Document:

Exhibit 10.8

 

AMENDMENT NO. 5 TO THE SEVENTH AMENDED AND
RESTATED LOAN AND

SECURITY AGREEMENT

 

This AMENDMENT NO. 5 TO THE SEVENTH AMENDED
AND RESTATED LOAN AND SECURITY AGREEMENT (together with all exhibits and
schedules attached hereto, this “Amendment”)
is entered into this 3rd day of June, 2004 by and among FLEET RETAIL GROUP,
INC. (“Fleet”), a Delaware
corporation, individually as a Lender and as Agent (“Agent”) for itself and any other financial institution which
is or becomes a party thereto (each such financial institution, including
FLEET, is referred to hereinafter individually as a “Lender” and collectively as the “Lenders”), THE CIT GROUP/BUSINESS CREDIT, INC., individually
as a Lender and as Co-Administrative Agent, the other financial institutions
party thereto as Lenders, RESTORATION HARDWARE, INC., a Delaware corporation (“Lead Borrower”) and THE MICHAELS FURNITURE
COMPANY, INC., a California corporation (“Michaels,”
together with the Lead Borrower, the “Borrowers”)
(each, an “Amendment Party” and,
collectively, the “Amendment Parties”),
and is made with reference to the following facts:

 

RECITALS

 

A.                                   WHEREAS, Borrowers,
the Agent, the Co-Administrative Agent and the Lenders (each a “Party” and, collectively, the “Parties”) have previously entered into that
certain Seventh Amended and Restated Loan and Security Agreement dated as of
November 26, 2002, as amended by a First Amendment dated as of
April 28, 2003, an Amendment No. 2 dated as of September 12, 2003, an
Amendment No. 3 dated as of November 18, 2003, and as further amended by
an Amendment No. 4 dated as of March 15, 2004 (as amended, modified or
supplemented from time to time, the “Loan
Agreement”) and various agreements and instruments collateral
thereto (collectively with the Loan Agreement, the “Loan Documents”).  All
capitalized terms used herein, unless otherwise defined herein, shall have the
meanings set forth in the Loan Documents.

 

B.                                     WHEREAS, the
Amendment Parties desire to amend the Loan Agreement on the terms and subject
to the conditions of this Amendment.

 

NOW THEREFORE, in consideration of the
foregoing recitals and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Amendment Parties agree as
follows:

 

SECTION 1                               AMENDMENTS
TO LOAN AGREEMENT

 

1.1                                 The Loan Agreement is
hereby amended by deleting all references to “Fleet Capital Corporation, a
Rhode Island corporation” and by inserting “Fleet Retail Group, Inc., a
Delaware corporation” in lieu thereof; and

 

1.2                                 Section 1 of the
Loan Agreement is hereby amended by deleting the introductory paragraph thereto
in its entirety and by inserting the following in lieu thereof:

 

Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lenders agree to make a Total Credit Facility of up to $100,000,000
(or such greater amount as may be made available pursuant to Section 1.1A,
below) available upon Borrowers’ request therefor, as follows:

 

1

 

1.3                                 Section 1 of the
Loan Agreement is hereby further amended by inserting the following text as a
new Section 1.1A, immediately below the text of Section 1.1 thereof:

 

1.1A                       Increase in Revolving Loan Commitments.

 

So long as no Default or Event of Default then exists, the Lead
Borrower shall have the right at any time, and from time to time, to request an
increase of the Revolving Credit Maximum Amount to an amount not to exceed
$150,000,000, as follows

 

1.1A.1.           Requests for Increase.  Any
requested increase of the Revolving Credit Maximum Amount shall be first made
to all existing Lenders on a pro rata basis. To the extent that any of the
existing Lenders (or all of them) decline to increase the aggregate Lenders’
Revolving Loan Commitment, or decline to increase such Lender’s Revolving Loan
Commitment to the amount requested by the Lead Borrower, the Agent may arrange
for other Persons to become a Lender hereunder and to issue commitments in an
amount equal to the amount of the increase in the Total Credit Facility
requested by the Lead Borrower and not accepted by any or all of the existing
Lenders (each such increase by either means, a “Commitment Increase,” and each such Person issuing, or
Lender increasing, its Revolving Loan Commitment, an “Additional Commitment Lender”),
provided, however, that (i) no Lender shall be obligated to provide a
Commitment Increase as a result of any such request by the Borrowers, and (ii)
any Additional Commitment Lender which is not an existing Lender shall be
subject to the approval of the Agent and the Lead Borrower  (each of whose approval shall not be
unreasonably withheld).  Each Commitment
Increase shall be in a minimum aggregate amount of at least $10,000,000 and in
integral multiples of $5,000,000 in excess thereof.

 

1.1A.2              Conditions Precedent to Commitment Increases.  No
Commitment Increase shall become effective unless and until each of the
following conditions have been satisfied:

 

(a)                                  the Borrowers, the Agent, and any Additional
Commitment Lender shall have executed and delivered a joinder to the Loan
Documents in such form as the Agent may reasonably require;

 

(b)                                 no Default or Event of Default exists as of
the Commitment Increase Date or would arise from the increase of the Revolving
Loan Commitment;

 

(c)                                  the Borrowers shall have paid such fees and
other reasonable compensation to the Additional Commitment Lenders as the Lead
Borrower and each such Additional Commitment Lenders may agree;

 

(d)                                 the Borrowers shall have paid such reasonable
arrangement fees to the Agent as the Lead Borrower and the Agent may agree but
in no event shall such arrangement fees be more than 7.5 basis points of such
Commitment Increase;

 

(e)                                  the Borrowers shall deliver to the Agent and
the Lenders an opinion or opinions, substantially in the form as delivered for
Amendment No. 5, from counsel to the Borrowers and dated such date;

 

(f)                                    Revolving Notes will be issued at the
Borrowers’ expense, to each such Additional Commitment Lender; and

 

(g)                                 the Borrowers and the Additional Commitment
Lenders shall have delivered such other instruments, documents and agreements
as the Agent may reasonably have requested.

 

2

 

1.1A.3              Notice of Effectiveness of Commitment
Increase.  The Agent shall promptly notify each Lender
as to the effectiveness of each Commitment Increase (with each date of such
effectiveness being referred to herein as a “Commitment Increase Date”), and at such time (i) the
Revolving Loan Commitments, the Revolving Credit Maximum Amount and the Total
Credit Facility under, and for all purposes of, this Agreement shall be
increased by the aggregate amount of such Commitment Increases, (ii) this
Agreement shall be deemed amended, without further action, to the extent
necessary to reflect such increased Revolving Loan Commitments.

 

1.1A.4              Covenants and Agreements of Borrowers In
Connection with Commitment Increases.  In connection with Commitment
Increases hereunder, the Lenders and the Borrowers agree that, notwithstanding
anything to the contrary in this Agreement, (i) the Borrowers shall, in
coordination with the Agent, (x) repay outstanding Loans of certain Lenders,
and obtain Loans from certain other Lenders (including the Additional Commitment
Lenders), or (y) take such other actions as reasonably may be required by the
Agent, in each case to the extent necessary so that all of the Lenders
effectively participate in each of the outstanding Loans pro rata on the basis
of their Commitment Percentages (determined after giving effect to any increase
in the Revolving Credit Maximum Amount pursuant to this Section 1.1A), and
(ii) the Borrowers shall pay to the Lenders compensation of the type referred
to in Section 3.2.5 as actually incurred in connection with any repayment
of Loans required pursuant to preceding clause (i).

 

1.4                                 Section 1.5 of
the Loan Agreement is hereby amended by deleting the reference to the amount of
“$30,000,000” in the proviso to clause (ii) of the first sentence and inserting
a reference to the amount “$50,000,000” in its stead.

 

1.5                                 Section 1.6 of
the Loan Agreement is hereby amended by deleting the reference to the amount
“$2,000,000” where it appears therein and inserting a reference to the amount
“$5,000,000” in lieu thereof.

 

1.6                                 Section 2.2 of
the Loan Agreement is hereby amended be deleting the words “Atlanta, Georgia”
and substituting the words “Boston, Massachusetts” in their stead.

 

1.7                                 Section 8.2.1 of
the Loan Agreement is hereby amended by deleting clause (ii) in its entirety
and by inserting the following in lieu thereof:

 

(ii)                                  acquisitions of assets consisting of fixed
assets or real property that constitute Capital Expenditures.

 

1.8                                 Section 8.2.3 of
the Loan Agreement is hereby amended by (a) deleting the reference to the
amount of “$3,000,000” where it appears in clause (ix) therein and inserting a
reference to the amount “$10,000,000 in its stead, (b) deleting the period at
the end of such clause (ix) and inserting “and;”, and (c) inserting the
following new clause (x):

 

(x)                                   Indebtedness in respect of money borrowed, in
an aggregate amount not to exceed $100,000,000 (inclusive of the amounts
permitted under clause (ix) hereof) at any one time outstanding, and otherwise
on  terms and subject to documentation
acceptable to the Agent and, if secured by a Lien permitted under
Section 8.2.5 hereof, to the Lenders.

 

1.9                                 Section 8.2.5 of
the Loan Agreement is hereby amended by renumbering clause (ix) as clause (x)
and inserting the following new clause (ix):

 

3

 

(ix)                                Liens to secure Indebtedness permitted under
Section 8.2.3(ix) hereof, provided that the Person holding such Liens
shall have entered into an intercreditor and subordination agreement reasonably
acceptable to the Agent and, the Lenders; and

 

1.10                           Section 8.2.8 of the
Loan Agreement is hereby deleted in its entirety and inserting the following in
lieu thereof:

 

8.2.8                        [Intentionally Omitted]

 

1.11                           Section 8.2.17
of the Loan Agreement is hereby amended by deleting clause (v) thereof in its
entirety.

 

1.12                           Section 12.8 of the
Loan Agreement is hereby amended by deleting the notice address for the Agent
and inserting the following in lieu thereof:

 

	
  If to the Agent:

  	
  Fleet Retail Group, Inc.

  
	
   

  	
  40 Broad Street

  
	
   

  	
  Boston, Massachusetts 02109

  
	
   

  	
  Attention: Mr. Keith Vercauteren

  
	
   

  	
  Facsimile No. (617) 434-4339

  
	
   

  	
   

  
	
  With a copy to:

  	
  Riemer & Braunstein LLP

  
	
   

  	
  Three Center Plaza

  
	
   

  	
  Boston, Massachusetts 02108

  
	
   

  	
  Attention:  David S. Berman,
  Esquire

  
	
   

  	
  Facsimile No. (617) 880-3456

  

 

1.13                           Appendix A of the
Loan Agreement is hereby amended as follows:

 

(a)                                  By
amending the definition of “Agent” by deleting the words “Fleet Capital
Corporation” and substituting the words “Fleet Retail Group, Inc” in their
stead.

 

(b)                                 By
amending the definition of “Applicable Margin” be deleting the table set forth
therein in its entirety and inserting the following in lieu thereof:

 

	
   

  	
  EBITDA and
  Fixed Charge Coverage

  Ratio for the Prior Twelve Months

  	
   

  	
  LIBOR
  Revolving Portion

  	
   

  	
  Base Rate
  Revolving Portion

  	
   

  
	
  Tier I

  	
  EBITDA >$35,000,000 and a Fixed Charge Coverage Ratio >1.1:1.0
  (If the Fixed Charge Coverage Ratio is less than 1.1:1.0, the rates in Tier
  II shall apply notwithstanding that EBITDA exceeds $35,000,000))

  	
   

  	
  1.50

  	
  %

  	
  0.00

  	
  %

  
	
  Tier II

  	
  EBITDA > $20,000,000 <= $35,000,000  (No applicable Fixed Charge Coverage Ratio)

  	
   

  	
  1.75

  	
  %

  	
  0.25

  	
  %

  
	
  Tier III

  	
  EBITDA > $12,000,000 <= $20,000,000 (No applicable Fixed Charge
  Coverage Ratio)

  	
   

  	
  2.00

  	
  %

  	
  0.50

  	
  %

  
	
  Tier IV

  	
  EBITDA <= $12,000,000 (No applicable Fixed Charge Coverage Ratio)

  	
   

  	
  2.25

  	
  %

  	
  0.75

  	
  %

  

 

4

 

(c)                                  By amending the
definition of “Availability Reserves” to add the following at the end thereof:

 

In no event shall the Agent
establish an Availability Reserve under clauses (iv) or (v) of this definition
as long as the Loan Party’s cost structure for Import Landing Costs and Landing
Costs is consistent with its historical practices.

 

(d)                                 By
deleting the definition of “Borrowing Base” in its entirety and substituting
the following in its stead:

 

“Borrowing Base” - as at
any date of determination thereof, the result of the following:

 

(A) (1)  At all times that the provisions of clause
(2) hereof do not apply, the Cost of Eligible Inventory of the Lead Borrower
and the Canadian Affiliate (net of Inventory Reserves) multiplied by the
applicable Inventory Advance Rate, not to exceed the Inventory Appraisal Cap;
or (2) for the period from the date of Amendment 5 though the earlier of
December 15, 2004 or the occurrence of the Special Capital Event, the
Inventory Appraisal Cap for Eligible Inventory 
plus

 

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

 

(C)  The product of the face amount of Eligible Receivables of
Michaels (net of Receivables Reserves) multiplied by 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 the amount of Eligible Credit Card Receivables of
the Lead Borrower and the Canadian Affiliate (net of Receivables Reserves)
multiplied by 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

 

5

 

calculation; and provided further that
Eligible In-Transit Inventory shall not constitute more than ten percent (10%)
of the Borrowing Base at any time.

 

(e)                                  By
deleting clause (ii) of the definition of “Eligible In Transit Inventory” and
substituting the following in its stead:

 

The documents which relate to such shipment
reflects a Borrower or the Canadian Affiliate as consignee (along with delivery
to such Person of the documents of title with respect thereto) and the Agent
has control over the documents which evidence ownership of the subject
Inventory such as by providing a customs broker agreement reasonably
satisfactory to the Agent.

 

(f)                                    By
deleting clause (vii) of the definition of “Eligible Inventory” and adding the
following immediately after the dash and the defined term “Eligible Inventory
-” in the first line of the definition thereof:

 

Eligible In Transit Inventory,
Eligible Letter of Credit Inventory and other

 

(g)                                 By
deleting clause (ii) of the definition of “Eligible Letter of Credit Inventory”
and substituting the following in its stead:

 

The documents which relate to such shipment
reflects a Borrower or the Canadian Affiliate as consignee (along with delivery
to such Person of the documents of title with respect thereto) and the Agent
has control over the documents which evidence ownership of the subject
Inventory such as by providing a customs broker agreement reasonably
satisfactory to the Agent.

 

(h)                                 By
deleting the definitions of “Fiscal Year 2002”, “Fiscal Year 2003”, “Fiscal
Year 2004” and “Fiscal Year 2005” in their entirety.

 

(i)                                     By
deleting the definition of the term “Inventory Advance Rate” in its entirety
and inserting the following in lieu thereof:

 

“Inventory Advance Rate” – The following percentages during the
periods indicated in the chart below:

 

	
  Period

  	
   

  	
  Inventory
  Advance Rate

  	
   

  
	
  January through
  August of each year

  	
   

  	
  72

  	
  %

  
	
  September of each
  year

  	
   

  	
  75

  	
  %

  
	
  October through
  December of each year

  	
   

  	
  85

  	
  %

  

 

(j)                                     By
deleting the definition of the term “Inventory Appraisal Cap” in its entirety
and inserting the following in lieu thereof:

 

6

 

“Inventory Appraisal Cap” – (i) 
for the period from the date of Amendment No. 5 through
December 15, 2004 (or sooner pursuant to clause (ii) below), ninety
percent (90%) of the Appraised Inventory Liquidation Value for Inventory of the
Lead Borrower and the Canadian Affiliate; and (ii) upon the earlier to occur of
December 15, 2004 or the Special Capital Event, and at all times
thereafter, eighty-five percent (85%) of the Appraised Inventory Liquidation
Value for Inventory of the Lead Borrower and the Canadian Affiliate.

 

(k)                                  By
deleting clause (iii) of the definition of “Receivables Advance Rate” and
adding the words “and the Canadian Affiliate” after the words “Lead Borrower”
in clause (ii) thereof.

 

(l)                                     By
deleting the definition of the term “Revolving Credit Maximum Amount” and
inserting the following in lieu thereof:

 

“Revolving Credit Maximum Amount” –  $100,000,000, as same may be increased from time to time pursuant
to Section 1.1A hereof.

 

(m)                               By
deleting the definition of the term “Revolving Loan Commitment” and inserting
the following in lieu thereof:

 

“Revolving Loan Commitment” – with respect to any Lender, the
amount of such Lender’s Revolving Loan Commitment pursuant to
subsection 1.1 of the Agreement, as set forth below such Lender’s name on
the signature page for Amendment No. 5 or the signature page to the joinder
agreement with respect to any Additional Commitment Lender, as same may be
increased from time to time pursuant to Section 1.1A hereof.

 

(n)                                 By
deleting the definition of the term “Total Credit Facility” in its entirety and
inserting the following in lieu thereof:

 

“Total Credit Facility” – means, at any time, the sum of the
Revolving Loan Commitments at such time.

 

(o)                                 By
inserting the following definitions in their proper alphabetical sequence:

 

“Additional Commitment Lender” – as defined in
Section 1.1A.

 

“Amendment No. 5” – means that certain Amendment No. 5 to the
Seventh Amended and Restated Loan and Security Agreement dated June 3,
2004 among the Borrower, the Agent and the Lenders.

 

“Commitment Increase” – as defined in Section 1.1A.

 

“Commitment Increase Date” – as defined in Section 1.1A.

 

“Consolidated Fixed Charges” means for any period the sum of
(i)  all interest and amortization of
debt discount and expense (including commitment fees, letter of credit fees,
balance deficiency fees and similar expenses) on all Indebtedness of the
Borrowers on a Consolidated basis paid or required to be paid in accordance
with GAAP (including with respect to Capitalized Lease Obligations), plus (ii)
the aggregate amount of scheduled principal payments paid or required to be
paid by the Borrowers with

 

7

 

respect to any Indebtedness (including
Capitalized Lease Obligations but excluding payments with respect to the
Revolving Credit Loans).

 

“Fixed Charge Coverage Ratio” – means the ratio of (i)
Consolidated EBITDA minus Consolidated Net Capital Expenditures minus current
taxes based on income of Borrowers and their Subsidiaries paid in cash with
respect to such period to (ii) Consolidated Fixed Charges, in each case, for
the twelve month period most recently ended for which financial statements have
been delivered to Agent.

 

 “Special Capital Event”
– means the Borrowers’ consummation of one or more capital transactions, from
and after the date of Amendment No. 5, pursuant to which the Borrowers shall
have obtained additional equity capital or incurred additional Indebtedness
permitted hereunder in an aggregate amount in excess of $50,000,000, upon terms
and conditions acceptable to the Majority Lenders.

 

SECTION 2                               CONDITIONS
PRECEDENT

 

2.1                                 This Amendment shall
become effective upon satisfaction of the following conditions (the date of
satisfaction of such conditions being referred to herein as the “Fifth Amendment Effective Date”):

 

(a)                                  Execution
and delivery to the Agent of this Amendment by the Borrowers, the Lenders, the
Agent and the Co-Administrative Agent.

 

(b)                                 Delivery
to the Agent of an opinion of counsel to the Borrowers in form and substance
satisfactory to the Agent and its counsel.

 

(c)                                  Delivery
to the Agent of resolutions of the Boards of Directors of the Borrowers,
approving and authorizing the execution, delivery and performance of this
Amendment, certified as of the Fifth Amendment Effective Date by their
corporate secretaries or assistant secretaries as being in full force and
effect without modification or amendment, in form an substance satisfactory to
the Agent.

 

(d)                                 Payment
to the Agent of (i) an amendment fee in the amount of $54,000 which shall be
payable to the Lenders based on their respective Revolving Loan Percentages
prior to the Fifth Amendment Effective Date, and (ii) and incremental exposure
increase fee in the amount of $49,000, which shall be payable to the Lenders
based on their respective Revolving Loan Percentages after the Fifth Amendment
Effective Date.  Such fees shall be
fully earned upon the execution hereof and shall not be subject to refund or
rebate under any circumstances.

 

(e)                                  No
Default or Event of Default shall then exist and be continuing.

 

(f)                                    Execution
and delivery of such other instruments, documents and agreements as the Agent
may reasonably require.

 

SECTION 3                               MISCELLANEOUS

 

3.1                                 Each of the Borrowers
reaffirms and restates the representations and warranties set forth in
Section 7 of the Loan Agreement, as amended by this Amendment (the
“Amended

 

8

 

Agreement”), and, after giving effect to the transactions contemplated
herein, all such representations and warranties shall be true and correct in
all material respects on and as of the date hereof (except insofar as such
representations and warranties expressly relate to an earlier date).

 

3.2                                 Each of the Borrowers
warrants and represents (which warranty and representation shall survive the
execution and delivery hereof) that:

 

(a)                                  It
has the corporate power and authority to execute and deliver this Amendment,
and to carry out the terms and provisions of this Amendment and the Amended
Agreement and the transactions contemplated hereby and thereby, and has taken
or caused to be taken all necessary corporate action to authorize the execution
and delivery of this Amendment and the performance of this Amendment and the
Amended Agreement and the transactions contemplated hereby and thereby;

 

(b)                                 No
consent of any other person (including, without limitation, its shareholders or
creditors), and no action of, or filing with any governmental or public body or
authority is required to authorize, or is otherwise required in connection with
the execution and delivery of this Amendment and the performance of this
Amendment and the Amended Agreement;

 

(c)                                  The
execution and delivery of this Amendment and the performance of this Amendment
and the Amended Agreement will not violate any law, statute or regulation, or
any order or decree of any court or governmental instrumentality, or conflict
with, or result in the breach of, or constitute a default under any contractual
obligation; and

 

(d)                                 This
Amendment has been duly executed and delivered by a duly authorized officer,
and this Amendment and the Amended Agreement constitute a legal, valid and
binding obligation of it, enforceable in accordance with their terms, subject
to laws affecting the enforcement of creditors’ rights generally and the
exercise of judicial discretion in accordance with general principles of
equity.

 

3.3                                 The Loan Documents,
subject to the foregoing terms and conditions provided by this Amendment,
constitute the complete agreement of the Parties with respect to the subject
matters referred to herein and supersede all prior or contemporaneous
negotiations, promises, agreements, or representations, all of which have
become merged and finally integrated into the Loan Documents and this
Amendment.  No agreements or
undertakings varying, modifying, amending, extending, discharging or
terminating the same shall be binding upon any Party unless in writing signed
by a duly authorized official or agent thereof.  No waiver by any Party of any breach hereunder shall be deemed a
waiver of any other or subsequent breach.

 

3.4                                 Each Borrower agrees
to pay, on demand, all attorneys’ fees and costs incurred in connection with
the negotiation, documentation, and execution of this Amendment.  If any legal action or proceeding shall be
commenced at any time by any Party in connection with its interpretation or
enforcement, the prevailing Party or Parties in such action or proceeding shall
be entitled to reimbursement of its reasonable attorneys’ fees and costs in
connection therewith,

 

9

 

in addition to all other relief to which the prevailing Party or
Parties may be entitled.  Each of the
Amendment Parties waives its right to a trial by jury in any action to enforce,
defend, or interpret, or otherwise concerning this Amendment.

 

3.5                                 Except as herein
expressly amended, the Loan Agreement is ratified and confirmed in all respects
and shall remain in full force and effect in accordance with its terms.

 

3.6                                 This Amendment and all
rights and obligations hereunder, including matters of construction, validity,
and performance, shall be governed by and construed under the laws of the State
of California and shall inure to the benefit of and shall be binding upon the
successors, heirs and assigns of the Parties.

 

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

 

3.8                                 This Amendment may be
executed in counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.

 

3.9                                 Delivery of an
executed counterpart of a signature page to this Amendment by telecopier shall
be effective as delivery of a manually executed counterpart of this Amendment.

 

[remainder
of page intentionally left blank]

 

10

 

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

 

	
   

  	
  RESTORATION
  HARDWARE, INC.,

  the Lead Borrower

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Patricia McKay

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Patricia McKay

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  CFO

  	
   

  
	
   

  	
   

  
	
   

  	
  THE
  MICHAELS FURNITURE COMPANY,

  
	
   

  	
  as a Borrower

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Patricia McKay

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Patricia McKay

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  CFO

  	
   

  
	
   

  	
   

  
	
   

  	
  FLEET
  RETAIL GROUP, INC., a Delaware 

  corporation, as Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Keith Vercauteren 

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Keith Vercauteren

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Director

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Amount:  $55,000,000.00

  
	
   

  	
   

  
	
   

  	
  THE CIT GROUP/BUSINESS CREDIT, INC.,

  as the Co-Administrative Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Frank Brown

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Frank Brown

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Amount:  $45,000,000.00

  
								

 

Signature Pages to Amendment No. 5 to the Seventh
Amended and Restated

Loan and Security Agreement

 

11EXHIBIT 10.20.2

 

 

MCDATA CORPORATION

 

FORM EXECUTIVE SEVERANCE AGREEMENT

 

This Agreement is made by
and between McDATA Corporation
(the “Company”), and you,
                          .  This Agreement is effective as of May 24,
2004 (the “Effective Date”).  For
purposes of this Agreement, the “Company” shall include any parent or
subsidiary of the Company, unless the context clearly requires otherwise.

 

This Agreement is
intended to strongly encourage you to remain with the Company by providing you
with certain severance benefits in the event that your employment with the
Company terminates under certain circumstances.  This Agreement also is intended to provide you with enhanced
financial security in recognition of your past and future service to the Company.

 

1.             Eligibility
for Severance Benefits.  You will be
entitled to the payments and benefits described in Section 2 only if both:
(a) either (1) the Company terminates your employment for a reason
other than Cause, death or Disability, or (2) you voluntarily terminate
your employment with the Company for Good Reason, and (b) you
(1) sign and deliver to the Company a Release of Claims satisfactory to
the Company, (2) do not subsequently revoke your signature on the Release
of Claims, and (3) comply with all of the terms of this Agreement,
including (but not limited to) Section 7 regarding Non-Solicitation of
Employees and Section 8 regarding Non-Competition.  Notwithstanding the preceding, if your termination of employment
would qualify you for payments and benefits under a  Change of Control Severance Agreement (if applicable to you) with
the Company  (the “Change of Control
Severance Agreement”), you will receive none of the payments and benefits
described herein.  Instead, you would
(if applicable)  receive the payments
and benefits to which you are entitled under a Change of Control Severance
Agreement (if applicable to you).

 

2.             Severance
Benefits.  If you meet the
eligibility requirements described in Section 1, you will receive the
following.

 

(a)            Cash Payments. 
You will receive severance pay equal to [one year][nine months][six
months] of your  base salary and target
bonus in effect immediately prior to the date of your termination of employment
(the “Termination Date”) for a period of [one year][nine months][six months]
following the Termination Date.  The
severance pay with respect to your [one year][nine months][six months] base
salary will be paid in accordance with the Company’s standard payroll practices
and the severance pay with respect to your target bonus will be paid at the
same time as bonuses are scheduled to be paid to the Company’s other senior
executives. No lump sum payment will be made. The payments will commence within
three (3) days after the Release of Claims becomes effective and no longer is
subject to revocation. You are responsible for any applicable taxes on such
payments.

 

(b)           Option Exercisability.  You will have one year following the Termination Date to exercise
your Company Class B stock options and any Company stock options granted to you
on or after the Effective Date, but in each
case only to the extent that such option is vested and unexpired on the
Termination Date. Moreover, in no event may any such option be
exercised after the original maximum term of the option.  

 

 

Any
options that are unvested on the Termination Date will be forfeited on that
date. With regard to your Executive Performance Incentive Bonus (“EPIB”)
restricted Class B stock shares, you would
be entitled to those shares that by their own terms become unrestricted within
one year following the Termination Date.

 

(c)           Other Benefits. 
The Company will provide you with health, dental and vision benefits
coverage for up to [one year][nine months][six months] following Termination
Date or until you become eligible for group insurance benefits from another
employer, whichever comes first, but only if you elect continuation coverage
under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(“COBRA”), within the time period prescribed pursuant to COBRA.  For the duration of the one-year coverage
period, the Company will pay the COBRA premiums otherwise payable by you (for
coverage for yourself and your eligible dependents).  After the [one-year][nine months][six months] coverage period,
you will be responsible for the payment of any COBRA premiums.  The Company will not reimburse you for any
taxable income imputed to you because the Company has paid your COBRA premiums
(or those of your eligible dependents).

 

(d)           Accrued Wages and Paid-Time Off; Expenses. The
Company will pay you: (1) any unpaid base salary due for periods prior to
the Termination Date, (2) all of your accrued and unused paid-time off
(“PTO”) through the Termination Date, (3) following your submission of
proper expense reports, the total unreimbursed amount of all expenses incurred
by you in your duties of employment with the Company that are reimbursable in
accordance with the Company’s then-existing policies, and (4) any other
benefits due to you through the Termination Date under the Company’s formal
employee benefit plans (for example, the Company’s “401(k)” plan).  These payments will be made promptly upon
your employment termination and within the period of time mandated by law or as
provided in the applicable plan document.

 

3.             Other
Terminations of Employment.  If your
employment with the Company is terminated by the Company for Cause, death or
Disability, or if you voluntarily terminate your employment other than for Good
Reason, you will not be entitled to receive any of the payments or benefits
described in Section 2 of this Agreement. 
However, you may be eligible for other benefits under other Company
plans or policies that may exist on the Termination Date. In addition, the Company
will pay you: (1) any unpaid base salary due for periods prior to the
Termination Date, (2) all of your accrued and unused PTO through the
Termination Date, (3) following your submission of proper expense reports, the
total unreimbursed amount of all expenses incurred by you in your duties of
employment with the Company that are reimbursable in accordance with the
Company’s then-existing policies, and (4) any other benefits due to you
through the Termination Date under the Company’s formal employee benefit plans
(for example, the Company’s “401(k)” plan). 
These payments will be made promptly upon your employment termination
and within the period of time mandated by law or as provided in the applicable
plan document.

 

4.             Definition
of Terms.  The following terms used
to in this Agreement shall have the following meanings:

 

(a)           Cause.  “Cause” means (1) an act of personal
dishonesty taken by you in connection with your responsibilities as an employee
and intended to result in your substantial personal enrichment, (2) your
being convicted of a crime recognized as a felony in the United States,
(3) a willful act by you which constitutes gross misconduct and which is
(or may be) injurious to the Company (e.g.,
a significant violation of Company policy or the Company Code of Conduct may be
deemed to meet this clause (3) definition since all employees are required to
be fully knowledgeable of such polices and code), (4) following delivery
to you of a written demand for performance from the Company which describes the
basis for the Company’s reasonable belief that the you have not substantially
performed your duties, continued violations by you of your obligations to the
Company which are demonstrably willful and deliberate on your part.

 

(b)           Disability.  “Disability” means your being unable to
perform the principal functions of your duties due to a physical or mental
impairment, but only if such inability has lasted or is reasonably expected to
last 

 

 

for at
least six months.  The Company will
determine whether a Disability exists based on evidence provided by one or more
physicians selected by the Company and reasonably acceptable to you.

 

(c)           Good Reason.  “Good Reason” means, without your written
consent (1) a material reduction of your duties, authority or
responsibilities, relative to your duties, authority or responsibilities as in
effect immediately prior to such reduction, or the assignment to you of such
reduced duties, authority or responsibilities; or (2) a material reduction
by the Company of your base compensation as in effect immediately prior to such
reduction (unless similar reductions apply to substantially all of the
Company’s other senior executives or to the employees); provided however, that
“Good Reason” shall not be triggered if the CEO reassigns you to another VP
level position and no material reduction in your base compensation occurs as
contemplated in paragraph (2) above..

 

(d)           Release of Claims.  “Release of Claims” means a written waiver
by you (in a form specified by the Company) of all employment-related
obligations of the Company and all claims and causes of action against the
Company.

 

5.             Term of Agreement.  If you have a termination of employment that
entitles you to receive the payments and benefits descried in Section 2, this
Agreement will terminate when all of your and the Company’s obligations under
the Agreement have been satisfied.  If
you have a termination of employment that does not entitle you to receive the
payments and benefits described in Section 2, this Agreement will terminate on
the Termination Date.

 

6.             At-Will Employment.  The Company and you acknowledge that your
employment is and will continue to be at-will, as defined under applicable law.

 

7.             Non-Solicitation of Employees.  You agree that for a period of two years following the Termination Date,
you will not either directly or indirectly solicit, induce, recruit or
encourage any of the Company’s employees to leave their employment, or take
away such employees, or attempt to solicit, induce, recruit, encourage or take
away employees of the Company, either for yourself or any other person or
entity.

 

8.             Non-Competition.  With respect to the businesses of the
Company or any of its subsidiaries on either the Effective Date or the date of
your termination of employment from the Company and all of it subsidiaries
(collectively, the “Businesses”), you agree that during period beginning on the
Effective Date and ending two years
after the Termination date, you, directly or indirectly, whether as employee,
owner, sole proprietor, partner, director, member, consultant, agent, founder,
co-venturer or otherwise, will: (i) not engage, participate or invest in any
business activity anywhere in the world that is directly competitive with the
principal products or services of the Businesses (except that it will not be a
violation of this Section 11 for you to own as a passive investment not more
than one percent of any class of publicly traded securities of any entity); nor
(ii) directly or indirectly solicit business from any of the Businesses’
customers and users on behalf of any business that directly competes with the
Businesses.

 

9.             Assignment.  This Agreement will be binding upon and
become of advantage to (a) your heirs, executors and legal representatives
upon your death and (b) any successor of the Company.  Any such successor of the Company will be
deemed substituted for the Company under the terms of this Agreement for all
purposes.  For this purpose, “successor”
means any person, firm, corporation or other business entity which at any time,
whether by purchase, merger or otherwise, directly or indirectly acquires all
or substantially all of the assets or business of the Company.  None of your rights to receive any form of
compensation payable pursuant to this Agreement may be assigned or transferred
except by will or the laws of descent and distribution.  Any other attempted assignment, transfer,
conveyance or other disposition of your right to compensation or other benefits
will be null and void.

 

 

10.           Notices.

 

(a)           General.  All notices, requests, demands and other
communications called for by this Agreement will be in writing and will be
deemed given (1) on the date of delivery if delivered personally,
(2) one day after being sent by a well established commercial overnight
service, or (3) four days after being mailed by registered or certified
mail, return receipt requested, prepaid and addressed to the parties or their
successors at the following addresses, or at such other addresses as the
parties may later designate in writing:

 

If to the
Company:

 

McDATA
Corporation

380
Interlocken Crescent

Broomfield,
Colorado 80012

 

Attn: General Counsel

 

If to you:

 

at your last
residential address known by the Company.

 

(b)           Notice of Termination. Any
termination by the Company for Cause or by you for Good Reason must be
communicated by a notice of termination to the other party.  The notice will indicate the specific
termination provision in this Agreement relied upon, will set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated, and will specify the date of your
employment termination (which will not be more than 30 days after the giving of
such notice).  Any failure on your part
to include in the notice any fact or circumstance that contributes to a showing
of Good Reason will not waive any of your rights under this Agreement or
prevent you from asserting that fact or circumstance in enforcing this
Agreement.

 

11.           Severability.  In the event that any provision hereof
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement will continue in full force and effect
without said provision.

 

12.           Entire
Agreement.  This Agreement, your
Change of Control Severance Agreement and the agreements evidencing any Company
stock options and other equity compensation awards (if any) granted to you
represent the entire agreement and understanding between the Company and you
concerning your severance arrangements with the Company or any of its
subsidiaries, and supersedes and replaces any and all prior agreements and
understandings concerning your severance arrangements with the Company.

 

13.           Arbitration.

 

(a)           General.  In consideration of your service to the
Company, its promise to arbitrate all employment related disputes and your
receipt of the compensation, pay raises and other benefits paid to you by the
Company, at present and in the future, you agree that any and all
controversies, claims, or disputes with anyone (including the Company and any
employee, officer, director, shareholder or benefit plan of the Company in
their capacity as such or otherwise) arising out of, relating to, or resulting
from your service to the Company under this Agreement or otherwise or the
termination of your service with the Company, including any breach of this
Agreement, shall be subject to binding arbitration under the Arbitration Rules
set forth under the rules and regulations of the American Arbitration
Association (the “Rules”) and pursuant to Colorado law.  Disputes which you agree to arbitrate, and
thereby agree to waive any right to a trial by jury, include any statutory
claims under state or federal law, including, but not limited to, claims under
Title VII of the Civil Rights Act of 1964, the 

 

 

Americans
with Disabilities Act of 1990, the Age Discrimination in Employment Act of
1967, the Older Workers Benefit Protection Act, the Colorado Fair Employment
and Housing Act, the Colorado Labor Code, claims of harassment, discrimination
or wrongful termination and any statutory claims.  You further understand that this Agreement to arbitrate also
applies to any disputes that the Company may have with you.

 

(b)           Procedure.  You agree that any arbitration will be
administered by the American Arbitration Association (“AAA”) and that a neutral
arbitrator will be selected in a manner consistent with its National Rules for
the Resolution of Employment Disputes. 
The arbitration proceedings will allow for discovery according to the
rules set forth in the National Rules for
the Resolution of Employment Disputes or Colorado Code of Civil Procedure.  You agree that the arbitrator shall have the
power to decide any motions brought by any party to the arbitration, including
motions for summary judgment and/or adjudication and motions to dismiss and
demurrers, prior to any arbitration hearing. 
You agree that the arbitrator shall issue a written decision on the
merits.  You also agree that the
arbitrator shall have the power to award any remedies, including attorneys’
fees and costs, available under applicable law.  You understand the Company will pay for any administrative or
hearing fees charged by the arbitrator or AAA except that you shall pay the
first $200.00 of any filing fees associated with any arbitration you
initiate.  You agree that the arbitrator
shall administer and conduct any arbitration in a manner consistent with the
Rules and that to the extent that the AAA’s National Rules for the Resolution
of Employment Disputes conflict with the Rules, the Rules shall take precedence.

 

(c)           Remedy.  Except as provided by the Rules, arbitration
shall be the sole, exclusive and final remedy for any dispute between you and
the Company.  Accordingly, except as
provided for by the Rules, neither you nor the Company will be permitted to pursue
court action regarding claims that are subject to arbitration.  Notwithstanding, the arbitrator will not
have the authority to disregard or refuse to enforce any lawful Company policy,
and the arbitrator shall not order or require the Company to adopt a policy not
otherwise required by law which the Company has not adopted.

 

(d)           Availability of Injunctive Relief.  In addition to the right under the Rules to
petition the court for provisional relief, you agree that any party may also
petition the court for injunctive relief where either party alleges or claims a
violation of this Agreement or any other agreement regarding trade secrets,
confidential information, or nonsolicitation. 
In the event either party seeks injunctive relief, the prevailing party shall
be entitled to recover reasonable costs and attorneys’ fees.

 

(e)           Administrative Relief.  You understand that this Agreement does not
prohibit you from pursuing an administrative claim with a local, state or
federal administrative body such as the Department of Fair Employment and
Housing, the Equal Employment Opportunity Commission or the workers’
compensation board.  This Agreement
does, however, preclude you from pursuing court action regarding any such claim.

 

(f)            Voluntary Nature of Agreement.  You acknowledge and agree that you are
executing this Agreement voluntarily and without any duress or undue influence
by the Company or anyone else.  You
further acknowledge and agree that you have carefully read this Agreement and
that you have asked any questions needed for you to understand the terms,
consequences and binding effect of this Agreement and fully understand it,
including that you are waiving your right to a jury trial.  Finally, you agree that you have been
provided an opportunity to seek the advice of an attorney of your choice before
signing this Agreement.

 

14.           No
Oral Modification, Cancellation or Discharge.  This Agreement may be changed or terminated only in writing
(signed by you and an authorized officer of the Company).

 

15.           Withholding.  The Company is authorized to withhold, or
cause to be withheld, from any payment or benefit under this Agreement the full
amount of any applicable withholding taxes.

 

 

16.           Governing
Law.  This Agreement will be
governed by the laws of the State of Colorado (with the exception of its
conflict of laws provisions).

 

17.           Acknowledgment.  You acknowledge that you have had the
opportunity to discuss this matter with and obtain advice from your private
attorney, have had sufficient time to, and have carefully read and fully
understand all the provisions of this Agreement, and are knowingly and
voluntarily entering into this Agreement.

 

 

IN WITNESS WHEREOF, the undersigned have executed this
Agreement on the respective dates set forth below:

 

 

	
   

  	
   

  	
  Date:

  	
   

  	
  , 2004

  	 

	
   

  	
   

  
	
   

  	
   

  
	
  MCDATA CORPORATION

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  	
  , 2004

  
	
  Name:

  	
   

  	
   

  	
   

  	 

	
  Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00067-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00067-of-00352.parquet"}]]