Document:

exv10w40

 

Exhibit 10.40

Execution Copy

FIRST AMENDMENT TO

FIFTH AMENDED AND RESTATED CREDIT AGREEMENT

          This FIRST AMENDMENT TO FIFTH AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”)
is entered into as of this 12th day of February, 2007 among WILSONS LEATHER HOLDINGS
INC., a Minnesota corporation (“Borrower”), GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware
corporation, as Lender, Term Lender, Swing Line Lender and as Agent (“Agent”), the Credit Parties
signatory hereto and the Lenders signatory hereto. Unless otherwise specified herein, capitalized
terms used in this Amendment shall have the meanings ascribed to them by the Credit Agreement (as
hereinafter defined).

RECITALS

          WHEREAS, Borrower, certain Credit Parties, Agent and Lenders have entered into that certain
Fifth Amended and Restated Credit Agreement dated as of December 29, 2006 (as amended,
supplemented, restated or otherwise modified from time to time, the “Credit Agreement”); and

          WHEREAS, Borrower, the Credit Parties signatories to the Credit Agreement, the Lenders and
Agent wish to amend certain provisions of the Credit Agreement, as more fully set forth herein.

          NOW THEREFORE, in consideration of the mutual covenants herein and other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

Section 1 Amendments to the Credit Agreement. Subject to the satisfaction of the
conditions precedent set forth in Section 3 hereof, the parties hereto hereby agree to
amend the Credit Agreement as follows:

     (a) The first sentence of clause (iii) of Section 1.1(c) of the Credit
Agreement is hereby amended and restated to read in its entirety as follows:

     The Swing Line Lender, at any time and from time to time in its sole and
absolute discretion, but not less frequently than once weekly, shall on behalf of
Borrower (and Borrower hereby irrevocably authorizes the Swing Line Lender to so act
on its behalf) request by telephone or telecopy each Lender (including the Swing
Line Lender) to make a Revolving Credit Advance to Borrower (which Revolving Credit
Advance made by each Lender (including the Swing Line Lender) initially shall be an
Index Rate Loan, but may be converted to a LIBOR Loan) in an amount equal to such
Lender’s Pro Rata Share of the principal amount of the Swing Line Loan (the
“Refunded Swing Line Loan”) outstanding on the date such notice is given.

     (b) In last sentence of clause (v) of Section 1.1(c) the term “federal funds
rate” where it appears is hereby replaced with the defined term of “Federal Funds Rate”.

 

 

     (c) Clause (iii) of Section 1.5(a) is hereby amended and restated to read in
its entirety as follows:

     (iii) with respect to the Swing Line Loan at a per annum rate equal to the
Commercial Paper Rate plus the Applicable Swing Line Margin.

     (d) The definition of “Applicable Swing Line Margin” set forth in Annex A to
Credit Agreement is hereby amended and restated to read in its entirety as follows:

     “Applicable Swing Line Margin” shall mean the per annum rate of
interest payable in addition to the Commercial Paper Rate on Swing Line Loans,
determined by reference to Section 1.6.

     (e) The
definition of “Index Rate” set forth in Annex A to Credit Agreement is
hereby amended and restated to read in its entirety as follows:

     “Index Rate” means, at any time, a rate per annum equal to the higher
of (a) the rate last quoted by The Wall Street Journal as the “base rate on
corporate loans posted by at least 75% of the nation’s largest banks” in the United
States or, if The Wall Street Journal ceases to quote such rate, the highest
per annum interest rate published by the Federal Reserve Board in Federal Reserve
Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan”
rate or, if such rate is no longer quoted therein, any similar rate quoted therein
(as determined by Agent) or any similar release by the Federal Reserve Board (as
determined by Agent) and (b) the sum of 0.5% per annum and the Federal Funds Rate.
Any change in the Index Rate due to a change in any of the foregoing shall be
effective on the effective date of such change in the “Prime Rate” or the Federal
Funds Rate.

     (f) The following definitions are added to Annex A to Credit Agreement in proper
alphabetical order:

     “Commercial Paper Rate” shall mean the month-end published rate for
30-day Dealer Commercial Paper (high grade unsecured notes sold through dealers by
major corporations in multiples of $1,000) as from time to time reported in the
“Money Rates” column in The Wall Street Journal. The rate of interest
applicable to the Swing Line Loan shall for each month be based upon the Commercial
Paper Rate as of the last Business Day of the preceding month.

     “Federal Funds Rate” means, for any day, a floating rate equal to the
weighted average of the rates on overnight federal funds transactions among members
of the Federal Reserve System, as determined by Agent in its sole discretion, which
determination shall be final, binding and conclusive (absent manifest error).

Section 2 Representations and Warranties. Borrower and the Credit Parties who are party
hereto represent and warrant that:
 

2

 

     (a) the execution, delivery and performance by Borrower and such Credit Parties of this
Amendment have been duly authorized by all necessary corporate action and this Amendment is a
legal, valid and binding obligation of Borrower and such Credit Parties enforceable against
Borrower and such Credit Parties in accordance with its terms, except as the enforcement thereof
may be subject to (i) the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar law affecting creditors’ rights generally and (ii) general principles of
equity (regardless of whether such enforcement is sought in a proceeding in equity or at law);

     (b) each of the representations and warranties contained in the Credit Agreement is true and
correct in all material respects on and as of the date hereof as if made on the date hereof, except
to the extent that such representations and warranties expressly relate to an earlier date;

     (c) neither the execution, delivery and performance of this Amendment nor the consummation of
the transactions contemplated hereby does or shall contravene, result in a breach of, or violate
(i) any provision of Borrower’s or Credit Parties’ certificate or articles of incorporation or
bylaws, (ii) any law or regulation, or any order or decree of any court or government
instrumentality or (iii) indenture, mortgage, deed of trust, lease, agreement or other instrument
to which Borrower, the Credit Parties or any of their Subsidiaries is a party or by which Borrower,
the Credit Parties or any of their Subsidiaries or any of their property is bound, except in any
such case to the extent such conflict or breach has been waived by a written waiver document a copy
of which has been delivered to Agent on or before the date hereof; and

     (d) no Default or Event of Default will exist or result after giving effect hereto.

Section 3 Conditions to Effectiveness. This Amendment will be effective only upon
execution and delivery of this Amendment by Borrower, the Credit Parties that are listed on the
signature pages hereto, the Agent and each Lender.

Section 4 Reference to and Effect Upon the Credit Agreement.

     (e) Except as specifically set forth herein, the Credit Agreement and the other Loan Documents
shall remain in full force and effect and are hereby ratified and confirmed.

     (f) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver
of any right, power or remedy of Agent or any Lender under the Credit Agreement or any Loan
Document, nor constitute a waiver of any provision of the Credit Agreement or any Loan Document,
except as specifically set forth herein. Upon the effectiveness of this Amendment, each reference
in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of similar
import shall mean and refer to the Credit Agreement as amended hereby.

Section 5 Waiver and Release.

     In consideration of the foregoing, each of Borrower and each Credit Party hereby waives,
releases and covenants not to sue Agent or any Lender with respect to, any and all claims it may
have against Agent or any Lender, whether known or unknown, arising in tort, by contract or
otherwise prior to the date hereof relating to one or more Loan Documents.

3

 

Section 6 Costs and Expenses.

     As provided in Section 11.3 of the Credit Agreement, Borrower agrees to reimburse
Agent for all fees, costs and expenses, including the fees, costs and expenses of counsel or other
advisors for advice, assistance, or other representation in connection with this Amendment.

Section 7 Governing Law.

     THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF ILLINOIS.

Section 8 Headings.

     Section headings in this Amendment are included herein for convenience of reference only and
shall not constitute a part of this Amendment for any other purposes.

Section 9 Counterparts.

     This Amendment may be executed in any number of counterparts, each of which when so executed
shall be deemed an original but all such counterparts shall constitute one and the same instrument.

Section 10 Confidentiality.

     The matters set forth herein are subject to Section 11.18 of the Credit Agreement, which is
incorporated herein by reference.

[signature page follows]

4

 

     IN WITNESS WHEREOF, this Amendment has been duly executed as of the date first written above.

	 	 	 	 	 	 	 
	 	 	BORROWER:	 	 
	 
	 	 	 	 	 	 
	 	 	WILSONS LEATHER HOLDINGS INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Title:
	 	/s/ Stacy Kruse
 

Chief Financial Officer and Treasurer
	 	 
	 
	 	 	 	 	 	 
	 	 	LENDERS:	 	 
	 
	 	 	 	 	 	 
	 	 	GENERAL ELECTRIC CAPITAL CORPORATION,

as Agent, Lender and Swing Line Lender
	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Kristina M. Miller
 

	 	 
	 

	 	Title:	 	Duly Authorized Signatory	 	 
	 
	 	 	 	 	 	 
	 	 	WELLS FARGO RETAIL FINANCE, LLC, as
Lender and Syndication Agent	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	/s/ Cory Loftus	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	Vice President	 	 

[Signature Page To First Amendment]

 

 

     The undersigned are executing this Amendment in their capacity as Credit Parties:

	 	 	 	 	 
	Wilsons The Leather Experts Inc.

	 
	 
	 	 	 	 
	By:

	 	/s/ Stacy Kruse
 

	 	 
	Title:

	 	Chief Financial Officer and
Treasurer	 	 
	 
	 	 	 	 
	Wilsons Center, Inc.

	 
	 
	 	 	 	 
	By:

	 	/s/ Stacy Kruse
 

	 	 
	Title:

	 	Chief Financial Officer and
Treasurer	 	 
	 
	 	 	 	 
	Rosedale Wilsons, Inc.

	 
	 
	 	 	 	 
	By:

	 	/s/ Stacy Kruse
 

	 	 
	Title:

	 	Chief Financial Officer and
Treasurer	 	 
	 
	 	 	 	 
	River Hills Wilsons, Inc.

	 
	 
	 	 	 	 
	By

	 	/s/ Stacy Kruse
 

	 	 
	Title:

	 	Chief Financial Officer and
Treasurer	 	 
	 
	 	 	 	 
	Bermans The Leather Experts Inc.

	 
	 
	 	 	 	 
	By: 

Title:

	 	/s/ Stacy Kruse
 

Chief Financial Officer and Treasurer
	 	 

[Signature Page To First Amendment]exv10w41

 

Exhibit 10.41

March 2, 2006

	 	 	 
		

      Megan Featherston

      6110 SW 38th Street

      Topeka, KS 66610

Dear Megan:

This letter has been updated to represent our conversations and our prior offer letters to you,
most recent letter dated February 24, 2006.

It is a pleasure to formally offer you the position of Chief Merchandising Officer for
Wilsons Leather reporting to Mike Searles, Chairman and Chief Executive Officer. Key elements of
our offer are as follows:

	 	 	 
	Base Pay:

	 	$300,000 annually (paid bi-weekly) with your first annual
performance/merit review in April 2007.
	 
	 	 
	STI Plan:

	 	The targeted annual award bonus is 40% of annual base salary (or
$120,000) once we achieve our operating profit performance
target. Once achieved, you will also participate in a bonus
pool award for every $1 million improvement in operating profit
from target. The pool allocation award for you is $7,000 for
each $1 million improvement in operating profit. Maximum
annualized incentive payout under the plan is 200% of salary or
$600,000. See enclosure for more specific plan details.
	 
	 	 
	 

	 	For fiscal year 2006, we have agreed to guarantee the 12-month
value of your award in the form of cash payment of $120,000
(gross) payable in March 2007. If you decide to voluntarily
leave the employ of Wilsons Leather and resign prior to March
2007, the award would not be payable.
	 
	 	 
	LTI Plan:

	 	You will receive a grant of 150,000 options to be awarded
shortly after your start date. Under our plan, options vest
over 3 years. The 150,000 award shall vest cumulatively with
one third of the shares vesting on each of the first, second,
and third anniversaries of the date of grant. The option is
subject to the terms and conditions of a stock option agreement
to be entered into between you and the company. Refer to the
enclosed LTI Agreement for more details, if needed. In
reference to your questions regarding vesting on a change in
control, please see section 7(a)(3) of the Plan, which states:

7401 Boone Avenue North Brooklyn Park, Minnesota 55428

763.391.4000 763.391.4906 fax wilsonsleather.com

 

 

Megan Featherston

March 2, 2006

Page 2

	 	 	 
	LTI Plan (cont.):

	 	“(3) Exercisability. Each Option shall be
exercisable in whole or in part on the terms provided in
the Agreement, provided that if a Change in Control
shall occur, then any Option that has not expired or
been terminated shall become exercisable in full...”
	 
	 	 
	 

	 	As discussed, with significant and noteworthy promotions
the company employs a practice of evaluating an
associate’s current option award package and recommends
with Compensation Committee approval, additional awards.
In addition, the company plans to recommend additional
awards to employees late 2009/spring 2010.
	 
	 	 
	 

	 	All awards are subject to the approval of the
Compensation Committee. The move to a five-year review
of awards was instituted spring 2005 with awards being
issued June 2, 2005.
	 
	 	 
	Signing Bonus:

	 	$100,000 (gross). You will receive this one-time
signing bonus with your first regular paycheck. If you
voluntarily resign your employment or are terminated for
cause within one (1) year from your date of hire, you
shall repay to Wilsons Leather 100% of the signing
bonus. If you voluntarily resign or are terminated for
cause within two (2) years from your date of hire, you
shall repay to Wilsons Leather 50% of the signing bonus.
Solely for purposes of determining whether or not you
must repay all or a portion of the signing bonus,
“terminated for cause” shall mean termination due to any
act of fraud, misappropriation of company funds or
assets, dishonesty or similar conduct, or indictment for
or conviction of a felony.
	 
	 	 
	Severance:

	 	Although Wilsons Leather employees are generally
employed at-will and the company does not enter into
employment guarantees with its employees, you have
requested assurances that you would have the
opportunity to demonstrate your abilities to make
substantial and sustained improvements to the company’s
merchandising position. To address this concern,
Wilsons Leather commits that if your employment is
involuntarily terminated by the company before the
third anniversary of your starting date for reasons
other than “cause” (as defined above), then the company
will pay you (1) severance pay in an amount equal to
your final annual base salary, and (2) if such
termination date is on or after July 1 of the plan
year, a payment equal to your full target bonus for
such STI Plan year in which the termination occurs.
Payment to you of any severance pay or STI

 

 

Megan Featherston

March 2, 2006

Page 3

	 	 	 
	Severance (cont.):

	 	 bonus under
this paragraph will further be conditioned upon you signing
a separation agreement in a form determined by the
company, such agreement to include a release of all
claims against the company, its affiliates, officers,
directors, employees, agents and assigns. Any
severance payable will be paid to you after expiration
of any rescission periods provided for in the
separation agreement continuing in accordance with the
Company’s regular payroll schedule for one year thereafter.
	 
	 	 
	 

	 	In the event the company in good faith determines that the severance
pay described above results in an amount being included as
compensation in your gross income under Section 409A of the Internal
Revenue Code, the company will also make an additional cash payment
to you equal to 20% of such amount, which payment will be made to you
on (or as soon as administratively practicable after) the first day
of the seventh month following separation from service as determined
under Section 409A.
	 
	 	 
	 

	 	Any bonus payable under this paragraph will be paid to you on (or as
soon as administratively practicable after) the first day of the
seventh month following separation from service as determined under
Section 409A of the Internal Revenue Code.
	 
	 	 
	Relocation:

	 	Benefits as outlined in the enclosed executive
relocation package and includes reimbursement for
home sale and home purchase expenses, tax gross up
benefits, and other relocation benefits to ensure a
successful move for you and your family.
We have agreed to extend your interim living through
August 31, 2006 if needed.
	 
	 	 
	Additional
	 	 
	Remuneration:

	 	We have agreed to reimburse you for actual
relocations costs incurred as part of your
relocation, which has been in process from Topeka,
Kansas to Dallas, Texas. I will work closely with
you once you provide me appropriate documentation on
expenses incurred. Your pay back obligations to
Michaels for relocation expenses will be reimbursed
to you by Wilsons Leather. In addition, we will
work with the tax and accounting experts regarding
any additional tax obligations incurred by you and
provide for additional reimbursement, if added taxes
are incurred, as a result of income consideration(s)
related to this transaction. I would encourage your
tax representative to participate in this review to
ensure that we close out the 2006 tax year properly
for yourself and Wilsons Leather.

 

 

Megan Featherston

March 2, 2006

Page 4

	 	 	 
	Spouse Job Search 

Assistance: 

	 	The Company will provide job search assistance in
order to support search efforts for your spouse, if
desired. Betty will provide at the appropriate time
a professional consulting firm, and contacts at
major companies for your spouse, if needed.

	 
	
Other Major Benefits:

	 	Medical, dental, life, 401(k), ESPP and more.
Details of these benefits are provided in the
enclosed benefits materials.

While these details are essential when considering our position, I believe the most important
aspect of this offer is my commitment to you as a member of our executive team and your broader
role as an executive officer of this company. With your background and expertise, we are confident
that you will very quickly make a solid contribution. We need broad-gauged, fast-paced, talented
employees to lead us into the future as we establish more aggressive sales & profit plans to
strategically position our existing business concepts and as we also establish new growth vehicles.

We look forward to a positive response and a mutually rewarding working relationship. Feel free to
contact Mike Searles at his office 763-391-4300 or on his blackberry
763-742-0604. I am also available at 763-391-4140 or my cell 612-889-0255 if you have any
questions.

Have a great weekend.

Sincerely,

/s/ Betty Goff

Betty Goff

Vice President, Human Resources

cc: Mike Searles, Chairman and Chief Executive Officer

/cc

Attachments:

	 	•	 	Leadership Team Incentive Plan
	 
	 	•	 	Long Term Incentive Plan Agreement
	 
	 	•	 	Executive Relocation Plan
	 
	 	•	 	Benefits Overview

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