Third Amendment to Fifth Amended and Restated Credit Agreement

EX-10.2 3 c27426exv10w2.htm THIRD AMENDMENT TO FIFTH AMENDED AND RESTATED CREDIT AGREEMENT Third Amendment to Fifth Amended and Restated Cred

Exhibit 10.2

Execution copy

THIRD AMENDMENT TO
FIFTH AMENDED AND RESTATED CREDIT AGREEMENT

This THIRD AMENDMENT TO FIFTH AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”) is entered into as of this 14^th day of February, 2008 among WILSONS LEATHER HOLDINGS INC., a Minnesota corporation (“Borrower”), GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as Lender, Term Lender, Swing Line Lender and as Agent (“Agent”), the Credit Parties signatory hereto and the Lenders signatory hereto. Unless otherwise specified herein, capitalized terms used in this Amendment shall have the meanings ascribed to them by the Credit Agreement (as hereinafter defined).

RECITALS

WHEREAS, Borrower, certain Credit Parties, Agent and Lenders have entered into that certain Fifth Amended and Restated Credit Agreement dated as of December 29, 2006 (as amended, supplemented, restated or otherwise modified from time to time, the “Credit Agreement”); and

WHEREAS, Borrower, the Credit Parties signatories to the Credit Agreement, the Lenders and Agent wish to amend certain provisions of the Credit Agreement, as more fully set forth herein.

NOW THEREFORE, in consideration of the mutual covenants herein and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1 Amendments to the Credit Agreement. Subject to the satisfaction of the conditions precedent set forth in Section 3 hereof, the parties hereto hereby agree to amend the Credit Agreement as follows:

(a) The third sentence of Section 1.1(a)(i) of the Credit Agreement is hereby amended and restated to read in its entirety as follows:

“The aggregate amount of Revolving Credit Advances outstanding shall not exceed at any time the lesser of (A) the Maximum Amount less the sum of 100% of the Letter of Credit Obligations, 100% of the Eligible Trade L/C Obligations and 100% of the Swing Line Loan outstanding and (B) the Borrowing Base plus the aggregate amount of unrestricted cash on deposit in a deposit account of Borrower under the control of the Agent, at a bank or other financial institution acceptable to Agent and subject to a tri-party blocked account agreement by and among Agent, such bank or financial institution and Borrower in form and substance satisfactory to Agent, less the sum of 100% of the Letter of Credit Obligations, 100% of the Eligible Trade L/C Obligations and 100% of the Swing Line Loan outstanding at such time (such amount, “Borrowing Availability”).“

(b) The second sentence of Section 1.1(c)(i) of the Credit Agreement is hereby amended and restated to read in its entirety as follows:

“The aggregate amount of Swing Line Advances outstanding shall not exceed the lesser of (A) the Swing Line Commitment and (B) the Borrowing Base plus the aggregate amount of unrestricted cash on deposit in a deposit account of Borrower under the control of the Agent, at a bank or other financial institution acceptable to Agent and subject to a tri-party blocked account agreement by and among Agent, such bank or financial institution and Borrower in form and substance satisfactory to Agent, less the sum of the outstanding balance of the Revolving Credit Advances, 100% of outstanding Letter of Credit Obligations and 100% of outstanding Eligible Trade L/C Obligations (“Swing Line Availability”).”

(c) The third sentence of Section 1.2 of the Credit Agreement is hereby amended and restated to read in its entirety as follows:

“In addition, the sum of 100% of the Letter of Credit Obligations and 100% of outstanding Eligible Trade L/C Obligations shall not exceed the Borrowing Base, plus the aggregate amount of unrestricted cash on deposit in a deposit account of Borrower under the control of the Agent, at a bank or other financial institution acceptable to Agent and subject to a tri-party blocked account agreement by and among Agent, such bank or financial institution and Borrower in form and substance satisfactory to Agent, less the then outstanding Revolving Credit Advances and Swing Line Loan.”

(d) Section 1.19 of the Credit Agreement is hereby amended by adding the following new sentence at the end thereof:

“Notwithstanding anything to the contrary set forth herein, any Inventory-Apparel located at the Closed Stores shall not constitute Eligible Inventory-Apparel following the date on which Borrower has received the Guaranteed Amount (as defined in the Agency Agreement).”

(e) Section 1.21 of the Credit Agreement is hereby amended by adding the following new sentence at the end thereof:

“Notwithstanding anything to the contrary set forth herein, any In-Transit Inventory in transit to or from a Closed Store shall not constitute Eligible In-Transit Inventory-Retail following the date on which Borrower has received the Guaranteed Amount (as defined in the Agency Agreement).”

(f) Section 1.24 of the Credit Agreement is hereby amended and restated to read in its entirety as follows:

“1.24 [Intentionally Omitted]”

(g) Section 6.8(a) of the Credit Agreement is hereby amended and restated to read in its entirety as follows:

“(a) (i) the sale of Inventory in the ordinary course of business and (ii) (v) sales of Inventory and other assets (collectively, the “Merchandise”) of Borrower and certain other Credit Parties (collectively, the “Merchants”) which are located at Merchants’ retail

store locations listed on Schedule K attached hereto (collectively, the “Closed Stores”), solely to the extent such sales are consummated in the Closed Stores by means of a promotional, store closing or similar sale (the “Store Closing Sale”), (x) sales (the “FF&E Sale”) of furnishings, trade fixtures, Equipment and real property improvements in connection with the Store Closing Sale which are located at the Closed Stores(the “FF&E”), (y) the sale or termination or other mitigation of damages with respect to the leases of the real property listed on Schedule L attached hereto (the actions and events described in this clause (y), the “Lease Mitigations” and together with the Store Closing Sale and the FF&E Sale are collectively being referred to herein as, the “Comprehensive Sale”) and (z) upon completion of the Comprehensive Sale the transfer by Merchants to Hilco/Gordon Brothers Joint Venture, or to a landlord or a designee of Hilco/Gordon Brothers Joint Venture (as applicable) title to all Merchandise and any FF&E remaining at the Closed Stores at the conclusion of the Comprehensive Sale pursuant to terms and conditions of the Agency Agreement (and Agent and Lenders hereby agree that all security interests held by Agent in and to such Merchandise and the FF&E transferred pursuant to above clause (z) shall be deemed released upon such transfer by Merchants and Lenders hereby direct Agent to release such security interest, and Agent hereby further agrees to prepare, execute and deliver to Borrower, at Credit Parties’ expense, an appropriate UCC financing statement amendment as soon after the completion of the Comprehensive Sale as practicable to evidence the release of Agent’s security interests on such Merchandise and FF&E),”

(h) Section 6 of the Credit Agreement is hereby amended by adding the following Section 6.20 thereto which shall read in its entirety as follows:

“6.20 Lease Mitigations

No Credit Party shall directly or indirectly make payments in connection with one or more Lease Mitigations in an aggregate amount in excess of $8,600,000 on or after the Third Amendment Effective Date.”

(i) Section 5 of the Credit Agreement is hereby amended by adding the following Section 5.11 thereto which shall read in its entirety as follows:

“5.11 Additional Deliveries.

On or prior to February 25, 2008, Borrower shall deliver to Agent Ultimate Parent’s forecasted consolidated balance sheets, profit and loss statements, cash flow statements and borrowing availability projections on a monthly basis for the remaining period in the Fiscal Year ending in January, 2009 and for the Fiscal Year ending in January, 2010, which, in each case, shall be (i) prepared in a manner consistent with the historical Financial Statements of Ultimate Parent together with appropriate supporting details and a statement of underlying assumptions and (ii) in form and substance reasonably satisfactory to Agent (the “Updated Projections”); provided that, notwithstanding anything to the contrary contained herein or otherwise, from and after the Third Amendment Effective Date through and including the date of receipt by Agent of the Updated Projections, in form and substance reasonably satisfactory to Agent, no

Revolving Loans may be outstanding under this Agreement (other than Letter of Credit Obligations and Eligible Trade L/C Obligations).”

(j) Clause (b) of Section 8.1 of the Credit Agreement is hereby amended and restated to read in its entirety as follows:

“(b) Any Credit Party shall fail or neglect to perform, keep or observe any of the provisions of Sections 1.4, 1.8, 5.4, 5.11 or 6, or any of the provisions set forth in Schedule E, respectively.”

(k) Schedule A to the Credit Agreement is hereby amended by adding the following new definitions in alphabetical order therein:

“Agency Agreement” means that certain Agency Agreement dated as of February 14, 2008 by and among the Borrower, the Credit Parties signatories thereto and the Hilco/Gordon Brothers Joint Venture as in effect on the Third Amendment Effective Date.

“Closed Stores” has the meaning set forth in Section 6.8 of the Credit Agreement.

“Comprehensive Sale” has the meaning set forth in Section 6.8 of the Credit Agreement.

“FF&E” has the meaning set forth in Section 6.8 of the Credit Agreement.

“FF&E Sale” has the meaning set forth in Section 6.8 of the Credit Agreement.

“Hilco/Gordon Brothers Joint Venture” means a joint venture composed of Hilco Merchant Resources, LLC, Gordon Brothers Retail Partners, LLC and Hilco Real Estate, LLC.

“Lease Mitigations” has the meaning set forth in Section 6.8 of the Credit Agreement.

“Merchandise” has the meaning set forth in Section 6.8 of the Credit Agreement.

“Merchants” has the meaning set forth in Section 6.8 of the Credit Agreement.

“Store Closing Sale” has the meaning set forth in Section 6.8 of the Credit Agreement.

“Third Amendment” shall mean that certain Third Amendment to the Fifth Amended and Restated Credit Agreement entered into as of the 14^th day of February, 2008 among the Borrower, the Agent, the Credit Parties signatory thereto and the Lenders.

“Third Amendment Effective Date” shall mean the date on which the conditions precedent set forth in the Third Amendment have been satisfied.”

(l) Each of the following definitions set forth in Schedule A to the Credit Agreement is hereby amended and restated to read in its entirety as follows:

“Borrowing Base” shall mean, as of any date of determination, the sum of:

(a) 100% of the book value of Eligible Accounts-Retail at all times; plus

(b) the lesser of (i) $10,000,000 or (ii) 100% of the book value of Eligible Accounts-Wholesale at all times; plus

(c) 102.5% of the NOLV of Eligible Inventory-Apparel and 102.5% of the NOLV of the Inventory-Apparel which shall exist upon a draw on the applicable Eligible Trade L/C-Retail; plus

(d) the lesser of (i) $10,000,000 or (ii) 60% of (A) the book value of Eligible Inventory-Wholesale (including Eligible In-Transit Inventory-Wholesale) at all times minus (B) the book value of Eligible In-Transit Inventory-Wholesale in excess of $5,000,000 at all times; plus

(e) 60% of the book value of the Eligible Inventory-Wholesale, which shall exist upon a draw on the applicable Eligible Trade L/C-Wholesale;

less the Minimum Excess Availability Reserve and less any additional Reserve established by Agent at such time.

“Minimum Excess Availability Reserve” shall mean a special Reserve established by Agent on the Closing Date and maintained by Agent in an amount at all times equal to the sum of (x) 10% of the lesser of (i) the Maximum Amount and (ii) the sum of the amounts set forth in clauses (a), (b), (c), (d) and (e) of the definition of Borrowing Base plus (y) $10,000,000.”

(m) The first sentence of clause (a) of Schedule B to the Credit Agreement is hereby amended and restated to read in its entirety as follows:

“Subject to the terms and conditions of this Agreement, Agent agrees to incur from time to time, upon the request of Borrower on behalf of Borrower and for Borrower’s account, Letter of Credit Obligations and Eligible Trade L/C Obligations by causing Letters of Credit and Eligible Trade L/Cs to be issued on terms acceptable to Agent and by Agent, a subsidiary of Agent or a bank or other legally authorized Person acceptable to Agent and Borrower (each, an “L/C Issuer”) for Borrower’s account and guaranteed by Agent; provided, however, that the aggregate amount of the sum of all such Letter of Credit Obligations plus Eligible Trade L/C Obligations shall not at any time exceed the lesser of (i) Seventy-Five Million Dollars ($75,000,000) (the “L/C Sublimit”), or (ii) the Maximum Amount less the aggregate outstanding principal balance of the Revolving Credit Advances; provided further that Letter of Credit Obligations plus Eligible Trade L/C Obligations shall not exceed the Borrowing Base plus the aggregate amount of unrestricted cash on deposit in a deposit account of Borrower under the control of the Agent, at a bank or other financial institution acceptable to Agent and subject to a

tri-party blocked account agreement by and among Agent, such bank or financial institution and Borrower in form and substance satisfactory to Agent less the outstanding balance of the Revolving Credit Advances and Swing Line Advances.”

(n) Clause (a) of Schedule H is hereby amended and restated to read in its entirety as follows:

“(a) To Agent, (1) no less frequently than daily by 1:00 p.m. (Chicago time) on each day, a Borrowing Base Certificate with respect to Borrower, accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion, which shall be prepared by the Borrower as of the previous day and (2) on or prior to 5 Business Days after the end of each Fiscal Month, a Borrowing Base Certificate with respect to Borrower, accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion, which shall be prepared by the Borrower as of the last day of the immediately preceding Fiscal Month; and”

(o) Schedule H to the Credit Agreement is hereby amended by adding the following new clauses (h) and (i) at the end thereof:

“(h) Borrower, at its own expense, shall deliver to Agent on or prior to the first Friday to occur following the commencement of the Comprehensive Sale and each Friday thereafter until the Comprehensive Sale is completed a summary of the cash proceeds and disbursements of fees, costs and other expenses relating to the Comprehensive Sale, in form and substance satisfactory to Agent.

(i) Borrower, at its own expense, shall deliver to Agent from and after the Third Amendment Effective Date, (x) on or prior to the fifth day of each calendar month, an updated appraisal, prepared on a NOLV basis and by a Person and in a form reasonably acceptable to Agent, of the Inventory owned by the Borrower as of the last day of the then immediately preceding calendar month and (y) upon Agent’s request, by 12:00 p.m. (Chicago time) on Wednesday of each week, an updated appraisal, prepared on a NOLV basis and by a Person and in a form reasonably acceptable to Agent, of the Inventory owned by the Borrower as of the last Friday of the immediately preceding week.”

(p) The Credit Agreement is hereby amended to add as Schedules K and L thereto the Schedules K and L attached hereto.

Section 2 Representations and Warranties. Borrower and the Credit Parties who are party hereto represent and warrant that:

(a) the execution, delivery and performance by Borrower and such Credit Parties of this Amendment have been duly authorized by all necessary corporate action and this Amendment is a legal, valid and binding obligation of Borrower and such Credit Parties enforceable against Borrower and such Credit Parties in accordance with its terms, except as the enforcement thereof may be subject to (i) the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally and (ii) general

principles of equity (regardless of whether such enforcement is sought in a proceeding in equity or at law);

(b) each of the representations and warranties contained in the Credit Agreement (as amended hereby) is true and correct in all material respects on and as of the date hereof as if made on the date hereof, except to the extent that such representations and warranties expressly relate to an earlier date;

(c) neither the execution, delivery and performance of this Amendment nor the consummation of the transactions contemplated hereby does or shall contravene, result in a breach of, or violate (i) any provision of Borrower’s or Credit Parties’ certificate or articles of incorporation or bylaws, (ii) any law or regulation, or any order or decree of any court or government instrumentality or (iii) indenture, mortgage, deed of trust, lease, agreement or other instrument to which Borrower, the Credit Parties or any of their Subsidiaries is a party or by which Borrower, the Credit Parties or any of their Subsidiaries or any of their property is bound, except in any such case to the extent such conflict or breach has been waived by a written waiver document a copy of which has been delivered to Agent on or before the date hereof; and

(d) no Default or Event of Default will exist or result after giving effect hereto.

Section 3 Conditions to Effectiveness. This Amendment will be effective only upon satisfaction of the following:

(a) Execution and delivery of this Amendment by Borrower, the Credit Parties that are listed on the signature pages hereto, the Agent and each Lender;

(b) Delivery to Agent of certified copies of (i) that certain Agency Agreement dated as of February 14, 2008 by and among the Borrower, the Credit Parties signatories thereto and the Hilco/Gordon Brothers Joint Venture, and (ii) all other agreements, documents and instruments executed and/or delivered in connection with the foregoing; and

(c) Payment of an amendment fee to Agent, for the benefit of Lenders signatory hereto, in an amount equal to $172,500, which amendment fee shall be fully earned and payable on the date hereof.

Section 4 Reference to and Effect Upon the Credit Agreement.

(a) Except as specifically set forth herein, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed.

(b) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of Agent or any Lender under the Credit Agreement or any Loan Document, nor constitute a waiver of any provision of the Credit Agreement or any Loan Document, except as specifically set forth herein. Upon the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of similar import shall mean and refer to the Credit Agreement as amended hereby.

Section 5 Waiver and Release.

In consideration of the foregoing, each of Borrower and each Credit Party hereby waives, releases and covenants not to sue Agent or any Lender with respect to, any and all claims it may have against Agent or any Lender, whether known or unknown, arising in tort, by contract or otherwise prior to the date hereof relating to one or more Loan Documents.

Section 6 Costs and Expenses.

As provided in Section 11.3 of the Credit Agreement, Borrower agrees to reimburse Agent for all fees, costs and expenses, including the fees, costs and expenses of counsel or other advisors for advice, assistance, or other representation in connection with this Amendment.

Section 7 Governing Law.

THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS.

Section 8 Headings.

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 purposes.

Section 9 Counterparts.

This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed an original but all such counterparts shall constitute one and the same instrument.

Section 10 Confidentiality.

The matters set forth herein are subject to Section 11.18 of the Credit Agreement, which is incorporated herein by reference.

[signature page follows]

IN WITNESS WHEREOF, this Amendment has been duly executed as of the date first written above.


	BORROWER: WILSONS LEATHER HOLDINGS INC.
	By:	/s/ Stacy A. Kruse
	Title:	Chief Financial Officer and Treasurer


	LENDERS: GENERAL ELECTRIC CAPITAL CORPORATION, as Agent, Lender, Term Lender and Swing Line Lender
	By:	/s/ Kristina M. Miller
	Title:	Duly Authorized Signatory

[Signature Page to Third Amendment]

The undersigned are executing this Amendment in their capacity as Credit Parties:

Wilsons The Leather Experts Inc.

By: /s/ Stacy A. Kruse