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Exhibit 4.7  


 
 

GUARANTEE AND INDEMNITY    
  


        THIS GUARANTEE AND INDEMNITY is made as of the 1st day of November, 2002, 



	BY:	 	ARCHIBALD CANDY (CANADA) CORPORATION, a corporation incorporated under the laws of Canada
	

 	
 	

(the "Guarantor")
	
IN FAVOUR OF:	
 	
FOOTHILL CAPITAL CORPORATION, as administrative agent on behalf of the Lenders
	

 	
 	

(the "Agent")





RECITALS:  


	A.
	Archibald
Candy Corporation has entered into the Loan Agreement.



	B.
	It
is a condition of the Loan Agreement that the Guarantor enter into this Agreement to guarantee the Guaranteed Obligations. 



        NOW THEREFORE in consideration of the sum of $1.00, the Lenders making available certain credit facilities on the terms set forth in the
Loan Agreement and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Guarantor agrees with the Agent as follows: 


ARTICLE 1.

INTERPRETATION  


        1.1    Definitions    


        In
this Agreement, in addition to the definitions set out in the recitals hereto, if any: 



        1.1.1    "this Agreement", "hereto", "herein", "hereof", "hereby", "hereunder" and any similar expressions refer
to this Guarantee and Indemnity as it may be supplemented, amended or restated from time to time, and not to any particular Article, section or other portion hereof; 


        1.1.2    "Borrower" means Archibald Candy Corporation, a corporation incorporated under the laws of Delaware, and
its successors; 



        1.1.3    "Business Day" means any day, other than Saturday, Sunday or any other day on which banks in the United
States or Toronto, Canada are authorized or required to close; 


        1.1.4    "Canadian Taxes" means all Taxes imposed, levied, collected, withheld or assessed by any Governmental
Body of or within Canada or any political subdivision thereof (excluding, any Taxes imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein
(i) measured by or based on the net income or net profits of a Lender, or (ii) to the extent that such Tax results from a change in the circumstances of the Lender, or a change in the
branch or lending office of the Lender participating in the transactions set forth herein); 


        1.1.5    "Conversion Rate" means, in relation to the conversion of one currency to another on a particular day,
the rate of exchange quoted by Wells Fargo Bank, National Association as its spot rate of exchange for the conversion of one currency to the other at approximately noon (Toronto time) on such day; 



        1.1.6    "Event of Default" has the meaning attributed to such term in the Loan Agreement; 


        1.1.7    "Governmental Body" means any government, parliament or legislature, or any regulatory authority, agency,
commission or board of any government, parliament or legislature or any court or (without limitation to the foregoing) any other law-, regulation- or rule-making entity, having
or purporting to have jurisdiction in the relevant
circumstances, or any Person acting or purporting to act under the authority of any of the foregoing (including, without limitation, any arbitrator); 



        1.1.8    "Guaranteed Obligations" means all of the Obligations, as defined in the Loan Agreement; 


        1.1.9    "Hypothec" means the deed of movable hypothec dated as of the date hereof made by the Guarantor in favour
of the Agent; 


        1.1.10    Indemnifiable Circumstance" has the meaning attributed to such term in section 2.2; 










        1.1.11    "Indemnified Amounts" means the amounts to be paid by the Guarantor under section 2.2; 


        1.1.12    "Lenders" means the lenders set forth in the Loan Agreement; 



        1.1.13    "Loan Agreement" means the loan and security agreement and guaranty dated as of November 1, 2002
between the Borrower, as borrower, Laura Secord Holdings Corp. and the Guarantor, as guarantors, the lenders named therein, as lenders, and the Agent, as arranger and administrative agent; 


        1.1.14    "Person" means any individual, partnership, limited partnership, joint venture, syndicate, sole
proprietorship, company or corporation with or without share capital, unincorporated association, trust, government, parliament or legislature, or any regulatory authority, agency, commission, board
or other entity however designated or constituted of any government, parliament or legislature, including without limitation any trustee, executor, administrator or other legal personal
representative, liquidator, trustee in bankruptcy, receiver, receiver and manager, and agent; 


        1.1.15    "Proceedings" means any receivership, insolvency, proposal, bankruptcy, compromise, arrangement,
reorganization, winding-up, dissolution or other similar proceedings, whether or not any of the foregoing is judicial in nature; 


        1.1.16    "Security" means: 



        1.1.16.1    any
mortgage, charge, assignment, lien, security interest or other encumbrance; 


        1.1.16.2    any
guarantee; and 


        1.1.16.3    any
other arrangement designed to secure the payment or performance of any obligation, liability or indebtedness; 



whether
obtained from the Borrower, the Guarantor or any other Person and whether obtained before, at the time of or after the execution and delivery of this Agreement; 





        1.1.17    "Security Agreement" means the general security agreement dated as of the date hereof made by the
Guarantor in favour of the Agent on behalf of the Lenders; and 


        1.1.18    "Taxes" means all taxes of any kind or nature whatsoever including, without limitation, income taxes,
sales or value-added taxes, levies, stamp taxes, royalties, duties, and all fees, deductions, compulsory loans and withholdings imposed, levied, collected, withheld or assessed as of the date hereof
or at any time in the future, by any Governmental Body of or within Canada or any other jurisdiction whatsoever having power to tax, together with penalties, fines, additions to tax and interest
thereon. 




        1.2    Headings    


        The
inclusion of headings in this Agreement is for convenience of reference only and shall not affect the construction or interpretation hereof. 


        1.3    References to Articles and Sections    



        Whenever
in this Agreement a particular Article, section or other portion thereof is referred to, such reference pertains to the Article, section or portion thereof contained herein
unless otherwise indicated. 


        1.4    References to Agreements and Enactments    


        Except
as otherwise specifically provided: 



        1.4.1    reference
in this Agreement to any contract, agreement or any other document shall be deemed to include (i) reference to the same as supplemented,
amended or restated from time to time and (ii) reference to any contract, agreement or any other document which substitutes, in whole or in part, for the same from time to time; and 


        1.4.2    reference
in this Agreement to any enactment, including, without limitation, any statute, law, by-law, regulation, rule, ordinance or order,
shall be deemed to include reference to such enactment as re-enacted or amended from time to time and to any enactment in substitution therefor. 




        1.5    Currency    



        All
amounts in this Agreement are stated and shall be paid in Canadian currency, provided that if Guaranteed Obligations are outstanding in a currency other than Canadian currency, the
Lenders, at their option, may require that such amounts be paid in such other currency, to the extent that the Guaranteed Obligations are outstanding in such other currency. 


        1.6    Gender and Number    


        In
this Agreement, unless the context otherwise requires, words importing the singular include the plural and vice versa and words importing gender include all genders. 






        1.7    Invalidity of Provisions    


        Each
of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision or part thereof by a court of
competent jurisdiction shall not affect the validity or enforceability of any other provision hereof. To the extent permitted by applicable law, the parties waive any provision of law which renders
any provision of this Agreement invalid or unenforceable in any respect. The parties shall engage in good faith negotiations to replace any provision which is declared invalid or unenforceable with a
valid and enforceable provision, the economic effect of which comes as close as possible to that of the invalid or unenforceable provision which it replaces. 


        1.8    No Conditions Precedent    



        This
Agreement is effective upon execution and delivery of this Agreement by the Guarantor. Such execution and delivery constitutes conclusive evidence that this Agreement was not
delivered in escrow and that any conditions precedent to the effectiveness of this Agreement have been satisfied or waived by the Guarantor. 


        1.9    Entire Agreement    


        This
Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement. There are no warranties, conditions, or representations (including
any that may be implied by statute) and there are no agreements in connection with such subject matter except as specifically set forth or referred to in this Agreement and the Loan Agreement. No
reliance is placed on any warranty, representation, opinion, advice or assertion of fact made either prior to, contemporaneous with, or after entering into this Agreement, the Loan Agreement or any
amendment or supplement thereof, by any party to this Agreement or the Loan Agreement or its directors, officers, employees or agents, to any other party to this Agreement or the Loan Agreement or its
directors, officers, employees or agents, except to the extent that the same has been reduced to writing and included as a term of this Agreement or the Loan Agreement, and none of the parties to this
Agreement or the Loan Agreement has been induced to enter into this Agreement or any amendment or supplement by reason of any such warranty, representation, opinion, advice or assertion of fact.
Accordingly, there
shall be no liability, either in tort or in contract, assessed in relation to any such warranty, representation, opinion, advice or assertion of fact, except to the extent contemplated above. 


        1.10    Waiver, Amendment    


        Except
as expressly provided in this Agreement, no amendment or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any
provision of this Agreement shall constitute a waiver of any other provision nor shall any waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided. 



        1.11    Governing Law, Attornment    


        This
Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. 


        1.12    Loan Agreement to Govern    



        If
there is any inconsistency between the terms of this Agreement and the terms of the Loan Agreement, the terms of the Loan Agreement will prevail to the extent of the inconsistency. 


ARTICLE 2.

GUARANTEE AND INDEMNITY  


        2.1    Guarantee    



        The
Guarantor unconditionally and irrevocably guarantees the due and punctual payment and performance of all Guaranteed Obligations (whether or not involving parties other than the
Borrower, the Agent and the Lenders). 


        2.2    Indemnity    


        The
Guarantor shall indemnify and save the Agent and the Lenders harmless from and against any losses which may arise by virtue of any of the Guaranteed Obligations, the Loan Agreement
or any other agreement relating to any of the foregoing being or becoming for any reason whatsoever in whole or in part: 



        2.2.1    void,
voidable, ultra vires, illegal, invalid, ineffective or otherwise unenforceable by the Agent or the
Lenders in accordance with its terms, or 


        2.2.2    released
or discharged by operation of law (other than as a result of irrevocable payment in full of the Guaranteed Obligations), 











(all
of the foregoing collectively, an "Indemnifiable Circumstance"). For greater certainty, these losses shall include without limitation the amount of all Guaranteed Obligations which would have
been payable by the Borrower but for the existence of an Indemnifiable Circumstance. 


        2.3    Guarantor Liable as Principal    


        The
Guarantor shall be liable to the Agent and the Lenders as principal debtor and not as surety only, and will not plead or assert to the contrary in any action taken by the agent or
the Lenders in enforcing this Agreement. 


        2.4    Continuing Guarantee and Indemnity    


        The
guarantee and indemnity herein shall be a continuing guarantee of the payment and performance of all the Guaranteed Obligations and a continuing indemnity for the payment of all
Indemnified Amounts and shall apply to and secure any ultimate balance thereof due or remaining unpaid to the Agent and the Lenders. The guarantee and indemnity herein shall not be considered as
wholly or partially satisfied by the intermediate payment or satisfaction at any time of all or any part of the Guaranteed Obligations or Indemnified Amounts. All dividends, compositions and payments
received by the Agent or the Lenders from the Borrower or any other Person shall be applied as payments in gross without any right on the part of the Guarantor to claim the benefit of any such
dividends, compositions or payments or any Security held by the Agent or the Lenders until payment in full of all Guaranteed Obligations and Indemnified Amounts. 


        2.5    Reinstatement    


        The
guarantee and indemnity herein shall be reinstated if at any time any payment of any Guaranteed Obligations or Indemnified Amounts is rescinded or must otherwise be returned by the
Agent or the Lenders upon any Proceedings of or affecting the Borrower or any other Person or for any other reason whatsoever, all as though such payment had not been made. The Agent or the Lenders
may concede or compromise any claim that such payment ought to be rescinded or otherwise returned, without discharging, diminishing or in any way affecting the liability of the Guarantor hereunder or
the effect of this section 2.5. 


ARTICLE 3.

ENFORCEMENT  


        3.1    Demand    



        Upon
the occurrence of an Event of Default, the Guarantor shall, on demand by the Agent on behalf of the Lenders, forthwith pay to the Agent, or perform or cause the performance of, all
Guaranteed Obligations for which such demand was made. All Indemnified Amounts shall be payable by the Guarantor to the Agent forthwith upon demand by the Agent, on behalf of the Lenders. 


        3.2    Right to Immediate Payment or Performance    


        The
Agent and the Lenders shall not be bound to make any demand on or to seek or exhaust its recourse against the Borrower or any other Person or to realize on any Security held by it in
respect of the Guaranteed Obligations before being entitled to demand payment from or performance by the Guarantor and enforce its rights under this Agreement, and the Guarantor hereby renounces all
benefits of discussion and division. 


        3.3    Interest    


        All
amounts payable by the Guarantor under this Agreement shall bear interest payable by the Guarantor from the date of demand for payment both before and after default and judgment at
the default rate as set out in Section 2.6(c) of the Loan Agreement. 


        3.4    Lenders' Statement    


        The
statement in writing of the Lenders or of the Agent on behalf of the Lenders as to the amount of the Guaranteed Obligations, the Indemnified Amounts and all other amounts payable
hereunder shall be binding upon the Guarantor and conclusive against it in the absence of manifest error. 


ARTICLE 4.

LIABILITY FOR TAXES  


        4.1    Gross-Up    


        All
payments made by the Guarantor to the Agent or the Lenders under this Agreement shall be made in full, without set-off or counterclaim, and free of and without deduction
or withholding for or on account of any present or future Canadian Taxes provided that, if the Guarantor shall be required by law to deduct or withhold any Canadian Taxes from or in respect of any
payment or sum payable to the Agent or the Lenders, the payment or sum payable shall be increased as may be necessary so that after making all required deductions or withholdings (including deductions
or withholdings applicable to additional amounts paid under this ARTICLE 4) 







the Agent or the Lenders, as the case may be, receive an amount equal to the sum it would have received if no deduction or withholding had been made, and the Guarantor shall pay the full amount
deducted or withheld to the relevant taxation or other authority in accordance with applicable law; provided, however, that Guarantor is not required to increase any such amounts payable to the Agent
or any Lender if the increase in such amount payable results from the Agent's or such Lender's own wilful misconduct or gross negligence. Guarantor will furnish to the Agent as promptly as possible
after the date of payment of any Canadian Taxes is due pursuant to applicable law certified copies of tax receipts evidencing such payment by Guarantor. 


        4.2    Indemnity for Taxes    


        The
Guarantor shall indemnify the Agent and the Lenders in respect of: 



        4.2.1    the
full amount of Canadian Taxes imposed or levied upon the Agent or the Lenders in respect of any payment received or receivable by it hereunder from
or on behalf of the Guarantor, whether or not such Canadian Taxes were correctly or legally asserted; and 


        4.2.2    any
net Canadian Taxes imposed by any jurisdiction on any increased amounts payable under section 4.1 after taking into account any refund,
credit, allowance, remission or deduction from income otherwise determined or tax otherwise payable available to the Agent or the Lenders in respect of the Canadian Taxes deducted or withheld as
contemplated by section 4.1 (whether or not claimed by the Agent or the Lenders, as the case may be). 




Payment
under this indemnification shall be made within ten days from the date the Agent or the Lenders make written demand therefor accompanied by a certificate of the Lenders stating the amount of
the relevant Taxes and the calculation thereof. 


        4.3    Lenders' Discretion Preserved    



        Nothing
contained in this ARTICLE 4 shall interfere with the right of the Agent or the Lenders to arrange its tax affairs in whatever manner it may think fit and, in particular, it shall
not be under any obligation to claim relief from its tax liability in respect of its payments, deductions or withholdings in priority to any other claims, reliefs, credits or deductions available to
it. 


ARTICLE 5.

APPROPRIATION AND SET-OFF BY LENDERS  


        5.1    Appropriation    



        The
Lenders shall be at liberty, without in any way prejudicing or affecting its rights hereunder, to appropriate or to refrain from appropriating any payment made to, or monies received
by, the Lenders from: 



        5.1.1    the
Borrower or others to any portion of the Guaranteed Obligations, and 


        5.1.2    the
Guarantor to any portion of the Guaranteed Obligations, the Indemnified Amounts, all other amounts payable hereunder and any other obligations,
liabilities and indebtedness of the Guarantor to the Agent or the Lenders, 




in
each case whether then due or to become due, and whether absolute or contingent, and from time to time to revoke or alter any such appropriation, all as the Lenders may from time to time in their
sole discretion determine. 


        5.2    Set-Off by Lenders    


        Each
of the Lenders may, without demand or notice of any kind, set off, appropriate and apply any and all deposits, general or special, matured or unmatured, in any currency, held by or
for the benefit of the Guarantor with such Lender, and any other indebtedness and liability of such Lender to the Guarantor, matured or unmatured, in any currency, against and on account of the
Guarantor's liability hereunder in any currency irrespective of whether or not the Lender has made any demand for payment hereunder or the Guaranteed Obligations are due, in such order of application
as such Lender may from time to time elect. If the amounts being set-off are not payable in the same currency, such Lender may convert either amount into the other currency at the
Conversion Rate on the day as of which that set-off is being effected, or if that day is not a Business Day then on the Business Day preceding the day as of which that set-off
is being effected. 





ARTICLE 6.

GUARANTOR NOT TO COMPETE  


        6.1    Guarantor Not to Compete    


        The
Guarantor shall not: 



        6.1.1    except
as authorized under the Loan Agreement, take any Security or dividend from the Borrower or any other guarantor or Person liable directly or as
surety for all or any part of the Guaranteed Obligations; 


        6.1.2    claim,
rank, prove or vote as a creditor in any Proceedings of or affecting the Borrower or any other guarantor or Person liable directly or as surety
for all or any part of the Guaranteed Obligations; 


        6.1.3    assert
any right (including without limitation any right of set-off, right of indemnity or reimbursement or right of contribution, and any
right whether or not the right arises under any Security) against the Borrower or any other guarantor or Person liable directly or as surety for all or any part of the Guaranteed Obligations; or 


        6.1.4    have
any right of subrogation to the Agent and/or the Lenders or be otherwise entitled to claim the benefit of any Security now or hereafter held by the
Agent on behalf of the Lenders or by the Lenders, in respect of the Guaranteed Obligations; 




until
the Agent and the Lenders have received payment and performance in full of all Guaranteed Obligations, all Indemnified Amounts and all other amounts payable hereunder. Any money, Security, or
other personal or real property taken or received by the Guarantor in contravention of this section 6.2 shall be held by the Guarantor in trust for the Agent, on behalf of the Lenders, or, in
the Province of Québec, as agent or mandatary for the Agent, on behalf of the Lenders, and shall be delivered or transferred to the Agent, on behalf of the Lenders, on demand. 


ARTICLE 7.

PROTECTION OF LENDER  


        7.1    Defects in Creation of Guaranteed Obligations    



        Neither
the Agent nor the Lenders shall be concerned to see or enquire into the capacity and powers of the Borrower or its directors, officers, employees or agents acting or purporting
to act on its behalf. All obligations, liabilities and indebtedness purporting to be incurred by the Borrower in favour of the Agent or the Lenders shall be deemed to form part of the Guaranteed
Obligations even though the Borrower may not be a legal entity or the incurring of such obligations, liabilities or indebtedness was irregularly, fraudulently, defectively or informally effected or in
excess of the capacity or powers of the Borrower or its directors, officers, employees or agents and notwithstanding that the Agent or the Lenders have specific notice of the capacity and powers of
the Borrower or its directors, officers, employees or agents. 


        7.2    Liability Absolute    


        The
liability of the Guarantor hereunder shall be absolute and unconditional and shall not be discharged, diminished or in any way affected by: 



        7.2.1    any
amalgamation, merger, consolidation or reorganization of the Borrower, the Guarantor, the Agent or any Lender or any continuation of the Borrower,
the Guarantor, the Agent or any Lender from the statute under which it now or hereafter exists to another statute whether under the laws of the same jurisdiction or another jurisdiction; 


        7.2.2    any
change in the name, business, objects, capital structure, ownership, constating documents, by-laws or resolutions of the Borrower, the
Guarantor, the Agent or any Lender, including without limitation any transaction (whether by way of transfer, sale or otherwise) whereby all or any part of the undertaking, property and assets of the
Borrower, the Guarantor, the Agent or any Lender becomes the property of any other Person; 


        7.2.3    any
Proceedings of or affecting the Borrower, the Guarantor, the Agent or any Lender or any other Person and any court orders made or action taken by the
Borrower, the Guarantor, the Agent or any Lender or any other Person under or in connection with those Proceedings, whether or not those Proceedings or orders or that action results in any of the
matters described in sections 7.3.1.1 to 7.3.1.8 occurring with or without the consent of the Lenders; 


        7.2.4    the
current existence or subsequent occurrence of an Indemnifiable Circumstance; 


        7.2.5    any
defence, counterclaim or right of set-off available to the Borrower; 










        7.2.6    the
fact that the Borrower ceases to be liable for any reason whatsoever to the Agent or the Lenders in respect of all or any part of the Guaranteed
Obligations (otherwise than by reason of the payment of those Guaranteed Obligations to the Agent or the Lenders) or the fact that a court determines that the liability of the Borrower to the Lenders
in respect of all or any part of the Guaranteed Obligations has been satisfied or is deemed to have been satisfied (except in circumstances where payment of those Guaranteed Obligations has been
received by the Lenders); and 


        7.2.7    any
other circumstance which might otherwise constitute in whole or in part a defence available to, or a discharge of, the Guarantor, the Borrower
or any other Person in respect of the Guaranteed Obligations or the liability of the Guarantor (otherwise than by reason of the payment of those Guaranteed Obligations to the Agent or the Lenders). 




        7.3    Dealings by Lenders    



        7.3.1    The
Lenders may from time to time in their absolute discretion, without discharging, diminishing or in any way affecting the liability of the Guarantor
hereunder: 



        7.3.1.1    advance
any funds to the Borrower or make or continue to make any credit facilities available to the Borrower constituting or relating to Guaranteed
Obligations; 


        7.3.1.2    permit
any increase or decrease, however significant, of the Guaranteed Obligations or otherwise supplement, amend, restate or substitute, in whole or
in part, however significant, the Guaranteed Obligations, the Loan Agreement or any other agreement relating to any of the foregoing or, in whole or in part, terminate the availability of any credit
facilities relating to, or demand repayment of any Guaranteed Obligations; 


        7.3.1.3    enforce
or take action under or abstain from enforcing or taking action under the Loan Agreement or any other agreement; 


        7.3.1.4    receive,
give up, subordinate, release or discharge any Security; supplement, amend, restate, substitute, renew, abstain from renewing, perfect or
abstain from perfecting or maintaining the perfection of any Security; enforce, take action under or realize in any manner or abstain from enforcing, taking action under or realizing any Security;
deal with or abstain from dealing with all or any part of the undertaking, property and assets covered by any Security or allow or abstain from allowing the Borrower or other Persons to deal with all
or any part of such undertaking, property and assets; 


        7.3.1.5    renew
all or any part of the Guaranteed Obligations or grant extensions of time or any other indulgences to the Borrower or to any other guarantor or
other Person liable directly or as surety for all or any part of the Guaranteed Obligations; 


        7.3.1.6    accept
or make any compositions or arrangements with or release, discharge or otherwise deal with or abstain from dealing with the Borrower or any
other guarantor or other Person liable directly or as surety for all or any part of the Guaranteed Obligations; 


        7.3.1.7    in
whole or in part prove or abstain from proving a claim of the Lenders in any Proceedings of or affecting the Borrower or any other Person; and 


        7.3.1.8    agree
with the Borrower, any other guarantor or any other Person to do anything described in sections 7.3.1.1 to 7.3.1.7; 



whether
or not any of the matters described in sections 7.3.1.1 to 7.3.1.8 above occur alone or in connection with one or more other such matters. 





        7.3.2    In
no case will the liability of the Guarantor hereunder be discharged, diminished or in any way affected as a result of: 



        7.3.2.1    any
default under, or breach by the Agent, the Lenders or its respective agents of, (i) the Loan Agreement or any other agreement including
without limitation any Security, (ii) any applicable law, or (iii) any other obligation or duty binding the Agent, the Lenders or its agents. 




        7.3.3    No
loss of or in respect of any Security for the Guaranteed Obligations or any part thereof, whether occasioned through the fault of the Agent, the
Lenders or otherwise, shall discharge, diminish or in any way affect the liability of the Guarantor hereunder. Neither the Agent, the Lenders nor any of its directors, officers, employees or agents or
any receiver or receiver-manager appointed by it or by a court shall have any liability, whether in tort, contract or otherwise, for any act taken or omitted to be taken by the Agent or the Lenders or
by any of such other Persons in connection with the Guaranteed Obligations or any part thereof or any Security for the Guaranteed Obligations or any part thereof including without limitation any of
the matters described above in this section 7.3, unless and until the Guaranteed Obligations are fully 








satisfied. The Guarantor waives all rights it may have as surety, whether at law, in equity or otherwise, that are inconsistent with the provisions of this Agreement. 




        7.4    Waiver of Notice    


        The
Guarantor expressly waives any right to receive notice of the existence or creation of all or any of the Guaranteed Obligations and presentment, demand, notice of dishonour, protest,
notice of any of the events or circumstances described in sections 7.1, 7.2 or 7.3 and all other notices whatsoever in respect of the Guaranteed Obligations except to the extent, if at all,
that the Personal Property Security Act (Ontario) or other applicable law requires notice to be given to the Guarantor in connection with any
disposition of collateral by or on behalf of the Lenders. The Guarantor hereby acknowledges communication to it of the terms of the Loan Agreement and all agreements and other documents referred to in
the Loan Agreement and of all the provisions therein contained and consents to and approves the same. 


        7.5    Expanded Interpretation    


        Notwithstanding
anything else in this Agreement, where the Agent or the Lenders allow the Borrower or any other Person to deal with any property and assets covered by any Security on
terms which stipulate that the Security continues to cover such property and assets after such dealing, each reference to the Borrower in ARTICLE 7 shall be deemed to include the Person
acquiring an interest in such property and assets. 


ARTICLE 8.

MISCELLANEOUS  


        8.1    Payment of Costs and Expenses    


        Unless
otherwise paid by and agreed to be paid by the Borrower pursuant to the Loan Agreement, the Guarantor shall pay to the Agent and the Lenders on demand all costs and expenses of
the Agent and the Lenders, its officers, employees and agents and any receiver or receiver-manager appointed by it or by a court in connection with this Agreement, the Hypothec and the Security
Agreement, including, without limitation: 



        8.1.1    any
actual or proposed amendment or modification hereof or any waiver hereunder and all instruments supplemental or ancillary thereto; 


        8.1.2    obtaining
advice as to the Agent's and/or the Lenders' rights and responsibilities under this Agreement; and 


        8.1.3    the
defence, establishment, protection or enforcement of any of the rights or remedies of the Agent or the Lenders under this Agreement including,
without limitation, all costs and expenses of establishing the validity and enforceability of, or of collection of amounts owing under, this Agreement; 




and
further including, without limitation, all of the fees, expenses and disbursements of the Agent and the Lenders' lawyers, on a solicitor and his own client basis, incurred in connection therewith
and all sales or value-added taxes payable by the Agent or the Lenders (whether refundable or not) on all such costs and expenses. 


        8.2    Currency Conversion and Indemnity    



        If,
in connection with any claim or proof made or filed against the Guarantor, any action brought in connection with this Agreement or any judgment or order obtained as a result thereof,
it becomes necessary to convert any amount due hereunder in one currency (the "first Currency") into another currency (the "second Currency"), then the conversion shall be made at the Conversion Rate
on the first Business Day prior to the day on which payment is received. 


        If
the conversion in connection with any action is not able to be made in the manner contemplated by the preceding paragraph in the jurisdiction in which the action is brought, then the
conversion shall be made at the Conversion Rate on the day on which the judgment is given. 



        If
the Conversion Rate on the date of payment is different from the Conversion Rate on such first Business Day or on the date of judgment or such other date upon which a court may order
the conversion made, as the case may be, the Guarantor shall pay such additional amount (if any) in the second Currency as may be necessary to ensure that the amount paid on such payment date is the
aggregate amount in the second Currency which, when converted at the Conversion Rate on the date of payment, is the amount due in the first Currency, together with all costs and expenses of
conversion. Any additional amount owing by the Guarantor to the Agent or the Lenders pursuant to the provisions of this section shall be due as a separate debt and shall give rise to a separate cause
of action and shall not be affected by or merged into any judgment obtained for any other amounts due under or in respect of this Agreement. 








        8.3    No Set-off By Guarantor    


        All
amounts payable by the Guarantor under this Agreement shall be paid without set-off or counterclaim and without any deduction or withholding whatsoever unless and to the
extent that the Guarantor shall be prohibited by law from doing so, in which case the Guarantor shall pay to the Agent and the Lenders such additional amount
as shall be necessary to ensure that the Agent and the Lenders, as the case may be, receive the full amount it would have received if no such deduction or withholding had been made. 


        8.4    No Waiver    


        No
delay on the part of the Agent or the Lenders in the exercise of any right, power or remedy hereunder or otherwise shall operate as a waiver thereof, and no single or partial exercise
by the Agent or the Lenders of any right, power or remedy shall preclude other or further exercise thereof or the exercise of any other right, power or remedy. No action of the Agent or the Lenders
permitted hereunder shall in any way impair or affect its rights, powers or remedies under this Agreement. 


        8.5    Additional Security    


        This
Agreement shall be in addition to, and shall not be in any way prejudiced by nor shall this Agreement prejudice: 



        8.5.1    any
other Security now or hereafter held by the Lenders or by the Agent on behalf of the Lenders, and 


        8.5.2    the
endorsement by the Guarantor of any notes or other documents, 




and
the Agent's and the Lenders' rights under this Agreement shall not be merged in any such other Security or endorsement. 


        8.6    Assignment by Lenders    



        The
Agent and the Lenders may sell, assign or transfer all or any of the Guaranteed Obligations to the extent permitted, and in accordance with the procedures set forth, in the Loan
Agreement, and in such event each and every immediate and successive assignee, transferee or holder of all or any of the Guaranteed Obligations, shall have, in respect of the rights or obligations
sold, assigned or transferred to it, the full benefit hereof to the same extent as if it were an original party hereto and to the Guaranteed Obligations or the part thereof so sold, assigned or
transferred, without regard to any set-off, counterclaim or equities between the Borrower, the Agent and the Lenders or the Guarantor, the Agent and the Lenders. 



        8.7    Communication    


        Any
notice or other communication, including a demand or a direction, required or permitted to be given hereunder shall be in writing and shall be personally delivered or sent by
registered or certified mail (postage prepaid, return receipt requested), overnight courier, electronic mail (at such email addresses as the Guarantor or 







the Agent, as applicable, may designate to each other in accordance herewith), or telefacsimile, as the case may be, at its address set forth below: 



	(a)    if to the Agent:
	

Foothill Capital Corporation

1 Boston Place

Boston, Massachusetts
	

Attention:	
 	

Business Finance Division Manager
	Telecopier number:	 	617.722.9493
	

with a copy to
	

Torys LLP

237 Park Avenue

New York, New York

10017-3142
	

Attention:	
 	

Emanuel Grillo
	Telecopier number:	 	212.745.0200
	

(b)    if to the Guarantor:
	

Archibald Candy (Canada) Corporation

c/o Archibald Candy Corporation

1137 West Jackson Boulevard

Chicago, Illinois

60607
	

Attention:	
 	

President and Chief Operating Officer
	Telecopier number:	 	312.243.3992
	

with a copy to
	

Winston & Strawn

35 West Wacker Drive

Chicago, Illinois

60601
	

Attention:	
 	

Patrick Doyle
	Telecopier number:	 	312.558.5700






        All
notices or demands sent in accordance with this Section 8.7, other than notices by Agent in connection with enforcement rights against the Collateral under the provisions of
the New York Uniform Commercial Code or other applicable personal property security legislation, shall be deemed received on the earlier of the date of actual receipt or 3 Business Days after the
deposit thereof in the mail. The Guarantor acknowledges and agrees that notices sent by the Agent or the Lenders in connection with the exercise of enforcement rights against Collateral under the
provisions of the New York Uniform Commercial Code or other applicable personal property security legislation shall be deemed sent when deposited in the mail or personally delivered, or, where
permitted by law, transmitted by telefacsimile or any other method set forth above. 


        Notwithstanding
the foregoing, if applicable personal property security legislation requires that a notice or other communication be given in a specified manner, then any such notice or
communication shall be given in such manner. 


        8.8    Successors and Assigns    



        This
Agreement shall be binding upon the Guarantor and its successors and enure to the benefit of the Agent, the Lenders and their respective successors and assigns. 


        8.9    Copy Received    


        The
Guarantor acknowledges receipt of a copy of this Agreement. 


(Remainder
of this page intentionally left blank) 






        IN WITNESS WHEREOF the Guarantor has executed this Agreement as of the date first above written. 



	 	 	ARCHIBALD CANDY (CANADA) CORPORATION
	

 	
 	
by:	

/s/  TED A. SHEPHERD      
 Name: Ted A. Shepherd

Title: President and Chief Executive Officer
	

 	
 	

by:	

/s/  RICHARD J. ANGLIN      
 Name: Richard J. Anglin

Title: Vice President and Chief Financial Officer











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