower and
the Canadian Borrower will, and will not permit any of its
Subsidiaries to, declare or make a Restricted Payment, or make
any deposit for any Restricted Payment, other than (a) Restricted
Payments made by Subsidiaries to the U.S. Borrower or Subsidiary
Guarantors; (b) Restricted Payments made by Foreign Subsidiaries
of the Canadian Borrower to the Canadian Borrower; and
(c) Restricted Payments in the form of repurchases of Equity
Interests by the U.S. Borrower permitted under Section 7.9.
SUBPART 2.1.15. Section 7.7 of the Existing Credit Agreement
is hereby amended in its entirety to read as follows:
Capital Expenditures. Subject (in the case of
Capitalized Lease Obligations) to Section 7.1(f), none of the
U.S. Borrower and the Canadian Borrower will, and will not permit
any of its Subsidiaries to make or commit to make Capital
Expenditures (other than Capital Expenditures (x) to the extent
funded from the Net Proceeds of a Disposition or a Casualty Event
or (y) in connection with the Boards Transaction) (i) in excess
of $35,000,000 in the 2006 Fiscal Year and (ii) $17,500,000 for
each Fiscal Year thereafter; provided, however, that, to the
extent that Capital Expenditures made by the U.S. Borrowers and
its Subsidiaries during in the 2006 Fiscal Year are less than the
maximum amount permitted to be made for such Fiscal Year, up to
$5,000,000 of such unused amount may be carried forward to the
2007 Fiscal Year and utilized to make Capital Expenditures in
such Fiscal Year; provided, further, that no Capital Expenditures
shall be made or shall be committed to be made if any Default
then exists or would result therefrom.
SUBPART 2.1.16. Section 7.9 of the Existing Credit Agreement
is hereby amended in its entirety to read as follows:
Equity Interest. The U.S. Borrower will not permit any
Subsidiary Guarantor (other than a Joint Venture Entity or a
Subsidiary not constituting a Wholly Owned Subsidiary, the
investment in which was made pursuant to Section 7.5(o)) to issue
any Equity Interests (whether for value or otherwise) to any
Person other than in the case of Subsidiaries to the U.S.
Borrower or a Subsidiary Guarantor. Neither the U.S. Borrower
nor the Canadian Borrower will, and will not permit any of its
Subsidiaries, to become liable in respect of any obligation
(contingent or otherwise) to purchase, redeem, retire, acquire or
make any other payment in respect of any Equity Interests of the
U.S. Borrower or any Subsidiary or any option, warrant or other
right to acquire any such Equity Interests, except that, so long
as no Default then exists or would result therefrom, the U.S.
Borrower may repurchase its Equity Interests in an amount not to
exceed $1,000,000 in any Fiscal Year in connection with the
payment by the Borrowers in respect of taxes required to be paid
in connection with restricted stock awards.
Section 7.12 of the Existing Credit Agreement is hereby
amended in its entirety to read as follows:
Sale and Leaseback. None of the U.S. Borrower and the
Canadian Borrower will, and will not permit any of its
Subsidiaries to, directly or indirectly enter into any agreement
or arrangement providing for the sale or transfer by it of any
property (now owned or hereafter acquired) to a Person and the
subsequent lease or rental of such property or other similar
property from such Person, except (i) the sale-leaseback of the
Dothan Headquarters and each Dothan Distribution Center, (ii) the
sale-leaseback of up to an aggregate amount of $10,000,000 of any
Non-Core Assets, and (iii) the sale-leaseback of up to an
aggregate amount of $10,000,000 of any other assets of the
Borrowers and their Subsidiaries; provided that before and after
giving effect to any such sale-leaseback transaction no Default
has occurred and be continuing; provided further that no sale-
leasebacks described in the foregoing clauses (ii) and (iii)
shall be permitted if prior to, or after giving effect to any
such sale-leaseback, the aggregate amount of Dispositions
consummated under Section 7.4(a)(iii), when added to the
aggregate amount of sale-leasebacks consummated pursuant to such
clauses (ii) and (iii), exceeds $100,000,000.
SUBPART 2.1.17. Section 7.13 of the Existing Credit Agreement
is hereby amended as follows:
(i) by amending subsection (a) in its entirety to read as follows:
(a) the Leverage Ratio as of the last day of any Fiscal
Quarter occurring during any period set forth below to be greater
than the ratio set forth opposite such period:
Leverage
Measuring Period Ratio
- -------------------------- ------------
The First Quarter of 2006 5.0 to 1.00
The Second Quarter of 2006 5.75 to 1.00
The Third Quarter of 2006 6.75 to 1.00
The Fourth Quarter of 2006 6.50 to 1.00
The First Quarter of 2007
through and including the
Third Quarter of 2007 2.25 to 1.00
The Fourth Quarter of 2007
and thereafter 2.00 to 1.00
(ii) by amending subsection (b) in its entirety to read as follows:
(b) the Fixed Charge Coverage Ratio as of the last day of
any Fiscal Quarter occurring during any period set forth below to
be less than the ratio set forth opposite such period.
Fixed Charge
Coverage
Measuring Period Ratio
- -------------------------- ------------
The First Quarter of 2006 1.05 to 1.00
The Second Quarter of 2006 1.05 to 1.00
The Third Quarter of 2006 1.00 to 1.00
The Fourth Quarter of 2006 1.00 to 1.00
The First Quarter of 2007
and thereafter 1.10 to 1.00
(iii) by amending subsection (c) in its entirety to read as follows:
(c) the Interest Coverage Ratio as of the last day of any
Fiscal Quarter occurring during any period set forth below to be
less than the ratio set forth opposite such period.
Interest
Coverage
Measuring Period Ratio
- -------------------------- ------------
The First Quarter of 2006 2.00 to 1.00
The Second Quarter of 2006 1.75 to 1.00
The Third Quarter of 2006 1.45 to 1.00
The Fourth Quarter of 2006 1.45 to 1.00
The First Quarter of 2007
and thereafter 3.00 to 1.00
SUBPART 2.1.18. Section 8.1 of the Existing Credit Agreement
is hereby amended as follows:
(i) by deleting "$25,000,000" wherever it appears in subsection (h)
and substituting in lieu thereof "$15,000,000".
(ii) by deleting "$25,000,000" wherever it appears in subsection (l)
and substituting in lieu thereof "$15,000,000".
(iii) by deleting "$25,000,000" wherever it appears in subsection (m)
and substituting in lieu thereof "$15,000,000".
(iv) by amending subsection (n) in its entirety to read as follows:
(n) There shall occur (i) any default under any Pari Passu
Debt, or any other Indebtedness (other than (x) the Loans and (y)
the Seller Notes, if any, issued in connection with the Boards
Transaction,) of the U.S. Borrower or any of its Subsidiaries in
an aggregate principal amount exceeding $15,000,000 at maturity
and which default shall continue unremedied for any applicable
period of time sufficient to allow the holder of such
Indebtedness to accelerate the maturity of such Indebtedness; or
(ii) any default under any Hedge Agreement having a notional
principal amount $10,000,000 or more;
SUBPART 2.1.19. Section 12.1 of the Existing Credit Agreement
is hereby amended by amending subclause (i) of clause (a) in its
entirety to read as follows:
If to the U.S. Borrower or the Canadian Borrower, to it at:
Movie Gallery, Inc.
9275 S.W. Peyton Lane
Wilsonville, Oregon 97070
Attn: Vice President Financial Operations and
Treasury
Facsimile No.: (503) 570-5022
with a copy to:
Movie Gallery, Inc.
900 West Main Street
Dothan, Alabama 36301
Attn: S. Page Todd
Executive Vice President, Secretary and General
Counsel
Facsimile No.: (334) 836-3626
E-mail: ptodd@movgal.com
and to:
Alston & Bird LLP
Attn: Richard W. Grice, Esq.
Facsimile No.: (404) 881-4777
E-mail: rgrice@alston.com
If to the U.S. Administrative Agent, to it at:
Wachovia Bank, National Association
301 South College Street
Charlotte, North Carolina 28288-0767
Attn: Mark Hedrick
Administrative Agent Account Number:
Facsimile No.: (704) 383-6249
E-mail: mark.hedrick@wachovia.com
with a copy to:
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017
Attn: Peter Pantaleo
Facsimile No.: (212) 455-2502
E-mail: ppantaleo@stblaw.com
If to the Canadian Administrative Agent, to it at:
Wachovia Capital Finance Corporation (Canada)
141 Adelaide Street West
Suite 1400
Toronto, Ontario M5H 3L5
Attn: Enza Agosta
Facsimile No.: (416) 364-6068
E-mail: eagosta@congressfinancial.com
with a copy to:
Bennett Jones LLP
Suite 3400
One First Canadian Place
Toronto, Ontario M5X 1A4
Attn: Daniel A. Ford
Facsimile No.: (416) 863-1716
E-mail: fordd@bennetjones.ca
and to:
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017
Attn: Peter Pantaleo
Facsimile No.: (212) 455-2502
E-mail: ppantaleo@stblaw.com
SUBPART 2.1.20. Section 12.5 of the Existing Credit Agreement
is hereby amended by (i) deleting the "and" preceding subclause
(D) of clause (b) and (ii) inserting the following new clause
(E) at the end of subclause (D):
", and (E) any assignment of the Revolving Commitment shall
also include a pro rata assignment of the Revolver PIK Loans in
respect thereof"
SUBPART 2.1.21. Exhibit B-1 and Exhibit B-2 to the Credit
Agreement are hereby replaced in their entireties with Exhibit A
and Exhibit B attached hereto.
SUBPART 2.1.22. Lender Consent. The Majority Lenders hereby
authorize the Administrative Agents to execute, on behalf of the
Lenders, the letter in the form separately delivered to the
Lenders and such letter shall constitute a Loan Document for all
purposes under the Credit Agreement and the other Loan
Documents.
PART III
CONDITIONS TO EFFECTIVENESS
SUBPART 3.1. Effectiveness Conditions. This Amendment shall become
effective on the date (the "Second Amendment Effective Date") when each of
the conditions set forth in this Part have been satisfied. The U.S.
Administrative Agent shall provide written notice to the U.S. Borrower of the
occurrence of the Second Amendment Effective Date promptly following the
occurrence thereof.
SUBPART 3.1.1. Executed Counterparts. The Administrative
Agents shall have received (i) counterparts of this Amendment
duly executed and delivered on behalf of the Borrowers and the
Administrative Agents; (ii) counterparts of the Acknowledgement
and Consent duly executed and delivered on behalf of the
Guarantors; and (iii) Consents duly executed and delivered on
behalf of the Majority Lenders.
SUBPART 3.1.2. Performance Certificate. The U.S.
Administrative Agent shall have received a Performance
Certificate dated as of the Second Amendment Effective Date for
the period of four full Fiscal Quarters immediately preceding
the Second Amendment Effective Date (prepared in good faith and
in a manner and using such methodology which is consistent with
the most recent financial statements delivered pursuant to
Sections 6.1 and 6.2 of the Existing Credit Agreement)
evidencing compliance with the covenants set forth in Section
7.13 and setting forth a pro forma calculation of the Leverage
Ratio.
SUBPART 3.1.3. Amendment Fee. The Administrative Agent shall
have received, an amendment fee in an amount equal to .50% of
the sum of the outstanding Loans and Commitments under the
Existing Credit Agreement held by Lenders that have delivered a
consent to the U.S. Administrative Agent to execute the Second
Amendment.
SUBPART 3.1.4. Fees and Expenses. The Administrative Agent
shall have received all fees and expenses due under Section 12.2
of the Existing Credit Agreement in connection with the
negotiation, preparation, execution and delivery of this
Amendment, including, but not limited to, the reasonable fees,
disbursements, invoiced retainers and other charges of Simpson
Thacher & Bartlett LLP, special counsel for the U.S.
Administrative Agent and its Affiliates, and Capstone Advisory
Group, LLC, financial advisors to the U.S. Administrative Agent
and its Affiliates. In this connection, the U.S. Administrative
Agent shall cause each advisor to return any unused retainers
previously paid by the Borrower on or before April 30, 2007, so
long as no Default or Event of Default has occurred during the
period between the Second Amendment Effective Date and such
date.
PART IV
MISCELLANEOUS PROVISIONS
SUBPART 4.1. Representations and Warranties. The Borrowers hereby
represent and warrant to the Lenders that:
(i) all of the representations and warranties of the Borrowers
and their respective Subsidiaries under the Credit Agreement and the
other Loan Documents, which, pursuant to Section 4.2 of the Credit
Agreement, are made at and as of the Second Amendment Effective Date,
are true and correct at such time in all material respects as if made
on the Second Amendment Effective Date, both before and immediately
after giving effect to this Amendment and after giving effect to any
updates to information provided to the Lenders in accordance with the
terms of such representations and warranties; and
(ii) no Default has occurred and is continuing, or would result
from entering into this Amendment.
SUBPART 4.2. Collateral. Each Loan Party ratifies and reaffirms the
validity and enforceability (without defense, counterclaim or offset of any
kind) of the liens and security interests granted to secure any of the
Obligations by such Loan Party to the Administrative Agents, for the benefit
of the Lenders, pursuant to the Security Documents to which such Loan Party
is a party. Each Loan Party acknowledges and agrees that all such liens and
security interests granted by such Loan Party shall continue to secure the
Obligations from and after the Second Amendment Effective Date. Each Loan
Party hereby represents and warrants to the Administrative Agent and the
Lenders that, pursuant to the Security Documents to which such Loan Party is
a party, the Obligations are secured by liens on and security interests in
all of such Loan Party's assets to the extent required by the Security
Documents.
SUBPART 4.3. Cross-References. References in this Amendment to any
Part or Subpart are, unless otherwise specified, to such Part or Subpart of
this Amendment.
SUBPART 4.4. Loan Document Pursuant to Existing Credit Agreement.
This Amendment is a Loan Document executed pursuant to the Existing Credit
Agreement and shall be construed, administered and applied in accordance with
all of the terms and provisions of the Credit Agreement.
SUBPART 4.5. Successors and Assigns. This Amendment shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
SUBPART 4.6. Full Force and Effect; Limited Amendment. Except as
expressly amended hereby, all of the representations, warranties, terms,
covenants, conditions and other provisions of the Existing Credit Agreement
and the Loan Documents shall remain unchanged and shall continue to be, and
shall remain, in full force and effect in accordance with their respective
terms. The amendments set forth herein shall be limited precisely as
provided for herein to the provisions expressly amended herein and shall not
be deemed to be an amendment to, waiver of, consent to or modification of any
other term or provision of the Existing Credit Agreement, any other Loan
Document referred to therein or herein or of any transaction or further or
future action on the part of the Borrowers or any other Loan Party which
would require the consent of the Lenders under the Existing Credit Agreement
or any of the Loan Documents.
SUBPART 4.7. Governing Law. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
SUBPART 4.8. Execution in Counterparts. This Amendment may be
executed in any number of counterparts by the parties hereto, each of which
counterparts when so executed shall be an original, but all the counterparts
shall together constitute one and the same agreement. Delivery of an
executed counterpart of a signature page to this Amendment by facsimile shall
be effective as delivery of a manually executed counterpart of this
Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers hereunto duly authorized as of the
day and year first above written.
MOVIE GALLERY, INC.
By:
Name:
Title:
MOVIE GALLERY CANADA, INC.
By:
Name:
Title:
WACHOVIA BANK, NATIONAL ASSOCIATION,
as U.S. Administrative Agent
By:
Name:
Title:
WACHOVIA CAPITAL FINANCE CORPORATION
(CANADA) (formerly known as Congress
Financial Corporation (Canada))
as Canadian Administrative Agent
By:
Name:
Title:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day
and year first above written.
MOVIE GALLERY, INC.,
as U.S. Borrower and U.S. Borrower
Guarantor
By:
Name: S. Page Todd
Title: Executive Vice President,
Secretary,
General Counsel and Chief
Compliance Officer
MOVIE GALLERY CANADA, INC.,
as Canadian Borrower
By:
Name: S. Page Todd
Title: Executive Vice President,
Secretary,
General Counsel and Chief
Compliance Officer
MOVIE GALLERY US, LLC
By: Movie Gallery, Inc., its Manager and
Sole Member
By:
Name: S. Page Todd
Title: Executive Vice President,
Secretary and General Counsel
M.G. DIGITAL, LLC
By: Movie Gallery US, LLC, its Manager
and Sole Member
By: Movie Gallery, Inc., its Manager and
Sole Member
By:
Name: S. Page Todd
Title: Executive Vice President,
Secretary and General Counsel
M.G.A REALTY I, LLC
By: Movie Gallery US, LLC, its Manager
and Sole Member
By: Movie Gallery, Inc., its Manager and
Sole Member
By:
Name: S. Page Todd
Title: Executive Vice President,
Secretary and General Counsel
HOLLYWOOD ENTERTAINMENT
CORPORATION
By:
Name: S. Page Todd
Title: Executive Vice President,
Secretary and General Counsel
MG AUTOMATION LLC
By: Hollywood Entertainment Corporation
By:
Name: S. Page Todd
Title: Executive Vice President and
Secretary
WACHOVIA BANK, NATIONAL ASSOCIATION, as
U.S. Administrative Agent
By:
Name:
Title:
WACHOVIA CAPITAL FINANCE CORPORATION
(CANADA) (formerly known as Congress
Financial Corporation (Canada)), as
Canadian Administrative Agent
By:
Name:
Title: