Commitment Letter - U.S. Bank of Idaho and Coldwater Creek Inc.
[Letterhead]
December 18, 1996
Mr. Don Robson
Vice President & Chief Financial Officer
Coldwater Creek Inc.
One Coldwater Creek Drive
Sandpoint, Idaho 83864
Dear Don:
I'm pleased to be able to inform you of U.S. Bank of Idaho's commitment to
increase and modify the two revolving credit facilities, and to add a
separate Letter of Credit facility, for your good company.
As we had discussed the increased facilities will consist of the following
two components:
Line #1: Amount: $17,500,000 (a $9,000,000 increase over the
existing line)
Type: Short-Term Revolving Line of Credit
Interest Rate: 30, 60 or 90 day LIBOR + 1.75%, or U.S. Bank's
Prime Rate minus 0.05%
Fee: 0.125% non-usage, payable quarterly
Maturity: June 30th, 1998
Collateral: Unsecured; however, Coldwater Creek pledges not to
encumber Accounts Receivable and Inventory
Line #2: Amount: $17,500,000 (a $6,000,000 increase over the
existing line)
Type: Longer Term Revolving Line of Credit
Interest Rate: 30, 60 or 90 day LIBOR + 1.85%, or U.S. Bank's
Prime Rate
Fee: 0.125% non-usage, payable quarterly
Maturity: June 30th, 2000
Collateral: Secured by a First Deed of Trust on Coldwater
Creek's headquarters complex and liens on
substantially all other fixed assets including
leaseholds at any other business locations
operated by the company plus fixed assets
contained therein. Collateral is being held as an
abundance of caution, given the multi-year term of
the commitment, and no appraisals are required.
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In addition to the increased facilities described above, U.S. Bank will
provide a separate unsecured line of credit exclusively for the purpose of
issuing either Standby or Commercial Letters of Credit with an aggregate face
value of no more than $1,000,000. Letters of Credit under this facility can
be issued up through June 30, 1998 for expiration by no later than June 30,
1999.
The Loan Agreement between the bank and the borrower will include the
following financial covenants:
- The ratio of Total Liabilities to Tangible Net Worth is not to exceed
1.50 : 1 at the fiscal year ending March 3, 1997 and 1.20 : 1 at the
fiscal year ending March 2, 1998 and at each fiscal year-end thereafter.
During each fiscal year, for measurement as of the end of the first,
second and third fiscal quarter, the ratio of Total Liabilities to
Tangible Net Worth is not to exceed 1.50 : 1.
- The Tangible Net Worth is to be at least $18,000,000 at the fiscal year
ending March 3, 1997 and $30,000,000 at the fiscal year ending March 2,
1998 and at each fiscal year-end thereafter.
- The Debt Service Coverage Ratio (Net Income + Depreciation / Debt Service
Requirement) is to be no less than 1.25 : 1 as of each fiscal year end.
For purposes of this covenant, Debt Service Requirement will be assumed
to be $3,500,000 which equates approximately to the annual principal
reduction requirement to fully amortize a $17,500,000 term loan over five
years.
For purposes of covenant measurements, we will treat Prepaid Expenses and
Deferred Catalog Costs as tangible assets.
In addition to the financial covenants, it will be a condition of the
unsecured Short Term Revolving Line of Credit that any borrowings thereunder
be fully repaid and that the line remains "at rest" for a minimum of thirty
consecutive days during a twelve month period starting as of the date of
closing of the documents finalizing this commitment. This condition is not
applicable to the secured Longer Term Revolving Line of Credit.
The above-described terms and conditions will be included in a new Loan
Agreement substantially comparable to the agreement that currently exists
between us. The only other notable difference will be a requirement for
quarterly Compliance Certificates whereby the Company certifies that it is in
compliance - or if applicable, out of compliance - with the covenants
contained in the agreement.
Don, as you and I discussed briefly yesterday, we'll do our best to complete
the documentation of these new credit facilities as quickly as possible to
fit within the timetable for your potential IPO processes. As in the past we
should be able to prepare all documents internally, without using outside
counsel, thereby limiting your out-of-pocket documentation expenses to only
the title insurance necessary to support the amended deed of trust and any
filing fees that may be payable. Please understand that such insurance
premiums and fees, if any, are for the account of Coldwater Creek.
I trust that this increase and modification of U.S. Bank's financing
commitment to Coldwater Creek will meet with your and the Board's approval.
Unless I hear otherwise, we will proceed immediately with the preparation of
the operative documents that will reflect
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this commitment. Obviously, if you or anyone has questions or concerns along
the way please don't hesitate to call.
Please know that all of us at U.S. Bank who have been involved in the growth
of our relationship appreciate the opportunity to be Coldwater Creek's bank.
We look forward to continuing to serve all of your commercial banking needs
as the company continues to grow and transform itself, potentially, into a
public corporation.
In closing, please accept my Very Best Wishes to you and your associates and
family for a wonderful Holiday Season!
Sincerely,
/s/ Anthony W. Olbrich
Anthony W. Olbrich
Senior Vice President & Mgr.
Corporate Banking
Ph. 208-383-7606