THIRD AMENDMENT TO FIRST AMENDED, RESTATED, AND CONSOLIDATED LOAN AND SECURITY AGREEMENT
THIRD
AMENDMENT TO
FIRST
AMENDED, RESTATED, AND CONSOLIDATED
This
THIRD AMENDMENT TO FIRST AMENDED, RESTATED, AND CONSOLIDATED LOAN AND SECURITY
AGREEMENT (“Third
Amendment”),
dated
as of November 28, 2006, is entered into by and among the lenders party hereto
(the “Lenders”),
▇▇▇▇▇
Fargo Retail Finance LLC (as successor in interest to ▇▇▇▇▇ Fargo Retail Finance
II, LLC), a Delaware limited liability company, as arranger and administrative
agent for the Lenders (the “Agent”),
The
Walking Company, a Delaware corporation, and Big Dog USA, Inc., a California
corporation (individually and collectively, the “Borrowers”),
and
Big Dog Holdings, Inc., a Delaware corporation (“Parent”).
RECITALS
WHEREAS,
Borrowers, Parent, Agent and Lenders have executed and delivered that certain
First Amended, Restated, and Consolidated Loan and Security Agreement, dated
as
of July 7, 2005, as amended by that certain First Amendment to the First
Amended, Restated, and Consolidated Loan and Security Agreement dated August
31,
2005, as amended by that certain Second Amendment to the First Amended, Restated
and Consolidated Loan and Security Agreement dated October 23, 2006
(collectively, as such may be amended, restated, supplemented and/or modified
from time to time, hereafter, the “Loan
Agreement”);
WHEREAS,
Borrowers have requested that Agent and Lenders extend and increase the credit
facilities provided under the Loan Agreement and Agent and Lenders have agreed
so to extend and increase the credit facilities and to make certain other
amendments to the Loan Agreement, all of which shall be subject to and pursuant
to the terms and conditions contained herein.
NOW
THEREFORE, for good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, and upon the terms and conditions set forth
herein, the parties hereby agree as follows:
1.
RELATION
TO THE LOAN AGREEMENT; DEFINITIONS.
1.1. Relation
to Loan Agreement.
This
Third Amendment constitutes an integral part of the Loan Agreement and shall
be
deemed to be a Loan Document for all purposes. Upon the effectiveness of this
Third Amendment, on and after the date hereof each reference in the Loan
Agreement to “this Agreement,” “hereunder,” “hereof,” or words of like import
referring to the Loan Agreement, and each reference in the other Loan Documents
to “the Loan Agreement,” “thereunder,” “thereof” or words of like import
referring to the Loan Agreement, shall mean and be a reference to the Loan
Agreement as amended hereby.
1.2 Definitions.
For all
purposes of this Third Amendment, capitalized terms used herein without
definition shall have the meanings specified in the Loan Agreement unless
specifically defined herein.
(a) The
following definitions shall be added to the Loan Agreement:
“Accordion
Activation Date”
as
defined in the definition of Maximum Revolver Amount.
“Accordion
Amount”
as
defined in the definition of Maximum Revolver Amount.
“Additional
Term Loan Advance”
as
defined in Section 2.2(f) hereof.
“Effective
Date of the Third Amendment”
means
the “Effective Date” as defined in that certain Third Amendment to First
Amended, Restated, and Consolidated Loan and Security Agreement dated November
28, 2006, among Lenders, Agent, Borrowers and Parent.
“Revolver
Increase Fee”
means
an amount equal to the product of thirty one hundredths of one percent (0.30)
times
the
Accordion Amount which shall be due and payable upon the Accordion Activation
Date.
(b) The
following definitions in the Loan Agreement are hereby amended as
follows:
“Applicable
Prepayment Premium”
means,
as of the date of determination, an amount equal to (a) during the period of
time from and after the date of the execution and delivery of this Agreement
up
to October 23, 2009, fifty one hundredths of one percent (0.50) times
the
Maximum Loan Amount, (b) during the period of time from and including the date
that is the first anniversary of the Closing Date of this Agreement up to
October 23, 2010, twenty five one hundredths of one percent (0.25) times
the
Maximum Loan Amount and (c) during the period of time from and including October
23, 2010 to the Maturity Date, zero.
2
“Average
Excess Availability”
means
the average daily Excess Availability for any calendar quarter of the Parent.
“LIBOR
Rate Margin”
has
the
meaning set forth in Section 2.7(a).
“Maturity
Date”
means
October 23, 2011.
“Maximum
Loan Amount”
means
the sum of Maximum Revolver Amount in effect as of the date of determination
thereof plus the Term Loan Amount.
“Maximum
Revolver Amount”
means
$50,000,000, provided, that the Maximum Revolver Amount may be increased by
up
to $10,000,000 at the option of the Borrowers, in increments of $5,000,000
each
(the “Accordion
Amount”)
exercised upon seven (7) days prior written notice to Agent, received anytime
from the Effective Date of the Third Amendment through July 23, 2011, provided,
that as of each Accordion Activation Date (hereinafter defined) (i) an Event
of
Default has not occurred and is continuing, and (ii) an Event of Default will
not occur as a result of increasing the Maximum Revolver Amount by the Accordion
Amount (the date which the Maximum Revolver Amount is increased by the Accordion
Amount, shall be referred to herein as the “Accordion
Activation Date”).
“Obligations”
includes, in addition to all “Obligations” included in the existing definition,
all “Obligations” in respect to the Additional Term Loan Advance.
“Term
Loan Maturity Date”
is
hereby deleted.
“TWC
Borrowing Base”
means,
as of any date of determination, the result of:
(a)
the
lessor
of:
3
(i)
75%
times the value (at Cost) of TWC Eligible Inventory, except that solely during
the periods when the TWC Maximum Advance Rate equals ninety percent (90%) then
80% times the value (at Cost) of the TWC Eligible Inventory; and
(ii)
the
TWC
Maximum Advance Rate times TWC’s then extant Net Liquidation Percentage times
the value (at Cost) of TWC’s Eligible Inventory,
plus
(b)
85%
of TWC Eligible Credit Card Receivables, up to the maximum amount of $2,000,000,
minus
(c)
any
Inventory Reserves associated with TWC Eligible Inventory (without duplication
in the calculation of Availability or Aggregate Borrowing Base).
“TWC
Maximum Advance Rate”
means
eighty-five percent (85%), except that solely during the months of May through
October in fiscal year of Parent 2007 and August and September during each
fiscal year of Parent thereafter, such percentage shall be increased to ninety
percent (90%) provided, that an Event of Default has not occurred and is
continuing and an Event of Default would not exist after giving effect to such
increased percentage.
2.
AMENDMENT
TO LOAN AGREEMENT.
2.1 Term
Loan.
The
following new Section 2.2(f) shall be inserted into the Loan
Agreement:
4
2.2(f) Additional
Term Loan Advance.
Notwithstanding anything in Section 2.2(a) hereof to the contrary, provided
that
no Event of Default has occurred and is continuing, prior to January 31, 2007,
upon receipt of written request from the Borrowers, the Agent and Lenders agree
to make one (1) additional advance under the Term Loan (“Additional
Term Loan Advance”)
to
Borrowers in an amount equal to the difference between the Term Loan Amount
minus
the
outstanding principal balance of the Term Loan as of the date of such Additional
Term Loan Advance. The Borrowers shall provide the Agent with at least seven
(7)
days advance written notice of Borrowers’ desire for such Additional Term Loan
Advance. If the Agent and Lenders make an Additional Term Loan Advance to
Borrowers, then Borrowers shall continue to be obligated to make payments of
principal, interest and any Applicable Prepayment Premium which may become
due
in connection with any early payments of the Term Loan in accordance with
Sections 2.2(c) and 2.2(d) of the Loan Agreement; except that (i)
notwithstanding anything contained in Section 2.2(c) to the contrary, Borrowers’
obligation to make monthly principal payments shall be suspended for a period
of
six (6) months from the date of such Additional Term Loan Advance until the
first day of the seventh (7th)
month
from the date of such Additional Term Loan Advance, but Borrowers shall be
required to make monthly principal payments of $55,555 on the first day of
each
month from and after such seventh (7th)
month
and (ii) the Term Loan Fee provided under Section 2.2(e) shall not be due in
connection with an Additional Term Loan Advance. Any unpaid principal and
accrued interest on the Term Loan shall be due and payable in full on the
Maturity Date. Notwithstanding anything contained in Section 2.2(a) hereof
to
the contrary, the proceeds of an Additional Term Loan Advance may be used for
any purpose permitted under Section 7.17 hereof.
2.2 Interest
Rates.
Section
2.7(a) of the Loan Agreement is deleted in its entirety and the following
substituted therefor:
2.7(a)
Interest
Rates.
Except
as provided in clause (c) below, all Obligations (except for undrawn Letters
of
Credit, the Term Loan or any Additional Term Loan Advance Obligations and Bank
Product Obligations) that have been charged to the Loan Accounts pursuant to
the
terms hereof shall bear interest on the Daily Balance thereof as follows: (i)
if
the relevant Obligation is a Standard Advance that is a LIBOR Rate Loan, at
a
per annum rate equal to the LIBOR Rate plus the applicable margins set forth
below based upon Average Excess Availability, as measured on the last day of
the
immediately preceding calendar quarter (it being understood that the applicable
margins will be adjusted quarterly on the first day of each calendar quarter
based upon the aforementioned measurements made on the last day of the
immediately preceding calendar quarter) and (ii) otherwise, at a per annum
rate
equal to the Base Rate plus the Base Rate Margin.
5
|
Level
|
Average
Excess Availability
|
LIBOR
Rate Margin
|
|
I.
|
Greater
than $15,000,000
|
1.25%
|
|
II.
|
Less
than or equal to $15,000,000 and greater than $7,500,000
|
1.50%
|
|
III.
|
Less
than or equal to $7,500,000
|
1.75%
|
The
Agent
and Lenders acknowledge and agree that the applicable margins shall be set
at
Level II in the above chart from the Effective Date of the Third Amendment
until
December 31, 2006. On January 1, 2007, and on the first day of each calendar
quarter after that, the applicable margins shall be adjusted in accordance
with
such chart.
2.3 Fees.
The
following new Section 2.12(d) is hereby inserted into the Loan
Agreement:
2.12(d)
Revolver
Increase Fee.
On any
Accordion Activation Date, the Borrowers shall pay Agent, on Lenders’ behalf,
the Revolver Increase Fee due on account of increasing the Maximum Revolver
Amount by the Accordion Amount occurring on such day. Such fee shall be deemed
fully earned and be due and payable such Accordion Activation Date.
2.4 Term.
Section
3.4 of the Loan Agreement is deleted in its entirety and the following
substituted therefor:
3.4 Term.
This
Agreement shall become effective upon the execution and delivery hereof by
Parent, Borrowers, Agent, and the Lenders and shall continue in full force
and
effect until the Maturity Date. The foregoing notwithstanding, the Lender Group,
upon election of the Required Lenders, shall have the right to terminate its
obligations under this Agreement immediately and without notice upon the
occurrence of an Event of Default.
6
2.5 Early
Termination by Borrower.
Section
3.6 of the Loan Agreement is deleted in its entirety and the following
substituted therefor:
3.6 Early
Termination by Borrower.
Borrowers have the option, at any time upon sixty (60) days written notice
by
Borrowers to Agent, to terminate this Agreement by paying to the Agent, for
the
benefit of the Lender Group, in cash, the Obligations (including (a) either
(i)
providing cash collateral to be held by Agent for the benefit of the Lenders
in
an amount equal to 105% of the then extant Letter of Credit Usage, or (ii)
causing the original Letters of Credit to be returned to the Issuing Lender,
and
(b) providing cash collateral to be held by Agent for the benefit of ▇▇▇▇▇
Fargo
or its Affiliates with respect to the then extant Bank Products Obligations),
in
full, together with the Applicable Prepayment Premium (to
be
allocated based upon letter agreements between Agent and individual Lenders).
If
Borrowers have sent a notice of termination pursuant to the provisions of this
Section, then the Commitments shall terminate and Borrowers shall be obligated
to repay the Obligations (including (a) either (i) providing cash collateral
to
be held by Agent for the benefit of the Lenders in an amount equal to105% of
the
then extant Letter of Credit Usage, or (ii) causing the original Letters of
Credit to be returned to the Issuing Lender, and (b) providing cash collateral
to be held by Agent for the benefit of ▇▇▇▇▇ Fargo or its Affiliates with
respect to the then extant Bank Products Obligations), in full, together with
the Applicable Prepayment
Premium, on the date set forth as the date of termination of this Agreement
in
such notice. In the event of the termination of this Agreement and repayment
of
the Obligations at any time prior to the Maturity Date as a result of a Change
in Control, then Borrowers shall be required to pay only fifty percent (50%)
of
the Applicable Prepayment Premium otherwise due hereunder. Provided further
that
in the event
of the
termination of this Agreement and repayment of the Obligations at any time
prior
to the Maturity Date, for any other reason, including (a) termination upon
the
election of the Required Lenders to terminate after the occurrence of an Event
of Default, (b) foreclosure and sale of Collateral, (c) sale of the Collateral
in any Insolvency Proceeding, or (iv) restructure, reorganization, or compromise
of the Obligations by the confirmation of a plan of reorganization or any other
plan of compromise, restructure, or arrangement in any Insolvency Proceeding,
then, in view
of
the impracticability and extreme difficulty of ascertaining the actual amount
of
damages to the Lender Group or profits lost by the Lender Group as a result
of
such early termination, and by mutual agreement of the parties as to a
reasonable estimation and calculation of the lost profits or damages of the
Lender Group, Borrowers shall pay the Applicable Prepayment Premium to Agent
(to
be allocated based upon letter agreements between Agent and individual Lenders),
measured as of the date of such termination.
7
2.6 Use
of
Proceeds.
Section
7.17 of the Loan Agreement is deleted in its entirety and the following
substituted therefor:
7.17 Use
of
Proceeds.
Use the
proceeds of the Advances or the Additional Term Loan Advance for any purpose
other than (a) to pay transactional fees, costs, and expenses incurred in
connection with this Agreement, the other Loan Documents, and the transactions
contemplated hereby and thereby and (b) to provide ongoing working capital
for
general corporate purposes, issuance of letters of credit, capex requirements
including new store openings and other general corporate purposes that are
consistent with the Borrowers’ business plan.
3. REPRESENTATIONS
AND WARRANTIES. Each
of
the Borrowers hereby affirms to Agent and Lenders that all of its
representations and warranties set forth in the Loan Agreement are true,
complete and accurate in all respects as of the date hereof. Additionally,
each
of the Borrowers represents and warrants to Agent and Lenders the
following:
(a)
Legally
Enforceable Agreement.
This
Third Amendment is a legal, valid and binding obligation of the Borrowers
enforceable against the Borrowers in accordance with its terms.
(b)
No
Defaults.
No
Events of Default have occurred and are continuing as of the date
hereof.
4. RELEASE.
In
consideration of Agent and Lenders entering into this Third Amendment, each
of
the Borrowers hereby releases and forever discharges Agent and Lenders, and
its
successors, assigns, agents, shareholders, directors, officers, employees,
agents, attorneys, parent corporations, subsidiary corporations, affiliated
corporations, affiliates, and each of them, from any and all claims, debts,
Obligations, demands, obligations, costs, expenses, actions and causes of
action, of every nature and description, known and unknown, whether or not
related to the subject matter of this Third Amendment or the other Loan
Documents, which Borrowers now have or at any time may have held, by reason
of
any matter, cause or thing occurred, done, omitted or suffered to be done prior
to the date of this Third Amendment. This release is fully effective on the
date
hereof. Agent and Lenders are not releasing Borrowers from any claims, debts,
Obligations, demands, obligations, costs, expenses, actions or causes of
action.
8
5. CONDITIONS
PRECEDENT. The
effective date of this Third Amendment (the “Effective
Date”)
shall
occur upon the receipt by Agent of an executed copy of this Third Amendment
by
all parties hereto and any other documents executed in connection
therewith.
6. COSTS
AND EXPENSES.
Borrowers shall pay to Agent all of Agent’s out-of-pocket costs and expenses
(including, without limitation, the fees and expenses of its counsel, which
counsel may include any local counsel deemed necessary, search fees, filing
and
recording fees, documentation fees, appraisal fees, travel expenses; and other
fees) arising in connection with the preparation, execution, and delivery of
this Third Amendment and all related documents. Agent shall be authorized to
charge the Loan Account with such fees and expenses.
7. MISCELLANEOUS.
Each of
the Borrowers confirms that the Loan Agreement and other Loan Documents remain
in full force and effect without amendment or modification of any kind, except
as expressly set forth in this Third Amendment. This Third Amendment shall
be
deemed to be a Loan Document and, together with the other Loan Documents,
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all prior dealings, correspondence, conversations
or
communications between the parties with respect to the subject matter
hereof.
8. LIMITED
EFFECT.
In the
event of a conflict between the terms and provisions of this Third Amendment
and
the terms and provisions of the Loan Agreement, the terms and provisions of
this
Third Amendment shall govern. In all other respects, the Loan Agreement, as
amended and supplemented hereby, shall remain in full force and
effect.
9. COUNTERPARTS:
EFFECTIVENESS.
This
Third Amendment may be executed in any number of counterparts and by different
parties on separate counterparts, each of which when so executed and delivered
shall be deemed to be an original. All such counterparts, taken together, shall
constitute but one and the same Third Amendment. This Third Amendment shall
become effective upon the execution of a counterpart of this Third Amendment
by
each of the parties hereto.
9
IN
WITNESS WHEREOF, the
parties hereto have caused this Third Amendment to be executed and delivered
as
of the date first above written.
|
BIG
DOG HOLDINGS, INC.,
|
|||
|
a
Delaware corporation, as Parent
|
|||
|
By:
|
|||
|
Title:
|
|||
|
BIG
DOG USA, INC.,
|
|||
|
a
California corporation, as a Borrower
|
|||
|
By:
|
|||
|
Title:
|
|||
|
THE
WALKING COMPANY,
|
|||
|
a
Delaware corporation, as a Borrower
|
|||
|
By:
|
|||
|
Title:
|
|||
|
▇▇▇▇▇
FARGO RETAIL FINANCE, LLC,
|
|||
|
a
Delaware limited liability company, as Agent and as a
Lender
|
|||
|
By:
|
|||
|
Title:
|
|||