Exhibit 10.1

 
 

EIGHTH AMENDMENT
TO
LOAN AND SECURITY AGREEMENT

 

 

Eighth Amendment dated as of March 7, 2012 to Loan and Security Agreement (the
"Eighth Amendment"), by and between SWANK, INC., a Delaware corporation (the
"Borrower") and WELLS FARGO CAPITAL FINANCE, INC. (formerly Wells Fargo
Foothill, Inc., the "Lender"), amending certain provisions of the Loan and
Security Agreement dated as of June 30, 2004 (as amended and in effect from time
to time, the "Agreement") by and between the Borrower and the Lender.  Terms not
otherwise defined herein which are defined in the Agreement shall have the same
respective meanings herein as therein.

WHEREAS, the Borrower and the Lender have agreed to modify certain terms and
conditions of the Agreement as specifically set forth in this Eighth Amendment;

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

§1.           Amendment to Section 1 of the Agreement.  Section 1.1 of the
Agreement is hereby amended as follows:

(a)           The definition of "Availability" set forth in Section 1.1 of the
Agreement is hereby amended by inserting immediately at the end of the text of
such definition the words "minus all book overdrafts of Borrower and its
Subsidiaries in excess of historical practices with respect thereto".

(b)           The definition of "Base Rate Margin" set forth in Section 1.1 of
the Agreement is hereby amended by deleting the amount "0.50" which appears in
such definition and substituting in place thereof the amount "0.25".

(c)           The definition of "Borrowing Base" set forth in Section 1.1 of the
Agreement is hereby amended by deleting such definition in its entirety and
restating it as follows:

   "Borrowing Base" means, as of any date of determination, the result of:

   (a)            85% of the amount of Eligible Accounts, less the amount, if
any of the Dilution Reserve, plus

   (b)            the lowest of
 
      (i)    $13,000,000 (the "Inventory Cap"), provided, however, to the extent
that the ratio of Eligible Accounts to Eligible Inventory is less than 1.25:1.00
at any time, then the Inventory Cap shall be reduced to an

 
 
 

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amount which would permit the Borrower to comply with such ratio during such
applicable period,

     (ii)           60% of the value of Eligible Inventory (such amount of
Eligible Inventory being hereinafter referred to as the "Available Inventory",
provided, for the avoidance of doubt, to the extent the advance rate applicable
to such Eligible Inventory is changed pursuant to the terms of this Agreement,
"Available Inventory" shall mean such revised percentage of the value of
Eligible Inventory at the relevant date of determination), and
 
               (iii)           85% times the Net Liquidation Percentage times
the book value of Borrower's Inventory, minus

(c)           the sum of (i) the Bank Product Reserve, and (ii) the aggregate
amount of reserves, if any, established by Lender under Section 2.1(b).
  
 (d)           The definition of "EBITDA" contained in Section 1.1 of the
Agreement is hereby amended by deleting such definition in its entirety and
restating it as follows:

"EBITDA" means, with respect to any fiscal period, Borrower’s and its
Subsidiaries’ consolidated net earnings (or loss), minus extraordinary gains and
interest income, plus, to the extent deducted in the calculation of consolidated
net earnings,  interest expense, income taxes, and depreciation and amortization
for such period, plus, to the extent deducted in the calculation of EBITDA, the
non-cash expenses associated with any stock based compensation, up to an
aggregate amount of not more than $1,000,000 in any fiscal year, as determined
in accordance with GAAP.

(e)           The definition of "Eligible Accounts" contained in Section 1.1 of
the Agreement is hereby amended by (i) deleting the words "and (ii) Accounts
owing from the Burlington Coat Factory" which appear in paragraph (a) of such
definition and substituting in place thereof the words "(ii) Accounts owing from
Costco with selling terms of not more than 70 days; and (iii) Accounts owing
from the Burlington Coat Factory"; (ii) deleting the words "Federated and The
May Department Stores Company on a combined basis (hereinafter referred to on
such combined basis as "Federated/May")" which appear in paragraph (i)(i) of
such definition and substituting in place thereof the words "Macy's
Corporation"; (iii) deleting the amount "20%" which appears in paragraph
(i)(iii) of such definition and substituting in place thereof the amount "25%");
and (iv) deleting the words "Federated/May" which appears in paragraph (i)(iv)
of such definition and substituting in place thereof the words "Macy's
Corporation".

(f)           The definition of "Eligible Inventory" contained in Section 1.1 of
the Agreement is hereby amended by (i) inserting immediately after the words
"held for sale in the ordinary course of Borrower's business" which appears in
the first sentence of such definition the words "and that does not constitute
retail inventory"; and (b) deleting all of the text which follows the words "set
forth on Schedule E-1" in paragraph (b) of such definition.

 
 
 

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(g)           The definition of "Excess Availability" contained in Section 1.1
of the Agreement is hereby amended by deleting such definition in its entirety.

(h)           The definition of "Fee Letter" contained in Section 1.1 of the
Agreement is hereby amended by deleting such definition in its entirety and
restating it as follows:

"Fee Letter" means that certain amended and restated fee letter, dated as of
March 7, 2012, between Borrower and Lender, in form and substance satisfactory
to Lender.

(i)           The definition of "LIBOR Rate Margin" contained in Section 1.1 of
the Agreement is hereby amended by deleting the amount "2.25" which appears in
such definition and substituting in place thereof the amount "2.00".

(j)           The definition of "Permitted Holders" contained in Section 1.1 of
the Agreement is hereby amended by (i) deleting the names "Marshall Tulin" and
"Raymond Vise" from such definition and (ii) inserting immediately after the
name "James Tulin," the name "Jerold K. Kassner,".

(k)           The definition of "Permitted Investments" contained in Section 1.1
of the Agreement is hereby amended by deleting such definition in its entirety
and restating it as follows:

"Permitted Investments" means (a) Investments in cash and Cash Equivalents; (b)
Investments in negotiable instruments for collection or deposit; (c) advances or
prepayments made in connection with purchases of goods or services in the
ordinary course of business consistent with past practices; (d) Investments
received in settlement of amounts due to Borrower or any of its Subsidiaries
effected in the ordinary course of business or owing to Borrower or any of its
Subsidiaries as a result of Insolvency Proceedings involving an Account Debtor
or upon the foreclosure or enforcement of any Lien in favor of Borrower or its
Subsidiaries; (e) Investments existing on the Closing Date and set forth on
Schedule PI-1 hereto; (f) Investments consisting of the granting of trade credit
in the ordinary course of business consistent with past practices; (g)
Investments consisting of advances to employees in the nature of draws against
commissions made in the ordinary course of business consistent with past
practices, provided, the aggregate amount of all such Investments do not exceed
$40,000 per month per employee at any time; (h) Investments consisting of
expense advances to employees in the ordinary course of business consistent with
past practices, provided no single expense advance exceeds $1,000; (i)
Investments consisting of obligations of Account Debtors to Borrower arising
from amounts owing on past due Accounts and which amounts are evidenced by a
written promissory note from such Account Debtor to Borrower, provided all
actions necessary to perfect Lender's security interest in such note have been
taken (including such original note being endorsed to Lender and delivered to
Lender); and (j) so long as no Default or Event of Default has occurred and is
continuing, Investments by Borrower (i) in The New Swank Inc. Retirement Plan
consisting of advances and other Distributions made by Borrower to The New

 
 

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Swank Inc. Retirement Plan, the proceeds of which are used by The New Swank Inc.
Retirement Plan to repurchase from employees and former employees of Borrower
shares of the Stock of Borrower owned by such employee and (ii) consisting of
advances or other Distributions to employees and former employees of Borrower to
repurchase from such employees shares of the Stock of Borrower owned by such
employee, provided, (x) the aggregate amount of such Investment shall not exceed
the amount set forth in Section 7.10 hereof; and (y) the Borrower's Availability
both before and after making such Investment is not less than $3,000,000.

(l)           The definition of "Permitted Purchase Money Indebtedness"
contained in Section 1.1 of the Agreement is hereby amended by deleting the
amount "$250,000" which appears in such definition and substituting in place
thereof the amount "$500,000".

(m)           The definition of "Required Availability" contained in Section 1.1
of the Agreement is hereby amended by deleting such definition in its entirety.

(n)           Section 1.1 of the Agreement is further amended by inserting the
following definitions in the appropriate alphabetical order:

"Appraisal Test Period" means, initially the period commencing on the Closing
Date and ending eighteen months after the Closing Date (such eighteen month
period being a "Test Period"), and thereafter each eighteen month period
commencing on the date when the immediately preceding Test Period has ended and
ending eighteen months thereafter.

"Average Cash Dominion Availability" means, as of any date of determination,
Borrower's average Availability based on the most recent trailing ten day period
ended on such date of determination.

"Cash Dominion Event" means any of the following:  (a) the occurrence of
Borrower's Average Cash Dominion Availability as of any date of determination
being less than $8,000,000, (b) the occurrence of the Borrower's Availability as
at any date being less than $6,000,000 or (c) the occurrence of any Event of
Default.

"Cash Dominion Unwind Event" has the meaning set forth in Section 2.6(e).

§2.           Amendment to Section 2 of the Agreement.  Section 2 of the
Agreement is hereby amended as follows:

(a)           Section 2.1(b) of the Agreement is hereby amended by deleting the
words "provided, however so long as no Default or Event of Default has occurred
and is continuing hereunder, the Borrower shall only be obligated to pay for two
such reappraisals in each calendar year" which appear at the end of Section
2.1(b) and substituting in place thereof the words "provided, however so long as
no Default or Event of Default has occurred and is continuing hereunder, (x) to
the extent Borrower's Availability is greater than $8,000,000 at all times
during each applicable Appraisal Test Period, Borrower shall only be obligated
to pay for

 
 

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one such reappraisal during such Appraisal Test Period and (y) otherwise,
Borrower shall only be obligated to pay for two such reappraisals during such
Appraisal Test Period."

(b)           Section 2.1(c) of the Agreement is hereby amended by deleting the
last sentence of Section 2.1(c) in its entirety.

(c)           Section 2.4 of the Agreement is hereby amended by deleting the
parenthetical "(including, without limitation, if any time the Unused
Availability Amount is less than $3,000,000)" which appears in the first
sentence of Section 2.4.

(d)           Section 2.6(a) of the Agreement is hereby amended by (i) inserting
at the beginning of such paragraph the words "From and after the occurrence of
the Cash Dominion Event,"; and (ii) deleting the words "set forth on Schedule
2.6(a)" which appears in paragraph (a)(i) of Section 2.6 and substituting in
place thereof the words "reasonably acceptable to Lender".

(e)           Section 2.6(c) of the Agreement is hereby amended by deleting the
words "amend Schedule 2.6(a) to" which appear in the first sentence of Section
2.6(c).

(f)           Section 2.6 of the Agreement is further amended by inserting
immediately after the end of the text of Section 2.6(d) the following new
paragraphs:

(e)           To the extent a Cash Dominion Event occurs causing Borrower to
comply with the provisions of this Section 2.6 and, subsequent thereto,
Borrower's Average Cash Dominion Availability as at each date of determination
is greater than $8,000,000 and Borrower's Availability as at such date of
determination is greater than $6,000,000 (such occurrence being hereinafter
referred to as a "Cash Dominion Unwind Event"), then, from and after the
occurrence of such Cash Dominion Unwind Event until another Cash Dominion Event
occurs, Borrower shall no longer be required to comply with the cash management
requirements contained in this Section 2.6(a) and (b), provided, there shall not
be more than four rescissions of the cash management requirements contained in
this Section 2.6 based on a Cash Dominion Unwind Event during the life of this
Agreement.
 
(f)           At all times from and after the Closing Date, whether or not a
Cash Dominion Event has occurred, all of Borrower's Securities Accounts and
Deposit Accounts shall be subject to the first priority perfected security
interest of Lender, including subject to a Control Agreement.
 
(g)           Section 2.10(c) of the Agreement is hereby amended by deleting the
words "the Borrower shall only be obligated to pay for four audits and four
appraisals (but only two full appraisals consisting of site visits and two
desktop appraisals) in any calendar year" which appear in Section 2.10(c) and
substituting in place thereof the words "(x) to the extent Borrower's
Availability is greater than $8,000,000 at all times during a calendar year,
Borrower shall only be obligated to pay for one audit in such calendar year and
(y) otherwise, Borrower shall only be obligated to pay for two audits in such
calendar year".

 
 
 
 

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(h)           Section 2.11(d) of the Agreement is hereby amended by deleting the
words "agreed by Borrower that, as of the Closing Date, the issuance charge
imposed by the prospective Underlying Issuer is .825% per annum times the face
amount of such Underlying Letter of Credit" and substituting in place thereof
the words "agreed by Borrower that any such issuance charge imposed by the
prospective Underlying Issuer is being based on its customary and prevailing
rates at the time of such issuance".

§3.           Amendment to Section 3 of the Agreement.  Section 3 of the
Agreement is hereby amended as follows:

(a)           Section 3.4 of the Agreement is hereby amended by deleting the
date "June 29, 2012" which appears in Section 3.4 and substituting in place
thereof the date "June 30, 2013".

(b)           Section 3.6 of the Agreement is hereby amended by deleting Section
3.6 in its entirety and restating it as follows:

3.6           Early Termination by Borrower.  Borrower has the option, at any
time upon 10 days prior written notice to Lender, to terminate this Agreement by
paying to Lender, in cash, the Obligations (including (a) either (i) providing
cash collateral to be held by Lender in an amount equal to 105% of the Letter of
Credit Usage, or (ii) causing the original Letters of Credit to be returned to
Lender, and (b) providing cash collateral (in an amount determined by Lender as
sufficient to satisfy the reasonably estimated credit exposure) to be held by
Lender for the benefit of the Bank Product Providers with respect to the Bank
Product Obligations) (in each cash pursuant to a cash collateral agreement
satisfactory to the Lender (with such cash collateral agreement providing for
the return of such cash collateral upon all Obligations being indefeasibly
repaid in full in cash)), in full on the date this Agreement is scheduled to
terminate as provided for in such notice.  Upon the termination of this
Agreement pursuant to a notice of termination given pursuant to the provisions
of this Section, then Lender’s obligations to extend credit hereunder shall
terminate and Borrower shall be obligated to repay the Obligations (including
(a) either (i) providing cash collateral to be held by Lender in an amount equal
to 105% of the Letter of Credit Usage, or (ii) causing the original Letters of
Credit to be returned to Lender, and (b) providing cash collateral (in an amount
determined by Lender as sufficient to satisfy the reasonably estimated credit
exposure) to be held by Lender for the benefit of the Bank Product Providers
with respect to the Bank Product Obligations), in full, on such date of
termination.
 
§4.           Amendment to Section 6 of the Agreement.  Section 6.2 of the
Agreement is hereby amended by deleting Section 6.2 in its entirety and
restating it as follows:

6.2           Collateral Reporting.  Provide Lender with the following documents
at the following times in form satisfactory to Lender:
 
 

   Daily*
(a) an accounts receivable activity report and supporting schedules, including a
sales journal, collection journal, and credit register since the last such
schedule, a report regarding credit

 
 
 
 

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memoranda that have been issued since the last such report,
 
(b) notice of all claims, offsets, or disputes asserted by Account Debtors with
respect to Borrower’s and its Subsidiaries’ Accounts.
 
 
*To the extent the average Availability as at any date of determination based on
the most recent trailing ten day period ending on such date of determination
exceeds $8,000,000, then the items set forth herein shall only be required to be
delivered weekly.
 
Weekly*
(c) Inventory system/perpetual reports specifying the standard cost and the
Borrower's selling price of its Inventory, by category, with additional detail
showing additions to and deletions therefrom, with such reports being delivered
by Borrower to Lender electronically in a format acceptable to Lender.
 
(d) detailed information as to any intercompany activity among the Borrower and
its Subsidiaries of a financial nature or relating to assets.
 
*To the extent the average Availability exceeds $8,000,000, then the items set
forth in (c) herein shall only be required to be delivered bi-weekly.
 
 

 
 
 
 

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Monthly (not later than the
15th day of each month)
(e) a detailed calculation of the Borrowing Base,
 
(f) a detailed aging, by total, of the Accounts of Borrower, together with a
reconciliation to the detailed calculation of the Borrowing Base  previously
provided to Lender,
 
(g) a summary aging, by vendor, of Borrower’s and its Subsidiaries’ accounts
payable and any book overdraft together with a summary of any held checks and an
aging by vendor,
 
(h) a detailed summary of the Borrower's Inventory, together with a
reconciliation to the detailed calculation of the Borrowing Base previously
provided to Lender, and a summary of Inventory by class, with such reports being
delivered by Borrower to Lender electronically in a format acceptable to Lender;
 
(i) a detailed report regarding Borrower and its Subsidiaries’ cash and Cash
Equivalents including an indication of which amounts constitute Qualified Cash;
 
(j) a detailed calculation of those Accounts which do not constitute Eligible
Accounts for purposes of the Borrowing Base;
 
(k) a detailed calculation of Inventory that does not constitute Eligible
Inventory for purposes of the Borrowing Base; and
 
(l) a monthly Accounts rollforward in a format acceptable to Lender in Lender's
sole discretion (with the beginning and ending Account balances used in such
report being tied to Borrower's general ledger).
   
Quarterly
(m) Intentionally Omitted.
   
Upon request by Lender
   (n) copies of invoices and purchase orders in connection with Inventory and
Equipment acquired by Borrower or its Subsidiaries;
 
(o) a detailed list of Borrower's and its Subsidiaries' customers, with address
and other contact information;
 
(p) invoices, their corresponding shipping and delivery documents, and credit
memos, their corresponding supporting documentation, above an amount determined
in the sole discretion of Lender, from time to time;
 
(q) proof of payment by Borrower and its Subsidiaries of all applicable taxes
and other charges (including, without limitation, payment of Real Estate taxes,
ad valorem and foreign taxes), together with a report regarding Borrower's and
its Subsidiaries'

 
 
 
 

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     accrued, but unpaid, ad valorem taxes; and
 
(r) such other reports as to the Collateral or the financial condition of
Borrower and its Subsidiaries, as Lender may request.
   

 
In addition, Borrower agrees to cooperate fully with Lender to facilitate and
implement a system of electronic collateral reporting in order to provide
electronic reporting of each of the items set forth above.

§5.           Amendment to Section 7 of the Agreement.  Section 7 of the
Agreement is hereby amended as follows:

(a)           Section 7.10 of the Agreement is hereby amended by deleting
Section 7.10 in its entirety and restating it as follows:

           7.10.           Restricted Payments.  Make any Restricted Payment,
provided, however, so long as no Default or Event of Default has occurred and is
continuing or would exist as a result thereof, Borrower shall be permitted to
make a Restricted Payment either (a) to The New Swank Inc. Retirement Plan
consisting of advances or other Distributions made by Borrower to The New Swank
Inc. Retirement Plan, the proceeds of which are used by The New Swank Inc.
Retirement Plan to repurchase from employees and former employees of Borrower
shares of the Stock of Borrower owned by such employees or former employees, as
applicable or (b) to employees and former employees of the Borrower to
repurchase from such employees or former employees, as applicable, shares of the
Stock of Borrower owned by such employee, provided, in each case (x) the
aggregate amount of all such Restricted Payments made pursuant to this Section
7.10(a) in any fiscal year shall not exceed $1,000,000; and (y) the Borrower's
Unused Availability Amount both before and after making such Restricted Payment
is not less than $3,000,000.
 
(b)           Section 7.18(a) of the Agreement is hereby amended by deleting
Section 7.18(a) in its entirety and restating it as follows:

(a)           Minimum EBITDA:  Fail to maintain or achieve EBITDA, measured on a
month-end basis, of at least the required amount set forth in the following
table for the applicable period set forth opposite thereto:
 
Applicable Amount
Applicable Period
   
An amount determined equal to the EBITDA set forth for the relevant period as
set forth in the Projections delivered
For the 12 month period
ending July 31, 2011 and each calendar month thereafter.

 
 
 
 

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 pursuant to Section 6.3(c) minus $1,500,000.  

 
(c)           Section 7.18(b) of the Agreement is hereby amended by deleting
Section 7.18(b) in its entirety and restating it as follow:

(b)           Capital Expenditures.  Make Capital Expenditures in any fiscal
year in excess of $1,000,000, provided, the Borrower shall also be permitted to
make an additional amount of Capital Expenditures in an amount not in excess of
$2,000,000 in the aggregate over the life of this Agreement so long as such
Capital Expenditures relate solely to the upgrade of Borrower's enterprise
resource planning system).
 
(d)           Section 7.18(c) of the Agreement is hereby amended by deleting the
amount "$2,000,000" which appears in Section 7.18(c) and substituting in place
thereof the amount "$1,000,000".

§6.           Amendment to Section 12 of the Agreement.  Section 12 of the
Agreement is hereby amended by deleting the addresses contained in Section 12
and substituting in place thereof the following:

If to Borrower:
SWANK, INC.
 
656 Joseph Warren Boulevard
 
Taunton, Massachusetts  02780
 
Attn:  Jerold R. Kassner, Chief Financial Officer
 
Fax No.  508-977-4403
   
with copies to:
SWANK, INC.
 
90 Park Avenue
 
New York, New York  10016
 
Attn:  John Tulin, President
 
Fax No.  212-867-0203
   
with copies to:
TROUTMAN SANDERS LLP
 
405 Lexington Avenue
 
New York, New York  10174
 
Attn:  William D. Freedman, Esq.
 
Fax No.  212-704-5935
   
If to Lender:
WELLS FARGO CAPITAL FINANCE, INC.
 
One Boston Place, 18th Floor
 
Boston, Massachusetts  02108
 
Attn:  Business Finance Manager
 
Fax No.: 617-523-1697
   
with copies to:
BINGHAM MCCUTCHEN LLP
 
One Federal Street
 
Boston, Massachusetts  02110

 
 
 
 

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  Attn:  Marion Giliberti Barish, Esq.   Fax No.:  617-951-8736        

 

 
§7.           Conditions to Effectiveness.  This Eighth Amendment shall not
become effective until the Lender receives the following:

(a)           a counterpart of this Eighth Amendment and the restated Fee
Letter, each executed by the Borrower and the Lender; and

(b)           payment to the Lender of the fees contemplated by the Fee Letter.

§8.           Representations and Warranties.  The Borrower hereby repeats, on
and as of the date hereof, each of the representations and warranties made by it
in Section 5 of the Agreement (except to the extent of changes resulting from
transactions contemplated or permitted by the Agreement and the other Loan
Documents and changes occurring in the ordinary course of business that singly
or in the aggregate are not materially adverse, and to the extent that such
representations and warranties relate expressly to an earlier date), provided,
that all references therein to the Agreement shall refer to such Agreement as
amended hereby.  In addition, the Borrower hereby represents and warrants that
the execution and delivery by the Borrower of this Eighth Amendment and the
performance by the Borrower of all of its agreements and obligations under the
Agreement  as amended hereby are within the authority of the Borrower and have
been duly authorized by all necessary action on the part of the Borrower.

§9.           Ratification, Etc.  Except as expressly amended hereby, the
Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects and
shall continue in full force and effect.  The Agreement and this Eighth
Amendment shall be read and construed as a single agreement.  All references in
the Agreement or any related agreement or instrument to the Agreement shall
hereafter refer to the Agreement as amended hereby.

§10.           No Waiver.  Nothing contained herein shall constitute a waiver
of, impair or otherwise affect any Obligations, any other obligation of the
Borrower or any rights of the Lender consequent thereon.

§11.           Counterparts.  This Eighth Amendment may be executed in one or
more counterparts, each of which shall be deemed an original but which together
shall constitute one and the same instrument.

§12.           Governing Law.  THIS EIGHTH AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).

 
 

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IN WITNESS WHEREOF, the parties hereto have executed this Eighth Amendment as a
document under seal as of the date first above written.

 
 

   
SWANK, INC.
             

 

              By:    /s/Jerold R. Kassner          Name: Jerold R. Kassner      
 Title: Executive Vice President

 
 

   
WELLS FARGO CAPITAL FINANCE, INC.,
       
a California corporation, as Lender
   

 

              By:   /s/Andrew J. Currie         Name: Andrew J. Currie       
Title: VP