<PAGE>
EXHIBIT 10.6
WAIVER, CONSENT, AND FOURTH AMENDMENT TO SECOND AMENDED
AND RESTATED REVOLVING CREDIT AND GOLD CONSIGNMENT AGREEMENT
THIS
WAIVER, CONSENT, AND FOURTH AMENDMENT TO SECOND AMENDED AND
RESTATED
REVOLVING CREDIT AND GOLD CONSIGNMENT
AGREEMENT (this "Amendment") is entered
into as of the 3 day of October, 2005 by
and among the banks that are or may
from time to time become parties hereto
(individually a "Bank" and collectively,
the "Banks"), LASALLE BANK NATIONAL
ASSOCIATION, a national banking association,
as administrative agent ("Administrative
Agent") and collateral agent, and as an
Accommodation Bank, BANK OF AMERICA, N. A.,
a national banking association, as
managing agent ("Managing Agent"), BACK BAY
CAPITAL FUNDING LLC ("Back Bay"), as
Accommodation Facility agent
("Accommodation Facility Agent") and as an
Accommodation Bank, and WHITEHALL
JEWELLERS, INC., a Delaware corporation
("Borrower").
W I T N E S S E T H:
WHEREAS,
the Agents (as defined in the Agreement, as amended hereby),
the
Banks and the Borrower are parties to that
certain Second Amended and Restated
Revolving Credit and Gold Consignment
Agreement dated as of July 29, 2003, as
amended by that certain First Amendment to
Second Amended and Restated Revolving
Credit and Gold Consignment Agreement dated
as of March 23, 2004, that certain
Second Amendment to Second Amended and
Restated Revolving Credit and Gold
Consignment Agreement dated as of January
31, 2005, and that certain Third
Amendment to Second Amended and Restated
Revolving Credit and Gold Consignment
Agreement dated as of April 6, 2005
(collectively, the "Agreement"); and
WHEREAS,
on or about September 14, 2005, the Administrative Agent
notified
the Borrower that one or more Events of
Default had occurred under the Agreement
(collectively, the "Existing Defaults");
and
WHEREAS,
the Borrower has advised the Administrative Agent that the
Borrower has agreed to a "Bridge Loan Term
Sheet" with Prentice Capital
Management, LP ("Prentice"), a copy of
which is annexed hereto marked Exhibit
"A", pursuant to which the Borrower intends
to enter into a $30,000,000.00 loan
arrangement with Prentice and/or one or
more entities managed by Prentice and
other participating investors, and which is
to be secured by a security interest
in substantially all of the Borrower's
assets subordinate to the security
interest granted to, and held by, the
Agents and the Banks (the "Subordinate
Financing"); and
WHEREAS,
the Borrower has advised the Administrative Agent that the
Borrower has entered into a term sheet (the
"Trade Lien Term Sheet"), a copy of
which is annexed hereto marked Exhibit "B",
with respect to the treatment of the
Borrower's trade indebtedness, and that as
contemplated therein, the Borrower
intends to enter into a "Trade Lien
Agreement" with a "Collateral Trustee" on
behalf of the Borrower's trade vendors;
and
WHEREAS,
the Borrower has advised the Administrative Agent that the
Subordinate Financing is contemplated to be
a bridge loan facility leading to a
$50,000,000.00 Secured Convertible Note
facility (the "Convertible Facility"),
as contemplated in a term sheet (the
<PAGE>
"Convertible Facility Term Sheet") entered
into by the Borrower with Prentice, a
copy of which is annexed hereto marked
Exhibit "C";
WHEREAS,
the Borrower has requested that the Agents and the Banks (i)
waive the Existing Defaults and reinstate
the commitment of the Banks and the
Accommodation Banks to make loans and
advances and to grant financial
accommodations to or for the benefit of the
Borrower, (ii) consent to the
Subordinate Financing, the Trade Lien
Agreement, and the execution of the term
sheet with respect to the Convertible
Facility, and (iii) amend certain other
provisions of the Agreement; and
WHEREAS,
the Agents and the Banks are willing to do so in accordance
with
the terms and conditions of this
Amendment.
NOW,
THEREFORE, for and in consideration of the premises and mutual
agreements herein contained and for the
purposes of setting forth the terms and
conditions of this Amendment, the parties,
intending to be bound, hereby agree
as follows:
1.
Incorporation of the Agreement. All capitalized terms which are
not
defined hereunder shall have the same
meanings as set forth in the Agreement (as
amended hereby), and the Agreement, to the
extent not inconsistent with this
Amendment, is incorporated herein by this
reference as though the same were set
forth in its entirety. To the extent any
terms and provisions of the Agreement
are inconsistent with the amendments set
forth in Section 6 below, such terms
and provisions shall be deemed superseded
hereby. Except as specifically set
forth herein, the Agreement shall remain in
full force and effect and its
provisions shall be binding on the parties
hereto.
2.
Preconditions to Effectiveness. This Amendment shall not take
effect
unless and until each and all of the
following items has been satisfied or
delivered, as the case may be, and in all
events, to the satisfaction of the
Agents, in their sole and exclusive
discretion. The willingness of the Agents
and the Banks to enter into this Amendment
is expressly conditioned upon the
prior satisfaction of the following
conditions precedent. The Borrower expressly
acknowledges and agrees that the Agents and
the Banks are relying upon the
satisfaction of the following conditions
precedent (collectively, the
"Preconditions to Effectiveness"):
(a) The Borrower shall have closed on, or be simultaneously
closing
with Prentice on, the Subordinate
Financing, and the Subordinate Financing shall
be upon terms and conditions acceptable to
the Agents, in their sole and
exclusive discretion, substantially in
accordance with the Bridge Loan Term
Sheet.
(b) The Agents shall have entered into an Intercreditor and
Lien
Subordination Agreement with Prentice
and/or the lenders participating in the
Subordinate Financing on terms and
conditions acceptable to the Agents, in their
sole and exclusive discretion.
(c) The Trade Lien Term Sheet shall be fully executed and in
full
force and effect.
2
<PAGE>
(d) The Administrative Agent shall have entered into a security
agreement, blocked account agreement,
control agreement, or similar agreement,
and received whatever additional documents,
instruments, and agreements may be
necessary to perfect the Agents' and the
Banks' security interest in all cash
deposited into escrow in as contemplated in
connection with the Trade Lien Term
Sheet;
(e) The Agents shall have finalized the form of Intercreditor
and
Lien Subordination Agreement with Prentice
and/or the lenders who shall be
participating in the Convertible Facility
on terms and conditions acceptable to
the Agents, in their sole and exclusive
discretion.
(f) The Administrative Agent shall have received from the
Borrower
each of the following fully executed
documents, in form and substance
satisfactory to the Administrative Agent,
and all of the transactions
contemplated by each such document shall
have been consummated or each condition
contemplated by each such document shall
have been satisfied:
(i) This Amendment;
(ii) A Fee Letter with the Administrative Agent and the
Managing
Agent in form and substance acceptable to them, in their sole
and
exclusive
discretion;
(iii) An Accommodation Facility Fee Letter in form and
substance
acceptable to the Accommodation Facility Agent, in its sole and
exclusive
discretion;
(iv) Secretary's Certificate of the Borrower with resolutions
and
incumbency; and
(v) A Borrowing Base report dated October 3, 2005 confirming
that the
Borrower would have had Borrowing Availability as of October 3,
2005 in an
amount not less than $15,000,000.00, after giving effect to all
payments
required to be made at the closing on this Amendment and the
Subordinate Financing (including the escrowed funds), including
closing
fees,
costs, expenses, and attorneys' fees payable by the Borrower and
the
application of the proceeds of the Subordinate Financing in
accordance
with this
Amendment, and after giving effect to the requirements of
Section
10.1 of the Agreement as amended by this Amendment;
(vi) Such other documents, certificates, and opinions as the
Agents may
request; and
(g) The Administrative Agent shall have delivered to the
Borrower
written notice confirming satisfaction of
each and all of the other
Preconditions to Effectiveness of this
Amendment.
3. Waiver
of Existing Defaults. Subject to the Preconditions to
Effectiveness set forth in Section 2,
above, the Agents and the Banks hereby
waive the Existing Defaults. The
Commitments of the Banks and the Accommodation
Banks to make loans and advances and to
grant financial accommodations to or for
the benefit of the Borrower are hereby
reinstated.
3
<PAGE>
(a) This waiver and reinstatement shall not take effect upon
the
execution of this Amendment by the Agents
and the Banks, and only shall become
effective upon satisfaction in full of each
of the Preconditions to
Effectiveness;
(b) This waiver relates only to the identified Existing Defaults,
is
a one-time waiver, and shall not be deemed
to constitute a consent or waiver
with respect to (x) similar matters of the
Borrower, or (y) any other Events of
Default, whether now existing or hereafter
arising, including, without
limitation, on account of the breach of any
other provision of the Agreement;
and
(c) This waiver and reinstatement is made in express reliance
upon
the terms and conditions of this Amendment,
including all representations,
warranties, and covenants of the Borrower
set forth herein.
4. Consent
to Subordinate Financing, Trade Lien Agreement, and Convertible
Facility. In the absence of this Amendment,
the Subordinate Financing, the Trade
Lien Agreement, the execution of the
Convertible Facility Term Sheet, and the
other documents or agreements entered into
in connection with any of the
foregoing would violate, among other
provisions, the terms and conditions of the
following Sections of the Agreement: (i)
Section 5.8.2, "New Issuance
Prepayment," (ii) Section 9.1,
"Restrictions on Indebtedness," (iii) Section
9.2, "Restrictions on Liens", (iv) Section
9.13, "Issuance of Equity
Securities", and (v) Section 13.1(p).
(a) The Agents and the Banks consent to the Subordinate
Financing,
the Trade Lien Term Sheet, the Trade Lien
Agreement, and the execution of the
Convertible Facility Term Sheet, and the
other documents or agreements entered
into in connection with any of the
foregoing, and waive any violation of the
Agreement which may be, or has been,
occasioned thereby, including without
limitation, any violation of the terms and
conditions of the foregoing
enumerated Sections of the Agreement. The
Net Proceeds of the Subordinate
Financing shall be applied in accordance
with Section 5.9(c) of the Agreement,
as amended by this Amendment.
(b) The foregoing consent and waiver is made in express
reliance
upon the terms and conditions of this
Amendment, including all representations,
warranties, and covenants of the Borrower
set forth herein.
(c) In connection with the Convertible Facility, the Borrower
shall
(i) file a notice of meeting, proxy
statement and form of proxy (together, the
"Proxy Statement") with the Securities and
Exchange Commission ("SEC") in
compliance with the Securities Exchange Act
of 1934, as amended, and the rules
and regulations promulgated thereunder, on
or before October 31, 2005 relating
to a special meeting of the Borrower's
stockholders to approve: (A) up to a 1 to
3 reverse stock split, (B) the Convertible
Facility, and (C) the issuance of
shares of common stock upon payment of
interest on, or conversion of, the
"Convertible Note", and exercise of the
"Warrants" (as defined in the
Convertible Facility Term Sheet); and (ii)
obtain the requisite approvals of the
Borrower's stockholders to the proposals in
the Proxy Statement at a special
meeting of the Borrower's stockholders to
be held on or before (x) December 30,
2005, or (y) if the SEC determines to
review the foregoing, January 31, 2006.
4
<PAGE>
(d) The Borrower has delivered to the Administrative Agent copies
of
the forms of the documents, instruments,
and agreements which will be used to
evidence, consummate, and implement the
Convertible Facility which are annexed
hereto collectively marked Exhibit "D"
(collectively, the "Convertible Facility
Documents"). So long as the Convertible
Facility is evidenced, consummated, and
implemented in accordance with the
Convertible Facility Documents, then the
Agents and the Banks (i) consent to the
consummation and implementation of the
Convertible Facility, (ii) notwithstanding
the provisions of Section 5.8.2 of
the Agreement, consent to the use of a
portion of the proceeds thereunder to,
among other things, repay the amounts due
under the Subordinate Financing, and
(iii) waive any violation of the Agreement
which may be, or has been, occasioned
thereby, including any violation of the
terms and conditions of the foregoing
enumerated Sections.
(e) The Borrower acknowledges and agrees that except with respect
to
a closing on the Convertible Facility and
use of a portion of the proceeds
thereof received by the Borrower to repay
the amounts due on the Subordinate
Financing (or use of a portion of the
proceeds of another independent source of
equity which shall have been obtained on
terms and conditions acceptable to the
Agents, in their sole and exclusive
discretion), no proceeds of Revolving Credit
Loans shall be used to repay the
Subordinate Financing.
5. Store
Closing Program. Incidental to the Bridge Financing and the
contemplated closing on the Convertible
Facility, the Borrower has indicated
that it may implement a program of store
closing sales pursuant to which the
Borrower liquidates all Collateral located
at, and thereafter closes certain of
its stores. In this regard:
(a) Not less than fourteen (14) days prior to the intended
implementation of the store closing
program, the Borrower shall have presented
to the Administrative Agent a definitive
list of the stores designated to be
included in the store closing program,
along with pro forma financial
projections incorporating the anticipated
results and economic impact of
consummating the store closing sales.
(b) Any such store closing program shall be implemented and the
store closing sales shall be conducted by a
nationally recognized professional
retail inventory liquidation firm (a
"Liquidator") on behalf of the Borrower,
and the Borrower shall implement the store
closing program in accordance with a
written so-called "Agency Agreement" with
the Liquidator.
(c) The number of stores to be included in the store closing
program, the Borrower's pro forma financial
projections, and the Agency
Agreement all shall be on terms and
conditions acceptable to the Agents, in
their sole and exclusive discretion.
Further, upon the commencement of the store
closing sales, all Inventory at the
Borrower's stores which are to be included
in the sales shall be removed from Eligible
Inventory in such amounts as the
Agents may determine, in their sole and
exclusive discretion.
(d) All proceeds payable by the Liquidator pursuant to the
Agency
Agreement on account of the store closing
sales shall be paid directly to the
Administrative Agent and applied in
reduction of the Obligations under the
Agreement in accordance with Section
5.9(c). Further, upon receipt of the
proceeds of the store closing sales, the
Borrowing Base shall be
5
<PAGE>
permanently adjusted and reduced in a
manner to be determined by the Agents, in
their sole and exclusive discretion.
(e) Nothing in this Amendment shall be deemed consent by the
Agents
to the implementation of store closing
sales or similarly styled sales. Any such
consent shall be granted only pursuant to a
further agreement in writing
executed on behalf of the Borrower and the
Agents, the execution and delivery of
whatever additional documents, instruments,
and agreements that the Agents may
require, and shall otherwise be upon such
terms and conditions as the Agents may
require, in their sole and exclusive
discretion.
6.
Amendment of the Agreement. Subject to the Preconditions to
Effectiveness set forth in Section 2,
above, from and after the execution of
this Amendment, the Agreement is amended as
set forth in this Section 6.
However, this Amendment (i) shall not take
effect upon the execution of this
Amendment by the Borrower, the Agents and
the Banks, and only shall become
effective upon satisfaction in full of each
of the Preconditions to
Effectiveness, and (ii) is made in express
reliance upon the terms and
conditions of this Amendment, including all
representations, warranties, and
covenants of the Borrower set forth
herein.
(a) New Definitions. The following definitions are hereby
inserted
in their appropriate alphabetical
order:
AGENT OR
AGENTS. ANY OR ALL, AS THE CASE MAY BE, OF THE ADMINISTRATIVE
AGENT, THE
MANAGING AGENT, AND/OR THE ACCOMMODATION FACILITY AGENT.
EARLY
TERMINATION FEE. ANY "EARLY TERMINATION FEE" SET FORTH IN
EITHER
THAT
CERTAIN FEE LETTER EXECUTED AS OF THE FOURTH AMENDMENT CLOSING
DATE
BETWEEN
THE BORROWER AND THE ADMINISTRATIVE AGENT, OR THAT CERTAIN
ACCOMMODATION FACILITY FEE LETTER EXECUTED AS OF THE FOURTH
AMENDMENT
CLOSING
DATE AMONG THE BORROWER, THE ADMINISTRATIVE AGENT, AND THE
ACCOMMODATION FACILITY AGENT.
FOURTH
AMENDMENT CLOSING DATE. OCTOBER 3, 2005.
CONSOLIDATED EBITDA. WITH RESPECT TO THE BORROWER AND ITS
SUBSIDIARIES AND
ANY
PARTICULAR FISCAL PERIOD, THE CONSOLIDATED EARNINGS (OR LOSS)
FROM
OPERATIONS
OF THE BORROWER AND ITS SUBSIDIARIES FOR SUCH PERIOD, AFTER
ELIMINATING THEREFROM ALL NON-CASH EXTRAORDINARY NONRECURRING ITEMS
OF
INCOME
(INCLUDING GAINS ON THE SALE OF ASSETS AND EARNINGS FROM THE
SALE
OF
DISCONTINUED BUSINESS LINES), AND AFTER ALL EXPENSES AND OTHER
PROPER
CHARGES,
BUT BEFORE PAYMENT OR PROVISION FOR (a) ANY INCOME TAXES OR
INTEREST
EXPENSES FOR SUCH PERIOD, (b) DEPRECIATION FOR SUCH PERIOD, (c)
AMORTIZATION FOR SUCH PERIOD, AND (d) ALL OTHER NON-CASH CHARGES
FOR SUCH
PERIOD,
ALL DETERMINED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES.
MAJORITY
BANKS. AS OF ANY DATE, THE BANKS (OTHER THAN DELINQUENT BANKS)
WHOSE
AGGREGATE COMMITMENTS TOGETHER CONSTITUTE FIFTY-ONE PERCENT (51%)
OF
THE TOTAL
COMMITMENT.
SUBORDINATE FACILITY. BOTH (i) THAT CERTAIN BRIDGE TERM LOAN
FINANCING
FACILITY
(THE "BRIDGE LOAN") ESTABLISHED ON OCTOBER 3, 2005 BY AND
BETWEEN
THE
BORROWER AND PRENTICE CAPITAL MANAGEMENT, LP (OR ONE OR MORE
ENTITIES
MANAGED BY
SUCH PERSON) EVIDENCED BY, AMONG OTHER THINGS, A BRIDGE TERM
LOAN
CREDIT AGREEMENT OF EVEN DATE, AND (ii) THE SECURED CONVERTIBLE
NOTE
FACILITY
CONTEMPLATED TO REFINANCE THE BRIDGE LOAN (THE "CONVERTIBLE
FACILITY").
6
<PAGE>
TRADE LIEN
AGREEMENT. THAT CERTAIN TRADE LIEN AGREEMENT TO BE ENTERED INTO
BY AND
BETWEEN THE BORROWER AND A COLLATERAL TRUSTEE TO BE NAMED
THEREIN,
AS
CONTEMPLATED BY THE "TRADE LIEN TERM SHEET" (SO-CALLED HEREIN)
EXECUTED
SEPTEMBER,
2005.
UNANIMOUS
BANKS. AS OF ANY DATE, THE BANKS (OTHER THAN DELINQUENT BANKS)
WHOSE
AGGREGATE COMMITMENTS TOGETHER CONSTITUTE ONE HUNDRED PERCENT
(100%)
OF THE
TOTAL COMMITMENT.
UNUSED
LINE FEE. IS DEFINED IN SECTION 2.13(c).
(b) Revised Definitions. The following definitions are hereby
deleted and amended and restated as
follows:
BALANCE
SHEET DATE. OCTOBER 3, 2005.
DELINQUENT
BANK. MEANS ANY BANK THAT FAILS (i) TO MAKE AVAILABLE TO THE
ADMINISTRATIVE AGENT ITS PRO RATA SHARE OF ANY LOAN OR TO PURCHASE
ANY
LETTER OF
CREDIT PARTICIPATION OR (ii) TO COMPLY WITH THE PROVISIONS OF
Section 15
WITH RESPECT TO MAKING DISPOSITIONS AND ARRANGEMENTS WITH THE
OTHER
BANKS, WHERE SUCH BANK'S SHARE OF ANY PAYMENT RECEIVED, WHETHER
BY
SETOFF OR
OTHERWISE, IS IN EXCESS OF ITS PRO RATA SHARE OF SUCH PAYMENTS
DUE AND
PAYABLE TO ALL OF THE BANKS, IN EACH CASE AS, WHEN AND TO THE
FULL
EXTENT
REQUIRED BY THE PROVISIONS OF THIS CREDIT AGREEMENT. A
"DELINQUENT
BANK"
SHALL BE DEEMED A DELINQUENT BANK UNTIL SUCH TIME AS SUCH
DELINQUENCY IS SATISFIED.
NRLV. NRLV
MEANS THAT PERCENTAGE, AS DETERMINED BY THE ADMINISTRATIVE
AGENT AND
THE MANAGING AGENT FROM THE THEN MOST RECENT APPRAISAL OF THE
BORROWER'S
INVENTORY UNDERTAKEN AT THE REQUEST OF THE AGENTS, REFLECTING
THE
ESTIMATE OF THE NET RECOVERY ON THE BORROWER'S INVENTORY IN THE
EVENT
OF AN
IN-STORE LIQUIDATION OF THAT INVENTORY.
(c) Deleted Definitions. The following definitions are hereby
deleted and each reference to the specified
terms is correspondingly removed:
(i) Required
Availability Reserve;
(ii) Appraised (GOB)
Percentage of Eligible Inventory;
(iii) Effective Percentage;
(iv) Field Examination
Reserve; and
(v) Minimum
Excess Availability.
(d) Increase in Commitment.
(i) The definition of the term "Total Revolver Commitment" is
hereby
amended by deleting the figure "$125,000,000.00" contained
therein,
and
substituting the figure "$140,000,000.00" in its place.
(ii) Schedule 1 is hereby deleted and replaced with a new
Schedule 1
in the form annexed hereto marked Exhibit "E".
(e) Extended Maturity Date.
7
<PAGE>
(i) The definition of "Maturity Date" and Section 2.12(c) are
hereby
amended by deleting the date "July 31, 2006" contained therein
and
substituting the date "OCTOBER 3, 2008" in its place in each
instance.
(ii) Section 2.8 is hereby deleted in its entirety and the
following
is inserted in its place:
MATURITY.
THE BORROWER SHALL PAY ON THE MATURITY DATE, AND THERE SHALL
BECOME
ABSOLUTELY DUE AND PAYABLE ON THE MATURITY DATE, ALL OF THE
OBLIGATIONS, INCLUDING ALL REVOLVING CREDIT LOANS AND LOANS UNDER
THE
ACCOMMODATION FACILITY, OUTSTANDING ON SUCH DATE, TOGETHER WITH ANY
AND
ALL
ACCRUED AND UNPAID INTEREST THEREON, AND ALL FEES, COSTS,
EXPENSES,
AND OTHER
AMOUNTS DUE BY THE BORROWER HEREUNDER.
(f) Amendment of Borrowing Base.
(i) The definition of "Borrowing Base" is hereby amended by
deleting
the first sentence thereof, and substituting the following in
its
place:
BORROWING
BASE. AT THE RELEVANT TIME OF REFERENCE THERETO, AN AMOUNT
EQUAL
TO THE
LEAST OF:
(i)
$140,000,000.00,
(ii) THE
LESSER OF EITHER (x) THE REVOLVING LOAN BORROWING BASE, PLUS
THE
OUTSTANDING PRINCIPAL BALANCE OF THE ACCOMMODATION FACILITY, OR
(y)
$125,000,000.00, PLUS THE OUTSTANDING PRINCIPAL BALANCE OF THE
ACCOMMODATION FACILITY, OR
(iii)
DURING THE PERIOD OF:
1. SUBJECT TO SUBPARAGRAPH 2, BELOW:
(A) JANUARY 16 THROUGH DECEMBER 18 EACH YEAR, THE SUM OF (a) 85%
OF
ELIGIBLE CREDIT CARD RECEIVABLES, PLUS (b) 100% OF THE NRLV OF
ELIGIBLE INVENTORY, MINUS (c) SUCH RESERVES AS MAY BE ESTABLISHED
BY
THE ADMINISTRATIVE AGENT AND THE MANAGING AGENT IN THEIR SOLE
AND
EXCLUSIVE DISCRETION.
(B) DECEMBER 19 THROUGH DECEMBER 30 EACH YEAR, THE SUM OF (a) 85%
OF
ELIGIBLE CREDIT CARD RECEIVABLES, PLUS (b) 88% OF THE NRLV OF
ELIGIBLE INVENTORY, MINUS (c) SUCH RESERVES AS MAY BE ESTABLISHED
BY
THE ADMINISTRATIVE AGENT AND THE MANAGING AGENT IN THEIR SOLE
AND
EXCLUSIVE DISCRETION.
(C) DECEMBER 31 THROUGH JANUARY 15 EACH YEAR, THE SUM OF (a) 85%
OF
ELIGIBLE CREDIT CARD RECEIVABLES, PLUS (b) 85% OF THE NRLV OF
ELIGIBLE INVENTORY, MINUS (c) SUCH RESERVES AS MAY BE ESTABLISHED
BY
THE ADMINISTRATIVE AGENT AND THE MANAGING AGENT IN THEIR SOLE
AND
EXCLUSIVE DISCRETION.
2. NOTWITHSTANDING THE FOREGOING, FOR THE PERIOD FROM THE
FOURTH
AMENDMENT CLOSING DATE THROUGH DECEMBER 18, 2006 ONLY:
(A) FOURTH AMENDMENT CLOSING DATE THROUGH DECEMBER 25, 2005, THE
SUM
OF (a) 85% OF ELIGIBLE CREDIT CARD RECEIVABLES, PLUS (b) 65% OF
THE
COST VALUE OF ELIGIBLE INVENTORY, MINUS (c) SUCH RESERVES AS MAY
BE
ESTABLISHED BY THE ADMINISTRATIVE AGENT AND THE MANAGING AGENT
IN
THEIR SOLE AND EXCLUSIVE DISCRETION.
8
<PAGE>
(B) DECEMBER 26, 2005 THROUGH JANUARY 1, 2006, THE SUM OF (a) 85%
OF
ELIGIBLE CREDIT CARD RECEIVABLES, PLUS (b) 88% OF THE NRLV OF
ELIGIBLE INVENTORY, MINUS (c) SUCH RESERVES AS MAY BE ESTABLISHED
BY
THE ADMINISTRATIVE AGENT AND THE MANAGING AGENT IN THEIR SOLE
AND
EXCLUSIVE DISCRETION.
(C) JANUARY 2, 2006 THROUGH JANUARY 8, 2006, THE SUM OF (a) 85%
OF
ELIGIBLE CREDIT CARD RECEIVABLES, PLUS (b) 90% OF THE NRLV OF
ELIGIBLE INVENTORY, MINUS (c) SUCH RESERVES AS MAY BE ESTABLISHED
BY
THE ADMINISTRATIVE AGENT AND THE MANAGING AGENT IN THEIR SOLE
AND
EXCLUSIVE DISCRETION.
(D) JANUARY 9, 2006 THROUGH JANUARY 15, 2006, THE SUM OF (a) 85%
OF
ELIGIBLE CREDIT CARD RECEIVABLES, PLUS (b) 93% OF THE NRLV OF
ELIGIBLE INVENTORY, MINUS (c) SUCH RESERVES AS MAY BE ESTABLISHED
BY
THE ADMINISTRATIVE AGENT AND THE MANAGING AGENT IN THEIR SOLE
AND
EXCLUSIVE DISCRETION.
(E) JANUARY 16, 2006 THROUGH DECEMBER 18, 2006, THE SUM OF (a)
85%
OF ELIGIBLE CREDIT CARD RECEIVABLES, PLUS (b) 100% OF THE NRLV
OF
ELIGIBLE INVENTORY, MINUS (c) SUCH RESERVES AS MAY BE ESTABLISHED
BY
THE ADMINISTRATIVE AGENT AND THE MANAGING AGENT IN THEIR SOLE
AND
EXCLUSIVE DISCRETION.
(ii) The definition of "LIBOR Applicable Margin" is hereby
deleted
and the following is inserted in its place:
LIBOR
APPLICABLE MARGIN. AT ALL TIMES, TWO AND ONE-HALF PERCENT
(2.50%).
(iii) The definition of "Revolving Loan Borrowing Base" is
hereby deleted in its entirety and
the following is inserted in its place:
REVOLVING
LOAN BORROWING BASE. AT THE RELEVANT TIME OF REFERENCE THERETO,
AN AMOUNT
DETERMINED BY THE ADMINISTRATIVE AGENT AND THE MANAGING AGENT
BY
REFERENCE
TO THE MOST RECENT BORROWING BASE REPORT DELIVERED TO THE BANKS
AND THE
AGENTS PURSUANT TO Section 5.2(A), WHICH IS EQUAL TO:
(A) DURING
THE PERIOD FROM THE FOURTH AMENDMENT CLOSING DATE THROUGH
DECEMBER
25, 2005, THE SUM OF (a) 85% OF ELIGIBLE CREDIT CARD
RECEIVABLES,
PLUS (b)
THE 60% OF THE COST VALUE OF ELIGIBLE INVENTORY, MINUS (c) SUCH
RESERVES
AS MAY BE ESTABLISHED BY THE ADMINISTRATIVE AGENT AND THE
MANAGING
AGENT IN THEIR SOLE AND EXCLUSIVE DISCRETION;
(B) DURING
THE PERIOD FROM DECEMBER 26, 2005 AND THEREAFTER, THE SUM OF
(a) 85% OF
ELIGIBLE CREDIT CARD RECEIVABLES, PLUS (b) 85% OF THE NRLV OF
ELIGIBLE
INVENTORY, MINUS (c) SUCH RESERVES AS MAY BE ESTABLISHED BY THE
ADMINISTRATIVE AGENT AND THE MANAGING AGENT IN THEIR SOLE AND
EXCLUSIVE
DISCRETION.
(g) Submission of Borrowing Base Reports.
(i) Section 5.2(a) is hereby deleted in its entirety and the
following
is inserted in its place:
(a) THE
BANKS SHALL HAVE NO OBLIGATION TO MAKE ANY EXTENSION OF CREDIT
IF,
AT ANY
TIME, THE OUTSTANDING FACILITY AMOUNTS, AFTER GIVING EFFECT TO
SUCH
EXTENSION
OF CREDIT, WOULD EXCEED THE BORROWING BASE. THE BORROWING BASE
SHALL BE
DETERMINED BY THE ADMINISTRATIVE AGENT AND THE MANAGING AGENT
BY
REFERENCE
TO THE MOST RECENT BORROWING BASE REPORT DELIVERED TO THE
ADMINISTRATIVE AGENT BY THE BORROWER, WHICH SHALL BE DELIVERED
WEEKLY, AT
OR BEFORE
11:00 AM EACH WEDNESDAY, AND WHICH MAY, IN THE BORROWER'S
DISCRETION, BE SUBMITTED MORE FREQUENTLY, INCLUDING DAILY, VIA
FACSIMILE
OR BY
E-MAIL, WITH THE ORIGINAL SUBMITTED THEREAFTER BY FIRST CLASS
MAIL.
9
<PAGE>
(ii) Schedule A to the Agreement (Borrowing Base Report) is
hereby
deleted and replaced with the Schedule attached hereto as
Schedule
A
(Borrowing Base Report).
(iii) The provisions of Section 8.4(f) are hereby deleted in
their
entirety and the following is inserted in their place:
[INTENTIONALLY OMITTED].
(iv) Section 12.5 is hereby amended by deleting the reference
"Section
8.4(f)" and substituting the reference "5.2(A)" in its place in
each
instance.
(h) Fees.
(i) Section 2.12(e) is hereby deleted in its entirety and the
following
is hereby inserted in its place:
(e) THE
BORROWER SHALL PAY TO THE ACCOMMODATION FACILITY AGENT AND THE
ACCOMMODATION BANKS THE FEES IN THE AMOUNTS AND AT THE TIMES, AND
IN
ACCORDANCE
WITH THAT CERTAIN ACCOMMODATION FACILITY FEE LETTER DATED AS OF
THE FOURTH
AMENDMENT CLOSING DATE ENTERED INTO BY AND BETWEEN THE BORROWER
AND THE
ACCOMMODATION BANKS. SUCH FEES SHALL BE FOR THE SOLE BENEFIT OF
THE
ACCOMMODATION FACILITY AGENT AND THE ACCOMMODATION BANKS, AS SET
FORTH
THEREIN
AND SHALL CONSTITUTE OBLIGATIONS.
(ii) A new Section 2.13 is hereby created and inserted in its
appropriate numerical order, as follows:
2.13.
UNUSED LINE FEE. IN ADDITION TO ANY OTHER FEE PAYABLE BY THE
BORROWER
HEREUNDER, THE BORROWER SHALL PAY THE ADMINISTRATIVE AGENT FOR
THE
RATABLE BENEFIT OF EACH BANK (OTHER THAN THE ACCOMMODATION BANKS)
THE
"UNUSED
LINE FEE" (SO REFERRED TO HEREIN) OF .375% PER ANNUM OF THE
AVERAGE
DIFFERENCE, DURING THE MONTH JUST ENDED (OR RELEVANT PERIOD
WITH
RESPECT TO
THE PAYMENT BEING MADE ON THE MATURITY DATE) BETWEEN THE
BORROWING
BASE AND THE AGGREGATE OF THE OUTSTANDING FACILITY AMOUNTS. THE
UNUSED
LINE FEE SHALL BE PAID IN ARREARS, ON THE LAST DAY OF EACH
CALENDAR
MONTH
AFTER THE EXECUTION OF THIS AGREEMENT AND ON THE MATURITY DATE.
THE
ADMINISTRATIVE AGENT IS
HEREBY AUTHORIZED BY THE BORROWER TO MAKE A
REVOLVING
CREDIT LOAN TO TIMELY PAY THE UNUSED LINE FEE AS AND WHEN DUE
SET FORTH
HEREIN.
(i) Letters of Credit Fees. Section 3.6 is hereby deleted in
its
entirety and the following is inserted in
its place:
LETTER OF
CREDIT FEE. THE BORROWER SHALL PAY TO THE ADMINISTRATIVE AGENT
FOR THE
RATABLE ACCOUNTS OF THE BANKS (OTHER THAN THE ACCOMMODATION
FACILITY
BANKS) A FEE (IN EACH CASE, A "LETTER OF CREDIT FEE") IN
RESPECT
OF LETTERS
OF CREDIT ON THE AVERAGE DAILY MAXIMUM DRAWING AMOUNT AT A RATE
PER ANNUM
EQUAL TO (a) WITH RESPECT TO EACH STANDBY LETTER OF CREDIT,
3.0%
AND (b)
WITH RESPECT TO EACH DOCUMENTARY LETTER OF CREDIT, 2.5%, SUCH
LETTER OF
CREDIT FEES BEING PAYABLE MONTHLY IN ARREARS ON THE LAST
BUSINESS
DAY OF EACH CALENDAR MONTH AND ON THE MATURITY DATE. THE
BORROWER
SHALL ALSO
PAY TO EACH ISSUING BANK, AT SUCH TIME OR TIMES AS SUCH CHARGES
ARE
CUSTOMARILY MADE BY EACH ISSUING BANK, THE ISSUING BANK'S
CUSTOMARY
ISSUANCE
FEES OR AMENDMENT FEES, AS THE CASE MAY BE, AND EACH ISSUING
BANK'S
CUSTOMARY TIME NEGOTIATION FEES PER DOCUMENT EXAMINATION OR
OTHER
ADMINISTRATIVE FEES.
(j)
Financial Statements and Projections.
10
<PAGE>
(i) Section 7.4.2 is hereby deleted in its entirety and the
following
is hereby inserted in its place:
PROJECTIONS. THE PROJECTIONS OF THE OPERATING BUDGETS OF THE
BORROWER AND
ITS
SUBSIDIARIES ON A CONSOLIDATED BASIS, BALANCE SHEETS AND CASH
FLOW
STATEMENTS
PRESENTED TO THE AGENTS AS THE BORROWER'S "BUSINESS PLAN",
COPIES OF
WHICH HAVE BEEN DELIVERED TO THE AGENTS, ARE BASED ON A VARIETY
OF
ASSUMPTIONS WITH RESPECT TO GENERAL ECONOMIC, FINANCIAL AND
MARKET
CONDITIONS
USED IN FORMULATING SUCH PROJECTIONS WHICH ARE BELIEVED BY THE
BORROWER
TO BE REASONABLE AS OF THE DATE OF THE BUSINESS PLAN BUT THAT
ARE
INHERENTLY
SUBJECT TO SIGNIFICANT ECONOMIC AND COMPETITIVE UNCERTAINTIES,
ALL OF
WHICH ARE DIFFICULT TO PREDICT AND MANY OF WHICH ARE BEYOND THE
CONTROL OF
THE BORROWER. TO THE KNOWLEDGE OF THE BORROWER OR ANY OF ITS
SUBSIDIARIES, AS OF THE FOURTH AMENDMENT CLOSING DATE NO FACTS
EXIST THAT
(INDIVIDUALLY OR IN THE AGGREGATE) WOULD RESULT IN ANY MATERIAL
CHANGE IN
ANY OF
SUCH PROJECTIONS. THE BUSINESS PLAN HAS BEEN PREPARED ON THE
BASIS
OF THE
ASSUMPTIONS STATED THEREIN AND REFLECT THE CURRENT ESTIMATES OF
THE
BORROWER
AND ITS SUBSIDIARIES OF THE RESULTS OF OPERATIONS AND OTHER
INFORMATION PROJECTED THEREIN.
(ii) Section 7.5.2 is hereby amended by deleting the first
sentence
thereof, and substituting the following in its place:
AFTER THE
CLOSING ON, AND CONSUMMATION OF, THE CONVERTIBLE FACILITY AND
OTHERWISE
GIVING EFFECT TO THE TRANSACTIONS CONTEMPLATED BY THIS CREDIT
AGREEMENT
AND THE OTHER LOAN DOCUMENTS, THE BORROWER AND ITS SUBSIDIARIES
ON A
CONSOLIDATED BASIS ARE SOLVENT.
(iii) Section 8.4(d) is hereby deleted in its entirety and the
following
is inserted in its place:
[INTENTIONALLY OMITTED].
(iv) The date for submission of the Borrower's (x) finalized
month end
July, 2005 financial statements is hereby extended to October
31, 2005;
(y) draft management month-end August, 2005 financial
statements
is hereby
extended to October 15, 2005, and (z) finalized month end
August,
2005 financial statements is hereby extended to November 15,
2005.
(k) Inventory Appraisals; Examinations.Sections 8.9.2 and 8.9.3
of
the Agreement are hereby deleted in their
entirety, and the following are
inserted in their place:
8.9.2.
APPRAISALS; EXAMINATIONS. (a) THE AGENTS SHALL OBTAIN SUCH
APPRAISALS
OF THE COLLATERAL AT THE TIMES, AND WITH SUCH FREQUENCY, AS THE
AGENTS, IN
THEIR SOLE AND EXCLUSIVE DISCRETION, MAY DETERMINE, TO BE
CONDUCTED
BY SUCH APPRAISERS AS ARE SATISFACTORY TO THE AGENTS.
NOTWITHSTANDING THE FOREGOING, (i) PRIOR TO THE OCCURRENCE OF ANY
EVENT OF
DEFAULT,
THE BORROWER SHALL ONLY BE OBLIGATED TO REIMBURSE THE AGENTS
FOR
THREE (3)
APPRAISALS OF THE COLLATERAL IN ANY TWELVE (12) MONTH PERIOD,
AND (ii)
FROM AND AFTER THE OCCURRENCE OF ANY EVENT OF DEFAULT, THE
AGENTS
MAY CAUSE
SUCH ADDITIONAL APPRAISALS TO BE UNDERTAKEN AS THE AGENTS, IN
THEIR SOLE
AND EXCLUSIVE DISCRETION, DEEM NECESSARY OR APPROPRIATE, EACH
OF WHICH
SHALL BE AT THE BORROWER'S EXPENSE.
(b) THE AGENTS SHALL CONDUCT SUCH COMMERCIAL FINANCE FIELD
EXAMINATIONS OF THE BORROWER'S BOOKS AND RECORDS AT THE TIMES, AND
WITH
SUCH
FREQUENCY, AS THE AGENTS, IN THEIR SOLE AND EXCLUSIVE DISCRETION,
MAY
DETERMINE,
TO BE CONDUCTED BY SUCH EXAMINERS AS ARE SATISFACTORY TO THE
AGENTS.
NOTWITHSTANDING THE FOREGOING, (i) PRIOR TO THE OCCURRENCE OF
ANY
EVENT OF
DEFAULT, THE BORROWER SHALL ONLY BE OBLIGATED TO REIMBURSE THE
AGENTS FOR
THREE (3) COMMERCIAL FINANCE FIELD EXAMINATIONS IN ANY TWELVE
(12) MONTH
PERIOD, AND (ii) FROM AND AFTER THE OCCURRENCE OF ANY EVENT OF
DEFAULT,
THE AGENTS MAY CAUSE SUCH ADDITIONAL COMMERCIAL FINANCE FIELD
EXAMINATIONS TO BE
11
<PAGE>
UNDERTAKEN
AS THE AGENTS, IN THEIR SOLE AND EXCLUSIVE DISCRETION, DEEM
NECESSARY
OR APPROPRIATE, EACH OF WHICH SHALL BE AT THE BORROWER'S
EXPENSE.
8.9.3.
INTENTIONALLY OMITTED.
(l) Permitted Indebtedness. Section 9.1 is hereby amended by
inserting new subparagraphs (i)and (j) in
their appropriate place and
alphabetical order:
(i) INDEBTEDNESS PURSUANT TO THE SUBORDINATE FACILITY.
(j) INDEBTEDNESS PURSUANT TO THE TRADE LIEN AGREEMENT.
(m) Permitted Liens. Section 9.2 is hereby amended by inserting
new
subparagraphs (k) and (l) in their
appropriate place and alphabetical order:
(k) LIENS IN CONNECTION WITH AND TO SECURE INDEBTEDNESS PURSUANT
TO
THE SUBORDINATE FACILITY.
(l) LIENS IN CONNECTION WITH AND TO SECURE INDEBTEDNESS PURSUANT
TO
THE TRADE LIEN AGREEMENT; PROVIDED THAT SUCH LIENS ARE SUBJECT TO
AN
INTERCREDITOR AND LIEN SUBORDINATION AGREEMENT IN FORM AND
SUBSTANCE
ACCEPTABLE TO THE AGENTS, IN THEIR SOLE AND EXCLUSIVE
DISCRETION.
(n) Revised Financial Performance Covenants.
(i) Section 10.1 is hereby deleted in its entirety and the
following
is inserted in its place:
"THE BORROWER SHALL MAINTAIN BORROWING AVAILABILITY IN AN
AMOUNT
GREATER THAN $7,000,000.00 AT ALL TIMES."
(ii) Section 10.2 is hereby deleted in its entirety and the
following
is inserted in its place:
"THE BORROWER (i) SHALL NOT SUFFER TO OCCUR AT ANY TIME A VOTE
OF
THE BORROWER'S SHAREHOLDERS FAILING TO APPROVE OR REJECTING THE
CONVERTIBLE FACILITY, (ii) SHALL NOT WITHDRAW THE PROXY
STATEMENT
RELATING TO THE CONVERTIBLE FACILITY, AND (iii) SHALL HAVE
RECEIVED
NET PROCEEDS FROM THE CONSUMMATION OF THE CONVERTIBLE FACILITY IN
AN
AMOUNT NOT LESS THAN $18,000,000.00 (AFTER REPAYMENT OF THE
AMOUNTS
DUE ON THE SUBORDINATE FINANCING) ON OR BEFORE DECEMBER 30, 2005
OR,
IF THE SECURITIES EXCHANGE COMMISSION DETERMINES TO CONDUCT A
REVIEW
OF THE CONVERTIBLE
FACILITY, JANUARY 31, 2006."
(iii) Section 10.3 is hereby deleted in its entirety and the
following
is inserted in its place:
"NO SOONER THAN NINETY (90) NOR LATER THAN THIRTY (30) DAYS PRIOR
TO
THE END OF EACH OF THE BORROWER'S FISCAL YEARS, THE BORROWER
SHALL
HAVE DELIVERED TO THE ADMINISTRATIVE AGENT A BUSINESS PLAN
COVERING
THE SUCCEEDING FISCAL YEAR, IN FORM AND SCOPE ACCEPTABLE TO THE
AGENTS, IN THE AGENTS' SOLE AND EXCLUSIVE DISCRETION,
DEMONSTRATING
ADEQUATE LIQUIDITY FOR THE BORROWER'S BUSINESS OPERA
