Amendment No. 1 to Credit Agreement


    AMENDMENT
      NO. 1 TO CREDIT AGREEMENT

     

    AMENDMENT
      NO. 1, dated as of May 25, 2007 (this “Amendment”),
      to
      the Credit Agreement, dated as of October 24, 2006 (the “Credit
      Agreement”),
      by
      and among The Bombay Company, Inc., BBA Holdings, LLC, Bombay International,
      Inc., The Bombay Furniture Company of Canada Inc., as borrowers (the
“Borrowers”),
      the
      lenders signatory thereto from time to time (the “Lenders”),
      General Electric Capital Corporation, for itself, as Lender, and as
      administrative agent and collateral agent for the Lenders (in such capacity,
      the
“Agent”)
      and GE
      Canada Finance Holding Company as Canadian agent (in such capacity, the
“Canadian
      Agent”).

     

    W
      I T N E
      S S E T H :

     

    WHEREAS,
      the Borrowers have requested that the Lenders amend the Credit Agreement to
      permit the Borrowers to incur additional debt under a secured term loan from
      GB
      Merchant Partners LLC (the “Term
      Agent”)
      in the
      aggregate principal amount of $10,000,000 pursuant to the Term Loan Agreement
      (as defined below);

     

    WHEREAS,
      the Lenders have agreed to amend the provisions of the Credit Agreement but
      only
      on the terms and subject to the conditions herein provided;

     

    NOW,
      THEREFORE, in consideration of the premises and the agreements hereinafter
      contained, the parties hereto agree as follows:

     

    1.  Defined
      Terms.
      Capitalized terms used herein but not defined herein have the respective
      meanings ascribed thereto in the Credit Agreement. 

     

    “Amendment
      Fee Letter”
means
      the letter agreement, dated as of May 25, 2007, addressed to the Borrowers
      from
      the Agent and accepted by the Borrowers, with respect to certain fees to be
      paid
      to the Agent.

     

    “Intercreditor
      Agreement”
means
      the Intercreditor Agreement dated as of June 5, 2007 among Agent, Term Agent
      and
      the Borrowers, in form and substance acceptable to the Agent.

     

    “Security
      Agreements”
means,
      collectively (a) Amendment No. 1 dated as of June 5, 2007 to the Guaranty and
      Security Agreement dated as of October 24, 2006 and (b) the Amended and Restated
      Canadian Security Agreement dated as of June 5, 2007.

     

    “Term
      Loan Agent”
means
      GB Merchant Partners, LLC, as agent, and its successors.

     

    “Term
      Loan Agreement”
means
      the Term Loan Agreement dated as of the date hereof among the Term Agent, the
      Term Loan Lenders and the Borrowers, in form and substance acceptable to the
      Agent, as amended, restated, supplemented, replaced or otherwise modified from
      time to time in accordance with the terms of the Intercreditor
      Agreement.

     

    “Term
      Loan Documents”
means,
      collectively, the Term Loan Agreement and the Term Loan Guaranty and Security
      Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Term
      Loan Guaranty and Security Agreement”
means
      the Guaranty and Security Agreement dated as of June 5, 2007 by and among Term
      Agent and Term Loan Lenders and Grantors, in form and substance acceptable
      to
      the Agent, as amended, restated, supplemented, replaced or otherwise modified
      from time to time.

     

    “Term
      Loan Lenders”
means
      the term lenders under the Term Loan Agreement.

     

    2.  Amendments.
      

     

    (a)  Section
      1.1 (Defined Terms).
      Section
      1.1 (Defined Terms) is hereby amended as follows:

     

    (i)  The
      following definition of “Amendment No. 1 Effective Date” shall be inserted in
      its proper alphabetical order: 

     

    “Amendment
      No. 1 Effective Date”
shall
      mean June 5, 2007.

     

    (ii)  The
      definition of “Availability” shall be amended and restated in its entirety as
      follows:

     

    “Availability”
means,
      as of any date of determination, if such date is a Business Day, and determined
      at the close of business on the immediately preceding Business Day, if such
      date
      of determination is not a Business Day, the amount as determined by the
      Administrative Agent at any time, in its Permitted Discretion equal to (a)
      the
      lesser of (i) the Maximum Revolver Amount and (ii) the Aggregate Borrowing
      Base,
minus
      (b) the
      sum of the U.S. Revolving Credit Out standings and the Canadian Revolving Credit
      Outstanding (in each case, determined after giving effect to all sublimits
      and
      Reserves then applicable hereunder).

     

    (iii)  The
      definition of “Cash Dominion Event” shall be amended and restated in its
      entirety as follows:

     

    “Cash
      Dominion Event”
means
      (a) the occurrence and continuance of any Event of Default, or (b) the period
      commencing with each failure by the Borrowers to maintain Adjusted Availability
      in an amount of greater than (i) ten percent (10%) of the Aggregate Borrowing
      Base for a period of 5 consecutive Business Days or (ii) five percent (5%)
      of
      the Aggregate Borrowing Base at any time and, in each case, ending with the
      occurrence of a Cash Dominion Reversion; provided,
      however
      that (y)
      no more than 2 Cash Dominion Reversions may occur in any 12 month period and
      (z)
      if an additional Cash Dominion Event occurs during such 12 month period, no
      further Cash Dominion Reversions may occur through and including the Scheduled
      Maturity Date. 

     

    (iv)  The
      definition of “Minimum Availability Amount” shall be amended and restated in its
      entirety as follows: 

     

    “Minimum
      Availability Amount”
means,
      as of any date of determination, the greater of (a) 7.5% of the Aggregate
      Borrowing Base and (b) the Term Loan Reserve Amount.

     

    
      
        
        

      

      
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    (v)  The
      definition of “Permitted Liens” shall be amended by deleting “and” at the end of
      clause (m) and inserting the following new clause (o) at the end thereof
      immediately before the period: 

     

    “,and
      (o)
      Liens securing the Permitted Term Debt”.

     

    (vi)  The
      following definition of “Permitted Term Debt” shall be inserted in its proper
      alphabetical order: 

     

    “Permitted
      Term Debt”
means
      all “Obligations”, as defined in the Term Loan Agreement.

     

    (vii)  The
      following definition of “Term Loan Agent” shall be inserted in its proper
      alphabetical order: 

     

    “Term
      Loan Agent”
means
      GB Merchant Partners LLC, as agent, and its successors.

     

    (viii)  The
      following definition of “Term Loan Agreement” shall be inserted in its proper
      alphabetical order: 

     

    “Term
      Loan Agreement”
means
      the Term Loan Agreement dated as of May 25, 2007 among the Term Loan Agent,
      the
      lenders party thereto and the Borrowers, as in effect on the Amendment No.
      1
      Effective Date, as amended, restated, supplemented, replaced or otherwise
      modified from time to time in accordance with the terms of the Intercreditor
      Agreement.

     

    (ix)  The
      following definition of “Term Loan Documents” shall be inserted in its proper
      alphabetical order: 

     

    “Term
      Loan Documents”
means
      the Term Loan Agreement , together with all other documents and agreements
      contemplated thereunder and executed in connection therewith.

     

    (x)  The
      following definition of “Term Loan Lenders” shall be inserted in its proper
      alphabetical order: 

     

    “Term
      Loan Lenders”
means
      the term lenders under the Term Loan Agreement.

     

    (xi)  The
      following definition of “Term Loan Reserve” shall be inserted in its proper
      alphabetical order: 

     

    “Term
      Loan Reserve Amount”
means
      the lesser of (i) $10,000,000, provided,
      that as
      of December 31st
      of each
      Fiscal Year, this amount shall equal the greater of the then Term Loan Reserve
      Amount or $15,000,000 until such time as the Borrower provides Projections
      acceptable to the Agent and Term Loan Agent and (ii) 10% of the Aggregate
      Borrowing Base.

     

    (b)  Section
      2.5 of the Credit Agreement.
      Section
      2.5 of the Credit Agreement is hereby amended by inserting the following clause
      (c) at the end thereof: 

     

    
      
        
        

      

      
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    “(c) Prepayment
      Fee.
      In the
      event that the Commitments are terminated and reduced to 0 under this
Section
      2.5
      on or
      before the second anniversary of the Amendment No. 1 Effective Date, the
      Borrowers shall pay to the Administrative Agent and the Canadian Agent, as
      the
      case may be, a premium (to be paid to the Lenders, as liquidated damages and
      compensation for the costs of being prepared to make funds available hereunder)
      in an amount equal to $200,000; provided,
      however,
      that no
      such prepayment fee shall be payable under this Section
      2.5(c)
      if the
      Commitments are terminated in connection with a refinancing whereby the Agent
      is
      the administrative agent under the new facility.”

     

    (c)  Section
      5.3(d) of the Credit Agreement.
      Section
      5.3(d) of the Credit Agreement is hereby amended by inserting the following
      into
      clause (iv), immediately preceding “generally”:

     

    “or
      by
      the Borrowers to the Term Loan Agent ”

     

    (d)  Section
      5.4(b) of the Credit Agreement.
      Section
      5.4(b) of the Credit Agreement is hereby amended as follows:

     

    (i)  The
      last
      sentence of clause (i) shall be deleted and replaced with the
      following:

     

    “Prior
      to
      the occurrence of an Event of Default, the Administrative Agent, in its
      Permitted Discretion, may (and shall at the Required Lender’s direction), cause
      one (1) additional inventory per Fiscal Year to be taken at the expense of
      the
      Borrowers. Following the occurrence and during the continuance of an Event
      of
      Default, the Administrative Agent, in its Permitted Discretion, may (and shall
      at the Required Lender’s direction), cause additional inventories to be taken at
      the expense of the Borrowers.”

     

    (ii)  Clause
      (ii) shall be amended and restated as follows:

     

    “(ii) At
      the
      Borrowers’ expense, upon the request of the Administrative Agent from time to
      time, the Borrowers will obtain and deliver to the Administrative Agent, or,
      if
      the Administrative Agent so elects, will cooperate with the Administrative
      Agent
      in the Administrative Agent’s obtaining, a report of an independent collateral
      auditor satisfactory to the Administrative Agent (which may be affiliated with
      one of Lenders) with respect to the Books and Accounts and inventory components
      included in the Aggregate Borrowing Base, which report shall indicate whether
      or
      not the information set forth in the Borrowing Base Certificate most recently
      delivered is accurate and complete in all material respects based upon a review
      by such auditors of the Accounts (including verification with respect to the
      amount, aging, identity and credit of the respective account debtors and the
      billing practices of the Borrowers) and inventory (including verification as
      to
      the value, location and respective types); provided,
      however,
      that
      the Borrowers shall not be obligated to pay for more than 4 commercial finance
      exams in any 12 month period; provided,
      further,
      that
      the Borrower shall be obligated to pay for any additional commercial finance
      exams conducted in connection with the Borrowers request to add Eligible
      Accounts of Wholesale, Accounts with respect to private label credit cards,
      or
      Accounts with respect to Permitted Acquisitions to the U.S. Borrowing
      Base.”

     

    
      
        
        

      

      
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    (iii)  The
      following shall be added to the end of clause (iii), immediately preceding
      the
      period:

     

    “;
      provided,
      further,
      that
      following the occurrence and during the continuance of an Event of Default,
      the
      Borrowers shall be obligated to pay for such additional appraisals as the
      Administrative Agent may, in its Permitted Discretion, require”

     

    (iv)  Clause
      (iv) shall be amended by deleting “1 real property appraisal in any 12 month
      period”, in the fourth line and replacing it with the following:

     

    “real
      property appraisals or “desktop” review of the most recent real estate appraisal
      as the Administrative Agent may, in its Permitted Discretion,
      require”

     

    (e)  Section
      6.14(a) of the Credit Agreement.
      Section
      6.14(a) of the Credit Agreement is hereby amended as follows:

     

    (i)  The
      following shall be added to the end of clause (iv), immediately preceding the
      semicolon

     

    “,
      including, without limitation, the delivery of any notice to the Term Loan
      Agent
      (or any Term Loan Lender) of any “defaults” or “events of default” under the
      Term Loan Agreement or the other Term Loan Documents”

     

    (ii)  Clauses
      (v) and (vi) shall be renumbered as clauses (vii) and (viii)
      respectively.

     

    (iii)  The
      following clauses (v) and (vi) shall be inserted immediately preceding clause
      (vii) (previously clause (v)):

     

    “(v) The
      occurrence of any Property Loss Event involving Collateral having a fair market
      value in excess of $500,000;

     

    (vi) Any
      prepayment of Permitted Term Debt;”

     

    (f)  Section
      7.1 of the Credit Agreement.
      Section
      7.1 of the Credit Agreement is hereby amended by deleting “and” at the end of
      clause (i) and inserting the following new clause (k) at the end thereof
      immediately before the period:

     

    “;
      and

     

    (k) Permitted
      Term Debt”

     

    (g)  Section
      7.3 of the Credit Agreement.
      Section
      7.3 of the Credit Agreement is hereby amended as follows:

     

    (i)  By
      deleting all of the language between the parentheses in clause (a) and replacing
      it with the following:

     

    “excluding
      this Agreement, the other Loan Documents and the Term Loan
      Documents”.

     

    
      
        
        

      

      
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    (ii)  By
      deleting all of the language between the parentheses in clause (b) and replacing
      it with the following:

     

    “excluding
      this Agreement, the other Loan Documents and the Term Loan
      Documents”.

     

    (h)  Section
      7.21 of the Credit Agreement.
      Section
      7.21 shall be inserted immediately following Section 7.20 of the Credit
      Agreement and shall read as follows:

     

    “Section
      7.21  Amendments
      to Term Loan Agreement.
      The
      Borrowers will not agree to any amendment, modification, waiver or supplement
      to
      the Term Loan Agreement or any other agreement executed in connection therewith
      which contravenes the provisions of the Intercreditor Agreement.”

     

    (i)  Section
      7.22 of the Credit Agreement.
      Section
      7.2 shall be inserted immediately following Section 7.21 of the Credit Agreement
      and shall read as follows:

     

    “Section
      7.22  Maximum
      Indebtedness.
      The
      Borrowers shall not permit or suffer to exist the aggregate of (i) all payment
      Obligations hereunder, plus (ii) all Permitted Term Debt, to be greater than
      60%
      of the sum of the Eligible Inventory (valued at Cost) owned by the U.S.
      Borrowers and Eligible Inventory (valued at Cost) owned by Bombay Canada, tested
      as of December 31, 2007.”

     

    (j)  Section
      8.1 of the Credit Agreement.
      Section
      8.1 of the Credit Agreement is hereby amended by deleting “or” at the end of
      clause (m) and inserting the following new clause (o) at the end thereof
      immediately before the period:

     

    “;
      or

     

    (o) any
      “Event of Default” under and as defined in the Term Loan Agreement shall have
      occurred and be continuing”

     

    (k)  Section
      10.19 of the Credit Agreement.
      Section
      10.19 of the Credit Agreement is hereby amended by inserting the following
      at
      the end thereof:

     

    “
The
      Borrowers hereby consent to the publication (including, without limitation,
      by
      way of press release or other public announcement), from time to time, by the
      Administrative Agent or any Lender of advertising material relating to the
      financing transactions contemplated by this Agreement and the other Loan
      Documents using any Borrower’s name, product photographs, logo or trademark,
      provided such publication shall not occur prior to the earlier of (i) the
      Amendment No. 1 Effective Date and (ii) any Borrower’s public announcement of
      such financing transactions.”

     

    (l)  Section
      10.23 of the Credit Agreement.
      Section
      10.23 shall be inserted immediately following Section 10.22 of the Credit
      Agreement and shall read as follows:

     

    “Section
      10.23  Intercreditor
      Agreement.
      In the
      event of any conflict between any provision in this Agreement and any provision
      in the Intercreditor Agreement, such 

     

    
      
        
        

      

      
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    provision
      in the Intercreditor Agreement shall control and such provision of this
      Agreement shall be deemed to have been complied with or satisfied to the extent
      of such conflict.”

     

    3.  Conditions
      to Effectiveness of this Amendment.
      This
      Amendment shall become effective as of the date first written above upon the
      satisfaction of the following conditions precedent:

     

    (a)  The
      Agent
      shall have received a duly executed counterpart of this Amendment, executed
      by
      each of the Borrowers and the Lenders;

     

    (b)  The
      Agent
      shall have received a duly executed counterpart of each of the Security
      Agreements, executed by each Borrower and Guarantor party thereto, together
      with
      copies of amendments to UCC and PPSA filings, executed by each of the Borrowers
      and the Lenders if necessary;

     

    (c)  The
      Agent
      shall have received a duly executed counterpart of the Intercreditor Agreement,
      executed by each party thereto;

     

    (d)  The
      Agent
      shall have received a duly executed counterpart of each Term Loan Document,
      executed by each of the Borrowers, Term Agent and the Term Loan
      Lenders.

     

    (e)  The
      Agent
      shall have received favorable opinions of counsel to the Borrowers from (a)
      Thompson & Knight LLP, special U.S. counsel to the Borrowers and (b) Fraser
      Milner Casgrain LLP, special Canadian counsel to the Borrowers, each addressed
      to the Agent and the Canadian Agent, the L/C Issuers and the Lenders and
      addressing such matters as the Agent may reasonably request;

     

    (f)  The
      Agent
      shall have received a certificate of the secretary or other Responsible Officer
      of each Borrower in charge of maintaining Books and records of such Borrower
      certifying as to (A) the names and signatures of each officer of such Borrower
      authorized to execute and deliver any of this Agreement, the Security
      Agreements, the Intercreditor Agreement and the Term Loan Documents, to which
      such Borrower is a party, (B) the Governing Documents of such Borrower attached
      to such certificate are complete and correct copies of such Governing Documents
      as in effect on the date of such certification (or, for any such Governing
      Document delivered to the Agent on the Closing Date, that there have been no
      changes from such Governing Document so delivered) and (C) the resolutions
      of
      such Borrower’s board of directors or other appropriate governing body approving
      and authorizing the execution, delivery and performance of each of this
      Agreement, the Security Agreements, the Intercreditor Agreement and the Term
      Loan Documents or any other agreement, to which such Borrower is a
      party;

     

    (g)  The
      Agent
      and the Lenders shall have received (i) payment of the arrangement fee set
      forth in the Amendment Fee Letter and (ii) all other fees and costs
      (including reasonable attorneys fees) incurred in connection with the
      negotiation, preparation and execution of this Amendment; and

     

    (h)  The
      Agent
      shall have received from the Borrowers such other documents and information
      as
      it may reasonably request.

     

    4.  Representations
      and Warranties.
      Each
      Borrower represents and warrants to the Agent and the Lenders as
      follows:

     

    
      
        
        

      

      
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    (a) The
      execution, delivery and performance by such Borrower of this Amendment is within
      such Borrower’s corporate powers or limited liability company powers, as
      applicable, and has been duly authorized by all necessary corporate or limited
      liability company, and, if required, stockholder or member action, as
      applicable. This Amendment has been duly executed and delivered by such Borrower
      and constitutes a legal, valid and binding obligation of such Borrower,
      enforceable in accordance with its terms, subject to applicable bankruptcy,
      insolvency, reorganization, moratorium or other laws affecting creditors’ rights
      generally and subject to general principles of equity regardless of whether
      considered in a proceeding in equity or at law. 

     

    (b) No
      consent or approval of any Governmental Authority or any other Person is
      required for any of the Borrowers to execute, deliver and perform this
      Amendment. 

     

    (c) After
      giving effect to this Amendment, the Agent has continuing, perfected liens
      in
      the Collateral.

     

    5.  Miscellaneous.

     

    (a)As
      of the
      date hereof, each reference in the Credit Agreement to “this Agreement,”
“hereunder,” “hereof,” “herein,” or words of like import, and each reference in
      the other Loan Documents to the Credit Agreement (including, without limitation,
      by means of words like “thereunder”, “thereof” and words of like import), shall
      mean and be a reference to the Credit Agreement as modified hereby, and this
      Amendment and the Credit Agreement shall be read together and construed as
      a
      single agreement.

     

    (b)The
      execution, delivery and effectiveness of this Amendment shall not, except as
      expressly provided herein, operate as a waiver of any right, power or remedy
      of
      the Lenders or the Agent under any of the Loan Documents, nor constitute a
      waiver or amendment of any other provision of any of the Loan Documents or
      for
      any purpose except as expressly set forth herein.

     

    (c)This
      Amendment shall be deemed a Loan Document.

     

    (d) The
      Section titles contained in this Amendment are and shall be without substantive
      meaning or content of any kind whatsoever and are not a part of the agreement
      between the parties hereto.

     

    (e) Except
      as
      expressly provided herein, the Credit Agreement and the other Loan Documents
      shall continue in full force and effect, and the terms and conditions of the
      Credit Agreement are expressly incorporated herein and ratified and confirmed
      in
      all respects.

     

    (f) The
      fact
      that any term or provision of this Amendment is held invalid, illegal or
      unenforceable as to any person in any situation in any jurisdiction shall not
      affect the validity, enforceability or legality of the remaining terms or
      provisions hereof or the validity, enforceability or legality of such offending
      term or provision in any other situation or jurisdiction or as applied to any
      person.

     

    (g) This
      Amendment may be executed in any number of counterparts, all of which, taken
      together, shall constitute one and the same agreement and any party may enter
      into this Amendment by executing a counterpart. Transmission by facsimile of
      an
      executed counterpart of this Amendment shall be deemed to constitute due and
      sufficient 

     

    
      
        
        

      

      
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delivery
        of such counterpart.

    

     

    (h) Each
      of
      the parties hereto irrevocably waives trial by jury in any action or proceeding
      with respect to this Amendment or any other Loan Document.

     

    (i) This
      Amendment shall be governed by, and construed in accordance with, the laws
      of
      the State of New York.

     

    (j) The
      terms
      of this Amendment shall be binding upon and shall inure to the benefit of the
      parties and their respective successors and assigns.

     

    


     

    
      
        
        

      

      
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    IN
      WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
      date
      first written above.

     

    


     

    THE
      BOMBAY COMPANY, INC.

    


    


    By:___________________________     

    Name:

    Title:

    


    BBA
      HOLDINGS, LLC

    


    


    By:___________________________     

    Name:

    Title:

    


    BOMBAY
      INTERNATIONAL, INC.

    


    


    By:___________________________     

    Name:

    Title:

    


    THE
      BOMBAY FURNITURE COMPANY OF CANADA INC.

    


    


    By:___________________________     

    Name:

    Title:

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    



    GENERAL
      ELECTRIC CAPITAL CORPORATION, as Lender and Administrative Agent

    


    


    By:___________________________________     

    Name:

    Title:
      Duly Authorized Signatory

    


    GE
      CANADA
      FINANCE HOLDING COMPANY, as Canadian Agent and as Canadian Lender

    


    


    By:___________________________________     

    Name:

    Title:
      Duly Authorized Signatory