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Exhibit
10.3
SECOND AMENDMENT AND
WAIVER
TO
AMENDED AND RESTATED
CREDIT AGREEMENT
This SECOND AMENDMENT AND
WAIVER TO AMENDED AND RESTATED CREDIT AGREEMENT (this “
Amendment ”) is effective as of September 23,
2005 by and among HARRY & DAVID OPERATIONS CORP. (formerly
known as Bear Creek Corporation), a Delaware corporation (“
Borrower ”), the Guarantors (such term and each other
capitalized term used but not defined herein having the meaning
given to it in Article I of the Credit Agreement referenced
below), the Required Lenders signatory hereto, UBS AG, STAMFORD
BRANCH, as administrative agent (the “ Administrative
Agent ”) for the Lenders, and GMAC Commercial Finance
LLC, as collateral agent (the “ Collateral Agent
”; and together with the Administrative Agent, the “
Agents ”) for the Secured Parties and Issuing
Bank.
RECITALS
WHEREAS, Borrower,
Guarantors, the Administrative Agent, the Collateral Agent, the
other Agents and the Lenders entered into that certain Amended and
Restated Credit Agreement dated as of February 25, 2005 (as
amended, supplemented, restated or otherwise modified from time to
time, the “ Credit Agreement ”); and
WHEREAS, Borrower has
requested that Agents and the Required Lenders amend certain
provisions of the Credit Agreement, all upon the terms and subject
to the conditions as herein set forth;
NOW THEREFORE, in
consideration of the foregoing recitals and mutual agreements
contained herein and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Agents,
Required Lenders, Borrower and the other Loan Parties agree as
follows:
SECTION 1.
Amendments . The Credit Agreement is hereby amended as
follows:
(a) The definition of the
term “ Consolidated EBITDA ” is hereby amended
and restated in its entirety to read as follows:
“ Consolidated
EBITDA ” shall mean, for any applicable measurement
period, Consolidated Net Income for such period, as adjusted by
adding thereto to the extent deducted in calculating Consolidated
Net Income during such measurement period, without duplication,
(a) any provision for (or less any benefit from) income and
franchise taxes, (b) the amount of Consolidated Interest
Expense, (c) amortization and depreciation, (d) losses
(or less gains) from Asset Dispositions (excluding sales expenses
or losses related to current assets), (e) non-recurring
charges and expenses in an amount, when combined with any such
charges relating to any prior measurement period, not to exceed
$2.0 million in the aggregate, (f) the amount of severance
paid by Borrower and Subsidiary Guarantors during fiscal years 2005
and 2006 in an amount not to exceed $10.0 million, (g) the
amount of expenses associated with the closing of retail stores of
Borrower or any of its Subsidiaries in an amount not to exceed $1.5
million in the aggregate in any fiscal year, (h) non-cash
charges (or less gains) relating to the marked to
market provision for, the
termination of, or terminated, Hedging Agreements, (i) an
amount (not to exceed $926,000 in the aggregate) representing the
write down of or yield impairment in respect of roses Inventory of
the Companies in fiscal year 2005 or 2006, (j) any amount paid
to Wasserstein & Co., LP pursuant to the Management
Services Agreement, (k) to the extent not adjusted for
pursuant to clause (e) in the definition of
“Consolidated Net Income”, the amount of the increase
in non-cash rent expense (not to exceed $994,000 in the aggregate)
arising as a result of the Borrower’s change in accounting
treatment relating to the loss of deferred straight-line rental
benefit, (l) non-cash expenses arising in connection with the
grant of stock options (not to exceed $800,000 in any fiscal year),
(m) to the extent not adjusted for pursuant to clause
(f) of the definition of “Consolidated Net
Income”, non-cash purchase accounting adjustments related to
inventory step-ups and write-ups of valuations of leasehold
improvements (not to exceed $1,126,000 in the aggregate),
(n) accounting fees incurred in connection with the change of
the Borrower’s fiscal year, the issuance of the Senior Notes
and the initial public offering of the Borrower’s common
stock in an aggregate amount not to exceed $751,000,
(o) non-cash accruals of expenses relating to the
Borrower’s “Liquidity Event Award” implemented by
the Borrower in February 2005, (p) other additional non-cash
expenses arising in connection with the grant of stock options
which constitute so called “cheap stock” expenses and
(q) any Management Services Termination Fee paid during such
period.
(b) The definition of the
term “Consolidated Fixed Charges” is hereby amended and
restated in its entirety to read as follows:
“ Consolidated Fixed
Charges ” shall mean, for any period, the sum, without
duplication, of (a) Consolidated Interest Expense for such
period; (b) the amount of all Capital Expenditures made by
Holdings and its Subsidiaries during such period; (c) all cash
payments in respect of income taxes made during such period (net of
any cash refund in respect of income taxes actually received during
such period); (d) the scheduled principal amount of all
amortization payments on all Indebtedness (including the principal
component of all Capital Lease Obligations) of Holdings and its
Subsidiaries for such period (as determined on the first day of the
respective period); (e) the product of (i) all dividend
payments on any series of Disqualified Capital Stock of Holdings
during such period multiplied by (ii) a
fraction, the numerator of which is one and the denominator of
which is one minus the then current combined federal, state
and local statutory tax rate of Holdings, expressed as a decimal;
(f) the product of (i) all cash dividend payments on any
Preferred Stock (other than Disqualified Capital Stock) of Holdings
during such period, multiplied by (ii) a
fraction, the numerator of which is one and the denominator of
which is one minus the then current combined federal, state
and local statutory tax rate of Holdings, expressed as a decimal
and (g) if and when the amounts described on clauses
(o) and (p) of the definition of “Consolidated
EBITDA” are subsequently paid in cash, the amount of such
payments.
(c) The definition of the
term “ Consolidated Interest Expense ” is hereby
amended and restated in its entirety to read as follows:
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“ Consolidated
Interest Expense ” shall mean, subject to the proviso set
forth in the definition of “Test Period”, for any
period, without duplication, the total consolidated interest
expense of Holdings and its Consolidated Subsidiaries for such
period (calculated without regard to any limitations on the payment
thereof and including, capitalized interest, commitment fees,
letter of credit fees and net amounts payable under Interest Rate
Protection Agreements, but excluding any interest paid in kind)
determined in accordance with GAAP plus , without
duplication, (a) the portion of Capital Lease Obligations of
Holdings and its Consolidated Subsidiaries representing the
interest factor for such period, (b) imputed interest on
Attributable Indebtedness, (c) cash contributions to any
employee stock ownership plan or similar trust to the extent such
contributions are used by such plan or trust to pay interest or
fees to any Person (other than Holdings or a Wholly Owned
Subsidiary) in connection with Indebtedness Incurred by such plan
or trust, (d) the product of (i) all dividend payments on
any series of any Preferred Stock of any Subsidiary of Holdings
(other than any Preferred Stock held by Holdings or a Wholly Owned
Subsidiary), multiplied by (ii) a fraction, the
numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local
statutory tax rate of Holdings and its Subsidiaries, expressed as a
decimal, and (e) all interest on any Indebtedness of the type
described in clause (e) or (j) of the
definition of “Indebtedness” with respect to Holdings
or any of its Subsidiaries. Notwithstanding the foregoing, for any
period, Consolidated Interest Expense shall be calculated without
regard to (i) interest on the NOL Loan for such period and
without regard to the $4.7 million of Consolidated Interest Expense
arising as a result of the prepayment in full of the obligations
under the Second Lien Loan Documents on the Closing Date,
(ii) amortization of the financing fees incurred in connection
with the Borrower’s February 2005 refinancing (including
amortization of fees paid in connection with the Original Credit
Agreement) up to an amount not to exceed $2,500,000 in any fiscal
year and (iii) prepayment premiums incurred in connection
with, and the write-off of financing fees in connection with, the
prepayment or redemption of the Senior Fixed Rate Notes or the
Senior Floating Rate Notes to the extent such repayment or
redemption is permitted pursuant to
Section 6.09(ii)(B).
(d) The definition of the
term “ Excess Cash Flow Prepayment Amount ” is
hereby amended and restated in its entirety to read as
follows:
“ Excess Cash Flow
Prepayment Amount ” means an amount equal to (i) 50%
of Excess Cash Flow for each full fiscal year of the Borrower
ending after the Closing Date and for which the Borrower has
delivered the annual financial statements required by
Section 5.01 (a) , and computed on a cumulative
consolidated basis, less (ii) the amount of all prepayments,
redemptions and repurchases of Senior Notes made in reliance on the
provisions of Section 6.09(ii)(C)(1) ; provided
that prepayments, redemptions and repurchases made pursuant to
Section 6.09(ii)(C) shall be deemed to be made in reliance on
Section 6.09(ii)(C)(l) until such amount is utilized in full,
and thereafter shall be deemed to be made in reliance on
Section 6.09(ii)(C)(2).
(e) Section 1.01 is
hereby amended to add the following new definitions thereto in
proper alphabetical order:
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“ Additional Senior
Note Prepayment Amount ” means in connection with any
prepayment, redemption or repurchase of Senior Notes during the
Borrower’s fiscal quarters ending in June
2006, September 2006 or March 2007 the lesser of (i) an
aggregate amount for all three such quarters equal to $15 million
and (ii) (A) in connection with any such prepayment,
redemption or repurchase made in Borrower’s fiscal quarter
ending in June 2006, the amount by which the aggregate balance of
Borrower’s cash and Cash Equivalents as of the end of its
fiscal quarter ending in March 2006 exceeded $75 million,
(B) in connection with any such prepayment, redemption or
repurchase made in the Borrower’s fiscal quarter ending in
September 2006, the amount by which the aggregate balance of
Borrower’s cash and Cash Equivalents as of the end of its
fiscal quarter ending in June 2006 exceeded $30 million and
(C) in connection with any such prepayment, redemption or
repurchase made in the Borrowers’ fiscal quarter ending in
March 2007, the amount by which the aggregate balance of
Borrower’s cash and Cash Equivalents as of the end of its
fiscal quarter ending in December 2006 exceeded $150 million;
provided that (i) at any time that any Revolving
Loans shall be outstanding the “Additional Senior Prepayment
Amount” shall be $0 and (ii) for all
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