Exhibit 10.1

AMENDMENT NO. 1 TO FOURTH AMENDED

AND RESTATED CREDIT AGREEMENT

This Amendment No. 1 to Fourth Amended and Restated Credit Agreement (this
“Agreement”) dated as of December 3, 2008 is made by and among WILLIAMS-SONOMA,
INC., a California corporation having its principal place of business in San
Francisco, California (the “Borrower”), BANK OF AMERICA, N.A., a national
banking association organized and existing under the laws of the United States
(“Bank of America”), in its capacity as administrative agent for the Lenders (as
defined in the Credit Agreement (as defined below)) (in such capacity, the
“Administrative Agent”), and each of the Lenders signatory hereto, and each of
the Guarantors (as defined in the Credit Agreement) signatory hereto.

W I T N E S S E T H:

WHEREAS, the Borrower, the Administrative Agent and the Lenders have entered
into that certain Fourth Amended and Restated Credit Agreement dated as of
October 4, 2006 (as hereby amended and as from time to time hereafter further
amended, modified, supplemented, restated, or amended and restated, the “Credit
Agreement”; capitalized terms used in this Agreement not otherwise defined
herein shall have the respective meanings given thereto in the Credit
Agreement), pursuant to which the Lenders have made available to the Borrower a
revolving credit facility, including letter of credit, swing line and
alternative currency subfacilities; and

WHEREAS, each of the Guarantors has entered into a Guaranty pursuant to which it
has guaranteed the payment and performance of the obligations of the Borrower
under the Credit Agreement and the other Loan Documents; and

WHEREAS, the Borrower has advised the Administrative Agent and the Lenders that
it desires to amend certain provisions of the Credit Agreement as set forth
below and the Administrative Agent and the Lenders signatory hereto are willing
to effect such amendment on the terms and conditions contained in this
Agreement;

NOW, THEREFORE, in consideration of the premises and further valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:

1.      Amendments to Credit Agreement.  Subject to the terms and conditions set
forth herein, the Credit Agreement is hereby amended as follows:

A.        Amendment to Section 1.1 of the Credit Agreement.  Subject to the
terms and conditions contained herein, Section 1.1 of the Credit Agreement is
hereby amended to add new definitions of “Alternative Base Rate,”
“Disproportionate Facility Risk,” “Distress Event,” “Fixed Charge Coverage
Ratio,” “Impacted Lender,” “Total Fixed Charges” “Total Rental Expense” in
alphabetical order and to amend and restate the definitions of “Base Rate,”
“Defaulting Lender,” “EBITDAR,” “Eligible Assignee” and

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“Total Adjusted Funded Debt”, all to read as follows:

“Alternative Base Rate” means, for all Loans, on any day any such Loan is
outstanding, the fluctuating rate of interest (rounded upwards, as necessary, to
the nearest 1/100 of 1%) equal to the British Bankers Association LIBOR Rate
(“BBA LIBOR”), as published by Reuters (or other commercially available source
providing quotations of BBA LIBOR as designated by the Agent from time to time)
at approximately 11:00 a.m., London time, on each day any such Loan is
outstanding, for US Dollar deposits with a term of one month, as adjusted from
time to time in the Agent’s sole discretion for changes in deposit insurance
requirements and other regulatory costs. If such rate is not available at such
time for any reason, then the “Alternative Base Rate” shall be the rate per
annum determined by the Agent to be the rate at which deposits in US Dollars for
delivery in Same Day Funds in the approximate amount of the US Dollar
denominated Loans outstanding with a term equivalent to one week would be
offered by Bank of America’s London Branch to major banks in the London
interbank eurodollar market at their request at approximately 11:00 a.m. (London
time), on each day any such Loan is outstanding.

“Base Rate” means for any day a fluctuating rate per annum equal to the highest
of (a) the Federal Funds Rate plus one-half of one percent (0.50%), (b) the
Alternative Base Rate plus 1.00%, and (c) the rate of interest in effect for
such day as publicly announced from time to time by Bank of America as its
“prime rate.” Such rate is a rate set by Bank of America based upon various
factors including Bank of America’s costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above or below such announced rate. Any change in
such rate announced by Bank of America shall take effect at the opening of
business on the day specified in the public announcement of such change.

“Defaulting Lender” means any Lender that (a) has failed to fund any portion of
the Revolving Loan, participations in L/C Obligations or participations in
Swingline Advances required to be funded by it hereunder within one Business Day
of the date required to be funded by it hereunder, (b) has otherwise failed to
pay over to the Agent or any other Lender any other amount required to be paid
by it hereunder within one Business Day of the date when due, unless the subject
of a good faith dispute or (c) has become subject to a Distress Event.

“Disproportionate Facility Risk” means, as of any date of determination,
(a) with respect to any Lender, each amount of excess at such date of the
Outstanding Amount of its Revolving Loans over the Outstanding Amount of
Revolving Loans of each Defaulting Lender, (b) with respect to the L/C Issuer,
the sum of (i) all unfunded participations in L/C Obligations at such date and
(ii) without duplication, all unfunded Base Rate Revolving Loans at such date
that have been requested under Section 3.3 to refinance L/C Obligations, in each
case allocable to Defaulting Lenders and Impacted Lenders, other than L/C
Obligations as to which cash collateral or other credit support satisfactory to
the L/C Issuer has been provided, and (c) with respect to Bank of America in its
capacity to make Swingline Advances, all unfunded participations in Swingline

 

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Advances at such date allocable to Defaulting Lenders and Impacted Lenders,
other than Swingline Advances as to which cash collateral or other credit
support satisfactory to the L/C Issuer has been provided.

“Distress Event” means, with respect to any Person (each, a “Distressed
Person”), a voluntary or involuntary case with respect to such Distressed Person
under the Bankruptcy Code or any similar bankruptcy laws of its jurisdiction of
formation, or a custodian, conservator, receiver or similar official is
appointed for such Distressed Person or any substantial part of such Distressed
Person’s assets, or such Distressed Person or any Person that directly or
indirectly controls such Distressed Person is subject to a forced liquidation,
merger, sale or other change of control supported in whole or in part by
guaranties or other support of (including without limitation the nationalization
or assumption of ownership or operating control by) the U.S. government or other
governmental authority, or such Distressed Person makes a general assignment for
the benefit of creditors or is otherwise adjudicated as, or determined by any
governmental authority having regulatory authority over such Distressed Person
or its assets to be, insolvent, bankrupt, or deficient in meeting any capital
adequacy or liquidity standard of any governmental authority applicable to such
Distressed Person and as to which the Agent, the L/C Issuer and Bank of America
have not concluded in good faith that the risk of creating Disproportionate
Facility Risk, as a result of any of the events or circumstances described
above, has been sufficiently mitigated, to permit the removal of such
designation.

“EBITDAR” means, for any period, the total of the following calculated for the
Borrower and its Subsidiaries, without duplication, on a consolidated basis for
such period:

(a)    Net Income; plus

(b)    any provision for (or less any benefit from) income or franchise taxes to
the extent included in the determination of Net Income; plus

(c)    Interest Expense to the extent included in the determination of Net
Income; plus

(d)    amortization and depreciation expense to the extent included in the
determination of Net Income; plus

(e)    expenses resulting from any non-cash compensation charges arising from
any grant of stock, stock options, stock-settled stock appreciation rights,
restricted stock units, or other equity based compensation, provided that such
expenses are and will be non-cash items in the period when taken and in all
later fiscal periods to the extent included in the determination of Net Income;
plus

(f)    other non-cash, non-recurring charges to the extent included in the
determination of Net Income (including by way of example, but not limited to,
asset write-offs associated with store or facility closings, asset impairments
associated with underperforming stores, asset write-offs associated with real
Property dispositions, and

 

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asset write-offs associated with obsolete or underperforming information
technology assets); plus

(g)    all lease and rent expense for any real Property to the extent included
in the determination of Net Income, plus

(h)    non-recurring cash expenses relating to store closings, other
discontinued operations or infrastructure downsizing (including by way of
example, but not limited to, store closings, call center closings, distribution
center closings and severance packages) in an aggregate amount not to exceed
$10,000,000 for any four consecutive Fiscal Quarters, to the extent included in
the determination of Net Income, minus

(i)    other non-recurring gains to the extent included in the determination of
Net Income.

“Eligible Assignee” means: (a) a Lender; (b) an Affiliate of a Lender; (c) an
Approved Fund; and (d) any other Person (other than a natural person) approved
by (i) the Agent, the L/C Issuer and Bank of America (in its capacity as lender
of Swingline Advances), and (ii) unless an Event of Default has occurred and is
continuing, the Borrower (each such approval not to be unreasonably withheld or
delayed); provided that notwithstanding the foregoing, “Eligible Assignee” shall
not include the Borrower, any of the Borrower’s Affiliates or Subsidiaries or
any Defaulting Lender or any of its Subsidiaries.

“Fixed Charge Coverage Ratio” means, as of any date of determination, the ratio
of (a) EBITDAR for the period of the four (4) Fiscal Quarters most recently
ended to (b) Total Fixed Charges for such period.

“Impacted Lender” means any Lender (a) that has given verbal or written notice
to the Borrower, the Agent, the L/C Issuer or any Lender or has otherwise
publicly announced that such Lender believes it will become, or that fails
following inquiry promptly to provide to the Borrower, the Agent, the L/C Issuer
or Lender making such inquiry, reasonably satisfactory assurance that such
Lender will not become, a Defaulting Lender, (b) as to which the Agent or the
L/C Issuer has a good faith belief that such Lender has defaulted in fulfilling
its obligations (as a lender, administrative or other agent, letter of credit
issuer or issuer of bank guarantees) under any other syndicated credit facility
or (c) with respect to which any Distress Event has occurred with respect to any
Affiliate of such Lender that directly or indirectly controls such Lender.

“Total Adjusted Funded Debt” means, as of any date of determination, with
respect to the Borrower and its Subsidiaries, (a) the average outstanding
principal balance of all Funded Debt of such Persons as of the end of each of
the immediately preceding twelve (12) Fiscal Periods, plus (b) without
duplication, all lease and rent expense for any real Property for the preceding
four (4) Fiscal Quarters multiplied by six (6).

“Total Fixed Charges” means, for any period, for the Borrower and its
Subsidiaries on a consolidated basis, without duplication, the sum of
(a) Interest Expense for such period, and (b) Total Rental Expense during such
period.

 

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“Total Rental Expense” means, for any period, the aggregate rental expenses
payable by the Borrower and its Subsidiaries on a consolidated basis for such
period (including percentage rent) under any operating lease classified as such
under GAAP, but not including any amount included in the definition of “Interest
Expense.”

B.        Amendment to Section 3.1(b)(vii) of the Credit Agreement.  Subject to
the terms and conditions set forth herein, the Credit Agreement is hereby
amended by inserting the phrase “or an Impacted Lender” after “Lender” and
before “hereunder” in the second line of Section 3.1(b)(vii).

C.        Amendment to Section 3.7 of the Credit Agreement.  Subject to the
terms and conditions set forth herein, the Credit Agreement is hereby amended to
restate Section 3.7 to read as follows

   Section 3.7    Cash Collateral.  (a) If, as of the Maturity Date, any Letter
of Credit may for any reason remain outstanding and partially or wholly undrawn,
the Borrower shall immediately Cash Collateralize the then Outstanding Amount of
all L/C Obligations. The Agent may, at any time and from time to time after the
initial deposit of Cash Collateral, request that additional Cash Collateral be
provided in order to protect against the results of exchange rate fluctuations.
For purposes hereof, “Cash Collateralize” means to pledge and deposit with or
deliver to the Agent, for the benefit of the L/C Issuer and the Lenders, as
applicable, as collateral for the L/C Obligations, cash or deposit account
balances pursuant to documentation in form and substance satisfactory to the
Agent and the L/C Issuer (which documents are hereby consented to by the
Lenders). Derivatives of such term, such as “Cash Collateral” have corresponding
meanings. The Borrower hereby grants to the Agent, for the benefit of the L/C
Issuer and the Lenders, as applicable, a security interest in all such cash,
deposit accounts and all balances therein and all proceeds of the foregoing.
Cash Collateral shall be maintained in blocked, non-interest-bearing deposit
accounts at Bank of America.

   (b)        Notwithstanding anything to the contrary contained in this
Agreement, (i) Cash Collateral or other credit support (and proceeds thereof)
provided by any Defaulting Lender or Impacted Lender pursuant to
Section 3.1(b)(vii) to support the obligations of such Lender in respect of
Letters of Credit shall be held and applied, first, to fund the L/C Advances of
such Lender arising from Letters of Credit with respect to which such Cash
Collateral or other credit support was provided, as the same shall be or become
due and owing to the L/C Issuer (or, with the consent or at the direction of the
L/C Issuer in its sole and absolute discretion, to fund such Lender’s Commitment
Percentage of the Base Rate Balance advanced to repay L/C Obligations under
Article 3, as applicable)and, second, to fund (x) the L/C Advances of such
Lender arising from any other Letters of Credit, as the same shall be or become
due and owing to the L/C Issuer (or, with the consent or at the direction of the
L/C Issuer in its sole and absolute discretion, to fund such Lender’s Commitment
Percentage of the Base Rate Balance advanced to repay L/C Obligations under
Article 3, as applicable), and (y) any interest accrued for the benefit of the
L/C Issuer pursuant to Section

 

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3.3(f) allocable to such Lender, and (ii) Cash Collateral (and proceeds thereof)
otherwise provided by or on behalf of the Borrower under Article 3, Section 5.4
or Section 13.2(c) to support L/C Obligations shall be held and applied to the
satisfaction of the specific L/C Obligations so Cash Collateralized prior to the
application of such collateral or proceeds thereof to any other Obligations in
accordance with Section 13.2(f).

   (c)        Cash Collateral and other credit support provided under
Section 3.1(b)(vii) in connection with any Lender’s status as a Defaulting
Lender or an Impacted Lender shall be released (except as the L/C Issuer and the
Person providing collateral or other credit support may agree otherwise)
promptly following the earlier to occur of (i) the termination of such Lender’s
status as a Defaulting Lender or Impacted Lender or (B) following the L/C
Issuer’s good faith determination that there remain outstanding no L/C
Obligations as to which it has actual or potential Disproportionate Facility
Risk in relation to such Lender as to which it desires to maintain collateral or
other credit support; subject, however, to the additional condition that, as to
any collateral or other credit support provided by or on behalf of the Borrower,
no Default or Event of Default shall then have occurred and be continuing.

D.        Amendment to Section 3.9 of the Credit Agreement.  Subject to the
terms and conditions set forth herein, the Credit Agreement is hereby amended by
inserting the following proviso after “2%” and before the period in the tenth
line of Section 3.9:

; and provided further that no Letter of Credit Fees shall be payable to any
Defaulting Lender or Impacted Lender, except in respect of Letters of Credit for
which Cash Collateral or other credit support has been provided by such
Defaulting or Impacted Lender under Section 3.1(b)(vii). Letter of Credit Fees
otherwise payable to Defaulting or Impacted Lenders in respect of outstanding
Letters of Credit for which Cash Collateral or other credit support has not been
provided shall be paid to the L/C Issuer.

E.        Amendment to Section 4.2 of the Credit Agreement.  Subject to the
terms and conditions set forth herein, the Credit Agreement is hereby amended to
restate the pricing grid contained in, and the last paragraph of, Section 4.2 to
read as follows:

 

LEVERAGE RATIO     FACILITY    
  FEE RATE         LIBOR RATE    
  MARGIN         IBOR RATE    
  MARGIN         BASE RATE  
  MARGIN  

 

Greater than or equal to 3.50 to 1.00

 

 

 

0.400%

 

 

 

3.100%

 

 

 

3.100%

 

 

 

2.100%

 

 

Greater than or equal to 3.00 to 1.00
but less than 3.50 to 1.00

 

 

 

0.325%

 

 

 

2.675%

 

 

 

2.675%

 

 

 

1.675%

 

 

Greater than or equal to 2.50 to 1.00
but less than 3.00 to 1.00

 

 

 

0.300%

 

 

 

2.450%

 

 

 

2.450%

 

 

 

1.450%

 

 

Greater than or equal to 2.00 to 1.00
but less than 2.50 to 1.00

 

 

 

0.250%

 

 

 

2.250%

 

 

 

2.250%

 

 

 

1.250%

 

 

Less than 2.00 to 1.00

 

 

 

0.250%

 

 

 

1.750%

 

 

 

1.750%

 

 

 

  .750%

 

 

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If the Borrower fails to deliver such certificate with respect to any Fiscal
Quarter which sets forth the Leverage Ratio within the period of time required
by Section 10.1(c): (x) each of the Libor Rate Margin and the IBOR Rate Margin
(each for Interest Periods commencing after the applicable Margin Adjustment
Date) shall automatically be adjusted to 3.100% per annum; (y) the Base Rate
Margin shall be automatically adjusted to 2.100% per annum; and (z) the Facility
Fee Rate shall automatically be adjusted to 0.400% per annum. The automatic
adjustments provided for in the preceding sentence shall take effect as of the
date on which the referenced certificate is due and shall remain in effect until
otherwise adjusted on the date such certificate is actually received in
accordance herewith.

F.        Amendment to Section 4.6 of the Credit Agreement.  Subject to the
terms and conditions set forth herein, Section 4.6 of the Credit Agreement is
hereby amended to add the words “that is not a Defaulting Lender” after the
words “each Lender” in the second line thereof.

G.        Amendment of Section 5.7 of the Credit Agreement.  Subject to the
terms and conditions set forth herein, Section 5.7 of the Credit Agreement is
hereby amended to add the following sentence at the end thereof: “The provisions
of this Section 5.7 shall not be construed to apply to any Cash Collateral or
other credit support provided to the L/C Issuer or Bank of America as the Lender
of Swingline Advances in respect of a Defaulting or Impacted Lender.”

H.        Amendment of Section 11.4 of the Credit Agreement.  Subject to the
terms and conditions set forth herein, the Credit Agreement is hereby amended to
restate Section 11.4 in its entirety to read as follows:

   Section 11.4    Restricted Payments.  The Borrower will not, nor will it
permit any Subsidiary of the Borrower to, directly or indirectly declare, order,
pay, make or set apart any sum for (i) any dividend or other distribution
(whether in cash, securities or other property) with respect to any shares of
any class of Capital Stock of the Borrower, (ii) any redemption, conversion,
exchange, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of Capital
Stock of any such Person now or hereafter outstanding or (iii) any payment made
to retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire shares of any class of Capital Stock of any such Person
now or hereafter outstanding except:

   (x)        so long as no Default or Event of Default shall exist at the time
of declaration or payment, after giving effect to such payment, calculated on a
pro forma basis, the Borrower may declare and pay cash dividends to its
stockholders in an amount not to exceed $60,000,000 in the aggregate in any
Fiscal Year; provided that in any Fiscal Year ending February 2, 2011 or
thereafter, if the Leverage Ratio for the Fiscal Year most recently ended is
less than 3.00 to 1.00, the Borrower may declare and pay cash dividends to its
stockholders in an amount not to exceed $75,000,000 in the aggregate in such
Fiscal Year; and

 

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   (y)        during the period beginning February 4, 2010 and ending on the
Maturity Date, the Borrower may repurchase its Capital Stock for an aggregate
cost not to exceed $100,000,000; provided that (A) the Total Debt to
Capitalization Ratio immediately after giving effect to any such repurchase,
calculated on a pro forma basis, shall not exceed 0.40:1, (B) at the time of any
such repurchase the Leverage Ratio for the Fiscal Year most recently ended shall
not exceed 3.00 to 1.00, and (C) no Default shall be in existence at the time of
such repurchase.

I.        Amendment of Article 12 of the Credit Agreement.  Subject to the terms
and conditions set forth herein, the Credit Agreement is hereby amended to
restate Article 12 in its entirety to read as follows:

Financial Covenants

  The Borrower covenants and agrees that, as long as the Obligations or any part
thereof are outstanding or any Lender has any Commitment hereunder or any Letter
of Credit shall remain outstanding (unless such Letter of Credit is Cash
Collateralized in full), it will perform and observe the following financial
covenants:

  Section 12.1    Leverage Ratio.  As of the end of each Fiscal Quarter set
forth below, the Borrower shall not permit the Leverage Ratio calculated as of
the end of such Fiscal Quarter, for the preceding twelve (12) Fiscal Periods
then ending, to exceed the ratio set forth below opposite such Fiscal Quarter:

 

Fiscal Quarter Ended   

Maximum

    Leverage Ratio    

  November 3, 2008

   3.50 to 1.00

  February 3, 2009

   3.50 to 1.00

  May 3, 2009

   4.20 to 1.00

  August 3, 2009

   4.60 to 1.00

  November 3, 2009

   4.50 to 1.00

  February 3, 2010 through November 3, 2011

   4.00 to 1.00

  Section 12.2    Fixed Charge Coverage Ratio.  As of the end of each Fiscal
Quarter set forth below, the Borrower shall not permit the Fixed Charge Coverage
Ratio calculated as of the end of such Fiscal Quarter, for the preceding twelve
(12) Fiscal Periods then ending, to be less than the ratio set forth below
opposite such Fiscal Quarter:

 

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Fiscal Quarter Ended   

Minimum Fixed Charge

Coverage Ratio

  November 3, 2008

   1.80 to 1.00

  February 3, 2009

   1.80 to 1.00

  May 3, 2009

   1.50 to 1.00

  August 3, 2009

   1.30 to 1.00

  November 3, 2009

   1.30 to 1.00

  February 3, 2010 through May 3, 2011

   1.50 to 1.00

  August 3, 2011 and thereafter

   1.60 to 1.00

J.        Amendment of Section 13.2 of the Credit Agreement.  Subject to the
terms and conditions set forth herein, Section 13.2 of the Credit Agreement is
hereby amended to restate the last paragraph thereof to read as follows:

“Notwithstanding the foregoing, subject to Section 3.3, amounts used to Cash
Collateralize Swingline Advances or the undrawn amount of Letters of Credit
shall be applied to satisfy the repayment of such Swingline Advances when due
and to satisfy drawings under Letters of Credit as they occur. If any amount
remains on deposit as Cash Collateral after all Swingline Advances have been
repaid and all Letters of Credit have either been fully drawn or expired, the
portion of such remaining amount that was provided by the Borrower shall be
applied to the other Obligations, if any, in the order set forth above, and such
portion of such remaining amount that was provided by a Defaulting or Impacted
Lender shall be returned to such Lender.

K.        Amendment and Restatement of Exhibit D.  Subject to the terms and
conditions set forth herein, the Credit Agreement is amended to restate Exhibit
D, the form of Compliance Certificate, in the form set forth as Exhibit A to
this Agreement.

2.      Effectiveness; Conditions Precedent.  The effectiveness of this
Agreement and the amendments to the Credit Agreement herein provided are subject
to the satisfaction of the following conditions precedent:

(a)        the Administrative Agent shall have received each of the following
documents or instruments in form and substance reasonably acceptable to the
Administrative Agent:

    (i)        six (6) original counterparts of this Agreement, duly executed by
the Borrower, the Administrative Agent, each Guarantor and the Required Lenders;

    (ii)       such other documents, instruments, opinions, certifications,
undertakings, further assurances and other matters as the Administrative Agent
shall reasonably request; and

 

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(b)        all fees and expenses payable to the Administrative Agent and the
Lenders (including the fees and expenses of counsel to the Administrative Agent)
estimated to date shall have been paid in full (without prejudice to final
settling of accounts for such fees and expenses).

3.      Consent of the Guarantors.  Each Guarantor hereby consents, acknowledges
and agrees to the amendments set forth herein and hereby confirms and ratifies
in all respects the Guaranty to which such Guarantor is a party (including
without limitation the continuation of such Guarantor’s payment and performance
obligations thereunder upon and after the effectiveness of this Agreement and
the amendments contemplated hereby) and the enforceability of such Guaranty
against such Guarantor in accordance with its terms.

4.      Representations and Warranties.  In order to induce the Administrative
Agent and the Lenders to enter into this Agreement, the Borrower represents and
warrants to the Administrative Agent and the Lenders as follows:

(a)        The representations and warranties made by the Borrower in Article 9
of the Credit Agreement and in each of the other Loan Documents to which it is a
party are true and correct on and as of the date hereof, except to the extent
that such representations and warranties expressly relate to an earlier date;

(b)        Since the date of the most recent financial reports of the Borrower
delivered pursuant to Section 10.1 of the Credit Agreement, no act, event,
condition, or circumstance has occurred or arisen which, singly or in the
aggregate with one or more other acts, events, occurrences or conditions
(whenever occurring or arising), has had or could reasonably be expected to have
a Material Adverse Effect;

(c)        The Persons appearing as Guarantors on the signature pages to this
Agreement constitute all Persons who are required to be Guarantors pursuant to
the terms of the Credit Agreement and the other Loan Documents, including
without limitation all Persons who became Subsidiaries or were otherwise
required to become Guarantors after the Closing Date, and each of such Persons
has become and remains a party to a Guaranty as a Guarantor;

(d)        This Agreement has been duly authorized, executed and delivered by
the Borrower and Guarantors party hereto and constitutes a legal, valid and
binding obligation of such parties, except as may be limited by general
principles of equity or by the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors’ rights generally;
and

(e)        After giving effect to this Agreement, no Default or Event of Default
has occurred and is continuing.

5.      Entire Agreement.  This Agreement, together with all the Loan Documents
(collectively, the “Relevant Documents”), sets forth the entire understanding
and agreement of the parties hereto in relation to the subject matter hereof and
supersedes any prior negotiations and agreements among the parties relating to
such subject matter. No promise, condition,

 

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representation or warranty, express or implied, not set forth in the Relevant
Documents shall bind any party hereto, and no such party has relied on any such
promise, condition, representation or warranty. Each of the parties hereto
acknowledges that, except as otherwise expressly stated in the Relevant
Documents, no representations, warranties or commitments, express or implied,
have been made by any party to the other. None of the terms or conditions of
this Agreement may be changed, modified, waived or canceled orally or otherwise,
except in writing and in accordance with Section 15.10 of the Credit Agreement.

6.      Full Force and Effect of Agreement.  Except as hereby specifically
amended, modified or supplemented, the Credit Agreement and all other Loan
Documents are hereby confirmed and ratified in all respects and shall be and
remain in full force and effect according to their respective terms.

7.      Counterparts.  This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original as against any party
whose signature appears thereon, and all of which shall together constitute one
and the same instrument. Delivery of an executed counterpart of a signature page
of this Agreement by telecopy, facsimile or other electronic transmission
(including .PDF) shall be effective as delivery of a manually executed
counterpart of this Agreement.

8.      Governing Law.  This Agreement shall in all respects be governed by, and
construed in accordance with, the laws of the State of California applicable to
contracts executed and to be performed entirely within such State, and shall be
further subject to the provisions of Section 15.13 of the Credit Agreement.

9.      Enforceability.  Should any one or more of the provisions of this
Agreement be determined to be illegal or unenforceable as to one or more of the
parties hereto, all other provisions nevertheless shall remain effective and
binding on the parties hereto.

10.    References.  All references in any of the Loan Documents to the “Credit
Agreement” shall mean the Credit Agreement, as amended hereby.

11.    Successors and Assigns.  This Agreement shall be binding upon and inure
to the benefit of the Borrower, the Administrative Agent and each of the
Guarantors and Lenders, and their respective successors, legal representatives,
and assignees to the extent such assignees are permitted assignees as provided
in Section 15.7 of the Credit Agreement.

[Signature pages follow.]

 

11

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be made,
executed and delivered by their duly authorized officers as of the day and year
first above written.

 

BORROWER:

WILLIAMS-SONOMA, INC.

By:

 

      /s/ Sharon L. McCollam

Name:

 

      Sharon L. McCollam

Title:

 

      Executive Vice President, Chief Operating

      and Chief Financial Officer

GUARANTORS:

WEST ELM, INC.

POTTERY BARN, INC .

POTTERY BARN KIDS, INC.

POTTERY BARN TEEN, INC .

WILLIAMS SONOMA HOME, INC.

WILLIAMS-SONOMA STORES, INC.

WILLIAMS-SONOMA DIRECT, INC.

WILLIAMS-SONOMA PUBLISHING, INC.

WILLIAMS-SONOMA RETAIL SERVICES, INC. WILLIAMS-SONOMA GIFT MANAGEMENT, INC.

By:

 

      /s/ Sharon L. McCollam

Name:

 

      Sharon L. McCollam

Title:

 

      Executive Vice President, Chief Operating

      and Chief Financial Officer

WILLIAMS-SONOMA STORES, LLC

By:

 

WILLIAMS-SONOMA STORES, INC.

 

By:

 

      /s/ Sharon L. McCollam

 

Name:

 

      Sharon L. McCollam

 

Title:

 

      Executive Vice President, Chief Operating

      and Chief Financial Officer

 

AMENDMENT NO. 1 TO

FOURTH AMENDED AND RESTATED CREDIT AGREEMENT

Signature Page

--------------------------------------------------------------------------------

ADMINISTRATIVE AGENT:

BANK OF AMERICA, N.A., as Administrative

Agent

By:

 

      /s/ Tiffany Shin

Name:

 

      Tiffany Shin

Title:

 

      Assistant Vice President

LENDERS: BANK OF AMERICA, N.A., as a Lender, L/C Issuer and Lender of Swingline
Advances By:  

      /s/ David Leimsieder

Name:

 

      David Leimsieder

Title:

 

      Senior Vice President

JPMORGAN CHASE BANK, N.A.

By:

 

      /s/ Camille Farnsworth-Schrader

Name:

 

      Camille Farnsworth-Schrader

Title:

 

      Senior Underwriter

UNION BANK OF CALIFORNIA, N.A.

By:

 

      /s/ Ching Lim

Name:

 

      Ching Lim

Title:

 

      Vice President

WELLS FARGO BANK, N.A.

By:

 

      /s/ Meggie Chichioco

Name:

 

      Meggie Chichioco

Title:

 

      Senior Vice President

THE BANK OF NEW YORK MELLON

By:

 

      /s/ Timothy J. Glass

Name:

 

      Timothy J. Glass

Title:

 

      Vice President

AMENDMENT NO. 1 TO

FOURTH AMENDED AND RESTATED CREDIT AGREEMENT

Signature Page

--------------------------------------------------------------------------------

U.S. BANK NATIONAL ASSOCIATION

By:

 

      /s/ Conan Schleicher

Name:

 

      Conan Schleicher

Title:

 

      Vice President

FIFTH THIRD BANK

By:

 

      /s/ Gary S. Losey

Name:

 

      Gary S. Losey

Title:

 

      Vice President

NATIONAL CITY BANK

By:

 

      /s/ Daniel O’Rourke

Name:

 

      Daniel O’Rourke

Title:

 

      Director

THE BANK OF NOVA SCOTIA

By:

 

      /s/ Annabella Guo

Name:

 

      Annabella Guo

Title:

 

      Director

MB FINANCIAL BANK, N.A.

(formerly OAK BROOK BANK )

By:

 

      /s/ Henry Wessel

Name:

 

      Henry Wessel

Title:

 

      Vice President

 

AMENDMENT NO. 1 TO

FOURTH AMENDED AND RESTATED CREDIT AGREEMENT

Signature Page

--------------------------------------------------------------------------------

EXHIBIT A TO AMENDMENT NO. 1

AMENDED AND RESTATED FORM OF COMPLIANCE CERTIFICATE

EXHIBIT D

Form of Compliance Certificate

The undersigned, duly appointed and acting chief financial officer or Vice
President, Treasury (as the case may be) of WILLIAMS-SONOMA, INC. (the
“Borrower”), being duly authorized, hereby delivers this Compliance Certificate
to the Agent and the Lenders, pursuant to Section 10.1(c) of that certain Fourth
Amended and Restated Credit Agreement, dated as of October 4, 2006, among the
Borrower, BANK OF AMERICA, N.A., in its capacity as administrative agent (the
“Agent”) and the Lenders party thereto, as such agreement may be amended,
restated or otherwise modified from time to time, reference to which hereby is
made (the “Credit Agreement”). Terms defined in the Credit Agreement which are
used herein shall have the meanings provided in the Credit Agreement.

1.        The Borrower hereby delivers to the Agent and the Lenders [check as
applicable]: the audited Fiscal Year end financial statements and the unaudited
consolidating financial statements required by Section 10.1(a); or     the
Fiscal Quarter end financial statements required by Section 10.1(b), dated as of
                    , 20    . Such financial statements have been prepared in
accordance with GAAP (as applicable) applied consistently throughout the periods
reflected therein, except for year-end audit adjustments and the absence of
footnotes for any financial statements delivered pursuant to Section 10.1(b) and
present fairly the financial condition of the Borrower and its Subsidiaries as
of the respective dates indicated therein.

2.        The undersigned represents and warrants to the Agent and the Lenders
that, except as may have been previously or concurrently disclosed to the Agent
and the Lenders in writing by the Borrower, the representations and warranties
contained in Article 9 of the Credit Agreement are true and correct on and as of
the date of this Compliance Certificate as if made on and as of the date hereof
(except to the extent that such representations and warranties are expressly by
their terms made only as of the Closing Date or another specified date).

3.        The undersigned hereby states that, to the best of his or her
knowledge and based upon an examination sufficient to enable an informed
statement [check as applicable]:

 

¨  

No Default exists as of the date hereof.

¨  

One or more Defaults have occurred or exist as of the date hereof. Included
within Exhibit A attached hereto is a written description specifying each such
Default, its nature, when it occurred, whether it is continuing as of the date
hereof and the steps being taken by the Borrower with respect thereto. Except as
so specified, no Default exists as of the date hereof.

4.        Exhibit B attached hereto sets forth the calculations necessary to
establish the status of the Borrower’s compliance with the covenant contained in
Article 12 of the Credit Agreement as of the effective date of the financial
statements referenced in paragraph 1 above.

--------------------------------------------------------------------------------

5.        Exhibit C attached hereto sets forth the determination of the Base
Rate Margin, the Libor Rate Margin, the IBOR Margin and the Facility Fee Rate to
become effective on the Margin Adjustment Date with respect to the financial
statements referenced in paragraph 1 hereof.

Date of execution of this Compliance Certificate:                     , 20    .

 

WILLIAMS-SONOMA, INC.

By:

 

 

Name:

 

 

Title:

 

 

--------------------------------------------------------------------------------

EXHIBIT A

to

COMPLIANCE CERTIFICATE

dated

                    , 20    

The following is attached to and made a part of the above referenced Compliance
Certificate.

[specify Defaults]

--------------------------------------------------------------------------------

EXHIBIT B

to

COMPLIANCE CERTIFICATE

dated

                , 20    

The following is attached to and made a part of the above referenced Compliance
Certificate.

 

1.

 

Leverage Ratio – Section 12.1:

         

(a)

 

Total Adjusted Funded Debt:

           

(i)

 

Average funded Debt1, plus

       

$                

   

(ii)

 

(A)

  all lease and rent expense for any Real  

        $                

              Property for the preceding four (4) Fiscal                
Quarters, multiplied by              

(B)

  six.  

        x              6

     

$                

   

(iii)

 

Total Adjusted Funded Debt

             

[1(a)(i) + 1(a)(ii)(B)]

 

        $                

     

$                

 

(b)

 

EBITDAR:

           

(i)

 

Net Income, plus (or less any benefit from)

 

        $                

         

(ii)

 

Income or franchise taxes to the extent included in the determination of Net
Income, plus

 

        $                

         

(iii)

 

Interest Expense to the extent included in the determination of Net Income, plus

 

        $                

         

(iv)

 

amortization and depreciation expense to the extent included in the
determination of Net Income, plus

 

        $                

         

(v)

 

expenses resulting from any non-cash compensation charges arising from any grant
of stock, stock options, stock-settled stock appreciation rights, restricted
stock units, or other equity based compensation, provided that such expenses are
and will be non-cash items in the period when taken and in all later fiscal
periods to the extent included in the determination of Net Income, plus

           

(vi)

 

other non-cash, non-recurring charges to the extent included in the
determination of Net Income (including by way of example, but not limited to,
asset write-offs associated with store or facility closings, asset impairments
associated with underperforming stores, asset write-offs associated with real
Property dispositions, and asset write-offs associated with obsolete or
underperforming information technology assets), plus

 

        $                

         

(vii)

 

all lease and rent expense for any real Property to the extent included in the
determination of Net Income, plus

           

(viii)

 

non-recurring cash expenses relating to store closings, other discontinued
operations or infrastructure downsizing (including by way of example, but not
limited to, store closings, call center closings, distribution center closings
and severance packages) in an aggregate amount not to exceed

       

 

1 The average of all Funded Debt as of the end of each of the immediately
preceding twelve (12) Fiscal Periods.

--------------------------------------------------------------------------------

     

$10,000,000 for any four consecutive Fiscal Quarters, to the extent included in
the determination of Net Income; minus

           

(ix)

 

other non-recurring gains to the extent included in the determination of Net
Income,

 

        $                

         

(x)

 

Total EBITDAR [sum of 1(b)(i) through 1(b)(ix)]

 

                  $                

 

(c)

 

Actual Leverage Ratio [1(a)(ii) ÷ 1(b)(x)]

    

                to 1.00

(d)

 

Required Maximum Leverage Ratio

       

 

 

Fiscal Quarter Ended

   Maximum Leverage Ratio     

November 3, 2008

   3.50 to 1.00     

February 3, 2009

   3.50 to 1.00     

May 3, 2009

   4.20 to 1.00     

August 3, 2009

   4.60 to 1.00     

November 3, 2009

   4.50 to 1.00     

February 3, 2010 through

       

November 3, 2011

   4.00 to 1.00   

 

Compliance:

 

    Yes/No

 

2.

 

Fixed Charge Coverage Ratio – Section 12.2:

         

(a)

 

Total EBITDAR (item 1.b.(x))

       

$                

 

(b)

 

Total Fixed Charges

           

(i) Interest Expense plus

 

        $                

         

(ii) Total Rental Expense

 

        $                

       

(c)

 

Total Fixed Charges

 

        $                

       

(d)

 

Actual Fixed Charge Coverage Ratio [2(a) ÷ 2(c)]

    

                to 1.00

 

(e)

 

Required Fixed Charge Coverage Ratio

       

 

 

Fiscal Quarter Ended

   Minimum Fixed Charge Coverage Ratio     

November 3, 2008

   1.80 to 1.00                       

February 3, 2009

   1.80 to 1.00                       

May 3, 2009

   1.50 to 1.00                       

August 3, 2009

   1.30 to 1.00                       

November 3, 2009

   1.30 to 1.00                       

February 3, 2010 through

       

                May 3, 2011

   1.50 to 1.00                       

August 3, 2011 and thereafter

   1.60 to 1.00                     

 

Compliance:

 

    Yes/No

--------------------------------------------------------------------------------

EXHIBIT C

to

COMPLIANCE CERTIFICATE

dated

                , 20    

The following is attached to and made a part of the above referenced Compliance
Certificate.

[insert determination of margins and rates]