Amendment No. 5 to Senior Credit Agreement and Security Agreement, dated as of February 7, 2020 among bocm3-DSTLD-Senior Debt, LLC, Stockholders, bocm3-DSTLD-Senior Debt 2, LLC and Digital Brands Group (formerly known as Denim.LA, Inc)
AMENDMENT NO. 5 TO SENIOR CREDIT AGREEMENT & SECURITY
This Amendment No. 5 to Senior Credit Agreement & Security Agreement (this “Amendment”) is made and entered into as of February 7, 2020, by and among Denim.LA, Inc., a Delaware corporation d/b/a DSTLD (the “Borrower”), the stockholders of the Borrower signatories below (“Stockholders”), bocm3-DSTLD-Senior Debt, LLC, a Utah limited liability company (“First Lender”) and bocm3-DSTLD-Senior Debt 2, LLC, a Utah limited liability company (“Second Lender” and together with the First Lender, the “Lenders”).
In consideration of the mutual covenants, conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged; it is hereby agreed that:
When used herein, the following terms shall have the following specified meanings:
|1.1||“Amendment” shall mean this Amendment No. 5 to Senior Credit Agreement & Security Agreement, as amended, restated, supplemented or otherwise modified from time to time.|
1.2 “Credit Agreement” shall mean the Senior Credit Agreement dated as of March 10, 2017, by and among the Borrower, Stockholders and First Lender, as amended by that certain Amendment No. 1 to Senior Credit Agreement, dated as of July 1 , 2017 (“Amendment No. 1”), that certain Amendment No. 2 to Credit Agreement, Security Agreement and Management, dated as of March 30, 2018 (“Amendment No. 2”), and that certain Limited Waiver and Amendment No. 3 to Senior Credit Agreement, dated as of April 30, 2018 (“Amendment No. 3”), that certain Amendment No. 4 to Senior Credit Agreement, dated as of February 28, 2019 (“Amendment No. 4” and, together with Amendment No. 1, Amendment No. 2 and Amendment No. 3, collectively, the “Amendments”), and as further amended, modified, supplemented, extended or restated from time to time.
1.3 “Security Agreement” shall mean the Security Agreement dated as of March 10, 2017, by and among the Borrower and Lenders, as amended by the applicable Amendments and as further amended, modified, supplemented, extended or restated from time to time
1.4 Other Capitalized Terms. All capitalized terms used in this Amendment and not specifically defined herein shall have the definitions assigned to such terms in the Credit Agreement or the Security Agreement, as applicable.
AMENDMENTS TO CREDIT AGREEMENT
2.1 Amendments. The Credit Agreement is hereby amended as follows:
|(a)||Section 1.1. The following replaces the existing definition of such term in Section 1.1 in its entirety or adds such definition to Section 1.1:|
“Bailey Collateral” means the “Collateral” (as such term is defined in the Norwest Pledge Agreement as of the date hereof).
“Norwest Note” means that certain Secured Promissory Note, dated as of the date hereof, by Borrower in favor of Norwest Venture Partners XI, LP and Norwest Venture Partners XII, LP, in the initial principal amount of $4,500,000, as in existence on the date hereof.
“Norwest Pledge Agreement” means that certain Pledge Agreement, dated as of the date hereof, by Borrower in favor of Norwest Venture Partners XI, LP and Norwest Venture Partners XII, LP, as Secured Parties, pledging the Bailey Collateral, as in existence on the date hereof.
“Norwest Permitted Lien” means the Liens on the Bailey Collateral in connection with the Norwest Pledge Agreement.
|(b)||Section 1.1. The definition of “Permitted Liens” shall be amended by adding a new Section (f) which shall read as follows:|
(e) the Norwest Permitted Lien.
“Note Maturity Date” means the earliest to occur of (i) the closing date of the IPO (as defined in the Norwest Note), (ii) the closing date of a Denim Sale (as defined in the Norwest Note) or (iii) September 30, 2020.
|(c)||Section 6.1. Section 6.1 shall be amended in its entire to read as follows:|
Indebtedness. Borrower shall not, directly or indirectly, create, incur, assume, or otherwise become directly or indirectly liable with respect to, any Indebtedness other than (i) Indebtedness under this Agreement, (ii) Indebtedness incurred after the date hereof in the ordinary course of Borrower’s operations, consistent with past practice, in an aggregate amount less than $25,000 or (iii) Indebtedness incurred pursuant to the Norwest Note or the Norwest Pledge Agreement; provided, however, that neither the Norwest Note nor the Norwest Pledge Agreement may be amended without Lenders’ prior written consent.
2.2 Miscellaneous Amendments. The Credit Agreement, the Notes, and all other agreements and instruments executed and delivered heretofore or hereafter pursuant to the Credit Agreement are amended hereby so that any reference therein to the Credit Agreement shall be deemed to be a reference to such agreements and instruments as amended by or pursuant to this Amendment.
AMENDMENTS TO SECURITY AGREEMENT
3.1 Amendment. The Security Agreement is hereby amended to add the following as Section 2(e):
Notwithstanding anything contrary herein or in any other Loan Document, the “Collateral” shall not include any part of the Bailey Collateral, and the Bailey Collateral shall be expressly excluded from the Collateral.
3.2 Filing Authorization. The Secured Party hereby authorizes the Borrower or any of its designees to file UCC-3 financing statement amendments to any UCC-1 financing statement on public record in favor of the Secured Party or any Lender in the form approved by Lenders.
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
The Borrower hereby represents and warrants to the Lenders that:
4.1 Credit Agreement. All of the representations and warranties made by Borrower in the Credit Agreement are true and correct on the date of this Amendment, except to the extent such representation or warranty relates to a specified earlier date, in which case it continues to be true and correct as of such date. No Event of Default under the Credit Agreement has occurred and is continuing as of the date of this Amendment.
4.2 Capitalization. As of the date hereof, all outstanding Capital Stock of Borrower is held as set forth on Schedule 4.2 All outstanding shares of Capital Stock were duly authorized and validly issued, and are fully paid and nonassessable. As of the Closing Date, except as set forth on Schedule4.2, there are no outstanding securities, options, warrants, rights, or other agreements of any nature that require Borrower to issue any additional Capital Stock.
4.3 Authorization; Enforceability. The making, execution and delivery of this Amendment and performance of and compliance with the terms of this Amendment and the terms of the Credit Agreement, as amended hereby, has been duly authorized by all necessary company action by Borrower. This Amendment is the valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.
4.4 Absence of Conflicting Obligations. The making, execution and delivery of this Amendment and performance of and compliance with the terms of this Amendment and the terms of the Credit Agreement, as amended hereby, do not violate any presently existing provision of law or the articles or certificate of formation, certificate of organization or operating agreement of Borrower or any agreement to which Borrower is a party or by which it or any of its assets is bound.
|4.5||Loan Balance. As of the date hereof, the balance of the Loans is $4,667,543.86.|
ARTICLE V. MISCELLANEOUS
5.1 Continuance of Credit Agreement. Except as specifically amended by this Amendment, the Credit Agreement shall remain in full force and effect.
5.2 Survival. All agreements, representations and warranties made in this Amendment or in any documents delivered pursuant to this Amendment shall survive the execution of this Amendment and the delivery of any such document.
5.3 Governing Law. This Amendment shall be governed by, and construed and enforced in accordance with, the laws of the State of Utah without regarding to principles of conflicts of laws.. The parties hereto acknowledge that this Amendment was negotiated with the assistance of counsel and, accordingly, such laws shall be applied without reference to any rules of construction regarding the draftsman hereof.
5.4 Counterparts; Headings. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Article and section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect.
5.5 Severability. In case any provision in or obligation under this Amendment shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
5.6 Course of Dealing; Consent. Borrower acknowledges that neither previous waivers, extensions, and amendments granted to Borrower by Lender, nor the amendments and waivers granted herein, create any course of dealing or expectation with respect to any further waivers, extensions, or amendments, and Borrower further acknowledges that Lender has no obligation whatsoever to grant any additional waivers, extensions, amendments, or forbearance.
5.7 No Defenses. Borrower acknowledges it has no defenses, rights of setoff, or rights of recoupment to the enforceability or payment of any of its obligations under the Credit Agreement as amended hereby.
5.8 Ex penses and Attorneys ’ Fees . Borrower shall pay (a) all fees and expenses (including attorney’s fees) incurred by Lender in connection with the preparation, execution, and delivery of this Amendment, and all prior legal fees and expenses (including attorney’s fees) incurred by each Lender in connection with the Credit Agreement and (b) all fees and expenses (including attorney’s fees) incurred by Borrower in connection with the preparation, execution, and delivery of this Amendment on the date hereof.
5.9 Further Assurances. Borrower shall promptly execute and deliver or cause to be executed and delivered to Lenders within a reasonable time following Lender’s request, and at the expense of Borrower, such other documents or instruments as Lender may reasonably require to in order to give effect to the intent and purposes of this Amendment.
[Signature page follows]
IN WITNESS WHEREOF, the parties have executed this Amendment No. 5 to Senior Credit Agreement & Security Agreement as of the date first written above.
|DENIM.LA, INC. d/b/a DSTLD|
|BOCM3-DSTLD-SENIOR DEBT, LLC|
|By:||/s/ Gregory David Seare|
|Name:||Gregory David Seare|
|Title:||Founder and Managing Director.|
|BOCM3-DSTLD-SENIOR DEBT 2, LLC|
|By:||/s/ Gregory David Seare|
|Name:||Gregory David Seare|
|Title:||Founder and Managing Director.|
|/s/ Mark Lynn|
|/s/ Corey Epstein|
[Signature page to Amendment No. 5 to Credit Agreement & Security Agreement]
|CS-5||Amplify.LA Capital II, LLC||1/31/2013||83,124|
|CS-24||Amplify.LA Capital II, LLC||09/12/2016||51,587|
|CS-25||Baroda Ventures LLC||09/12/2016||36,111|
|CS-26||Plus Capital, L.P.||09/12/2016||41,269|
|CS-27||3-4 Surf, GP||09/12/2016||4,578|
|CS-28||TenOneTen Ventures, LLC||09/12/2016||11,802|
|CS-33||Scott C. Steigerwald||09/12/2016||18,313|
|CS-34||Patrick M. Falle||09/12/2016||10,983|
|CS-35||Siemer Ventures II LP||09/12/2016||55,668|
|CS-36||North Rim Investments, LLC (Joh||09/12/2016||25,793|
|CS-37||Unicorn Ventures, LLC||09/12/2016||10,317|
|CS-38||Yobin Capital, Inc.||09/12/2016||25,793|
|CS-42||Everlast Investments, LLC||09/12/2016||257,932|
|CS-43||SI Selections Fund I, L.P.||09/12/2016||206,346|
|CS-44||TRIPLE 8 HOLDINGS, LLC||09/12/2016||154,759|
[Signature page to Amendment No. 5 to Credit Agreement & Security Agreement]
|PS-125||The Academy, LLC||Series Seed Preferred||10/06/2014||117,284|
|PS-134||Amplify.LA Capital II, LLC||Series A||09/12/2016||104,166|
|PS-135||Baroda Ventures LLC||Series A||09/12/2016||72,916|
|PS-136||Plus Capital, L.P.||Series A||09/12/2016||83,333|
|PS-137||3-4 Surf, GP||Series A||09/12/2016||9,244|
|PS-139||Randy Nichols||Series A||09/12/2016||47,054|
|PS-140||Viking Power||Series A||09/12/2016||21,158|
|PS-141||Dan Brown||Series A||09/12/2016||5,911|
|PS-142||Scott C. Steigerwald||Series A||09/12/2016||36,978|
|PS-143||William Essin||Series A||09/12/2016||4,731|
|PS-144||Patrick M. Falle||Series A||09/12/2016||22,179|
|PS-145||Siemer Ventures II LP||Series A||09/12/2016||112,409|
|PS-146||North Rim Investments, LLC (John Victor||Series A||09/12/2016||52,083|
|PS-147||Unicorn Ventures, LLC||Series A||09/12/2016||20,833|
|PS-148||Yobin Capital, Inc.||Series A||09/12/2016||52,083|
|PS-149||Andrea Berkholtz||Series A||09/12/2016||20,833|
|PS-150||Dan Zigmond||Series A||09/12/2016||20,833|
|PS-151||Sean Brecker||Series A||09/12/2016||20,833|
|PS-152||Everlast Investments, LLC||Series A||09/12/2016||520,833|
|PS-153||SI Selections Fund I, L.P.||Series A||09/12/2016||416,666|
|PS-154||TRIPLE 8 HOLDINGS, LLC||Series A||09/12/2016||312,500|
|PS-156||Mark Epstein||Series A||03/31/2017||98,388|
|PS-157||Seth Elken||Series A||01/27/2017||52,083|
|PS-169||TenOneTen Ventures, LLC||Series A||09/12/2016||23,829|
|PS-170||Amplify.LA Capital II, LLC||Series A||06/09/2017||3,555|
|PS-171||Baroda Ventures LLC||Series A||06/09/2017||2,372|
|PS-172||Yobin Capital, Inc.||Series A||06/09/2017||1,003|
|PS-192||Patrick M. Falle||Series A-3||08/24/2018||94,340|
|PS-193||CherryTree VC||Series A-3||10/18/2018||188,680|
|PS-197||Oswaldo Nascimiento||Series A-3||11/08/2018||300,000|
|PS-202||Scott C. Steigerwald||Series A-3||12/26/2018||111,321|
|PS-207||Crowdcube Nominees||Series A-3||02/26/2019||341,056|
|PS-S40||Zillion, LLC||Series Seed Preferred||10/06/2014||1,838,396|
|PS-S41||Plus Capital, L.P.||Series Seed Preferred||10/06/2014||367,679|
|PS-S42||The Kevin Yorn Trust||Series Seed Preferred||10/06/2014||110,303|
|PS-S43||3-4 Surf, GP||Series Seed Preferred||10/06/2014||183,839|
|PS-S44||Baroda Ventures LLC||Series Seed Preferred||10/06/2014||183,839|
|PS-S45||Amplify.LA Capital II, LLC||Series Seed Preferred||10/06/2014||240,400|
|PS-S46||QueensBridge Fund I, L.P.||Series Seed Preferred||10/06/2014||91,919|
|PS-S47||Viking Power||Series Seed Preferred||10/06/2014||183,839|
|PS-S48||Siemer Ventures II LP||Series Seed Preferred||10/06/2014||183,839|
|PS-S49||Clark W. Landry||Series Seed Preferred||10/06/2014||91,919|
|PS-S50||Structure Fund LP||Series Seed Preferred||10/06/2014||91,919|
|PS-S51||Scott C. Steigerwald||Series Seed Preferred||10/06/2014||735,358|
|PS-S52||Patrick M. Falle||Series Seed Preferred||10/06/2014||441,215|
|PS-S53||William Essin||Series Seed Preferred||10/06/2014||91,919|
|PS-S54||Brad Zions||Series Seed Preferred||10/06/2014||91,919|
|PS-S55||Equity Trust Company Custodian FBO W||Series Seed Preferred||10/06/2014||91,919|
|PS-S56||Arena Ventures Fund, LP.||Series Seed Preferred||05/21/2015||773,335|
|PS-S-1||Corey Epstein||Series Seed Preferred||10/06/2014||617,122|
|PS-S-2||Ryan Jaleh||Series Seed Preferred||10/06/2014||101,847|
|PS-S-3||Amplify.LA Capital II, LLC||Series Seed Preferred||10/06/2014||1,222,364|
|PS-S-4||Paige Craig||Series Seed Preferred||10/06/2014||0|
|PS-S-5||Siemer Ventures II LP||Series Seed Preferred||10/06/2014||1,004,400|
|PS-S-6||Baroda Ventures LLC||Series Seed Preferred||10/06/2014||773,335|
|PS-S-7||Plus Capital, L.P.||Series Seed Preferred||10/06/2014||773,139|
|PS-S-8||Siemer Ventures II LP||Series Seed Preferred||10/06/2014||338,019|
|PS-S-9||Baroda Ventures LLC||Series Seed Preferred||10/06/2014||241,667|
|PS-S-10||Dennis Phelps||Series Seed Preferred||10/06/2014||241,381|
|PS-S-11||CAA Ventures I, L.P.||Series Seed Preferred||10/06/2014||480,470|
|PS-S-12||SLP Ventures II, LLC||Series Seed Preferred||10/06/2014||238,885|
|PS-S-13||Crunch Fund I, L.P.||Series Seed Preferred||10/06/2014||713,462|
|PS-S-14||Welle Family Trust||Series Seed Preferred||10/06/2014||237,022|
|PS-S-15||SC Worldwide Enterprises LLC||Series Seed Preferred||10/06/2014||237,022|
|PS-S-16||TenOneTen Ventures, LLC||Series Seed Preferred||10/06/2014||473,881|
|PS-S-17||Viking Power||Series Seed Preferred||10/06/2014||236,920|
|PS-S-18||Dennis Phelps||Series Seed Preferred||10/06/2014||236,920|
|PS-S-19||Amplify.LA Capital II, LLC||Series Seed Preferred||10/06/2014||236,900|
|PS-S-20||Amplify.LA Capital II, LLC||Series Seed Preferred||10/06/2014||118,450|
|PS-S-21||Crunch Fund I, L.P.||Series Seed Preferred||10/06/2014||236,879|
|PS-S-22||Michael Lastoria||Series Seed Preferred||10/06/2014||236,859|
|PS-S-23||Mark Epstein||Series Seed Preferred||10/06/2014||236,797|
|PS-S-24||Lanoha Ventures LLC||Series Seed Preferred||10/06/2014||236,756|
|PS-S-25||Siemer Ventures II LP||Series Seed Preferred||10/06/2014||709,103|
|PS-S-26||Demarest Films, LLC||Series Seed Preferred||10/06/2014||235,713|
|PS-S-27||Tom McInerney||Series Seed Preferred||10/06/2014||235,365|
|PS-S-28||Glenn E. Montgomery||Series Seed Preferred||10/06/2014||117,611|
|PS-S-29||Dan Brown||Series Seed Preferred||10/06/2014||117,550|
|PS-S-30||Mark Epstein||Series Seed Preferred||10/06/2014||117,324|
|PS-S-31||The Bernhard J. and Diane H. Welle Fam||Series Seed Preferred||10/06/2014||234,588|
|PS-S-33||Dave Berlin||Series Seed Preferred||10/06/2014||234,362|
|PS-S-34||Randy Nichols||Series Seed Preferred||10/06/2014||935,731|
|PS-S-35||Plus Capital, L.P.||Series Seed Preferred||10/06/2014||185,771|
|PS-S-36||The Mandel Company||Series Seed Preferred||10/06/2014||185,722|
|PS-S-37||Zillion, LLC||Series Seed Preferred||10/06/2014||539,088|
|PS-S-38||Zillion, LLC||Series Seed Preferred||10/06/2014||1,113,940|
|PS-S-39||Zillion, LLC||Series Seed Preferred||10/06/2014||371,313|
|PS-S57||StartEngine Broker Dealer||Series A-3||1/30/2020||1,158,931|
|PS-S58||StartEngine Crowd||Series A-3||1/30/2020||1,368,432|
|ID||Shareholder||Shares||Strike Price||Grant Date|
|OG-12||William Brian Smith||-||$||0.15||6/17/2014|
|OG-40||Nick Lehman (re:DSTLD.com sale)||300,000||$||0.16||1/1/2016|
|OG-59||Patrick M. Falle||37,736||$||0.21||8/24/2018|
|2014-1||G Squared Media Holdings, LLC||Common||6/17/2014||10,000|
|WG-2||TRIPLE 8 HOLDINGS, LLC||Common||6/6/2016||1,800,000|
|WG-3||SI Securities, LLC||Series A||8/3/2016||157,953|
|WG-4||bocm3-DSTLD-Senior Debt, LLC||Common||4/7/2017||1,139,398|
|WG-5||bocm3-DSTLD-Senior Debt, LLC||Common||1/2/2018||610,578|
|WG-6||bocm3-DSTLD-Senior Debt, LLC||Common||4/9/2018||637,769|
|WG-7||SI Securities, LLC||Series A-2||7/7/2017||296,637|
|WG-8||SI Securities, LLC||Series A||1/28/2016||66,000|
|WG-9||North Capital Private Securities Corporation||Series A||1/28/2016||7,333|
|WG-10||North Capital Private Securities Corporation||Series A||8/3/2016||17,550|
|WG-11||bocm4-DSTLD-Senior Debt, LLC||Common||3/12/2019||1,082,973|
|WG-12||bocm4-DSTLD-Senior Debt, LLC||Common||2/7/2020||1,929,003|
|WG-13||bocm4-DSTLD-Senior Debt, LLC||Common||2/7/2020||1,929,003|
Denim intends to issue stock options to each of its Chief Executive Office and Chief Operating Officer – the number of shares subject to such stock options, and the date of issuance and exercise price of such options has not yet been determined but it is expected that such options could equal up to 30% of the outstanding shares of Denim on a fully converted, fully diluted basis measured as of the effective date of its proposed IPO.