Exhibit 10.1
EXECUTION COPY
THIRD AMENDMENT TO CREDIT AGREEMENT
     THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this “Amendment”), dated
February 23, 2009, is entered into by and among TWEEN BRANDS, INC., a Delaware
corporation (the “Borrower”), each of the GUARANTORS (as hereinafter defined),
the REVOLVING CREDIT LENDERS (as hereinafter defined), the TERM LOAN LENDERS (as
hereinafter defined), and BANK OF AMERICA, N.A., a national banking association,
in its capacity as administrative agent for the Secured Parties (as defined
below) under this Agreement (hereinafter referred to in such capacity as the
“Agent”).
BACKGROUND
     WHEREAS, reference is made to that certain Credit Agreement dated as of
September 12, 2007 (as same has been amended prior to the date hereof, the
“Credit Agreement”) by, among others, the Borrower, each of the Guarantors from
time to time party thereto (collectively, the “Guarantors” and, together with
the Borrower, the “Loan Parties”), the Revolving Credit Lenders and the Term
Loan Lenders from time to time party thereto (collectively, the “Lenders”) the
Agent, for its own benefit and the benefit of the other Secured Parties (as
defined therein), National City Bank, as Syndication Agent, Fifth Third Bank, as
Documentation Agent, Citicorp North America, Inc., as Managing Agent, Banc of
America Securities LLC, as sole book runner, and Banc of America Securities LLC
and National City Bank, as co-lead arrangers. Capitalized terms used herein and
not defined herein shall have the meanings assigned to such terms in the Credit
Agreement; and
     WHEREAS, the Loan Parties have requested that the Lenders further amend
certain provisions of the Credit Agreement, and the Lenders have agreed to do
so, but only on the terms and conditions set forth herein.
     NOW, THEREFORE, intending to be legally bound hereby, in consideration of
the foregoing and for other good and valuable consideration received, the
parties hereto covenant and agree as follows:
     1. Definitions. Terms which are defined in the Credit Agreement and not
otherwise defined herein shall have the meanings given to them in the Credit
Agreement.
     2. Amendments to Article I of Credit Agreement. The provisions of Article I
of the Credit Agreement are hereby amended as follows:
     (a) By deleting the definition of “Applicable Margin” in its entirety and
substituting the following in its stead::
Applicable Margin shall mean, as applicable:
     (A) the percentage spread, to be added to Base Rate under the Base Rate
Option equal to 3.75% per annum, or
     (B) the percentage spread, to be added to LIBO-Rate under the LIBOR Option
equal to 3.50% per annum
     (b) By deleting the definition of “Augmenting Revolving Credit Lender” in
its entirety.

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     (c) By deleting the definition of “Consolidated EBITDAR” in its entirety
and substituting the following in its stead:
Consolidated EBITDAR shall mean, for any period of determination, consolidated
net income for such period plus, without duplication and to the extent deducted
in determining such consolidated net income, the sum of Consolidated Interest
Expense, income tax expense, depreciation expense, amortization expense,
Consolidated Minimum Rent and other non-cash charges, the transaction costs,
fees and expenses incurred in connection with this Agreement and the overnight
share repurchase transaction to be consummated on or promptly after the Closing
Date (but for the purposes of calculating Consolidated EBITDAR such transaction
costs, fees and expenses shall not exceed $500,000), one-time restructuring
charges, and the transaction costs, fees and expenses incurred in connection
with the Third Amendment and minus consolidated interest income and non-cash
credits, in each case of the Borrower and its Subsidiaries for such period
determined and consolidated in accordance with GAAP.
     (d) By adding the words “and Section 7.02(o)” after the words
“Section 7.02(n)” in the definition of “Consolidated Tangible Net Worth Limit”.
     (e) By deleting the definition of “Expiration Date” in its entirety and
substituting the following in its stead:
Expiration Date shall mean the Initial Expiration Date.
     (f) By deleting the definition of “Extended Expiration Date” in its
entirety.
     (g) By deleting the definition of “Increasing Revolving Credit Lender” in
its entirety.
     (h) By deleting the definition of “Leverage Ratio” in its entirety and
substituting the following in its stead:
Leverage Ratio shall mean the ratio of (a) Consolidated Senior Debt as of the
end of the most recently ended fiscal quarter to (b) Consolidated EBITDAR for
the period of four (4) consecutive fiscal quarters then ended.
     (i) By deleting the definition of “Permitted Acquisition” in its entirety.
     (j) By deleting the definition of “Release Event” in its entirety.
     (k) By deleting the last sentence of the definition of “Revolving Credit
Commitment” in its entirety and substituting the following in its stead:
As of the Third Amendment Effective Date, the aggregate of all Revolving Credit
Commitments is $50,000,000.
     (l) By deleting the definition of “Security Documents” in its entirety and
substituting the following in its stead:
Security Documents shall mean the Security Agreement, the Ancillary Security
Documents, all mortgages, deeds of trust and all other documents, instruments,
and agreements sufficient to provide the Agent for the benefit of the Lenders
with a first

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priority perfected Lien, subject only to Permitted Liens having priority over
the Lien of the Agent under applicable law, on all of the assets of the Loan
Parties, including, without limitation, (a) all inventory, accounts, documents
of title, deposit accounts, investment accounts, instruments, general
intangibles, furniture, fixtures, equipment, chattel paper and commercial tort
claims and the proceeds thereof, and (b) all real estate owned by the Loan
Parties and the proceeds thereof, but excluding (i) any trademarks and trade
names other than those trademarks and trade names set forth on Schedule 1
hereto, (ii) all leasehold interests, (iii) any assets of a foreign Subsidiary
of the Loan Parties or assets in which perfection of Lien is governed by the
laws of a jurisdiction other than the United States of America, its states and
territories, (iv) the Designated Escrow Accounts, and (e) any voting equity
interests in any direct or indirect foreign Subsidiary of the Borrower in excess
of 65% of such equity interests.
     (m) By deleting the definition of “Specified Default” in its entirety and
substituting the following in its stead:
Specified Default shall mean the occurrence of any Event of Default under any of
(i) Section 8.01(a), (ii) Section 8.01(b) (but only with respect any financial
statements or financial information delivered under this Agreement or with
respect to representations concerning Solvency), (iii) Section 8.01(c) (but only
with respect to Section 7.02(m) or Section 7.02(n) and not any other provisions
covered by Section 8.01(c)), (iv) Section 8.01(d) (but only with respect to
Section 7.01(a), Section 7.01(b), Section 7.01(c) and Section 7.01(d) and not
any other provisions covered by Section 8.01(d)), (v) Section 8.01(g),
(vi) Section 8.01(j), (vii) Section 8.01(l), (viii) Section 8.01(m),
(ix) Section 8.01(n), or (x) Section 8.01(o).
     (n) By deleting the definition of “Triggering Event” in its entirety.
     (o) By adding the following definitions in appropriate alphabetical order:
     (i) Borrower’s Operating Account shall mean a deposit account maintained by
the Borrower with Agent or another financial institution reasonably acceptable
to Agent for the purpose of paying business expenses in the ordinary course and
any other working capital needs in the ordinary course of business.
     (ii) Borrowing Base shall mean, at any time of calculation, an amount equal
to
     (A) eighty percent (80%) multiplied by the net book value of the Borrower’s
accounts receivable, plus
     (B) Sixty percent (60%) multiplied by the net book value of the Borrower’s
inventory.
     (iii) Borrowing Base Certificate shall mean a certificate reflecting the
calculation of the Borrowing Base in reasonable detail and certified by the
Chief Executive Officer, President or Chief Financial Officer of the Borrower as
being true and accurate in all material respects.
     (iv) Borrowing Base Testing Period shall mean any time (i) when an Event of
Default exists and is continuing, or (ii) when the Revolving Facility Usage
exceeds, or after giving effect to the making of a Revolving Credit Loan or
Swing Loan or issuance of a Letter of Credit would exceed, the Revolving Loan
Threshold.

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     (v) Capital Expenditures shall mean with respect to the Borrower and its
Subsidiaries on a consolidated basis for any period, (a) all expenditures made
(whether made in the form of cash or other property) or costs incurred for the
acquisition or improvement of fixed or capital assets, in each case that are set
forth as capital expenditures in a consolidated statement of cash flows of such
Person for such period, in each case prepared in accordance with GAAP, and (b)
Capital Lease Obligations incurred by the Borrower or any of its Subsidiaries
during such period. For purposes of this definition, the purchase price of
equipment that is purchased simultaneously with the trade-in of existing
equipment or with insurance proceeds shall be included in Capital Expenditures
only to the extent of the gross amount of such purchase price less the credit
granted by the seller of such equipment for the equipment being traded in at
such time or the amount of such proceeds, as the case may be.
     (vi) Capital Lease Obligations shall mean, with respect to the Borrower and
its Subsidiaries on a consolidated basis for any period, the obligations of the
Borrower and its Subsidiaries to pay rent or other amounts under any lease of
(or other arrangement conveying the right to use) real or personal property, or
a combination thereof, which obligations are required to be classified and
accounted for as liabilities on a balance sheet of the Borrower and its
Subsidiaries under GAAP and the amount of which obligations shall be the
capitalized amount thereof determined in accordance with GAAP.
     (vii) Cash Dominion Event shall mean either (i) the occurrence and
continuance of any Specified Default, or (ii) the acceleration of the time for
payment of the Obligations as a result of the occurrence of an Event of Default
and the commencement of the exercise of remedies against any of the property
upon which the Agent has been granted a Lien under the Security Documents, or
(iii) the outstanding Revolving Credit Loans exceed the Revolving Loan Threshold
at any time. For purposes of this Agreement, the occurrence of a Cash Dominion
Event shall be deemed continuing (i) until such Specified Default has been
waived or any cure has not been rejected, (ii) such acceleration and exercise of
remedies has been rescinded, and/or (iii) if the Cash Dominion Event arises as a
result of the Revolving Credit Loans exceeding the Revolving Loan Threshold,
until the outstanding Revolving Credit Loans have been less than the Revolving
Loan Threshold for thirty (30) consecutive days, in which case a Cash Dominion
Event shall no longer be deemed to be continuing for purposes of this Agreement;
provided that a Cash Dominion Event shall be deemed continuing (even if a
Specified Default is no longer continuing, acceleration and exercise of remedies
has been rescinded, and/or the outstanding Revolving Credit Loans are less than
the Revolving Loan Threshold for thirty (30) consecutive days) at all times
after a Cash Dominion Event has occurred and been discontinued on four
(4) occasions during any consecutive twelve month period. For purposes of this
definition, the term “Revolving Credit Loans” shall mean and include Swing
Loans.
     (viii) Consolidated Senior Debt shall mean, at any time of calculation, the
sum of the principal amount then outstanding of all Loans under this Agreement
plus six (6) times the Forward Minimum Rent Commitments of the Borrower and its
Subsidiaries. In calculating Consolidated Senior Debt, adjustment shall be made
on a quarterly basis to give effect to the actual amount of Forward Minimum Rent
Commitments (and solely for purposes of calculating Consolidated Senior Debt and
notwithstanding anything to the

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contrary in the definition of Forward Minimum Rent Commitments, Forward Minimum
Rent Commitments shall be calculated quarterly for the four fiscal quarter
period following the Borrower’s most recently ended fiscal quarter, as reported
or to be reported in the Borrower’s quarterly reports filed on Form 10-Q or
annual report filed on Form 10-K, as applicable, with the Securities and
Exchange Commission).
     (ix) Designated Asset Transaction means with respect to of any real
property, trademarks or trade names owned by any Loan Party (whether or not the
Agent has been granted a Lien in such property to secure the Obligations), any
of the following: (a) the sale, transfer, license, lease or other disposition
(including any Sale Leaseback transaction), (whether in one transaction or in a
series of transactions) of any of such assets; (b) any insurance payment,
condemnation award, or other recovery event with respect to any such assets, or
(c) the incurrence of Indebtedness (other than the Obligations) secured by any
such assets. Notwithstanding the foregoing, (i) the exclusive license by a Loan
Party of trademarks or trade names owned by such Loan Party in the ordinary
course of business shall not constitute a Designated Asset Transaction to the
extent that the arrangement relates solely to a territory or territories outside
the United States, and/or to a specified product category sold inside or outside
the United States, and (ii) the non-exclusive license by a Loan Party of
trademarks or trade names owned by such Loan Party in the ordinary course of
business shall not constitute a Designated Asset Transaction; as long as no more
than thirty percent (30%) of consolidated revenue of the Borrower and its
Subsidiaries in any Fiscal Year shall be attributable to sales pursuant to all
such exclusive and non-exclusive licenses in the aggregate.
     (x) Designated Escrow Accounts means collectively, the Tax Escrow Account
and the Equity Proceeds Escrow Account.
     (xi) Equity Proceeds Escrow Account means a deposit account of the Borrower
maintained with the Agent into which solely net proceeds from the issuance of
equity interests by the Borrower shall be deposited.
     (xii) Excess Cash means all cash and cash equivalents of the Borrower
(excluding amounts in the Designated Escrow Accounts) in excess of the Minimum
Cash Amount.
     (xiii) Fiscal Year shall mean the fiscal year of the Borrower and the other
Loan Parties ending on the Saturday nearest to the last business day of January
of each calendar year. For purposes of this Agreement, any particular Fiscal
Year shall be designated by reference to the calendar year in which such Fiscal
Year begins.
     (xiv) Minimum Cash Amount means $20,000,000 (excluding amounts in the
Designated Escrow Accounts).
     (xv) Net Proceeds shall mean (a) with respect to any sale, transfer or
other disposition (including any Sale-Leaseback Transaction, whether in one
transaction or in a series of transactions, of any property by the Borrower or
any of its Subsidiaries, the excess, if any, of (i) the sum of cash and cash
equivalents received in connection with such transaction (including any cash or
cash equivalents received by way of deferred payment pursuant to, or by
monetization of, a note receivable or otherwise, but only as and when so
received) over (ii) the sum of (A) the principal amount of any Indebtedness that
is secured by the applicable asset by a Lien permitted hereunder which is senior
to

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the Agent’s Lien on such asset and that is required to be repaid (or to
establish an escrow for the future repayment thereof) in connection with such
transaction, (B) the reasonable and customary out-of-pocket fees, costs and
expenses incurred by the Borrower or such Subsidiary in connection with such
transaction (including, without limitation, brokerage, legal, title and
recording or transfer tax expenses and commissions) paid by the Borrower or any
such Subsidiary to third parties (other than Affiliates)) and (C) income taxes
reasonably estimated to be actually payable within one year of the date of such
sale, transfer or other disposition as a result of any gain recognized in
connection with such sale, transfer or other disposition; and (b) with respect
to the incurrence or issuance of any Indebtedness by the Borrower or any of its
Subsidiaries, the excess of (i) the sum of the cash and cash equivalents
received in connection with such transaction over (ii) the underwriting
discounts and commissions, and other reasonable and customary out-of-pocket
fees, costs and expenses, incurred by the Borrower or such Subsidiary in
connection therewith.
     (xvi) Revolving Loan Threshold shall mean $10,000,000 (without giving
effect to the aggregate undrawn face amount of outstanding Letters of Credit up
to $5,000,000 (any such amounts in excess of $5,000,000 being included in the
calculation of the Revolving Loan Threshold)).
     (xvii) Tax Escrow Account means a deposit account of the Borrower
maintained with the Agent into which solely that portion of the Net Proceeds
from any sale, transfer or other disposition of any property of the Borrower or
any of its Subsidiaries constituting income taxes reasonably estimated to be
actually payable within one year of the date of such sale, transfer or other
disposition as a result of any gain recognized in connection with such sale,
transfer or other disposition; provided that any such amounts not utilized to
pay such taxes shall be paid to the Agent and applied to the Term Loan in
accordance with Section 4.05(d) hereof..
     (xviii) Third Amendment shall mean that certain Third Amendment to Credit
Agreement dated as of February 23, 2009, by and among the Borrower, the
Guarantors party thereto, the Revolving Credit Lenders party thereto, the Term
Loan Lenders party thereto and the Agent.
     (xix) Third Amendment Effective Date shall mean February 24, 2009.
     3. Amendments to Article II of Credit Agreement. The provisions of
Article II of the Credit Agreement are hereby amended as follows:
     (a) The provisions of Section 2.01(a) of the Credit Agreement are hereby
amended by deleting clause (ii) thereof and substituting the following in its
stead:
     (ii) the Revolving Facility Usage at any one time outstanding shall not
exceed the Revolving Credit Commitments of all of the Revolving Credit Lenders,
provided that if a Borrowing Base Testing Period is then applicable, the
Revolving Facility Usage at any one time outstanding shall not exceed the lesser
of (A) the Revolving Credit Commitments of all of the Revolving Credit Lenders
or (B) the Borrowing Base.
     (b) The provisions of Section 2.05 of the Credit Agreement are hereby
amended by adding the following new clause (c) at the end thereof:

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(c) Notwithstanding anything to the contrary herein contained, the Borrower may
not request a Revolving Credit Loan or Swing Loan in excess of the Revolving
Loan Threshold unless and until it has utilized its Excess Cash, if any, and is
holding cash in an amount not to exceed the Minimum Cash Amount.
     (c) The provisions of Section 2.11 of the Credit Agreement are hereby
deleted in their entirety and the following substituted in their stead:
     2.11 Intentionally Omitted.
     (d) The provisions of Section 2.12 of the Credit Agreement are hereby
deleted in their entirety and the following substituted in their stead:
     2.12 Intentionally Omitted.
     4. Amendments to Article III of Credit Agreement. The provisions of
Section 3.01(c) of the Credit Agreement are hereby deleted in their entirety and
the following substituted in their stead:
(c) Change in Fees or Interest Rates. Any increase or decrease in Applicable
Facility Fee due to an increase or decrease in the Leverage Ratio Level after
the Closing Date shall be effective on the first calendar day following the date
on which the Compliance Certificate evidencing the computation of such Leverage
Ratio Level is due to be delivered under Section 7.03(d). If the Applicable
Facility Fee Rate is thereby increased or reduced with respect to any period for
which the Borrower has already paid Facility Fees, the Agent shall recalculate
the Facility Fees due from or to the Borrower and shall, within fifteen
(15) Business Days after the Borrower notifies the Agent of such increase or
decrease, give the Borrower and the Lenders notice of such recalculation.
(i) Any additional Facility Fees due from the Borrower shall be paid to the
Agent for the account of the Lenders on the next date on which a fee payment is
due; provided, however, that if there are no Loans outstanding or if the Loans
are due and payable, such additional Facility Fees shall be paid promptly after
receipt of written request for payment from the Agent.
(ii) Any Facility Fees refund due to the Borrower shall be credited against
payments otherwise due from the Borrower on the next fee payment due date or, if
the Loans have been repaid and the Lenders are no longer committed to lend under
this Agreement, the Lenders shall pay the Agent for the account of the Borrower
such Facility Fees refund not later than five (5) Business Days after written
notice from the Agent to the Lenders.
     5. Amendments to Article IV of Credit Agreement. The provisions of
Article IV of the Credit Agreement are hereby amended as follows:
     (a) The provisions of Section 4.05(a) of the Credit Agreement are hereby
deleted in their entirety and the following substituted in their stead:
Scheduled Payments on Term Loans. The aggregate unpaid principal balance of all
Term Loans made by such Term Lender to the Borrower pursuant to this Agreement
shall be made in accordance with the following payment schedule: (i) on the last
Business Day of each calendar month (other than the last calendar month of each
Fiscal Year), commencing February 28, 2009, principal payments in the amount of
$500,000 each

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calendar month, (ii) in addition to the payments described in clause (i),
annually, on the last Business Day of each Fiscal Year of the Borrower,
commencing with the Fiscal Year ending January, 2010, principal payments in an
amount equal to $8,750,000 each year, and (iii) no later than 12:00 p.m on the
Expiration Date, a final payment in an amount equal to the entire outstanding
principal balance of the Term Loans, together with accrued and unpaid interest
thereon and other amounts payable under this Agreement.
     (b) By adding the words “or Section 7.02(o)” after the words
“Section 7.02(n)” in Section 4.05(b) and Section 4.05(c) of the Credit
Agreement.
     (c) The provisions of Section 4.05(d) of the Credit Agreement (to be
re-lettered as (g) as provided below) are hereby amended by deleting the last
two sentences thereof.
     (d) The provisions of Section 4.05 of the Credit Agreement are hereby
amended by re-lettering clauses (d), (e) and (f) as clauses (g), (h) and (i) and
inserting the following new clauses (d), (e), and (f):
(d) Mandatory Prepayment Upon Designated Asset Transaction; Prepayment of Term
Loans; Mandatory Reduction of Credit Commitments. Within five (5) Business Days
of any Designated Asset Transaction by any one or more Loan Parties, the Term
Loans shall be prepaid (or if there are no Term Loans outstanding, the Revolving
Credit Loans shall be repaid without any reduction in the Revolving Credit
Commitments (unless the Agent is not reasonably satisfied that the Borrower will
be in pro forma compliance with the covenants set forth in Sections 7.02(m),
(n), and (o) for the following four fiscal quarters , in which case the
Revolving Credit Commitments shall be automatically and permanently be reduced)
in an amount equal to the Net Proceeds of such Designated Asset Transaction. On
the date of any reduction of the Revolving Credit Commitments pursuant to this
Section 4.05(d), the Borrower shall make a mandatory prepayment of so much of
the Revolving Credit Loans as shall be necessary in order that the Revolving
Facility Usage will not exceed the Revolving Credit Commitments after giving
effect to such reduction. Notwithstanding the foregoing, no prepayment of the
Term Loans and no reduction of the Revolving Credit Commitments shall be
required to the extent of that portion of the Net Proceeds from any casualty
loss, condemnation award or other recovery event which the Borrower certifies to
the Agent that it reasonably expects to use to purchase substitute or
replacement assets for use in the business of the Borrower or another Loan Party
within one hundred eighty (180) days of the date of such loss, award or recovery
event. All such substitute or replacement assets shall be subject to or, if
necessary in the reasonable judgment of Agent, made subject to the Security
Documents. In the event that such substitution or replacement purchase has not
occurred within such one hundred eighty (180) day period, the Borrower shall
make a mandatory prepayment of all Net Proceeds not so expended. All Net
Proceeds not certified as expected to be so expended on substitute or
replacement assets for use in the business of the Borrower or another Loan Party
within such one hundred eighty (180) day period shall be subject to the first
sentence of this Section 4.05(d). Any prepayment hereunder shall be subject to
the Borrower’s Obligation to indemnify the Lenders under
Section 4.06(b)[Indemnity]. All payments made under this Section 4.05(d) applied
to the Term Loans shall be applied to reduce each subsequent principal
installment on a pro rata basis and any subsequent principal installments shall
not be deferred on account thereof. The provisions of this Section 4.05(d) are
in addition to, but not duplicative of, any prepayments required under clauses
(b) and (c) hereof. In the event of a conflict between the provisions of this
Section 4.05(d) and either Section 4.05(b) or (c), the provisions of this
Section 4.05(d) shall control.

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(e) (i) Subject to the provisions of clauses (ii) through (v) hereof, after the
occurrence and during the continuation of a Cash Dominion Event, all cash
receipts of the Loan Parties constituting proceeds of the property upon which
the Agent has been granted a Lien pursuant to the Security Documents, shall be
transferred to the Agent by automated clearinghouse transfer or wire transfer
daily to the Concentration Account (as defined in the Security Agreement).
     (ii) Upon the occurrence of a Cash Dominion Event arising from the fact
that the outstanding Revolving Credit Loans (including Swing Loans) exceed the
Revolving Loan Threshold, that portion of such receipts and proceeds arising
from the collection of accounts receivable or the sale or other disposition of
inventory after the date of commencement of a Cash Dominion Event and any Excess
Cash shall be applied to repay the Revolving Credit Loans (including Swing
Loans) until the outstanding principal amount of all Revolving Credit Loans
(including Swing Loans) do not exceed the Revolving Loan Threshold without any
reduction in the Revolving Credit Commitments. As long as no Specified Default
then exists or the time for payment of the Obligations has not been accelerated,
after such funds are applied to so repay the Revolving Credit Loans (including
Swing Loans), any excess shall be transferred to the Borrower’s Operating
Account.
     (iii) Upon the occurrence of a Cash Dominion Event arising from the
existence of a Specified Default (and the time for payment of the Obligations
has not been accelerated), that portion of such receipts and proceeds arising
from the collection of accounts receivable or the sale or other disposition of
inventory after the date of commencement of a Cash Dominion Event and any Excess
Cash shall be applied to repay the Revolving Credit Loans (including Swing
Loans) until all Revolving Credit Loans (including Swing Loans) have been paid
in full. After such funds are applied to so repay the Revolving Credit Loans
(including Swing Loans), any excess shall be transferred to the Borrower’s
Operating Account.
     (iv) Upon the occurrence of a Cash Dominion Event arising from the
acceleration of the time for payment of the Obligations and the commencement of
exercise of remedies, that portion of such receipts and proceeds arising from
the collection of accounts receivable or the sale or other disposition of
inventory, whenever received (including that portion constituting Excess Cash
and the Minimum Cash Amount) shall be applied first to repay the Revolving
Credit Loans (including Swing Loans) until all Revolving Credit Loans (including
Swing Loans) have been paid in full, second to repay the Term Loans until all
Term Loans have been paid in full, and thereafter to repay any and all other
Obligations. After such funds are applied to so repay the Obligations, any
excess shall be transferred to the Borrower’s Operating Account.
     (iv) Upon the occurrence and during the continuance of any Cash Dominion
Event, any receipts and proceeds from any property upon which the Agent has been
granted a Lien pursuant to the Security Documents not constituting proceeds from
the collection of accounts receivable or the sale or other disposition of
inventory shall be applied to the Term Loan in the manner set forth in the
penultimate sentence of Section 4.05(d).

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     (f) If during any Borrowing Base Testing Period, the Revolving Facility
Usage exceeds the lower of (i) the then amount of the aggregate of the Revolving
Credit Commitments, and (ii) the then amount of the Borrowing Base, the Borrower
will immediately upon notice from the Agent (A) prepay the Swing Loans in an
amount necessary to eliminate such excess, (B) if, after giving effect to the
prepayment in full of all outstanding Swing Loans, such excess has not been
eliminated, prepay the Revolving Credit Loans in an amount necessary to
eliminate such excess, and (C) if, after giving effect to the prepayment in full
of all outstanding Swing Loans and Revolving Credit Loans such excess has not
been eliminated, deposit cash with the Agent in an amount equal to 102.5% of the
Letters of Credit Outstanding to the extent necessary to eliminate such excess.
Upon and to the extent that (1) the lesser of (x) the Revolving Credit
Commitments or (y) the Borrowing Base plus (2) the amount of such cash
collateral exceeds the Revolving Facility Usage, the Agent shall release and
return an amount of such cash collateral equal to such excess to the Borrower
upon its request.
     6. Amendments to Article VII of Credit Agreement. The provisions of
Article VII of the Credit Agreement are hereby amended as follows:
     (a) The provisions of Section 7.01 of the Credit Agreement are hereby
amended by adding the following new clause (l) thereto:
     (l) Appraisals and Environmental Site Assessments. (i) Upon the request of
the Agent, the Loan Parties shall permit the Agent to conduct appraisals of any
real property upon which the Agent has been granted a Lien pursuant to the
Security Documents by appraisers reasonably satisfactory to the Agent. The
Borrower shall pay the fees and expenses of the Agent or such appraisers with
respect to only one such appraisal, unless a Specified Default exists and is
continuing, in which event the Borrower shall pay the costs of all such
appraisals undertaken thereafter. The Borrower will, and will cause each of its
Subsidiaries to, cooperate in all respects with the Agent and such third parties
to enable such appraisals to be timely completed in a manner reasonably
satisfactory to the Agent.
     (ii) Upon the request of the Agent, the Loan Parties shall permit the Agent
to engage a geohydrologist, an independent engineer or other qualified
consultant or expert, reasonably acceptable to the Agent, at the expense of the
Borrower, to undertake Phase I environmental site assessments of any real estate
upon which the Agent has been granted a Lien pursuant to the Security Documents.
Environmental assessments may include detailed visual inspections of such real
estate, including, without limitation, any and all storage areas, storage tanks,
drains, dry wells and leaching areas, and the taking of soil samples, surface
water samples and ground water samples, as well as such other investigations or
analyses as are reasonably necessary for a determination of the compliance of
the real estate and the use and operation thereof with all applicable
Environmental Laws. The Borrowers will, and will cause each of their
Subsidiaries to, cooperate in all respects with the Agent and such third parties
to enable such assessment and evaluation to be timely completed in a manner
reasonably satisfactory to the Agent.
     (b) The provisions of Section 7.02(e)(i) of the Credit Agreement are hereby
deleted in their entirety and the following substituted in their stead:
(i) any Loan Party other than the Borrower may consolidate or merge with and
into (A) the Borrower, so long as the Borrower is the surviving entity, or
(B) another Loan Party which is wholly-owned by one or more of the Borrower or
any other Loan Party.

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     (c) The provisions of Section 7.02(e)(ii) of the Credit Agreement are
hereby deleted in their entirety and the following substituted in their stead:
     (ii) Intentionally Omitted.
     (d) The provisions of Section 7.02(f) of the Credit Agreement are hereby
amended by renumbering clause (vii) as clause (viii) and adding the following
new clause (vii):
     (vii) Subject to the provisions of Section 4.05(d), Designated Asset
Transactions; and
     (e) The provisions of Section 7.02(i)(ii) of the Credit Agreement are
hereby deleted in their entirety and the following substituted in their stead:
     (ii) Intentionally Omitted
     (f) The provisions of Section 7.02(m) are hereby deleted in their entirety
and the following substituted in their stead:
(m) Maximum Leverage Ratio. The Loan Parties shall not permit the Leverage Ratio
to exceed the following amounts for the following test dates:

      Test Date   Maximum Leverage Ratio
Fourth Fiscal Quarter End for Fiscal Year 2009
  7.65:1.00
 
   
First Fiscal Quarter End for Fiscal Year 2010
  7.50:1.00
 
   
Second and Third Fiscal Quarters End for Fiscal Year 2010
  7.25:1.00
 
   
Fourth Fiscal Quarter End for Fiscal Year 2010
  6.75:1.00
 
   
First Fiscal Quarter End for Fiscal Year 2011
  6.50:1.00
 
   
Second Fiscal Quarter End for Fiscal Year 2011
  6.25:1.00
 
   
Third Fiscal Quarter End for Fiscal Year 2011
  6.00:1.00
 
   
Fourth Fiscal Quarter End for Fiscal Year 2011 and each Fiscal Quarter End
thereafter
  5.75:1.00

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     (g) The provisions of Section 7.02(n) are hereby deleted in their entirety
and the following substituted in their stead:
(n) Minimum Coverage Ratio. The Loan Parties shall not permit the Coverage Ratio
to be less than the following amounts for the following test dates:

      Test Date   Minimum Coverage Ratio
Fourth Fiscal Quarter End for Fiscal Year 2008
  1.00:1.00
 
   
First three Fiscal Quarter Ends for Fiscal Year 2009
  0.80:1.00
 
   
Fourth Fiscal Quarter End for Fiscal Year 2009
  0.90:1.00
 
   
First three Fiscal Quarter Ends for Fiscal Year 2010
  1.00:1.00
 
   
Fourth Fiscal Quarter End for Fiscal Year 2010
  1.05:1.00
 
   
First three Fiscal Quarter Ends for Fiscal Year 2011
  1.10:1.00
 
   
Fourth Fiscal Quarter End for Fiscal Year 2011 and each Fiscal Quarter End
thereafter
  1.20:1.00

     (h) The provisions of Section 7.02(o) of the Credit Agreement are hereby
deleted in their entirety and the following substituted in their stead:
(o) Maximum Capital Expenditures. The Loan Parties shall not permit the Capital
Expenditures (net of tenant allowances actually received by the Loan Parties
during such period) to exceed the following amounts for the following periods:

      Period   Maximum Capital Expenditures
Fiscal Year 2009
  $10,000,000 
 
   
Fiscal Year 2010
  $15,000,000 
 
   
Fiscal Year 2011
  $20,000,000 
 
   
Fiscal Year 2012
  $30,000,000 

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     (i) The provisions of Section 7.03(c) of the Credit Agreement are hereby
deleted in their entirety and the following substituted in their stead:
(c) Monthly Financial Statements; Borrowing Base Certificates (i) Within thirty
(30) calendar days after the end of each fiscal month, (A) inventory stock
ledger reports as of the end of such fiscal month, (B) unless required more
frequently as provided in clause (ii), below, a Borrowing Base Certificate, and
(C) financial statements of the Borrower, consisting of a consolidated balance
sheet as of the end of such fiscal month and related consolidated statements of
income, and cash flows for the fiscal month then ended and the fiscal year
through that date, all in reasonable detail and certified (subject to normal
year-end and quarter end audit and similar accounting adjustments and except for
the absence of footnotes thereto) by the Chief Executive Officer, President or
Chief Financial Officer of the Borrower as having been prepared in accordance
with GAAP, consistently applied, and setting forth in comparative form the
respective financial statements for the corresponding date and period in the
previous fiscal year.
(ii) At any time that cash and cash equivalents of the Borrower (excluding
amounts in the Designated Escrow Accounts) is less than the Minimum Cash Amount,
a Borrowing Base Certificate on Friday of each week.
     (j) The provisions of Section 7.04 of the Credit Agreement are hereby
deleted in their entirety and the following substituted in their stead:
Collateral Security for Obligations. The Obligations are and shall continue to
be secured by Liens on the property described in the Security Documents and the
Ancillary Security Documents. The Loan Parties hereby covenant and agree that
they shall, upon the reasonable request of the Agent, take all such actions and
execute and deliver (or cause to be executed and delivered) all such Ancillary
Security Documents as may be reasonably requested by the Agent, to ensure that
the Liens granted pursuant to the Security Documents and the Ancillary Security
Documents shall constitute a valid, binding and enforceable first priority Lien
in all Collateral (as defined in the Security Agreement), subject to any
Permitted Liens having priority over the Agent’s Lien under applicable law.
     7. Amendment to Schedules. Schedules 1.01(B) and 5.01(B) to the Credit
Agreement are hereby deleted in their entirety and replaced by Schedules 1.01(B)
and 5.01(B) in the form attached hereto.
     8. Conditions Precedent to Credit Extensions. Prior to the Third Amendment
Effective Date, certain conditions precedent to the making of Revolving Credit
Loans and issuance of Letters of Credit under Section 6.02 were not satisfied in
all material respects. The Agent and the Lenders agree that no such failure to
satisfy a condition precedent to such credit extensions of which the Agent was
aware prior to the Third Amendment Effective Date shall be applicable to any
request for to the making of Revolving Credit Loans and issuance of Letters of
Credit after the Third Amendment Effective Date. The foregoing shall not be
deemed to otherwise modify the provisions of Section 6.02.
     9. Conditions to Effectiveness. This Amendment shall not be effective until
each of the following conditions precedent have been fulfilled to the
satisfaction of the Agent:

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     (a) This Amendment shall have been duly executed and delivered by the Loan
Parties, the Agent and the Required Lenders, and the Agent shall have received a
fully executed copy hereof, of all Security Documents and of each other document
required hereunder.
     (b) The Agent shall have received (i) evidence reasonably satisfactory to
it that all action on the part of the Loan Parties necessary for the valid
execution, delivery and performance by the Loan Parties of this Amendment shall
have been duly and validly taken, (ii) evidence that all necessary consents and
approvals to the Amendment have been obtained, and (iii) a legal opinion of
counsel to the Borrower and Guarantors reasonably satisfactory in form and
substance to the Agent.
     (c) The Agent shall have completed all due diligence which it deems
appropriate with respect to the assets which are to constitute collateral for
the obligations under the Security Documents.
     (d) The Agent (i) shall have filed all such financing statements and
mortgages, as may be necessary for the Agent to perfect its security interest in
the property which is the subject of the Security Documents for the benefit of
the Lenders and the Agent and to assure its first-priority status therein
(subject to Permitted Liens having priority under applicable law), and
(ii) unless otherwise agreed by the Agent, shall have obtained all such control
agreements and shall have given all such notices as may be necessary for the
Agent to perfect its security interest in the property which is the subject of
the Security Documents for the benefit of the Lenders and the Agent and to
assure its first-priority status therein (subject to Permitted Liens having
priority under applicable law).
     (e) No event shall have occurred that could reasonably be expected to
result in a Material Adverse Change.
     (f) There shall not be any action, suit, investigation or proceeding
pending or, to the knowledge of the Borrower threatened in any court or before
any arbitrator or governmental authority that could reasonably be expected to
have a material adverse effect on the condition (financial or otherwise),
operations, assets, or income of the Borrower and Guarantors or could reasonably
be expected to result in a Material Adverse Change.
     (g) The Loan Parties shall have paid all fees payable to the Agent and the
Lenders hereunder and otherwise due in connection herewith and the Loan Parties
shall have reimbursed the Agent for all of its reasonable out-of-pocket expenses
incurred in connection with negotiation and preparation of this Amendment,
including all reasonable attorneys’ fees and expenses.
     (h) After giving effect to this Amendment, no Potential Default or Event of
Default shall have occurred and be continuing.
     (i) The Loan Parties shall have provided such additional instruments,
documents, and agreements to the Agent as the Agent and its counsel may have
reasonably requested.
     10. Representations and Warranties. Each Loan Party hereby represents and
warrants to the Agent and the Lenders that, after giving effect to this
Amendment: (i) no Potential Default or Event of Default has occurred or exists
under the Credit Agreement or under any other Loan Document, and (ii) except
with respect to those representations and warranties which relate solely to an
earlier date, all representations and warranties contained in the Credit
Agreement and the other Loan Documents are true and correct as of the date
hereof.

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     11. Miscellaneous.
     (a) Except as provided herein, all terms and conditions of the Credit
Agreement and the other Loan Documents remain in full force and effect and are
hereby ratified and confirmed in all respects.
     (b) This Amendment may be executed in counterparts, each of which when so
executed and delivered shall be an original, and all of which together shall
constitute one agreement. Delivery of an executed counterpart of a signature
page hereto by facsimile or electronic means (such as PDF) shall be effective as
delivery of a manually executed counterpart hereof.
     (c) This Amendment expresses the entire understanding of the parties with
respect to the transactions contemplated hereby. No prior negotiations or
discussions shall limit, modify, or otherwise affect the provisions hereof.
     (d) The Loan Parties shall execute and deliver to the Agent such other
documents, instruments, and agreements that the Agent may reasonably require in
order to implement the terms and conditions of this Amendment.
     (e) Any determination that any provision of this Amendment or any
application hereof is invalid, illegal, or unenforceable in any respect and in
any instance shall not affect the validity, legality, or enforceability of such
provision in any other instance, or the validity, legality, or enforceability of
any other provisions of this Amendment.
     (f) In connection with the interpretation of this Amendment and all other
documents, instruments, and agreements incidental hereto:
     (i) The captions of this Amendment are for convenience purposes only, and
shall not be used in construing the intent of the Agent, the Lenders and the
Loan Parties under this Amendment.
     (ii) In the event of any inconsistency between the provisions of this
Amendment and any of the other Loan Documents, the provisions of this Amendment
shall govern and control.
     (iii) The parties hereto have prepared this Amendment and all documents,
instruments, and agreements incidental hereto with the aid and assistance of
their respective counsel. Accordingly, all of them shall be deemed to have been
drafted by each of them and shall not be construed against either party.
     (g) This Third Amendment shall be governed by, and construed in accordance
with, the internal laws of the State of Ohio without regard to its conflict of
laws principles,.
[Signature Pages Follow]

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          IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Amendment as of the day and year first above
written.

              BORROWER:
 
            TWEEN BRANDS, INC.
 
       
 
  By:   /s/ Rolando de Aguiar
 
       
 
  Name:   Rolando de Aguiar
 
  Title:   Executive Vice President and Chief Financial Officer
 
       
 
            GUARANTORS:
 
            AMERICAN FACTORING, INC.
 
       
 
  By:   /s/ Rolando de Aguiar
 
       
 
  Name:   Rolando de Aguiar
 
  Title:   President
 
       
 
            FLORET, LLC
 
       
 
  By:   /s/ Rolando de Aguiar
 
       
 
  Name:   Rolando de Aguiar
 
  Title:   Chief Financial Officer
 
       
 
            TWEEN BRANDS DIRECT SERVICES, INC.
 
       
 
  By:   /s/ Rolando de Aguiar
 
       
 
  Name:   Rolando de Aguiar
 
  Title:   Executive Vice President and Chief Financial Officer
 
       
 
            TWEEN BRANDS AGENCY, INC.
 
       
 
  By:   /s/ Scott M. Bracale
 
       
 
  Name:   Scott M. Bracale
 
  Title:   President and Chief Executive Officer
 
       
 
            TWEEN BRANDS DIRECT, LLC
 
       
 
  By:   /s/ Scott M. Bracale
 
       
 
  Name:   Scott M. Bracale
 
  Title:   President, Chief Executive Officer and Executive Vice President

Signature Page to Third Amendment to Credit Agreement

 

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              TWEEN BRANDS PURCHASING, INC.
 
       
 
       
 
  By:   /s/ Rolando de Aguiar
 
       
 
  Name:   Rolando de Aguiar
 
  Title:   President and Chief Executive Officer
 
       
 
            TWEEN BRANDS STORE PLANNING, INC.
 
       
 
       
 
  By:   /s/ Rolando de Aguiar
 
       
 
  Name:   Rolando de Aguiar
 
  Title:   Executive Vice President and Chief Financial Officer
 
       
 
            TOO GC, LLC
 
       
 
       
 
  By:   /s/ Rolando de Aguiar
 
       
 
  Name:   Rolando de Aguiar
 
  Title:   President, Treasurer and Secretary
 
       
 
            TWEEN BRANDS SERVICE CO.
 
       
 
       
 
  By:   /s/ Rolando de Aguiar
 
       
 
  Name:   Rolando de Aguiar
 
  Title:   Chief Financial Officer
 
       
 
            TWEEN BRANDS INVESTMENT, LLC
 
       
 
       
 
  By:   /s/ Gregory J. Henchel
 
       
 
  Name:   Gregory J. Henchel
 
  Title:   President and Chief Executive Officer

Signature Page to Third Amendment to Credit Agreement

 

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              AGENT AND LENDERS:
 
            BANK OF AMERICA, N.A., individually as a Lender and in its capacity
as Agent
 
       
 
       
 
  By:   /s/ Christine M. Scott
 
       
 
  Name:   Christine M. Scott
 
  Title:   Director

Signature Page to Third Amendment to Credit Agreement

 

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              FIFTH THIRD BANK
 
       
 
       
 
  By:   /s/ Michael R. Zaksheske
 
       
 
  Name:   Michael R. Zaksheske
 
  Title:   Vice President

Signature Page to Third Amendment to Credit Agreement

 

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              KEYBANK NATIONAL ASSOCIATION
 
       
 
       
 
  By:   /s/ J. Brent Thomas
 
       
 
  Name:   J. Brent Thomas
 
  Title:   Senior Vice President

Signature Page to Third Amendment to Credit Agreement

 

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              US BANK, NATIONAL ASSOCIATION
 
       
 
       
 
  By:   /s/ Frances W. Josephic
 
       
 
  Name:   Frances W. Josephic
 
  Title:   Vice President, U.S. Bank, N.A.

Signature Page to Third Amendment to Credit Agreement

 

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              HSBC BANK USA, NATIONAL ASSOCIATION
 
       
 
       
 
  By:   /s/ Jeffrey Wieser
 
       
 
  Name:   Jeffrey Wieser
 
  Title:   Senior Relationship Manager

Signature Page to Third Amendment to Credit Agreement

 

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              JPMORGAN CHASE BANK, N.A.
 
       
 
       
 
  By:   /s/ James Knight
 
       
 
  Name:   James Knight
 
  Title:   Vice President

Signature Page to Third Amendment to Credit Agreement

 

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              HUNTINGTON NATIONAL BANK
 
       
 
       
 
  By:   /s/ Jeff D. Blendick
 
       
 
  Name:   Jeff D. Blendick
 
  Title:   Vice President — Loan Syndications

Signature Page to Third Amendment to Credit Agreement

 

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              SOVEREIGN BANK
 
       
 
       
 
  By:   /s/ David Denlinger
 
       
 
  Name:   David Denlinger
 
  Title:   Senior Vice President

Signature Page to Third Amendment to Credit Agreement