Exhibit 10.1


 


AMENDMENT NO. 6 TO THE SEVENTH AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT


 


This AMENDMENT NO. 6 TO THE SEVENTH AMENDED
AND RESTATED LOAN AND SECURITY AGREEMENT (together with all exhibits and
schedules attached hereto, this “Sixth Amendment”) dated as of July 29,
2005 among


 


RESTORATION HARDWARE, INC., a Delaware corporation,
as Lead Borrower for the Borrowers, being said RESTORATION HARDWARE, INC., and


 


THE MICHAELS FURNITURE COMPANY, INC., a California
corporation; and


 


the LENDERS party hereto; and


 


FLEET RETAIL GROUP, LLC (f/k/a Fleet Retail
Group, Inc.), as Agent for the Lenders (the “Agent”), a Delaware limited
liability company, having its principal place of business at 40 Broad Street,
Boston, Massachusetts 02109; and


 


THE CIT GROUP/BUSINESS CREDIT, INC.,
individually as a Lender and as Co-Administrative Agent; and


 


WELLS FARGO RETAIL FINANCE, LLC, individually
as a Lender and as Documentation Agent;


 


in consideration of the mutual covenants
herein contained and benefits to be derived herefrom.


 


W  I  T  N  E  S
S  E  T  H:


 


WHEREAS, the
Borrowers, the Lenders, the Agent, and the Co-Administrative Agent among
others, have entered into a certain Seventh Amended and Restated Loan and
Security Agreement dated as of November 26, 2002 (as amended and in effect, the
“Credit Agreement”); and


 


WHEREAS, the
Borrowers and the Lenders desire to increase the amount of the Total Credit
Facility to $150,000,000 and to add Wells Fargo Retail Finance, LLC as a Lender
and as Documentation Agent under the Credit Agreement; and


 


WHEREAS, the Borrowers
and the Lenders desire to amend and modify certain terms and provisions of the Credit
Agreement as provided herein;


 


NOW THEREFORE,
in consideration of the mutual promises and agreements herein contained, the parties
hereto hereby agree that the Credit Agreement is hereby amended as follows:


 


1





















 


1.                                       Incorporation
of Terms and Conditions of Credit Agreement.   All of the terms and conditions of the Credit
Agreement (including, without limitation, all definitions set forth therein)
are specifically incorporated herein by reference.  All capitalized terms not otherwise defined
herein shall have the same meaning as in the Credit Agreement.


 


2.                                       Representations
and Warranties.  Each Borrower hereby
represents and warrants that (i) no Default or Event of Default exists under
the Credit Agreement or under any of the other Loan Documents, and (ii) all
representations and warranties contained in the Credit Agreement and the other
Loan Documents are true and correct as of the date hereof (except insofar as
such representations and warranties expressly relate to an earlier date, in
which case they are true and correct as of such earlier date).


 


3.                                       Amendments
to Credit Agreement.


 


a.                                       Amendments
to Section 1 of the Credit Agreement. 
The provisions of Section 1 of the Credit Agreement are hereby amended
as follows:


 


i.                                          The
introductory paragraph to Section 1 is hereby amended by deleting the words “$100,000,000
(or such greater amount as may be made available pursuant to Section 1.1A,
below)” and substituting the number “$150,000,000” in its stead.


 


ii.                                       The
provisions of Section 1.1A are hereby deleted in their entirety.


 


iii.                                    Section
1.1 is hereby amended as follows:


 


a)                                      by
deleting the words “Borrowing Base” in the eighth line thereof and substituting
the words “Adjusted Borrowing Base” in their stead.


 


b)                                     by
adding the following at the end thereof:


 


Further, in no event shall the aggregate outstanding
amount of Incremental Revolving Loans at any time exceed the Incremental
Availability.


 


iv.                                   Section
1.2  is hereby deleted in its entirety
and the following substituted in its stead:


 


Agent may make Revolving Credit Loans on behalf of the
Lenders at a time when an Overadvance exists or would be caused by the making
of such Revolving Credit Loans on behalf of the Lenders where such Revolving
Credit Loans are Protective Advances; provided however, in no event shall (w)
the aggregate of the then outstanding Revolving Credit Loans (including any
Overadvances) plus the LC Amount exceed the aggregate Revolving Loan
Commitments of all Lenders, (x) the making of


 


2





















 


any Overadvance cause any Lender to exceed that Lender’s
Revolving Loan Commitment, (y) the aggregate amount of Protective Overadvances
exceed 5% of the Adjusted Borrowing Base or (z) any such Overadvance remain
outstanding for more than forty-five (45) consecutive Business Days, unless in
case of clause (z) the Majority Lenders otherwise agree.


 


v.                                      Section
1.5 is hereby amended by deleting “$50,000,000” in the proviso to clause (ii)
of the first sentence and substituting “$60,000,000” in its stead.


 


b.                                      Amendments
to Section 2 of the Credit Agreement. 
The provisions of Section 2 of the Credit Agreement are hereby amended
as follows:


 


i.                                          Section
2.1.1 is hereby amended by adding the words “including Incremental Revolving
Credit Loans bearing interest at the Base Rate” after the words “Base Rate
Revolving Portion” in the second line thereof and the words “including
Incremental Revolving Credit Loans bearing interest at LIBOR” after the words “LIBOR
Advances” in the sixth line thereof.


 


ii.                                       Section
2.3 is hereby amended by adding the words “as such Agent’s Fee Letter has been supplemented
by letter dated July 29, 2005” before the period at the end of Section 2.3.


 


iii.                                    Section
2.5 is hereby amended by deleting the number “0.375%” appearing therein and
substituting the number “0.25%” in its stead.


 


c.                                       Amendments
to Section 3 of the Credit Agreement. 
The provisions of Section 3 of the Credit Agreement are hereby amended
as follows:


 


i.                                          Section
3.1.1 of the Credit Agreement is hereby amended by adding the following at the
end thereof:


 


In the event that the aggregate outstanding Revolving
Credit Loans and the LC Amount exceeds the Borrowing Base, all Revolving Credit
Loans made thereafter by the Lenders in excess of the Borrowing Base shall be
deemed to constitute Incremental Revolving Credit Loans, and only Incremental
Revolving Credit Loans shall bear interest at the Base Rate plus the Base Rate
Margin for Incremental Revolving Credit Loans or at LIBOR plus the LIBOR Margin
for Incremental Revolving Credit Loans, as applicable.


 


ii.                                       Sections
3.2.6 (a), (b), and (c) and (d) of the Credit Agreement are hereby amended by
adding the words “or other Obligations not arising under the Loan Documents”
immediately after the words “Derivative Obligations” therein.


 


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d.                                      Amendments
to Section 4 of the Credit Agreement. 
The provisions of Section 4.1 of the Credit Agreement are hereby amended
by deleting the date “June 30, 2006” appearing therein and substituting the
date “June 30, 2009” in its stead.


 


e.                                       Amendments
to Section 6 of the Credit Agreement. 
The provisions of Section 6 of the Credit Agreement are hereby amended
as follows:


 


i.                                          The
provisions of Section 6.1.1 of the Credit Agreement are hereby amended by
deleting Exhibit 6.1.1 and substituting Exhibit 6.1.1 attached
hereto in its stead.


 


ii.                                       The
provisions of Section 6.2.4 of the Credit Agreement are hereby deleted in their
entirety and the following substituted in their stead:


 


“6.2.4                  Cash
Receipts.


 


(a)                                  After
the occurrence of a Cash Dominion Event, the Borrowers shall cause the sweep on
each Business Day of all available cash receipts and other proceeds from the
sale or disposition of any Collateral, including, without limitation, the
proceeds of all credit card charges (all such cash receipts and proceeds, “Cash
Receipts”), to (x) a concentration account maintained by the Agent at Bank
of America, N.A. (the “Concentration Account”), or (y) a Blocked
Account, as the Agent may direct.


 


(b)                                 The
Blocked Account Agreements shall require, after the occurrence of a Cash
Dominion Event, the sweep on each Business Day of all Cash Receipts to the
Concentration Account or to such other account as the Agent may direct.


 


(c)                                  If
at any time after the occurrence of a Cash Dominion Event, any cash or cash
equivalents owned by the Borrowers and constituting proceeds of Collateral are
deposited to any account, or held or invested in any manner, otherwise than in
a Blocked Account that is subject to a Blocked Account Agreement as required
herein, the Agent shall require the Borrowers to close such account and have
all funds therein transferred to the Concentration Account or such Blocked
Account as the Agent may direct.


 


(d)                                 The
Borrowers may close Blocked Accounts and/or open new Blocked Accounts, subject
to the execution and delivery to the Agent of Blocked Account Agreements
consistent with the provisions of this Section 6.2.4.


 


(e)                                  The
Concentration Account is and shall remain under the sole dominion and control
of the Agent. Each Borrower acknowledges and agrees that (i) such Borrower has
no right of withdrawal from the Concentration Account,


 


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(ii) the
funds on deposit in the Concentration Account shall continue to be collateral
security for all of the Obligations, and (iii) the funds on deposit in the
Concentration Account shall be applied as provided in Section 3.2.6 or
Section 3.4, as applicable.


 


(f)                                    So
long as no Cash Dominion Event has occurred, the Borrowers may direct, and
shall have sole control over, the manner of disposition of its funds in the
Blocked Accounts.  After the occurrence
of a Cash Dominion Event, whether or not any Obligations are then outstanding,
the Borrowers shall cause the ACH or wire transfer, upon the Agent’s
instruction, to the Concentration Account of the then entire ledger balance of
each Blocked Account.


 


(g)                                 In
the event that, notwithstanding the provisions of this Section 6.2.4, after the
occurrence of a Cash Dominion Event, the Borrowers receive or otherwise have
dominion and control of any such proceeds or collections of Collateral, such
proceeds and collections shall be held in trust by the Borrowers for the Agent
and shall not be commingled with any of the Borrowers’ other funds or deposited
in any account of any Borrower other than as instructed by the Agent.”


 


iii.                                    The
provisions of Section 6.2.5 of the Credit Agreement are hereby amended by
deleting the words “Dominion Account” in the sixth line thereof and
substituting “Blocked Account” in their stead.


 


iv.                                   The
provisions of Section 6.3.1 of the Credit Agreement are hereby deleted in their
entirety and the following substituted in their stead:


 


“6.3.1                  The
Borrowers, at their own expense, shall cause not less than one (1) physical
inventory of the Borrowers’ inventory to be undertaken in each twelve (12)
month period during which this Agreement is in effect, conducted by nationally
recognized inventory takers and using practices consistent with practices in
effect on the date hereof.  The Agent, at
the expense of the Borrowers, may participate in and/or observe each scheduled
physical count of Inventory which is undertaken on behalf of any Borrower or
its Subsidiaries.  The Borrowers shall
provide the Agent with the preliminary Inventory levels at each of the
Borrowers’ stores within ten (10) days following the completion of such inventory.  The Borrowers, within forty-five (45) days
following the completion of such inventory, shall provide the Agent with a
reconciliation of the results of each such inventory (as well as of any other
physical inventory undertaken by the Borrowers) and shall post such results to
the Borrowers’ stock ledger and general ledger, as applicable.  The Agent, in its discretion, if any Event of
Default exists, may cause such additional inventories to be taken as the Agent
determines (each, at the expense of the Borrowers).  The Agent shall use its best efforts to
schedule


 


5





















 


any such
inventories so as to not unreasonably disrupt the operation of the Borrowers’
business.”


 


v.                                      The
provisions of Section 6.5 of the Credit Agreement are hereby amended by
deleting the words “the Dominion Account” in the eighth line thereof and
substituting “a Blocked Account” in their stead.


 


f.                                         Amendment
to Section 7 of the Credit Agreement. 
The provisions of Section 7 of the Credit Agreement are hereby amended as
follows:


 


i.                                          The
provisions of Section 7.1.1 of the Credit Agreement are hereby amended by
deleting Exhibit 7.1.1 and substituting Exhibit 7.1.1 attached
hereto in its stead.


 


ii.                                       The
provisions of Section 7.1.4 of the Credit Agreement are hereby amended by
deleting Exhibit 7.1.4 and substituting Exhibit 7.1.4 attached
hereto in its stead.


 


iii.                                    The
provisions of Section 7.1.5 of the Credit Agreement are hereby amended by
deleting Exhibit 7.1.5 and substituting Exhibit 7.1.5 attached
hereto in its stead.


 


iv.                                   The
provisions of Section 7.1.14 of the Credit Agreement are hereby amended by
deleting Exhibit 7.1.14 and substituting Exhibit 7.1.14 attached
hereto in its stead.


 


v.                                      The
provisions of Section 7.1.23 of the Credit Agreement are hereby amended by
deleting Exhibit 7.1.23 and substituting Exhibit 7.1.23 attached
hereto in its stead.


 


g.                                      Amendment
to Section 8 of the Credit Agreement. 
The provisions of Section 8 of the Credit Agreement are hereby amended as
follows:


 


i.                                          by
deleting Section 8.1.3 in its entirety and substituting the following in its
stead:


 


“8.1.3  Financial
Statements and Other Information. 
The Borrowers shall furnish to the Agent:


 


(a)                                  Within
ninety (90) days after the end of each fiscal year of the Borrowers, a
consolidated balance sheet and related statements of operations and cash flows
as of the end of and for such year, setting forth in each case in comparative
form the figures for the previous fiscal year, all audited and reported on by Deloitte
& Touche LLP or another independent public accountants of recognized
national standing (without a


 


6





















 


“going concern”
or like qualification or exception and without a qualification or exception as
to the scope of such audit) to the effect that such consolidated financial
statements present fairly in all material respects the financial condition and
results of operations of the Borrowers and their Subsidiaries on a consolidated
basis in accordance with GAAP consistently applied;


 


(b)                                 Within
forty-five (45) days after the end of each fiscal quarter of the Borrowers, a
consolidated balance sheet and related statements of operations and cash flows,
as of the end of and for such fiscal quarter and the elapsed portion of the
fiscal year, setting forth in each case in comparative form the figures for the
previous fiscal year, all certified by one of the Lead Borrower’s financial
officers as presenting in all material respects the financial condition and
results of operations of the Borrowers and their Subsidiaries on a consolidated
basis in accordance with GAAP consistently applied, subject to normal year end
audit adjustments and the absence of footnotes;


 


(c)                                  Within
thirty (30) days after the end of each fiscal month of the Borrowers, a
consolidated balance sheet and related statements of operations and cash flows,
as of the end of and for such fiscal month and the elapsed portion of the
fiscal year, setting forth in each case in comparative form the figures for the
previous fiscal year, all certified by one of the Lead Borrower’s financial
officers as presenting in all material respects the financial condition and
results of operations of the Borrowers and their Subsidiaries on a consolidated
basis in accordance with GAAP consistently applied, subject to normal year end
audit adjustments and the absence of footnotes;


 


(d)                                 Concurrently
with any delivery of financial statements under clause (a), (b), or (c)
above, a certificate of a financial officer of the Lead Borrower in the form of
Schedule 8.1.3(d) hereto (a “Compliance Certificate”) (i)
certifying as to whether a Default or Event of Default has occurred and, if a
Default or Event of Default has occurred, specifying the details thereof and
any action taken or proposed to be taken with respect thereto,
(ii) setting forth reasonably detailed calculations with respect to
Availability and the Fixed Charge Coverage Ratio, whether or not then in
effect, for such period, and (iii) stating whether any change in GAAP or in the
application thereof has occurred since the date of the Borrowers’ most recent
audited financial statements and, if any such change has occurred, specifying
the effect of such change on the financial statements accompanying such
Compliance Certificate;


 


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(e)                                  Within
sixty (60) days after the commencement of each fiscal year of the Borrowers,
a detailed, updated and extended forecast which shall go out at least through
the end of the then next fiscal year and shall include a consolidated income
statement, balance sheet, and statement of cash flow, by month, each prepared
in conformity with GAAP and consistent with the Borrowers’ then current
practices;


 


(f)                                    Promptly
after the same become publicly available, copies of all periodic and other
reports, proxy statements and other materials filed by any Borrower or any of
its Subsidiaries with the Securities and Exchange Commission (including,
without limitation, Forms 10K and 10Q), or any governmental authority
succeeding to any or all of the functions of said Commission, or with any
national securities exchange, as the case may be;


 


(g)                                 Promptly
upon receipt thereof, copies of all reports submitted to any Borrower by
independent certified public accountants in connection with each annual,
interim or special audit of the books of the Borrowers or any of their
Subsidiaries made by such accountants, including any management letter
commenting on the Borrowers’ internal controls submitted by such accountants to
management in connection with their annual audit;


 


(h)                                 The
financial and collateral reports described on Schedule 8.1.3 (h)  hereto, at the times set forth in such
Schedule; and


 


(i)                                     Promptly
following any request therefor, such other information regarding the
operations, business affairs and financial condition of any Borrower or its
Subsidiaries, or compliance with the terms of any Loan Document, as the Agent
or any Lender may reasonably request.”


 


ii.                                       by
deleting Section 8.1.7 in its entirety.


 


iii.                                    by
deleting clause (B) of Section 8.2.6 in its entirety and substituting the
following in its stead:


 


“(B)                          Provided
further that all payments for termination of Store leases and all proceeds of
Relocation Sales shall be paid, upon the occurrence of a Cash Dominion Event,
directly to a Blocked Account or the Concentration Account, to be applied and
distributed as set forth in Section 6.2;”


 


iv.                                   by
deleting clauses (C) and (D) of Section 8.2.6 in their entirety.


 


v.                                      by
adding the following new subsection:


 


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8.2.18 Fixed Charge Coverage Ratio. At any time
that there are Incremental Revolving Loans outstanding, in the event that
Availability under the Adjusted Borrowing Base shall be less than ten percent (10%)
of the then Adjusted Borrowing Base, the Borrowers shall not for such time
permit the Fixed Charge Coverage Ratio to be less than 1.1:1.0.


 


h.                                      Amendment
to Section 10 of the Credit Agreement. 
The provisions of Section 10 of the Credit Agreement are hereby amended as
follows:


 


i.                                          The
provisions of Section 10.1.3 are hereby amended by adding the words “or 8.2.18”
after the words “or 8.3” in the third line thereof.


 


ii.                                       The
provisions of Section 10.1.6 are hereby amended by deleting “$200,000” in the
eleventh line thereof and substituting “$500,000” in its stead.


 


iii.                                    The
provisions of Section 10.1.15 are hereby amended by deleting “$300,000” from
the fourth line thereof and substituting “$500,000” in its stead.


 


iv.                                   The
provisions of Section 10.4 are hereby amended by adding the words “or other
Obligations not arising under the Loan Documents” immediately after the words “Derivative
Obligations” therein.


 


i.                                          Amendment
to Section 11 of the Credit Agreement. 
The provisions of Section 11 of the Credit Agreement are hereby amended as
follows:


 


i.                                          The
provisions of Section 11.9.1. are hereby amended by adding the following at the
end thereof:


 


Notwithstanding anything to the contrary herein
contained, each partial assignment shall be made as an assignment of a
proportionate part of all of the assigning Lender’s rights and
obligations, including, without limitation, assignments of all Revolving Loan
Commitments to make Incremental Revolving Credit Loans.


 


ii.                                       The
provisions of Section 11.10 are hereby amended by adding a comma and the words “Adjusted
Borrowing Base, Appraised Inventory Liquidation Value, Availability, Average
Net Availability, Net Availability, Cash Dominion Event, and Incremental
Availability” after the words “Borrowing Base” in clause (12) thereof.


 


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j.                                          Amendments
to Appendix A to the Credit Agreement. 
Appendix A to the Credit Agreement is hereby amended as follows:


 


i.                                          The
definitions of “Additional Commitment Lender”, “Commitment Increase”, “Commitment
Increase Date”, ““Dominion Account”, “Inventory Advance Rate”, and “Inventory
Appraisal Cap” are hereby deleted in their entirety.


 


ii.                                       The
definition of “Availability” is hereby amended by deleting the words “Borrowing
Base” in the sixth and seventh lines thereof and substituting the words “Adjusted
Borrowing Base” in their stead.


 


iii.                                    The
definition of “Applicable Margin” is hereby deleted in its entirety and the
following substituted in its stead:


 


“Applicable Margin”
- initially, the percentages with respect to the Base Rate Revolving Portion
(other than Incremental Revolving Credit Loans), the LIBOR Revolving Portion
(other than Incremental Revolving Credit Loans) and the Incremental Revolving
Credit Loans set forth in Level II, below:


 


	
  Level

  	
   

  	
  Average Net

  Availability

  	
   

  	
  Base Rate

  Margin

  	
   

  	
  LIBOR

  Margin

  	
   

  	
  Base Rate

  Margin for

  Incremental

  Revolving

  Credit Loans

  	
   

  	
  LIBOR Margin

  for Incremental

  Revolving

  Credit Loans

  	
   

  
	
  I

  	
   

  	
  >$50,000,000

  	
   

  	
  0

  	
  %

  	
  1.25

  	
  %

  	
  1.00

  	
  %

  	
  3.50

  	
  %

  
	
  II

  	
   

  	
  <=$50,000,000 and > $30,000,000

  	
   

  	
  0

  	
  %

  	
  1.50

  	
  %

  	
  1.00

  	
  %

  	
  3.50

  	
  %

  
	
  III

  	
   

  	
  <=$30,000,000 and > $15,000,000

  	
   

  	
  0

  	
  %

  	
  1.75

  	
  %

  	
  1.00

  	
  %

  	
  3.50

  	
  %

  
	
  IV

  	
   

  	
  <=$15,000,000

  	
   

  	
  0

  	
  %

  	
  2.00

  	
  %

  	
  1.00

  	
  %

  	
  3.50

  	
  %

  



 


The Applicable Margin shall be adjusted quarterly
commencing with the fiscal quarter ending January 28, 2006, based upon the
Borrowers’ Average Net Availability for the immediately preceding fiscal
quarter, as of the first day of each fiscal quarter.  Upon the occurrence of an Event of Default,
at the option of the Agent or at the direction of the Majority Lenders, interest
shall be immediately increased to that set forth in Level IV (even if the
Average Net Availability requirements for a different Level have been met) and
interest shall accrue at the rate set forth in Section 2.1.2.


 


iv.                                   The
definition of “Borrowing Base” is hereby deleted in its entirety and the
following substituted in its stead:


 


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“Borrowing Base”
means, at any time of calculation, an amount equal to the sum of the following:


 


(a)                                  The
product of (i) 80% multiplied by
(ii) the Appraised Inventory Liquidation Value of Eligible Inventory of the
Lead Borrower and the Canadian Affiliate (net of Inventory Reserves); plus


 


(b)                                 The
product of (i) the Cost of Eligible Inventory of Michaels (net of Inventory
Reserves) multiplied by (ii) 25%, which together
with the result of clause (c) below shall not exceed $2,000,000; plus


 


(c)                                  The
product of (i) the face amount of Eligible Accounts of Michaels (net of
Receivables Reserves) multiplied by
(ii) the applicable Receivables Advance Rate, which together with the result of
clause (b) above shall not exceed $2,000,000; plus


 


(d)                                 The
product of (i) the amount of Eligible Credit Card Receivables of the Lead
Borrower and the Canadian Affiliate (net of Receivables Reserves) multiplied by (ii) the applicable Receivables Advance Rate.


 


provided, however, that until the Agent obtains a
perfected security interest in the Canadian Assets and the Canadian Inventory,
the amounts set forth in clauses (a) and (d) attributable to the Canadian
Affiliate shall not be included in the Borrowing Base calculation; and provided
further that Eligible In-Transit Inventory shall not constitute more than twenty
percent (20%) of the Eligible Inventory at any time.


 


v.                                      The
definition of “Borrowing Base Certificate” is hereby amended by adding the
words “and the Adjusted Borrowing Base” after the words “Borrowing Base”
wherever same appears.


 


vi.                                   The
definition of “Overadvance” is hereby amended by deleting the words “Borrowing
Base” in the last line thereof and substituting the words “Adjusted Borrowing
Base” in their stead.


 


vii.                                The
definition of “Receivables Advance Rate” is hereby deleted in its entirety and
the following substituted in its stead:


 


“Receivables Advance Rate” - Eighty-five percent
(85%).


 


viii.                             The
definition of “Revolving Loan Commitment” is hereby deleted in its entirety and
the following inserted in its stead:


 


““Revolving Loan
Commitment” – with respect to any Lender, the amount of such Lender’s
Revolving Loan Commitment pursuant to subsection 1.1


 


11





















 


of the Agreement, as set
forth below such Lender’s name on the signature page to Amendment No. 6 to this
Agreement.”


 


ix.                                     The
definition of “Revolving Credit Loan” is hereby amended by adding the words “and
shall include, in all events Incremental Revolving Credit Loans made hereunder”.


 


x.                                        The
definition of “Revolving Credit Maximum Amount” is hereby deleted in its
entirety and the following substituted in its stead:


 


xi.                                     “Revolving
Credit Maximum Amount” - $150,000,000.


 


xii.                                  The
definition of “Total Credit Facility” is hereby deleted in its entirety and the
following substituted in its stead:


 


“Total Credit Facility” - $150,000,000.


 


xiii.                               The
following new definitions are hereby added to Appendix A to the Credit Agreement
in appropriate alphabetical order:


 


(1)                                  “Adjusted
Borrowing Base” means, at any time of calculation, an amount equal to the
sum of the following:


 


(a)                                  The
product of (i) 95% multiplied by
(ii) the Appraised Inventory Liquidation Value of Eligible Inventory of the
Lead Borrower and the Canadian Affiliate (net of Inventory Reserves); plus


 


(b)                                 The
product of (i) the Cost of Eligible Inventory of Michaels (net of Inventory
Reserves) multiplied by (ii) 25%, which together
with the result of clause (c) below shall not exceed $2,000,000; plus


 


(c)                                  The
product of (i) the face amount of Eligible Accounts of Michaels (net of
Receivables Reserves) multiplied by
(ii) the applicable Receivables Advance Rate, which together with the result of
clause (b) above shall not exceed $2,000,000; plus


 


(d)                                 The
product of (i) the amount of Eligible Credit Card Receivables of the Lead
Borrower and the Canadian Affiliate (net of Receivables Reserves) multiplied by (ii) the applicable Receivables Advance Rate.


 


provided, however, that until the Agent obtains a
perfected security interest in the Canadian Assets and the Canadian Inventory,
the amounts set forth in clauses (a) and (d) attributable to the Canadian
Affiliate shall not be included in the Adjusted Borrowing Base calculation; and
provided further that Eligible In-Transit Inventory shall not constitute more
than twenty percent (20%) of the Eligible Inventory at any time.


 


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(2)                                  “Average
Net Availability” means the average daily Net Availability for the
immediately preceding three month period.


 


(3)                                  “Blocked
Account” means each deposit account of the Borrowers which is the subject
of a Blocked Account Agreement.


 


(4)                                  “Blocked
Account Agreement” means agency agreements with the banks maintaining
deposit accounts of the Borrower where funds from one or more checking or other
demand deposit account maintained by any Borrower into which proceeds of
Collateral are deposited are concentrated, which agreements shall be in form
and substance satisfactory to the Agent.


 


(5)                                  “Cash
Dominion Event” means either (i) the occurrence of an Event of Default, or
(ii) the failure of the Borrowers to maintain Availability under the Adjusted
Borrowing Base in an amount equal to at least fifteen (15%) of the then Adjusted
Borrowing Base.


 


(6)                                  “Cash
Receipts” as defined in Section 6.2.4(a).


 


(7)                                  “Concentration
Account” as defined in Section 6.2.4(a).


 


(8)                                  “Incremental
Availability” means, as of any date of determination, the excess of (a) the
Adjusted Borrowing Base, over (b) the Borrowing Base.


 


(9)                                  “Incremental
Revolving Credit Loans” means all Revolving Credit Loans based on
Incremental Availability at any time made by a Lender.


 


4.                                       No
Further Modification.    Except as
expressly modified in the manner set forth above, the Credit Agreement and the
other Loan Documents shall remain unmodified and in full force and effect.


 


5.                                       No
Claims; Waiver.   Each Borrower
acknowledges, confirms and agrees that as of the date hereof such Borrower has
no knowledge of any offsets, defenses, claims or counterclaims against the
Agent or any Lender with respect to, under or relating to the Loan, the Loan
Documents, or the transactions contemplated therein.


 


6.                                       Conditions
to Effectiveness.  This Sixth Amendment
shall not be effective until each of the following conditions precedent have
been fulfilled to the satisfaction of the Agent:


 


a.                                       This
Sixth Amendment shall have been duly executed and delivered by the Borrowers,
the Agent and Lenders.  The Agent shall
have received a fully executed copy hereof and of each other document required
hereunder.


 


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b.                                      All
action on the part of the Borrowers necessary for the valid execution, delivery
and performance by the Borrowers of this Sixth Amendment shall have been duly
and effectively taken.  The Agent shall
have received from the Borrowers true copies of the resolutions authorizing the
transactions described herein, each certified by their secretary or other
appropriate officer to be true and complete.


 


c.                                       The
Agent shall have received an opinion of counsel to the Borrowers in form and
substance satisfactory to the Agent and its counsel.


 


d.                                      The
Borrowers shall have paid the Agent all amounts due under the Amendment to the Fee
Letter of even date herewith.


 


e.                                       The
Borrowers shall have reimbursed the Agent for all expenses incurred in
connection herewith, including, without limitation, reasonable attorneys’ fees.


 


f.                                         After
giving effect to this Sixth Amendment, no Default or Event of Default shall
have occurred and be continuing.


 


g.                                      The
Borrowers shall have provided such additional instruments and documents, as the
Agent and its counsel may have reasonably requested.


 


7.                                       Binding
Agreement.  The terms and provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their heirs, representatives, successors and assigns.


 


8.                                       Multiple
Counterparts.   This Sixth Amendment
may be executed in multiple counterparts, each of which shall constitute an
original and together which shall constitute but one and the same instrument.


 


9.                                       Governing
Law; Sealed Instrument.  This Sixth Amendment
shall be construed, governed, and enforced pursuant to the laws of the State of
California.


 


10.                                 Amendments.  All references to the Credit Agreement
contained in the Credit Agreement and the other Loan Documents and the other
documents and instruments delivered pursuant to or in connection therewith or
herewith shall mean the Credit Agreement, as amended hereby and as may in the
future be amended, restated, supplemented or modified from time to time.


 


[SIGNATURE PAGES FOLLOW]


 


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IN WITNESS
WHEREOF, this Sixth Amendment has been duly executed and delivered by each of
the parties hereto as of the date first above written.


 


 


	
   

  	
  RESTORATION HARDWARE, INC.

  
	
   

  	
  as Lead Borrower and Borrower

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE MICHAELS FURNITURE

  COMPANY INC.

  
	
   

  	
  as Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  



 


15





















 


	
   

  	
  FLEET RETAIL GROUP, INC.,

  
	
   

  	
  as Agent, and as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Keith Vercauteren

  
	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
  40 Broad Street

  
	
   

  	
   

  	
  Boston, Massachusetts 02109

  
	
   

  	
  Revolving Loan Commitment: $55,000,000

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE CIT GROUP/BUSINESS CREDIT,

  INC. as Co-Administrative Agent and as

  Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
  300 South Grand Avenue, 10th Floor

  
	
   

  	
   

  	
  Los Angeles, California 90071

  
	
   

  	
  Revolving Loan Commitment: $45,000,000

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO RETAIL FINANCE, LLC

  as Documentation Agent and as Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
  One Boston Place, 18th Floor

  
	
   

  	
   

  	
  Boston, Massachusetts 02108

  
	
   

  	
  Revolving Loan Commitment: $50,000,000

  



 


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